- FTSE 100 drops 31 points
- Bond yields on the rise, hitting shares
- JD Sports leads blue chip fallers
London stocks have extended their initial losses, with the blue-chip Footsie now down 31 points or 0.4% to just over 7,047, while the mid-caps of the FTSE 250 have fallen 0.6% to 23,696.
Leading the big cap fallers is JD Sports (LSE:JD.) after sportwear giant Nike last night cut its sales expectations and warned of expected delays during the pre-Christmas shopping season as products are held by supply chain issues.
“In Vietnam, nearly all footwear factories remain closed by government mandate. Our experience with COVID-related factory closures suggest that reopening and ramping back to full production scale will take time,” Nike's financial chief said, with the company having lost 10 weeks of production in the south-east Asian country so far.
UK housing market names are also prominent among the fallers, led by Rightmove, Barratt Developments and Taylor Wimpey (LSE:TW.).
Stock markets are weaker this morning around Europe as investors are digesting the selloff in global bonds as yields start to escalate, while also looking ahead to the uncertainty of the German election on Sunday, says market analyst Neil Wilson at Markets.com.
"Central banks on the move: Norway’s central bank became the first in the G10 to raise rates after the pandemic, Turkey’s central bank - an outlier - lowered rates (to 18%), whilst the Bank of England and Federal Reserve sat on their hands but indicated they too are about to start moving. Yields are on the move too as bonds sell off on tightening expectations.
"Something has clearly changed and positioning on rates is shifting. US 10yr yields jumped to 1.44%, posting their biggest one-day gain since March, whilst 30yr bond yields jumped the most in a single day since March 2020. European bond yields are also marching higher."
9.09am: Consumer confidence
More on the long-running GfK consumer confidence report that was published overnight and showed a decline in the overall index to -13 for September from -8 a month ago.
All five measures recorded by GfK fell month-on-month, with the biggest movement coming from British people's view of the general economic situation over the next 12 months, where the sub-index tumbled 10 points to -16.
Analysts at broker Shore Capital said this was unsurprising given the increase in inflation, the upcoming end of the government furlough scheme for around 1.5m people and now energy, food and fuel shortages (see BP's petrol station warning last night).
“Overall it appears many consumers will appear to be anticipating a direct impact from tougher economic conditions and a potentially higher cost of living," wrote ShoreCap's Katie Cousins, noting the personal financial situation index is down for both last year and the year ahead.
Gfk's index of major purchase intentions also fell, three points to -6, which is 15 points above the same period last year, which to Cousins, “indicates bad news for retailers ahead of the key 'golden' Q4 period".
“Overall, we see this morning’s GfK report as a grim but unsurprising read. The commentary that accompanies this economic data states; 'When consumer confidence drops, shoppers tend to spend less, and this dampens the overall economic prospects for the UK. This really is an unwelcome picture if this continues into 2022 and beyond', which sets a worrying tone for consumer and retailers leaders, especially non-food discretionary, across the country, in our view.
“However, we note that even if the demand and sentiment were stronger, there is still the issue of stock shortages. Rising inflation, cuts to government support schemes, the power crisis along with the potential lack of products available are clearly a worry within the UK and likely to be causing big challenges for the Conservative party, especially with its upcoming annual conference. We expect these concerns to remain headwinds to the GfK Consumer Index recovery, throughout the upcoming months," Cousins and her colleagues concluded.
8.48am: Early nudge lower
The FTSE 100 resisted the pull higher of Wall Street to open in the red.
While far from dominating sentiment early on, the latest UK consumer confidence numbers were rather lacklustre and will have provided traders pause for thought.
Uppermost in their minds likely will be the impending collapse of Evergrande, the Chinese property giant, and its potential impact on the real estate and financial sectors.
Topping the Footsie risers was AstraZeneca, up 3% after positive phase III data from its Lynparza drug, which met its goals a metastatic prostate cancer trial.
In the last five trading days, the Anglo-Swedish pharma giant has seen its value grow by 8.5%, or £11bn, and in the last six months has advanced 25%.
Turning to the natural resources sector, Touchstone Exploration investors received a boost from the company’s final exploration well of its latest campaign in Trinidad.
Results were far better than expected, propelling the shares 27% higher in the early exchanges.
6.50 am: Flat start predicted
The FTSE 100 is set for a flat start even though US markets powered higher overnight as UK investors focus instead on domestic issues and the seemingly worsening Evergrande situation.
Financial spread betters see London’s main index easing around three points at the open to follow yesterday’s five-point fall to 7,087.
In the US, all three of the main indices shot higher as investors decided that the Fed commitment to tighten its monetary policies was a good thing or at least no worse than expected.
Bond yields rose sharply which made the jump in US markets more impressive, said commentators. Dow Jones rose 1.5%, the S&P 500 1.3% and Nasdaq 1% as investors kept hitting the buy button.
Asian markets were mixed and again dominated by Evergrande with the Chinese regime said to be warning local governments to prepare for its collapse.
Reuters this morning reported that the beleaguered property firm had missed its latest interest repayment deadline.
The company, which owes $305bn, was due to make a payment of US$83.5mln but there has been no comment from Evergrande that this has been paid, said the wire.
If not, it has a 30-day grace period to pay after which it is in default.
Where any liability might lie in that event is the next question likely to trouble the markets.
Global banks have repeatedly assured investors that their risk is not material which begs the question of who does pick up the tab in the event of default.
Consumer mood the focus in the UK
Consumer confidence is the main UK point of interest today in an otherwise slim scheduled news list.
On the company front, Judges Scientific releases interims but the gas price crisis has dominated headlines this week and that seems unlikely to change heading into the weekend
Friday 24 September:
Interims: Judges Scientific PLC (AIM:JDG)
Economic data: UK GFK consumer confidence
6.50am: Early Markets - Asia / Australia
Stocks in the Asia-Pacific region were mostly lower on Friday as The Wall Street Journal reported on Thursday that Chinese authorities have told local officials to prepare for a potential demise of Evergrande.
Shares of China Evergrande Group in Hong Kong fell around 7%.
The Shanghai Composite slipped 0.21% while Hong Kong’s Hang Seng index fell 0.11%
Japan’s Nikkei 225 was an exception, surging 2% while South Korea’s Kospi dropped 0.17%.
Australia’s S&P/ASX200 has, in the last hour of trading, fell 0.43% to 7,338.
https://news.google.com/__i/rss/rd/articles/CBMifWh0dHBzOi8vd3d3LnByb2FjdGl2ZWludmVzdG9ycy5jby51ay9jb21wYW5pZXMvbmV3cy85NjEyNzEvZnRzZS0xMDAtc2V0LWZvci1mbGF0LXN0YXJ0LWFzLWV2ZXJncmFuZGUtd29ycmllcy1ncm93LTk2MTI3MS5odG1s0gE-aHR0cHM6Ly93d3cucHJvYWN0aXZlaW52ZXN0b3JzLmNvLnVrL2NvbXBhbmllcy9hbXAvbmV3cy85NjEyNzE?oc=5
2021-09-24 05:49:00Z
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