- FTSE 100 falls 38 points to 7,212
- House purchase mortgage approvals in September fell to 72,600 from 74,200 in August
- Net mortgage lending rose to £9.5bn in September, up from £4.4bn in August,
11.35am: Mortgage approvals dip in September
House purchase mortgage approvals in September fell to 72,600 from 74,200 in August, according to the Bank of England.
The consensus forecast had been for a figure of 71,000.
Net consumer credit rose by £0.2bn, in line with its six-month average but below the consensus forecast of £0.5bn.
Households' total liquid assets, i.e. their deposits with banks and building societies, as well as cash stored in National Savings and Investment accounts etc., rose by £9.4bn in September, down marginally from the £9.9bn increase in August.
There was clearly an impact from buyers racing to complete their purchases before the stamp duty threshold returned to its normal level at the start of October, suggested Martin Beck, the senior economic advisor to the EY ITEM Club.
Mortgage Approvals in the United Kingdom decreased to 72.60 Thousand in September from 74.45 Thousand in August of 2021. https://t.co/xjNGJUUXea pic.twitter.com/dGH2EdhQxM
— Trading Economics (@tEconomics) October 29, 2021
“The lending data has made clear that the stamp duty holiday has been highly distortionary, causing transactions to be brought forwards and being a major factor behind the frothiness in prices over the past year. The flip side is likely to be a softening in demand over the coming months and a slowdown in house price inflation, or even a modest decline in prices. September’s 14-month low for mortgage approvals suggests this process is already underway,” Beck suggested.
“Net unsecured lending fell back to £0.2bn in September, following a sizeable net repayment of non-credit card debt. With gross unsecured lending still 10% down on its pre-pandemic level and increases in household deposits remaining high, consumers’ appetite to spend using credit clearly remains diminished. If the consumer recovery is to remain on track, this situation will have to change.
““Real incomes face a range of headwinds over the months ahead, including high inflation, a fiscal squeeze, and the likelihood of higher debt servicing costs. So, the consumer recovery will become increasingly reliant on households’ appetite for borrowing increasing, and on some of the ‘excess’ savings accumulated over the past 18 months being spent,” Beck concluded.
The FTSE 100 was down 38 points *0.5%) at 7,212.
10.40am: As if we needed telling ... air travel plummeted in the second quarter
The second quarter of 2021 seems a long time ago now, especially in view of the findings of the International Passenger Survey published today by the Office of National Statistics (ONS).
Overseas residents made 277,000 visits by air to the UK in the second quarter, which was 97% fewer than in the same quarter of (pre-pandemic) 2019.
UK residents made 1 million visits abroad by air in the quarter, down 95% on two years earlier.
Overseas residents spent £386 million on their visits to the UK, down 94% on two years before while UK residents spent £1,122mln on visits abroad (-93%).
9.45am: Banks in demand (with one obvious exception)
The Footsie has rallied a little to regain the ground above 7,200 thanks largely to enthusiasm for banking stocks – with one notable exception.
London’s index of heavyweight shares is down 30 points (0.4%) at 7,220.
While investors continue to prod shares of NatWest Group PLC (LSE:NWG) with a bargepole – the shares are now off 4.0% - they seem a lot keener on Standard Chartered PLC (LSE:STAN), Lloyds Banking Group PLC (LSE:LLOY) and Barclays PLC (LSE:BARC), all of which are up by around 1%.
BP PLC (LSE:BP.), up 0.4%, is another stock doing its bit to pare the index’s losses, as the price of oil continues to head north.
“Both Brent and WTI oil prices edged up in early trading today but are heading or their first weekly losses in at least eight weeks after US oil stocks rose more than expected and Iran flagged it was resuming talks with Western powers which could lead to an end to sanctions,” reported SP Angel, the broker that specialises on resource stocks.
“Both benchmarks, which touched multi-year highs on Monday, but are on track to fall about 1% for the week - the first weekly drop in 10 weeks for WTI and the first in eight weeks for Brent.
“It appears that the heat has come out of a two-month rally stoked by tight gas and coal prices in Europe and China which had spurred fuel-switching in power generation to fuel oil and diesel while oil supplies were tight,” the broker opined.
Not for the first time, events in Blighty seem a bit less glam than those in the home of the brave and the land of the free.
“It was a tumultuous night across the pond for the US technology sector as Amazon and Apple proved that, for all their resources, they’re not immune to global supply chain challenges and Facebook, sorry Meta, unveiled a controversial name change.
“Meta – a term more often employed by pretentious film students discussing a knowingly self-referential movie – is being employed by Mark Zuckerberg’s charge to reflect its move into an apparent brave new future where we’ll all be interacting over the metaverse with virtual reality headsets.
“Given this future and, Meta or Facebook’s part in it, remains a long way from coming to fruition perhaps a better name would have been hubris,” suggested Russ Mould at AJ Bell.
Good gag, Russ but as we know, septics don’t really do irony – a term they usually reserve for describing Mike Tyson.
8.30am: NatWest results fail to shoot the lights out
London's blue-chips are in decline with the retreat headed by NatWest Group PLC (LSE:NWG), which laid an egg with its third-quarter results.
The FTSE 100 was down 55 points (0.8%) at 7,194, with NatWest off 3.2% at 224p.
“These are not results to shoot the lights out, particularly given the strength of the numbers from its peers so far, but there are nonetheless some reasons to be cheerful,” suggested Richard Hunter at interactive investor.
“The theme of the reporting season has been a release of credit impairments and NatWest is no different, with a release of £242 million for the quarter given an improved macroeconomic outlook. This has contributed to a pre-tax profit figure of £1.1 billion, as opposed to a previous loss of £355 million, and is comfortably ahead of expectations.
“In addition, total income has also surpassed estimates, rising to £2.8 billion from £2.4 billion a year ago. Underpinning the growth is an extraordinarily robust balance sheet, where the capital cushion has risen to 18.7% from 18.2% in the previous quarter, and where the Liquidity Coverage Ratio stands at 166%,” Hunter noted, concluding that, “in all, the numbers are safe but lack sparkle”.
Miners are out of favour today, especially Glencore PLC (LSE:GLEN), which is down 1.5% a 354.1p after its third-quarter production report. The commodities giant made no change to full-year production guidance.
6.30am: Amazon.com and Apple Inc (NASDAQ:AAPL) find US investors hard to please
It was another day of new highs in the US but back in the UK – as the Beatles didn’t sing – a morning of gentle decline looks in store.
The FTSE 100 is tipped to open 28 points lower at 7,221.
“US economic data was a bit of a mixed bag yesterday, as weekly jobless claims continued to fall back, pulling continuing claims down to their lowest levels since the beginning of March 2020, at 2.24m, while Q3 GDP slowed sharply to 2% from 6.7% in Q2, as rising Delta infections hammered consumer confidence and crimped economic activity during the quarter,” said CMC’s Michael Hewson.
“Today we get a look at early indications of EU Q3 GDP, along with the preliminary releases for France, Germany, and Italy which are likely to show similar levels of economic activity, despite lower infection rates,” he added.
The Dow Jones stormed 240 points higher to close at 35,730 and the S&P 500 jumped 45 points to 4,596.
Earnings announcements after the bell from Apple and Amazon, however, failed to come up to the market’s high expectations.
“Amazon reported third-quarter revenues of US$110.8bn slightly behind market expectations despite rising 15% year-on-year. All divisions showed progress, but growth was particularly strong in AWS [Amazon Web Services] following a wide range of customer wins,” reported Nicholas Hyett at Hargreaves Lansdown.
“Marketing expenses have risen nearly 50% year-on-year, and a whole host of other costs are also outpacing revenue growth as the group ramps up its capacity to meet increased customer demand and expectations; however, even in a company with Amazon’s track record, a sudden, unexpected reverse in margins can make investors jumpy,” Hyett said.
As for fellow tax avoidance specialist Apple, it saw fiscal fourth-quarter sales rise 28.8% to a record US$63.4bn.
“Looking back, it’s hard to fault the year Apple’s had but that doesn’t cancel out some questions,” suggested Sophie Lund-Yates, a colleague of Hyett at Hargreaves Lansdown.
“The group’s costs as a proportion of sales for its phones are increasing, suggesting it’s getting harder to stay ahead of the competition. This is by no means a close race at the moment, but as a wider trend, it’s something to think about. Compared to less hardware-focused FAANG peers, Apple is also a lot more exposed to supply chain disruption. It’s managed to navigate the problems fairly well but hasn’t escaped unscathed, and an extended duration of these problems will spell trouble, especially because the market is unforgiving when it comes to Apple’s performance. Add in questions from some shareholders about forced labour and carbon footprint concerns and it becomes clear that while the Apple is still plenty good enough to eat, there’s some potential for bruising,” she added.
As for UK company results, NatWest Group PLC (LSE:NWG) wraps up the results season for the banks with the prospect of interest rate rises definitely on the radar.
NatWest is the most geared of the UK banks to higher interest rates but for the quarter covered by today’s update this will not be the main thrust of the numbers.
Key within results will be assessing how those benefits are reinforced by a potentially larger rate hedge and offset by the significant decline in the flow of mortgage spreads, said UBS.
Rising yields would have significant implications for equity markets, the strategists said cyclical and value sectors such as banks and energy have the best macro skews to rising rates, with analysts at Berenberg seeing NatWest as likely to benefit most.
Around the markets
- Sterling: US$1.3970, down 0.03 cents
- Gilt: 1.008%, up 2.31 basis points
- Gold: US$1,795.60 an ounce, down US$7
- Brent crude: US$83.91 a barrel, up 25 cents
- Bitcoin: US$61,367, down 98 cents
6.50am: Early Markets - Asia / Australia
Stocks in the Asia-Pacific region were mixed on Friday as retail sales in Australia rose 1.3% month-on-month in September on a seasonally adjusted basis.
That was higher than forecasts for a 0.2% gain in a Reuters poll.
China’s Shanghai Composite rose 0.41% while Hong Kong’s Hang Seng index slipped 0.50%
In Japan, the Nikkei 225 gained 0.11% but South Korea’s Kospi fell 0.88%.
Australia’s S&P/ASX200 slumped 1.44% to 7,323.7 with the loss, in part, due to the Reserve Bank of Australia declining to buy bonds at its 11:15am announcement time, sending bond yields higher.
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2021-10-29 07:29:00Z
CBMilgFodHRwczovL3d3dy5wcm9hY3RpdmVpbnZlc3RvcnMuY28udWsvY29tcGFuaWVzL25ld3MvOTY0NjYxL2Z0c2UtMTAwLWxlZC1sb3dlci1ieS1uYXR3ZXN0LWdyb3VwLXdoaWNoLXVuZGVyd2hlbG1zLXdpdGgtaXRzLXF1YXJ0ZXJseS11cGRhdGUtOTY0NjYxLmh0bWzSAT5odHRwczovL3d3dy5wcm9hY3RpdmVpbnZlc3RvcnMuY28udWsvY29tcGFuaWVzL2FtcC9uZXdzLzk2NDY2MQ
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