Jumat, 24 Juni 2022

FTSE 100 closes 2.68% higher as UK market rebounds - Proactive Investors UK

  • FTSE 100 closes up 188 points
  • US stocks higher
  • Carnival shares surge on day

4.51pm: FTSE closes firmly ahead

FTSE 100 closed firmly higher on Friday as the market decided to put on a decent rebound.

Britain's top share index finished the day, up around 188 points, or 2.68%, at 7,208.

Cruise giant Carnival was a notable share riser on Friday in a sector generally under sustained pressure. Shares rose over 8% on the day as the company offered a more positive outlook for 2023.

Michael Hewson, chief market analyst at CMC Markets, said: "The cruise industry, like most in the travel sector, has had a difficult two years. Pre-pandemic in 2019, Carnival annual revenues were $20.8bn, and don’t look like getting anywhere near that much before 2023.

"Today’s Q2 numbers have seen losses come in at $1.8bn, pushing H1 losses to $3.7bn.

"H1 revenues rose to just over $4bn, with $2.4bn of that coming in Q2, an almost 50% increase on Q1," he added.

3.52pm: FTSE flying

The FTSE 100 is flying and, despite a wobbly middle, is on course fo its first positive week after three weeks of declines.

Both industrials and consumer facing stocks are leading the rise, with US-focused names also doing well, including Ashtead Group PLC top of the leaderboard, with Flutter Entertainment PLC also doing well. 

There are 15 blue chips up between 4-6%, with others including Spirax-Sarco Engineering (LSE:SPX) PLC, below-mentioned Croda, Prudential PLC and Howden Joinery Group (LSE:HWDN) PLC.

Only five of the Footsie are in the red, including British Gas owner Centrica PLC (LSE:CNA), plus travel related names (International Consolidated Airlines Group SA (LSE:IAG)) and Rolls-Royce Holdings PLC (LSE:RR.).

Market analyst Michael Hewson said markets are being boosted by the hopes that the US Fed will not hike rates quite as fast as previously feared. 

This followed a lower-than-expected update from the University of Michigan inflation expectations survey, removing the previous gains that had prompted the Fed to pivot toward a 75-basis-point rate hike at its June meeting.

"This market reaction helps to prove the point that sometimes it's unwise to allow monetary policy to be driven by a single data point," said Hewson.

The main Wall Street stock indices are all higher too, up around 2%.   

3pm: US stocks up but Headingly cricketers collapse

US markets have opened higher as expected.

The Dow Jones 30-share index was up 379 points (1.2%) at 31,056 while the S&P 500 was 55 points (1.4%) firmer at 3,851.

In London, the FTSE 100 is slowly accumulating gains in a way that English cricketers at Headingley today are not, with a familiar batting collapse underway.

The index was up 127 points (1.8%) at 7,148.

2.10pm: Miners slow the Footsie's progress

London’s index of leading shares is putting its best foot forward despite lack of enthusiasm for the heavily-weighted mining sector.

The FTSE 100 index was up 113 points (1.6%) at 7,133 despite mining giants such as Glencore PLC (LSE:GLEN), Rio Tinto PLC (LSE:RIO), Fresnillo PLC (LSE:FRES) and Anglo American PLC (LSE:AAL) all losing ground.

Against that background, global investment trading platform Capital.com issued a press release in which it revealed 38% of trades on its platform so far this quarter have been “short” trades, i.e. bets that a company’s share price will go down.

The proportion of short trades was 15% higher than in the same period of last year, although it is not clear from the press release whether that really is 15% higher – i.e. three-twentieths – or 15 percentage points (i.e. 38% versus 23%).

“Given the size of market slides — across all sorts of asset classes this year — it is perhaps not surprising that more traders are choosing to short-sell, to perhaps position themselves to profit from further market weakness, or even hedge other investments,” said David Jones, Capital.com’s chief market strategist.

“Once again it is the NASDAQ 100 that has proved to be the most popular market with traders this week. Volatility always attracts traders - and we still continue to see sizeable swings in global stock indices. Only last week the NASDAQ traded down to its lowest levels since November 2020. The last few days have seen something of a bounceback but at the moment, opinion seems split as to whether this is a sustainable recovery or just another dead cat bounce before the market slides lower once more.

“The area that has seen the largest jump in short trades is commodities. This may suggest — for some traders at least — there is a level of comfort in trying to call the top in the great commodity bull run that has persisted for at least the last couple of years. Of course, a fall in commodities would be welcome by many economies around the world as it would help to slow the rise of inflation,” he added.

1.30pm: US stocks to open higher

US stocks were expected to open higher on Friday with softer economic data from the world’s biggest economy helping investors scale back some of their most aggressive expectations for inflation.

The spate of stock market falls over recent weeks is also bringing out the bargain hunters again and looks set to shore up the main indices as another volatile trading week closes.

Futures for the Dow Jones Industrial Average rose 0.8% in pre-market trading, while those for the broader S&P 500 index rose 0.7%, and contracts for the Nasdaq-100 were up 0.9%.

“US and European futures are trading higher as bargain hunting is taking place,” said Naeem Aslam chief market analyst at avatrade.com.

“The Nasdaq index, which has been driving the markets lower for the past number of months and quarters, has found some love among investors and traders, and it was the Nasdaq index that actually pulled the US markets out of its negative territory to a positive one,” he added.

Some sectors have really taken a hit over recent weeks and are ripe for bargain hunters.

“There is no doubt that the entire tech sector is higher oversold, and there are some great bargains and traders are finding it difficult to resist, especially when stocks like Meta and Netflix are down over 70% from their recent highs,” Aslam noted.

Economic data out recently came in below expectations. While many investors still believe the US will slip into a recession over the coming months, some sections of the market are now hoping that the softer economic data might mean that inflation too could start to ease.

“In terms of economic numbers, we saw the US Manufacturing PMI numbers falling off a cliff yesterday. It became even more clear that economic growth is slowing down, and it is only a matter of a time before we will see recession readings in front of us,” said Aslam.

In energy markets, WTI crude oil futures rose 1.2% to US$105.51 a barrel and Brent crude futures gained 1.1 % to US$111.26.

12.35pm: Ton-up for the Footsie

The FTSE 100 has added over a hundred points or 1.55% to 7,129, almost back to where it was before Wednesday's sell-off. 

Industrials are leading the way, with chemicals group Croda International PLC (LSE:CRDA) topping the leaderboard, followed by electronic components supplier RS Group PLC and health and safety products supplier Halma PLC (LSE:HLMA).

European stock markets are also higher and, with Asia finished almost universally in the green, North America is poised to join today's risk-on day.

Futures for the Dow Jones and S&P 500 indices point to 0.7% gains at the open, while contracts for the Nasdaq-100 are up 0.9%.

Fresh economic data leads investors to scale back some of their most aggressive expectations for inflation, while the spate of stock market falls over recent weeks is also bringing out the bargain hunters at the end of another volatile trading week.

“US and European futures are trading higher as bargain hunting is taking place,” said Naeem Aslam chief market analyst at AvaTrade.

“The Nasdaq index, which has been driving the markets lower for the past number of months and quarters, has found some love among investors and traders, and it was the Nasdaq index that actually pulled the US markets out of its negative territory to a positive one,” he added.

Some sectors have really taken a hit over recent weeks and are ripe for bargain hunters.

“There is no doubt that the entire tech sector is higher oversold, and there are some great bargains and traders are finding it difficult to resist, especially when stocks like Meta and Netflix are down over 70% from their recent highs,” Aslam noted.

With recent economic data coming in below expectations, he said there are investors who believe the US will slip into a recession over the coming months while others are hoping that the softer economic data might mean that inflation too could start to ease.

“In terms of economic numbers, we saw the US Manufacturing PMI numbers falling off a cliff yesterday. It became even more clear that economic growth is slowing down, and it is only a matter of a time before we will see recession readings in front of us,” said Aslam.

In energy markets, crude oil futures rose, with WTI up 1.2% to US$105.51 a barrel and Brent up 1.1 % to US$111.26.

10.27am: Household incomes fall further

The FTSE keeps rising, but people are still mulling the lowest levels of consumer confidence since the 1970s, following the data earlier. 

As well as the GfK confidence numbers and ONS retail figures, also this morning there was Asda's income tracker for May, which has recorded a seventh consecutive monthly decline. 

The average UK household discretionary income fell £42 a week versus the same period last year, with the average spending power for May stated as £202 per month, from £205 last month, backing up research on rising food prices from Kantar earlier this week.

Worsening financial positions and extra pressures on household spending from rising inflation is highlighted as one of the main drivers of the negative impact.

The statement also includes results from a separate survey of 1,000 Asda customers which 41% of customers are changing their behaviour and buying less in a bid to save money, with 39% switching to own-brand products wherever possible.

"How the consumer landscape unfolds in this uncertain time is still unknown," says Katie Cousins, a retail analyst at Shore Capital.

"Whilst we see some comfort in high job security (given high employment and elevated vacancy rates, along with positive commentary around recovery in spending on travel, leisure, and entertainment from the likes of PMI and S&P Global reports), we would expect the overall confidence index to remain depressed throughout the rest of the year."

Cousins noted that food inflation has been a key driver of the inflationary increase throughout the year.

10.15am: PM ploughs on as odds rise on departure

The prime minister, Boris Johnson, shocked absolutely no one by maintaining he will “keep going” after the government lost two by-elections overnight.

The odds on him quitting as PM before the end of the year have shortened to 7/4 from 9/4, according to bookie William Hill.

Johnson pledged to “listen” to voters after a chastening night for the Conservative Party.

“It’s absolutely true we’ve had some tough by-election results. They’ve been, I think, a reflection of a lot of things, but we’ve got to recognise voters are going through a tough time at the moment.

“I think, as a government, I’ve got to listen to what people are saying, in particular to the difficulties people are facing over the cost of living, which, I think, for most people is the number one issue,” Johnson told broadcasters in Kigali, Rwanda, this morning. Johnson is in Rwanda for a Commonwealth summit meeting.

“We’ve got to recognise there is more we’ve got to do and we certainly will, we will keep going, addressing the concerns of people until we get through this patch,” Johnson said.

The Conservatives remain marginal 5/6 favourites to win the most seats at the next General Election, according to William Hill, but the odds on Boris Johnson not leading them into that election have shortened to 4/11 from 4/9.

William Hill is offering odds of 7/4 on Boris Johnson quitting this year, 2/1 on him exiting next year and 11/8 on him not being prime minister in 2024 or later.

Keir Starmer is the favourite at 5/1 to be what William Hill terms “the next permanent prime minister after Borish Johnson”, which is to say “acting” or interim prime minister appointments do not count.

Jeremy Hunt and Penny Mordaunt are joint second-favourites after Starmer at 7/1. The star of chancellor of the exchequer Rishi Sunak appears to have well and truly waned as he is nowhere among the leading runners and riders on William Hill’s book.

9.10am: Near 50-year low in UK consumer confidence

In macroeconomic news, market research group GfK today said its consumer confidence index fell to another record low of -41 in June from -40 in May. Economists had expected an unchanged reading.

"The consumer mood is currently darker than in the early stages of the COVID pandemic, the result of the 2016 Brexit referendum and even the shock of the 2008 global financial crisis, and now there's talk of a looming recession," said Joe Staton, client strategy director at GfK.

“The confidence reading is a telling indicator, as GfK’s survey measures the level of optimism that consumers have about the performance of the economy in the next 12 months. The index has been going for 48 years, so record lows are quite noteworthy,” he added.

All gloomy stuff but the FTSE 100 nonetheless added to early gains, rising above 7,100 at 7,102, up 81 points (1.2%) on the day.

8.45am: Retail sales dip in May

UK retail sales (excluding fuel) fell by 0.5% in May after rising 0.5% in April.

“In what has always tended to be a fairly volatile data series, these are not monumental changes. Still, spending excluding fuel is down by roughly 4% since last October. It’s tempting to put this entirely down to the squeeze on household incomes, and that’s probably at least partially true. The ONS [Office for National Statistics] reckons the 1.6% monthly decline in food spending is down to higher prices,” said James Smith, who covers developed markets at ING.

“But the picture is muddied by a more general rotation away from goods back towards services post-Covid. One consequence is that retailers are likely to find they have excess inventory, as delayed shipments arrive in a backdrop of more tepid demand for – in particular – durable goods. Household good stores have seen sales fall by 15-20% since the same time last year.” the economist continued.

“At the same time, the cost of living squeeze is likely to cause a further hit to demand over the coming months. Confidence fell to another all-time low in June, despite new government support measures. The near-10% rise in petrol/diesel prices over the past month has dealt another blow to finances,” he added.

Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said shoppers tightened their belts in May after rising bills took a bigger ite out of their income in April.

“ONS figures show that 44% of us are buying less food in an effort to keep a lid on costs - up from 18% at the beginning of the year,” Coles commented.

No wonder we’re tightening our belts…

The FTSE 100 was up 42 points (0.6%) at 7,062.

Barclays PLC (LSE:BARC) went against the trend, shedding 0.3% at 153.68p after it agreed to acquire UK specialist mortgage lender Kensington from Blackstone and Sixth Street.

Shares in Ultra Electronics Holdings PLC (LSE:ULE) rose 135 to 3,458p on the news that the business secretary Kwasi Karteng is minded to approve the acquisition of the company by Cobham PLC (LSE:COB), the company owned by US private equity group Advent International. Cobham is offering 3,500p a share to get its hands on the supplier of nuclear submarine equipment.

6.35am: It's a resigning issue - but not for Boris

If the sun is setting on Boris Johnson’s time as prime minister, UK markets do not seem too bothered by it.

The FTSE 100 is expected to open 58 points higher at 7,078 after the Labour Party returned one brick to its Red Wall in Wakefield while the Liberal Democrat overturned a massive 24,000+ Tory majority in Tiverton & Honiton to comfortably win the seat.

After the disastrous results, the chair of the Conservative Party, Oliver Dowden, resigned but as we know, resignation is a word that is not in Boris Johnson’s lexicon.

The results were not entirely unexpected and it may be this morning investors are more focused on a strong showing yesterday by US markets and today’s UK retail sales numbers.

“As we look to today’s May retail sales numbers, the comparatives to a year ago aren’t expected to be as stark [as they were in April], which means we could see an improvement on a year-on-year basis at the same time as seeing a month-on-month decline,” suggested Michael Hewson of CMC Markets.

“We might also see some carry forward effect in terms of spending ahead of the Jubilee bank holiday weekend although it might not be enough to prompt a positive number, with expectation of a decline of -0.7% expected, while year on year a -4.9% decline could improve to -4.5%.

“With GfK UK consumer confidence already at a record low in May of -40, its notable that in June there was a further deterioration to -41 as higher prices continued to impact discretionary spending,” he added.

In the US yesterday, the Dow surged 194 points to close at 30,677 while the S&P 500 leapt 36 points to 3,796.

The happy mood has continued in Asia this morning with Japan’s Nikkei 225 up 272 points to 26,444 and Hong Kong’s Hang Seng 309 points firmer at 21,583.

On the company news front, cruises operator Carnival PLC (LSE:CCL) issues its fiscal second-quarter results today although if memory serves at some weird time – 1pm? - because its shares are also listed in the US.

With so little revenue coming in, the first quarter the company saw the group lose US$1.49bn but with 75% of its ships back in the water the second quarter (Q2) should see these red numbers shrink.

The company said it still expects to make a loss in Q2 but that bookings have started to recover strongly.

Around the markets

  • Sterling: US$1.2276, up 0.15 cents
  • Gilt: 2.317%, down 18.4 basis points
  • Gold: US$1,826.70 an ounce, down US$3.10
  • Oil: US$106.67 a barrel, up 21 cents
  • Bitcoin: US$21,055, up US$253
  • Ethereum: US$1,147.50, up US$13.30

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2022-06-24 15:52:00Z
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