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London open: Stocks fall as investors eye US inflation data
London stocks fell in early trade on Tuesday following a downbeat session across the pond, as investors mulled the latest UK wage data and eyed a reading on US inflation.
At 0840 BST, the FTSE 100 was down 0.9% at 7,548.74.
Victoria Scholar, head of investment at Interactive Investor, said: “European markets are under pressure, taking their cues from the declines on Wall Street as the market await key inflation data stateside.
“Trading updates and economic data are setting the agenda in the UK with the FTSE 100 under pressure inching towards support at 7,600. Rolls Royce and the LSE are languishing at the bottom of the index while the miners and oil companies like BP, Glencore, Fresnillo and Endeavour eke out modest gains.
“In Germany focus is on the banks with Deutsche Bank and Commerzbank selling off sharply on a report that a key investor is offloading a major stake in both.”
On home shores, the latest data from the Office for National Statistics showed that real pay for workers fell for the second month running as wage rises were more than offset by rising inflation.
Regular pay, excluding bonuses, rose 4% in the three months to February. The ONS said pay adjusted for inflation fell 1%. Including bonuses, real pay rose 0.4%.
The figures show incomes being squeezed by rising prices before a further increase that took inflation to 6.2% in March from 5.5% in February. The Bank of England expects inflation to peak at 8% or higher in 2022 and household budgets are also under pressure from tax increases.
Real pay fell despite rising employment. The ONS’s labour force survey measure of employment rose by 10,000 in the three months to February but the increase was less than the 52,000 analysts expected on average. The headline three-month average unemployment rate dipped to 3.8% from 3.9% a month earlier in line with expectations.
Laith Khalaf, head of investment analysis at AJ Bell, said the pay data was the “calm before the inflationary storm” with implications for the wider economy.
“This month price rises are going to move up a notch, and really exert pressure on consumer purses, especially when combined with tax and National Insurance increases,” Khalaf said.
In equity markets, engine maker Rolls-Royce tumbled after JPMorgan Cazenove downgraded the shares to ‘underweight’ from ‘neutral’ and slashed the price target to 75p from 140p.
EasyJet flew lower even as the low-cost airline reported improved trading in the second quarter after the removal of Covid travel restrictions, and said summer bookings were tracking ahead of pre-pandemic 2019.
On the upside, BAE Systems racked up solid gains after Deutsche Bank lifted its price target on the ‘buy’ rated shares to 860p from 670p.
Diploma rallied after the specialist seals and controls maker said full-year results were expected to “materially exceed” expectations after a strong contribution from acquisitions.
Plus500 advanced after the online trading platform said full-year revenue was set to be ahead of current market expectations as it posted a 68% jump in first-quarter revenues.
Moneysupermarket rose after it posted a jump in first-quarter revenue and reiterated full-year guidance.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rightmove Plc | +1.76% | +11.20 | 646.40 |
| 2 |  |
Bhp Group Limited | +1.48% | +43.00 | 2,950.00 |
| 3 |  |
Johnson Matthey Plc | +1.45% | +27.00 | 1,894.00 |
| 4 |  |
Auto Trader Group Plc | +1.32% | +8.40 | 642.60 |
| 5 |  |
Bp Plc | +1.29% | +5.00 | 391.65 |
| 6 |  |
Glencore Plc | +1.02% | +5.30 | 525.70 |
| 7 |  |
Rio Tinto Plc | +0.82% | +50.00 | 6,120.00 |
| 8 |  |
Bae Systems Plc | +0.73% | +5.60 | 770.60 |
| 9 |  |
Anglo American Plc | +0.72% | +29.50 | 4,100.00 |
| 10 |  |
Fresnillo Plc | +0.59% | +4.60 | 786.40 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Rolls-royce Holdings Plc | -7.06% | -6.71 | 88.29 |
| 2 |  |
Tui Ag | -3.33% | -8.00 | 232.10 |
| 3 |  |
Melrose Industries Plc | -2.91% | -3.45 | 115.30 |
| 4 |  |
Hiscox Ltd | -2.89% | -28.40 | 953.80 |
| 5 |  |
Astrazeneca Plc | -2.82% | -306.00 | 10,552.00 |
| 6 |  |
Easyjet Plc | -2.43% | -13.20 | 529.40 |
| 7 |  |
Ocado Group Plc | -2.18% | -27.00 | 1,211.00 |
| 8 |  |
Informa Plc | -2.17% | -13.40 | 604.20 |
| 9 |  |
International Consolidated Airlines Group S.a. | -2.10% | -2.86 | 133.62 |
| 10 |  |
Admiral Group Plc | -2.09% | -53.00 | 2,483.00 |
Europe open: Shares slump on US sell-off as inflationary worries weigh
European shares were sharply lower at the open on Tuesday after an overnight sell-off in the US and Asia on fears of rising inflation and a Chinese economic slowdown due to Covid lockdowns.
The pan-European Stoxx 600 index was down 1.14% in early deals, with all major regional bourses in the red.
US treasury yields continued to rise, with the two-year yield moving above 2.5%, closing in on the 10-year benchmark. Investors are fretting over the risks of a global recession and now looking at the next batch of inflation figures from the US and Germany.
Oil prices moved back over the $100 mark after Opec’s warning yesterday that future and current sanctions on Russian oil would create one of the world’s worst ever supply shocks.
The oil producing cartel told European Union officials that it would not be possible to offset the potential loss of up to seven million barrels a day of Russian oil.
Brent crude stood at over $100.98 a barrel after sharp falls on Monday over fears that Covid lockdowns in the Chinese city of Shanghai would hit demand. It was the first time in a month that Brent had been below $100 a barrel.
In Britain, official data showed the jobless rate slipped further below its level immediately before the coronavirus pandemic.
In equity news, shares in Deutsche Bank and Commerzbank were sharply lower after an undisclosed investor on Monday evening sold stakes of more than 5% in the German lenders.
Low-cost airline easyJet rose after reporting strong second quarter trading and a positive outlook for summer, despite flight cancellations over the Easter holiday break due to staff contracting Covid-19.
Rolls-Royce shares slumped after JP Morgan downgraded the aero engine maker’s shares to ‘underweight’ from ‘neutral’.
US close: Stocks sharply lower ahead of Q1 earnings
Wall Street stocks registered losses on Monday as Treasury yields continued to move higher ahead of the Q1 earnings season.
At the close, the Dow Jones Industrial Average was down 1.19% at 34,308.08, while the S&P 500 was 1.69% weaker at 4,412.53 and the Nasdaq Composite saw out the session 2.18% softer at 13,411.96.
The Dow Jones closed 413.04 points lower on Monday, extending losses recorded in the previous session that saw major indices end last week in the red as fears regarding a more aggressive stance against inflation by the Federal Reserve weighed on sentiment.
Treasury yields were in focus throughout the session on Monday after the yield on the benchmark 10-year note exceeded 2.79%, a level not seen since January 2019, as the Fed continued to brace market participants for tighter monetary policy going forward. It was hovering at around 2.775% at the close of trading.
Covid-19 related lockdowns in China and the Russia-Ukraine conflict were also drawing an amount of investor attention on Monday.
While no major earnings were published on Monday, first-quarter earnings season will kick off later in the week, with bank JPMorgan Chase and carrier Delta both set to report results on Wednesday, while Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo will report before markets open on Thursday.
Tuesday newspaper round-up: Cancelled flights, mortgage lenders, Meggitt, Waitrose
More than a quarter of a billion people around the world could be pushed into extreme poverty this year amid a surge in global food prices after Russia’s invasion of Ukraine, the ongoing impact of Covid and rising global inequality, Oxfam has warned. Highlighting the knock-on impact of the war for the poorest people around the globe, the aid charity said two decades of progress were in danger of being reversed as the conflict pushes up prices on wholesale markets, disrupts harvests and impedes exports of vital commodities. – Guardian
More flights were cancelled on Monday as airlines and airports struggled to cope with the big Easter getaway, and Heathrow said it was increasing resourcing as fast as possible to deal with rising passenger numbers. British Airways cancelled at least 64 domestic or European flights to or from Heathrow. Affected UK routes included Heathrow to Aberdeen, Edinburgh, Manchester and Newcastle, while the international routes affected were services to and from Berlin, Dublin, Geneva, Paris and Stockholm. British Airways said passengers were given advanced warning of the cancellations. – Guardian
Mortgage lenders are betting on a sharp economic slowdown as a Covid public spending blitz that artificially pumped up growth finally comes to an end. Movements in the market suggest that banks and building societies are bracing for the recovery to run out of steam, forcing the Bank of England to abandon its cycle of interest rate rises. – Telegraph
A £6.3bn foreign takeover of one of Britain’s biggest defence companies has moved a step closer after it won backing from Brussels. The sale of Coventry-based Meggitt has been cleared by the European Commission, which said that the company’s US buyer Parker-Hannifin had satisfied its competition requirements. – Telegraph
The accounting watchdog is preparing to announce new powers to take direct control over restricting or removing licences from auditors of large companies if they carry out poor quality work. The Financial Reporting Council plans to take control of auditor registrations, which are presently delegated to four industry bodies, including the Institute of Chartered Accountants in England and Wales. – The Times
Waitrose has been left £4 million out of pocket through its brief tie-up with an insolvent venture set up by one of Ocado’s founders. A progress report by administrators at Interpath has shown that Waitrose is the second-largest trade creditor of Today Development Partners, which went bust last month while its remaining assets were sold to Ocado in a £326,000 deal. – The Times
