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London open: Stocks little changed ahead of mini-budget
London stocks were little changed in early trade on Friday as investors eyed the mini-budget, with Chancellor Kwasi Kwarteng set to announce the biggest tax cuts since Margaret Thatcher was in No 10 Downing Street.
At 0825 BST, the FTSE 100 was down 0.1% at 7,155.00, while sterling fell to a fresh 37-year low against the dollar, below $1.12.
CMC Markets analyst Michael Hewson said: “At the very least we’ll see the national insurance rise that was so heavily criticised in April reversed, from November, while the corporation tax rise that was due to take effect next year will be cancelled.
“Other trial balloons this week have been cuts to stamp duty and the removal of the cap on bankers’ bonuses, which suggest a focus in areas that probably aren’t a high priority at this moment in time.
“Rather than focussing on stamp duty, it would be more helpful in the move towards renewables to encourage or mandate the installation of solar panels on all new house building projects, as one example, in order to help reduce carbon footprints, and improve the energy efficiency of the housing stock.
“What would be more helpful would be an overhaul of the business rates system, as well as simplifying the way online businesses pay tax, relative to their bricks and mortar peers. While this hasn’t been leaked it doesn’t mean that the Chancellor might not be forthcoming when it comes to what he has up his sleeve later today.”
Ahead of the mini-budget, investors were mulling the latest consumer confidence survey from GfK.
The GfK Consumer Confidence Index fell five points in September to a record low of -49, the worst overall index score since records began in 1974, as the cost-of-living crisis continues to weigh heavily.
Within that, the personal financial situation index for the next 12 months, which measures consumers’ expectations, slid nine points to -40, while the general economic situation index for the next year lost eight points to -68.
The major purchase index, which indicates how likely consumers are to spend on big ticket items, was unchanged at -38.
Joe Staton, client strategy director at GfK, said the falls seen on the forwarding-looking indices were “especially worrying”.
“These numbers are where many forecasters look for signs of economic optimism among consumers, and the results deliver very bad news in that respect,” he said.
“Consumers are buckling under the pressure of the UK’s growing cost-of-living crisis, driven by rapidly rising food prices, domestic fuel bills and mortgage payments. They are asking themselves when and how they situation will improve.”
In equity markets, wealth manager Investec ticked lower despite saying that it expects to post a jump in first-half adjusted operating pre-tax profit to between £372.6m and £406.2m, from £325.7m a year earlier.
Engineering company Smiths Group jumped to the top of the FTSE 100 as it said full-year organic revenues and pre-tax profits had grown ahead of expectations amid “high demand” across the majority of its end markets.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smiths Group Plc | +4.69% | +69.00 | 1,539.50 |
| 2 |  |
Prudential Plc | +2.29% | +21.40 | 955.60 |
| 3 |  |
Persimmon Plc | +2.14% | +29.50 | 1,405.00 |
| 4 |  |
Barratt Developments Plc | +2.02% | +8.30 | 420.00 |
| 5 |  |
Taylor Wimpey Plc | +1.95% | +2.05 | 107.35 |
| 6 |  |
Marks And Spencer Group Plc | +1.90% | +2.10 | 112.50 |
| 7 |  |
Rolls-royce Holdings Plc | +1.09% | +0.80 | 74.07 |
| 8 |  |
United Utilities Group Plc | +0.69% | +6.80 | 993.00 |
| 9 |  |
Severn Trent Plc | +0.66% | +17.00 | 2,578.00 |
| 10 |  |
International Consolidated Airlines Group S.a. | +0.61% | +0.62 | 102.92 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Burberry Group Plc | -4.13% | -71.00 | 1,647.00 |
| 2 |  |
Shell Plc | -3.63% | -85.00 | 2,253.50 |
| 3 |  |
Bp Plc | -3.33% | -15.25 | 443.00 |
| 4 |  |
Fresnillo Plc | -3.31% | -24.20 | 707.20 |
| 5 |  |
Antofagasta Plc | -3.29% | -36.50 | 1,071.50 |
| 6 |  |
Coca-cola Hbc Ag | -3.19% | -62.00 | 1,882.50 |
| 7 |  |
Anglo American Plc | -3.14% | -89.00 | 2,749.50 |
| 8 |  |
Glencore Plc | -2.94% | -14.40 | 475.60 |
| 9 |  |
Bhp Group Limited | -2.64% | -60.00 | 2,210.50 |
| 10 |  |
Rio Tinto Plc | -2.52% | -121.50 | 4,706.50 |
US close: Stocks extend losses amid further growth fears
Wall Street stocks closed weaker on Thursday, as market participants continued to digest the Federal Reserve’s interest rate decision overnight.
At the close, the Dow Jones Industrial Average was down 0.35% at 30,076.68, as the S&P 500 lost 0.84% to 3,757.99 and the Nasdaq Composite was off 1.37% at 11,066.81.
The Dow closed 107.1 points lower on Thursday, extending the losses it recorded on Wednesday after the Federal Reserve said it would raise interest rates by a further 75 basis points.
“Today has seen another bout of downside for stock markets throughout Europe and the US, with geopolitical and economic concerns providing a drag on risk assets once again,” said IG senior market analyst Joshua Mahony.
“On a week dominated by central banks, it was always going to be difficult to envisage a scenario where traders emerge with a positive outlook.
“Volatility has come from a variety of sources, with the aftereffects of yesterday’s FOMC monetary policy meeting coming into play alongside a Russian nuclear war warning, BoJ yen intervention, and a BoE rate decision.”
Comments from the central bank remained in focus throughout Thursday’s session, after policymakers vowed to continue raising rates to as high as 4.6% in 2023 before pulling back as part of an effort to battle surging inflation.
News that the Fed was expecting to raise its year-end rate to 4.4% in 2022 also left market participants fearful that the US economy may very well be rapidly approaching a recession.
On the macro front, Americans filed first-time unemployment claims at an accelerated pace in the week ended 17 September, according to the Department of Labor.
Initial jobless claims rose by 5,000 week-on-week to 213,000, below market expectations for a print of 218,000 but still a slight increase from the prior week’s downwardly revised print.
Elsewhere, the Conference Board‘s leading index decreased by 0.3% in August to 116.2 points for a sixth consecutive drop and following its 0.5% fall in July.
In equities, FedEx managed gains of 0.84% after it announced a hike in air and ground shipping rates, as well as its cost-cutting plans, after it pulled its guidance last week.
Eli Lilly leapt 4.85% after UBS upgraded the pharmaceuticals maker to ‘buy’, describing its diabetes drug candidate ‘Mounjaro’ as potentially “the biggest drug ever”.
On the downside, Novavax tumbled 13.3% after a downgrade to ‘underweight’ from ‘neutral’ at JP Morgan, amid weakening demand for its Covid-19 vaccine.
Friday newspaper round-up: Boeing, rail strikes, HSBC
Boeing and its former chief executive have settled an investigation by the US’s top financial regulator into allegedly misleading statements the planemaker and its then boss made about its 737 Max jets, involved in two deadly crashes in Indonesia and Ethiopia. Boeing will pay $200m to settle charges that it misled investors and the former Boeing chief Dennis Muilenburg has agreed to pay $1m. – Guardian
Rail services around Britain will be brought to a near standstill for the first two weekends in October after the RMT union announced a further national strike. About 40,000 RMT members employed by Network Rail and 15 train operating companies will strike for another 24 hours on Saturday 8 October. – Guardian
Britain’s power supplies risk running short for 10 hours this winter if it is unable to import power from the continent, according to the latest forecasts from leading energy analysts. LCP explored the “very possible” scenario that Europe won’t be able to meet Britain’s electricity needs this winter due to its own shortages. – Telegraph
Abuse of Britain’s corporate registry by “kleptocrats, organised criminals and terrorists” is to be confronted with the biggest changes to Companies House in 170 years, the government has said. The business department’s reforms will tackle the use of UK companies as a front for crime and corruption by making Companies House a “more active gatekeeper”. – The Times
The asset management business of HSBC has set out plans to cut investments in thermal coal, months after one of its former top executives caused a furore with his comments about climate change. The investment division of the FTSE 100 bank gave a timetable for removing companies that make money from the polluting fuel from its actively managed holdings by 2040. Its active fund managers will also immediately stop investing in new bonds or the stock market flotations of companies that are expanding their thermal coal operations. – The Times
