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London open: Housing stocks pull FTSE lower on rate-hike fears
The FTSE 100 dropped in early trade on Tuesday as investors reacted to an unexpected acceleration in UK wage growth and a surprise interest rate cut in China.
By 0831 BST, the UK benchmark index was down 0.4% at 7,481, after closing at a one-month low the day before.
Average weekly earnings excluding bonuses rose 7.8% year-on-year in the three months to June – the highest since records began in 2001 – the Office for National Statistics said, putting more pressure on the beleaguered Bank of England to lift interest rates again in its fight to quell inflation. Economists had pencilled in a slowdown to 7.3% from 7.5% the previous month.
Meanwhile, the unemployment rate increased to 4.2% from 4%, its highest since October 2021 and ahead of expectations, while soaring wages mean more interest rate pain could be on the way.
The news means that a rate hike at the next policy meeting in September now looks highly likely, according to economists.
In other news, the People’s Bank of China made a surprise cut to interest rates on Tuesday as it looked to stimulate economic demand amid a sputtering recovery. Defying expectations, the central bank cut the rate on 401 billion yuan ($55.25bn) worth of one-year medium-term lending facility loans to some financial institutions by 15 basis points to 2.50% from 2.65% previously.
The cash injection was to counteract factors including tax payments in order to “keep banking system liquidity reasonably ample”, the PBOC said in a statement.
In the US, retail sales figures for July will be out on Tuesday, and are expected to show that growth picked up from 0.2% to 0.4% last month.
Property stocks slip after wage data
A host of building and real estate stocks were in the red on the back of concerns about how the Bank of England will react to the latest wage data. Higher interest rates have depressed market activity over the past year, with many property companies reporting falling profits and declining portfolio valuations in recent results. Persimmon, Land Securities, Savills and Derwent London were all trading lower early on.
On the other hand, a host of retailers were making gains, including Next, Frasers Group and Curry’s.
Marks & Spencer was the standout performer on the FTSE 350 with shares jumping 8% after the retailer lifted guidance for half-year profits after strong sales growth in the first 19 weeks of its financial year. “We now expect the outcome for the year to show profit growth on 2022-23, and the interim results to show a significant improvement against previous expectations,” M&S said.
Legal & General slipped after reporting an operating profit of £941m for the first half, slightly below the £958m recorded in the first six months of 2022.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Marks And Spencer Group Plc | +6.60% | +13.50 | 218.20 |
| 2 |  |
Hikma Pharmaceuticals Plc | +0.09% | +2.00 | 2,148.00 |
| 3 |  |
Fresnillo Plc | +0.08% | +0.40 | 525.80 |
| 4 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 5 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 6 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 7 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
| 8 |  |
Reckitt Benckiser Group Plc | +0.00% | +0.00 | 6,498.00 |
| 9 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
| 10 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Legal & General Group Plc | -3.60% | -8.40 | 224.70 |
| 2 |  |
Antofagasta Plc | -3.06% | -46.00 | 1,457.00 |
| 3 |  |
Phoenix Group Holdings Plc | -2.82% | -15.20 | 524.60 |
| 4 |  |
Admiral Group Plc | -2.51% | -56.00 | 2,178.00 |
| 5 |  |
Prudential Plc | -2.37% | -23.70 | 977.80 |
| 6 |  |
Johnson Matthey Plc | -2.21% | -37.50 | 1,656.00 |
| 7 |  |
Hargreaves Lansdown Plc | -2.15% | -17.20 | 784.00 |
| 8 |  |
Halma Plc | -2.07% | -44.00 | 2,084.00 |
| 9 |  |
Schroders Plc | -2.00% | -8.70 | 426.30 |
| 10 |  |
Anglo American Plc | -1.95% | -40.50 | 2,033.50 |
US close: Stocks reverse losses to finish in the green
Wall Street saw a positive end to the trading day on Monday, with major indices advancing amid subdued trading activities.
The upswing came as market participants continued to mull over last week’s inflation data, and keenly awaited minutes from the Federal Reserve’s latest policy meeting, due for release later in the week.
By the close, the Dow Jones Industrial Average had registered modest gains, rising by 0.07% to 35,307.63.
The S&P 500 meanwhile advanced 0.58% to settle at 4,489.72, and leading the pack, the tech-heavy Nasdaq Composite rose 1.05% to 13,788.33.
In currency markets, the dollar was little changed, last trading 0.01% lower on sterling at 78.84p.
It remained flat against the euro at 91.69 euro cents, while it registered a slight decrease of 0.01% versus the yen, changing hands at JPY 145.54.
“Despite starting the week on the back foot on account of a weak Asia session, and concerns over the Chinese real estate market, European markets tried to rally in early trading, but spent the day struggling for gains as they look to recover some ground after two weeks of losses,” said CMC Markets chief market analyst Michael Hewson earlier.
“US markets took their cues from the lacklustre nature of today’s European session, opening lower, at the same time as yields have continued to edge higher.”
US Steel rejects takeover, PayPal announces new CEO, AMC share price tumbles
Amid a dearth of economic updates for investors to sink their teeth into, all eyes were on equities, with United States Steel Corporation surging 36.8%.
The move came in the wake of the company’s rejection of a $7bn takeover offer from competitor Cleveland-Cliffs.
That bid was placed at $35 a share, making for a substantial 43% premium to US Steel’s closing price on Friday.
Adding to the narrative, US Steel disclosed over the weekend that it was currently exploring various options, having received multiple unsolicited acquisition proposals.
Cleveland-Cliffs itself saw its shares rise by 8.78%.
Elsewhere, PayPal Holdings gained 2.81% after it announced that Alex Chriss, currently heading Intuit’s small business and self-employed division, would be taking the reins as PayPal’s chief executive come September.
On the downside, electric vehicle giant Tesla dipped 1.19%, after the company’s decision to reduce the price of its Model Y vehicles in China.
Cinema operator AMC Entertainment Holdings tumbled 35.55% after a Delaware court gave the green light to its revised and controversial stock conversion plans towards the end of last week.
AMC’s preferred equity stock, however, was boosted by the news, rising 16.3% by the close.
Tuesday newspaper round-up: Trump indictment, Harvey Nichols, Plus500, Wilko, B&M
Donald Trump and several allies were indicted in Georgia last night, charged with launching a “criminal enterprise” to overturn the result of the 2020 presidential election in the state, after demanding that officials “find” the extra votes to reverse President Biden’s victory. In the indictment issued by district attorney Fani Willis in Fulton County after a two-year investigation, Trump, 77, was accused of racketeering, forgery and a string of other election crimes as he and associates pressured Georgia officials to overturn his narrow defeat to Biden. The indictment, which hinges on laws originally designed to prosecute the mafia, could prompt the first televised criminal trial of a former president in US history. – The Times
The chief executive of Harvey Nichols has quit abruptly following a clash with the luxury retailer’s Chinese owner over her plans for the business. Manju Malhotra is to step down after just over three years in the role and will be replaced by the son of Sir Dickson Poon, the tycoon who has owned Harvey Nichols through his company Dickson Concepts since 1991. – Telegraph
The government’s levelling up plans for England are being hampered by a funding system that is “not fit for purpose” and deprives the poorest areas of the financial support to match their needs, a leading think tank has said. The Institute for Fiscal Studies said that the method for allocating money to pay for public services is out of date, based on inadequate data and skewed in favour of the better-off south-east. – Guardian
Two more big London-listed companies have joined the roll call of those considering a listing in New York, a trend that threatens to undermine Britain’s standing as a financial centre. Plus500, the financial trading platform whose headquarters are in the UK, said it was looking at the possibility of securing a dual listing, while YouGov, the polling firm, said it was thinking about moving its listing from the Aim market to Wall Street. – The Times
The collapse of Wilko is bad news for staff, customers and Britain’s high streets – but not everyone will be commiserating. For the billionaire brothers behind rival B&M Value Retail, the collapse of their 93 year-old rival is an opportunity. “The Wilko administration offers further opportunity for B&M to take market share,” analysts at Deutsche Bank predicted this week, forecasting a £200m sales boost. The note helped B&M end the Monday at the top of the FTSE 100. – Telegraph
The daily usage of Threads, Meta’s answer to Twitter, continues to slump after a strong start in its first weeks of existence. Engagement with the social media app is down 79% from a high of 2.3 million active users in early July to 576,000 as of 7 August, according to Similarweb, a digital intelligence platform. – Guardian
