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London open: All eyes on U.S. inflation, geopolitics
Stocks in London were trading a tad higher on Wednesday ahead of the release of key inflation data in the U.S. later in the session.
The situation in the Middle East was also still very much on investors’ minds.
Cameron Brandt, director of research at market-date firm EPFR, told Dow Jones Newswires: “I think that markets and the actors in them are still somewhat unsure about how to deal with geopolitics and how much weight to give it”.
Against that backdrop, as of 0915 BST the FTSE 100 was edging up 0.03% to 7,630.30.
At 1330 BST the U.S. Department of Labor was scheduled to release producer price figures for the month of September.
Investors would also be keeping close tabs on a slew of scheduled speeches from top Federal Reserve officials.
First out would be Fed governor Michele Bowman at 0915 BST who was scheduled to deliver a speech in Marrakech, Morocco, at the IMF’s annual meeting.
She would be followed at 1515 BST by Fed governor Christopher Waller, Atlanta Fed boss Raphael Bostic at 1715 BST and Boston Fed chief Susan Collins at 2130 BST.
And at 1900 BST the Federal Reserve was to release the minutes of its last rate-setting meeting.
“In the last few days, we’ve heard from Fed vice chair Philip Jefferson, Dallas Fed President Lori Logan, who were followed yesterday by Atlanta Fed President Raphael Bostic, as well as Minneapolis Fed President Neel Kashkari who all acknowledged that monetary policy could be restrictive enough and that rising yields could mean the Fed might have to do less, and not hike again in November,” said Michael Hewson, chief market analyst at CMC Markets UK.
“While this may be true, this week’s inflation numbers could prompt some repricing of that expectation if they come in hotter than expected, starting with today’s PPI numbers for September, and tomorrow’s CPI report.”
Pagegroup anticipates large drop in profits
Recruitment firm Pagegroup said it expects full-year profits to drop by as much as 36% as a result of ongoing challenging conditions across Asia, the UK and US markets in the third quarter. Group operating profit for 2023, excluding one-off items, is expected to come in at between £125m and £130m, compared with the £196.1m made in 2022.
FirstGroup said in an update on Wednesday that it was expecting improved full-year profits in both its rail and bus divisions, citing stronger-than-expected demand and agreed variable fee payments with the Department for Transport for First Rail, and robust passenger volumes plus pension fund changes for First Bus. Corporate actions included managing Greyhound pension liabilities and purchasing a portion of its 2024 bonds. As a result, 2024 group adjusted operating and attributable profits were expected to surpass previous board expectations by £14 to £20m and £7m to £10m, respectively, with an anticipated year-end adjusted net cash position of £20m to £30m.
Gold producer Endeavour Mining has said that it’s about 70% of the way through planned drilling at its key Côte d’Ivoire project for 2023, but results so far have been promising. The company, with exploration assets across West Africa, said 123km has been drilled at its Tanda-Iguela projects so far this year with plans for an additional 55km before the year is out, well ahead of the 70km initially planned. An updated mineral resource estimate for its key Assafou deposit will be published later this year, but Endeavour says that drill results obtained so far “continue to demonstrate [Tanda-Iguela’s] potential to become Endeavour’s next cornerstone asset”.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Imperial Brands Plc | +1.94% | +33.50 | 1,756.50 |
| 2 |  |
Centrica Plc | +1.72% | +2.70 | 159.35 |
| 3 |  |
Bp Plc | +1.56% | +8.20 | 533.30 |
| 4 |  |
Sse Plc | +1.43% | +22.50 | 1,591.50 |
| 5 |  |
Bt Group Plc | +1.35% | +1.60 | 119.85 |
| 6 |  |
United Utilities Group Plc | +1.33% | +12.80 | 973.00 |
| 7 |  |
Bae Systems Plc | +1.30% | +13.50 | 1,054.50 |
| 8 |  |
Severn Trent Plc | +1.25% | +30.00 | 2,421.00 |
| 9 |  |
National Grid Plc | +1.20% | +11.60 | 976.60 |
| 10 |  |
Coca-cola Hbc Ag | +0.88% | +19.00 | 2,168.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Burberry Group Plc | -3.54% | -65.00 | 1,770.50 |
| 2 |  |
Carnival Plc | -2.17% | -20.80 | 936.40 |
| 3 |  |
Ferguson Plc | -2.14% | -295.00 | 13,490.00 |
| 4 |  |
Kingfisher Plc | -2.07% | -4.50 | 213.30 |
| 5 |  |
Taylor Wimpey Plc | -1.75% | -2.05 | 115.20 |
| 6 |  |
Barratt Developments Plc | -1.64% | -7.10 | 425.00 |
| 7 |  |
Persimmon Plc | -1.64% | -17.50 | 1,048.50 |
| 8 |  |
Smith & Nephew Plc | -1.61% | -15.80 | 965.00 |
| 9 |  |
Next Plc | -1.48% | -104.00 | 6,932.00 |
| 10 |  |
International Consolidated Airlines Group S.a. | -1.26% | -1.90 | 148.30 |
US close: Stocks rise after more dovish Fed remarks
US stocks gained on Tuesday as bond yields tumbled on the back of yet more indications from the Federal Reserve that they are in no rush to tighten monetary policy just yet.
The Dow Jones Industrial Average closed 0.4% higher at 33,739, the S&P 500 gained 0.5% to 4,358, while the Nasdaq finished up 0.6% at 13,563.
Fed vice chair Philip Jefferson and Dallas Fed president Lorie Logan on Monday both highlighted how the recent spike in Treasury yields may have altered their outlook since the last policy meeting, with higher rates potentially doing enough of a job to keep financial conditions restrictive enough.
On Tuesday, Atlanta Fed President Raphael Bostic doubled down on the view, saying that the central bank is likely done tightening for now. Referring to bringing inflation down to the 2% target, Bostic said: “I actually don’t think we need to increase rates anymore.”
After being closed on Monday for Columbus Day and Indigenous Peoples Day, bond markets opened to see strong gains in US Treasuries, with the yield on a 10-year note sinking 15 basis points to 4.655%.
“A steady stream of dovish messaging from the Fed is just what the rally doctor ordered,” said Stephen Innes, managing partner at SPI Asset Management.
“And with 10-year US Treasury yields trading nearly 25 basis points below Friday’s pre-NFP levels, there is a growing sense we have seen peak rates, but significantly, investors are strongly coming around to the idea that the Fed has finally reached the end of its aggressive rate hike runway.”
Markets were largely able to shake off ongoing conflict in the Middle East, with oil prices pulling back after a 4%+ surge the previous session. West Texas crude was down 0.6% at $85.83 a barrel on Tuesday.
No major economic data was released during Tuesday’s session, with the focus firmly on the following day’s US producer price inflation figures. Consensus estimates point to a slowdown in monthly price growth from 0.7% in August to 0.4% for September. The year-on-year rate is expected to remain unchanged at 1.6%.
Minutes from the latest Federal Open Market Committee meeting will also be out later in the evening, while the release of the consumer price index will be closely watched on Thursday.
Boeing, airlines higher
Airline stocks were on the rise, rebounding after heavy falls the previous session following a surge in oil prices, with American, Delta and United in demand. Even Boeing was flying higher despite the news that September deliveries of its 737 MAX jets fell to their lowest level since August 2021.
PepsiCo gained after the drinks giant beat forecasts with its third-quarter results and impressed with the market with guidance for 10% organic revenue growth this year.
Oil stocks lower after some strong gains the previous session, with ExxonMobil, Chevron and ConocoPhillips trading lower.
Kitchen supplies group Tupperware surged by over a quarter after the news that its executive vice chair and director Richard Goudis has stepped down. Shares have risen by nearly 90% since the start of July, but are still trading close to their all-time lows.
Wednesday newspaper round-up: IMF, Currys’, Mortgages
The International Monetary Fund has warned that a surge in oil prices caused by war in the Middle East could hobble the already ‘limping’ global economic recovery. The president of the World Bank, Ajay Banga, said the conflict was ‘an economic shock we don’t need’. Israel’s war with Hamas adds to turbulence on financial markets already convulsed by worries about ‘higher for longer’ interest rates. – Daily Mail
Bidders are lining up a potential takeover of Currys’ Greek and Cypriot business. The electricals retailer said that a strategic review of Kotsovolos, which had begun in June, had elicited interest from “several potential buyers who in turn have submitted non-binding offers”. The FTSE 250 company said the board and its advisers were “evaluating” the bids and would provide a further update “when appropriate”. The news drove a rise in Currys’ shares of 2¼p, or 5 per cent, to 49¼p. – The Times
The proportion of homeowners taking out mortgages of 35 years or longer has jumped as borrowers try to offset the impact of higher interest rates, the Bank of England has warned. Threadneedle Street signalled yesterday that it was watching the developments in the mortgage market closely as homeowners look for ways to limit the steep rises they face in monthly mortgage payments. It said that the share of new mortgage lending on terms of at least 35 years had climbed from 4 per cent in the first quarter of 2021 to 12 per cent in the three months to the end of June. – The Times
Rural homeowners whose views and properties are blighted by new electricity pylons and cables could be offered home insulation, heat pumps and other energy efficiency measures by National Grid. Ben Wilson, National Grid’s chief strategy officer, said the company wanted people living alongside pylons and cabling to benefit from the infrastructure, which must be rolled out at scale as part of the shift to net zero. – Daily Telegraph
