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London open: Stocks nudge lower as investors keep an eye on bond yields
London stocks nudged lower in early trade on Tuesday as investors kept an eye on UK bond yields and ahead of the release of the latest US inflation reading.
At 0840 GMT, the FTSE 100 was down 0.1% at 8,215.79.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “UK markets opened broadly flat this morning, feeling continued pressure from rising UK bond yields (gilts) and shifting rate expectations as investors grappled with persistent inflation concerns.
“The yield on the UK 10-year gilt climbed to 4.9%, its highest since July 2008, as traders once again pared back expectations for Bank of England rate cuts in 2025. With inflation data looming and markets anticipating steady annual inflation at 2.6%, but a slight dip in the core rate to 3.4%, the focus remains on how stubborn price pressures will influence monetary policy and broader economic sentiment.”
There are no major UK data points due, but the US producer price index for December is scheduled for release at 1330 GMT.
In equity markets, JD Sports tumbled as it downgraded its full-year profit forecast, posting a drop in revenue for November and December in challenging markets.
The group now expects full-year pre-tax profit of between £915m and £935m, down from previous guidance of £955m to £1.035bn.
BP was in the red as the energy major said it now expects to report lower upstream production for the fourth quarter, while tax charges and foreign exchange losses for the full year will be greater than previously expected.
British American Tobacco retreated on news that Reinet Investments SCA is offering to sell its 2% stake in the company in a placing.
Crest Nicholson lost ground as the housebuilder delayed the publication of its 2024 results and said it expects the total fire remediation provision at the year-end to be about £245m to £255m, compared to £145m at the half year.
On the upside, Persimmon jumped as the housebuilder said full-year underlying pre-tax profit was set to be around the upper end of market expectations as completions were ahead of market forecasts.
Barratt Redrow and Taylor Wimpey also gained.
Ocado surged as Ocado Retail delivered a strong finish to its financial year, with sales growth accelerating in the fourth quarter as weekly orders reached a milestone of 500,000 for the first time.
The company, which is the grocery joint venture between Ocado Group and Marks & Spencer, reported retail revenues of £715.8m for the 13 weeks to 1 December, up 17.5% year-on-year and a pick-up from the 15.5% growth seen in the third quarter. That was followed by a record performance over the key Christmas trading period, Ocado Retail said.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Banco Santander S.a. | +5.17% | +19.50 | 397.00 |
| 2 |  |
Barratt Redrow Plc | +2.89% | +11.50 | 409.20 |
| 3 |  |
Aib Group Plc | +2.62% | +12.00 | 470.00 |
| 4 |  |
Informa Plc | +2.11% | +16.60 | 803.40 |
| 5 |  |
Glencore Plc | +2.01% | +7.30 | 371.25 |
| 6 |  |
Bhp Group Limited | +1.74% | +35.00 | 2,051.00 |
| 7 |  |
Rio Tinto Plc | +1.69% | +82.50 | 4,967.50 |
| 8 |  |
Ferguson Enterprises Inc. | +1.59% | +220.00 | 14,090.00 |
| 9 |  |
Flutter Entertainment Plc | +1.53% | +320.00 | 21,200.00 |
| 10 |  |
Antofagasta Plc | +1.45% | +24.50 | 1,715.50 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bp Plc | -2.39% | -10.30 | 420.90 |
| 2 |  |
Centrica Plc | -2.21% | -3.00 | 132.85 |
| 3 |  |
British American Tobacco Plc | -1.70% | -50.00 | 2,883.00 |
| 4 |  |
Intermediate Capital Group Plc | -1.35% | -28.00 | 2,044.00 |
| 5 |  |
Gsk Plc | -1.24% | -16.50 | 1,314.50 |
| 6 |  |
Next Plc | -1.18% | -110.00 | 9,240.00 |
| 7 |  |
Severn Trent Plc | -0.68% | -16.00 | 2,347.00 |
| 8 |  |
Tesco Plc | -0.56% | -2.00 | 358.20 |
| 9 |  |
Astrazeneca Plc | -0.50% | -54.00 | 10,768.00 |
| 10 |  |
Unilever Plc | -0.42% | -19.00 | 4,512.00 |
US close: Stocks erase losses after late rally, Nasdaq stays lower
US equity markets were mixed on Monday after finishing well above their daily lows, with the S&P 500 erasing early losses to close higher but weakness in the tech sector kept the Nasdaq in the red.
Overall, the mood was one of caution to start the week, as bond yields continued to creep higher in the aftermath of Friday’s bumper jobs report.
The S&P 500 finished up 0.2%, having fallen as much as 0.9% earlier on, while the Nasdaq fell 0.4%.
The Dow, however, jumped 0.9% as investors shifted into more defensive cyclical sectors with economic bellwethers like banks and industrial stocks performing well.
10-year US Treasury yields rose a further 1.8 basis points to 4.787% on the back of December’s stronger-than-expected reading of non-farm payrolls, which raised uncertainties regarding the Federal Reserve’s near-term path for monetary policy. The yield is now trading at its highest in 14 months, with many expecting the 5.0% mark to be hit in the near future.
“Many analysts are predicting a move up to 5.0% this time round as well, as the robust labour market, along with the recent pickup in inflation, are both making it difficult for the Federal Reserve to justify further rate cuts. In fact, some analysts now believe the Fed’s next move may be a hike,” said David Morrison, senior market analyst at Trade Nation.
In fact, economists at Goldman Sachs announced in a note on Friday that they now expect the Fed to cut rates just twice in 2025 with the first cut in June, compared with earlier projections for three cuts with the first happening in March.
Also adding to inflationary pressures was a fresh surge in the price of oil due to Friday’s announced broader US sanctions on Russian oil. WTI crude was up 2.9% at $78.78 a barrel, trading at levels not seen since mid-August.
Investors were also scaling back risk appetite ahead of the most recent producer and consumer price index reports for December, which will be released on Tuesday and Wednesday, respectively.
Meanwhile, banking heavyweights Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America will all report fourth-quarter earnings before the week is out.
Market movers
Nvidia was leading chip stocks lower as the outgoing Biden administration issued fresh restrictions over exports of advanced AI chips. The White House said the new rules were “thwarting smuggling, closing other loopholes, and raising AI security standards”.
Rising bond yields were also adding to downwards pressure on growth-oriented stocks like Nvidia, which was seen as a catalyst for much of the US equity market’s gains in 2024. Palantir, Tesla and Micron Technology also dropped.
Also weighing on the tech sector was Apple, which finished lower on the day of its first hearing in a $1.8bn class action lawsuit in the UK, with prosecutors accusing the tech giant of anti-competitive practices on iOS devices.
Shares in US Steel were rising strongly amid speculation that Cleveland-Cliffs and Nucor are mulling a possible big for the manufacturer after the planned sale to Nippon Steel was blocked by the government.
Tuesday newspaper round-up: TikTok, Lloyds, Amazon
Taxpayers are being asked to shoulder £1bn in debt amassed by a bankrupt Surrey council that will be merged in the government’s plan for the biggest transfer of powers to England’s regions this century. Posing a fresh financial headache for the government, councillors in Surrey have requested that ministers “write off” £1bn in debt held by troubled Woking borough council to enable a merger between the county’s 12 local authorities. – Guardian
Chinese officials are in preliminary talks about a potential option to sell TikTok’s operations in the United States to billionaire Elon Musk, should the short-video app be unable to avoid an impending ban, Bloomberg News reported on Monday. Beijing officials prefer that TikTok remains under the control of parent Bytedance, the report said, citing sources. – Guardian
Britain’s hiring downturn is “just the tip of the iceberg”, business chiefs have warned, as companies face surging costs in the wake of Rachel Reeves’s tax raid. The share of employers putting the brakes on hiring jumped during the last three months of 2024, according to figures from the British Chambers of Commerce (BCC), with companies already slashing jobs following the Budget. – Telegraph
One of Britain’s biggest lenders has stepped up efforts to bring employees back to the office as it emerged that senior staff at Lloyds Banking Group may have bonuses cut if they fail to go in at least twice a week. The risk of a lower bonus for falling short of office attendance requirements applies to about 20 per cent of Lloyds’s 60,000 staff who are considered to be senior employees. – The Times
Amazon has put in orders for more than 150 electric heavy goods vehicles to create Britain’s largest zero-emission truck fleet. The delivery company is also to start moving packages at scale by rail, using freight trains on the west coast main line which runs between Scotland, the West Midlands and London. – The Times
