1.52pm: US markets make upbeat start
US stocks opened higher on optimism regarding the outcome of the Fed’s November meeting on Wednesday, with investors hoping for dovish pivot by the central bank.
Just after the market opened, the Dow Jones Industrial Average had added 240 points or 0.7% at 32,973 points, the S&P 500 was up 37 points or 1% at 3,910 points, and the Nasdaq Composite had gained 144 points or 1.3% at 11,133 points.
Forex.com market analyst Joshua Warner noted that the Fed is taking center stage this week and stocks have found support on hopes the central bank could adopt a less hawkish approach to monetary policy after their November meeting.
“Strategists at JPMorgan (NYSE:JPM) said there is hope that aggressive rate hikes are coming to an end and that they will start to rise at a slower rate after the November meeting before peaking in the first quarter of 2023,” Warner said.
“Markets are also finding some support from speculation that China could look to remove Covid-19 restrictions and reopen the economy once again, with stocks like Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), Bilibili and JD.com all trading 5.9% to 9.3% higher on their American exchanges today.”
In terms of other major movers, Uber (NYSE:UBER) jumped 13.6% at the open after the ride-sharing company posted mixed third quarter results, including a revenue beat due to a surge in bookings.
Ahead of reporting its results after the closing bell today, Airbnb (NASDAQ:ABNB) shares rose 3.8%, with the accommodation platform expected to report increased revenue and improved adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
“It is important to remember that the business remains considerably larger than it did before the pandemic, although the ability to keep delivering the strong growth that investors have become accustomed to will become more difficult as markets brace for a recession in 2023,” Warner noted.
Back in the UK, and the FTSE 100 is up 113.47 points or 1.6% at 7208, off its high of 7228 but still at its best level for five weeks.
12.47pm: Footsie firms on track for record buybacks
Bumper profits from BP PLC (LON:BP) have inevitably led to calls for further windfall taxes on the oil giants, especially given its latest share buyback plan.
But the buyback news could see a new record set for FTSE 100 companies.
AJ Bell investment director Russ Mould said: “The debate over the rights and wrongs of BP’s bumper profits will run and run, but from the narrow perspective of investment the oil major’s announcement of its fourth share buyback scheme in 2022 means the FTSE 100’s members are on track to return record amounts of cash to their shareholders this year.
“After Shell’s $4 billion announcement last week and BP’s $3.5 billion plan for the final three months of 2022, FTSE 100 firms are now due to return £55.5 billion to their shareholders via share buybacks this year, on top of a forecast aggregate dividend pay-out of £81.5 billion.
“That estimated dividend payment is a fraction short of 2018’s all-time peak of £85.2 billion but share buybacks are now firmly on track to set a new record, with the prior high of £34.4 billion also set in 2018."
11.40am: Pound higher against dollar and euro
Sterling has shrugged off the day's poor housing and manufacturing data, as investors anticipate the Bank of England raising interest rates on Thursday.
Against a weaker dollar, the pound is up 0.76% at US$1.1554 but it is also ahead against the euro, up 0.137% at €1.1615.
Apart from this week's interest rate decision, the Bank is also expected to begin selling off some of the gilts it bought as part of the quantitative easing programme.
Neil Wilson at Markets.com said: "Watch out today as the Bank of England begins selling £750mln of its stock of gilts..This is the first attempt to offload the £838bn in gilts it has been holding since 2009 – let’s hope it’s a boring affair."
10.45am: Wall Street set for positive start
US stocks are expected to push higher on Tuesday, starting the new month positively after a strong showing overall in October, although much will depend on another batch of earnings and underlying caution will remain ahead of Wednesday's Federal Reserve policy meeting decision.
Futures for the Dow Jones Industrial Average were 0.7% higher in pre-market trading, while those for the S&P 500 were ahead 1.0%, and contracts for the Nasdaq-100 gained 1.2%. Wall Street stocks slipped on Monday but the major indexes still closed October with monthly gains.
The Federal Reserve Open Market Committee (FOMC) will gather today to start its latest two-day meeting to discuss how much more to raise US interest rates as the central bank tries to cool inflation, which remains near 40-year highs.
Craig Erlam at Oanda said: "While a 75 basis point hike looks locked in tomorrow, the messaging is what investors are interested in. Despite inflation remaining at eye-watering levels, there's a growing belief that the central bank will signal a desire to ease off the brake over the following few meetings starting with a 50bps hike in December.
"It may come too late to avoid a recession but the Fed has been very clear from the start that while a soft landing is the desirable and attainable outcome, getting inflation under control is the primary focus. The question is whether the central bank believes its efforts will achieve that or if more needs to be done.
"With the economy weakening, earnings not impressing and yield curves inverting - signaling an incoming recession - many now believe the risks of aggressive tightening are greater than a more gradual approach. The economy has a lot of tightening to absorb once rates likely hit the 3.75-4% range this week.
"A dovish signal could be an exciting moment for equity investors, one they've craved all year, but that doesn't mean it'll be plain sailing from here," Erlam concluded.
On the corporate front, earnings are due Tuesday from a diverse set of companies including Airbnb, Uber, Pfizer (NYSE:PFE), AMD and Devon Energy.
10.30am: Crude prices on the rise
Oil prices are higher, in the wake of the latest OPEC report on the market.
Brent crude has added 1.72% to US$94.41 a barrel while West Texas Intermediate, the US benchmark, is up 1.59% at US$87.91.
Craig Erlam, senior market analyst at Oanda said: "OPEC released its 2022 oil market report on Monday and sees demand continuing to grow in the coming years. That's despite the economic headwinds in the near term that drove its controversial two million barrel cut last month
"Among other things, the report highlighted the need for more investment, the strengthening of demand due to the shift from focusing on the transition to energy security, and a much later peak in demand."
That has done little for BP PLC, although its shares have recovered from their early negative start to edge up 0.52%. The oil giant reported bumper profits and a share buyback, but this has only renewed demands for further windfall taxes on the sector.
Overall the FTSE 100 remains buoyant despite the poor UK manufacturing and housing figures out today, and ahead of key interest rate decisions from the US Federal Reserve and the Bank of England.
Supported by mining shares and Ocado Group PLC (LON:OCDO), the leading index has hit five week highs and is now up 1.49% or 105.99 points at 7200.52.
9.41am: Manufacturing in no position to help UK avoid recession - S&P
UK factories saw their biggest contraction since the first Covid-19 lockdown in May 2020, while business optimism hit a two and a half year low.
The latest S&P Global/CIPS manufacturing purchasing managers index came in at 46.2 in October, up from the initial estimate of 45.8 but well down on the 48.4 recording in September. This marked a 29 month low.
Any reading below 50 signals a contraction.
UK S&P Global/CIPS Manufacturing PMI Oct F: 46.2 (est 45.8; prev 45.8)— LiveSquawk (@LiveSquawk) November 1, 2022
The continuing slowdown in the economy presents another concern for the Bank of England, which is widely expected to raise interest rates again this week.
Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing production suffered a further decline at the start of the fourth quarter, with the sector buffeted by weak demand, high inflation, supply-chain constraints and heightened political and economic uncertainties...
"The darkening situation also knocked business optimism down to a two-and-a-half year low, as concerns about the weak demand outlook, recession, inflationary pressure and sustained uncertainty hit confidence. The labour market picture has also deteriorated, with companies cutting jobs for the first time in almost two years while still struggling to recruit and retain appropriate staff.
"On current form manufacturing is in no position to help prevent the broader UK economy from sliding into recession."
???????? The decline in the UK’s manufacturing sector deepened in October with the #PMI at a 29-month low of 46.2. Moreover, job cuts were registered for the first time in almost 2 years while inflationary pressures eased. Read more: https://t.co/oVpSgC86Dw pic.twitter.com/LI2lTIUjYt— S&P Global PMI™ (@SPGlobalPMI) November 1, 2022
9.20am: BP dips on windfall tax talk after results
Shares in BP PLC have edged 0.45% lower despite the company reporting bumper third quarter profits of US$8.2bn, up from US$3.32bn this time last year, as it benefited from the surge in oil prices.
The problem for the company, of course, is that such soaring profits have prompted more calls for windfall taxes on the oil giants, especially since it unveiled a share buyback.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV), said: "BP shares have been pretty flat despite unveiling a bumper $8.2bn in profits for the third quarter. Speculation is still swirling about fresh windfall taxes on the sector, particularly as oil prices are staying elevated, with Brent Crude rising above US$94 a barrel as supply looks tight. The results come just weeks after outgoing chief executive Ben van Beurden said taxes on oil and gas companies are "inevitable" to help the poorest people in societies.’’
BP made 3-month profit of $8.2bn, which was all cash, and is giving $2.5bn to shareholders via a share buyback. Giving away $2.5bn rather than investing it looks like an invitation by BP to a cash-strapped Sunak government to raise the 25% rate of the “windfall” oil and gas tax— Robert Peston (@Peston) November 1, 2022
Overall the FTSE 100 is holding on to most of its gains, and is now up 99.86 points or 1.41% at 7194.39.
8.34am: Commodity companies provide support
Mining shares are among the gainers after an improvement in China's Caixin manufacturing PMI, which typically covers smaller private firms.
Glencore PLC (LON:GLEN) has climbed 3.98%, Anglo American PLC (LON:AAL) has added 3.78%, Antofagasta PLC (LON:ANTO) is up 3.4% and Rio Tinto PLC (LON:RIO) has risen 3.44%.
But Rentokil Initial PLC (LON:RTO) is down 2.83% after its third quarter update failed to inspire.
Pest control revenues rose 12.6% in line with the first half, but with less demand for hygiene services post-pandemic, disinfection services saw sales of £3.6mln, down by £8.6mln year-on-year.
Victoria Scholar, head of investment at interactive investor said: "Shares in Rentokil have performed well lately, rallying by more than 11% over the last month, making it once of the top performing stocks on the FTSE 100 in October. However, it is giving back some of those gains this morning.”
8.12am: Footsie follows Asian markets higher
Leading shares are moving sharply higher in early trading ahead of this week's key interest rate decisions from the Bank of England and Federal Reserve.
With Asian markets shrugging off a fall on Wall Street, the FTSE 100 has jumped 104.09 points or 1.47% to 7198.62
Later comes the latest snapshot of the UK manufacturing sector, and it is not expected to be particularly pretty.
Michael Hewson at CMC Markets UK said: "With inflation here in the UK.. above 10%, it isn’t too surprising to see how much of an impact it is having on business sentiment with today’s October manufacturing PMI expected to be confirmed at 45.8 and its lowest level since May 2020.
"Combined with an expected fiscal squeeze on UK taxpayers, the outlook for the UK economy is likely to remain subdued as we head into 2023, as the UK government looks to try and plug an apparent “eye-watering fiscal black hole” as described by UK treasury officials."
Among the risers Ocado Group PLC has soared 17% after its signed a deal with South Korean conglomerate Lotte Group to develop its online shopping business.
Ocado chief executive Tim Steiner said: "This partnership brings the Ocado Smart Platform, the most advanced technology for serving online grocery, to one of the most mature ecommerce markets in the world. I'm delighted to welcome Lotte to the innovative group of retailers developing their online operations with Ocado. With this new partnership, our unique, proprietary technology will now power the online businesses of twelve major retailers across ten countries worldwide."
7.50am: Sterling consolidates against the dollar, European hawks steer euro
European Inflation isn’t slowing down any time soon. In fact, at 10.7%, September figures grew even higher than expected.
European Central Bank president Christine Lagarde has been vague about the bank’s interest rate plans, but investors expect the hawks to drive policy in the near future, if the rise in the EUR/USD pair is any indicator.
The pair dipped immediately another the announcement but has since added 0.4%, reaching just below parity at US$0.992 at the time of writing.
But some headwinds are expected in anticipation for the US Federal Reserve’s interest rate decision tomorrow, as hawkish confirmation will likely motivate what has been a softer US dollar of late.
EUR/GBP similarly dipped and recovered and remains relatively flat at 86.1p.
Sterling is currently swapping for 1.151 US dollars, with cable remaining compressed by the greenback’s continued strength among the G10 set.
Luckily the pair has a 3% boost achieved from a buoyant October behind it.
Cable’s strong October added 3% to the pair
Today’s UK house price data will be a significant pressure point for the pound though- The Nationwide House Price Index was up 7.2% year on year in October, the smallest increase since April of 2021 and slowing sharply from a 9.5% rise in September.
7.39am: House prices see first monthly decline since July 2021
UK house prices saw a sharp decline in October, following the turmoil of the mini-budget and amid rising interest rates.
Annual UK house price growth slowed to 7.2% in October, from 9.5% in September, according to the Nationwide.
Prices fall 0.9% month-on-month – the first monthly decline since July 2021.
Robert Gardner, Nationwide's chief economist, said: “October saw a sharp slowdown in annual house price growth, to 7.2% from 9.5% in September. Prices fell by 0.9% month-on-month, after taking account of seasonal effects, the first such fall since July 2021 and the largest since June 2020.
“The market has undoubtedly been impacted by the turmoil following the mini-Budget, which led to a sharp rise in market interest rates. Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.
“For example, the increase in mortgage rates meant that a prospective first-time buyer (FTB) earning the average wage and looking to buy a typical FTB home with a 20% deposit would see their monthly mortgage payment rise from c.34% of take-home pay to c.45%, based on an average mortgage rate of 5.5%. This is similar to the ratio prevailing before the financial crisis."
He warned the market would slow in the coming quarters, with the outlook extremely uncertain.
But he added: "Much will depend on how the broader economy performs, but a relatively soft landing is still possible. Longer term borrowing costs have fallen back in recent weeks and may moderate further if investor sentiment continues to recover."
7.00am: Strong start seen in London
FTSE 100 expected to open higher on Tuesday, shrugging off a weak showing in the US, with investors eyeing interest rate decisions either side of the pond this week.
Spread betting companies are calling the lead index up by around 45 points.
US markets ended in negative territory, finishing a strong month on a softer footing with investors looking ahead to the Federal Reserve’s policy meeting which kicks off today.
At the close the Dow Jones Industrial Average was down 129 points, or 0.39%, at 32,733, the S&P 500 fell 29 points, or 0.75%, to 3,872 and the Nasdaq Composite declined 114 points, or 1.03%, to 10,988.
But Michael Hewson, chief market analyst at CMC Markets UK said the US showing is “not expected to prevent markets here in Europe from picking up from where they started the week yesterday, with a higher open, after a similarly strong start in Asia markets.”
On a busy week of central bank announcements The Reserve Bank of Australia raised the cash interest rate target by 25 basis points by 2.85% and also increased the interest rate on exchange settlement balances by the same amount to 2.75%.
In London, results from BP PLC (LON:BP) and Rentokil Initial PLC (LON:RTO) will lead a busy day of corporate news while manufacturing PMI figures are also due.