Proactive Investors -
- FTSE 100 falls 92 points
- Mining shares lower despite BHP update
- Boohoo drops on sales slide
1.31pm: US jobless claims fall unexpectedly
US weekly jobless claims have come in much better than expected.
The number of Americans seeking unemployment benefit for the first time last week was 190,000, down from 205,000 the previous week.
Analysts had been expecting an increase to 214,000.
⚠️BREAKING:*U.S. JOBLESS CLAIMS RISE 190,000; EST. 214,000; PREV. 205,000
*LOWEST SINCE APRIL 2022
???????????????? pic.twitter.com/B7WLddRORk
— Investing.com (@Investingcom) January 19, 2023
12.35pm: Footsie falls continue
The decline in leading shares continues to accelerate.
The FTSE 100 is now down 92.52 points or 1.18% at 7738.18, on course for its biggest daily percentage fall since the middle of December.
Miners, banks and housebuilders remain among the biggest fallers.
But Informa PLC (LON:INF) is holding firm in positive territory following its positive update. Its share are up 0.94% at 666.2p, also helped by Goldman Sachs (NYSE:GS) putting the company onto its conviction buy list and lifting its price target from 789p to 907p.
11.50am: US market slide set to continue
Wall Street is expected to open lower after a slew of poor economic data heightened fears that the US is heading into recession, with the Federal Reserve still intent on raising interest rates.
Futures for the Dow Jones Industrial Average fell 0.6% in Thursday pre-market trading, while those for the broader S&P 500 index dropped 0.7% and contracts for the Nasdaq-100 also declined 0.7%.
Markets ended sharply lower on Wednesday following the release of worse-than-expected industrial production and retail sales data for December. Despite producer inflation numbers for that month also coming in softer than expected, the Fed reiterated its stance yet again for a likely terminal rate of over 5%
At the close the DJIA was down 1.8% at 33,297, the S&P 500 fell 1.6% to 3,929 and the Nasdaq Composite slipped 1.2% to 10,957, snapping a seven-day winning streak.
“The S&P 500 had its worst day in a month and the Dow Jones faded by more than 600 points as investors booked profits following a decent run-up in the first two weeks of January,” commented Neil Wilson at markets.com. “After a blistering start to the year, it’s not a great surprise that some softer economic data is an excuse to sell.”
“But bad news is not just yet translating into good news as the Fed is not for budging from its agenda just yet,” Wilson continued. “Whilst markets still think the Fed is going to cut later this year, even the most optimistic investors realise it’s not done with hiking yet.”
Back in the UK, the FTSE 100's slump continues, with the leading index now down 78.49 points or 1% at 7752.21.
11.25am: Housebuilders subside and banks fall
With continuing signs of a weakening UK housing market, building firms are among the day's fallers so far.
In particular Persimmon PLC (LON:PSN) is down 2.88% and Taylor Wimpey PLC (LON:TW.) has lost 2.51%.
A chartered surveyors report has suggested the market was the weakest for 13 years, while sentiment has not been helped by a Bank of England report showing demand for home loans fell back in the last quarter of 2022.
The Bank also flagged a trend for increased defaults for small, medium and larger companies, which has knocked back the banking sector, with Barclays PLC (LON:BARC) down 2.66% and HSBC Holdings PLC (LON:HSBA) 1.56% lower.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV), said: ‘’Caution is returning to the banking sector with Barclays leading the industry charge downwards in early trading, as worries whip up about loans turning bad and recession fears stalk the global economy. The UK economy may have escaped recession in 2022 but the Bank of England’s credit conditions survey highlights that a worrying trend of defaults could still be playing out for companies large and small...
"Fresh worries are whipping around the housing sector as the data shows demand for home loans fell back in the last three months of 2022 and is expected to dip further during the first quarter of this year. It’s clear the disappearance of cheaper mortgage deals has left buyers in limbo, with demand for new properties expected to shrivel. The warning lights have prompted a fresh slide in housing stocks."
10.50am: Goldman boosts Auto Trader
Auto Trader Group PLC (LON:AUTOA) has moved higher in a weaker market.
Its shares are up 1.06% to 572.8p as Goldman Sachs (NYSE:GS) put the company onto its conviction buy list and raised its price target from 789p to 907p.
Tobacco shares have also edged up, wanted for their defensive qualities. British American Tobacco PLC (LON:BATS) is 0.93% higher while Imperial Brands PLC (LON:IMB) has added 0.84%.
Overall though the FTSE 100 remains in negative territory, down 68.51 points or 0.87% at 7762.19 and on track for its biggest fall since 30 December.
10.20am: Housing market weakest for 13 years - surveyors
More signs of weakness in the UK housing market amid rising mortage rates and worries about recession.
House prices were at the lowest levels for 13 years in December, according to the Royal Institution of Chartered Surveyors.
Its housing index balance - which measures the difference between the percentage of surveyors seeing rises and falls in house prices - dropped to -42 in December from -26 the previous month.
This was the lowest since October 2010 and below the -30 that economists had been expecting.
Simon Rubinsohn, chief economist at RICS, said the survey "highlights challenges in the housing market as new buyers grapple with more costly finance terms and uncertainty over the outlook of the economy."
According to the latest RICS survey, housing market activity cooled in December. Prices also look set to fall further in 2023—the price expectations balance points to a 10% y/y drop—due to high mortgage rates, falling real incomes and the perception that house prices will fall. pic.twitter.com/g0daNbt5HD— Gabriella Dickens (@G_Dickens11) January 19, 2023
Walid Koudmani, chief market analyst at online investment platform XTB.com, said: "British consumers continue to be impacted by the cost of living crisis and inflation while demand for properties dropped noticeably after prices rose significantly from 2020.
"While this could be the beginning of a readjustment in the property market, rents continue to show signs of increases as supply of rental properties has declined. In either case, a situation like this was predictable as the increase in prices was bound to impact demand at some point, especially while interest rates continue to rise.
"However, it is unlikely we will see prices return to previous levels and at this point many potential buyers have been priced out of the market."
9.55am: Informa a bright spot
Shares in publishing and exhibitions group Informa PLC have added 1% after an unscheduled but positive trading statement.
The company said Informa it expected to beat forecasts for both full year revenues and earnings. However it was slightly cautious on business in China, forecasting incremental growth but towards the back end of 2023 and into 2024.
Analysts at UBS said: "We expect investors to respond positively to this announcement, mainly due to the beat on 2022 EBIT.
"We interpret the commentary on China as being more cautious than what is currently in consensus forecasts. We estimate consensus expects around £150mln of China revenue in 2023 (similar to 2021), and this may not be possible if China shows do not run until the "back end of 2023".
"Also, additional investment in recent acquisitions may mean that consensus expectations for margin expansion in Informa Tech in 2023 are too optimistic. Overall, we think consensus 2023 EBIT could increase by around 2%, but there could be downgrades later in the year if no China shows run during the first half of 2023."
Overall the market remains under the cosh, with the FTSE 100 currently down 51.97 points or 0.66% at 7778.73.
AJ Bell investment director Russ Mould said: “An overnight sell-off in the US has soured sentiment across Europe this morning
“For once bad news really was bad news, rather than a positive because of the implications it might have for interest rates. Weak US retail sales suggested consumers’ resilience may have been pushed beyond breaking point.
“This undermined the hypothesis of a ‘soft landing’ for the US economy with inflation easing before rates have inflicted too much pain.
“News that Microsoft (NASDAQ:MSFT) is planning to cut 10,000 jobs and a series of weak earnings reports also didn’t help the market’s mood."
9.30am: BT puts up prices but shares not impressed
Shares in BT Group PLC (LON:BT) have edged down 0.63% despite the company announcing hefty price rises.
UBS said the shares were likely to remain volatile "with upside potential in Consumer offset by growing infrastructure competition for Openreach and uncertainty around the pension deficit."
On the price rises, UBS analyst Polo Tang said: "BT has confirmed Consumer prices will rise by +14.4% (CPI+3.9%) from April 2023. While this is positive for investor sentiment and suggests upside risk to BT Consumer estimates, BT shares have rallied +15% YTD ahead of this event and the net impact may not be as high as expected.
"Specifically, promotional prices on broadband have been coming down in recent months; it is not clear if other operators will follow and we see risk of intervention by the government and/or regulator. Comments from the Culture Secretary state that, “imposing above-inflation price hikes is not the right thing to do”, and Ofcom is reviewing whether CPI+ increases were made clear to consumers when they signed up.
"For calendar 2022, +9.3% price rises at BT Consumer did not lead to upgrades in Group EBITDA given cost inflation and downgrades in Enterprise/GS. Overall, we think UK operators can put through price rises for 2023, but the debate is on the quantum amid signs of rising pressures on the UK consumer."
9.15am: Dr Martens drags down FTSE 250
The mid-cap index is also heading lower, not helped by a slide in shares of Dr Martens PLC.
The bootmaker has dropped 21.56% as it cut its full year revenue and earnings estimates on a bottleneck at its new Los Angeles distribution centre and weaker-than-anticipated US trading.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV), said: ‘’Dr Martens has been caught seriously on the back foot with operational problems at its new distribution centre in Los Angeles, piling yet more problems on the beleaguered bootmaker. The transfer of inventory to the new hub was faster than planned, causing a bottleneck of stock, and the chaos is set to reduce wholesale revenues by up to £25 million.
"It’s forced the company to take on new space and an extra shift of staff to sort out the problems which will also push up costs. This is another big migraine for the company, which was also dealing with the headache of disappointing US sales in the fourth quarter, which is viewed as a key market for growth for the company."
Overall the FTSE 250 is down 0.7% at 19,750.93.
Meanwhile the FTSE 100 has fallen 43.33 points or 0.55% at 7787.37.
8.34am: Commodity companies under pressure
Mining shares are among the leading fallers as the prospect of recession raises fears of weakening demand for commodities.
The falls come despite positive comments on China from BHP Group Ltd, down 1%, as the miner maintained its production guidance for 2023.
On China it said: "BHP believes China will be a stabilising force when it comes to commodity demand in the 2023 calendar year, with OECD nations experiencing economic headwinds.
"China's pro-growth policies, including in the property sector, and an easing of COVID-19 restrictions are expected to support progressive improvement from the difficult economic conditions of the first half. China is expected to achieve its fifth straight year of over 1 billion tonnes of steel production."
But worries of a further global slowdown saw Fresnillo PLC (LON:FRES) fall 4.04%, while Glencore PLC (LON:GLEN) is down 2.26%, Antofagasta PLC (LON:ANTO) has lost 1.97% and Anglo American PLC (LON:AAL) is 1.85% lower.
With the oil price weaker - Brent crude is down 0.84% at US$84.27 a barrel - BP PLC (LON:BP) has lost 2.11% and Shell PLC (LON:RDSa) is down 1.79%.
Overall the FTSE 100 has now fallen 38.17 points or 0.49% to 7792.53.
Richard Hunter, head of markets at interactive investor, said: “Markets succumbed to a bout of profit taking as fresh economic data reignited recessionary concerns...
"Declines in the premier index reflected the risk-off approach, with the staples of the sectors which had underpinned the FTSE100’s outperformance – banks, miners and oils - showing some weakness. Despite the initial markdown in early exchanges which have for the moment erased hopes for a new record high, the FTSE100 is still ahead by 4.7% in the year to date."
Among the banks Barclays PLC (LON:BARC) is off 1.75%.
8.14am: FTSE 100 goes into reverse in early trading
Leading shares have opened lower, in the wake of Wall Street's late falls as poor US retail sales revived recession fears.
At the same time, despite signs of inflation easing, central banks are still set to persist with further interest rate rises, although in the case of the US Federal Reserve, perhaps at a slower pace.
So in early trading the FTSE 100 has fallen 35.34 points or 0.45% to 7795.36, a turnaround from earlier in the week when all the talk was of the index testing its record highs.
Bucking the trend, The Sage Group PLC (LON:SGE) has added 1% as the software firm said it had made a good start to the year and stuck to its full year guidance.
Jonathan Howell, Chief Financial Officer, said: "While we are mindful of the current macroeconomic environment, we remain confident in our strategy for delivering efficient growth and we reiterate our guidance for the full year, as set out in our 2022 results announcement."
Steve Clayton, HL Select Fund Manager at Hargreaves Lansdown, said: “Sage is delivering good growth, strongest in the US and from fully cloud-based products in particular. Sage acquired Intaact a few years ago, for what seemed like a very full price at the time
"But today we can see the merits of the deal with almost all of the growth in the business coming from the type of native cloud-based software that Intaact brought into the group."
Elsewhere Deliveroo PLC (LSE:ROO) is up 5% as it said it had reached breakeven in the second half of the fiscal year and predicted that its full-year earnings would be ahead of previous guidance.
This follows a positive update from rival Just Eat Takeaway.com NV this week.
But Boohoo Group PLC is down 4.96% as it reported a 13% drop in sales last year.
8.00am: GBP sent lower against USD after approaching eight-month highs
Japan’s economic morass was on full display with today’s balance of trade read, which showed the biggest annual shortfall since 1979, driven by a weakened yen and a global surge in commodity prices.
Imports did slow down in December, perhaps even more than expected, but for the full year, they jumped over 39%, much faster than a 24.8% rise in 2021, driven mainly by minerals and, petroleum and gas.
The yen, seeing equities pushed lower, advanced against the dollar in this morning’s Asia trading window, with the USD/JPY fair falling 16 bps to 128.11. Advanced of half a percent were made against the pound and 0.,3% against the euro.
Wednesday’s session saw the pound retreat from an intraday high of 1.243 against the greenback, which would have seen the GBP/USD pair hit eight-month highs. The pair still closed in the green, although this morning has seen a further drawback to 1.230.
Cable sent lower after testing a key resistance point – Source: capital.com
EUR/USD performed a similar intraday retreat to 1.079, although the euro looks comparatively stronger this morning, having inched higher to 1.080.
Today’s jobless claims in the US are expected to underscore a resilient jobs market in the face of recessionary fears, but a drastic over or undercalculation of the forecast could cause the greenback to rise or fall on the FX markets according.
For the moment, the US Dollar Index (DXY) continues to range below the 102 barrier.
6.59am: Market set for downbeat start
The FTSE 100 is set to open lower today following heavy falls in the US and as yesterday’s inflation numbers suggested there would no let up yet in the pace of interest rate rises in the UK.
Spread betting companies are calling London’s blue-chip index down by around 45 points.
US markets ended the day nursing hefty losses lower as weak industrial production and retail sales figures heightened fears that the US was heading into recession.
At the close the Dow Jones Industrial Average was down 614 points, or 1.81%, to 33,297, the S&P 500 fell 62 points, or 1.56%, to 3,929 and the Nasdaq Composite slipped 138 points, or 1.24%, to 10,957.
Michael Hewson at CMC Markets said: “This concern about the economic outlook, along with announcements from the likes of Amazon (NASDAQ:AMZN) and Microsoft about job losses, saw US markets roll over after European markets had closed, closing sharply lower, as once again the S&P500 failed above the 4,000 level.”
Asian markets were mixed with falls in Japan and Hong Kong and a slight rise in China.
Back in London and trading updates are expected from Boohoo Group PLC and Deliveroo PLC amongst others.
Read more on Proactive Investors UK
