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FTSE 100 in the red and Wall Street slides, but Haleon bucks negative trend

Stock Markets Sep 20, 2022 15:11
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© Reuters. FTSE 100 in the red and Wall Street slides, but Haleon bucks negative trend
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  • FTSE 100 down 38 points
  • Frasers falls as Ashley to step down
  • Oil moves higher and lifts BP (LON:BP) and Shell (LON:RDSa)

2.47pm: Wall Street in negative territory at the open

US stocks are on the slide as the Federal Open Market Committee kicks off its highly anticipated, two-day rate-setting September meeting.

Just after the open, the Dow Jones Industrial Average had shed 273 points or 0.9% at 30,747 points, the S&P 500 was down 35 points or 0.9% at 3,865 points, and the Nasdaq Composite was down 98 points or 0.9% at 11,437 points.

Ford Motor Company (NYSE:F) fell about 7% at the open after the car maker said inflation had pushed its supplier costs $1 billion higher than expected in the current quarter, revising down its projected quarterly earnings ahead of reporting its results next month.

Beyond Meat Inc (NASDAQ:BYND) was down about 1% following reports the company’s chief operating officer was arrested over the weekend after allegedly biting a man’s nose during an altercation.

The opening fall on Wall Street has pushed the FTSE 100 even lower.

The blue chip index is now down 38.2 points or 0.53% at 7198.48, a shade above its low for the day so far.

2.25pm: Haleon outperforms as Footshie slips

Leading shares remain in the doldrums as investors await the key interest rate decisions from among others, the US Federal Reserve and the Bank of England.

The FTSE 100 is currently down 23.73 points or 0.33% at 7212.95 although it is off the low of 7204.

Bucking the trend is Haleon PLC, the the consumer healthcare group recently spun out of GSK PLC (LSE:GSK, NYSE:GSK).

Its shares are up 3.64% following its results, making it the biggest riser in the blue chip index.

Steve Clayton, fund manager at HL Select, said: “We were expecting a decent update from Haleon, given their earlier trading statement back in June and they have duly delivered. Their portfolio is delivering good growth, backed up by buoyant free cash flow coming from a strong stable of consumer healthcare brands. The group’s earnings should be resilient in the face of economic weakness given they address real and recurring consumer needs.

"Litigation surrounding Zantac, which was previously marketed by GSK and Pfizer (NYSE:PFE) is a distraction, but Haleon itself never marketed this product and we do not see significant financial costs, other than those of defending the litigation, being incurred by Haleon as a result."

12.40pm: Pound shrugs off Truss admission that US trade deal unlikely any time soon

Sterling has edged higher against the dollar ahead of Thursday's expected rate rise from the Bank of England, despite the likelihood of the US Federal Reserve also lifting borrowing costs tomorrow.

The pound is up 0.066% at US$1.145 having hit a 37 year low against the follar on Friday.

Against the euro it is also heading in the right direction, up 0.31% to €1.1445.

The market seems to have shrugged off news that prime minister Liz Truss has admitted there may not be a free trade deal with the US for years, as she headed off to New York for talks with President Biden.

Susannah Streeter at Hargreaves Lansdown (LON:HRGV) said:"An aura of pessimism over Britain’s prospects is set to continue given that no quick fix is on the cards to boosting trade with overseas partners. There will be particular disappointment among Brexiteers with Liz Truss’ admission en route to talks at the UN in New York, that a free trade agreement with the US, is unlikely in the short to medium term.

"This acknowledgement comes after Joe Biden’s administration warned the UK government not to rip up the Northern Ireland protocol governing trade arrangements, which was an essential part of the Brexit trade deal with the EU. There are no fresh talks yet scheduled with European counterparts to move this protracted dispute forward with the government’s in tray overflowing with difficult issues to resolve, not least the cost-of-living crisis and energy security headaches."

11.58am: Wall Street set for lower opening

US stocks are expected to open lower as the Federal Reserve starts its two-day interest rate setting meeting which is widely expected to culminate in a 75 basis point rate hike on Wednesday.

Futures for the Dow Jones Industrial Average were down 0.4% in pre-market trading, while those for the S&P 500 shed 0.5%, and contracts for the Nasdaq-100 lost 0.6%.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank noted that activity on Fed funds futures indicates an over 80% chance of a 75-basis point hike and under a 20% chance for a 100-basis point increase hike.

“Although the probability of a full percentage point hike spiked up to 35% after last week’s disappointing inflation reports, we still believe that the Fed has nothing to gain by surprising the market with a bigger than expected rate hike,” she said, noting that the strength of the US dollar is another factor that will help persuade rate setters against a larger increase.

In data out last week, the US consumer price index (CPI) for August showed inflation at 8.3% on an annualized basis, more than the average economists' forecast of 8.1%. The data led to falls in equity markets but sporadic bargain hunting emerged to shore up prices yesterday.

“Therefore, a 75 basis point hike at tomorrow’s announcement has the potential to give some relief to the US dollar and the equity markets, as it would help de-pricing the scenario of 100 basis point hike,” Ozkardeskaya said.

A 75-basis point interest rate hike on Wednesday wouldl be the third such increase as US rate-setters try to dampen inflation which remains stubbornly around 40-year highs. Investors are worried that the spate of aggressive hikes will threaten economic growth and weigh on corporate profits. US Treasury yields were higher ahead of the rate verdict.

Back in the UK, the FTSE 100 continues to drift, down 7.54 points or 0.1% at 7229.14.

11.36am: UK five year bond yields hit highest level since December 2008

Leading shares are further in the red, with the FTSE 100 down 16.28 points or 0.22% at 7220.40.

The biggest faller is Ocado Group PLC (LSE:LON:OCDO), down 7.6% as analysts at HSBC (LON:HSBA) cut their recommendation from hold to reduce.

With the Bank of England set to raise interest rates again on Thursday, UK five year bond yields this morning hit their highest level since December 2008 at 3.219%.

Meanwhile in a week of expected rate rises, Sweden's central bank kicked things off with a higher than percentage point increased and warned of more rises to come.

10.20am: Kingfisher and Frasers out of favour

Kingfisher PLC has now gone into reverse as investors take a closer look at its latest results and decide they don't like what they see.

Its shares are now down 5.14%, making it one of the biggest fallers in the leading index.

Susannah Streeter at Hargreaves Lansdown (LON:HRGV) said:"Kingfisher’s numbers paint a picture of the waning DIY craze, with sales dropping by 4.1% to £6.8 billion from the £7.1 billion reported the same time last year...

"Profits have taken a big tumble... with half year numbers coming in 29.5% lower. Margins are being painfully squeezed due to the mounting costs of energy and core products, in addition to ongoing disruption at ports.

"The supply chain headaches haven’t eased and the company is finding it much harder to cope, with volatility continuing. Commodity prices may have dropped off recently but it takes time to feed through and the time lag is hurting. Kingfisher is now running out of out of nails to keep its full-year target intact. It has warned that although this half year drop off in sales was forecast, their outlook is much more uncertain for the coming months."

Elsewhere Frasers Group PLC (LSE:FRAS) has fallen 1.65% as the one time Sports Direct (LON:FRAS) revealed that Mike Ashley - synonymous with the company one way or another - would be stepping down from the board. He plans to remain available as a consultant however.

AJ Bell investment director Russ Mould said it seemed a seismic moment for the business.

He said: "[Ashley] may have divided opinion in the City, but his entrepreneurial skills still helped take the business from a single store in Maidenhead to one of the UK’s largest retailers.

“Without him on the board Frasers may have a bit of an identity crisis. Ashley’s strategy of buying fallen competitors and adopting a ‘pile them high, sell them cheap’ approach to retail may have attracted criticism but it had some clarity to it.

“Without him, will Frasers management have the same level of ruthlessness or will it start to look like a bloated and unfocused business at a time when the pressures on the industry are very acute?

“A lot will fall on the shoulders of the current CEO and Ashley’s son-in-law, Michael Murray, which shows that Ashley is literally keeping the leadership of the business he built in the family.”

Overall the FTSE 100 has drifted into the red after a bright start and has edged down 0.99 points to 7235.69.

9.28am: Oil recovers on China news

Oil is heading higher, despite the prospect of higher interest rates this week dampening down demand.

Brent crude is up 0.42% at US$92.39 a barrel while West Texas Intermediate, the US benchmark, is 0.33% better at US$86.01.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown (LON:HRGV), said: "Prices are being supported... to some extent by the easing of COVID-19 restrictions in China, with the huge city of Chengdu leaving lockdown and 21 million people allowed to resume their lives once more. Supply nerves have also been eased after the US said it would sell an extra 10 million barrels into the market from its strategic reserves for delivery in November, ahead of the EU ban on Russian oil which is looming in December.’’

So BP PLC shares are 1.63% better and Shell PLC is up 1.46%.

This is helping to support the FTSE 100 index, which has lost some of its early shine and is now up 8.96 points at 7245.64.

In truth markets are pretty much in a holding pattern ahead of this week's key interest rate decisions, including the US Federal Reserve tomorrow and the Bank of England on Thursday, not to mention the UK mini-budged the day after.

The Fed is expected to raise rates by 0.75 percentage points or perhaps even higher, while the Bank of England is likely to plump for 0.5 percentage points although 0.75 could not be ruled out.

More data today confirms why central banks are so keen to act to curb inflation.

Victoria Scholar, head of investment atinteractive investor, said: “Germany’s producer price index for August soared by 45.8% year-on-year, sharply outpacing forecasts for 37.1%. Month-on-month the figure rose by 7.9%, almost five times the forecast for 1.6%, signalling red hot producer inflation in the eurozone’s largest economy, well above analysts’ expectations. Japan’s inflation rate also accelerated to 3% in August, the highest reading since September 2014, driven by soaring food and fuel costs.”

8.50am: TUI (LON:TUIT) flies after latest update

A positive update from travel group TUI AG (LSE:TUI) has seen its shares fly higher, and also helped to boost the airline sector.

TUI, up 3.03%, said bookings for the peak summer months were at 94% of the 2019 figures, and it expected its winter programme to be close to normalised pre-pandemic levels.

Among the airlines, Wizz Air Holdings PLC (AIM:LON:WIZZ) is up 3.3%, easyJet PLC (LSE:LON:EZJ) has climbed 3.01% and British Airways owner International Consolidated Airlines Group (LON:ICAG) SA (LSE:IAG) has added 2.68%.

Meanwhile the FTSE 100 is off its best levels but is still up 37.37 points or 0.52% at 7274.05.

8.14am: Bright start for Footsie

Leading shares are heading higher after the Bank Holiday break, helped by a late recovery on Wall Street.

The FTSE 100 is up 65.37 points or 09% in early trading at 7302.05.

B&Q owner Kingfisher PLC (LSE:KGF) has edged up 0.69% after a mixed picture from its results.

Richard Hunter, head of markets at interactive investor, said: "Although pre-tax profits for the half are in line with expectations at £474mn, this figure represents a decline of 30% year-on-year.

"The immediate outlook is similar, with the company reporting a sales decline of 0.7% so far in the third quarter, although up by 15.2% on a three-year view. In addition, there has been continued demand for outdoor and big ticket items, while the company continues to tweak its overall offering to remain relevant and competitive.

"The question for investors is whether to compare this performance against pre-pandemic levels, where there has been significant progress, or against the strong comparatives of last year, where there has not.

"Despite an initial bounce in early trade, the share price reaction is a clear indication of the decision investors have made, with the price having fallen by 33% over the last year, as compared to a gain of 4.8% for the wider FTSE100."

Haleon PLC (LSE:HLN, NYSE:HLN) has fared better after its results, up 1.87%.

7.01am: US recovery set to lift London market

The FTSE 100 is expected to open higher this morning after gains in the US yesterday with investors awaiting interest rate decisions either side of the pond.

Spread betting companies are calling London’s blue-chip index - shut on Monday for the state funeral of Queen Elizabeth - up by around 35 points.

In the US the Dow finished Monday up 197 points, 0.6%, at 31,020, the Nasdaq Composite added 87 points, 0.8%, to 11,535 and the S&P 500 improved 27 points, 0.7%, to 3,900.

It was an up-and-down session for the benchmarks, but they managed to end a two-day slide a day before the Federal Reserve begins its meetings on Tuesday.

Michael Hewson, chief market analyst at CMC Markets UK, said: "Yesterday’s late rebound in the US looks set to translate into a positive start for European markets later this morning, however whether that can hold is likely to depend on the events of the next few days...

"This week’s central bank meetings are likely to be pivotal in the context of what comes next, starting with the Federal Reserve meeting which starts today, and concludes tomorrow, as well as the latest meetings from the Bank of Japan, Bank of England, and the Swiss National Bank...

"The main factor spooking markets right now is how much higher will rates have to go, and will there be any more profit warnings of the kind we got from FedEx (NYSE:NYSE:FDX) last week?"

In London, results from Haleon PLC (LSE:HLN, NYSE:HLN) and Kingfisher PLC (LSE:KGF) are due.

Read more on Proactive Investors UK


FTSE 100 in the red and Wall Street slides, but Haleon bucks negative trend

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David Hawley
David Hawley Sep 20, 2022 18:59
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Yanks are sh it scared it might rain tomorrow
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