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.