- FTSE 100 down one point at 8,445
- Shell falls as trading statement disappoints
- Stocks under bond market pressure as yields rise
4.08pm: FTSE cuts losses, pound and mid-caps wallow
The FTSE 100 has almost climbed back in positive territory as the clock ticked into Wednesday's final half-hour, with US stocks also cutting losses across the Atlantic.
Losses are now in single figure for London's blue-chip index, while the mid-caps of the FTSE 250, which is generally more aligned to the UK economy, is wallowing 1.8% in the red.
In Europe the DAX is down 0.3% and the CAC 40 has dropped 0.8%.
Sterling is the worst-performing G10 currency today, as the rout in the gilt market continues.
UK government bond yields have been surging around the start of US trading, with 10-year UK sovereign yields at their highest level since 2008.
French government bond yields are also elevated and while US Treasury yields also spiked they have since eased back.
"The bond market has taken fright from the growing sense of inflationary pressures in the air," says Laith Khalaf, head of investment analysis at AJ Bell (LON:AJBA).
He says it is "somewhat odd" that bond yields have risen to these highs so long after Central Bank interest rates peaked, suggesting that markets were "complacent about inflation" and overly confident that the Bank of England would cut rates sharply.
Khalaf says putting the blame on Chancellor Rachel Reeves is likely to be "wide of the mark", with US and UK 10-year bond yields having tracked upwards almost hand in hand since October.
"Those who think the current bout of bond market jitters is down to policies announced in the Budget need to explain why there has been such correlation in the upward march of bond yields both here and in the US," he says, adding that market movement over a short time frame are sometimes simply a matter of momentum.
Rising yields on both sides of the Atlantic suggests there is a focus on the incoming US president and the potential for his trade and immigration policies to be inflationary, while bond investors "might also be looking at the giant stacks of government debt already on the books on both sides of the pond and saying thanks, but no thanks".
One result of rising yields will mean we are likely to see firmer pricing in the mortgage market, which Khalaf sais "will go down like a cup of cold cauliflower soup for anyone who is remortgaging or has decided to make the first giant leap onto the housing market".
"However it’s an ill wind that blows no one any good, and the corollary of this is that savers can expect fixed term cash deals to pick up again."
3.48pm: M&A activity in Europe expected to continue
Merger and acquisition activity in Europe was up last year and pent-up demand is likely to result in more in 2025, according to Merlin Piscitelli at M&A software specialist Datasite.
Deal activity on Datasite shows that transactions in Europe, Middle East and Africa are up, alongside the US, he says, though Asia Pacific is down.
"Pent up demand on both sides is likely to invigorate M&A, as dealmakers now have somewhat more clarity on how elections will impact regulation and trade policies to create and manage healthy pipelines," Piscitelli says, noting that "significant capital is ready to be deployed".
He adds that the 12% surge in EMEA sell-side activity for the first nine months of 2024 suggests a positive start for UK dealmaking in 2025, across a broad range of key sectors, especially investment in AI.
"A flurry of technology, media and telecommunications (TMT) sector mid-market sale launches are anticipated for the first quarter of 2025."
A lag has been seen in EMEA healthcare deal closures, with the first half of 2025 offering potential for some early signs of recovery.
"Another trend to continue in 2025 will be more dual track processes as businesses look to IPOs as an exit strategy," Piscitelli says.
3.22pm: GSK (LON:GSK) cancer M&A
UK pharma giant GSK PLC (LSE:GSK, NYSE:GSK) is close to buying a US biotech, the FT is reporting.
It will pay $1 billion for startup IDRx, which was only founded in 2022, to boost its cancer drug business.
Backed by a raft of venture capital and private equity firms, the Massachusetts-based firm has been developing a treatment for gastrointestinal tumours.
It follows several purchases by GSK in the cancer space in the past year and a half.
2.47pm: Equities are being sold
US stocks have opened lower, led by small caps, while European shares are also heading lower.
The FTSE 100 is down 0.3%, with utilities and housebuilders leading the fallers, while the mid-caps of the FTSE 250 have plunged 1.7%.
In Europe, France's CAC 40 seems to be the biggest faller whenever the threat of tariffs looms, down 1%, while the Euro STOXX 600 has dropped 0.6%.
In the US the Russell 2000 small cap index has dived 1%, with the S&P 500 and Nasdaq dipping 0.3% and the Dow Jones 0.4%.
1.27pm: Trump mulls national emergency declaration
The rebound in the dollar looks to have followed a statement from President-Elect Donald Trump that he is "mulling a national emergency declaration to allow for new tariff program".
In currency markets, the pound has been sent almost 1.1% lower to 1.234, the lowest since last April.
Stocks markets, especially US equities, have been "skittish" so far this year, says market analyst David Morrison at Trade Nation.
"This is fairly typical when markets trade near extremes, whether around all-time highs, or after significant sell-offs," he says.
"Market participants become aware that the path of least resistance is no longer as obvious as it was before. This leads to overreactions to otherwise minor events and announcements, exactly as seen over the last two trading sessions."
He says for today, "much will depend on the market reaction to today’s ADP payroll report, weekly unemployment claims and minutes from last month’s FOMC meeting".
Traders also are finding they again need to pay close attention to everything Trump says, as the "national emergency declaration" statement goes to prove the point.
1pm: UK grocery moves
More grocery sector news this morning emerged from Nielsen IQ (NIQ), which found that four-week UK grocery sales were up 3.2% up to 28 December.
The survey implied modest volume growth with prices climbing.
Analysts at Shore Capital suggest this is a "good mix" for the industry, with stores in the main outperforming online.
The NIQ data showed that Ocado Retail gained a lot of channel share, while Marks and Spencer Group PLC (LSE:LON:MKS) (which owns half of Ocado Retail with Ocado Group PLC (LSE:LON:OCDO)), also stood out alongside Lidl as gainers of share.
Laggards included Asda, Morrison and Iceland.
"We sense that the quoted grocers will deliver sound forthcoming updates, Tesco (LON:TSCO) UK sustains the strongest momentum of the superstore groups, whilst we await guidance around cost recovery and price in CY25 post the UK government’s Budget raid," says the Shore analysts.
"We feel, in the evolving, cooling, UK economic climate, that non-discretionary will continue to outperform."
Tesco PLC (OTC:TSCDY) (LSE:TSCO) shares are down 1% today, with J Sainsbury (LON:SBRY) PLC down 0.4%, M&S falling 1.5% and Ocado Group slipping 4.3%.
12.42pm: UK bonds an outlier?
UK bonds look like an "outlier" today, says XTB head of research Kathleen Brooks, noting that UK yields are rising at a faster pace across the curve compared to the US and Europe.
"The UK is in a precarious position," she says.
"Each piece of growth and inflation data will be watched closely by bond market vigilantes in the coming months, including next week's CPI data."
Asked about the earlier 5-year debt auction, she acknowledged that it had a higher bid ratio than the previous 5-year auction as yields were higher.
"This is a concern because the bulk of selling in the UK bond market has been further out the curve - 10-year and 30-year - so far this year, yet investors in short-term UK debt are also demanding a premium to buy UK bonds.
"This could be because of the weak growth outlook for the UK, or it could be a reaction to the economy's performance since the Budget.
"There may be a feeling that the UK government is not focussed on growth and is not a competent steward of the economy, which is why public spending has surged in the last five months.
"This could mean that a political risk premium is being built into UK gilt yields once again.
"This is not a positive development for the UK. As businesses cope with higher tax burdens, they are also facing higher costs of capital, which is unlikely to boost growth this year."
12.28pm: Dollar and bonds weigh
The pound and euro are under pressure from the dollar, with EUR/USD down 0.5% to 1.0290 and GBP/USD plunging 1.1% to 1.2336.
UK gilt yields ripped up in the past couple of hours to 4.784%, having been at 4.667% earlier this morning.
These are the highest levels since 2008.
12.16pm: Stocks come under pressure ahead of US open
London and European stocks are on the wane in the run-up to the US open, with Wall Street stock futures having dipped into the red.
Just after midday, the FTSE 100 is down 27 points or 0.3%, having been up almost 20 points earlier.
The more UK-focused FTSE 250 index has sunk 342 points or 1.7% to 20,008, levels last seen in May 2024.
On the Continent, Germany's DAX is flat, France's CAC 40 is down 0.7% and the Euro STOXX 600 has slipped 0.2%.
Across the Atlantic, S&P 500 futures are down 0.1%, with those for the Nasdaq 100 down almost 0.2% and Dow Jones futures just below flat.
11.44am: Topps major shareholder approves of CEO change
Fresh from the Topps Tiles PLC (LSE:LON:TPT) update, revealing that Rob Parker is stepping down as CEO, its largest shareholder has welcomed the move.
In November, the Austrian investment company had sniped in an open letter to chairman Paul Forman about a "continued lack of engagement and willingness to listen to our concerns".
Galleon, which owns almost a 30% stake, says it welcomes the decision to initiate a CEO succession process.
Managing director Piotr Lipko says the change of leadership "is a positive first step and we look forward to working with them in identifying an appropriate candidate to lead Topps Tiles".
MS Galleon, which has €7 billion in assets under management, first invested in Topps in 2020.
11.04am: UK-focused funds see ninth year of outflows
Last month capped off a record year for fund inflows from UK investors, according to data from Calastone, which says equity funds have been the "clear winners", especially global and North American focused funds, but UK focused funds mostly seeing outflows.
Equity funds saw a net £2.91 billion of inflows in December, despite volatile stock markets around the world.
UK funds saw net selling of £221 million last month, which was the second best month since May 2021, Calastone said.
Overall, UK-focused funds suffered a ninth year of outflows, and with a total of £9.6 billion the annual outflows were the worst the firm has recorded relative to the wider market.
Almost all the inflows were to passive equity funds, with exchange-traded funds (ETFs) and other trackers getting £29.6 billion of inflows, while actively managed funds were hit by £2.4 billion of net outflows.
Weak bond markets from the summer saw inflows to fixed-income funds fall sharply to £1.3bn in 2024.
10.26am: Government debt auction
Another UK government debt auction this morning saw five-year bonds issued at higher costs of borrowing.
The sale of five-year gilts was the biggest in more than a decade, with the Debt Management Office (DMO) finding buyers for £4.25 billion of new debt at a yield of 4.49%.
This is a day after long-term government borrowing costs surged to the highest level since 1998, with yesterday's 30-year gilt aution seeing the lowest demand in over a year as yields rose to a multi-decade high.
Yields on 5yr UK debt, meanwhile, have risen almost 35 basis points since early December, though are below where they were in the summer of 2023.
The rising borrowing costs are eating into the Chancellor’s fiscal rule of a balanced budget.
Economist Ruth Gregory at Capital Economics yesterday said she sees a "significant chance" that revised forecasts from the Office for Budget Responsibility (OBR) in late March will judge that Rachel Reeves "on course to miss her main fiscal rule".
"To maintain fiscal credibility, this may mean that Reeves is forced to tighten fiscal policy further."
10.06am: Oil prices at highest since mid-October
Oil prices are on the up today, though the FTSE is not seeing much benefit as both Shell and BP (LON:BP) are in the red.
Brent crude futures have gained 0.9% at $77.75, the highest levels since mid-October.
"Higher fuel prices are among the inflationary pressures weighing on economies," says Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:HRGV).
Industry API data showed US oil stocks fell by more than 4 million barrels last week, way more than the 250,000 drop expected.
"Prices are also being driven up by expectations of tighter supply amid sanctions on Russia and China, with Saudi Arabia increasing prices for Asia customers for the first time in three months," says Streeter.
"There is also an expectation of higher energy demand from China going forward, given bigger stimulus moves forecast from authorities to boost the economy.
"These increases are set to filter through to the pumps, adding to the headaches for central bank policymakers."
9.54am: Uncertain global outlook remains, says economist
"Rarely has the outlook for the coming twelve months been as uncertain as it is now," says Berenberg's chief economist, Holger Schmieding, in his outlook for 2025.
He sees the outlook as also unusually dependent "on immediate political choices in the US and, to a lesser but still significant extent, in Europe as well".
As a result, he sees an unusually wide range of potential outcomes for the year.
On the positive side, he says there are "great opportunities", with household real incomes still rising on both sides of the Atlantic, private sector balance sheets mostly in good health, labour markets resilient, China adding some economic stimulus and inflation at "tolerable" levels.
"If incoming US president Donald Trump listens to his better advisors and if Germany, France and the EU get their political acts together somewhat, the world could fare well in 2025."
But if Trump rekindles US inflation with a wave of tariffs and a sharp crackdown on immigration, "the US Fed could be forced to shock markets with rate hikes", he warns.
Allowing Russia a de facto win in Ukraine could see a new wave of refugees rattle Europe.
"On balance, we are modestly optimistic for 2025," he says. "On the economic side, we see two feedback loops that could prevent or at least limit major mishaps: i) with inflation at tolerable levels, central banks would have scope to react to an unexpected weakness in demand with additional rate cuts.
"As one example, China would likely scale up its stimulus sufficiently to stabilise its struggling economy for a while if more policy support is needed.
"And ii) Trump and some of his super-rich advisors care about the verdict of financial markets. If their actions were to impair the potential for growth and corporate earnings badly enough to trigger a sell-off, they might change tack."
9.36am: Flutter hit by 20-year perfect storm for NFL bets
Betfair and Paddy Power owner Flutter Entertainment PLC (LON:FLTRF) (LSE:FLTR), though no longer in a Footsie constituent after moving its main listing to the US, is still popular with UK investors, but less so today, with the shares down 2.7%.
The bookmaker revealed last night that it lost US$390 million due to a run of "very unfavourable" sports results - mainly from NFL aka American football, which is a big deal for its US arm, FanDuel.
November and December had seen a surge in losses mainly due to 'parlay outcomes', where punters make multiple bets on the same outcome.
"The 2024/2025 NFL season to date has been the most customer-friendly since the launch of online sports betting with the highest rate of favourites winning in nearly 20 years," said Flutter.
9am: Stocks on the rise
After an hour of trading, European stock indices are in the green.
The FTSE 100 continues to inch up, still only around 0.1%, while the more domestically focused FTSE 250 is heading lower, down 81 points or 0.4%.
Top of the blue-chip risers is Games Workshop Group PLC (LON:GAW), perhaps on the back of the Hornby update, followed by London Stock Exchange Group PLC (LSE:LON:LSEG) and a group of big banks.
Over the Channel, the CAC 40 is just above flat in Paris, but the German, Spanish and Italian benchmarks are all up around 0.3%.
The Euro STOXX has added 0.25%, with German software group TeamViewer (ETR:TMV) up 12% in the lead, followed by French engineer Vallourec (EPA:VLLP), Banco Comercial Portugues and Saab.]
Market analyst Kathleen Brooks at XTB says the bond selloff at the start of the year, which has seen bond yields rise and dominated markets in the first few days, may continue.
"However, bond market dynamics may not get in the way of European stocks making a comeback in the medium term," Brooks says.
She notes that Citi’s economic surprise index for the Eurozone has picked up in recent weeks and is close to its highest level since November.
"If this continues, then we could see European stocks outperform their US counterparts in the longer term.
"However, in the short term, we expect some fallout from the rout in US stocks and Trump’s tariff talks on Wednesday."
8.29am: Rosenblatt dispute deepens a founder sets up firm with same name
Outside the FTSE 350, a big downwards mover is RBG Holdings PLC (AIM:RBGP), the holding company for law firms Rosenblatt and Memery Crystal.
The shares are down 20% after the group terminated its agreement with Ian Rosenblatt, the founder of the former of those two firms, with immediate effect due to what it says are breaches of a consultancy agreement and "offensive behaviour unbecoming of a solicitor and consultant".
As followers of the company will know, Ian Rosenblatt requisitioned a general meeting just before Christmas to consider resolutions to remove the current group CEO Jon Divers and two current non-executive directors and to appoint a new CEO and a new non-executive director...more details here
8.13am: FTSE 100 opens higher
The FTSE 100 has opened six points higher at 8,251.3 and the FTSE 250 is also inching upwards.
Top risers are mostly financials, with London Stock Exchange Group PLC (LSE:LSEG) up over 2%, followed by Barclays PLC (NYSE:BCS) (LSE:BARC), NatWest Group PLC (LON:NWG), 3i (LON:III) Group PLC and HSBC Holdings (LON:HSBA) PLC.
This reflects growing expectations that rates may not fall much if at all this year.
Shell PLC (LSE:LON:SHEL, NYSE:SHEL) is leading the fallers, down 1.6%.
8.02am: Why US stocks fell yesterday
After Wall Street opened higher yesterday, led by Nvidia (NASDAQ:NVDA) taking the crown of largest company in the world from Apple (NASDAQ:AAPL), there was a rapid U-turn that ended with a 1.1% fall for the S&P 500.
This was due to "big or landmark moves" over whether the US Federal Reserve can cut rates in 2025, says Deutsche Bank (ETR:DBKGn) macro strategist Jim Reid.
He says the market pricing is "catching up" to the view that there may be not cuts this year, with some more repricing yesterday following the ISM services print, where the prices paid indicator surged to its highest in almost two years, and the JOLTS report for November showed job openings were up to a six-month high.
"It’s true that the prices paid might not have the same impact as a CPI report, but it’s worth noting that a similar spike last January came right before some very strong US inflation prints in Q1 2024.
"And in turn, that led to a big reassessment of how quickly the Fed would cut rates, hence we saw such a big market reaction yesterday."
Fed funds futures pushed back the probability of another cut by the March meeting falling from 44% on Monday to 41% by the close, with the total amount of cuts priced by December’s meeting falling too.
Reid says the bigger sell-off came at the longer-dated bonds, with the 10yr Treasury yield climbing 5.5bps to its highest since April, at 4.69%, with a US Treasury auction seeing the highest issue yield for a 10yr auction since 2007, at 4.68%.
The yield curve moved to the steepest it’s been since May 2022.
"The effects of that bond selloff were felt globally, and European yields also saw a significant rise in response to the US data," says Reid, with yields on German 10yr bunds rising and on track for a sixth consecutive weekly rise and UK gilts experiencing some of the biggest losses, with 10yr gilt yields up 7.3bps to their highest since October 2023.
"And significantly, the 30yr gilt yield (+6.8bps) was up to 5.25%, which is its highest level since 1998.
"The problem for the UK government is that with yields where they currently are, they are close to breaching their own fiscal rules and as such may require additional tax rises," says Reid.
7.52am: Hornby on track
This month is going to be full of festive trading updates from retailers and after the mostly positive one from Next (LON:NXT) yesterday, and today there's another good one from a different corner of the sector.
Hornby PLC (LSE:LON:HRN) said it outperformed the market over the Christmas period and is "on track" to grow in the year to March 2025.
The maker of toy trains and model cars said its turnaround is "very much on track" as it cuts central costs, focuses on core brands and improves operational processes.
Chief executive Olly Raeburn says: "In a tough economic climate, we are pleased to be able to report growth in revenue, margins and gross profits through this critical quarter.
"Concurrently we are continuing to drive down the inventory levels that had built up in recent years and are delivering our change plans in a steady and sustainable way."
7.42am: Shell numbers disappoint
Looking around, it seems the Shell numbers were worse than expected.
More on them soon.
7.37am: Shell guidance not that helpful
The Shell PLC (LSE:SHEL, NYSE:SHEL) update contains its headline fourth-quarter outlook, and is sparse with full quarterly results set to be finalised by January 30.
It sets out headline numbers for each division, including production and adjusted earnings, with Integrated Gas production expected to decline due to maintenance at the Pearl Gas to Liquids plant in Qatar and reduced liquid natural gas volumes, with Q3 adjusted earnings expected to be in a range of $1.2-1.6 billion in Q4 compared to $1.4 billion in Q3.
Upstream production is forecast to be between 1,790 and 1,890 kboe/d compared to 1,811 kboe/d, with earnings expected to be between $2.4-3.1 billion in Q4, compared to $2.7 billion last time.
Marketing and Chemcals earnings are both expected to be lower in Q4 "reflecting seasonality".
Renewables and Energy Solutions EBITDA is expected to see the loss widen, with a range of $0.1-0.6 billion compared to a $0.2 billion loss in Q3.
7.14am: FTSE to hold firm after US falls
Futures are pointing to the FTSE 100 opening just below flat on Wednesday, after US stocks were sold off overnight.
London's blue-chip benchmark has been called around four points lower, a day after finishing down by the same amount at just over 8,245.
Last night in New York, the S&P 500 fell 1.1% and the Nasdaq dropped 1.9% as tech titans led the retreat, with Nvidia tumbling 6.2% the biggest faller, followed by Super Micro Computer and Tesla.
Asian stocks are mixed this morning, with the Hang Seng down another 1% and India's Sensex almost as much, but the Shanghai, Seoul and Singapore indices in the green.
5am: What to watch on Wednesday
Wednesday will offer a break from this week's retail-heavy schedule as oil supermajor Shell updates.
Shell PLC (LSE:SHEL, NYSE:SHEL) should give some insight into how it is dealing with the steady drip down in oil prices... Read more
Announcements due:
Trading updates: Shell
US earnings: Jefferies Financial Group Inc
AGMs: Equals Group (LON:EQLS) PLC, Sts Global Income & Growth Trust PLC, Orchard Funding Group PLC
Economic announcements: MBA Mortgage Applications (US), Crude Oil Inventories (US), Consumer Credit (US), FOMC Minutes (US)