- FTSE 100 pushes higher, up 10 points
- Insolvencies at highest levels since 2009
- Mortgage rates keep ticking higher - Moneyfacts
12,00pm: US markets seen flat ahead of jobs report
Not long until the non-farm payrolls so time to look across the pond.
Ahead of those numbers US stocks are expected to open mixed with futures for the Dow Jones Industrial Average up 0.2% in pre-market trading, while those for the S&P 500 were flat and contracts for the Nasdaq-100 were 0.3% lower.
“The US will announce its latest jobs data in a tense and volatile environment of energy crisis, persistent inflation, Fed members insisting that what they are doing is right, and markets crying that what they are doing is maybe a bit too much,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Investors are not totally wrong betting that the Fed may have to slow down, and even reverse policy if they go too far. And this is why the jobs data is gaining importance, yet again,” added Ozkardeskaya.
Consensus estimates point to a 275,000 rise in payrolls in September after a 315,000 increase in the previous month
11.25am: Mortgage rates keep ticking higher
Average fixed mortgage rates are continuing to climb to the highest levels in over a decade,the latest data from Moneyfacts shows.
The average new two-year fixed rate – which was 4.74% on the day of the mini-budget – has climbed to 6.16%, having started the week at 5.75%.
It is a similar story with five-year fixes, with the average rate now standing at 6.07%, from 6.02% yesterday.
Meanwhile the FTSE 100 has moved into positive territory, up 10 points, but still trading in a narrow range ahead of the US non-farm payroll numbers.
10.45am: Insolvencies hit highest levels since 2009
Company insolvencies in England and Wales have hit their highest level since the aftermath of the financial crisis.
The Office for National Statistics reported that 5,629 companies collapsed across England and Wales in the second quarter of 2022, the most since the third quarter of 2009.
Construction firms made up 20% of all the insolvencies, followed by the wholesale and retail trade industries at 14%.
Company insolvencies in England and Wales reached their highest quarterly level in Quarter 2 (Apr to June) 2022 since Quarter 3 (July to Sept) 2009.➡️ https://t.co/LgtxVAgN4J pic.twitter.com/sC29gf8MMy
— Office for National Statistics (ONS) (@ONS) October 7, 2022
10.18am: Credit Suisse (SIX:CSGN) to buy back £2.7bn of debt
Over in Europe Credit Suisse has offered to buy back around SFr3bn (£2.7bn) of its own debt in a show of financial strength amid worries about the bank's stability.
The offer includes euro and pound sterling debt securities worth up to €1bn and a separate offer for US dollar securities up to $2bn, the Zurich-based lender said.
Credit Suisse is locked in turmoil just weeks ahead of the announcement of a major strategic review following a series of scandals. Its shares have lost half of their value this year.
Last weekend it had to resort to phoning investors and employees in a bid to reassure them that the bank was solvent as rumours swept the market that it was in financial difficulties.
In August, the Swiss bank appointed Dixit Joshi, a former Deutsche Bank (ETR:DBKGn) executive, as its chief financial officer to replace David Mathers.
The review is expected to include a number of asset sales.
9.51am: Business confidence falls in Q3 - BCC
Business confidence declined significantly in the third quarter according to a report from the British Chambers of Commerce (BCC).
The BCC’s quarterly economic survey showed a significant decline of key economic indicators, with weakening structural business conditions and confidence a cause for concern.
The BCC did point out that the survey took place before the government’s energy support package for firms and the mini-budget announcement.
????️@BCCShevaun: "As well as long-term structural challenges for businesses, recent events will have added to firms’ worries. The current volatility in the markets must be speedily addressed to return stability to the economy."Latest BCC biz survey ????https://t.co/XKSX29w7f3
— BCC (@britishchambers) October 7, 2022
More businesses are now seeing their cashflow decreasing, instead of increasing. One in three (32%) firms reported reduced cashflow over the last three months, while 23% reported an increase.
Indicators for business confidence have also plummeted; less than half (44%) of firms expect their turnover to increase over the next 12 months, while 25% expect a decrease.
Profitability confidence has dropped to an even lower level; only one in three (33%) businesses believe their profits will increase over the coming year, while 39% now expect a decrease.
Unsurprisingly, firms are not upping investment in their business. Only 22% reported an increase to plant/equipment investment in the past three months, while 57% reported no change, and 22% reported a decrease.
9.25am: Fall in house prices a sign of things to come
Today’s fall in house prices reported in the Halifax house price survey is a sign of things to come according to analysts.
Martin Beck, chief economic advisor to the EY ITEM Club, said rising interest rates will push down demand, and restrict what lenders will offer.
“Weakness in prices in September is likely to be a sign of things to come, reflecting cost of living pressures and the recent rise in market interest rate expectations and mortgage rates.”
“Combined with the weakening economic outlook and squeezed household incomes, the EY ITEM Club expects property values to fall by 5% or more over the next year or so.”
Myron Jobson, senior personal finance analyst, interactive investor said: “The spike in mortgage rates in tandem with rampant inflation could result in a more acute property market slowdown in the coming months.”
But he said "The evidence points to house prices dampening rather than tumbling as the laws of supply and demand are likely to continue to prevail. The weaker pound could also fuel interest from foreign investors which could exacerbate the supply-demand mismatch.”
Tom Bill, head of UK residential research at Knight Frank said: “It’s a fairly safe bet that UK house prices have now peaked. The impact of rising mortgage rates will begin to hit demand and spending power in coming months, which we believe will lead to a fall of 10% over the next two years for UK prices.”
9.00am: FTSE in a subdued mood
FTSE 100 is pretty lacklustre early on, down a touch, looking ahead to the US non-farm payrolls numbers due later today.
At 9.00am the lead index was down 7 points at 6,990 and the FTSE 250 was down 88 points at 17,545.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown (LON:HRGV): “The reason this data set is a big one, arguably the biggest since markets began to unravel, is because the data will show if the Fed’s enthusiastic interest rate hikes are now being felt in the jobs market.”
“Today’s news will shape the Federal Reserve’s monetary decision in November.”
A report from Halifax pointing to a softening in the UK housing market sent shares in Rightmove PLC (LSE:RMV) down 1.8%.
Halifax said house prices fell 1% in September with the annual rate of increase slowing to 9.9%.
J D Wetherspoon PLC (LON:JDW) cheered investors, with shares rising 9.3%, despite reporting a loss before tax in the first half of £30.4mln.
Brokers pointed out that whilst losses were worse than expected there had been an upturn in the trend of like for like sales which were up 10.1% in the In the first 9 weeks of the current financial year, to 2 October 2022 compared to 2021.
8.42am: Recruitment activity slows in September - KPMG/REC
The latest survey of the UK labour market showed a further slowdown in recruitment activity across the UK in September.
The KPMG and Recruitment and Employment Confederation (REC), UK Report on Jobs showed that permanent staff appointments and temp billings expanded at the weakest rates in over a year-and-a-half, as uncertainty over the outlook and limited staff supply hampered growth.
The latest REC and KPMG Report on Jobs is out today, showing softer increases in perm and temp staff appointments, slower growth in vacancies, and the fastest rise in temp pay since July 2007 pic.twitter.com/krQPMj3nGF— REC Press Office (@RECPress) December 7, 2018
The weaker economic outlook led some firms to be more cautious about hiring, and also discouraged some people from changing jobs, while a generally low unemployment rate, skills shortages and Brexit also weighed on candidate availability, the survey showed.
Shares in recruiters PageGroup PLC (LSE:PAGE) and Hays (LON:HAYS) PLC (LSE:HAS) slipped by around 1% on the news.
The rising cost of living and competition for scarce workers drove further marked increases in starting pay for both permanent and short-term workers in the latest survey period.
This was despite the rate of starting salary inflation moderating further from March's all-time record to a 15-month low. Temp wage growth also edged down to its weakest since June 2021
Claire Warnes, head of education, skills and productivity at KPMG UK, said some firms are bracing for a downturn.
“Some employers, even those who anticipate that the recession may be short, are taking steps now to contain costs, including hiring freezes.”
“Those employers who continue to invest in their workforce, particularly upskilling, may find they weather the recession better and will be in a stronger position to benefit from the upturn as and when it comes.”
8.13am: FTSE 100 little changed at the open
FTSE 100 little changed in early trading with investors nervously awaiting US non-farm payrolls figures due later today.
Economic news failed to lift spirits with BDO reporting slowing growth in retail sales in September and the Halifax house price survey showing a fall in prices in September too, pointing to a colling in the housing market.
By 8.10am the FTSE 100 was down 3 points at 6,994 although the FTSE 250 slipped 71 points to 17,562.
Sterling was also little moved in early trading, down 0.05% against the US dollar at US$1.119.
Marshalls PLC (LON:MSLH) tumbled 22% after it warned that full-year profits will be slightly below market forecasts following a drop in demand for landscaping products from struggling households hit by soaring energy prices and inflation.
In a trading statement, Marshalls said it “now anticipates that the outturn for the group as a whole will be slightly below the bottom end of the current range of market expectations” of profits of £95.1mln-£101.0mln.
Peel Hunt slashed its price target to 470p from 830p but kept its buy rating.
On a brighter note, Superdry PLC (LSE:SDRY) saw its shares bounce nearly 10% to 112p after reporting a return to profit in the year to April 30 although it remained cautious in the near term citing economic factors including high inflation and the impact of these on consumer spending.
Superdry made an adjusted profit before tax of £21.9mln compared to a loss of £12.6mln in the previous year, revenues rose 9.6% to £609.6mln.
The retailer said it had made an encouraging start to this financial year but forecast profit would fall to between £10mln and £20mln pounds, as cost inflation puts pressure on margins.
Broker Liberum said it would leave its forecasts unchanged and reiterated a buy rating.
With a price target of 500p the broker said “The shares remain too cheap.”
“Superdry’s return to profit in full year 2022, despite COVID’s impact, marks an inflexion point that gives confidence in its positive long-term trajectory” Liberum said.
7.48am: House prices fall in September - Halifax
The UK housing market is slowing, according to the latest house price data from Halifax today, with average house prices down 0.1% in September, leaving the average property now costing £293,835.
The annual house price inflation rate slowed for the third month in a row, to 9.9% from 11.4%, the lowest rate since January.
UK House Price Index UK (Halifax) announcement - Actual: -0.1%, Expected: pic.twitter.com/ucngddKtxD— Spreadex Trading (@Spreadexfins) October 7, 2022
Kim Kinnaird, director at Halifax Mortgages, commented that house prices have been largely flat since June, as the markets entered “a more sustained period of slower growth.”
Kinnaird warned that house prices will come under heavier downward pressure in the months ahead, from rising borrowing costs and the cost of living crisis:
“While stamp duty cuts, the short supply of homes for sale and a strong labour market all support house prices, the prospect of interest rates continuing to rise sharply amid the cost of living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability, are likely to exert more significant downward pressure on house prices in the months ahead” Kinnaird.
7.28am: Royal Mail provided emergency liquidity to pension fund - Telegraph
Royal Mail rushed forward the monthly payment into its pension scheme to help prevent a cash crunch, according to a report in The Telegraph, after the mini-budget sent crucial money markets into a tailspin.
The company responded to a request from the trustees of the Royal Mail Pension Plan to provide emergency liquidity, amid fears across the City that a run on pension funds driven by products known as Liability-Driven Investments (LDIs) would leave major funds insolvent.
The Royal Mail scheme has 124,000 members and liabilities of £11bn.
7.25am: Retail sales growth dipped in September - BDO
Retail sales grew at their slowest pace in September since shops reopened after COVID due to a combination of inflation, cost of living pressures and an unexpected bank holiday.
Figures from the BDO’s High Street Sales Tracker showed in-store and online sales increased by just 2.8% in September on last year.
It comes after a similar poor set of results in August, which was the previous lowest post-COVID performance for retail sales.
The month began with sales up 3.9% and peaked in the second week at 4.9%, before falling to 2.8% and 1.3% in the third and fourth weeks respectively, the report said.
The fourth week saw a bank holiday to mark the Queen's funeral.
Fashion sales were up just 6.7% on last September, when retailers would normally expect shoppers to be spending on their autumn and winter wardrobes.
Lifestyle sales were up a meagre 1.2%, but homewares sales fell by 6.3%.
Sophie Michael, head of retail and wholesale at BDO, said: "While the overall like-for-like is not quite going backwards across all discretionary spending categories, it's clear that it's trending downwards.
"The one bright spot is that with the pound's weakness, the UK becomes an attractive destination for overseas tourists doing their Christmas shopping.”
“However, this is unlikely to provide much of a boost to retailers beyond flagship stores in major cities.”
7.00am: FTSE 100 expected to open lower
FTSE 100 is expected to make a weak start on Friday with investors nervously awaiting the US non-farm payrolls numbers due later today.
Spread betting companies are calling the lead index down by around 14 points.
In Asian trading sterling was quoted at $1.1168, lower than $1.1191 at the London equities close yesterday.
In the US markets closed lower on Thursday with investors nervously awaiting today's non-farm payrolls numbers to see if the Fed’s aggressive interest rate moves are finally denting the jobs market.
By the close the Dow Jones Industrial Average was down 347 points, or 1.15%, to 29,926.47, the S&P 500 fell 39 points, or 1.03%, to 3,744.40, and the Nasdaq Composite slipped 75 points to 11,073.