- FTSE 100 bounces strongly in early trading
- Oil and banking stocks provide support
- Pub bosses demand support
FTSE 100 remained in positive territory mid-morning but off session highs helped by a weaker pound and gains in oil and banking stocks.
AJ Bell investment director, Russ Mould, said "The FTSE 100 started on the front foot after the Bank Holiday, having careered into the long weekend with some substantial losses after Federal Reserve chair Jerome Powell’s hawkish speech at the Jackson Hole summit.”
“It helps that US stocks have stabilised to some extent in the interim. Unsurprising given that many expected Powell to pour a dose of cold water on the idea that a so-called ‘dovish pivot’ was on the way."
“Helping the FTSE 100 is strength in the dollar relative to sterling – will forex traders be eyeing the possibility of parity between the pound and its US counterpart? A similar fate to that which befell the euro recently."
“It would take a big move to get there but as the energy crisis continues to grip the UK it doesn’t feel like a scenario where you could rule anything out."
“Putin’s use of Russian gas supplies as a proxy front in the current conflict with Ukraine continues to add to the supply pressures in the energy market and ramps up the pressure as winter starts to approach."
“A weak pound is typically good news for a FTSE 100 index which is heavily dominated by overseas earners.”
9.05am: Pub bosses call for support
Leaders of six of the UK’s biggest pub and brewing companies have signed an open letter to the government urging it to act in order to avoid "real and serious irreversible" damage to the sector.
Energy price increases of more than 300% are in danger of forcing pubs and brewers across the UK out of business in the coming months, industry leaders have said.
Greene King (LSE:LON:GNK), JW Lees, Carlsberg (CSE:CARLa) Marston's, Admiral Taverns, Drake & Morgan and St Austell Brewery want more assistance to help the industry which also faces big increases in wholesale food and drink prices.
8.45am: Footise bounces strongly
Shares in London bounced strongly, after opening lower, to move into positive territory in early trading supported by gains in oil and banking stocks.
At 8.45am the FTSE 100 was trading around 53.44 points higher at 7,480.75 with support also coming from early indications that US markets would open higher today.
Index heavyweights BP PLC (LSE:LON:BP.) and Shell (LON:RDSa) PLC (LSE:SHEL, NYSE:SHEL) both rose reflecting the higher oil price while banking stocks such as Barclays PLC (LSE:LON:BARC), Lloyds Banking Group PLC (LSE:LON:LLOY) and HSBC Holdings PLC (LSE:LON:HSBA) advanced with banking stocks seen as beneficiaries from increasing interest rates.
Richard Hunter, head of markets at interactive investor said: “Despite the general pessimism pervading sentiment, the FTSE 100 managed to eke out a small if unconvincing gain in opening exchanges.”
“Not having had the chance to react to the sharp falls at the end of last week due to yesterday’s Bank Holiday, the index was nonetheless helped by a strengthened oil price, and now stands ahead by a marginal 0.6% in the year to date.”
“Early movers included unsurprising rises for the oil majors as well as the banks, the latter of which would traditionally benefit from the rising interest rate environment which looks likely to stay for the time being.”
“Any number of challenges remain on a global basis, however, and further volatility is likely over the coming weeks” Hunter added.
8.05am: FTSE 100 opens slightly lower
FTSE 100 opens lower, following the extended weekend, as Federal Chairman Jerome Powell's comments continue to resonate.
At 8.05am the lead index was trading 15.12 points lower at 7,411.76 and the FTSE 250 index was 45.94 points lower at 19,123.78.
Dechra Pharmaceuticals (LON:DPH) has bought Med-Pharmax, a leading veterinary pharmaceutical manufacturer based in Pomona, California, for £221.5mln with the deal funded from existing resources.
The global specialist veterinary pharmaceuticals company said the deal would be “immediately accretive to underlying earnings per share” adding Med-Pharmax had been a long-term target.
Ian Page, Chief Executive Officer at Dechra commented: “The US market is highly consolidated, therefore this is a unique opportunity to add several new products to our portfolio, enter the US food producing animal products market and improve the manufacturing footprint for our North American business."
Struggling retailer, Joules Group, hit back against rumours that talks with Next PLC (LSE:NXT) could be breaking down.
Sky News reported at the weekend that Next had not received enough financial information to make a formal proposal for Joules, with questions being raised about whether it would proceed with the deal at no less than 33p a share.
But in a statement released today Joules said today talks continue with Next PLC (LSE:NXT) about both adopting its Total Platform services to support its long-term growth plans and a potential equity investment.
Earlier this month the group issued a profits warning.
7.30am: Powell's comments to weigh on London
Trading in London is expected to make a weak start following the extended weekend and reflecting hefty falls in the US in the past two sessions following Federal Reserve chairman, Jerome Powell’s comments on Friday.
Spread betting companies are calling the FTSE 100 down by around 15 points.
Michael Hewson chief market analyst at CMC Markets UK said: “If the market price action of the last few days is any guide the penny finally appears to have dropped that the Federal Reserve is willing to risk a recession to get inflation under control.”
“Powell’s message from last week’s speech at Jackson Hole on Friday, couldn’t have been any clearer, that the Fed would keep going until the job is done, the pity being it took so long for investors to take notice, as stock markets dropped, and bond yields spiked higher.”
“With the European Central Bank also indicating that it was considering going in for a 75bps rate move next week, markets are slowly realising that their ideal scenario of rate cuts in 2023, was wishful thinking at best, and that higher rates are here to stay for some time to come.”
“As we look at the return of UK markets, we can expect to see the FTSE100 open lower as markets here play catch-up, while we’ll also get an insight into how higher inflation and interest rates is slowing demand for loans and mortgages in July.”
“The effect of higher interest rates as well as the rising cost of living has already started to manifest itself in the most recent lending data. It’s been a trend that has been in place since the start of this year, but appears to be accelerating as we head into the autumn.”
Bunzl PLC (LSE:LON:BNZL) reported 12.4% growth in revenue at the half-year stage to £5,650.8mln and a 7.7% increase in operating profit to £327.5mln in results released today.
It also said it now expects the group operating margin in 2022 to be higher than historical levels and only slightly lower than that achieved in 2021.
The base business saw very strong revenue growth across North America, Continental Europe and UK & Ireland, driven by strong product cost inflation which more than offset the expected decline in Covid-19 related sales, the company said.
7.00am London set for opening losses
FTSE 100 expected to open lower on Tuesday when trading resumes following the extended weekend reflecting further losses in the US on Monday which came on top of Friday’s hefty falls.
Spread betting companies are calling the lead index down by around 15 points.
The Dow closed Monday down 184 points, 0.6%, at 32,099, the Nasdaq Composite slid 124 points, 1%, to 12,018 and the S&P 500 fell 27 points, 0.7%, to 4,031.
The benchmarks struggled again after a massive selloff on Friday, driven by fears that the Federal Reserve will continue to aggressively raise interest rates.
“While the aggressive and unrelenting selling from Friday is abating, there isn’t much genuine buy demand – even the bulls want to get through some of this week’s major macro events (including China’s PMIs and the Eurozone CPI on Wed and the US jobs report on Friday) before stepping back in on the long side,” said Adam Crisafulli of Vital Knowledge, as reported by CNBC.
In London, results are due from Bunzl while mortgage approvals and consumer credit figures are also due. In the US, consumer confidence numbers are out later today.
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