- FTSE 100 up 170 points
- Hargreaves Lansdown (LON:HRGV) higher after upgrade
- Legal & General ahead
3.28pm: Pressures of Queen's death hampered mini-budged - Kwarteng
Another day and another chance for the Bank of England to buy up to £bn of gilts in its programme to stabilise the market in the wake of the mini-budged catastrophe.
And how much did it buy today? Well...
Well, Bank of England didn't buy any bonds today. Rejected a couple of billion quid of offers. pic.twitter.com/7FeqFyB32r— Andy Bruce (@BruceReuters) October 4, 2022
Meanwhile chancellor Kwasi Kwarteng is now blaming pressures following the Queen's death for the badly received statement.
He told GB News: "We had a nation in mourning, and then literally four days after the funeral we had the mini-budget.
"It was a high-speed, high pressure environment, and we could have, as David Cameron used to say, prepared the pitch a bit better."
No comment.
3.20pm: Jobs data energises markets
Wall Street has picked up the pace after the US job openings figures added to the hope that the Federal Reserve would be more dovish about raising interest rates.
The Dow Jones Industrial Average is now up 746 points or 2.53% while the S&P 500 is 2.9% better and the Nasdaq Composite is up 3.3%.
JOLTSPlease stop hiking.
— Ian Shepherdson (@IanShepherdson) October 4, 2022
The dollar has weakened, meaning the pound is now up 0.65% at US$1.1405.
And the FTSE 100 is soaring on the coat-tails of the US market, now up 2.46% or 170.15 points at 7078.91.
3.10pm: US job openings fall
The latest US jobs data has come in lower than expected.
Employers advertised just over 10mln job openings - one of the Federal Reserve's key measures - in August, compared to expectations of a 11.08mln figure.
⚠️ US Data:JOLTS Job Openings
Actual 10.053M
Forecast 11.0875M
Previous 11.239M
Factory Orders MoM
Actual 0.0%
Forecast 0%
Previous -1.0%
via https://t.co/wXVagA44VK
~ @Newsquawk with full data pic.twitter.com/YYhuaC2tx6
— PiQ (@PriapusIQ) October 4, 2022
This is the first time since late last year that the figure has come in below 11mln, and suggests the jobs market is still strong but is slowing as interest rate rise.
That's a meaningful drop in JOLTS job openings pic.twitter.com/0onyoGKpJR— ForexLive (@ForexLive) October 4, 2022
August 2022 #JOLTS Report:???? WHOA! A huge drop in job openings. Down by over a million.
???? Quits rate at 2.7%, private sector rate down to 3%
???? Layoffs rate still low, but up at tick to 1%
— Nick Bunker (@nick_bunker) October 4, 2022
2.45pm: US rally continues but will it last?
Over in the US, stocks have been able to sustain yesterday’s much-welcomed rally with the three major indexes starting the day on Tuesday in positive territory.
Just after the market opened, the Dow Jones Industrial Average had added 450 points or 1.5% at 29,941 points, the S&P 500 was up 68 points or 1.9% at 3,747 points, and the Nasdaq Composite had gained 256 points or 2.4% at 11,073 points.
Forex.com market analyst Fawad Razaqzada said that this sudden rally stemmed from the hope that central banks would soon pivot toward a more dovish stance.
“Buoyed by hopes that softening US economic data is going to lead to a change in central bank policy, stocks have risen along with metals and bonds, with the dollar going in the opposite direction,” he said.
However, he added that he expected the stock market recovery to fade and the dollar to resume higher in the not-too-distant future.
“I fear much of the factors that had weighed on risk appetite are still there,” Razaqzada said. “The gains come on the back of a poor third quarter for risk assets… this weighed heavily on stocks, cryptos, metals, and bonds.”
Back in the UK, the FTSE 100 is close to its high for the day at 7062.28, up 153.52 points or 2.22%
2.07pm: Bank's gilt buying programme has had the desired effect
The Bank of England's market intervention last week to bring down gilt yields amid worries about UK pension funds has been working.
The Bank pledged to buy up to £5bn of long dated gilts a day until 14 October. On that basis the move would have cost £65bn.
But so far it has spent just £3.6bn - which means the total will be nowhere near £65bn - and that has been enough to produce the effect it wanted.
Yields on the UK 30 year bonds, which surged to 5.1% in the wake of the chaotic mini-budget, are now at 3.87%.
1.51pm: Kwarteng said debt reduction plan still set for late next month
Speaking of the chancellor, there seems to be some confusion about when exactly he will deliver his debt reduction plan, ie the spending cuts.
Initally it was supposed to be on 23 November but with many believing it should be sooner, there has been talk it would be brought forward to later this month and ahead of the Bank of England's expected interest rate rise on 3 November.
But perhaps not.
Speaking to GB News, Kwasi Kwarteng said it was still set for the 23rd.
In his speech on Monday he said it would happen shortly. Asked if that meant before the 23rd, he said it meant the 23rd and that people had been "reading the runes."
Pressed to say if he was bringing the fiscal plan forward he said: "It’s going to be the 23rd of November."
GB News Exclusive: Chancellor @KwasiKwarteng tells @LiamHalligan his Medium-Term Fiscal Plan will be published on November 23rd as planned and not bought forward. pic.twitter.com/BmldaoknKh— GB News (@GBNEWS) October 4, 2022
The pound, which earlier touched a day's high of US$1.1425, has come off its best after the comments and is now up 0.42% at US$1.1379.
But the FTSE 100 is still well ahead, up 2.05% or 141.84 points at 7050.60.
12.30pm: Truss and her chancellor
An interesting interview with the prime minister put out by Sky TV.
As well as repeating yet again the government's action on energy prices and saying the Bank of England sets interest rates when she was asked about mortgages rising, she also failed to back the chancellor after the two U-turns this week.
Why doesn't Liz Truss say in this interview that she trusts her Chancellor when repeatedly invited to say so https://t.co/cqdA1RpHUZ— Sam Coates Sky (@SamCoatesSky) October 4, 2022
12.26pm: Eurozone producer prices surge in August
Over in the eurozone more signs of growing inflation, with producer prices in August rising at a record rate.
The cost of goods and raw materials rose by 43.3% compared to a year ago, up from 38% in July.
The month on month increase was 5%, with the main cause for the higher prices being - unsurprisingly - energy costs.
In the wide EU the month on month rise was 4.9% and the annual increae 43% .
Euro area industrial #ProducerPrices +5.0% in August over July 2022, +43.3% over August 2021 https://t.co/JxidjB0L2K pic.twitter.com/Bf8SLJh3nI— EU_Eurostat (@EU_Eurostat) October 4, 2022
12.02pm: US market recovery expected to continue
US stocks are expected to open higher, continuing their recovery from yesterday, as investors welcome the prospect of weaker economic data as a sign that the Federal Reserve will be persuaded to slow the pace of interest rate hikes.
Futures for the Dow Jones Industrial Average were up 1.3% in pre-market trading, while those for the S&P 500 rose 1.5% and contracts for the Nasdaq-100 were 1.9% higher.
“For now, we can all take a deep breath, and enjoy some positive vibes across the global financial markets,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Some of the gains were driven by firmer oil prices, with some investors betting that oil cartel OPEC will cut output by around a million barrels per day to stabilize oil prices.
Meanwhile, the US ISM manufacturing index, released yesterday, showed that expansion in the world’s biggest economy slowed faster than investors expected.
“Interestingly, the soft ISM gave a positive spin to the market,” Ozkardeskaya added.
“I believe that this is an important sign that despite the Federal Reserve officials’ strongly hawkish rhetoric, many investors no longer believe that the Fed could continue tightening at the current speed. That’s a good ingredient for a global market rebound.”
Looking ahead, various indicators on the US jobs market will be in focus this week, culminating in the crucial non-farm payrolls numbers on Friday.
“Today, we will be watching the job openings data in the US, and hope to see a smaller number, as the Fed sees the job openings as a factor that could ease the pressure in the US jobs market,” said Ozkardeskaya.
The ADP report follows on Wednesday.
“Investors are praying for softish numbers this week to continue the rally,” noted Ozkardeskaya.
Still, fears that the world’s biggest economy will be stuck in a prolonged recession amid rising interest rates and spiraling inflation continue to worry investors and are likely to cap gains.
Back in the UK and the FTSE 100 continues its strong showing.
The leading index is up 129.95 points or 1.88% at 7038.71.
11.09am: UK auctions £2.5bn of bonds
The UK has raised £2.5bn in the bond markets but had to offer the highest yield for any gilt sold at auction since 2014.
It sold a 40 year gilt at 3.371%, with the lowest bid to cover ratio since March.
Not the greatest of gilt auctions this morning - sale of 0.5% 2061 conventional gilt covered 1.97 times (lowest since March).Notably the longest yield tail since Nov 2018 at 4 bps - a clear indication the DMO had to accept a lot of lowball bids to shift these bonds. pic.twitter.com/MEMQawXWlR
— Andy Bruce (@BruceReuters) October 4, 2022
Yield tail: the difference between the average yield for a bond sold at auction and the highest yield (ie. the lowest priced bid accepted by the DMO)It's usually a lot less than 1 basis point. Today's was 4 bps - which means the DMO accepted a lot more low bids than normal.
— Andy Bruce (@BruceReuters) October 4, 2022
So if the cover was on the low side and the yield tail was on the high side, it tells you it was pretty hard work for the DMO to shift these bonds.— Andy Bruce (@BruceReuters) October 4, 2022
10.17am: FTSE 100 and 250 both up but mid-cap index outperforms
Leading shares continue to be in buoyant mood, with the FTSE 100 back above 7000.
The blue chip index has added 119.03 points or 1.72% to 7027.79, with financial shares still among the top movers.
UBS strategist Matthew Gilman is positive about the UK market, in particular the leading index.
He said: "At first glance this seems in contrast to our rather pessimistic outlook for the economy. But it’s important to remember that the FTSE 100 is not the UK economy. Only about a quarter of FTSE 100 revenues are generated in the UK, so the global economy matters much more than the domestic backdrop.
"The top 5 constituents (Shell (LON:RDSa), AstraZeneca (NASDAQ:AZN), HSBC (LON:HSBA), Unilever (LON:ULVR) and Diageo (LON:DGE)), which make up around one-third of the FTSE 100 index, are clear examples of the international nature of the market. The next five largest don’t contradict that either ( BP (LON:BP), BAT (LON:BATS), Glencore (LON:GLEN), GSK and Rio Tinto (LON:RIO)).
"This means that not only is exposure to the domestic challenges limited, but the weaker currency will also provide a material boost to corporate earnings as overseas profits are converted back into sterling, and improve the competitiveness of exporters, supporting equities. This, along with higher oil prices, are the key reasons why the FSTE 100 is expected to see one of the fastest earnings growth rates of any major global market this year.
"We expect 20% earnings growth in 2022, which is around double the current consensus forecast for global equities.
"The other factor that has supported the UK’s outperformance this year and continues to underpin our most preferred stance is the sector mix. The FTSE 100 is a value market that’s heavily skewed toward commodities and defensive sectors."
At the moment however the blue chip index is being outperformed by the more domestically focused FTSE 250, which is up 2.33% at 17,688.23.
Leading the way is Greggs PLC (LSE:GRG), up 9.93% following an upbeat trading statement.
And the rise in the index comes despite a 5.39% fall in Drax Group (LON:DRX) following a critical TV programme.
Danni Hewson at AJ Bell said: “Being accused of poor business practices on primetime TV is never a good look and it’s no wonder that shares in Drax have fallen .. after the BBC investigation broadcast last night.
“The renewable energy producer was accused of chopping up wood from primary forests in Canada, despite insisting that it only used offcuts and sawdust from timber yards and diseased trees to make wood pellets to fuel its power stations.
“Many investors will have bought this stock thinking it had good ESG principles, but the TV programme would suggest otherwise.”
10.03am: Goodbye Royal Mail
Royal Mail PLC (LON:RMG) shares are up 3.62% on its last day of trading in this form.
No, the group has not been taken over. It has officially changed its name to International Distributions Services plc from today although, perhaps ironically, the stock exchange will not take delivery of the new name until tomorrow morning.
The move appears designed to convince investors there is more to the company than a strike hit UK business in constant conflict with its workers.
Danni Hewson, financial analyst at AJ Bell, said: “Royal Mail has been rocked by employee strikes and things are only going to get worse given the timetable for further picket lines throughout October and November. It’s no wonder the group is desperate for the market to understand there is more to its business than simply delivering letters and parcels in the UK.
“Its overseas arm GLS has become increasingly important to the group’s earnings and that’s why the corporate name has changed to International Distributions Services, in the hope that people will stop thinking of the business simply as a fleet of red vans and workers in shorts pushing energy bills through doors. It’s not the snappiest of names and one wonders if Irregular Delivery Services might have been a more appropriate moniker.”
9.51am: Oil lifted by expectation of OPEC production cut
Oil is edging higher ahead of an OPEC meeting tomorrow which is expected to announce production cuts to support the price.
Brent crude is 0.69% better at US$89.47 a barrel while West Texas Intermediate, the US benchmark, is up 0.56% at US$84.10.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "Oil bulls are betting that OPEC will announce an output cut of around a million barrels per day to ‘stabilize’ oil prices.
"It is also said that Saudi may be willing to build some reserves to compensate for the Russian oil as the European cap on Russian oil price could lead to lower Russian output.
"If the market mood remains ok-ish, we could see the oil prices recover toward US$90, where stands the 50-day moving average. But the global slowdown, and recession fears are never far, nowadays, and could cap the price rally.
"Four factors should however give support to oil prices in the medium run: the gas to oil switch increases demand for oil; the US will stop selling its strategic reserves; European measures to cap Russian oil price will likely hit the Russian oil output, and we have not heard more about a nuclear deal with Iran."
8.55am: Pound rallies
Sterling is at a two week high in the wake of the UK government's U-turn on plans to axe the top rate of tax.
The pound - which hit an historic low against the dollar of US$1.035 in the aftermath of Kwasi Kwarteng's contentious mini-budget - is now up 0.66% at US$1.1406.
But this mood may not last.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: "This mini reversal is likely to be short-lived in its nature as sterling remains under significant pressure in the face of a looming recession and a US Fed that looks likely to continue aggressive rate rises."
8.46am: Financials help lift market
The government's U-turns on the 45p tax rate and the timing of its statement explaining how it plans to fund its spending continues to help sentiment.
But there are more battles ahead for the beleaguered prime minister and chancellor, with Tory rebels unhappy with the prospect of real-terms cuts in benefits.
While Liz Trusst has committed to increase pensions in line with inflation, on benefits she has said "we have to be fiscally responsible" and the suggestion is they will be raised in line with earnings not inflation. This would mean a much lower increase.
Benefits are usually lifted in line with September's consumer price index, with the rise coming into effect the following April.
A number of Tory's are unhappy with this, including commons leader Penny Mordaunt.
However this has not upset the FTSE 100, which remains 72.30 points higher at 6981.06.
Richard Hunter, head of markets at interactive investor, said: "The FTSE100 ..opened higher, with a combination of broker upgrades and decent trading updates lifting some of the wider financial stocks. The index may remain down by 5.6% in the year to date, but is a relative outperformer in global terms.
"With its large exposure to overseas earnings as well as a smattering of established, defensive plays which, underpinned by an average dividend yield of 4.1%, it ticks a number of boxes for overseas and institutional investors alike.”
Among the financials, Hargreaves Lansdown PLC is up 6.35% at 914p after analysts at Jefferies moved from underperform to hold and raised their price target from 800p to 930p.
Legal & General Group PLC is now up 2.7% following its update, while Prudential PLC (LON:PRU) has put on 2.58%.
8.12am: Footsie follows US and Asia higher
Leading shares are heading higher in early trading, helped by positive performances from the US and Asia.
Chinese markets are closed this week for holidays, but the Nikkei 225 is up 2.9% as investors shrugged off reports that North Korea had fired a missile over northern Japan for the first time in five years.
Closer to home, markets have welcomed the U-turn on the abolition of the 45p tax rate and also suggestions that chancellor Kwasi Kwarteng will bring forward his spending announcements to this month from 23 November.
Mel Stride MP, chair of the Treasury select committee told Radio 4's Today programme that the decision could mean the Bank of England could raise rates by less than expected next month.
He said: "Provided the OBR forecast and new fiscal targets provide reassurance then bringing these forward should calm markets more quickly and reduce the upward pressure on interest rates to the benefit of millions of people up and down the country.
“In particular getting the forecast out ahead of the MPC meeting on 3rd November might help to reassure our rate setters that they can go with a smaller base rate increase than would otherwise be the case.”
Economists are currently expecting the Bank to lift rates by at least 1%.
So the FTSE 100 has jumped 72.57 points or 1.05% to 6981.33.
Legal & General Group PLC, which fell back last week amid the gilt chaos and worries about pension funds, is up 5% after a positive trading statement.
It said the positive momentum seen in the first half had continued into the second, despite the economic conditions, and the volatiliy in the second half has had limited economic impact on its business.
On last week's turmoil and the Bank of England's intervention to stabilise the market, it said: "Recent extraordinary increases in interest rates, and the unprecedented speed of those increases, have caused challenges for the pension fund clients and counterparties of LGIM's UK LDI (Liability Driven Investment) business.
"The Bank of England announced last Wednesday its intention, in line with its financial stability objectives, to carry out purchases of long dated gilts in a temporary and targeted way to restore orderly market conditions. Interest rates have reduced as a result.
"These steps have helped to alleviate the pressure on our clients. We are continuing to work closely with them to achieve appropriate hedging levels in their portfolios. LGIM acts as an agent between our LDI clients and market counterparties and therefore has no balance sheet exposure."
7.36am: RBA lifts rates
Elsewhere the central bank rate rising season continues.
The Reserve Bank of Australia has lifted interest rates by 25 basis points to 2.6%, its sixth increase in as many months.
It said: "The board is committed to returning inflation [currently around 7%] to the 2% to 3% range over time. Today's increase in interest rates will help achieve that goal and further increases are likely to be required over the period ahead."
But the move was less than markets had been anticipating.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "It is.. encouraging for investors to see that the Reserve Bank of Australia lifted its interest rates by 25bp only, versus 50bp expected by analysts."
7.02am: UK market set to get Wall Street lift
FTSE 100 is expected to open higher on Tuesday following strong gains in the US on Monday.
Spread betting companies are calling the lead index up by around 46 points.
Markets may take some comfort from the news that the chancellor plans to bring forward publication of fiscal forecasts which will show how his plans will be funded.
US markets started the quarter in an upbeat mood with all three major indices posting significant gains lifted by advances in oil and commodity prices.
At the close the Dow Jones Industrial Index was up 765 points at 29,490, the S&P 500 soared 93 points to 3,678 while the Nasdaq Composite advanced 240 points to 10,815.