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Non-oil shares hit by risk-off mood amid Middle East fighting, Tesla misses on deliveries

Published 02/10/2024, 14:48
© Reuters.  FTSE 100 live: Non-oil shares hit by risk-off mood amid Middle East fighting, Tesla misses on deliveries
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Proactive Investors -

  • FTSE 100 rises 20 points
  • Oil prices up modestly after Iran missile attack on Israel
  • JD Sports interim results disappoint
  • Challenger bank Starling fined for 'shockingly lax' controls

Tesla deliveries miss

Tesla Inc (NASDAQ:TSLA) deliveries are out, ahead of the Wall Street opening bell.

Third quarter deliveries came in at 462,890 vehicles, up from 443,956 in the second but below the consensus forecast of 463,897.

Production rose to 469,796 vehicles for Q3 from 410,831, which was ahead of the average estimate of 465,828.

Model 3/Y deliveries were ahead of expectations at 439,975.

Tesla stock is down 3.3% premarket at $249.40.

US jobs stronger than expected

US jobs data has come in much stronger than expected, with an ADP non-farm employment change reading of 143k for September, up from 99k before and against 125k expected.

The data "rolled in like a breath of fresh air for the Fed," says market analyst Naeem Aslam at Zaye Capital.

"This news has certainly put a damper on hopes for a ballistic shift in monetary policy. As a result, gold prices have taken a hit, with the dollar index flexing its muscles."

"All eyes are now on Friday’s developments," he says, referring to the much more closely followed official jobs report, or the non-farm payrolls or NFPs as they are known in the trade.

"In the world of markets and risk, good news is still good news - but when it comes to volatility, the scene is rather tame, lacking the drama traders crave," says Aslam.

US stocks tipped to dip

US stocks are expected to slip lower when Wall Street opens, joining most European markets in the red.

Dow Jones futures are down 0.3%, while those for the S&P 500 are down 0.2% and for the Nasdaq 100 they are 0.1% lower.

In Europe, only the FTSE 100 is in positive territory, though only up 0.1% since the open.

Germany's DAX is down 0.6%, while Spain's IBEX and Italy's FTSE MIB are both 0.5% lower. France's CAC-40 is flat.

Inflation back in focus as oil prices rebound

Inflation is in focus as the oil price rebound, though it remains still well off the levels seen six months ago.

Oil prices are continuing to rise as we move into the afternoon, with Brent crude up 3.2% to $75.98, levels last seen in early September.

This follows traders calculating what the fall-out will be from the missile attack by Iran on Israel last night.

Matthew Ryan, strategist at Ebury, says moves in various asset prices reflects "a bout of risk aversion", with many equity markets lower and safe-haven currencies outperforming, including the US dollar.

"The wider implication for markets is the rising possibility of a sharp move higher in global oil futures, and another period of elevated energy prices and consumer inflation.

"The ramifications will not, however, be anywhere near as severe as following the Ukraine invasion, and so far, at least, the moves in markets have been relatively contained," Ryan says.

Trevor Greetham, head of multi-asset at Royal London Asset Management, says: "The main message from geopolitics is inflation hasn’t gone away."

Bond markets reactions include Germany’s 10-year bond yield rising 5.5 basis points, having yesterday hit its lowest level since January.

The UK’s 10-year gilt yield was up 8bps today to 4.02pc.

Massimiliano Maxia, fixed income specialist at Allianz (ETR:ALVG) Global Investors, said: “Markets are taking a breather after yesterday’s bond rally. However, geopolitics and the central bank’s policy paths remained in focus.”

Oil and defence companies support London and Paris benchmarks

The FTSE 100 is battling higher again, up 16 points to 8,293, but over two thirds of Footsie companies are in the red now as the risk-off mood imposes itself amid continued fighting and threats in the Middle East.

Hezbollah media chief Mohammad Afif told media "we are only in the first round" following clashes with Israeli troops.

He says the Lebanese group has enough fighters, weapons and ammunition to push back Israel.

"We assure you, the enemy, that this is only the first round,” Afif told reporters in southern Lebanon, including Al Jazeera.

He said the group is ready to "sacrifice our blood and soul for our homeland by the grace of God” and that what happened in Lebanese towns Maroun al-Ras and Odaisseh "are nothing but the tip of the iceberg".

Afif said Israel’s air superiority will "turn into losses on the ground".

The FTSE is being lifted by gains for oil, defence and mining companies, plus China-tilted banks.

Top of the leaderboard are Prudential PLC (LON:PRU), BP PLC (LON:BP), Shell PLC (LON:SHEL), BAE Systems (LON:BAES), HSBC Holdings PLC (LON:HSBA) and Standard Chartered PLC (LON:STAN).

Miners are not far behind.

In Europe, Frankfurt's DAX is down, but in Paris the CAC-40 is flat, with defence giant Thales and oiler TotalEnergies (LON:TTEF) (NYSE:TOT, EPA:TTE) doing the heavy lifting.

FTSE in the red

The FTSE 100 has now slid into the red, down just over six points at 8,270.

JD Sports continues to be the biggest loser, down 4.6%, with utility companies among the other prominent fallers, including water companies Severn Trent (LON:SVT) and United Utilities (LON:UU) both down around 3%, Vodafone (LON:VOD) and SSE (LON:SSE) both down over 2%.

Housebuilders, airlines, banks and retailers are also generally down between 1.5% and 2.5%, including Vistry Group (LON:VTYV), Persimmon (LON:PSN), easyJet (LON:EZJ), NatWest (LON:NWG), Kingfisher (LON:KGF) and Next.

Starling 'shockingly bad' crime controls

The City watchdog has fined challenger Starling Bank almost £29 million for its "shockingly lax" financial sanction screening controls.

Acknowledging that Starling rapidly grew from approximately 43,000 customers in 2017 to 3.6 million in 2023, the Financial Conduct Authority (FCA) said "measures to tackle financial crime did not keep pace with its growth".

The digital bank's lax controls to screen for financial sanctions, says Therese Chambers, an FCA enforcement director, "left the financial system wide open to criminals and those subject to sanctions. It compounded this by failing to properly comply with FCA requirements it had agreed to, which were put in place to lower the risk of Starling facilitating financial crime."

Oil prices creep higher

Brent crude oil prices have risen further, up 2.5% to $75.43 a barrel now.

Iran said this morning that last night's attack was now over, barring further provocation, but Israel and the US both promised to hit back.

An Al Jazeera report from Lebanon says Israeli forces entered Lebanese territory this morning but were repelled in ground fighting, adding that a response attack had also been made on Israel.

"Hezbollah also bombed the Shtula settlement, where Israeli forces are staging on the border, and hit a large infantry force in the Misgav Am settlement with missiles and artillery."

Earlier, European equity markets were, says market analyst Joshua Mahony at Scope Markets, "seemingly happy to ignore the growing risk of a major Middle East conflict between Israel and Iran".

He says Brent crude is on track for its best week since February.

"Unsurprisingly, the heavily commodity-focused FTSE 100 has enjoyed the benefits of rising oil prices, with Shell and BP both pushing higher in anticipation of a potential conflict that could impact the production and transit of oil in the region."

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