- FTSE 100 ends 3 points higher
- US stocks hold firm in morning session
- Most but not quite all remaining lockdown restrictions will be lifted on July 19
5.10pm: FTSE ends in positive territory
The FTSE 100 index ended marginally in positive territory on Monday, albeit having recouped earlier sizeable falls amid rising yields, helped by early gains from US stocks.
London also took heart from confirmation that the UK plans to remove most coronavirus pandemic lockdown measures on July 19, although high street and travel stocks felt little real benefit having rallied into the announcement.
At the close, the UK blue-chip index was 3.54 points, or 0.05% higher at 7,125.42, below the late session peak of 7,134.87 but well above the session low of 7,066.20
On Wall Street around London’s close, the Dow Jones Industrials Average was 90.37 points or 0.3% higher at 34,960, with the broader S&P 500 index ahead 0.2%. while the tech-laden Nasdaq Composite added 0.1%.
Joshua Mahony, senior market analyst at IG, a global leader in online trading commented: “A slow start to the week has seen European and US markets enjoy marginal gains in a bid to follow Friday’s impressive surge for stocks. The rebound in yields since Friday has dented confidence for growth names, with the Nasdaq trading in the red today as a continuation of Friday’s pop in yields.
“UK travel names have been hit hard today despite the confirmation that the UK will continue to respect the 19 July date to fully unlock the economy. Airlines are likely to continue on a relatively bumpy path as the UK shows its willingness to allow Covid levels to surge as a result of the reopening efforts.”
Mahoney added: “Richard Branson’s trip to the edge of space was expected to mark a fresh boost for Virgin Galactic shares, yet the decision to sell $500 million of stock dampened that bullish sentiment. After all the speculation over the possibility and logistics of space tourism, it is finally becoming a reality.
“With just eight days until Jeff Bezos hops aboard his Blue Origin New Shepard capsule, there are questions over what demand will look like once things have settled. The development of the technology required to get Virgin Galactic to this point has come at a cost, but investors will hope that the company can soon stand on its own feet and turn out a profit after many years in the red.”
4.05pm: Lockdown restrictions lift off
Today has been a day of two halves for the Footsie, which continues to make steady progress in the afternoon session as the Health Secretary, Sajid Javid, confirmed England will lift lockdown restrictions on 19 July.
London’s index of heavyweight shares was up 10 points at 7,131.
Javid said most but not quite all remaining lockdown restrictions will be lifted on 19 July.
Mass events in England will be allowed to go ahead, with entertainment hotspots such as nightclubs can reopen, but such businesses will be encouraged to implement COVID-19 checks at the door.
In a speech to the House of Commons the Health Secretary conceded that in respect of COVID-19 cases, things are likely to get worse before they get better and stressed the importance of people continuing to wear masks indoors in public spaces.
Javid confirmed the government is no longer recommending people work from home if they can but neither is it encouraging them to rush back to the office either, with the minister saying the government is expecting “a gradual return to the workplace over the summer”.
2.45pm: Mixed open on Wall Street
The main indices on Wall Street got off to a mixed start on Monday, with the Nasdaq proving to be the positive outlier at the opening bell.
In the first minutes of trading, the tech-heavy index was up 0.34% at 14,751, while the Dow Jones Industrial Average dropped 0.32% to 34,756 and the S&P 500 fell 0.09% to 4,365.
Meanwhile, despite expectations of a surge following its successful test flight over the weekend, shares in space tourism firm Virgin Galactic slumped 6.2% to US$46.13 in early deals, potentially due to profit taking as optimism over the launch previously drove the stock higher.
Back in London, the FTSE 100 had regained some ground into late afternoon but was still down 14 points at 7,107 at around 2.40pm.
12.35pm: US markets to fall
Concerns about the delta variant of COVID-19 are making markets uneasy, and that includes the US, where stocks are set to give back some of Friday’s gains.
The Dow Jones is expected to open 153 points lower at 34,717 and the S&P 500 is tipped to shed 12 points at 4,358. The tech-laced Nasdaq 100 is seen defying the trend, however, with a 24 point advance to 14,850.
“The major US banks will report their quarterly earnings results in the coming week,” observed Fawad Razaqzada at ThinkMarkets.
“After a very positive first quarter, lenders may very well struggle to top those numbers in Q2. Indeed, Wall Street analysts on average expect EPS and revenue to decline from levels seen in the first quarter. Still, with the Covid-19 vaccinations having been ramped up and the economy recovering stronger than expected, don’t expect to see many disappointments either. In fact, it is quite possible that with lowered expectations, banks might be able to beat consensus, though probably not like Q1 style.
“One source of surprise in Q1 was the release of large reserves that some lenders had previously stowed away for loan losses that didn’t materialise. Expect the banks to release more such funds as the impact of the pandemic was largely offset by significant intervention from the government and the Federal Reserve. The quieter market conditions in Q2 means profits from trading operations will most likely be lower than in Q1 for US banks,” he added.
Neil Wilson at markets.com reckons investors will be looking at share buybacks and dividends after the Fed gave all 23 major institutions the green light to up shareholder returns again.
“Trading revenues won’t be as strong as we have been used to, but loan loss provisions should continue to be written down, boosting headline EPS. Very strong numbers are expected, so banks have a lot of work to do and will require a major upside surprise this earning season,” Wilson said.
US macro data is not so much thin on the ground as non-existent, which gives traders more time to work themselves up into a tizzy over tomorrow’s consumer price index data.
On the company front, Kaltura has slashed the indicated range for the price on its initial public offering. The company is expected to float at between US$9 and US$11, having previously hoped to price its shares at between US$14 and US$16. The new flotation price would value the video-on-demand specialist at up to US$1.36bn.
One Virgin Galactic launch produces >30 tons of carbon dioxide. 7x more than the average human produces in a year; twice what the average American produces in a year.
Enjoy your 4 minutes of weightlessness.#ClimateCrisis
— Peter Gleick ???????? (@PeterGleick) July 11, 2021
Shares in Virgin Galactic Holdings Inc were trading 7.3% higher at US$52.82 after Virgin founder Richard Branson cheered thousands by getting launched into space. He has come back to earth, however, even if the share price has not.
Meanwhile, in the UK, the FTSE 100 is down 40 points (0.6%) lighter at 7,082.
11.15am: EU considers introducing taxes on aviation kerosene
London’s blue-chips remain in the red but at least the FTSE 100’s position is not worsening considerably.
The index of heavyweight shares was down 41 points (0.6%) at 7,081, despite the pound losing around half a cent against the US dollar at US$1.3856.
A report in the Financial Times that the European Union is considering introducing taxes on aviation kerosene has gone down like the proverbial lead balloon with aerospace-related stocks.
British Airways owner International Consolidated Airlines SA (LON:IAG) is off 3.0% at 179.26p, aeroplane engine market and servicer Rolls-Royce Holdings PLC (LON:RR.) is down 3.0% at 97.97p while Melrose Industries PLC (LON:MRS), which owns automotive and aerospace engineer GKN, was 2.7% weaker at 155.15p.
Daily Mail and General Trust PLC (LON:DMGT) is defying the trend, up 2.7% at 1,068p, as is Tate & Lyle PLC (LON:TATE), up 1.8% at 776p – both after announcing plans to spin-off or sell parts of their businesses.
“In the case of media group Daily Mail & General Trust, it has for years owned stakes in various assets and it’s come to the stage where major shareholder, the Rothermere family, thinks it could be best to take the business private,” said Russ Mould, the investment director at AJ Bell.
“In a world where investors have been chasing the next big growth story, DMGT has been an underappreciated player in this space,” he suggested, going on to list the newspaper and exhibitions group’s investments in property, education and publishing.
— Proactive (@proactive_UK) July 12, 2021
“In the case of Tate & Lyle, it is focusing on the faster growth element of its business and offloading a controlling stake in its lower growth operations. That’s a perfectly logical step to take.
“In doing so, investors may reappraise Tate & Lyle and be prepared to pay a higher multiple of earnings to own the shares. In essence, this is a classic re-rating catalyst,” Mould said.
9.40am: Business outlook survey provides some cheer
The Accenture/IHS Markit Business Outlook survey in June indicated hiring intentions among UK businesses are at a new high.
Just over two thirds ((67%) of UK private sector firms expect an increase in business activity during the year ahead, compared to just 9% that project a reduction. At +58% (i.e. +67 – 9) in June, the resulting net balance of business expectations rose to its highest level in six years.
The net balance of companies expecting to increase employment in the coming year rose to a record 41%, fuelled by expectations of increased profits; subtracting the percentage of survey respondents expecting a fall in profits over the next year from those expecting an increase resulted in a net balance of +37%.
“Despite continued uncertainty, it is hugely encouraging that confidence remains high amongst British businesses; however, the most positive signal is that the confidence appears to be translating into action, with companies now hiring and investment plans at a high point,” said Rachel Barton at Accenture.
“The challenge for business is to invest in a way that inspires sustainable growth by hiring people with the right skills and investing in the right technologies that will deliver for the long term,” she added.
Stock markets are on the look-out for any sign of the “inflation genie” being let out of the bottle and the Business Outlook survey had some worrying data on that front, with around 60% of respondents expecting non-staff costs to increase over the next 12 months, compared to just 5% expecting a reduction. The resulting balance of +55% was the highest on record, while the news is no better on the staffing costs front, as the net balance there was a new high of +70%, compared with an EU average of +42% with some firms commenting that Brexit contributed to a reduced pool of available workers.
“The cautionary note in this overwhelmingly positive outlook is the potential for rising costs and supply chain pressures. Many businesses have used the pandemic to restructure their supply chains to bring production closer to the point of demand. This, and other measures, will help them be more agile in the future and build back better, more sustainably,” Barton concluded.
The FTSE 100 was down 49 points (0.7%) at 7,073.
8.30am: Sombre start
The FTSE 100 made a dour start to proceedings as the market reflected the generally disappointing aftermath of England’s footballing defeat to Italy in the Euro 2020 final.
The mood was in stark contrast to the buoyant performances of Asia’s main markets, which were lifted Wall Street’s record finish on Friday and a raft of largely positive economic data from China.
The corporate headline maker was Daily Mail & General Trust (LON:DMGT) whose chairman and 36% shareholder, Lord Rothermere, said he is considering taking the newspaper group private.
The shares perked 4% in the early exchanges at the prospect of the transaction, which also includes the sale of the insurance business and distribution of the proceeds.
Continued worries over the spread of the Covid delta variant hit the airline industry, with IAG (LON:IAG) top of the Footsie losers list with a 2.5% decline.
Rolls Royce (LON:RR.), which makes the jet engines for many of the world’s carriers, fell 2%.
The miners were also marked lower, led by Chilean copper giant Antofagasta (LON:ANTO), which was off 1.8% amid generally weaker metals prices.
6.50 am: Dour start predicted
The markets look set to reflect England’s mood after the penalties defeat against a rugged and determined Italy side in the final of the Euros.
The spread betting firms reckon the FTSE 100 will recede 18 points at the open 7,103.88, ignoring the generally upbeat performance of Asia’s main markets.
Wall Street’s record close and a more positive assessment of China’s economic prospects after the release of a welter of data appeared to calm nerves in the region.
Japan’s Nikkei was the early star performer after it jumped 2.3% from a two-month low.
Later Monday earnings season kicks off in the US with the financial sector setting the tone.
Expected are half-term figures from JP Morgan, Goldman Sachs, Citigroup and Wells Fargo.
Here in the UK, the corporate diary is starting to fill up.
Around the markets
- Pound US$1.3887 (-0.1%)
- Bitcoin US$34,232.16 (+2%)
- Gold US$1,801.20 (-0.5%)
- Brent crude US$75.37 (-0.2%)
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were higher on Monday after China’s central bank announced a 50 basis points cut in its reserve requirement ratio (RRR) for all banks, effective from July.
The lowering of the RRR, or the amount of money that banks must hold in their coffers as a proportion of their total deposits, will increase the supply of money that banks can lend to businesses and individuals.
The Shanghai Composite in China gained 0.88% and Hong Kong’s Hang Seng index rose 0.61%
In Japan, the Nikkei 225 surged 2.17% while South Korea’s Kospi lifted 0.94%.
Shares in Australia gained, with the S&P/ASX 200 trading 0.76% higher.