Display stock market numbers and hongkong background
  • FTSE 100 closes down 1.12%
  • BoE rate setter says QE taper may be needed
  • US stocks mixed at mid-session

5pm: FTSE 100 closes lower

FTSE 100 index closed in the red on Thursday, while FTSE 250 headed lower too as traders digested weak growth data from China and lower energy prices.

There were also hints from the Bank of England that action could be taken on rising inflation, with a notable shift to a more hawkish tone from two members.

The UK’s premier share index finished the session down around 79 points, or 1.12% at 7,012, while FTSE 250 dropped over 248 points, or 1.09%, at 22,501.

“Commentary from BoE members Ramsdale and Saunders spooked the doves today, with both members raising the risk of a swift tightening in monetary policy should inflation continue to rise,” said Joshua Mahony, senior market analyst at trading group IG.

“While better-than-expected jobs data out of Australia and the UK set the tone for a more positive day, that has been undermined by fears over rising Covid cases and the potential repercussions that could come into play,” he added.

“In the US, lower than expected readings across the unemployment claims, Philly Fed manufacturing index and industrial production do little to encourage sentiment around the US recovery. Nonetheless, the fact that both initial and continuing jobless claims are moving South prove that the employment picture is gradually moving in the right direction.”

On Wall Street, the Dow Jones added around 33 points at 34,965, while the S&P 500 shed around ten points to 4,364. The tech-heavy Nasdaq index lost over 85 points at 14,559

3.42pm: Stocks lower

Major stock indices on both sides on both the Atlantic are trading lower as investors digest comments from policymakers. 

After the hawkish trend-setting by the central banks of Canada and New Zealand, is the Bank of England close to joining them, wonders market analyst Fawad Razaqzada at ThinkMarkets.

“While the major central banks are continuing to send mixed signals regarding their respective monetary policy guidance in the near-term outlook, one thing is becoming clear: emergency measures are slowly being eased.” 

As a result of the strengthening UK data, including for the jobs market today, the BoE is becoming increasingly vocal about tapering QE, with monetary policy committee member Michael Saunders saying it “may become appropriate fairly soon to withdraw some stimulus”. 

As Razaqzada observes, Saunders said that would be appropriate so long as economic activity and inflation indicators remain in line with recent trends, and downside risks to growth and inflation do not rise significantly.

“The hawkish comments from Saunders and those from Ramsden the day before have led to some speculation that the August MPC meeting could be a live one. However, I don’t think the BoE will move that soon to end asset purchases, but it could nevertheless prepare the market for tapering in the months ahead.” 

Over in the US, the big upsurge in inflation has surprised even the Fed, though the US central bank continues to say these upward price pressures will be temporary and that the economic recovery hasn’t progressed enough to begin its tapering.

The markets have responded by buying bonds, says Razaqzada, causing their yields to drop, with 10-year Treasury yields down again today.

Fed boss Jerome Powell will be testifying again today, so Razaqzada expects to hear more of the same dovish rhetoric.

In London, the Footsie is down 62 points or 0.9% at 7,029, while in New York, the Nasdaq is the biggest faller, down 0.6%, while the S&P 500 is down 0.35% and the Dow is just below flat. 

All the big tech names apart from Tesla (NASDAQ:TSLA) are in the red. 

A big faller is Oatly Group (NASDAQ:OTLY) after short seller Spruce Point Capital Management said the oat-milk maker’s stock – having topped US$28 in the weeks after its May IPO – is worth less than US$10 a share, alleging the Swedish company overstated its revenue and gross margins. The company has denied the allegations, calling them “false and misleading”.

2.41pm: Negative start for Wall Street

Wall Street began Thursday’s session in the red as traders processed the jobless claims data and awaited more testimony from Fed chair Jerome Powell.

Shortly after the opening bell, the Dow Jones Industrial Average was down 0.28% at 34,834 while the S&P 500 dropped 0.22% to 4,364 and the Nasdaq fell 0.27% to 14,604.

Sentiment may have wobbled in the wake of the higher than expected jobless data, with analysts at Pantheon saying the rate of decline in jobless claims “appears to have slowed” but markets may have to wait until the end of August for the true picture as seasonal adjustments faded.

Back in London, the FTSE 100 was down 59 points at 7,032 at around 2.40pm.

1.30pm: Wall Street seen joining downbeat mood

The Dow Jones, S&P 500 and Nasdaq are expected to join the FTSE in the red after the Wall Street opening bell in a short while.

One that looks to be heading higher is Netflix (NASDAQ:NFLX) after reports that it has hired a former EA and Facebook executive to lead its first foray into computer games. 

Games will be made available on Netflix’s video streaming platform within the next year, Bloomberg reported overnight, with no plans to charge extra for the content – to start with, of course (read more on the Netflix story here).

Netflix shares are up 2% to US$557.3 in pre-market trading, while the wider Nasdaq Composite is seen heading for a modest fall at the open, with the S&P and Dow futures predicting slightly larger declines.

General Motors (NYSE:GM) meanwhile will be starting in reverse gear after several of its Chevrolet Bolt electric cars caught fire.

Back in London, the Footsie is down 52 points or 0.7% at 7,039.30. 

Following the earlier speech from BoE monetary policy committee (MPC) member Michael Saunders, where he signalled that the BoE could end its net asset purchases as soon as next month instead of in December, as the bank still signalled last month’s meeting.

The shift comes on the back of the faster than expected economic recovery and signs that the ongoing rise in inflation may be more persistent then the BoE had previously projected.

“Taken at face value, the commentary from the Financial Policy Report combined with the hawkish tilt by Saunders look like an attempt to tighten financial conditions a little in order to prevent an overheating,” says economist Kallum Pickering at Berenberg.

“Of course, Saunders’ view may not be widely shared among the other members of the policy committee. However, as central banks often use such speeches to fine tune guidance and prepare markets for a policy change, the speech suggests that the BoE will at least discuss at their next meeting on 5 August whether to end net asset purchases early instead of in December.

“In our view, given recent upside surprises to inflation, building pressure in the labour market and the outlook for continued strong growth even after the economy reaches its pre-pandemic level of output, ending the stimulus early would be the correct course of action.

“The hawkish tilt by Saunders also suggests that the risks to our call for a first rate hike in August 2022 are skewed towards an even earlier hike.”

11.52am: Pound perks up on BoE rate-setter comments 

The FTSE 100 has taken a dive, falling 55 points to 7035 as the pound rises and US futures markets point to a mixed start for Wall Street later today.

Sterling is up slightly after comments from Bank of England monetary policy-maker Michael Saunders said the central bank may decide to halt its bond purchasing programme early due to the unexpectedly sharp rise in inflation seen recently. 

“It could be another frustrating day ahead, if the opening hours of trade are anything to go by,” said market analyst Chris Beauchamp at IG as an attempt at a recovery in early trading has fizzled out, with European indices under pressure.

He said Fed head Jerome Powell’s surprisingly dovish commentary overnight might once have delivered the foundations for a sustainable rally in equities, but this is not playing out at the moment.

“There has been little change so far this morning, and while European markets are off their lows they are struggling to hold their early gains.

“The easing back of tapering talk has, unsurprisingly, proved to be a boon for growth stocks, with Nasdaq 100 futures targeting 15,000 once again. Europe’s lack of such heavyweights is once again proving its undoing.”

Oilers BP (LON:BP.) and Shell (LON:RDSB) are a big weight on the Footsie, with clothes retailers JD Sports (LON:JD.) and Next (LON:NXT) likely to be hit by the read-across from the slowing seen at ASOS (read more: ASOS close to losing AIM crown).

A note has landed from healthcare analyst Adam Barker at Shore Capital, noting evidence showing that the increase in COVID-19 cases in England are “starting to show signs of having plateaued”, and falling in the unvaccinated, with most people only seeming to infect one other person.

Four days ahead of the government’s ‘freedom day’ on 19 July, cases are now growing more quickly in the vaccinated, observed Barker, who is a Dr of the Cambridge PhD kind rather than MD kind, but he agrees with the prognosis that the vaccine is breaking the link between cases and hospitalisations and deaths. 

10.16am: Experian excites, Just Eat falls

Away from bid-boosted Avast, other top blue-chip risers this morning include Experian (LON:EXP) as the personal data-amassing behemoth boasted a strong first quarter.

With 22% organic revenue growth at the start of its financial year, directors now expect group revenue growth of between 13% and 15% for the full year, of which 9% to 11% will be organic.

Going the other way, Just Eat Takeaway (LON:JET) is one of the biggest fallers after it delivered a curate’s egg of a trading update.

The online takeaway marketplace, which is now valued at over £15bn after completing the acquisition of US rival GrubHub last month, said losses rose in the first half of the year, but on the plus side, it believes they have “peaked” and expects profit margins to “trend back to profitability” (you can read more on the JET story here).

While the Footsie is marginally in positive territory, up just over six points at 7,097.59, smaller sibling the FTSE 250 index is continuing the retreat that began at the start of the week, down 78 points or 0.3% to 22,671.59.

Yo-yo stock Cineworld (LON:CINE), Tullow Oil (LON:TLW) and Hays (LON:HAS) are leading the mid-cap fallers.

This was despite recruiter Hays reporting 39% like-for-like fee growth in the past quarter, ahead of consensus and now just 8% lower than 2019 as all regions saw a good recovery.

“With the June exit rate suggesting a more modest, but steady, rate of sequential improvement ahead we see net fees on track to return to previous peaks by end-FY’22e, allowing Hays to continue strategic growth investments to support long-term growth,” said analysts at UBS, raising their target price to 210p and reiterating a ‘buy’ recommendation.

9.35am: Blue chips turn green (in a good way)

The FTSE 100 has climbed into positive territory as investors digest the UK labour market data that was released earlier. 

Unemployment in May was 4.8%, which was flat compared to April after that month’s figure was revised upwards, while the number of people on the payroll rose by 356k to stand 206k below pre-pandemic levels.

Average earnings rose by 7.3%, or 6.6% if excluding bonuses.

It was a mixed update in terms of expectations, with the unemployment rate having been predited to be stable but employment rising less than expected.

“But average weekly earnings rose more than expected, although that may be influenced by the mix of people going back to work,” said market analyst Marshall Gittler at BDSwiss. 

Ruth Gregory at Capital Economics said: “May’s figures paint a picture of a labour market well on its way to recovery and will further fuel concerns about labour shortages and the possible impact on inflation of higher wage growth.”

She said past revisions to the data suggest there is still plenty of slack in the labour market.

“We think that a sustained rise in pay growth won’t take place until the second half of 2023 and that an interest rate rise is further away than the financial markets think.” 

8.37am: FTSE drifts lower at open

The FTSE 100 made a quiet start to proceedings as US inflation fears kept a lid on equity markets.

Overnight, Jay Powell denied the Federal Reserve was being complacent about the issue as he addressed the House financial services committee.

Concerns mounted after official figures revealed the cost of living jumped by an annualised 5.4% as the world’s largest economy continued to recover from the pandemic.

“I know people are very worried about inflation,” Powell told the committee. “We hear that loud and clear from everybody.”

There was no doubting the stock of greatest interest on the Footsie – Avast (LON:AVST), the cybersecurity giant that is in advanced discussions to be taken over by US rival Norton. The deal is mooted to value the UK group at £5.8bn. The shares shot up 14.8%.

On the flipside, ASOS (LON:ASC) shares were trading 8.5% lower after the online fashion giant warned on Covid uncertainty and higher freight costs (read more on the ASOS story here).

The slide in the oil price forced Shell (LON:RDSA) 2.6% lower, while BP (LON:BP.) was off 2.4%.

Travel restrictions that have left prospective holidaymakers confused seeped over onto the market with tour operator TUI (LON:TUI) off 2.8% while British Airways owner IAG (LON:IAG) fell 1.6%.

6.50 am: Slow start expected 

The FTSE 100 is set to start Thursday slightly lower as lacklustre sentiments continue keep the brakes on equity market recoveries.

CFD firm IG Markets sees the London benchmark down around 17 points, making a price of 7,081 to 7,084 with just over an hour to go until the open.

Minds are focussed on inflation and what its going to mean first for stimulus and ultimately for interest rates – though Federal Reserve chairman Jerome Powell yesterday threw a boon saying the US stimulus won’t be tapered yet as the US economy has not yet progressed enough,

“Nagging concerns about inflation, transitory or otherwise have continued to dominate sentiment, while worries over the pace and persistence of rising prices, appear to be tempering optimism over the wider global recovery story,” said Michael Hewson, analyst at CMC Markets.

New York equity markets were mixed. The Dow Jones finished Wednesday up just 0.13% at 34,933 whilst the S&P 500 marked a 0.12% gain.

The Nasdaq Composite meanwhile dipped 0.22% to close at 14,644 and the small-cap focussed Russell 2000 fell 1.63% to 2,202.

Around the markets

The pound: US$1.3849, down 0.08%

Gold: US$1,827 per ounce, up 0.07%

Silver: US$26.33 per ounce, up 0.4%

Brent crude: US$74.28 per barrel, down 2.8%

WTI crude: US$72.52 per barrel, down 3.6%

Bitcoin: US$32,574, up 2.75%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Thursday as official data showed China’s GDP rose 7.9% year-on-year in the second quarter.

That was slightly lower than forecasts by analysts in a Reuters poll for an 8.1% rise.

The Shanghai Composite in China gained 0.45% and Hong Kong’s Hang Seng index surged 1.13%

In Japan, the Nikkei 225 slumped 1.17% while South Korea’s Kospi lifted 0.50%.

Shares in Australia dipped, with the S&P/ASX 200 trading 0.21% lower.