• FTSE 100 closes up 59 points
  • Wall Street higher
  • Eyes turn to next week’s busy earnings schedule

5pm: FTSE closes above 7,000

FTSE 100 index closed higher on Friday and above the 7,000 level as the share rout on Monday now seems like a distant memory.

Britain’s blue chip index finished up around 59 points, or 0.85%, at 7,027, just shy of the session high at 7,033. Over the week as a whole, the index nudged up 0.27%.

Midcap FTSE 250, and the more UK focused index, was also higher, up over 206 points, or 0.91%, at 22,883.

“The Monday selloff seems like a moment of brief panic, and while it was startlingly short-lived, it was enough it appears to reset sentiment and activity and prompt a resurgence of bullish momentum,” said Chris Beauchamp, chief market analyst at online trading group IG, in a note.

“Central bank have done their bit to allay fears, most notably the ECB this week, but now that the reappointment of Jerome Powell is more assured markets are also much more relaxed about the outlook for US policy too. The drumbeat of earnings season continues to provide a positive underpinning too, as US firms continue to provide optimistic outlooks and strong earnings reports as well.”

On Wall Street, the tech-laden Nasdaq earlier topped 15,000 this afternoon, but then eased back to 14,797, up 112 points. The Dow Jones added around 191 at 35,014 and the S&P 500 gained around 34 points at 4,401.

4pm: Shares mostly ahead

Equities are mostly ahead all around the world, with London and New York stock indices keeping their plates spinning.

As well as the social media giants climbing on the back of their earnings, another big riser on Wall Street is vaccine rising star Moderna Inc, up 3% after the advisory committee to the European medical regulator gave the thumbs up to authorising the company’s COVID-19 vaccine in 12-17-year olds in the European Union.

Investors on both sides of the Atlantic are looking to the week ahead, with a very busy week of results and earnings reports, including most of the FAAANG and other big tech names: Apple, Alphabet, Amazon, Facebook, Microsoft and Tesla stateside.

In London, there are different sector themes, as mentioned in our week ahead report, including big oil with BP PLC (LSE:BP.) (LSE:BP.) and Royal Dutch Shell (LSE:RDSA) (LSE:RDSA) PLC; banks with Barclays PLC (LSE:BARC) (LSE:BARC), Lloyds Banking Group (LSE:LLOY) (LSE:LLOY) PLC and NatWest Group (LSE:NWG) (LSE:NWG) PLC; big pharma with AstraZeneca (LSE:AZN) (LSE:AZN) PLC and GlaxoSmithKline PLC (LSE:GSK) (LSE:GSK); not-so-big-anymore airlines in the form of IAG, Ryanair and Wizz Air, plus others across various sectors, including British American Tobacco PLC (LSE:BATS) and Games Workshop Group PLC (LSE:GAW).

Earlier, analysts at JPMorgan put out a note summing up the earnings season so far: “We are approaching the busiest part of the Q2 ’21 results season, with nearly 50% of US and European companies scheduled to report next week.

“So far, 18% of companies in the US and 23% in Europe have reported. Initial results point to a strong and reassuring earnings delivery, supported by the acceleration in activity momentum in Q2 and favourable base effects, in line with our positive Q2 earnings preview.

“S&P500 Q2 ’21 blended EPS has been revised higher by 16% since the start of the year. Still, current estimates remain below what was delivered in Q1. We think that this is too conservative, with a likely continued inflection higher.”

As the FTSE heads towards the close it is up 55 points or 0.8% at 7,023, with gold miners the main brake, with Fresnillo PLC (LSE:FRES) and Polymetal International PLC (LSE:POLY) on the bottom two rungs. 

Despite the falls at the start of the week, the index is looking like finishing around 15 points higher.

2.40pm: Positive start in New York

Wall Street made a positive start to Friday’s session after a set of strong earnings from tech companies lifted market sentiment.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.52% at 35,003, while the S&P 500 climbed 0.46% to 4,387 and the Nasdaq rose 0.36% to 14,737.

Shares in Snap Inc (NYSE:SNAP), which reported blowout earnings overnight, jumped 22.7% to US$77.27 in early deals, while Twitter Inc (NYSE:TWTR) was up 1.9% at US$70.86 after reporting a jump in revenues.

Back in London, the FTSE 100 had managed to hold most of its gains into late afternoon and was up 47 points at 7,015 at around 2.40pm.

2.15pm: FTSE 100 back in black

Stock indices the world over are in green on the last day of the week, despite some iffy economic data and surging coronavirus cases.  

While the market’s attention has been focused on the virus this week, as market analyst Marshall Gittler says, with stocks plunging on Monday on fears about the more virulent Delta variant, but by Thursday stock markets had recovered, with the S&P 500 was up 0.93% for the week and the STOXX 600 was up 0.39%.

“Although the variant has punctured the ‘vaccine euphoria’ that was prevalent in the market several months ago, investors seem convinced that economies will continue to open up gradually despite the new variant,” he says.

“Presumably the hope is that with the most vulnerable population vaccinated – the elderly and those with pre-existing conditions – as well as a good portion of the rest of the population, the link between new cases on the one hand and hospitalizations & deaths on the other may have been broken.

“The virus may keep raging but without flooding hospitals and killing thousands. That’s evident so far in the data from the UK, where a surge in new cases has not resulted in a surge in deaths – yet. That may be a risk that individuals and governments are willing to take.”

His conclusions are that there is greater uncertainty about how households and businesses will react to the new variant, while governments are likely to be more cautious in reopening their economies such as seen in the US and France.

“That’s good in that it will make for a longer, more gradual upcycle rather than a V-shaped recovery that runs the risk of a boom followed by a bust, not to mention less inflationary pressure,” Gittler says.

But on the other hand a major effect of the rising cases on supply chains in Asia and, further out, there is potential for schools to remain closed after the summer holidays, with more knock-on effects.

But the market seems to be taking all these Rumsfeldian known unknowns and unknown unknowns in its stride, with the Dow Jone now expected to open up 180 points higher, or 0.5%, though futures for the tech-powered Nasdaq have become less bullish as we approach the opening bell. 

Back in blighted Blighty, the FTSE 100 is up 53 points or 0.8% at just over 7021, with the mid caps of the FTSE 250 up 0.7% and only a few hundred points from the all-time high seen earlier this month.

12.23pm: US stocks seen adding to upbeat mood

UK and European stocks are on the front foot and should soon be joined by their ever-exuberent cousins from Wall Street, who will be looking to extend gains to the third day in a row.  

The Footsie is up 0.75% at almost 7,021, up 15 points for the week or 0.2%. 

Futures markets are also pointing to positive starts for the main US indices, with the Dow Jones seen rising at least 150 points and with the S&P 500 and Nasdaq also expected to open at least 0.4% higher.

Market analysts Naeem Aslam at AvaTrade said: “Despite a significant growth in jobless claims last week, the three major indices closed in the green yesterday, boosted by a strong performance by technology stocks.

“Stock traders should understand that the growth in tech stocks came amid rising concerns related to the rise in Covid cases caused by the Delta variant. Investors are unsure what this update means for the economy’s recovery in the coming months.

“Investors should keep in mind that, at the height of the coronavirus pandemic, tech stocks provided a haven for distressed investors due to their higher-than-average earnings performance. Responding with the same strategy, investors are moving away from stocks positively correlated with economic cycles to tech stocks in an attempt to hedge their risk.”

Aslam said stock traders are awaiting the earnings of technology giants such as Amazon.com, Microsoft, Apple, Google, and Facebook, which are set to be released next week.

11.20am: Gains extended

The FTSE is extending its gains as the morning goes on, no up 57 points or 0.8% to 7,025, with Vodafone PLC the top riser and NatWest Group (LSE:NWG) PLC, Burberry Group PLC (LSE:BRBY) and Melrose Industries PLC (LSE:MRO) also on the leaderboard. 

London’s blue chip index is now higher than it was at the start of the week.

“European markets are continuing their ascent, with Monday’s collapse becoming a distant memory as traders and investors buy the dip in style,” says market analyst Josh Mahony at IG.

“Yesterday’s ECB meeting provided fresh confidence for bulls, with the bank promising to remain “persistently accommodative” until their inflation target it consistently met.”

He adds: “In the midst of a period dominated by earnings reports, today has seen a fixation on economic data thanks to UK retail sales and European PMI releases.

“The pound has been enjoying a brief bounce against the dollar of late, yet that strength is fading despite the better-than-expected retail sales reading this morning.

“While there are questions around high-street retail demand despite government steps to reopen the economy, the saving grace appears to have come from football fans who drove up alcohol and food sales for the Euro 2020 tournament. Restrictions limiting pubs to tables of six pushed many to watch the tournament at home, and with England’s final three games of the tournament falling in July it is likely we will see a similar boost next month.”

10am: Underwhelming PMI data shugged off

UK equity investors seem to have taken underwhelming purchasing managers’ index (PMI) data in their stride.

The FTSE 100 was up 45 points (0.7%) at 7,013, more or less where it was before the PMI releases.

Chris Williamson, the chief business economist at IHS Markit, said the rising wave of virus infections had subdued customer demand, disrupted supply chains and caused widespread staff shortages.

“Transport, hospitality and other consumer-facing services companies were the hardest hit, though manufacturing also saw growth weaken markedly during the month.

“Although the July flash survey only covered three days of the full easing of covid restrictions, any imminent re-acceleration of growth in August looks unlikely due to a steep slowing in overall new order growth recorded during July.

“Concerns over the Delta variant have meanwhile overshadowed the passing of ‘freedom day’, and were a key factor alongside Brexit and rising costs behind a sharp slide in business expectations for the year ahead, which slumped to the lowest since last October.

“The PMI indicates that GDP growth will likely have slowed in the third quarter, after having rebounded sharply in the second quarter.

“Firms’ costs rose at a rate unprecedented in over 20 years of survey history as supply shortages pushed up the price of goods, suppliers of services hiked prices and employee pay continued to rise,” Williamson added.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS) said acute material and staff shortages in certain sectors had “interrupted the rhythm of recover in private sector business”.

“The upturn this month was the weakest since March as pipelines of new work, the slowest since February, took the heat out of a blistering spring of activity but gave more breathing space for companies to catch up on backlogs,” Brock said.

Earlier in the day, it was reported retail sales grew 0.5% month-on-month in June following a 1.3% decline in May.

“Within the detail, growth in June was driven by rebound in spending at food stores (4.2%M/M, following a decline of 5.5%M/M in May), with anecdotal evidence suggesting the jump was partially linked to the Euro 2020 football championship. Auto fuel sales continued to rise (2.3%M/M) too as domestic travel increased as lockdowns eased and ongoing international travel restrictions encouraged staycations. In contrast, non-food store sales fell in June (-1.7%M/M) for the first time since January, with a hefty drop in sales at household goods stores (-10.9%M/M), reportedly partly associated with shortages of certain items – furniture and electrical goods – due to supply-side issues,” said Daiwa Capital Markets.

“This notwithstanding, sales of such items were still significantly higher than their pre-pandemic peak and overall, sales at non-food stores were up 37%Q/Q [quarter-on-quarter] (boosted by the re-opening of non-essential stores in April) but while the amount spent online fell for the second successive month in June, the proportion of online retail spending (26.7%) still remained high by historical standards,” it added.

9.40am: Flash PMIs fall to four-month low

There was no sign of PMI tension this morning with the FTSE 100 up 47 points at 7,015.

IHS Markit/CIPS have just released the flash UK composite PMI (purchasing managers’ index) for July and the reading of 57.7 is a four-month low and below the consensus forecast of 62.0.

A reading of above 50 still indicates an increase in activity, however, but the fall from June’s final reading of 62.2 will likely disappoint the market.

The flash UK Services Business Activity index also fell to a four-month low, of 57.8 from June’s final reading of 62.4.

The manufacturing output PMI fell to 57.1 from June’s 61.1 and was also a four-month low, while the manufacturing PMI fell to 60.4 – the lowest level for guess how many months – from 63.9 in June.

Survey respondents widely reported staff and raw material shortages due to the pandemic. Concerns about the loss of momentum contributed to the lowest degree of optimism towards the business outlook for nine months, IHS Markit said.

8.30am: Retail sales beat forecasts

The FTSE 100 got off to a better-than-expected start, boosted by higher than forecast retail sales, which were in turn aided by bumper food volumes as shoppers spent heavily during the Euros.

The advance of 0.5% in the month pipped the consensus figure, which was 0.4%.

“The Euros kicked off a spell of celebratory spending as national teams progressed through the tournament, fans splashed the cash on food and alcohol,” said Susannah Streeter, an analyst at the funds supermarket Hargreaves Lansdown.

“Beers, pizza and barbecue treats flew off the shelves, boosting spending in food stores by 4.2%.

“That marked a turnaround compared to May when the re-opening of indoor dining led to a decline in retail food sales.”

The market had largely anticipated the good news for the food retailers, which opened the session flat.

Vodafone (LON:VOD) topped the early risers’ list with a 3.5% gain after its quarterlies passed muster.

The morning’s biggest riser was in the FTSE 250. Ultra Electronics (LSE:ULE) jumped 33% after private-equity owned aero-engineer Cobham (LON:COB) bid £2.6bn for the defence contractor, a deal that has been recommended by the Ultra board.

6.50 am: Footsie set to join the party

Ahead of retail sales data, the UK’s leading equities are tipped to open modestly higher.

Quotes on CFD platforms suggest the FTSE 100 will open 17 points higher at 6,985 after the index missed out yesterday on the otherwise global advance by equity indices.

In the US, the Dow Jones rose 25 points to close at 34,823 and the S&P 500 climbed 9 points to 4,367, just shy of a new high.

This morning, Hong Kong’s Hang Seng is off 276 points at 27,448. Japanese markets are closed today.

“In the UK, despite the delay in easing lockdown restrictions in June, there appears to be little expectation of a rebound in retail sales after the surprise -1.4% decline seen in May. This is a little surprising even if you take into account the strong numbers in March and April. Expectations for May were for a rise of 1.5% so the estimates could not have been more wrong,” said Michael Hewson of CMC Markets.

“As we look towards today’s June numbers and a decline of -0.1%, there is concern that the delay in relaxing restrictions might have knocked confidence; however, the latest British Retail Consortium (BRC) retail survey for June showed that was far from being the case.

“According to the BRC, UK retail had its best quarter on record with spending in June rising by 13.1% against a decline of 1.9% in June 2019. Food and non-food sales were strong due to Euro2020, and other sporting events prompting additional spending.

“With more people being encouraged to holiday at home the delay in lifting travel restrictions could also act as a boost as more people book a domestic break instead,” Hewson suggested.

Today will see the release of the Markit/CIPS “flash” purchasing managers’ indices (PMIs) for July.

The consensus forecast for the composite PMI is for a pull-back to 61.7 in July from 62.2 in June.

“Surging Covid-19 cases probably weighed on Markit’s PMI surveys in July, particularly the services survey. Indeed, other timely indicators, including the BoE’s CHAPS data and OpenTable’s data on restaurant diner numbers, indicate that the recovery in demand for services has faltered. In addition, the survey will have been in the field mostly before the Step Four unlocking on July 19, when most remaining restrictions on businesses were lifted,” said Samuel Tombs at Pantheon Macroeconomics.

“Meanwhile, evidence is growing that component shortages are weighing on manufacturing production. Indeed, the output sub-index of the manufacturing PMI fell for the first time in four months in June,” he added.

As for company news, mobile phone network provider Vodafone Group PLC (LSE:VOD) is set to hold centre stage this morning.

Vodafone’s update will likely see the main focus on the company’s plans to expand its digital services in Europe and Africa, as well as how the company has fared in the first quarter of its current year after a somewhat neutral performance in its last one.

Shareholder focus is likely to be on the company’s performance in its core German market, as well as any updates on the progress of its plan to power its entire European operation using renewable energy and cut its carbon emissions to net-zero by 2030.

Around the markets

  • Sterling: US$1.3763, down 0.05 cents
  • Gilt: 0.569%, down 4.3 basis points
  • Gold: US$1,804.00 an ounce, down US$1.40
  • Brent crude: US$73.50 a barrel, down 29 cents
  • Bitcoin: US$32,741, up US$485

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Friday as Bloomberg reported that Beijing is considering harsh penalties on ride-hailing giant Didi.

The penalties may include a fine likely bigger than the record $2.8 billion Alibaba paid earlier this year or even a forced delisting of Didi, which debuted last month after an IPO.

The Shanghai Composite in China fell 0.65% and Hong Kong’s Hang Seng index slumped 1.01%

In Japan, the Nikkei 225 lifted 0.58% while South Korea’s Kospi rose 0.08%.

Shares in Australia slipped, with the S&P/ASX 200 trading 0.02% lower.