FTSE 100 claws back this week's losses
A turbulent week in the City is over!
The blue-chip FTSE 100 share index has closed for the night, finishing 23 points higher at 8168 points, up 0.28% today.
That means it only lost 6 points during the week, and what a week it was!
The FTSE plunged by 2% or 166 points on Monday. during the global stock rout, before stabilising on Tuesday, rallying on Wednesday (up 140 points), and slipping back slightly on Thursday.
The pound is trading slightly higher today, up 0.15% today. But it’s still on track for its fourth daily fall in a row, matching a run last seen in September 2023.
On what was a largely uneventful day, the pan-European Stoxx 600 index gained around 0.5%, with stocks also a little higher in Frankfurt, Paris, Madris and Milan.
And that’s all for the week. Phew! We’ll be back on Monday. GW
Eurozone bond prices have risen today, which may show investors remain nervous and are seeking out safer assets.
That’s pushed down bond yields (the rate of return on the bond, which falls when prices rise).
Yields are up over the week, though, as Reuters reports:
Germany’s two-year bond yield was last down 2 bps at 2.385% and was set to end the week 5 bps higher.
Italy’s 10-year yield was down 7 bps at 3.639% and was on track to end the week up 1 bp. The gap between German and Italian borrowing costs stood 4 bps lower than on Monday at 141 bps.
Financial stocks are higher on Wall Street today, with American Express (+1.2%), JP Morgan Chase (+0.9%) and Visa (+0.8%) leading the risers on the Dow Jones industrial average.
The top faller on the Dow is Intel (-3.6%), which has announced the postponement of its “Innovation” event, in San Jose, California, where it would have shown off new hardware.
Updated
Office staff at car giant Ford to take industrial action in pay dispute
In the UK car sector, around 1,200 ‘white collar’ staff at Ford are to take industrial action in a dispute over pay.
The Unite union has announced that its members within Ford’s office staff will take action short of strikes from August 22.
Hundreds of Ford managers in the union are already taking industrial action over pay, in a dispute over “unacceptable” wage offers and contract changes.
Unite said co-ordinated strike action will be held if the dispute is not resolved.
Unite general secretary Sharon Graham said:
“Ford’s relationship with its white-collar staff has never been worse. Instead of engaging with Unite, the company has resorted to threats and bullying to try and prevent staff from taking industrial action.
“The intimidation tactics have failed – our members know the company is simply trying to boost its huge profits at the expense of their wages. They have Unite’s full support in taking industrial action for a fair pay rise.”
🚨 1,500 @forduk white collar staff taking nationwide industrial action.
— Sharon Graham (@UniteSharon) August 9, 2024
Ford’s relationship with its white-collar staff has never been worse. Instead of engaging with @unitetheunion, the company has resorted to threats and bullying to try and prevent staff from taking action.
A Ford spokesperson said:
“We will continue to engage with Unite and our employees on the fair and balanced offer that reflects an already highly competitive pay and benefits package.”
Wall Street opens a little lower
Over in New York, trading has begun…. and it’s rather subdued so far.
The Dow Jones industrial average fell by 95 poinst at the open, down 0.24%, to 39,351.24.
The broader S&P 500 slipped by 0.07%, while the tech-focused Nasdaq lost 0.11%.
After strong gains on Thursday, investors may be more cautious today – having had what ING calls “a reality check” in recent sessions.
ING told clients today:
The reality check for everything related to technology and AI had already started somewhat earlier. Some earnings disappointed and illustrated that there are limits to fantasies regarding future returns and that not everything that has ‘AI’ on it immediately brings big bucks.
Another came from US weaker-than-expected labour market data last Friday, which brought back the R-word to financial markets: recession. The announcement that Warren Buffet sold some big positions also triggered some concerns among market participants; what does he know that we don’t?
Finally, as the interest rate differential between Japan and the US and also the eurozone is gradually narrowing, some closed carry-trade positions and fueled a sell-off in Japanese stocks.
Canada’s economy unexpectedly shed a net 2,800 jobs in July, pulling the country’s employment rate down by 0.2 percentage points to 60.9%.
The latest Canadian jobs report also shows that the unemployment rate remained at 30-month high of 6.4%, while annual pay growth slowed to 5.2% from 5.6% in June.
🚨CANADA LOSES JOBS FOR SECOND STRAIGHT MONTH
— Genevieve Roch-Decter, CFA (@GRDecter) August 9, 2024
CANADA LOST -2,800 POSITIONS VS +25,00 EXPECTED
UNEMPLOYMENT RATE 6.4% (HIGHEST IN 2 YEARS)
BIG RATE CUT INCOMING (IMO)
PROBABLY NOTHING.
Updated
The gold price has crept up to its highest level since Monday, when it was knocked lower by the global market rout.
Spot gold has gained 0.2% today to $2,431 per ounce.
Li Xing Gan, financial markets strategist at Exness, says gold has stabilised after being volatily in the last few sessions:
This stability is due to reduced recession fears following the release of US initial jobless claims data, which were lower than expected. However, gold could remain supported by the anticipation of a Fed interest rate cut in September.
The forthcoming US Consumer Price Index (CPI) data for July will be critical in shaping expectations regarding the Fed’s rate cuts trajectory for the year. This data, expected next Wednesday, could introduce some volatility in the market.
At the same time, escalating geopolitical tensions could reinforce gold’s appeal as a safe-haven asset. Markets are on edge over potential retaliatory strikes in the Middle East and the implications of Ukrainian actions in Russia.
French president Emmanuel Macron had some good news this morning – France’s unemployment rate has fallen.
The jobless rate in the euro area’s second-biggest economy fell to 7.3%, statistics agency Insee reported, down from 7.5% in Q1.
The number of people out of work and looking for a job decreased by 40,000 over the quarter, to 2.3 million people.
Unemployment Rate in France decreased to 7.30 percent in the second quarter of 2024 from 7.50 percent in the first quarter of 2024.https://t.co/0FNZ5op7u6 pic.twitter.com/fFxZBcRUwp
— TRADING ECONOMICS (@tEconomics) August 9, 2024
After a rollicking rally yesterday, Wall Street is likely to take a breather today.
The main indices are being called slightly higher this morning (trading begins in three hours).
The futures contract for the S&P 500 share index is up 0.17%, while the Nasdaq is tipped to rise by 0.25%. The Dow Jones industrial average is expected to be flat.
5 Hours ahead of the NY Open, our cross-asset model indicates a +0.12% gain for the S&P (while futures are up +0.29% since prior close). The signal from Global Equities is most bullish (+0.15%), while the signal from Rates is least bullish (-0.02%). pic.twitter.com/ubfRsua23g
— Exante Data (@ExanteData) August 9, 2024
Updated
Back in the City, the FTSE 100 has now recovered all its losses from earlier this week.
The blue-chip share index is now up 44 points, or 0.55%, at 8190. That’s around 15 points above its close on Friday afternoon, before it slumped on Monday after Japan’s Nikkei tumbled by over 12%.
Cheaper mortgages are boosting demand in the UK housing markets, housebuilder Bellway reported this morning.
Bellway reports that reservation have risen in the last year, to 0.51% per outlet per week – 10.9% more than a year ago.
Its forward order book has grown too, to 5,144 homes, up from 4,411 homes in 2023.
Jason Honeyman, Bellway’s chief executive, says:
“While a lower starting forward order book drove a reduction in volume output, customer demand during the year has benefitted from a moderation in mortgage interest rates which has helped to ease affordability constraints and supported an increase in reservations.
The improving trading backdrop, combined with the strength of our outlet opening programme, has generated healthy growth in the year-end order book. As a result, we are in a strong position to return to growth in financial year 2025, as previously guided.“
UK mortgage rates drop
UK mortgage rates have dipped this week, as lenders compete to attract customers:
Data provider Moneyfacts reports:
The average 2-year fixed residential mortgage rate today is 5.70%. This is down from 5.74% the previous working day.
The average 5-year fixed residential mortgage rate today is 5.33%. This is down from 5.36% the previous working day.
New deals, for those with up to a 40% deposit, hope to attract buyers back to the mkt over their hols. Halifax cuts its mortgage rates to sub 4% (3.99%) after Barclays dropped their rate to 3.84% yesterday @gracegausden93 https://t.co/M4vv9gTGey
— Emma Fildes (@emmafildes) August 8, 2024
Over in China, manufacturers continued to cut their prices last month, but consumer inflation picked up.
China’s producer price index (PPI), which measures costs for goods at the factory gate, fell by 0.8% year on year in July, the National Bureau of Statistics reported.
Prices of building materials and non-metallic materials fell by 5.2% in July, reflecting weaker demand in the Chines property sector.
But consumers faced higher prices in the shops – china’s consumer prices rose by a more-than-expected 0.5% in July from a year ago.
Inflation was lifted by a surge in pork prices, reports CNBC:
Prices of pork, a widely consumed food staple in China, surged by 20.4% year-on-year in July. That was the biggest increase since December 2022, according to Wind Information.
Pork prices play a significant role in China’s consumer price index, but can be prone to large swings due to disease or other factors affecting production.
European markets rebound as recession worries ease
European stock markets are also making a positive start.
The pan-European Stoxx 600 index has gained 0.4%, with small gains on the German DAX (+0.12%) and on France’s CAC 4o (+0.3%).
Mark Haefele, chief investment officer at UBS Global Wealth Management, says:
“Although the US economy now looks to be growing at a rate slightly below trend, fears of a recession look premature.
Recent consumer spending data points to a normalization from elevated levels rather than a period of weakness.”
FTSE 100 opens higher
City traders are in a cheerier mood this morning, pushing shares higher.
In London the FTSE 100 has jumped by 28 points, or 0.33%, to 8169 points.
That takes the blue-chip index close to its closing level on Friday, meaning Monday’s plunge has now been clawed back.
Miners are among the risers in London with Anglo American up 2.1% and copper producer Antofagasta rising 1.9%.
We have confirmation that inflation in Germany rose last month.
On an EU-harmonised basis, Germany’s annual inflation rate rose in July to 2.6%, up from 2.5% in June.
Ruth Brand, President of the Federal Statistical Office (Destatis) , says:
“Decreases in energy prices, in particular, are having a dampening effect on the rate of inflation.
“By contrast, we continue to see above-average increases in service prices.”
Hargreaves Lansdown takeover agreed
One of the UK’s leading investment houses, Hargreaves Lansdown, has agreed to be taken over.
A consortium of private equity companies have hammered out a deal that values Hargreaves Lansdown at £5.4bn.
They will pay £11.40 per share – £11.10 in cash plus a 30p dividend from HL. Investors can also chose to reinvest their stock in the private equity group’s unlisted vehicle.
The consortium is made up of CVC Private Equity Funds, Nordic Capital XI Delta, SCSp, (acting through its general partner, Nordic Capital XI Delta GP SARL) and Platinum Ivy B 2018 RSC Limited.
The deal means the London Stock Exchange loses another member, at a time when it is fighting to attract new listings.
The firm, which is part of the FTSE 100 share index, was founded in 1981 by Peter Hargreaves and Stephen Lansdown, in a spare bedroom in Hargreaves’ house. It offers a variety of investment options, including ISAs and the ability to buy shares, bonds and exchange traded funds (ETFs).
The takeover means hefty payouts for its founders – Hargreaves owns almost 20% of the company, while Lansdown owns 5.7%.
Update: Hargreaves has chosen to take half of his payout in cash, and rollover the other 50% into the consortium’s new ownership structure. Lansdown is taking the cash.
Updated
Over in Tokyo, traders can finally relax after a week of highly volatile market moves.
The Nikkei 225 share index has just closed, up around 0.5%. That ends a week which brought the Nikkei’s biggest plunge since 1987, followed by its best day since 2008.
Today had some drama too – the index initially surged by 2%, after Wall Street’s strong session, before dropping into the red in afternoon trading.
Japan's Nikkei salvages a positive close on the day, and just down over 2% on the weekhttps://t.co/cGyja8EM5R
— ForexLive (@ForexLive) August 9, 2024
The stock market roller coaster took another twist last night, as Wall Street posted its best day of trading in nearly two years.
The S&P 500 share index rose 2.3% to 5,319.32, its biggest single-day jump since November 2022, as investors welcomed a drop in the number of Americans filing new unemployment benefit claims last week.
That eased some of the US recession worries that have been building in the markets.
UBS: Labour's honeymoon likely over
The pound’s weakness since mid-July comes after a strong start to the summer.
It jumped by three and a half cents in the first two weeks of last month, as investors appeared to welcome the incoming Labour government.
That rally has now fizzled out, with sterling hitting its lowest since 2 July yesterday.
“The Labour honeymoon is likely over,” said Shahab Jalinoos, the global head of currency research at UBS, via Bloomberg, adding:
“The pound has finally reacted to what has for some time seemed like excessive long positioning.”
Updated
Introduction: Pound on track for worst run in a year
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
After a week of volatile trading, the pound is on track for its longest run of losses in a almost a year.
Sterling is heading for its fourth weekly loss in a row, which would be its worst run since last September.
The pound has dropped by two and a half cents against the US dollar over the last month, amid a scramble for safe-haven assets. In mid-July, sterling was worth $1.30 – today, it’s trading around $1.275.
Last week’s Bank of England interest rate cut, and the prospect of one or two further rate cuts this year, pushed the pound down.
Sterling has also dropped for the last four weeks against the euro.
Alex Kuptsikevich, senior market analyst at FxPro, says market balance has shifted back in favour of sellers.
The British Pound has been under increased pressure over the past few weeks, facing serious resistance as it tries to break important long-term levels against the Dollar and Euro.
The most important reason for the pressure on the pound is monetary policy, as the Bank of England swiftly eased policy in response to falling inflation.
However, the impressive buying of the Euro against the Pound over the past fortnight cannot be overlooked. The fall in EURGBP to near two-year lows has made buying euros against the pound attractive, especially when it appeared that the ECB and the Bank of England were moving at roughly the same pace in easing policy.
The agenda
7am BST: Germany’s inflation rate for July
9am BST: Italian inflation rate for July
1.30pm BST: Canadian jobs report for July
5pm BST: Russia’s Q2 GDP report and inflation data for July
Updated
