• FTSE 100 down 81 points
  • Supermarkets in demand
  • Melrose biggest blue-chip loser

5.05pm: Footsie closes off its lows

The FTSE 100 index ended lower on Wednesday but off its weakest level after Russian president Vladimir Putin said the country would increase the amount of gas it will send to Ukraine via Europe, reining in surging gas prices that contributed to market weakness.

The issue underlines the volatility in the market and the nervousness amongst investors about low stockpiles of gas across Europe, said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

At the close, the UK blue-chip index was 81 points, or 1.15% lower at 6,996, above the session low of 6,946.

The more UK plc focused FTSE 250 shed 344 points, or 1.51% to 22,387.

“When Putin’s promises help calm the storm of rising prices which was pummelling financial markets, it’s clear investors are desperate for any gust of good news blowing in,” Streeter said.

“The energy price spikes are the biggest thorn making investors very uncomfortable right now, but there are still other price pressures causing pain, and adding to the worries that stagflation could take hold. Melrose Industries which warned of delays this week to orders due to the computer chip shortages was the biggest faller on the FTSE 100, as concerns about the supply chain crisis loom ever larger.”

On Wall Street by London’s close, the Dow Jones Industrials Average was 320 points, or 0.93% lower at 33,994, with the broader S&P 500 index down 0.78%, while the tech-laden Nasdaq Composite lost 0.42%.

3.55pm: Leading shares recover from lows

Leading shares are off their worst levels as gas and oil prices stabilise a little after comments from Vladimir Putin.

The price of UK gas for next day delivery has fallen from its record 300p a therm to 260p after the Russian president said the country is boosting supplies to Europe and is ready to help stabilise the energy market.

The surge in energy prices had sent the FTSE 100 sharply lower, with the index set to record its worst daily percentage fall since mid-July at one point.

But it has recovered from its low of 6945.5 and is now down 71.59 points or 1.01% at 7005.51.

US markets have also come off the bottom, with the Dow Jones Industrial Average now down 0.95%.

The UK fallers remain a mixed bag.

Consumer stocks are down on worries about inflation in the wake of the surge in energy prices and possible interest rate rises as a consequence.

JD Sports Fashion PLC (LSE:JD.) has lost 4.35%, Next PLC (LSE:NXT) is down 4.05% and Premier Inn owner Whitbread PLC (LSE:WTB) has fallen 3.93%.

Melrose, the industrial group which earlier this week warned of automotive order delays due to semiconductor shortages, is down 4.14%

But Tesco PLC (LSE:TSCO) is up 6.52% after its positive results, and HSBC PLC (LSE:HSBA) is 3.65% higher after an upgrade from analysts at UBS>

Standard Chartered PLC (LSE:STAN) is also wanted and has climbed 2.17%.

3.12pm: US markets under pressure

Wall Street has joined other global markets in recording sharp falls.

As investors contemplate the better than expected US jobs figures – and what that might mean for the Federal Reserve easing its support for the economy – the Dow Jones Industrial Average has dropped 386 points or 1.13%.

The S&P 500 is down 1.14% and the Nasdaq Composite has lost 1.06%.

Back in the UK the FTSE 100 is down 83.68 points or 1.18% at 6993.42.

But its recovery from its worst levels means it is having its worst day since mid-August, no longer mid-July.

Comments from Russian president Vladimir Putin that the country could increase supplies to Europe seems to have helped the market’s revival.

1.27pm: Stronger than expected US jobs report

Ahead of the widely watched US non-farm payroll numbers due on Friday, another jobs report has come in stronger than expected.

The private payroll survey from ADP has seen a 568,000 increase in monthly employment, much higher than the forecast figure of 430,000.

Last month’s number has been revised down from 373,000 to 340,000.

But, ahead of Friday, it is worth remembering that the average difference between the ADP report and the non-farm number has been 200,000 over the past 12 months.

US markets have edged a little higher after the report but are still in negative territory.

The Dow Jones Industrial Average is indicated 0.78% lower, the S&P 500 is showing a 0.93% opening fall and the Nasdaq Composite a 1.08% decline.

Meanwhile the FTSE 100 is off its worst level and is now down 89.76 points or 1.27% at 6987.34.

12.36pm: Three main US indices under pressure

US stocks are expected to open down in a choppy week, as investors await the key non-farm payrolls data on Friday.

The Dow Jones Industrial Average is forecast to fall 0.94%, while the broader S&P 500 index is set to open down 1.11% and the tech-heavy Nasdaq Composite is indicated 1.26% lower.

The Dow closed higher on Tuesday, erasing Monday’s decline, as investors stepped in and bought the recent dip in big tech names.

At the close, the Dow rose 312 points, or 0.92%, to 34,315, while the S&P 500 added 45 points, or 1.05%, to 4,346 and the Nasdaq climbed 178 points, or 1.25%, to 14,434.

Oanda senior market analyst Jeffrey Halley said: “I am expecting the markets to continue tying themselves in knots over the next few sessions until we, hopefully, get a decisive non-farm payrolls print. Higher or lower than 500,000 will do, as it will allow some clarity on the Federal Reserve taper path and positioning appropriately.”

A possible indication for Friday’s figures could come from ADP’s September report on private payrolls, although the correlation between the two is not always clear cut.

Analysts are expected a rise of 430,000 compared to 373,000 in August.

Meanwhile the FTSE 100 remains mired in the red.

The leading index is currently down 108.3 points or 1.54% at 6968.17.

11.40am: Gas prices jump

UK gas prices continue to surge, to the point where some industrial users may be forced to shut down unless the government takes emergeny measures, according to the Energy Intensive Users Group.

Contracts for delivery in November jumped almost 40% to 400p a therm before falling back to around 340p.

The rise in gas and energy prices generally comes because stockpiles are low, demand is growing, supplies from Russia are limited and there has been a lack of wind to power turbines. And we could be facing a cold winter.

10.36am: Down, down, deeper and down

Things are not exactly improving as investors decide this is definitely a down day.

The FTSE 100 is now off 115.59 points or 1.63% at 6961.51, its low for the day so far and on track for its biggest percentage fall since mid-July

AJ Bell investment director Russ Mould said: “A continuing surge in energy prices means the sceptre of inflation is looming large over the markets again…Oil prices are camped above $80 per barrel after producers’ cartel OPEC failed to increase output and natural gas continues to touch record highs. The concern will be that rising prices will prove much stickier than hoped.

“This is undermining the markets’ efforts to pick themselves off the canvas after a bruising autumn so far. The next big announcement on the radar is the US jobs report on Friday – a weak number could prompt concern that we are heading for the dreaded stagflation scenario.”

Melrose PLC, the industrial group which warned of order delays this week, is down another 4.35% and is currently the biggest faller.

Consumer groups are also under pressure, with retailer JD Sports Fashion PLC (LSE:JD.) falling 4.16% and Premier Inns owner Whitbread PLC (LSE:WTB) off 4.11%.

The disappointing construction figures have helped push housebuilder Persimmon PLC (LSE:PSN) 3.54% lower and rival Taylor Wimpey (LSE:TW.) PLC down 3.56%.

Amid the sea of red, Tesco PLC (LSE:TSCO) remains in demand following its figures, up 4.74%.

Richard Hunter, head of markets at interactive investor, said: “Tesco remains the supermarket which its rivals aim to emulate. Its scale and reach are underpinned by a network of large and convenience stores which is now supplemented by an online offering which provides the consumer with an array of choice.

“Speculative and actual M&A activity in the sector is also adding froth and, while Tesco is not bombproof from potential approaches, its size may deter most acquirers.”

Banking group HSBC PLC (LSE:HSBA) is up 3.26% after a UBS recommendation.

9.45am: Slowdown in growth in UK construction

The UK construction industry saw a slowdown in growth in September, and a worse one than expected at that.

The Markit/IHS CIPS construction PMI fell from 55.2 in August to 52.6, compared to forecasts of a figure of 54.

This is well below the 24-year high of 66.3 seen in June.

There was softer demand, along with disruptions on site from unavailable transport, a severe lack of materials and continued staff shortages

In particular, companies reported a rapid drop in sub-contractor availability. This lead to the steepest rise in sub-contractor charges since the survey began in April 1997.

Tim Moore, director at IHS Markit, said: “September data highlighted a severe loss of momentum for the construction sector as labour shortages and the supply chain crisis combined to disrupt activity on site.

“The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards. As a result, the latest survey data pointed to the worst month for order books since January’s lockdown.

“Shortages of building materials and a lack of transport capacity led to another rapid increase in purchase prices during September. There was also a considerable decline in the availability of sub-contractors, with survey respondents citing shortages of bricklayers, drivers, groundworkers, joiners, plumbers and many other skilled trades.”

9.25am: Bond yields rise

Fears of inflation are driving up yields on US and UK government bonds, adding to the general cocktail of concerns now upsetting investors.

US Treasury 10 year yields hit 1.570%, the highest since mid-June while the yield on the UK ten year gilt is at 1.14% from the previous close of 1.089%, its highest since mid-2019.

Neil Wilson at Market.com said: “Inflation/stagflation, supply chain problems, the US debt ceiling, an energy crisis as natural gas prices soar to new records in Europe and the UK, tighter monetary policy from central banks, worries about the Chinese property sector – all swirling around equity markets this week and not going away any time soon. Chiefly this morning we might say that rising Treasury yields and soaring energy prices are conspiring to knock risk appetite.”

So the FTSE 100 continues to decline, now down 103.24 points or 1.46% at 6973.86.

Over in Germany the DAX is down more than 2% as the country’s factory orders fell 7.7% in August after rising 4.9% in July, as supply chain issues hit the sector.

9.02am: HSBC boosted by buy recommendation

HSBC PLC (LSE:HSBA) has also been lifted by a positive note from analysts at UBS.

Moving from neutral to buy with a price target raised from 450p to 485p, the analysts say HSBC is cheap even if interest rates do not rise, but very, very cheap if they do.

Its relative underperformance has been “driven by concerns around rates, mainland China linked real-estate, restructuring, geopolitics, and a market preference for more focussed plays.”

UBS said it was “too cheap for a stock representing 11% of the European bank index and possessing excess capital, excess credit reserves and longer term growth in Asia.”

The bank’s shares are currently up 2.34% at 402.2p.

But that has not helped the FTSE 100. Its fall has accelerated and it is now down 96.52 points or 1.36% at 6980.58.

8.25am: Rollercoaster ride continues

Investors continue to experience a roller coaster ride on the markets.

One day up, one day down, and now…

In early trading it is another down day, with the FTSE 100 falling 70.96 points or 1% to 7006.14.

Inflation continues to be a major concern, and how central banks will respond to the growing pricing pressures.

Energy prices in particular continue to surge.

Brent crude is up 1.6% to US$82.56 a barrel, a new three year high, while West Texas Intermediate, the US benchmark, is at a new seven year high of US$79.61, up 0.86%.

Naeem Aslam, chief market analyst at Avatrade, said: “Crude oil has gained support from uncertainty regarding energy supplies as supplies of coal, natural gas, and crude appear to be tighter.

“Monday’s Opec meeting only exacerbated the issue as the group conveyed no significant rise in oil production and decided to go on with its already existing timeline to avoid any major repercussions caused by another wave of coronavirus. However, the cartel may be pushed into a corner if demand continues to rise, leaving no option but to ramp up production.”

With the UK still facing petrol supply issues, rising pump prices as crude continues to surge will only add to the problems. The RAC believes petrol could hit a new all time high.

And gas prices also show no sign of easing. European natural gas futures jumped 20.04% to a record EUR116.02 per megawatt hour on Tuesday, with Jim Reid of Deutsche Bank (NYSE:DB) pointing out that it was the biggest daily percentage increase in over a year: “The absolute increase of EUR19.37 is actually more than the level at which natural gas was trading as recently as the first quarter of this year.”

The FTSE fallers are a mixed bunch.

JD Sports Fashion PLC (LSE:JD.) is down 2.39%, housebuilder Persimmon PLC (LSE:PSN) is 2.02% lower and industrial group Melrose Industries PLC (LSE:MRO, OTC:MLSPF) – which this week warned of automotive order delays due to semiconductor shortages – is off 2.01%.

But Tesco PLC (LSE:TSCO) is leading the risers, up 3.99% after its profits doubled to GBP1.1bn in the first half of the year as it kept shelves stocked despite supply problems and cut pandemic related costs.

The supermarket group also lifted its full year expectations and said the first tranche of its share buyback programme would be GBP500mln.

J Sainsbury PLC (LSE:SBRY) is also benefitting, up 0.67% while HSBC PLC (LSE:HSBA) is 1.44% higher as banks will receive a boost from any interest rate rises.

6.50am: Choppy week set to continue

The FTSE 100 is expected to open lower on Wednesday as the choppy week continues ahead of Friday’s US Non-Farm Payrolls main event.

“Overnight, firmer services PMI data across Europe and from the US was enough to flush out the buy-the-dippers in equity markets, which ignored a torrid Asian session and posted strong gains. Unsurprisingly, US technology behemoths outperformed, having been singled out for treatment the day before,” analysts at OANDA commented.

“The disconnect continued elsewhere, where US yields firm, notably at the long end. It wasn’t enough to distract the FOMO gnomes of the equity market, but the US Dollar did lift itself higher over the session. Energy prices continued to surge, led by natural gas which climbed nearly 10.0% overnight. We’ll have to name it Bit-gas at this rate. On that note, Bitcoin and cryptos also continue on a burn higher, for reasons I know not. Elon Musk hasn’t said anything, but I note that the Head of the US SEC in testimony on the Hill, said that the US wouldn’t ban cryptos.”

IG is calling the FTSE 100 47 points lower at the opening bell.

6.50am: Early Markets – Asia / Australia

Shares in the Asia-Pacific region were lower on Wednesday as the Reserve Bank of New Zealand raised its official cash rate to 0.5%, among the first advanced economies to do so in the pandemic era.

In Japan, the Nikkei 225 fell 0.83% and South Korea’s Kospi slumped 0.97%.

Hong Kong’s Hang Seng index slipped 0.05% while Mainland Chinese markets remain closed for the holidays.

Banks have been amongst the losers on Australia’s S&P/ASX200, with the index down 0.58% to 7,206.


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