• FTSE 100 up 11 points
  • US markets mixed at midday
  • Banking shares under pressure

5:05pm: FTSE 100 climbs 11 points to end in the green

The UK blue-chip index edged out a gain by day’s end, up 11 points (0.16%) to close at 7,141.

Supply chain challenges and 3Q data from banks kept the market in check Wednesday, while positivity from the construction sector aided in the uptick.

“Barratt Developments continues to lead housebuilders higher in afternoon trading on the FTSE 100, after a solid update that confirms a continued recovery in activity despite the end of Help to Buy and the stamp duty holiday,” Chris Beauchamp, chief market analyst at IG wrote in an afternoon note.

He continued: “Prices are going up too, offsetting concerns about the inevitable supply chain disruptions. These gains in housebuilders today have helped keep the index in positive territory, offsetting weakness in bank shares in the wake of JPMorgan’s results.”

Elsewhere, US markets were mixed at the noon hour, with the tech weighted NASDAQ adding 61 points to hold at 14,526. The Dow Jones Industrial Average was down 119 to 34,258 and the S&P 500 dipped into the red, shedding 1 point by lunch to 4,348.

Beauchamp attributed the volatility in US markets to inflation concerns eroding risk appetite.

3.56pm: Housebuilders support UK market

Leading shares have gained ground and are close to their highs for the day.

The move is not exactly dramatic however: the FTSE 100 has put on just 12.23 points or 0.17% at 7142.46. But at least it is in the right direction.

Housebuilders are providing some support after a well received update from Barratt Developments PLC (LSE:BDEV), up 5.11%.

Taylor Wimpey PLC (LSE:TW.) has climbed 4.12% while Persimmon PLC (LSE:PSN) has added 3.63%.

But British Airways owner International Consolidated Airlines PLC is the biggest faller in the blue chip index, down 2.84% after Delta Airlines said rising fuel costs were a threat to its profits.

Other airlines have also fallen back, with easyJet PLC down 4.2% and Ryanair Holdings PLC (LSE:RYA) off 1.05%.

Banks are also in the red, with Barclays PLC (LSE:BARC) down 2.42%, Standard Chartered PLC (LSE:STAN) falling 2.06% and Lloyds Banking Group PLC (LSE:LLOY) losing 1.7%.

Michael Hewson at CMC Markets UK said: “Financials are.. losing ground, a trend that has been accelerated somewhat by a disappointing reaction to another decent set of numbers from JPMorgan Chase, though the decline in yields because of today’s US core CPI numbers, which remained steady at 4%, may also be playing a part.”

The FTSE 250 is also higher, up 0.62%.

Top risers in the mid-cap index are investment firm Man Group (LSE:EMG) PLC, up 7.05%, and Darktrace PLC (LSE:DARK), 6.13% higher, after both released trading updates.

The UK gains come despite a 149 point or 0.43% fall on the Dow Jones Industrial Average and a 0.12% slip on the S&P 500. The Nasdaq Composite by contrast is up 0.4%.

3.35pm: The persistence of pricing pressures

More on US inflation.

Specifically, the signs from the latest figures that much of the pricing pressures are not coming from what could be termed transitory sources.

Caleb Thibodeau at Validus Risk Management, said: “Coming in close to the survey high, the September CPI figure adds to the series of upside inflation beats over the past six months. While not a major overshoot, the market appears to be turning more apprehensive of continuingly high or ‘persistent’ inflation numbers.

“Previous contributions to a higher CPI came predominantly from transitory reopening imbalances, such as airfares, hotel rates or used cars. More than half of the 0.4% month-over-month increase for September was from increases in food or shelter-related costs, which is a marked shift towards non-transitory price increases.

“While the Fed continues to encourage inflation in order to achieve ‘price stability’ as one of its two main mandates, a shift to non-transitory inflation could be problematic and force monetary tightening on a more shortened timescale.

“The FOMC has acknowledged that inflation is elevated in its most recent statement, however, only as a result of what it deemed to be transitory factors. Given this inflation persistence in the short term and recent employment data, we can reasonably expect that the Fed will move forward with a tapering announcement at the November policy meeting.”

2.51pm: Pricing pressures continue to unsettle markets

Wall Street has made a mixed start to trading as investors assess whether a slightly stronger than expected US inflation figure goes against the Federal Reserve’s long standing mantra that pricing pressures are transitory.

No doubt things will become clearer from the Fed minutes due to be released later.

But the tone of Fed chair Jerome Powell in his press conference after the last meeting was taken as suggesting rate rises could be on the cards sooner than people had been anticipating.

Consistently strong inflation, as shown by the CPI figures, would fit that pattern.

So the Dow Jones Industrial Average has dipped 51 points or 0.15% while the S&P 500 is up 0.05% and the Nasdaq Composite is 0.48% better.

In the UK the FTSE 100 is down just 0.24 points at 7129.15.

1.53pm: US consumer price index rises

US inflation has come in higher than expected.

The consumer price index rose 5.4% year on year in September, compared to forecasts of an unchanged figure of 5.3% from August.

Food and energy were among the main drivers, with the latter up 24.8% over the past 12 months.

The update has seen US markets dip into the red.

The Dow Jones Industrial Average is now expected to open down 0.14% while the S&P 500 is forecast for a 0.12% fall while the Nasdaq Composite is virtually unchanged.

In the UK however the FTSE 100 has recovered nearly all the day’s losses and is down just 0.42 points at 7129.81.

12.49pm: JP Morgan beats forecasts

JP Morgan Chase has got the US reporting season off to a good start with better than expected figures.

Third quarter net income rose 24% to US$11.7bn, helped by the release of US$2.1bn from the reserves put aside for possible loan defaults during the pandemic.

The bank also benefited from increased revenues from mergers and acquisitions, strength in its wealth management arm and a rise in interest income as credit card spending climbed.

Earnings per share rose 28% to US$3.74.

Boss Jamie Dimon said: “JP Morgan Chase delivered strong results as the economy continues to show good growth – despite the dampening effect of the Delta variant and supply chain disruptions.”

The bank recently launced a digital retail bank in the UK as part of its international expansion plans.

In pre-market trading, its shares are up 0.6%.

11.56am: US investors await inflation news and bank results

US stocks are expected to open a touch higher as investors await earnings reports this week from some of the country’s largest banks. The release of September’s consumer price index (CPI) ahead of the market opening, will also be watched keenly.

Futures for the Dow Jones Industrial Average futures gained 0.11% in Wednesday pre-market trading, while the broader S&P 500 index rose 0.2% and those for the tech-heavy Nasdaq 100 added 0.51%.

At the close on Tuesday, the Dow eased 118 points to 34,378, while the S&P 500 gave back 11 points to 4,351 and the tech-heavy Nasdaq slipped 20 points to 14,466.

Global inflation concerns have been one of the drivers of risk aversion as energy prices soar and the market expects inflation to remain high, unchanged from August’s 5.3% year-on-year print.

“With investors doubtless awaiting direction from today’s US CPI report, and with bank earnings news and the latest FOMC minutes on the horizon too, a relatively quiet session on Wall Street saw the S&P500 post a modest 0.2% loss yesterday,” commented Daiwa Capital Markets analyst Emily Nicol.

“There was little reaction to the predictable news that the House had passed the stopgap bill to raise the debt ceiling by $480 billion, providing the Treasury with headroom to meet financial obligations until sometime in December.”

JP Morgan kicks off the third-quarter earnings season today. Other notable names reporting financial results this week include Bank of America (NYSE:BAC), Citigroup, and Goldman Sachs (NYSE:GS).

Back in the UK, and the FTSE 100 is now barely changed, down just 4.15 points at 7126.08.

10.58am: Sterling ahead after UK figures

The pound has edged up after the day’s UK data.

It is currently up 0.35% at US$1.3624, on hopes that the UK economy can move forward despite a somewhat lacklustre set of GDP and trade figures.

Joshua Mahony, senior market analyst at IG, said: “A raft of economic data out of the UK has provided a somewhat mixed outlook for economic growth

” August saw a welcome return to growth for the UK, with the July figure revised down into the first negative reading since February (-0.1%).

“Gains for the pound highlight a feeling of optimism, with rising growth, industrial production and manufacturing production all pointing in the right direction. That helps to build on yesterday’s jobs report, which similarly shows progress as unemployment and the claimant count continue to fall.”

Meanwhile the FTSE 100 continues to drift in the red zone, down 13.63 points or 0.19% at 7116.60.

10.05am: Investors remain cautious

Leading shares continue to edge lower as UK economic growth disappointed amid continuing concerns about shortages and rising prices.

But housebuilders are bucking the trend after a well received update from Barratt Developments PLC (LSE:BDEV).

Laura Hoy, equity analyst at Hargreaves Lansdown, said: “The housebuilders have found themselves in somewhat of a sweet spot. While pent-up lockdown demand is starting to wane, people are still motivated to move and that’s driven house prices higher. According to Barratt, that’s been enough to offset build cost inflation, and the group’s not expecting to deliver any downside surprises this year.

“Supply chain constraints were called out as an industry-wide issue, but Barratt confirmed that so far the logjams impacting several other sectors have yet to throw a wrench in the group’s plans.”

Barratt is up 5.17% while Taylor Wimpey PLC (LSE:TW.) has added 4.05%, Persimmon PLC (LSE:PSN) has put on 3.63% and Berkeley Group Holdings PLC is 2.38% better.

Overall the FTSE 100 is currently down 14.73 points or 0.21%.

Russ Mould, investment director at AJ Bell, said: “Equity markets look to have stabilised after a patchy showing earlier this week, however it does feel as though investors remain slightly nervous.

“The FTSE 100’s biggest fallers in index point terms were a mixture of defensive and cyclical stocks, so investors are clearly not falling on one side of the fence. Pharmaceuticals, consumer goods and miners were among the stocks in negative territory.”

AstraZeneca PLC (LSE:AZN) is down 2.19% while rival GlaxoSmithKline PLC (LSE:GSK) is off 1.22%.

Among the miners Rio Tinto PLC (LSE:RIO) has fallen 2.44%.

9.48am: UK trade deficit grows

Still with the UK economy, and the trade deficit widened from GBP2.9bn in July to GBP3.7bn in August.

The decline came as exports were hit by COVID-19 and Brexit related shortages.

Total exports fell by GBP1.3bn or 4.6%, including a 4.3% fall in goods sent to the EU and a 5% fall elsewhere.

Total imports dropped by GBP1.3bn or 3.1%, with a 5.6% fall from non-EU countries and a 0.5% fall from the EU.

8.48am Back to the 1970s?

The FTSE 100 kicked off in the red as the spectre of ‘stagflation’ – that compound word redolent of the 1970s – began to be whispered.

The economic stagnation/inflation thesis was given some credence by the latest official data.

They showed the UK grew at a slower-than-expected 0.4% in August, while the month earlier number was retrospectively downgraded.

At the same time, supply chain issues and steepling energy prices (particularly gas) are forcing up the cost of living at a pace not seen in many years.

Indeed, inflation has become a preoccupation of the global markets.

Worries related to this issue were largely behind the poor performances of Wall Street and Asia’s main markets.

In London, the morning’s top riser was Barratt Developments PLC (LSE:BDEV). It was up 3.2% after a reasonably upbeat trading statement and dragged the sector with it. Its sites have remained open despite industrywide problems sourcing materials.

Supplying the builders is a company called Brickability, which earlier reported a 300% increase in its revenues. Its shares were up 4%.

THG PLC (LSE:THG), the online retailer also known as The Hut Group, continued its descent after a torrid Tuesday on which it lost more than a third of its value.

A presentation designed to reassure analysts and investors about the long-term prospects for its Ingenuity e-commerce platform spectacularly mis-fired. One newspaper said it was met with a “barrage of sell orders”.

The reset continued Wednesday with THG shares down a further 4% in the early exchanges.

This despite the company saying it “knows of no notifiable reason for the material share price movement, and that no material new information was disclosed at the event.”

7.55am: UK economic growth picks up but by less than forecast

The UK economy is showing signs of stalling, growing by less than expected in August and contracting rather than rising in July.

The latest figures from the Office for National Statistics show GDP grew by 0.4% in August compared to a forecast rise of 0.5%, meaning it is 0.8% below its pre-pandemic level.

The previous month has been revised downwards to show a 0.1% fall rather than a 0.1% increase, mainly due to falls in car manufacturing as the global semiconductor shortgage hit the sector.

But since then motor manufacturing has recovered somewhat, up 6.6% and helping the manufacturing sector to grow by 0.5% in August.

Services were the biggest contributor to the August rise, with output growing by 0.3%, helped by accommodation, food and entertainment in the first full month of lockdown restrictions being fully eased.

Construction contracted, with output down by 0.2% in August . The sector is now 1.5% below its pre-pandemic level.

Emma-Lou Montgomery associate director at Fidelity International, said: “August’s 0.4% growth marks a small rebound on July’s stalling GDP figures, yet the worry remains that economic growth won’t even be in touching distance of pre-pandemic levels until well into next year.

“Shortages of HGV drivers and supply-chain disruption continues to trouble multiple sectors and is clearly dampening consumer confidence. Forecourts and shelves have been left empty, with mass recruitment drives yet to attract the number of staff urgently needed. This all comes in the crucial lead up to Christmas, when suppliers and retailers should be firing on all cylinders. But with households facing steep price rises for everyday items, from the food shop through to the gas bill, there will be little desire – or capacity – to spend, spend, spend.

“Policymakers will be keen to avoid this troubling mix of slow growth and rising prices from settling in for a sustained period of time, but this ‘stagflation’ doesn’t look like it will be going anywhere fast. There is a lot for the Chancellor to cover in The Treasury’s spending review and Budget announcement in a couple of weeks’ time, and he will undoubtedly aim to quell concerns while firming up faith in the UK economy. However, it’s what’s ahead that is concerning economists even more, with potential further hits to GDP lurking just around the corner.”

But the weakness may temper the Bank of England‘s thoughts of an interest rate rise this year.

Paul Dales, chief UK economist at Capital Economics said: “In the third quarter as a whole, GDP may have risen by around 1.4% quarter on quarter. That would be weaker than the 2.1% quarter on quarter rise the Bank of England expected in September. So while the chances of an interest rate hike this year have recently risen, a weaker activity outlook means it’s not a done deal.”

6.50am: Leading shares set for unchanged start

The FTSE 100 is expected to open flat at 7,130 ahead of some key releases in the US.

In August US CPI fell back from 5.4% in July to 5.3%, while core prices fell from 4.3% to 4%. No further changes are expected to either number, however given the continued resilience in energy prices, and the disruption caused by Hurricane Ida that may be more of a hope than an expectation.

Tonight’s Fed minutes should give us an insight into the FOMC’s thinking from the nature of its statement.

The Fed said that “if progress continues broadly as expected, the Committee judges a moderation in the pace of asset purchases may soon be warranted”.

“Nobody really expected this to mean November, but from the tone of Powell’s press conference later this appeared to be what the FOMC wanted us to think, despite there only being one payrolls report between now and the November meeting,” commented Michael Hewson at CMC Markets.

“While a taper seems pretty much nailed on now, speculation has now shifted to the timing of the first interest rate increase.”

“This is especially important given that the number of FOMC members who saw the potential for a rate rise in 2022 increased from 7 in June, to 9, meaning the committee are evenly split, however that is likely to change if the data evolves as expected, which means that a rate hike for 2022 is likely to become a majority view by the end of this year, which is a big shift in thinking from earlier this year.”

“Since that meeting a lot of water has passed under the bridge, we’ve seen further sharp rises in the costs of energy, as well as further supply chain disruption feeding into headline inflation, and we’ve also seen a pretty disappointing payrolls report, that could influence thinking next month.”

6.50am: Early Markets – Asia / Australia

Shares in the Asia-Pacific region were mixed on Wednesday as trading in Hong Kong was cancelled because of severe weather due to Typhoon Kompasu.

The Shanghai Composite gained 0.25% after China’s trade surplus with the U.S. rose to a monthly record of US$42 billion in September — exports surged by about 30% from a year ago, while imports climbed by just under 17%.

In Japan, the Nikkei 225 fell 0.20% while South Korea’s Kospi gained 0.96%.

Australia’s S&P/ASX200 dropped 0.11% to 7,272.50 as many companies that move or make things warned of profit pressures owing to rising input costs.


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