- FTSE 100 closes higher
- Powell remans as Fed chair
- Gold moves lower for third session in a row
5pm: FTSE closes ahead
FTSE 100 closed in the green on Monday while Wall Street also forged higher as markets were boosted by the reappointment of Jerome Powell as Federal Reserve chair and the continuity that provides.
The UK’s blue-chip benchmark finished ahead by almost 32 points, or 0.44%, at 7,255.
This Thursday, US markets will be closed for Thanksgiving.
“With US markets losing interest in the situation from Wednesday on as the US looks toward Thanksgiving, and the reappointment of the Fed chairman out of the way, the week is in many ways already over,” said Chris Beauchamp, chief market analyst at online trading group IG.
“Equities traditionally do better around Thanksgiving and into the end of November, and the continued resilience comes despite the worsening situation in Europe and a still-unsolved supply chain problem.”
3.30pm: UK equities recover
UK equities recovered from a lunchtime lurch and look set to finish the day in a happy place.
The FTSE 100 index was up 29 points (0.4%) at 7,253, with miners and banks to the fore.
It’s not been such a good day for cryptocurrencies where Bitcoin has backtracked US$1,356 (2.3%) to US$58,212 and Ethereum has retreated US$135.16 (3.1%) to US$4,234.29.
Before gold bugs get too smug, the price of the yellow metal is also on the wane, sliding US$36.70 (2.0%) at US$1,814.90.
“Bitcoin is slipping again today after paring losses in recent days. It failed to break back above $60,000 though which may be a bearish signal in the near term. Most people seem to be of the opinion at this point that bitcoin hasn’t peaked and new highs aren’t that far away, but as we’ve seen so often in the past, corrections can be deep and painful. We may not be seeing that now but a failure to get back above $60,000 suggests 20% may not be as bad as it’s going to get,” said OANDA’s Craig Erlam.
“Gold is lower for a third straight session after enjoying a fantastic rally during the first half of the month. The yellow metal soared on higher inflation pressures as central banks, including the Fed, pushed back against a near-term policy response. That suppressed real yields and drove investors towards the comfort of inflation hedge gold but with the US economy performing well and the consumer in a strong position, the Fed may be better positioned to tolerate higher rates and could adopt a more hawkish position next month. With yields on shorter-term Treasuries rising, gold has lost some of its appeal and now faces a big test around $1,833 where it repeatedly saw strong resistance over the summer,” he added.
2.30pm: US indices power ahead as Fed boss Powell gets reappointed
US indices powered higher at the outset as markets celebrated the decision to extend Jerome Powell’s stint as chair of the Federal Reserve.
The Dow Jones was up 305 points (0.9%) at 35,907 and the S&P 500 was 43 points (0.0%) heavier at 4,741.
“It seems continuity prevailed as President Biden named Jerome Powell for a second term, whilst Brainard is nominated as vice-chair,” said Olivier Konzeoue, a sales trader at Saxo Markets.
“Looking ahead, the decision to re-appoint Jerome Powell also removes uncertainty with his current term ending in February 2022. If there had been delays, this may have caused significant market anxiety but with Powell back in the driving seat, we expect to see minimal market impact,” Konzeoue said.
“The Fed’s going to power on with Powell,” was ING’s headline on the subject.
“President Biden has ignored calls from progressives in his party to replace Jerome Powell as Fed Chair and has instead nominated him for a second term. This was the generally expected outcome given the successful role Powell played in steering the economy through the pandemic and the consequent broad bipartisan for his re-nomination,” said James Knightley, the chief international economist at ING.
“This must have been an important consideration given the President’s frustration in getting legislation passed due to wafer-thin majorities in the House and Senate. Biden would not have wanted another battle of attrition that diverts him from achieving his policy agenda since this Fed role requires Congressional approval,” Knightley suggested.
Here in the UK, the FTSE 100 was back in positive territory, up 18 points (0.3%) at 7,241, helped by sterling losing four-tenths of a cent against the US dollar.
12.50pm: Lights go out at Bulb
Bulb, the seventh-largest energy supplier in the UK, has collapsed into special administration.
“We’ve decided to support Bulb being placed into special administration, which means it will continue to operate with no interruption of service or supply to members,” a spokesperson for Bulb said.
“If you’re a Bulb member, please don’t worry as your energy supply is secure and all credit balances are protected,” the spokesperson added.
Meanwhile, the FTSE 100 has fallen into the red albeit by just a couple of points (0.0%) at 7,221.
Royal Dutch Shell PLC (LSE:RDSB), down 1.4% at 1,586.2p, has tipped the balance as the price of Brent Crude continues to fall. Crude for January delivery was down 15 cents at US$78.74 a barrel, not far from a seven-week low.
“Oil prices remain under pressure after Japan said it was weighing releasing oil reserves and as the COVID-19 situation in Europe worsened, raising concerns about both oversupply and weak demand,” said SP Angel.
“Japanese Prime Minister Fumio Kishida signalled on Saturday he was ready to help combat soaring oil prices following a request from the US to release oil from its emergency stockpile, in an unprecedented move.
“Tokyo is exploring ways to bypass a law which permits the release of oil reserves only in cases of supply shortage or natural disasters,” the broker added.
11.45am: Wall Street to open higher
London and the rest of Europe’s stock markets are striding higher and their cousins across the Atlantic are expected to do the same when they jump out of bed later.
US stocks are expected to march together on the front foot after a mixed finish to last week, with Wall Street likely to be abuzz with anticipation as US President Joe Biden announces who will chair the Federal Reserve for the next few years.
Futures for the Dow Jones and S&P 500 are up 0.4% in New York’s pre-market trading, while the tech masses of the Nasdaq are surging 0.9% higher.
Last week’s mixed closed came amid concerns over a resurgence of COVID-19 cases that weighed on global markets, sparked by Austria announcing a new national lockdown and Germany bringing in new restrictions for unvaccinated people.
Trading action on Wall Street will be “heavily compressed” given the Thanksgiving holiday on Thursday, said Deutsche Bank research strategist Jim Reid.
“The highlight though will be a likely choice of Fed governor before this, assuming the timetable doesn’t slip again.
“Overnight it’s been announced that Biden will give a speech to the American people tomorrow on the economy and prices. It’s possible the Fed Chair gets announced here and perhaps plans to release oil from the strategic reserve. We will see.”
Meanwhile, back in Blighty, the FTSE 100 is up 25 points at just over 7,248, while the FTSE 250 is up 24 points at 23,516.
With BT Group still leading London’s blue chips, here’s an analysis of why that might be: Will BT Group and Vodafone be the next telcos on private equity shopping lists?
10.30am: Paying creed to Apollo reports
While some talk of Marks and Spencer Group PLC (LSE:MKS) preparing to buy out Ocado in their joint UK grocery venture, others are suggesting M&S itself may be an acquisition target.
Shares in the iconic British retailer are up 3.2% at 248.8p on weekend press reports that a private equity group – inevitably – is sizing up the company.
According to the Sunday times, Apollo Global Management (NYSE:APO) has been “running the rule” over M&S, once a FTSE 100 mainstay but now languishing in the UK stock market’s equivalent of the Championship.
Shares in M&S were up 3.0% at 248p.
The FTSE 100 was up 22 points (0.3%) at 7,245.
9.45am: When dinosaurs roamed the Earth
The FTSE 100 was up 23 points (0.3%) at 7,247.
BHP Group PLC (LSE:BHP) is doing its bit to support the Footsie’s advance after it approve phase 1 of the Scarborough upstream project located in the North Carnarvon Basin, Western Australia. The FTSE 100 giant is to merge its oil and gas portfolios with Woodside Petroleum and has sanctioned the expenditure of US$1.5bn on the development of the Scarborough project.
“BHP is serious about the threat posed by mounting environmental pressures. The mooted deal to merge its oil and gas assets with Woodside, which was confirmed today, enables it to be clear of assets at the sharp end of the so-called energy transition,” said Russ Mould, the investment director at AJ Bell.
Climate bomb????: Woodside approves massive Scarborough LNG project: An additional 1.6 billion tonnes of GHG emissions = 15 new coal power stations. Also places World Heritage Murujuga Aboriginal rock art at risk of being destroyed #climateemergency #auspol https://t.co/467a4Qrh45
— John Englart EAM ???????????????? (@takvera) November 22, 2021
“While the pace of change remains open to question, the direction of travel for fossil fuels looks fairly clear.
“This deal will allow BHP investors to remain exposed to the petroleum industry should they wish – with shares in the new combined entity distributed to shareholders – but equally if they want pure mining exposure they can sell up and move on,” Mould said.
BHP shares were up 0.8% at 1,899.80p.
8.35am: Brighter than expected start
The FTSE 100 made a brighter than expected start to proceedings as London’s traders chose to ignore the unfolding Covid chaos in mainland Europe and the mixed start in Asia to focus on the positives.
Oddly for the ‘old economy’ heavy UK stocks index, it was the tech-driven Nasdaq, which ended Friday in record territory, that set the tone.
“The rotation follows proposed lockdowns in parts of Europe and, with the US also unable as yet to reduce the vestiges of the pandemic to a comfortable level, cyclical stocks have been eschewed,” said Richard Hunter of Interactive Investor.
Still, those stocks you’d expect to be battered by worries over the winter rise of coronavirus cases in Europe were somewhat oblivious to the problem.
British Airways owner IAG was a case in point. The stock, which is usually incredibly sensitive to any uptick in Covid cases, opened the session 2.8% higher with no discernible tailwind. The fact that the shares have tumbled 10% in less than a week suggests the latest movement is likely to have been prompted by bargain-hunters.
The latest news from IAG is that the company is to face a UK competition probe over its planned acquisition of Spanish carrier, Air Europe.
Rolls Royce, another pandemic Bellwether (in a negative sense, that is), was also well bid with the shares ahead 2.2% in early trade.
There was also demand for telecoms stocks with Vodafone and BT Group both up 2%.
On the FTSE 250, the main casualty, down a whopping 45%, was Hochschild Mining, one of the major casualties of a clampdown in Peru.
On Friday, the country’s prime minister, Mirtha Vasquez, said a group of four mines in the Andean Ayacucho region would not be allowed any extensions on their operational timelines. Two of them were Hochschild assets.
6.50 am: FTSE 100 called higher
The FTSE 100 looks set to start the new trading week on the front foot.
However, any gains look likely to be capped by growing concerns over swelling Covid hospital admissions and civil unrest on mainland Europe.
“The imposition of another lockdown in Austria, following on from the reintroduction of tighter restrictions in the Netherlands, as well as in Germany, has punctured the optimism that the vaccines could offer a clear way out of the pandemic and a resumption of normal life, as we head towards the Christmas period,” said Michael Hewson, an analyst at CMC Markets.
“The realisation that a number of countries could see another disrupted Christmas hasn’t gone down well in a number of European countries with civil disorder breaking out in a number of countries across the region, with Dutch police firing on demonstrators in Rotterdam, while in Austria protests broke out in Vienna over the governments mandating compulsory vaccination from 1st February next year.
“There’s also been protests in Belgium, Croatia and Italy over the modest tightening of restrictions there as a number of European countries run the risk of losing control of the virus.”
The prospect of new lockdowns and tighter restrictions has also seen oil prices slide sharply. Brent crude closed out last week below US$80 a barrel for the first time in seven weeks.
In Asia earlier, the picture was mixed with Chinese central bank warning on the threat posed by ‘stagflation’ – a portmanteau word that has shades of the 1970s about it and is used to describe that potent cocktail of economic stagnation and inflation.
Looking ahead, it looks likely to be a quiet week for corporate news with updates from United Utilities, Compass Group (LSE:CPG) and CRH among the pick of the larger firms reporting.
Around the markets
- Pound US$1.3440 (flat)
- Bitcoin US$57,308.74 (-2.71%)
- Gold US$1,848.70 (-0.30%)
- Brent crude US$75.78 (-0.21%)
6.50am: Early Markets – Asia / Australia
Asia-Pacific shares were mixed on Monday as China kept its one-year and five-year Loan Prime Rate (LPR) unchanged at 3.85% and 4.65%, respectively.
China’s Shanghai Composite gained 0.61% while Hong Kong’s Hang Seng index dipped 0.48%
In Japan, the Nikkei 225 rose 0.09% and South Korea’s Kospi surged 1.54%.
Australia’s S&P/ASX200 fell 0.59% to close at 7,353.10 points with energy, travel and financial stocks the worst performers.