• FTSE 100 closes 11 points higher
  • US blue-chips find gains, but broader market lower
  • Oil price advances in spite of strategic release news

4.55pm: Energy boost for Footsie

The FTSE 100 closed higher on Tuesday, in spite of mixed progress on Wall Street, supported by strength in energy majors as the oil price rose in the face of news the US is to release 50mln barrels of oil from its strategic reserves over the next few months.

At the close, the UK blue-chip index was 11.23 points, or 0.2% firmer at 7,266.69, below the session peak of 7,293.07, but well above the day’s low of 7,204.37.

On Wall Street around London’s close, the Dow Jones Industrials Average was up 28 points, or 0.1% at 35,647, although the broader S&P 500 index lost 0.2%, and the tech-laden Nasdaq Composite shed 0.9%.

Joshua Mahony, senior market analyst at IG, a global leader in online trading commented: “Joe Biden’s grandiose plans to drive down energy prices appears to have fallen by the wayside today, with an unprecedented move to release oil reserves alongside a host of Asian nations doing little to help drive down prices this afternoon.

“Today’s rise in crude oil prices does highlight the fact that governments are struggling to actually lift production to a level that would balance the market, with an emergency release of reserves seen as an unsustainable way to drive down prices. While Joe Biden will know that higher fuel costs are intrinsically linked with his declining approval ratings, today highlights how his lack of support for higher oil & gas exploration could come at a cost in the polls.”

3.55pm: Brent back above US$80 a barrel

News that, as part of a concerted effort by a number of countries, the US is releasing 50mln barrels of oil from its strategic reserves over the next few months has had the reverse effect to that intended.

It has sent crude prices higher.

(The UK is releasing 1.5mln barrels as part of the move but that in the grand scheme of things is neither here nor there.)

Investors are betting that Opec will be sufficiently riled by the news to cancel or cut back its proposed 400,000 barrel production increase due next month.

So Brent crude, having earlier been on the slide, is now up 2.1% at US$81.37. West Texas Intermediate has added 1.63% to US$78.

Craig Erlam at Oanda said: “Oil prices are recovering despite the coordinated efforts of the US, China, India, Japan, South Korea and the UK to release oil reserves and rebalance the market to ease prices. The move wasn’t the game-changer that it could have been and only provides short-lived support. Instead it appeared to serve more as a warning to Opec+ to not ignore consuming countries.

“These countries have vast reserves but they are intended for emergencies, not to start price wars with producers every time they get a little high. The question now is how Opec+ will respond as the group can easily wipe out any benefits of the releases by slowing their planned monthly output increases. This isn’t what the White House wants which may explain why the estimates look a little on the low end.

“The markets are rebounding because what was announced didn’t surpass expectations so markets were more than positioned for it. If Opec+ responds, we could see WTI back above US$80 in no time. The bigger downside risk for crude is lockdowns and if other European countries will follow Austria’s lead.”

The rise in crude has lifted BP PLC (LSE:BP.) by 2.22% and Royal Dutch Shell PLC (A shares) (LSE:RDSA) by 1.84% and helped keep the UK blue chip index in positive territory.

The FTSE 100 is currently up 24.85 points or 0.34% at 7280.31.

Following their latest updates, caterer Compass Group PLC (LSE:CPG) has climbed 5.43% and building materials firm CRH PLC (LSE:CRH) is up 3.86%.

Miners are also moving higher, with Rio Tinto PLC (LSE:RIO) rising 3.12% and BHP Group PLC (LSE:BHP) 2.94% better.

Meanwhile Wall Street has turned negative as the prospect of interest rises to counter inflationary pressures is again in investors’ minds.

The Dow Jones Industrial Average is now down 0.16%, the S&P 500 has lost 0.35% and the Nasdaq Composite is the worst performer of the three, down 0.96%.

3.34pm: Turkish lira’s problems continue

The Turkish lira has has continued its freefall today, hitting a record low against the dollar before coming off the bottom.

It fell 15% to 13.44 against the dollar after President Tayyip Erdogan welcomed recent interest rate cuts and said the country will “emerge victorious from this war of economic independence”.

Last week, the central bank cut rates (by 1 percentage point to 15%) for the third consecutive month, even though inflation has soared to almost 20% and economists have issued warnings about the risk of hyperinflation. The bank’s move followed a 200bps cut in October and a 100bps cut in September.

Reports that the president was meeting with the central bank governor have seen the currency’s position improve slightly and it is now down a mere 9% at 12.5 to the dollar.

3.08pm: US economy grows but so do pricing pressures

Mixed signals from the US economy, according to the latest purchasing managers indices.

There was a sharp upturn in business activity in November – although not as much as the previous month – with manufacturing outpacing the service sector.

But labour and material shortages continued to cause problems.

And there were further signs of the persistence of pricing pressures. Input price inflation reached a new series high midway through the final quarter, said IHS Markit which compiles the data. Sharper increases in cost burdens at both manufacturers and service providers led to soaring prices, with a vast range of materials reported as having risen in cost.

Chris Williamson, chief business economist at IHS Markit, said: “The US economy continues to run hot. Despite a slower rate of expansion of business activity in November, growth remains above the survey’s long-run pre-pandemic average as companies continue to focus on boosting capacity to meet rising demand

“However, the slowdown underscores how the economy is struggling to cope with ongoing supply constraints. Although supplier delivery delays eased to the lowest for six months, the lengthening of lead times remains far greater than anything seen prior to the pandemic, restricting output relative to demand and once again causing prices to rise sharply.”

Even so US markets are now mainly in positive territory.

The Dow Jones Industrial Average is up 65 points or 0.18% and the S&P 500 has edged up 0.12%. But the Nasdaq Composite, which fell sharply on Monday, has dipped another 5 points.

In the UK the FTSE 100 is up 32.11 points or 0.44% at 7287.57.

2.39pm: Mixed start for US markets

US stocks started mixed but little changed in New York on Tuesday as traders await the Thanksgiving break and after a technology led sell-off.

In early deals, the Dow Jones Industrial Average added around ten points at 35,629. The S&P 500 was down around six points at 4,676. The Nasdaq index lost nearly 77 at 15,777.

Stocks rose yesterday initially after it emerged Jerome Powell would remain as Fed chair. However, markets turned south nearer the end of the session as yields continued to rise.

2.39pm: Compass rebounds after early dip

Leading shares remain in positive territory after their downbeat start, with the FTSE 100 now up 22.68 points or 0.31% at 7278.14.

Also turning around during the day is catering group Compass Group PLC (LSE:CPG).

An early dip to 1435p after its latest update has been followed by a recovery to 1551p, up 5.33%.

The firm said a continuing recovery from the pandemic meant it would see revenue growth of 20%-25% this year, and it is also resuming dividend payments.

Chris Beauchamp, chief market analyst at IG, said: “Early weakness for Compass has been reversed as buyers step to pick up some bargains in this global outsourcer. The shares have, unsurprisingly, taken a knock as the global outlook has weakened of late, but the improvement in operating profit has provided a reason to buy, putting the shares back in positive territory for the day.”

12.51pm: Crude prices mixed after US move

Oil prices are recovering as investors sold on the rumour and bought on the fact.

The US has confirmed a release of up to 50mln barrels from its strategic reserve to help put a cap on the rising price of crude.

But Brent, which had fallen on talk of the move, has now recovered 0.3% to US$79.94.

West Texas Intermediate, the US benchmark, is down 0.29% at US$76.53, but less than it was.

12.40pm: MPC member talks interest rates

More fuel to add to the fire in terms of a possible UK interest rate rise in December.

Jonathan Haskel, an external member of the Bank of England‘s monetary policy committee and a fairly dovish one at that up until now, has made more hawkish noises today.

He said the Bank had to remain vigilant on inflation, even if some of the current pricing pressures including energy were transiant.

He said: “In my view, if the labor market stays tight, the bank rate will have to rise.”

11.56am: US investors continue to mull Powell nomination

US stocks are expected to open down as investors continue to digest US President Joe Biden’s decision to nominate incumbent Federal Reserve Chair Jerome Powell to serve a second term over Lael Brainard, the only Democrat on the Fed’s Board of Governors.

Futures for the Dow Jones Industrial Average declined 0.1% in Tuesday pre-market trading, while the broader S&P 500 index shed 0.19% and those for the tech-heavy Nasdaq Composite fell 0.45%.

US stocks finished Monday’s trading session mixed following the news of the Powell renomination. At the close, the Dow rose 17 points, or 0.05% to 35,619, while the S&P 500 slipped 15 points at 4,683 and the Nasdaq fell 203 points to 15,855.

Meanwhile back in the UK, and leading shares have managed to edge up into positive territory.

The FTSE 100 is now up 3.29 points or 0.045% at 7258.75, having earlier fallen to 7204.

11.05am: Housing market feels effect of stamp duty holiday ending

UK property transactions fell sharply last month as the effect of the stamp duty holiday finally ended.

According to HMRC, residential transactions fell 52% from September to October to 76,930. This is also 28.2% lower than October 2020.

Iain McKenzie, chief executive of The Guild of Property Professionals, said: “While transaction numbers may be lower now the stamp duty holiday has ended, the fact that the demand for properties currently far outstrips supply means that prices are likely to keep rising.

“At a time when there is often a rush to get moved in before the festivities commence, we should expect that sales will continue to be steady in the run-up to Christmas.”

This optimism probably helps explain why Barratt Developments PLC (LSE:BDEV) is up 1.63% and Taylor Wimpey PLC (LSE:TW.) has added 1.24% despite the transaction figures.

Overall the FTSE 100 is barely changed after its earlier falls, down just 2.58% or 0036% at 7252.88.

10.20am: Plenty for investors to be nervous about

Caution rules in the market as a host of factors combine to send shares lower.

AJ Bell investment director Russ Mould said: “A slump in the oil price as the US taps into its strategic reserves helped put the FTSE 100 on the back foot on Tuesday..

“The air has been coming out of the market like a slowly deflating balloon over the last week or so but it has accelerated this morning, not helped by a sell-off in US technology stocks overnight.

“This was linked to fears of more rapid tapering of financial stimulus and hikes to interest rates after Jerome Powell was re-nominated for another term as chair of the US Federal Reserve.

“The fourth wave of Covid being endured in parts of Continental Europe is prompting the reintroduction of restrictions and resulting civil unrest, threatening its economic recovery.

“In combination there’s plenty to make investors nervous as winter begins to bite.”

Even so the leading index has recovered some ground.

It is down 16.04 points or 0.22% at 7239.42, having earlier fallen to 7204.

The fallers are a mixed bag, including a 3.06% drop for technology company Halma PLC (LSE:HLMA), a 2.77% decline for gaming group Flutter Entertainment PLC (LSE:FLTR) and a 2.6% loss for Johnson Matthey PLC. (LSE:JMAT)

9.36am: UK data backs possible December rate rise

In the UK, the latest PMI reports show the overall picture is in line with forecasts, but manufacturing has done slightly better than expected.

Cost pressures continue to trouble businesses, with the average increase the highest since the index began in January 1998, driven by higher wages and a spike in prices paid for fuel, energy and raw materials.

But some of these are now being passed on to consumers. This of course adds to inflationary pressures and the prospect of rate rises.

Chris Williamson, chief business economist at IHS Markit, said: “A combination of sustained buoyant business growth, further job market gains and record inflationary pressures gives a green light for interest rates to rise in December.

“Output growth across manufacturing and services came in slightly faster than expected in November, albeit heavily skewed towards the service sector as factories continued to struggle with supply shortages and falling exports.

“Encouragingly, an acceleration in growth of new business hints that December should bring a strong end to the year, meaning the fourth quarter should see a welcome pick up in GDP growth after the slowdown seen in the third quarter.”

Thomas Pugh, economist at RSM UK, said: “There was a surprise rise in the manufacturing PMI from 57.8 in October to 58.2 in November, driven by strong rises in output, new orders and employment. However, participants noted that severe shortages of materials and staff held back growth. The services PMI also fell by less-than-expected to 58.6 in November as domestic demand remained strong.

“Overall, November’s PMI readings also suggest that the economy has not slowed as much as some had feared in the last quarter of the year. If the official GDP and employment data for October is as steady as the unofficial data we have had so far suggests, the MPC will probably hike rates at its meeting on 16 December.”

Following the news the FTSE 100 is off its worst level, now down 28.37 points or 0.39% at 7227.09.

9.20am: Miners buck the downward trend

Leading shares are close to the day’s lows, with the FTSE 100 now down 43.24 points or 0.6% at 7212.22.

Victoria Scholar, Head of Investment, interactive investor says, “European markets are trading in the red with technology and travel & leisure leading the leg lower while the basic resource sector is the outlier in the green. Rising US treasury yields weighed on the tech-heavy Nasdaq Composite last night, with negative momentum carrying forward to the European bourses.”

Among the risers, BHP Group PLC (LSE:BHP) is up 2.13% and Rio Tinto PLC (LSE:RIO) has risen 1.95%.

Building supplies group CRH PLC (LSE:CRH) has climbed 2.11% after nine month profits jumped 15% and it said the full year would be a new record.

9.03am: European PMIs beat forecasts

In Europe the French and German economies are doing slightly better than expected, to judge from the purchasing managers indices for November.

France saw the fastest increase in services for four years, helping to compensate for slower growth in manufacturing.

Joe Hayes, senior economist at IHS Markit said: “Having embarked on a clear period of slowing growth in the months leading up to October, the flash PMI data for November showed a fresh acceleration in French economic expansion. As well as stronger growth in output, new orders rose at a faster pace, which firms suggest is down to businesses recovering, helping to lift client demand.

“However, the driving force behind improvements in the data is services. Manufacturers are still struggling with component shortages, long lead times and subdued demand conditions. These factors drove back-to-back drops in production.

“Unfortunately, this puts the wider economic recovery in a precarious position, especially with the raft of new COVID-19 containment measures being implemented across other parts of Europe. While French officials have talked down the prospect of imminent restrictions, the trajectory of the virus in the coming weeks will be a key determinant of near-term economic activity, as any new restrictions are likely to hit the service sector, which at present is giving the economic recovery its principal impetus.”

In Germany there was a slight acceleration in growth of business activity across the German private sector, although the upturn remained only modest amid – again – subdued manufacturing growth.

Lewis Cooper, economist at IHS Markit, said: “Overall, the flash PMI data point to a slightly improved trend for business activity, but supply delays and inflationary pressures remain a key cause for concern and are likely to weigh further on growth in the coming months, especially if these constraints further stifle demand.”

The overall EU figures also came in higher than forecast.

8.30am: Oil down as US prepares to release reserves

Oil prices continue to slip as the US prepares to release some of its strategic reserves to try and put a cap on the soaring price of black gold.

But the move, which could see other countries follow, has not gone down well with Opec, which may reconsider its own plans to raise output.

Ipek Ozkardeskaya, senior analyst at Swissquote, said: “The battle on the oil field is getting heated as [US president] Joe Biden is expected to start releasing the strategic oil reserves as soon as today, to tame the upside pressure in oil prices, which also boost inflation and leaves the Federal Reserve (Fed) with a decision that it doesn’t want to make: hike rates

“And Biden is not playing alone; the world’s biggest oil eaters, like Japan, India, South Korean and even China consider making similar statements in the coming days. So, this is a war declaration to Opec+ which refused to answer Biden’s call to increase supply to cool down the rally in oil prices over the past months. As a result, the US will help itself, and release 35 million barrels over time to help easing the energy crisis…

“Opec thinks that the US move is unjustified by the current market conditions – which is of course nothing but a bad faith, but the cartel will likely scrap its plans to pump 400,000 barrels of additional daily supply when it meets next Thursday. Until then, we will probably see the oil traders’ heart pounding between larger strategic supply from the biggest oil consumers, and prospects of lower Opec supply.”

Brent crude is down 0.63% at US$79.2 a barrel while West Texas Intermediate has lost 0.98% to US$76.

8.20am: UK markets head lower

Leading shares have lost ground in early dealings, following the downturn in US tech stocks on Monday.

The FTSE 100 has fallen 29.89 points or 0.41% to 7225.57, while the more broadly based FTSE 250 is 0.71% lower.

On the agenda later are the initial readings for the November purchasing managers indices..

They are expected to show a slowdown from October, particularly in Europe where the prospect of renewed COVID-19 restrictions has already led to civil unrest.

Michael Hewson at CMC Markets UK said: “The risk of a slide back into economic contraction [in Europe] is rising with each passing day, and that in itself is feeding into a weaker euro, and while today’s flash PMIs from Germany and France are likely to point to still fairly decent levels of economic activity, they have been heading in the wrong direction for several months now.

“In manufacturing both France and German economic activity is expected to slow to 53.1, and 56.9 respectively, while in services we can also expect to see a similar softening to 55.5 for France and 51.5 in Germany.

“The UK, on the other hand, by opening up earlier, and seeing infections stay constant at a higher level through the summer, may well have played a blinder in building up a more resilient wall of immunity, along with the booster program, as the weather gets colder. That’s not to say that the strategy might not still go pear-shaped, but in terms of economic activity we haven’t seen the type of drop off being seeing in Europe.

“Today’s November flash PMI numbers are expected to see manufacturing slow modestly to 57.3, from 57.8, while services, which saw a decent jump in October to 59.1, from 55.4, is set to fall back to 58.5.”

Perhaps not surprisingly, AO World PLC (LSE:AO.) has lost nearly a quarter of its value, down 23.38% to 95.01p after the electricals retailer cut its profit forecast amid supply chain concerns, driver shortages and rising costs ahead of the key Black Friday and Christmas trading periods.

Richard Hunter, head of markets at interactive investor, said: “The company is currently in a parlous position. The well-publicised supply chain disruptions have had a severe impact, with a shortage of delivery drivers a particular issue. At the same time, the group’s foray into the German market is not only in the early stages of establishing the brand, but is also being faced by significantly increased competition…

“The company is anticipating poor availability in some categories for the second half as well, alongside ongoing supply issues, an increase in raw material prices and general inflationary pressures. As such, the company is expecting a much softer peak trading period than previously expected, with full-year revenue likely to be flat to minus 5%….

“The undeniable shift towards online shopping, allied to the absence of a store portfolio cost drag, both provide opportunities for the business. At the same time, the group’s international aspirations remain intact and, indeed, there are signs of progress in the German market, despite its being a relative newcomer.

“In the meantime, however, the challenges are clear and with the shares not obviously cheap on valuation grounds, some investors have chosen to vote with their feet.”

6.50am: Leading shares set to start on the back foot

The FTSE 100 is expected to head lower on Tuesday, following a bout of blood-letting for US tech stocks overnight.

New York’s Nasdaq plunged over 202 points or 1.26%, with eight of the ten largest tech giants losing ground 2-3%.

The S&P 500 fell 0.3% and the blue-chip Dow Jones maintained its balance, just, with a 17-point gain to just over 35,619.

London’s blue-chip benchmark is being predicted by City spread-betters to fall more than 31 points, a fall of around 0.4%, after adding just over that amount to finish at 7,255.46 at the start of the week.

It was a “frisky” session on Wall Street, said Jeffrey Halley, market analyst at Oanda, sparked by President Biden renominating Jerome Powell for another term as chairman of the Federal Reserve.

Powell’s rival, Lael Brainard, was given the role of vice-chair.

“Ms Brainard is very much a dove, and it appears that stock and bond markets, in particular, had been simmering near recent highs in case Ms Brainard got the nod for the top job,” Halley commented, but as she did not, US markets rushed to price in faster tapering by the Fed and earlier rate hikes, which hit ‘rate sensitive’ stocks such as the Nasdaq tech titans.

“The US yield curve steepened as long-dated bond yields from ten years out rose sharply, notably in the 30-year tenor. The US dollar recorded another impressive rise, with the yield differential-sensitive USD/JPY jumping nearly 90 points.”

Technology stocks are sensitive to the Fed tapering its monumental bond-buying programme as it removes the teat that has fattened their valuations to galactic proportions.

Gold and cryptocurrencies also plummeted as US yields reacted to what Halley called “the reel-in-inflation chorus”.

He added: “The moves overnight did Bitcoin no favours either, with the digital Dutch tulip looking wobbly at $56,800.00 this morning. Failure of $55,500.00 could see $53.300.00 tested and failure there sets up a deeper move lower targeting the 100 and 200-day moving averages lurking under $49,000.00. Momentum appears to have stalled between $60,000.00 and $61,000.00 for now.”

For the corporate schedule in London, we have updates from US-focused building materials giant CRH PLC (LSE:CRH), caterer Compass Group PLC (LSE:CPG), livestock breeder and meat packer Cranswick PLC (LSE:CWK), sausage maker Devro PLC (LSE:DVO), water company Severn Trent PLC, online white goods retailer AO World PLC (LSE:AO.), recent profit-warning giver Avon Protection PLC (LSE:AVON), fluffy animal retailer Pets at Home PLC and Telecom Plus PLC (LSE:TEP), which was recently fined GBP1.5mln by the regulator for unfair treatment of customers.

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Tuesday as investors reacted to U.S. President Joe Biden’s announcement on Monday that he will renominate Jerome Powell for a second term as Federal Reserve chair.

China’s Shanghai Composite gained 0.23% while Hong Kong’s Hang Seng index slumped 1.18% and South Korea’s Kospi dipped 0.54%.

Japanese markets were closed for a holiday.

Australia’s S&P/ASX200 rose 0.78% to close at 7,410.60 points with mining and energy stocks helping drive the index higher.


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