FTSE 100 reverses gains to close in red as traders take flight from shares

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  • FTSE 100 finishes down 0.41%
  • Oilers and miners weigh heaviest
  • US stocks are mixed

4.51pm: FTSE closes in the red

FTSE 100 closed lower on Friday, having been ahead earlier, as investors took flight from equities amid an uncertain economic outlook.

Britain’s blue-chip benchmark finished down around 28 points, or 0.41%, at 7,016.

“After a brief recovery, stocks are coming off once again. Wall Street opened with some gains, but a reversal now appears to be in play, while in Europe indices are clinging on to gains, but seem likely to succumb,” said Chris Beauchamp, chief market analyst at online trading firm IG.

“Despite another week of inflows to stock markets, indices are unable to make progress on any sustained basis.

“Fresh tightening from central banks, the ongoing withdrawal of stimulus and general caution about the outlook continues to drive investors out of stocks, with no sign of a summer bottom.”

4.10pm: FTSE drops

Unfortunately for Footsie fans, blue-chip index’s slide had only temporarily paused and it is now in the red.

The FTSE is down 7 points or 0.1% at 7,037, one of a few markets around the world not in positive territory at this point.

For the whole week, the loss is not far off 4%, taking us back to where we were during the dips in early March and early October.

“After the big losses of yesterday, as well as this week, European markets have tried to muster a semblance of a rebound as we head into the weekend, but are struggling to gain any sort of foothold, with a slide in commodity prices weighing on the FTSE100, with copper prices sliding to their lowest levels this year, and oil prices on course for their first negative week since early May,” rambles Michael Hewson at CMC Markets.

Looking across the pond he adds: “After a torrid week US markets are trying to rebound as we head into the weekend, although the upside progress is being tempered by concerns over a slowdown in the US economy against a backdrop of a more aggressive Federal Reserve.”

3.27pm: Slide stopped?

The good news is that the FTSE 100 has stopped its late-afternoon slide, probably because most traders have made an early start to the weekend.

London’s index of heavyweight shares was up 35 points (0.5%) at 7,080, with its advance limited by the weakness of mining and oil stocks.

“I think we’ve all earned a weekend break in the sun after a quite extraordinary week in the markets that saw plenty of central bank action, even from those not scheduled to meet,” said OANDA’s Craig Erlam, capturing the mood of the moment.

“Stock markets are ending the week on a positive note, not that anyone is getting carried away with today’s price action after turbulent trading conditions in recent days,” he added.

2.35pm: US markets open higher

US markets have opened higher after yesterday’s shellacking.

The Dow Jones industrial average edged up 71 points (0.2%) to 29,998 and the S&P 500 rose 18 points (0.5%) at 3,684. Both indices have been left chewing the dust of the Nasdaq Composite, which was up 104 points (1.0%) at 10,750.

In London, the FTSE 100 has had a bit of a relapse but is still in positive territory, up 35 points (0.5%) at 7,080.

1.30pm: FTSE 100 continues to claw back some of yesterday’s heavy losses

UK equities took a while to get into their stride today but the rally is now well underway.

The FTSE 100 was up 73 points (1.0%) at 7,119.

Scottish Mortgage Investment Trust PLC (LSE:SMT), which has taken a shoeing in recent months as investors rotated out of the sort of tech stocks that the company invests in, rebounded today, advancing 3.8% to 696.2p.

ASOS PLC (LSE:ASC), the online retailer, was also on the comeback trail after Wednesday’s battering, which was sparked by a profit warning.

Three non-executive directors, including the company’s chair, have put their hands in their pockets and bought shares in the company.

Meanwhile, Peter Garnry, the head of equity strategy at Saxo Bank, asks whether e-commerce was a bubble after ASOS confirmed that the outlook is deteriorating for fashion e-commerce due to the worsening cost-of-living crisis.

“E-commerce stocks are down 66% over the past year having shredded almost all of their gains during the first phase of the pandemic. In hindsight it looks like e-commerce was in a bubble driven by a massive shift in spending from services to goods while interest rates plunged to record lows fueling equity valuations to astronomical levels,” Garnry said.

Among the small-caps, UniVision (AIM:UVEL) Engineering Ltd lost two-fifths of its value after it received formal notice this week of the termination of its contract with MTR Corporation for the replacement works of the closed-circuit TV systems for MTRC’s railway lines in Hong Kong, for alleged breach of contract.

UniVision (AIM:UVEL) denies breaching the contract and wants to negotiate with MTRC to resolve the matter.

12.10pm: Light at the end of the tunnel?

Investors have more light at the end of the tunnel, according to calculations from Bank of America (NYSE:BAC) Merrill Lynch.

With this being the 20th bear market in the past 140 years, the average peak-to-trough bear decline has been 37.3% and the average duration has been 289 days.

“History is no guide to future performance but if it were… bear market would end on Oct 19, 2022,” the bank said, with the S&P 500 at 3,000 versus its current 3,666.

October 19 is also the 35-year anniversary of Black Monday, incidentally. 

For today, analysts are expecting trading in the US to remain volatile after all three major indexes closed at their lowest levels since 2020, on the back of the Federal Reserve rate hikes and further weak economic data as strong inflationary headwinds have become a mainstay and energy prices remain elevated.

The Philadelphia manufacturing gauge fell sharply to 2.6 in May from 17.6 in April, the lowest level of activity since the spring of 2020, while the US weekly jobless claims rose more than expected to 229,000 for the week ended June 11. 

Elsewhere, a report from the Commerce Department showed housing starts declined 14.4% to a seasonally-adjusted annual rate of 1.549 million units last month, the lowest level since April 2021, while permits for future homebuilding fell 7.0% to 1.695mln units.

All three data points amplified fears of a recession.

On the other hand, the firmer US dollar is an indication that “the upsetting data could hardly cheer up the Fed doves who know that the Fed won’t do much to help before inflation softens,” said analyst Ipek Ozkardeskaya at Swissquote Bank.

“And unfortunately, inflation won’t soften until energy prices ease significantly.”

Oil prices rebounded aggressively on Friday after falling to US$112 per barrel yesterday from US$122 at the start of the week, with expectations that China’s economic recovery, the global travel boom and a tight supply will combine to keep the market bullish in the medium term.

Back in London the FTSE is up 63 points or 0.9% at 7,108.

10.49am: Tech at the top 

Tech stocks are now leading the way in London and are expected to drive Wall Street’s rebound later.

Top of the Footsie leaderboard are Ocado Group PLC (LSE:OCDO) and tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT), Sage Group PLC and Auto Trader Group PLC (LSE:AUTO).

Futures markets are pointing to the Nasdaq bouncing 1.2% later, outperforming the S&P 500 and Dow Jones.

London is still being held back by oil and mining heavyweights, with the index up 53 points or 0.76% at 7,098.36.

Among the small caps, directors of ad agency M&C Saatchi PLC have performed a dramatic U-turn and told shareholders not to support a proposed takeover from Next Fifteen Communications Group PLC, which they had previously recommended.

The reason being that the buyer’s share price has fallen from around 1,300p to near 900p since it made the bid, while today M&C’s shares are down 5.5% to 167.28p, which is over a 20% since it backed the deal.

Analysts at Peel Hunt said they “would not rule out the possibility of another acquirer appearing”.

9.49am: Up and running

After a shaky start, the Footsie has got its running shoes on and is heading in the right direction, led by Glencore PLC (LSE:GLEN).

The miner and commodities trader is up 3.6% at 480.65p after a trading update and leading the FTSE 100 51 points higher to 7,095.

READ: Glencore’s marketing arm set for bumper first half as coal prices surge

“The sun is shining bright, the weekend is here, yet all investors can think about is medicine to calm the motion sickness after one of the most chaotic five days for stocks and shares in a long time,” says Russ Mould, the investment director at AJ Bell.

“The FTSE 100 is on track to end the week nearly 4% lower. The S&P and Nasdaq in the US are looking at circa 6% losses for the five-day session.

“Year-to-date that means the FTSE 100 has fallen approximately 6%, the S&P down 24%, and the Nasdaq 33% lower. This is a shock to the system for many investors who are relatively new to the game and haven’t seen a proper market correction before,” Mould said.

The mid-cap FTSE 250 is outperforming its bigger brother with a 254 point (1.4%) gain at 18,981, led by Aston Martin Lagonda Global Holdings PLC (LSE:AML), proving every dog has its day.

Aston Martin shares are up 10.2% at 516.6p.

The seemingly unstoppable publishing group Future PLC (LSE:FUTR) (Future PLC (LSE:FUTR)) was the next best performer among mid-caps, rising 5.6% in the wake of an upbeat trading statement.

The group allayed fears about consumer belt-tightening hitting profits by revealing the second half of its trading year had seen the momentum from the first half continue.

8,40am: Miners spoil the comeback story

Hey, dude, where’s my rally?

The FTSE 100 was expected to claw back some of yesterday’s losses but largely thanks to weak resource stocks it is back on the retreat, sliding 6 points (0.1%) to 7,039.

Miners such as Fresnillo PLC (LSE:FRES), Rio Tinto PLC (LSE:RIO) and Anglo American PLC (LSE:AAL) are sporting losses of more than 1% while the heavily weighted oil giants BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) are down 1.3% and 1.1% respectively.

Also on the slide was Tesco PLC (LSE:TSCO) after its first-quarter trading statement. The shares slipped 0.7% to 247.9p after it warned customers face “unprecedented increases in the cost of living”.

“After a slew of retailers warned on profits it’s encouraging to see Tesco keeping guidance unchanged,” said Matt Britzman, an equity analyst at Hargreaves Lansdown. “That’s not to say they’re immune to the current pressures, back in April we heard consumer spending wasn’t showing signs of weakness yet, but it always felt like it was round the corner.

“Those cost pressures are now starting to take their toll and management called out changing behaviours today, that puts more emphasis on grocers offering a strong value proposition which is an area Tesco deliver well on. Aldi Price Match and Low Everyday Prices are being rolled out further, with distribution up shy of 20% from last year, that’s helping keep prices at a level consumers can stomach and the group’s snapping up market share as a result.”

6.30am: FTSE to stagger back to its feet

After posting its biggest one-day loss in three months yesterday, the FTSE 100 is expected to claw back some losses this morning.

Spread betting quotes point to the Footsie opening 51 points firmer at 7,096.

US markets took a battering yesterday, with the Dow Jones plunging 741 points (2.4%) to 29,927 and the S&P 500 plummeting 123 points (3.3%) to 3,667.

In Asia this morning markets have been mixed.

“This morning it was the turn of the Bank of Japan to make its own monetary policy decision, and thus far it has steadfastly refused to join the party when it comes to hiking rates, or even looking at tightening policy. Its headline inflation rate is like the Swiss inflation rate at 2.5%; however, unlike the franc, the Japanese yen is down over 12% year to date against the US dollar. The central bank said it [will] continue to expand the monetary base until the year-on-year rate exceeds 2% and stays above target in a stable manner. It’s currently at 2.1%,” said Michael Hewson at CMC Markets.

The Nikkei 225 was off 387 points (1.5%) at 26,044 in Tokyo.

The Hang Seng index in Hong Kong was in recovery mode, rising 231 points (1.1%) at 21,076.

In London today, Tesco PLC (LSE:TSCO) is set to update the market.

Analysts at Barclays predict a 1.8% decline in like-for-like sales for Tesco, albeit this would represent a gain of about 7.3% on pre-Covid levels.

Tesco’s Booker cash and carry division is tipped to report a 12.4% increase in like-for-like sales by Barclays.

With Tesco only having provided full-year guidance in mid-April of £2.4bn-£2.6bn retail earnings (EBIT) – the analysts were “doubtful that there will be any change in the outlook at this stage”.

Around the markets

  • Sterling: US$1.2303, down 0.47 cents
  • Gilt: 2.518%, up 5.17 basis points
  • Gold: US1,848.30 an ounce, down US$1,60
  • Oil: US$119.10 a barrel, down 71 cents
  • Bitcoin: US$20,719, up US$36
  • Ethereum: US$1,095.95, down 91 cents