FTSE 100 finishes near flat as traders mull over IMF forecast for UK

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  • • FTSE 100 closes near flat
  • • IMF cuts UK growth forecast
  • • US markets lower

4.50pm: FTSE 100 closes near flat

FTSE 100 closed slightly in negative territory on Tuesday as traders sit on their hands amid a worrying economic prognosis.

Britain’s top share index closed down near flat, or down 0.02 points, at 7,306.

According to the International Monetary Fund (IMF), the UK is set for the slowest growth of the G7 richest economies next year.

“The IMF have reiterated the looming economic crisis that faces the world, with the UK in particular looking forward to a bleak 2023,” noted Joshua Mahony, senior market analyst at online trading group IG.

“As Rishi Sunak and Liz Truss battle it out over the opportunity to lead the country forward, the IMF have highlighted the potentially poisoned chalice on offer,” he added.

3.45pm: FTSE falls back

FTSE 100 fell back sharply in afternoon trading, moving into negative territory, following a weak open by US markets and news that the IMF had cut UK growth forecasts.

Heading to the close the blue-chip index was down 4.33 points at 7,301.97, while the broader FTSE 250 was 250 points lower at 19,553.

Michael Hewson at CMC Markets commented: “It’s been a broadly negative day for European markets … The wider negative tone for markets, has been primarily driven by yesterday’s news from Gazprom, that it would be reducing gas flows from tomorrow to 20% of capacity, and the consequence of what that is likely to mean for the economic outlook for Europe as we head into the winter months.”

In the US the Dow Jones Industrials Average fell 100.42 points to 31,889.62 hit by a profit warning from Wal-Mart after the close on Monday. The  S&P 500 was down 32.50  points at 3,936.56 and the tech-laden Nasdaq also retreated, trading 44.04 points lower at 27,655.

The downbeat mood was exacerbated by The International Monetary Fund (IMF) which warned that the UK was set for the slowest growth of the G7 richest economies next year.

It is predicting UK growth will fall to just 0.5% in 2023, much lower than its forecast in April of 1.2%.

The global economy has shrunk for the first time since 2020, the IMF said, hit by the Ukraine war and Covid-19.

With growth stalling in the UK, US, China and Europe, the world “may soon be teetering on the edge of a global recession”, it said.

The IMF has cut its 2022 global growth forecast to just 3.2% and warned the slowdown risks being even more severe.

It said fast-rising prices were to blame for much of the slowdown, with households and businesses squeezed by a combination of higher prices and higher borrowing costs as policymakers raise interest rates to try to counter inflation.

“The global economy, still reeling from the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy and uncertain outlook,” economist Pierre-Olivier Gourinchas wrote in a blog outlining the international lending body’s latest economic forecast.

“The outlook has darkened significantly” since April, the last time the IMF issued forecasts,” he added.

2.45pm: FTSE retreats after US markets open lower

FTSE 100 fell back sharply after a weak open in the US wiith the leading index just 9 points higher at 7,315 after earlier topping 7,360. The broader FTSE 250 was sharply lower, down 1.1%, at 19.585.52 with retailers under pressure following a series of gloomy industry updates.

US stocks opened lower as corporate earnings continued to roll in from key companies such as McDonald’s Corporation and Microsoft Corporation (NASDAQ:MSFT) ahead of the Fed’s interest rate decision on Wednesday.

Just after the open, the Dow Jones Industrial Average had slipped 98 points at 31,892 points, while the S&P 500 was down 25 points at 3,942 points and the Nasdaq Composite had shed 120 points at 11,663 points.

Shares of McDonald’s were relatively flat, down about 0.5% at the open, after the fast food giant posted its 2Q earnings which showed a 9.7% increase in international sales, while earnings per share came in above analyst expectations and revenue fell short.

Meanwhile, retail stocks had fallen sharply in pre-market trading after Walmart Inc (NYSE:WMT) slashed its profit outlook late on Monday. At the open, Walmart had plunged about 8%, Best Buy Co Inc (NYSE:BBY) was down about 4%, and Target Corporation (NYSE:TGT) had slipped about 5%.

1.50pm: FTSE 100 positive, US seen lower, earnings in focus

FTSE 100 remained in positive territory in early afternoon trading with gains in index heavyweight sectors mining and oil offsetting weakness in the retail sector following a series of gloomy updates.

Strong trading statements lifted Unilever and Compass Group and the market was now awaiting the open on Wall Street with US markets seen lower. Earnings will be in focus across the pond with General Electric (NYSE:GE), McDonald’s and GM amongst those reporting.

At 13.50 pm the lead index was trading 41.46 points to the good at 7,347.48 although the FTSE 250 returned to its worst levels for the day, down 107.79 points at 19.695.20 as a profits warning from Wickes weighed heavily on the stock and sector.

12.15pm: CBI survey adds to gloom in the retail sector

FTSE 100 fell from earlier highs as pressure on retail stocks and an expected weak US open eroded gains.

At 12.15pm the blud chip index was 29.80 points higher at 7,336.10.

Retail shares came under pressure with a batch of gloomy news weighing heavily on the sector.

The latest CBI retail survey, Neilson grocery store sales volumes data and a profits warning from Wickes all suggested the cost of living squeeze was intensifying.

The CBI survey showed expectations amongst retailers for August were at their lowest level since March 2021 when many shops still faced COVID-19 lockdown restrictions.

The July retail sales balance for July edged up to -4 from June’s -5, but expectations for August dropped to -14 as the cost of living squeeze weighed on demand.

“Retail activity continues to take a hit as consumers struggle to cope with the effects of the cost-of-living crisis,” CBI economist Martin Sartorius said.

In a sign that supply chain difficulties are easing – and that retailers fear having too much stock on their hands as demand weakens – the CBI’s balance for retail stock levels relative to expected demand was its highest since July 2020.

Amongst those to see their share price fall were Marks and Spencer down 4.57% to 138.75p, Currys down 3.8% to 68.30p, DFS down 6.29% to 146p, JD Sports down 4.79% to 132.25p and Kingfisher down 6.75% to 250p.

11.45am: FTSE 100 retreats from session highs, Wall Street seen lower

FTSE 100 slipped back from early session highs as pressure on retail stocks and an expected weak open on Wall Street dampened the mood.

At 11.50am the lead index was 33 points higher at 7,339.66.

US stocks were expected to open lower on Tuesday ahead of some key quarterly earnings figures from the likes of McDonald’s and Microsoft.

Beyond the earnings, investors are also looking to the Federal Reserve’s interest rate verdict and accompanying statement on Wednesday for direction.

Futures for the Dow Jones Industrial Average were trading 0.4% lower pre-market, while those for the broader S&P 500 index were 0.2% down, and futures for the tech-laden Nasdaq-100 also shed 0.2%.

“As for today, the focus continues to remain on earnings; Coca-Cola, McDonald’s, and General Motors will report their earnings before the market open,” said Naeem Aslam, chief market analyst at avatrade.com.

“Tech stocks such as Microsoft and Alphabet will report their numbers after the market close. Chipotle Mexican Grill (NYSE:CMG), UPS, and Enphase Energy will report their earnings after the market bell,” he added.

Given the sheer volume of quarterly results due today, trading has turned cautious. In part, Walmart’s results and its warning about falling customer numbers on Monday continue to spook markets.

“Walmart cut its profit forecast due to rising food inflation and painted a highly gloomy picture for the US economy. This is despite the fact that President Biden doesn’t think that the US economy will face a recession,” added Aslam.

Beyond today, all eyes are on the US rate-setters. The Fed is widely expected to raise interest rates by 75 basis points on Wednesday as it tries to tame inflation. The key question is whether such a hike will have the desired effect of tackling inflation which is currently at multi-decade highs.

“By default, traders are expecting an interest rate hike of 75 basis points from the Fed. As long as the Fed delivers on that, there will be no surprise for traders,” said avatrade.com’s Aslam. “What matters the most is their forward guidance for their rates, which means by how much they will increase the interest rate after that. Will there be an interest rate hike of 50 basis points, or will there be an increase of 75 basis points?”

The Fed’s two-day meeting kicks off today, culminating in a rate decision and accompanying statement on Wednesday.

In energy markets, WTI crude oil futures were 1.9% higher at $98.54 a barrel, while Brent crude futures were up 1.6% at $106.84.

11.15am: FTSE 100 remains buoyant

FTSE 100 maintained its strong start to the day with the lead index trading 48 points higher at 7,354 at 11.15am.

“The FTSE 100 made some modest progress on Tuesday morning as earnings reports on both sides of the Atlantic turn from a trickle to a flood,” said  AJ Bell Investment Director Russ Mould.

“Some really big hitters report in the US later today, including Coca-Cola, McDonalds as well as Microsoft and Alphabet.

“These could really define an earnings season which, up until now, has been pretty resilient given the backdrop.

“Another defining moment this week comes with tomorrow’s decision on US interest rates. How hard will the US Federal Reserve push – will it serve up another 75 basis point rise as is widely expected? Or will it dial back a touch?” Mould speculated.

In the political arena William Hill reported strong backing for Liz Truss to become the next UK Prime Minister.

William Hill spokesperson, Tony Kenny, said: “Punters were seemingly initially impressed by Rishi Sunak’s performance in last night’s BBC debate backing him into 13/8 which included a £6,000 bet before it got underway.

“Liz Truss had drifted to 1/2 but it’s been one way traffic since and she’s back into 3/10 with our customers feeling she is the more viable candidate at this stage.”

10.30am: FTSE holds near highs, supermarkets slip as sales volumes dip

FTSE 100 holds near session highs trading 52.43 points higher at 7,358 boosted by gains in the mining and oil sectors combined with some positive trading updates.  

The broader FTSE 250 remained weaker, down 41 points at 19,761, but well off earlier lows.

UK grocery sales have enjoyed a boost over the last month as Brits stocked up on picnic items during heatwave.

Sales rose 4.4% in the four weeks to July 16, driven by fresh food and beverages as a desire for al fresco eating outweighed surging inflation.

Still, volume sales were down 4.1% over the period as households tightened the purse strings for their weekly shop.

Discounters Lidl and Aldi were the biggest winners, with sales rising 14.8% and 5.4% respectively as more people switched to cheaper stores.

Tesco sales rose 2% and both Asda and Sainsbury’s posted 0.3% growth, according to Nielsen. Morrisons sales fell 4.8%, while Ocado dropped 1.2%.

Shares in Tesco slipped back 1.78% to 260.10p, whilst Sainsbury was 2.26% lower at 216.20p.

10.00am: FTSE extends gains, Bridgepoint tops FTSE 250 risers

FTSE 100 extended its gains in mid-morning trading as strength in index heavyweight sectors, mining and oil, pushed the market higher.

At 10.00am the lead index was trading 58 points higher at 7,364 although the FTSE 250 was 52.54 points lower at 19,750.45 as a profits warning by Wickes hit the building materials and home improvement sector in particular and retailers generally.

The warning by Wickes dragged Kingfisher, Persimmon, Travis Perkins (LSE:TPK) and Howden Joinery lower amongst others.

A brighter spot in the FTSE 250 was Bridgepoint Group which topped the risers on Tuesday after strong H1 results were combined with positive comments for the future..

Shares in the asset management company soared 11.65% to 255p after the company reported a 15% and 17% increase in EBITDA and revenue respectively compared to 2021 H1 and said underlying fund performance was ahead of expectations.

Commenting on this performance, William Jackson, Bridgepoint chairman, said: “Our results for H1 2022 reflect the resilience and continued strong progress of our business despite a much more volatile market backdrop than expected at the start of the year.

“Looking forward, we expect market volatility and inflation pressures to continue and have positioned our investment activity accordingly. We will not be immune to macroeconomic events but believe our funds are well positioned for current conditions.”

9.05am: Oil and mining stocks rise

FTSE 100 made a strong start to trading on Tuesday boosted by gains in mining and oil stocks and some positive company trading updates.

Michael Hewson Chief Market Analyst at CMC Markets UK commented: “It’s been a mixed start to the day for European markets with the FTSE 100 edging higher after some positive earnings updates, while markets in Europe are under pressure as investors absorb what yesterday’s news from Gazprom is likely to mean when it comes to gas supplies over the next few days.”

At 9.00am, the blue chip index in the UK was 36.84 points higher at 7,343.14.

However, the broader FTSE 250 tumbled 97.99 points to 19,705.00 as domestic economic concerns were highlighted by a profits warning by home improvement retailer Wickes.

The company cut its FY profit guidance now forecasting adjusted pre-tax profits for the current year of £72mln-£82mln, down from its previous forecast of £83mln and below the £85mln recorded in the year to 1 January 2022 as the cost of living crisis started to bite. 

Shares in Wickes slumped 15.6% following the update, dragging others in the sector lower as well. Amongst those suffering were Howden Joinery Group (LSE:HWDN) which fell 4.6% and Travis Perkins (LSE:TPK), down 6.45%.

Better news from Compass Group which raised its FY organic revenue growth guidance from around 30% to 35% as it reported that revenues had doubled in the three months to June 30th.

Shore Capital analyst Greg Johnson said he expects to raise his FY revenue forecast by £1bn to around £25bn and sees a potential £60m improvement in operating profits to above £1,500m.

Shares rose 2% to 1,881.50 following the update.

Unilever extended its gains after raising its FY guidance as strong pricing offset a drop in volumes.

By 9.00am, Unilever was top of the FTSE 100 risers, up 2.49% to 4,014.00

Matt Britzman, Equity Analyst at Hargreaves Lansdown commented  “It’s no surprise to see inflation and global uncertainty called out as headwinds, but importantly for Unilever work done raising prices is keeping sales and profits moving in the right direction.”

“Having a host of strong brands is essential if any business wants to pass on rising costs, and Unilever has those up its sleeve – the ability to raise prices just shy of 10% and only have a 1.6% drop in volumes is a good place to be.”

8.25am: Footsie in fine fettle

FTSE 100 made a strong start to trading boosted by a batch of positive corporate trading updates.

At 8.25am the lead index was trading 30 points higher at 7,344 building on yesterday’s gains while the broader FTSE 250 was little changed, down 2.24 points at 19,800.

The mood could remain volatile as the FOMC meeting kicks off in the US with a 75bps rise in interest rate broadly expected.

Unilever enjoyed a positive start to trading with shares rising 1.6% to 3,979 as CEO Alan Jope said the company was raising its sales guidance for the year after reporting solid 1H results.

Underlying sales grew 8.1% while turnover rose 14.9% to EUR29.6bn and underlying EPS by 1% to EUR1.34.

The company also announced plans to extend its share buyback scheme in Q3.

Jope commented “The challenges of inflation persist and the global macroeconomic outlook is uncertain, but we remain intensely focused on operational excellence and delivery in 2022 and beyond.”  

Richard Hunter, Head of Markets at interactive investor, commented “Unilever is treading a fine line between growth and pricing out some of its customers, but for the moment the strategy is holding up.”

Compass Group raised its FY organic revenue growth guidance from around 30% to 35% as it reported that revenues had doubled in the three months to June 30th.

All three of the company’s trading regions are operating above 2019 levels, Compass said.

Compass also confirmed its full-year 2022 operating margin guidance of over 6%.

Shares in the group rose 1.17% on the back of the news to £18,69.

7.30am: FTSE 100 seen opening slightly higher, Unilever raises FY sales guidance

FTSE 100 seen opening slightly higher following gains in the US after a choppy session across the pond.

Spread betting companies are calling the blue chip index around 15 points higher as the market also digests a hefty batch of company updates.

In the US, the DJIA closed 90.75 points higher at 31,990.04, while the S&P 500 rose 5.21 points to 3,966.84.

Consumer goods company Unilever’s CEO Alan Jope said the company was raising its sales guidance for the year as it reported solid 1H results.

Underlying sales grew 8.1% while turnover rose 14.9% to EUR29.6bn and underlying EPS by 1% to EUR1.34.

The company also announced plans to extend its share buyback scheme in Q3.

Jope commented “The challenges of inflation persist and the global macroeconomic outlook is uncertain, but we remain intensely focused on operational excellence and delivery in 2022 and beyond.”  

easyJet was also in focus reporting Q3 results to June 30th, 2022. The low cost airline provider reported a Q£ headline EBITDAR profit of £103m a hefty fall from Q3 2019 (£313m).

However, it said the headline loss before tax was £11m, including a £133m cost impact from disruption and a £36m loss from FX balance sheet revaluations.

Q4 is currently 71% booked, load factor slightly ahead of 2019 and sold ticket yield is 13% above FY19.

Commenting, Johan Lundgren, easyJet Chief Executive said:

“easyJet expects capacity to be c.90% of Q419 across our network of major European airports, with load factors targeted above 90%.”

6.50am: FTSE 100 seen higher at open

FTSE 100 is expected to open higher as the torrent of FTSE 100 updates this week picks up speed.

Financial spread bet firms predict a gain of up to 20 points when Footsie opens, adding to the near 30-point rise on Monday.

Unilever and easyJet are the standouts among the reportees. Both have problems, many of them self-inflicted but it will be inflation in the form of the cost of raw materials and fuel that will set the tone (read more).

Overseas markets were mixed with the S&P up and Nasdaq down in the US and a similar pattern in Asia where Hong Kong is higher and Japan lower.