FTSE 100 off worst levels, while Wall Street set for a mixed start

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  • FTSE 100 down 115 points
  • Dow to see another decline
  • Burberry shares out of fashion

12.45pm: Investors look to US producer price figures

Wall Street’s bad mood may not be entirely over, judging by the US futures.

The Dow Jones Industrial Average is forecast to open down another 127 points or 0.41% while the S&P 500 is set for a 0.09% dip. But the Nasdaq Composite is in better mood and is expected to add 0.31%.

After Wednesday’s higher than expected rise in the consumer price index to 4.2% compared to the forecast 3.6%, eyes now turn to the producer price index.

The PPI – as the name implies a measure of inflation from the perspective of producers rather than consumers – is expected to rise from 4.2% in March to 5.8% last month.

Michael Hewson at CMC Markets said: “Factory gate or producer prices tend to be leading indicators for future price rises further down the supply chain and ..[a rise to 5.8%] could well be a leading indicator for another big rise in CPI in May.”

Chris Beauchamp, chief market analyst at IG, said: “After struggling to hold their ground following US CPI data yesterday, markets are bracing themselves for PPI data this afternoon.

“For stocks this might be an even tougher moment, given that companies may find themselves struggling to pass on price increases to customers, hitting profitability and putting the year-long earnings recovery in jeopardy.  Fed members have done their best to calm nerves in the wake of the CPI reading, but from the stock market reaction (although interestingly not the bond market’s view) it seems there is still plenty of concern that the rise in prices will not be transitory, and instead will have a meaningful impact on Fed policy in the months to come.”

There are also weekly US jobless claims, which will be in focus given Friday’s disappointing non-farm payroll numbers.

They are expected to edge down from 498,000 to 490,000.

On the corporate front Walt Disney Co (NYSE:DIS) is set to release second quarter results after the market closes,

In the UK, the FTSE 100 has recovered from its worst levels, down 1.64% or 115.1 points at 6889.53. 

12.12pm: Shell and BP slide

A fall in the price of oil is also undermining the market – ironic given that it is fears of rising inflation that is doing much of the damage to sentiment at the moment.

After recent gains Brent crude is down 2.71% at $67.44 a barrel, partly due to concerns about the current violence between Israel and Palestine.

Given how many commodity companies are in the leading index, this is certainly having an effect.

BP PLC (LON:BP.) is down 2.95% or 9.3p at 306p while Royal Dutch Shell PLC (LON:RDSA) – which has also gone ex-dividend – has lost 3.34% or 47.2p to 1365.8p.

Russ Mould, investment director at AJ Bell, said: “It’s another miserable day with rain soaking the UK, heightened tensions in the Middle East dominating the news, and stock markets falling around the world once again. 

“When there are only four stocks rising on the FTSE 100 and one of them is a boring old utility company, you know investors are feeling grumpy.”

The FTSE 100 appears to have found its level at the moment, however. It is stuck at 6862.29, down 142.34 points or 2.03%.

11.31am: 3i upbeat despite pandemic

Leading shares may still be under the cosh, but at least things have stabilised a little.

The FTSE 100 is down 143.97 points or 2.06% at 6860.66.

And there are a handful of (marginal) risers apart from Intertek.

Among them are investment busines 3i Group plc (LON:III).

It has edged up 0.5% to 1204p after reporting a £1.726bn or 22% return on total shareholder funds.

Chief executive Simon Borrows said: “3i delivered a strong result in 2021 during a period of unprecedented uncertainty and disruption caused by the COVID-19 pandemic. This outcome was supported by the resilient performance of our Private Equity and Infrastructure portfolios, our strong balance sheet and the capabilities of our experienced team.” 

10.28am: Intertek passes the test

The 13th day of the month may not have been the best one to announce a big deal, given the current state of the stock market.

Nonetheless testing and certification specialist Intertek Group PLC (LON:ITRK) has unveiled the A$855mln (£470mln) acquisition of SAI Global Assurance. It said the deal would give it a stronger market position in Australia, the US, Canada, the UK and China, and an expanded service capability.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Assurance is an attractive business for a number of reasons.

“As companies have outsourced more and more of their operations, supply chains have become increasingly complex. That means more scope for mistakes or negligence somewhere along the process. Put that together with the fact businesses are increasingly risk conscious, and assurance providers are the logical answer. Regulation has played a part too, with increased environmental and safety standards and harsh penalties for failing to comply. Those trends all look set to continue. It helps that assurance is also usefully capital light – meaning the upfront cost of expansion is minimal.

“That all makes for a fast growing, profitable industry – no wonder Intertek wants a bigger slice of the pie.

“However, expansion isn’t coming cheap. A multiple of 15.5 times 2021 cash profits is similar to that enjoyed by Intertek’s own shares – and they’re close to a record high. The group hopes to improve margins to boost profitability, but it will still take years for the deal to break even. If the group can capture a sufficient share of the growing assurance industry that won’t matter – but large deals at high prices are risky, and integrating businesses is rarely as straight forward as management hope.”

The market seems to like the move though, with Intertek up 0.21% at 5820p and currently the only riser in the blue chip index.

Overall, although the FTSE 100 is off its worst levels, it is still down 144.16 points or 2.06% at 6860.47 as inflation fears continue to send shudders through global markets.

 

9.39am: Commodity companies among biggest losers

The sell-off in the UK market is intensifying.

The FTSE 100 is now down 160.78 points or 2.3% at 6843.85 as it catches up with the inflation-driven falls on Wall Street.

There is just the one riser, energy group SSE PLC (LON:SSE), possibly on the grounds that it is a defensive stock. But it is not much of a defence: the shares are up just 6.5p or 0.45% at 1454p.

Neil Wilson at Markets.com said: “Another sell everything kind of day: A hot inflation print from the US has left stock markets around the world nursing losses…

” I would characterise this less as a rotation [out of growth stocks] than a capitulation with everything being offered.

“The FTSE 100 [is] trading about 300 points off Monday’s post-pandemic peak at 7,164 and at its lowest ebb since the first week of April. Stairs up, elevator down. Basic resources, energy and tech are the biggest fallers, with defensives utilities, healthcare and real estate down less, but still lower. The big miners and oil majors trade about 3-4% lower in early trade with oil easing off a two-month high.”

The market is not being helped by the fact that oil heavyweight Royal Dutch Shell PLC (LON:RDSA), down 3.95% or 55.8p at 1357.2p, has gone ex-dividend.

Anglo American PLC (LON:AAL) has lost 4.48% to 3248.5p while Rio Tinto PLC (LON:RIO) has dropped 4.32% to 6291p.

Nor is there much support from company results. Both Burberry PLC (LON:BRBY), down 7.94% at 1937p, and BT Group PLC (LON:BT.A), 3.88% at 162.5p, are out of favour following their latest updates.

8.43am: Inflation fears hit UK market

The FTSE 100 opened sharply lower after a bruising session on Wall Street – one which saw the Dow Jones tank 688 points, or 2%.

Haunting international markets was the spectre of inflation, which was far more real than imagined as a runaway economic recovery in the US saw consumer prices jump by a worse than expected 4.2% April.

The worry is the Federal Reserve will intervene, signalling the end of the ultra-easy monetary policy that has fuelled spending on equities, particularly shares in the tech sector.

Reflecting those concerns, the Nasdaq Composite was closed down 2.7%. The Footsie had shut up shop before the real fun began.

Still, it made for a wobbly start on Thursday. Topping the fallers was Burberry (LON:BRBY), which dropped 8% after the fashion group’s prelims. Traders focused on the negative – margin pressure – rather than the positives, including a resumption of the dividend and the revival of key Asian markets.

“A weak wider market and some elements of profit-taking have made for an ugly start for the shares in response to the results,” said Richard Hunter, head of markets at Interactive Investor.

“While this update will reassure bulls of the stock, given the recent strength of the price-performance, the shares are seen as being up with events for now, with the market consensus coming in at a hold.”

BT Group (LON:BT.A) fell 5% after it said it would be spending heavily to accelerate its fibre broadbandnd roll-out.

Proactive news headlines

Helium One Global Ltd (LON:HE1) said its planned exploration drilling programme at the Rukwa project in Tanzania was awarded an Environmental Impact Assessment (EIA) Certificate on May 4, meaning the AIM-quoted company has all necessary permits in place to start exploration drilling in early June. 

Arix Bioscience PLC (LON:ARIX) flagged after last night’s close that its portfolio company, Autolus Therapeutics PLC (NASDAQ:AUTL), has announced new data highlighting progress in the company’s AUTO1 CAR T cell therapy. The company said Autolus noted AUTO1 demonstrated a tolerable safety profile in adult patients with IBCL, with early data in 10 patients showing 100% complete remission rates and excellent CAR engraftment/expansion.

Symphony Environmental Technologies PLC (LON:SYM) said has received defence documents from the Commission, Parliament, and Council of the European Union.

E-therapeutics PLC (LON:ETX) said forming partnerships and deals will be key priorities for the coming year, including for its new RNA interference (RNAi) platform as this is an area currently commanding significant and attractive deals.

FinnCap Group PLC (LON:FCAP) said one of its executive directors, Stuart Andrews, has exercised options over 1.1mln shares at a price of 14p per share under the company’s EMI Plan.

Incanthera plc (LON:INC) said its chairman Tim McCarthy and chief executive Simon Ward will give a presentation on the company’s current corporate status and activities at the Shares and AJ Bell investor evening webinar on May 19.

Shanta Gold Limited (LON:SHG) said it has appointed Michelle Jenkins as an independent non-executive director of the company with immediate effect. The company said Jenkins has extensive experience across Africa including currently as the executive for finance and administration (South Africa) for Orion Minerals Ltd and as a non-executive director of Kumba Iron Ore Limited.

Building on its success in major Fortnite and Rocket League Tournaments, team owner Guild Esports PLC (LON:GILD) is launching a second, limited-edition apparel range that will appeal to fans.

ECR Minerals PLC (LON:ECR) said drilling is now underway at the Bailieston and Creswick gold exploration projects in the Victoria Goldfields, Australia.

Argo Blockchain PLC (LON:ARB) said it has completed the acquisition of two data centres in the Canadian province of Quebec as part of its strategy to increase its control over the cryptocurrency mining facilities which host its machines.

Eurasia Mining PLC (LON:EUA), a platinum group metals and gold producer, said its strategic review and formal sale process led to it receiving several proposals, including a proposal from a credible party for the potential acquisition of substantially all of the company’s assets. “We are delighted to have received a proposal from a credible party that could allow us to pay a significant dividend to all shareholders,” said executive chairman Christian Schaffalitzky.

Gaming Realms PLC (LON:GMR) has signed a four-year licensing deal with Scientific Games, extending its existing agreement.

6.50 am: Wall Street wobble expected to shake the Footsie 

The FTSE 100 is set to start Thursday on the backfoot after American equities again suffered a bloody nose.

CFD and spreadbetting firm IG Markets sees London’s blue-chip benchmark down around 60 points, making a price of 6,942 to 6,945 with just over an hour to go until the open.

After stocks dropped earlier this week on the sentiments and indirect indicators of inflation this latest sell-off was preceded by a spike in the US consumer price index (CPI), which jumped to its biggest increase for nearly fifteen years.

New York’s Dow Jones fell 681 points or 1.99% on Wednesday to close at 33,587 whilst the S&P 500 similarly dropped 2.14% down to 4,063.

The Nasdaq gave up 357 points or 2.67% to finish Wednesday’s trading at 13,031.

Small Cap focussed Russell 2000 index fell further still, losing 3.26% to end the day at 2,135.

“Federal Reserve vice chair Richard Clarida expressed some surprise at how big the jump was in yesterday’s inflation numbers, but still insisted that the moves higher in prices were transitory in nature,” said Michael Hewson, analyst at CMC Markets.

“Fears about overheating seem somewhat premature at this time given the disruption wrought by the pandemic and the price disruptions of the past 12 months. There is no question we’ve seen some big gains in commodity prices over the past 12 months.”

He added: “While concerns about inflation are continuing to dominate investor concerns, there is unlikely to be any respite with the latest US PPI numbers for April due to be released this afternoon.”

Producer price index (PPI) readings are typically leading indicators for consumer prices, as the rise in ‘factory gate’ pricing tends to be passed straight down to the consumer further down the supply chain – so its possible that the stock market volatility triggered by inflation won’t abate just yet.

In Asia, Japan’s Nikkei shed 600 points or 2.13% to change hands at 27,548 and Hong Kong’s Hang Seng dropped 1.29% to 27,865. The Shanghai Composite index lost just over 1% to 3,426.

Around the markets

The pound: US$1.4063, up 0.06%

Gold: US$1,817 per ounce, down 0.02%

Silver: US$27.02 per ounce, down 0.4%

Brent crude: US$68.57 per barrel, up 0.02%

WTI crude: US$65.33 per barrel, up 0.07%

Bitcoin: US$51,077, down 11%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were lower on Thursday after Wall Street fell sharply on Wednesday following higher-than-expected inflation data triggering fears of an interest rate hike.

The Hang Seng index in Hong Kong fell 1.24% while the Shanghai Composite in China slipped 1.06%.

In Japan, the Nikkei 225 dipped 2.42% and South Korea’s Kospi fell 1.21%.

Shares in Australia declined, with the S&P/ASX 200 trading 0.75% lower.

Proactive Australia news:

Netlinkz Ltd (ASX:NET) has raised $1.7 million in an institutional entitlement offer, with strong support from new and existing institutional shareholders.

Torian Resources Ltd (ASX:TNR) has discovered a new gold mineralised zone from surface at the Mt Stirling Gold Project near Leonora in Western Australia.

Blackstone Minerals Ltd (ASX:BSX) (OTCMKTS:BLSTF) (FRA:B9S) has delivered further massive sulphide vein (MSV) nickel results from drilling at Ta Khoa Nickel-Copper-PGE Project in Vietnam.

Predictive Discovery Ltd (ASX:PDI) has enhanced the regional prospectivity of Bankan Gold Project in Guinea with new auger drilling results from Argo Regional Target AG1 returning 12 metres at 9.84 g/t gold from 4 metres and 16 metres at 2.02 g/t from 4 metres.

Alto Metals Ltd (ASX:AME) is trading higher after intersecting the highest grade ever reported from the Vanguard prospect of Sandstone Gold Project in Western Australia with a result of 4 metres at 60.6 g/t from 40 metres.

Rimfire Pacific Mining NL (ASX:RIM) has received strong validation of the golden potential of Sorpresa development project in central NSW with partner Golden Plains Resources (GPR) confirming that it will continue into the second year of an earn-in.

Firefinch Ltd (ASX:FFX) (FRA:N9F) (OTCMKTS:EEYMF) has started open pit mining at Morila Pit 5 within the wider Morila Gold Project in Mali where contractor EGTF has mobilised a new 100-tonne class fleet.

Arafura Resources Ltd (ASX:ARU) (OTCMKTS:ARAFF) (FRA:REB) is encouraged by the strong support being demonstrated by the Australian Federal Government for the Nolans Neodymium-Praseodymium (Nd-Pr) Project in the Northern Territory.

Brookside Energy Ltd (ASX:BRK) (OTCMKTS:RDFEF) has commenced trading on the Frankfurt Stock Exchange (FSE) under the ticker (FRA:8F3).

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