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FTSE 100 stuck in negative territory, US mixed at the open By Proactive Investors

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FTSE 100 stuck in negative territory, US mixed at the open
  • remains downbeat, bond yields back to pre mini-budget levels
  • Rishi Sunak confirmed as new prime minister
  • HSBC shares lower as bad debts increase

2.45pm: FTSE 100 stuck lower

The FTSE 100 remained in the doldrums hit by falls in banging heavyweight, , a falling oil price and as US markets made a mixed start to the day.

At 2.40pm London’s blue chip index was down 47 points at 6,967 but the more domestically focused advanced 137 points to 17,474.

US stocks opened mixed as investors await the release of earnings from tech giants and due after the bell today.

Just after the market opened, the had shed 45 points or 0.1% at 31,454 points, while the S&P 500 was up 9 points or 0.2% at 3,806 points and the had added 77 points or 0.7% at 11,032 points.

All of this overshadowed Rishi Sunak’s first day as prime minister with the new occupant of number 10 set to make appointments to his new cabinet today with the markets focusing on his choice as chancellor.

The new PM pledged to put economic stability at the heart of policy and this will receive its first test on 31 October when the chancellor, whoever that may be, is set to unveil a fiscal statement together with economic forecasts from the OBR.

2.20pm: Reshuffle underway

So far we just know who is leaving the Cabinet:

  • Jacob Rees-Mogg quits as business secretary
  • Jake Berry quits as Conservative party chaiman
  • Kit Malthouse quits as education secretary
  • Ranil Jayawardena quits as environment secretary
  • Robert Buckland quits as welsh secretary
  • Brandon Lewis quits as justice secretary
  • Simon Clarke quits as levellinguUp secretary
  • Wendy Morton quits as chief whip
  • Chloe Smith quits as work and pensions secretary
  • Vicky Ford quits as minister for development

There is speculation that Suella Braverman may be set to return to the cabinet, possibly even as home secretary, the post she resigned from only last week, while Dominic Raab is tipped to head to the Ministry of Justice.

Current home secretary Grant Shapps is tipped to succeed Rees-Mogg as business secretary.

1.58pm: Bond yields back to pre-Kwarteng levels

Bond yields have continued to fall and are now back to the level seen before Liz Truss and Kwasi Kwarteng announced their disastrous “mini-budget”.

The 30-year yield dropped as low as 3.64% on Tuesday, the level on September 22.

During the market chaos that followed the budget on 23 September, the jumped above 4% as investors dumped UK government debt.

Then there was a truly historic yield surge above 5% the next week that threatened to cause a spiralling crisis in UK pension funds.

But the appointment of first, Jeremy Hunt, as chancellor, followed by a new prime minister, Rishi Sunak, has so far restored confidence in the money markets.

12.55pm: Oil prices weaken on demand concerns

Oil prices declined by more than 1% on Tuesday as bearish economic data from key global economies heightened concerns that demand may fall.

International benchmark futures fell 1.14% to $90.48 per barrel while US West Texas Intermediate crude futures also declined, by 1.23%, to $83.34 per barrel.

Weak global PMI data and concerns as to the strength of the Chinese economy sparked renewed concerns of a deepening global recession.

In London, index heavyweights (down 0.7%) and (down 1.54%) were weaker features in the FTSE 100 reflecting the falls.

12.30pm: FTSE remains lower with Wall Street set to make a weak start

FTSE 100 was off its worst levels for the day but remained lower following news that Rishi Sunak has been officially appointed as prime minister.

At 12.30pm the lead index was down 47 points at 6,967 but the broader FTSE 250 index rose 69 points to 17,407.

US markets are expected to open lower on Tuesday ahead of key quarterly earnings figures from big tech companies including computer giant Microsoft and Google owner, Alphabet.

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

With the earnings season now in full swing, investors will be looking to key earnings figures for maintain direction after Monday’s sharp gains.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank noted that Alphabet’s revenue is expected to rise, but be slower than recent quarters while its earnings per share is expected to be dented by a challenging advertisement business, and rising competition from TikTok.

“If there is one thing that could save the day is the cloud revenue, which has been one of the key growth drivers. But even that is expected to reveal a slower growth compared to previous quarters,” she said.

Turning to tech giant Microsoft, the picture is not rosy either, she warned.

Microsoft is expected to reveal its fifth consecutive quarter of slowing revenue, led by a steep decline in PC demand, the strong US dollar, and faltering macroeconomic conditions, she said, noting that as at Google, investors will focus on how Microsoft’s cloud segment did last quarter.

“It’s important to remember that soft results don’t necessarily mean negative market reaction. If the soft results still beat the market estimates, we could see Google, and Microsoft shares rally,” Ozkardeskaya said.

12.00pm: Sunak puts economic stability and confidence at heart of policy

Rishi Sunak has spoken outside number 10 Downing Street.

On Liz Truss:

“I want to pay tribute to my predecessor Liz Truss. She was not wrong to want to promote growth in this country. It is a noble aim. And I admired her restlessness to create change. But some mistakes were made. Not borne of ill will or bad intentions…”

On Boris Johnson:

“I will always be grateful to Boris Johnson for his incredible achievements… And I treasure his warmth and generosity of spirit. And I know he would agree that the mandate my party earned in 2019 is not the property of any one individual.”

His aims:

“I will place economic stability and confidence at the heart of this government’s agenda. This will mean difficult decisions to come. But you saw me during Covid doing everything to protect people… I promise you this, I will bring that same compassion”.

“I fully appreciate how hard things are. And I understand too that I have work to do to restore trust after all that has happened. All I can say is that I am not daunted. I know the high office I’ve accepted and I hope to live up to its demands.”

“Trust is earned and I will earn yours.”

11.33am: Rishi Sunak confirmed as PM

Rishi Sunak has officially been appointed as prime minister after meeting King Charles III at Buckingham Palace.

11.29am: Verdict on Truss’s speech

Not much contrition in the speech from outgoing PM, Liz Truss as noted by The Economist’s Matthew Holehouse

Other commentators struck a similar note.

11.16am: CBI survey shows factory inflation expectations falling

A survey from the Confederation of British Industry showed that British factories’ inflation expectations for the coming months fell in October to its lowest level in more than a year, a sign that some price pressures are abating.

The survey showed a monthly net balance of manufacturers expecting prices to rise in the next three months fell to +46 from +59 in September, its lowest reading since September 2021.

New business continued to contract, but by less than expected, with the net order book balance falling to -4 from -2 in September and below expectations for a fall of -12.

But factories remained downbeat with the business sentiment indicator falling to to its lowest level since April 2020 at -48 from -21 previously.

“It’s a tough time for manufacturers. Price pressures remain acute, availability of materials is still a big issue,” said Alpesh Paleja, CBI lead economist.

10.50am: Truss on way to Buckingham Palace to tender resignation

Outgoing prime minister Liz Truss said It has been a huge honour to be PM in particular leading the nation in leading the mourning for the Queen.

In her final speech outside No 10 on Tuesday she said the government has acted “urgently and decisively’ on the side of families and businesses.

“In just a short period, this government has acted urgently and decisively on the side of hardworking families and businesses.”

“We reversed the national insurance increase. We helped millions of households with their energy bills and help thousands of businesses avoid bankruptcy. We are taking back our energy independence so we are never again beholden to global market fluctuations or malign foreign powers.”

She urged her successor, Rishi Sunak, to “be bold” as she laid down the gauntlet by suggesting he should continue cutting taxes and keep the planned rise in defence spending.

Truss showed no sign of contrition for the chaos that engulfed her 50-day premiership, instead quoting the Roman philosopher Seneca, who said: “It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult.”

10.40am: German business confidence improves in October

German business confidence improved in October but remained at low levels as Europe’s largest economy heads into a tough winter.

A gauge of expectations released by the rose to 75.6 from a revised 75.3 in September. Economists had predicted a further drop.

However, an index of current conditions slipped. Clemens Fuest, IFO fo president, said: “Companies were less satisfied with their current business. Their expectations improved, but they are still worried about the coming months. The German economy is facing a difficult winter.”

9.53am: Supermarket budget ranges up 17% in last year – ONS

The cost of low-priced items like vegetable oil, pasta and tea have shot up over the past year as value ranges soar as much as their premium equivalents, according to the Office for National Statistics (ONS).

The ONS said the prices of supermarket budget ranges are up 17% in the year to September – slightly more than the 15% rise in the official price of food and a huge jump from 7% in the year to April.

Some budget range prices have risen far faster – with vegetable oil up 65% in a year, pasta up 60% and tea up 46% while prices fell for four of the 30 items – including minced beef (down 7%) and orange juice (down 9%).

Between April and September, the three biggest rises in monetary terms were vegetable oil (up 80p a litre to £2.58), chips (up 27p to £1.37 for 1.5kg) and milk (up 25p to £1.52 for four pints).

The ONS has issued experimental figures covering inflation among supermarket budget ranges and has collated the prices of 30 low-cost items from supermarket websites.

“Crucially, these large rises in the cheapest available items are broadly in line with the average food price rises reported within the ONS’s regular headline inflation measures,” the ONS said.

However, Sir Ian Diamond, the National Statistician, said families who bought the lowest priced items were unable to cushion the impact of price rises by trading down.

He told the BBC’s Radio 4 Today Programme: “There isn’t further to go down, so they can be impacted quite a lot. Very, very few things are going down [in price] at all. The squeeze on people who buy the lowest cost things is pretty hard at the moment.”

9.37am: Sterling advances and bond yields fall

The pound has moved higher this morning and UK gilts remained steady as investors wait for more details on economic and fiscal policy from new prime minister Rishi Sunak.

The pound rose 0.45% to $1.132 against the dollar holding most of its gains made since late last week when Liz Truss announced her resignation. Against the euro it was up 0.3pc at 87.30p.

Meanwhile, the yield on 10-year government bonds dipped 3 basis points to 3.7pc.

Mr Sunak will be sworn in as prime minister later today and is expected to keep Jeremy Hunt as chancellor.

9.03am: FTSE weaker as Sunak prepares to become PM

FTSE 100 made a weak start on Tuesday as investors digested a batch of corporate earnings and with Rishi Sunak set to meet King Charles III as he officially becomes UK prime minister.

At 9.00am London’s blue-chip index was down 30 points at 6,984 while the FTSE 250 rose 18 points to 17,355.

The incumbent PM, Liz Truss, will hold her last cabinet at 9.00am before officially tendering her resignation to the King.

Sunak will then take the reins and is set to appoint his cabinet today with Jeremy Hunt expected to retain his position as chancellor.

Results from HSBC Holdings PLC and failed to lift the mood despite both companies reporting better-than-expected profits.

HSBC slipped as increases in bad debt provisions and continued worries over the state of the Chinese property market overshadowed the above forecast profits.

The banking giant also named Georges Elhedery, a former head of its investment bank, as its new chief financial officer in a surprise move that leaves him in pole position to eventually succeed chief executive Noel Quinn.

Whitbread PLC, the owner of Premier Inn, also fell as it warned that inflationary pressures would result in costs rising £60mln in the rest of the year eating into margins.

was another weak feature, down 5.4%, after it warned that profit for the year would be at the lower end of analyst expectations as market turmoil hit trading at the end of the third quarter.

8.38am: Whitbread lower as sees costs rising £60mln

Shares in Whitbread PLC slipped 2% after the owner of Premier Inn warned of a £60mln increase in costs this year fuelled by soaring inflation.

The company said that a combination of rising labour costs, utility bills such as energy and food and beverage costs – as well as increased investment in IT and marketing – will see total costs increase £60mln for the year to March.

The news came as the group posted better than expected pre-tax profits of £307.4mln for the six months to 1 September compared to a loss of £19mln in the same period last year and 40% ahead of the same period in 2019 (pre-pandemic).

Whitbread, which runs 800 Premier Inn hotels, also said that it was increasing its target of number of rooms from 110,000 to 125,000 to take advantage of independent accommodation operators going bust in the UK and Ireland.

Total revenues of £1.35bn were 25% ahead of pre-pandemic levels.

8.15am: FTSE makes a subdued start

FTSE 100 made a subdued start to trading on Tuesday despite strong gains in the US overnight although Rishi Sunak’s appointment as prime minister gave some stability to the bond markets, for now at least.

At 8.15am the lead index was down 17 points at 6,997.

CMC Markets analyst Michael Hewson said: “Markets are hoping that the coronation of Rishi Sunak as the next UK prime minister will help draw a line under the events of recent days, as the new PM elect warned his party that they needed to unite or die.”

“This may prove to be a tall order, given the Tories propensity for fratricide over the years.”

Sunak will unveil his new cabinet today and financial markets will be hoping that the chancellor Jeremy Hunt retains his position so that the fiscal statement panned for 31 October will go ahead.

Markets remained calm at the prospect of the new PM with the pound up 0.14% against the US dollar at $1.129.

Shares in HSBC PLC fell 4.8% despite better-than-expected profits as it set aside a further $1.1 billion for bad debts and with nervousness in the region following the recent political developments in China.

Richard Hunter, Head of Markets at interactive investor said: “The figures are markedly skewed by two large provisions which entirely change the quarterly result.”

“Pending the sale of its French banking operations, HSBC has set aside a provision of $2.4 billion, while due to wider economic uncertainty there is a further $1.1 billion set aside for potential bad debts, bringing the cumulative figure this year to $2.2 billion.”

7.48am: FCA to probe tech companies over moves into financial services

The Financial Conduct Authority is to probe how to regulate big tech companies such as , Google and over fears they could harm competition in Britain’s financial services sector.

The City watchdog suggested that big tech companies could provide innovations in financial services and drive down costs, but also expressed concerns that they could build dominant positions leading to the “potential exploitation of market power”, according to analysis published on Tuesday.

US technology companies are increasingly considering global financial services as they look for ways to use their huge profits, market power and troves of data to disrupt another industry.

Alphabet (the owner of Google), the retailer Amazon, (the owner of Facebook) and the iPhone-maker Apple all already offer some financial services in the UK, the FCA said.

Only last week Amazon launched an online insurance store in the UK.

The FCA analysis said: “Big tech firms’ entry in financial services could benefit many consumers.”

However, it added that those benefits “could be eroded if these firms can create and exploit entrenched market power to harm healthy competition and worsen consumer outcomes.”

7.44am: Sterling falls again, but signs of stability emerge

There is a glimmer of hope on the horizon that the UK markets might stabilise themselves now that Rishi Sunak has taken the mantle as the next UK Prime Minister.

Following his ascension, 10-year gilt yields fell sharply to 3.74%, though the pound also fell in tandem, albeit only slightly.

Gilts’ wild ride: Volatility rarely seen on the bond market – Source: Financial Times

The pair is changing hands at US$1.128 after having 25 pips knocked off it in this morning’s Asia trading session, while remains more or less flat at 87.5p.

Sunak faces a steep hill: The pound against the US dollar – Source: capital.com

The pair is changing hands at US$0.987, and the moving averages point to some potential further upside, though the latest economic data shows contracting economic activity across the continent.

Parity between the euro and US dollar is likely to face still bearish resistance.

The Japanese yen edged higher against the US dollar, with falling below 150, though the pair remains at a precarious 148.8.

The Japanese government refuses to comment, but a suspected US$36bn intervention was likely responsible for the yen’s incremental recovery… but there’s doubt as to whether it’s enough to resuscitate the struggling yen to any significant degree.

The Australian dollar is currently buying US$0.63.

7.16am: HSBC lower in Hong Kong as profits fall

HSBC PLC shares fell 2.6% in Hong Kong, after reporting a decline in profit and revenue in the third quarter.

In the three months to September 30, HSBC reported pre-tax profit of $3.15 billion, down 42% from $5.40 billion a year before.

Chief Executive Noel Quinn said “We maintained our strong momentum in the third quarter and delivered a good set of results.”

“Our strategy produced good organic growth in all three global businesses, and net interest income increased on the back of rising interest rates.”

“We retained a tight grip on costs, despite inflationary pressures, and remain on track to achieve our cost targets for 2022 and 2023.”

Net interest income improved to $8.58 billion from $6.61 billion, but net fee income fell to $2.78 billion from $3.32 billion.

Net insurance premium income slipped to $2.66 billion from $2.72 billion and revenue decreased by 3.2% to $11.62 billion from $12.01 billion.

The banking giant also named Georges Elhedery, a former head of its investment bank, as its new chief financial officer in a surprise move that leaves him in pole position to eventually succeed chief executive Noel Quinn.

7.00am: FTSE 100 seen slightly higher

The FTSE 100 is set to open slightly higher on Tuesday following further strong gains in the US and as Rishi Sunak prepares to be officially appointed as prime minister.

Spread betting companies are calling London’s blue chip index up by around 11 points.

US markets made further strong advances on Monday, extending last week’s gains, shrugging aside weak economic data which suggested that the Fed’s aggressive rate raising strategy aimed at tackling soaring inflation may be slowing the economy too.

At the close the DJIA was up 418 points, or 1.34%, to 31,501, the S&P 500 rose 45 points, or 1.2%, to 3,798 and the Nasdaq Composite jumped 93 points, or 0.86%, to 10,953.

HSBC Holdings PLC (LSE:HSBA) was 2.6% lower in Hong Kong, after the China-focused bank reported a decline in profit and revenue in the third quarter.

In the three months to September 30, HSBC reported pre-tax profit of $3.15 billion, down 42% from $5.40 billion a year before.

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