Oil prices at multi-year highs and pressure on the valuations of Wall Steet tech giants including Facebook have set the scene for another testing session in London.
The failure of OPEC and its allies to expand on their existing production targets meant Brent crude yesterday spiked at $81 a barrel, which is where it remains today to add to concerns about inflationary pressures in the global economy.
London stocks in focus today include entrepreneur Matt Moulding's Hut Group after an eight-day losing streak for the shares, while Greggs has given a boost to profit forecasts alongside a pledge to grow its estate to 3,000 outlets.
FTSE 100 Tuesday
FTSE 100 trading higher
Melrose shares under pressure
14:50 , Oscar Williams-Grut
Shares in GKN-owner Melrose sunk to the bottom of the FTSE 100 today after the engineering group warned semiconductor shortages in the car market were getting worse.
GKN supplies drive systems to car manufacturers but the company has seen a spike in cancelled order s as chip shortages hold up production on factory floors. Melrose said monthly cancellations had risen from around 1% to up to 25%. Orders were “heavily constrained” by supply chain issues and the company warned problems were getting worse.
“Tightened supply of semi-conductors to the automotive industry are frustrating and difficult to plan for, but whilst they affect current trading, they don’t impact long-term value,” said chief executive Simon Peckham.
Melrose shares fell 3p, or 1.7%, to 167.9p.
Facebook opens higher
14:31 , Oscar Williams-Grut
Facebook’s stock has just opened up 1% in New York. The social media giant is recovering from a 4.9% slump in its stock yesterday after a global service outage panicked investors.
Service has been resumed by Facebook’s problems are far from over. The company is grappling with leaks from a whistleblower who has raised concerns over the company’s attitude to teens on the platform, among other things. The whistle blower, Frances Haugen, is testifying in front of the US Senate at 3pm UK time today. Her testimony is likely to be embarrassing for Facebook in the best case and highly damaging in the worst case. The stock could come under further pressure as she speaks.
Bitcoin returns to $50,000
14:15 , Oscar Williams-Grut
Bitcoin was up 4.8% to $50,056 by Tuesday afternoon. The world’s biggest cryptocurrency was changing hands at levels not seen in a month. Bitcoin has been rising steadily since the start of the month, leading some adherents to adopt the moniker ‘Uptober’.
The broader market is also gaining ground. The market value of all cryptocurrencies in circulation was up 3.6% to $2.2 trillion, according to industry data source CoinMarketCap.com.
London office lettings pick up
14:05 , Joanna Bourke
The amount of London office space companies signed for in the last three months reached its highest point since the start of the pandemic, as firms draw up future workspace plans.
Close to 2.6 million square feet of space was taken in the capital in the three months to September 30, mostly in the City and West End.
That is ahead of 1.1 million square feet agreed a year earlier, and the highest quarterly figure since the start of the Covid-19 crisis, according to property agent Colliers. However, it is below the 3.5 million square feet of take-up in the comparable period in 2019.
Read the full story HERE.
13:11 , Simon English
An up day for the FTSE 100, so far anyway. At lunch, though stock markets don’t take lunch, the premier index is up 52 points at 7063.
Ocado leads the way on the back of Sainsbury’s takeover chatter. We get Tesco results first thing tomorrow. The City is looking for more meat from CEO Ken Murphy. He needs a bigger plan, is the sentiment. What will have to say?
Will Facebook shares keep sliding later? Chief F-booker Mark Zuckerberg is $6bn poorer after yesterday. If you have tears, read more here
Our City Editor throws in his tuppence on Facebook here.
Elsewhere, Google’s Deep Mind has turned a profit.
And the oil price is troubling. Is there a winter energy crisis coming?
Google’s DeepMind turns first profit
13:09 , Oscar Williams-Grut
Sales at the cutting edge researchcompany rose by £560 million last year to hit £826 million. DeepMind books most of its revenue from research carried out for other companies under the Google umbrella. The company specialises in breaking new ground in AI and machine learning research that can then be commercialised later.
The surge in revenue helped the business turn its first profit of £43.8 million, compared to a loss of £476 million in 2019. Business expenses rose 8% to £779 million.
Winter fuel warning as oil prices soar
10:51 , Simon English
That in turn will put intense pressure on central banks to shove up interest rates faster than they would like.
Crude is already at a seven-year high, after Opec refused last night to increase production levels in order to keep profits up.
THG slide continues
10:31 , Graeme Evans
Entrepreneur Matt Moulding's dream start to life on the stock market continues to sour after shares in his Hut Group business took another hammering today.
The Manchester-based e-commerce company THG was at one stage more valuable than Burberry, ASOS and Sainsbury's after attracting a wave of investor cash in the wake of September 2020's stock market listing.
Shares peaked at 800p in January, but they've since tumbled below their 500p flotation price in a dramatic reversal of fortunes. They've now fallen in the past nine sessions and were today at 425p after losing another 3% or 15p.
That's a fresh blow for the fortunes of Moulding and his wife, who currently hold about 25% of the group, as well as the charitable foundation that holds shares as part of Moulding's commitment not to profit from employment at the company he founded in 2004.
Analysts had targeted a price of 1,000p or more earlier this year, but sentiment appears to have deteriorated sharply since THG revealed a plan two weeks ago to split its beauty brands division into a separate listing.
The focus will now be on an upcoming capital markets day and THG's plans for its fast-growing Ingenuity business, which runs e-commerce for other retailers under contract.
Many other London tech-focused stocks fared well today, despite another poor session last night for the Nasdaq and “FAANG” stocks such as Facebook and Amazon.
They included Ocado, which rose 48.5p to 1,704p in a positive session for the FTSE 100 index as the top flight climbed 0.6% or 39.89 points to 7,050.90.
Oil stocks and banks were among those higher, while Sainsbury's added another 3.2p to 297.3p amid the speculation about further consolidation in the supermarket sector.
The FTSE 250 index lifted 82.32 points to 22,737.74, while logistics firm Wincanton made strong inroads in the FTSE All-Share after its latest update sent shares up 7% or 25p to 356p.
It reported strong revenues growth in the six months to September and said the recent fuel shortages had not impacted profitability.
Retailer Marks Electrical reveals plans to list on AIM
10:29 , Naomi Ackerman
White Goods retailer Marks Electrical today revealed plans to list on London's junior AIM market after benefiting from the pandemic online shopping boom.
The company, launched in 1987 by founder-CEO Mark Smithson from his father's Leicester garage, saw revenues soar by 78% to £56 million in the year to end March.
The listing, expected to take place late this month, could value the retailer at up to £175 million, the City estimates.
Read the full story here
FTSE 100 on front foot
08:39 , Graeme Evans
The FTSE 100 index bucked an otherwise gloomy start to the week for global markets by rising 41.18 points to 7,052.19.
The biggest top flight risers were grocery technology business Ocado and industrial conglomerate Smiths Group, while there was a recovery of sorts for BT Group following yesterday's 5% hammering on Sky's reported plans to join forces with Virgin Media on rolling out ultra-fast fibre broadband. Its shares recouped 2.25p to 153.7p.
Melrose Industries fell 3.1p to 167.8p, but second-tier stock Greggs added 3% on the back of an upbeat trading update from chief executive Roger Whiteside.
The FTSE 250 index lifted 100.54 points to 22,755.46.
Hut Group shares under pressure
08:30 , Graeme Evans
It's been a torrid few days for shares in e-commerce business THG Holdings, better known as The Hut Group. The stock made a flying start following last year's London listing, but having topped 800p in January is now back at 438p after falling by a third in the past month.
The sell-off follows plans to spin off its beauty division into a separate listing, as well as testing times for all tech-focused companies in recent weeks. AO World added to the strain last week with a profit warning linked to driver shortages and supply chain issues.
Alongside its e-commerce health and beauty products operation, THG has a fast growing business running e-retail for other retailers under contract. The business is still overseen by chief executive Matt Moulding, who founded the business in 2004.
Shares were 1.6p lower at 438.6p.
08:07 , Graeme Evans
GKN owner Melrose Industries has reported an upturn in its aerospace markets after revenues rose 16% in the September quarter.
Underlying demand from automotive customers has been strong, but chief executive Simon Peckham described the tightened supply of semi-conductors “frustrating and difficult to plan for”.
He added: “We have made our businesses better, more flexible and resilient to deal with near term headwinds, and all our businesses are on track to achieve their margin targets assuming partial end market recoveries.”
Greggs to Londoners: We are coming
07:54 , Simon English
GREGGS boss Roger Whiteside upped profit forecasts today, renewed his prediction that the baker will grow to 3000 stores and had a simple message for Londoners: We are coming.
The fall in property costs in central London means it plans to expand rapidly in the centre of town from just 19 stores to many more.
“We are coming into London with renewed vigour,” he said.
Today Greggs said sales in the third quarter are up 3.5% despite staff and supply chain problems.
07:52 , Graeme Evans
The operator of Le Shuttle has described the economic impact of Brexit on cross-channel flows of freight as “very moderate” after it reported that its services carried nearly one million trucks in the first nine months of the year, a decline of 4% on 2020.
The figures from Getlink are distorted by Covid factors and comparisons with pre-Brexit stockpiling last year, with the 116,915 trucks transported in September a decrease of 11%.
Le Shuttle also carried 135,287 passenger vehicles, an increase of 6% compared to September 2020. This was driven by later holiday returns from UK customers linked to travel conditions that were less restrictive than during the same period a year earlier.
Getlink is owned by French private shareholders, with its monthly figures often regarded as a key barometer of Britain’s trading economy.
Oil price pressure
07:34 , Graeme Evans
US oil prices have risen to their highest level in seven years and Brent crude is at a three-year high of $81 a barrel after OPEC and its allies failed to extend production beyond their existing plan for an increase in November of 400,000 barrels a day.
The move will do little to ease the global energy crunch, where sharp rises in the prices of natural gas and coal have contributed to the recent momentum in the oil price.
Bank of America warned on Friday that Brent crude could easily pass $100 a barrel if low stocks and an air travel rebound “collide with a cold winter.”
OPEC has argued that the rise in prices is an issue over natural gas and coal supply rather than to do with oil and that seasonal factors usually temper consumption.
Oanda's senior market analyst Jeffrey Halley said: “Assuming the energy squeeze is the new normal, it is hard to see transient inflation being as transient as the world's central bankers are forecasting/hoping it will be. The effect will be felt throughout the worlds supply chains.”
The potential for higher US interest rates kept up the recent pressure on technology stocks on Wall Street overnight, resulting in the tech-heavy Nasdaq sliding more than 2%.
Higher rates diminish the appeal of tech stocks and other high growth sectors where their present value is built around future cash flows. Facebook shares fell 5% last night and Amazon was down 3%.
The negative sentiment was also felt in Asia markets, although the FTSE 100 index is set for a steadier session amid forecasts for it to open more than 20 points higher at about 7,030.