Europe’s deepening energy crisis triggered more volatility for financial markets today, leading to fresh pressure for London-listed shares
Friday’s announcement by Gazprom that it has suspended gas deliveries via the Nord Stream 1 pipeline caused a fresh spike in natural gas futures after their falls last week.
European stock markets are under heavy selling pressure, with Brent crude prices higher ahead of today’s meeting of OPEC oil ministers.
FTSE 100 Live
Natural gas futures surge on pipeline closure
Stock markets weaken on economy fears
Dechra Pharmaceuticals shares fall after results
Pounded, but sterling will always bounce back
15:29 , Simon English
The crashing of the pound – the trashing of it, to those who blame what is left of the present government for absolutely everything – is plainly bad news.
The things we import that are largely denominated in dollars include fuel and food. Ouch.
But it is just about possible to be sanguine. If you’re an importer paying for US goods in dollars, or planning a holiday in America, the state of sterling is somewhere between a huge problem and a serious inconvenience.
For the rest of us, well it speaks to the notion that the country is in a mess, has devalued itself in all manner of ways.
And there’s not much sign of a let up. Capital Economics last week predicts it will fall to $1.05 before the bleeding stops.
The pound being anywhere near parity with the dollar remains shocking, but as long as it bounces back it is just another problem we deal with and carry on.
Those who find the state of the pound a blow to their patriotism might note that the Japenese Yen and the Euro are hardly in better shape.
Currency traders are worried about how the UK and the EU will fund solutions to the energy crisis.
So money is flocking to the dollar is on the TINA basis -- There Is No Alternative.
That’s a vote of confidence in the strongest country in the world during troubled times, rather than necessarily a huge black mark against the UK.
In the longer run, assuming sensible governing, the pound comes back. It always, always does.
FTSE 100 off lows and outperforms Europe as oil majors and defence stocks rally after Truss win
15:08 , Michael Hunter
A rally for oil majors and defence stocks after Liz Truss ws confirmed as the the UK’s new prime minister is helping London’s FTSE 100 buck a trend for sharp losses on continental European stock markets.
After the incoming leader pledged to address the supply side of the energy crisis in some of her earliest remarks after winning the contest among Conservative party members with 57% of the vote, resource stocks lifted the main UK index off session lows and back to the flatline. BP gained 2.1% and 463p, with Shell up 1.5% to 2359p. BAE Systems, also seen as a likely winner of the Truss years after her pledge to increase defence spending, was up 3.2% to 1137p.
Overall, London ‘s main stock index was steady at 7280.76, outperforming a loss of over 2% for the main German market and a fall of over 1% for the French equivalent. Concern about the energy crisis across Europe’s economies continued to grip investors after Russia refusing to reopen the Nord Stream gas pipeline until an end to sanctions on its economy. which were brought on after the invasion of Ukraine. Italy’s bourse was down almost 2% and Spain’s lost over 1%. New York markets were closed for the Labor Day public break.
The pound tested lows not seen since the 1980s and the Downing Street tenure of Market Thatcher under the $1.15 mark, with concern about the implications for tax cuts on the fight against inflation in the UK.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “Expectations that a Trussenomics solution will be found by slashing taxes and spending big is fuelling worries that inflation will not easily be brought under control and that the Bank of England will be forced to keep raising rates and keep them elevated for longer.”
The FTSE 250, which is seen as more representative of the domestic UK economy, was down 243 points at 18610.43, a loss of 1.3%, with financial stocks prominent on the list of its biggest fallers. Oil stocks also provided it with support. Tullow oil gained 4.3% to 52p. Harbour Energy was up 3.3% at 487p.
City expects emergency measures from new Truss government to include reformed tax regime
13:14 , Michael Hunter
City experts expect the new prime minister, Liz Truss, to include tax reform when she outlines her government’s response to the UK’s cost-of-living crisis and economic slowdown.
Sian Steele, head of tax at the wealth manager Evelyn Partners, prediced “an emergency fiscal event” containing such reforms.
“This may or may not be a full Budget, but it is thought it will include a reverse in the recent rise in national insurance contributions. The new PM has however specifically ruled out introducing any new taxes.”
““Liz Truss’s campaign has been marked by big tax pledges, which she is expected to announce formally later this month. In the last hustings, she also commented that the tax system is too complicated, and that the number of loopholes needs to be reduced.
“A headline announcement, which will be welcomed by many, is her plan to reverse the rise in national insurance [NI] contributions. This 1.25% rise was only implemented in April by then Chancellor Rishi Sunak, with an increase in the threshold for payment from £9,880 to £12,570 from July. It is not clear if any further changes will be made to the current NI threshold, or if the recent 1.25% increase to the dividend tax rate will also be reversed.”
FTSE oil majors shares rally after Truss pledge on energy supply
13:08 , Michael Hunter
Shares in the FTSE 100’s biggest oil companies were higher after the UK’s new prime minister promised to “deal with” energy supply issues as part of her hotly-anticipated response to the cost-of-living crisis.
Liz Truss made the remarks in a brief acceptance speech after the announcement of her victory over Rishi Sunak. They stood out ahead of longer and more detailed words expected this afternoon. after she has been formally appointed by Queen Elizabeth II.
After Truss pointed to the supply side of the energy crisis so soon after emerging as the new leader of the Conservative party, shares in BP were up 1.2% to 459p and Shell was up 0.6% at 2339p. Tullow Oil, on the FTSE 250, was up 4.4% at 52p.
Federation of Small Businesses calls for ‘big and bold action’ from Truss
13:00 , Michael Hunter
The organisation that speaks up for the UK’s almost six million small firms has called for “big and bold action” from the country’s new prime minister on what it calls “the cost of doing business crisis” .
The Federation of Small Business’s chair, Martin McTague, said: “The challenge now is to deliver action that is big and bold enough to match the scale of the crisis threatening the existence of many small firms, and the jobs, livelihoods and communities which depend upon them.
“Small firms, not protected by an energy price cap, are seeing bills soaring out of control. This is at a time of sky-high taxes, rampant inflation and supply chain disruption, creating a toxic mix which must be addressed urgently.”
Pound at its lowest level since the 1980s as Liz Truss is confirmed as the UK’s prime minister
12:43 , Michael Hunter
As Liz Truss was confirmed as the UK’s new prime minister, the pound was trading around its weakest levels against the dollar since Margret Thatcher was in 10 Downing Street,
Sterling ws under $1.15 at $1.1498 as the announcement was made in Westminster. It briefly fell to a low of $1.1443 , below the $1.14506 it touched on March 19 2020 into the Covid pandemic.
Truss is already under pressure to announce how her government will help consumers facing soaring energy costs as the cost of living crisis worsens into winter, driving by rising energy costs since Vladimir Putin’s invasion of Ukraine.
Speaking in London after the announcement of her win, with 57% of the votes cast by just over 141,000 Conservative party members, she pledged to “deliver a bold plan to cut taxes and grow our economy” and said “I will deliver on the energy crisis, dealing with people’s energy bills but also dealing with the long-term issues we have on energy supply.”
London’s FTSE 100 was down almost 50 points at 7231.60, in line with losses across European stock markets, which were spooked by the economic implications of soaring energy prices for the region’s economy.
Aston Martin drafts in Mercedes to shore up finances
12:15 , Simon Hunt
Debt-ridden British carmaker Aston Martin has drafted in the support of Mercedes and the Saudi Arabian sovereign wealth fund after announcing a £576 million rights issue in a bid to shore up its finances.
Mercedes has committed to a £56 million investment as part of the deal, while the Saudi-run Public Investment Fund, controlled by crown prince Mohammed bin Salman, took up its full entitlement under the rights issue and is understood to be becoming the firm’s second largest shareholder.
The fund attracted controversy after taking over Newcastle United Football Club last year, with fans protesting over Saudi Arabia’s human rights record.
James Bond film favourite Aston Martin said it would use the capital raise to pay down its debts and invest in a new range of electric sports cars.
FTSE 100 lower, Dechra shares off 7%
10:21 , Graeme Evans
Dechra Pharmaceuticals continues to find the going tougher in the FTSE 100 index after shares in the veterinary drugs business suffered a big results-day slide.
The Cheshire-based firm has lost about a third of its value so far in 2022, with the stock down another 7% at the top of a heavily-populated top flight fallers board today.
Dechra was one of London’s top performing stocks during the pandemic, with strong demand for pets and pet related services boosting investor interest and helping to propel the company into the FTSE 100.
The promotion capped a remarkable stock market story that began in 2000 when Dechra listed at 120p a share, rising to over 5000p by the end of last year.
Dechra was back at 3238p after today’s fall of 258p, even though long-serving boss Ian Page said the veterinary pharmaceutical market was resilient and in growth. His optimism has been further boosted by expansion in the US following the recent acquisition of Med-Pharmex.
Today’s annual results showed revenues growth of 13.8% to £681.8 million and 16.2% increase in operating profits to £95.5 million.
Victoria Scholar, head of investments at Interactive Investor, said: “The fundamentals of the business remain robust with no sell recommendations on the stock from the analyst community.
“But the macroeconomic challenges of inflation and the risk of recession combined with the backdrop of volatile financial markets suggest the path ahead continues to look bumpy.”
Dechra was joined on the blue-chip fallers board by packaging firms Smurfit Kappa and DS Smith, down by 177p to 2772p and 9.5p to 261.5p respectively.
The FTSE 100 index dropped 0.9% or 64.38 points to 7216.81, representing a resilient performance in comparison with the 2.5% losses seen on the continent and the decline of 1.3% or 246.30 points to 18,606.92 for the FTSE 250 index.
Commodity-focused stocks offered some support in the top flight as BP shares rose 4.95p to 458.65p and Glencore improved 13.3p to 466.55p.
FTSE 100 lower, Smurfit Kappa down 4%
08:26 , Graeme Evans
The FTSE 100 has fallen 63.76 points to 7217.46, a resilient performance in comparison with declines of more than 2% for benchmarks in Europe.
The weakness followed a near 30% jump in European natural gas prices, with the UK contract for October delivery up 21% at 496p a therm this morning.
Big fallers in London’s top flight included packaging firm Smurfit Kappa, which declined 4%, and British Airways IAG after being marked down 2% or 2.4p to 106p.
Commodity-focused stocks offered some support as BP shares rose 3.65p to 457.35p and Glencore improved 8.75p to 462p.
In the FTSE 250 index, Aston Martin Lagonda shares fell 6% or 30.1p to 450p after it announced plans to raise £575 million through a 4-for-1 rights issue.
Countryside Partnerships lifted 10.4p to 238.6p after a recommended takeover by housebuilder Vistry valued the business at £1.25 billion. The FTSE 250 index fell 1% or 200.35 points to 18,652.87.
Pound weaker, FTSE 100 under pressure
07:58 , Graeme Evans
Traders are braced for a turbulent session after Gazprom’s suspension of gas deliveries via the Nord Stream 1 pipeline deepened the energy crisis.
The Dax in Frankfurt is expected to open 400 points lower at 12,650, while CMC Markets is also forecasting a fall for the FTSE 100 index of over 70 points to 7211.
The impact of Friday’s indefinite closure of Nord Stream 1 meant natural gas futures jumped by more than 25% this morning, reversing the falls seen last week.
The economic impact of higher energy prices led to further pressure on currency markets, with the euro below 99 cents for the first time in two decades.
The pound weakened 0.5% to $1.146, a move which also reflected dollar strength after figures on Friday showed the US economy created 315.000 jobs in August.
Brent crude rose by more than 2% to above $95 as traders focus on today’s meeting of oil cartel Opec and its allies, with production levels for October likely to be kept in line with original plans.