Investors remain on the sidelines after recession and interest rate fears led to more heavy selling for stock markets today.
The FTSE 100 index lost almost 2% of its value over August, with the UK-focused FTSE 250 down by 5.5% amid the weakening economic outlook. The pound has also fallen to below $1.16.
Despite inflation and higher borrowing costs, Nationwide said the UK’s average house price grew 0.8% month-on-month in August and is 10% higher over the past year. However, the building society said there are signs the market is “losing some momentum”.
FTSE 100 Live Thursday
FTSE 100 falls, mining stocks slide
Pound below $1.16 on weaker UK outlook
Nationwide house prices up 0.8% last month
FTSE 100 sheds 140 points to 6-week low as fears on global economy worsen
15:31 , Michael Hunter
London’s main stock index made broad and deep losses in afternoon trade as US markets joined a global sell-off on intensifying concern about the outlook for the world economy.
There were only 9 FTSE 100 constituents that did not fall as it surrendered over 130 points to 7151.30, a decline of almost 2%. Resource stocks took a hit as a range of indicators in Europe and Asia alike pointed to an economic slowdown at a time when a range of central banks are also lifting interest rates to flight inflation. It was a six-week low for the index.
Glencore, the commodities trader, was down 7.5% at 438p, while Anglo American, the miner, lost 4.2% to 2665p.
Gas distributor Centrica topped the short list of gainers, up 1.7% at 77p, with soaring energy costs already fuelling inflation before the onset of peak domestic energy demand leaving much of the rest of the market deeply uneasy.
“Any sort of an economic rebound looks further away than ever as winter approaches,” said Michael Hewson, chief market analyst at CMC Markets UK.
“The reality is financial markets appear to be losing faith in politicians of all political persuasions to deal with the problems facing them, as well as their populations. Years and years of political short termism and economic mismanagement appear to be coming home to roost, and the bill appears to be becoming due.”
Tally of FTSE 100 CEO departures announced in 2022 reaches 17
15:08 , Michael Hunter
The departure of Reckitt Benckiser’s chief executive blindsided the City and hit shares in the FTSE 100 today, taking the number of CEOs announcing plans to leave their posts at constituents of the top UK index this year to 17.
Laxman Narasimhan is heading back to his native US after just three years at the Slough-based maker of household-name consumer goods from Clearasil to Calgon, way under the average near-six year tenure at a FTSE 100 helm.
The observation comes from broking firm AJ Bell. Its investment director, Russ Mould, points out that of the 17 announced moves, “seven have already become effective, two more are due before the year end and seven more will take place in 2023,” adding: ”There is no timeline available yet for the appointment of someone to take over from the retiring John Foley at M&G.”
Here’s where you can read the the full list of who’s in and who’s out.
Wall Street stocks fall further with attention turning to jobs report
14:57 , Michael Hunter
New York’s S&P 500 failed to find support, taking its run lower into the fourth consecutive day amid a sense of gloom on global stock markets asa range economic indicators from around Asia and Europe pointed to a global slowdown.
The muted mood also came ahead of the closely watched US jobs report for August, due on Friday at 1.30p.m. London time, which will play into the market’s assessment of the pace and extent of Federal Reserve rate hikes.
Wall Street’s main stock index fell 27 points to 3927.0, a loss of 0.7%., leaving it around 10% lower than the four-month high it touched in August. It is down 13 over the last year.
UK watchdog adds to global scrutiny over Microsoft’s blockbuster acquisition of Activision Blizzard
13:13 , Michael Hunter
It adds to a chorus of doubts among major regulators and industry rivals on the deal’s impact and the creation of what some experts have referred to as the ‘Netflix of gaming’, as online streaming is becoming more popular among players.
The combination would unite the Xbox gaming platform with the maker of Call of Duty and Candy Crush and is expected to complete in June next year.
“Microsoft could leverage Activision Blizzard’s games together with Microsoft’s strength across console, cloud, and PC operating systems to damage competition in the nascent market for cloud gaming services,” said the CMA.
Microsoft’s â¯presidentâ¯and vice chair Brad Smith said We’re ready to work with the CMA on next steps and address any of its concerns.â¯Sony, as the industry leader, says it is worried about Call of Duty, butâ¯we’veâ¯said we are committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less.”
Shock departure of Reckitt Benckiser CEO keeps shares under pressure
12:12 , Michael Hunter
The shock departure of Reckitt Benckiser’s well-regarded chief executive after just three years in the job has kept shares in the maker of household-name products from Cillit Bang to Nurofen under pressure.
Laxman Narasimhan is stepping down from the FTSE 100 multinational citing family reasons and “an opportunity” to return to his native US, which City observers interpreted as a sign he could be headed for a new job on the other side of the Atlantic.
Shares were down over 4% in early afternoon London trade at 6362p, having been 6% lower in initial trade.
Narasimhan joined the Slough-based firm after being poached from PepsiCo, the world-famous American soft drinks giant. It is the UK’s eleventh biggest company by market value, with shares in issue worth over £47 billion.
Narasimhan said his departure comes after he was offered “an opportunity to return to the United States,” adding: “Although it is difficult to leave, it is the right decision for me and my family.”
London house prices set to rise another £27,000 this year despite economic headwinds
11:46 , Simon Hunt
London house prices are set to rise by another £27,000 before the end of the year as cost of living pressures and soaring interest rates are doing little to quell strong demand for homes in the capital.
Kensington and Chelsea will see the biggest jump in property value of any London borough with an average £68,103 rise, according to data from estate agent Benham and Reeves, followed by Westminster with a £47,222 rise.
The City of London will see a £41,519 jump in average property values, while prices in Camden will grow by £41,493. The average UK house price is set to rise 5%.
Benham and Reeves director Marc von Grundherr said: “We keep waiting for house prices to plateau, but it’s just not happening.
Park Plaza says business customers are returning but warns of energy price storm cloud
10:52 , Simon Hunt
The finance boss of Park Plaza Hotels has hailed the return of the London business trip but warned of “dark clouds” ahead as the firm braces for surging energy prices and a looming recession.
The company posted a loss of £26 million in the first half of 2022 as Covid restrictions in Europe stifled international travel in the first quarter.
Park Plaza CFO Daniel Kos said: “We’re still gradually improving…in the second quarter we were at around 90% of pre-covid levels [while] July and August exceeded 2019 revenues.
“If we look at our current trading everything looks healthy and solid but we all realise there are some dark clouds in the sky coming at us.”
The company, which owns the Park Plaza Westminster Bridge hotel, is continuing with expansion plans, with work underway to open a Hoxton location in 2024.
FTSE 100 slides 1.6%, Rio Tinto down 3%
10:14 , Graeme Evans
The pummelling for London stocks continued today as fears over the deteriorating economic outlook pushed the FTSE 100 index to a six-week low.
Commodities trading giant Glencore was the worst hit, sliding 7% or 32.6p to 440.7p after the price of copper and other key metals came under more pressure.
The FTSE 100 index surrendered another 1.6% or 120.67 points to 7163.48, having been above 7500 prior to Friday’s speech by Federal Reserve chair Jerome Powell backing a “restrictive policy stance” for some time.
His message on interest rates contributed to sterling’s worst month against the safe haven US dollar since October 2016, following a fall of 4.5% in August.
The pound traded just below $1.16 today amid more weak signals from the UK economy, including a report showing a big contraction in manufacturing activity last month. Capital Economics said yesterday it expected sterling to set a record low of $1.05.
In addition to interest rate fears, traders are increasingly worried by the demand impact of the latest Covid restrictions in key Chinese cities. This led shares in Asia-focused luxury goods group Burberry down by 47.5p to 1700.5p.
Other big fallers included car insurer Admiral, which shed 118p to 2004p and Rolls-Royce after losing 2.5p to 74.5p.
Mining giant Rio Tinto lost 3% or 165.5p to 4605.5p after securing a deal worth an improved $3.3 billion (£2.85 billion) for the minority interests of Turquoise Hill, a move giving it control of the giant Oyu Tolgoi copper-gold project in Mongolia.
The FTSE 250 index fell 1.7% or 320.5p to 18,743.25, with Royal Mail down 5% and recruitment firm Page off 8%.
City Comment: The Bank of England needs to go for it
08:52 , Simon English
THE letter to the FT is blunt. The banking crisis needed a £150 billion intervention from the Bank of England. The Covid pandemic about the same.
And the present energy crisis? A cool £200 billion, magicked out of thin air via quantitative easing, money-printing if you prefer, though the actual process is electronic.
Learned professors David Blanchflower, Lord Sikka and Richard Murphy aren’t long on optimism. A sample: “millions of jobs will be lost”, “mortgage repossessions will increase”, “the likelihood of recession on a scale not seen since the 1930s is very high”.
Are you cheered up yet? The Profs point is that none of these disasters have to happen. The Bank just needs to go big, because it is the only entity that can really save us all from catastrophe.
Since it seems a matter of near inevitability that the next Prime Minister will have to tell the Bank to take radical action, it’s not clear what the point is in waiting.
Let’s assume we won’t actually allow the poor and the old to freeze to death this winter. That when it comes to it, we will find, or invent, the money to cover fuel bills, making vague talk from politicians about cuts to income tax or VAT look rather twee.
The objections to the Bank spaffing money about will be that it could fuel inflation and that well, it sounds like a lot.
But inflation is driven by global forces that there isn’t a lot the Bank can do about it.
And not spending money now to avert disaster later won’t be cheaper in the end.
FTSE 100 down 1%, Reckitt Benckiser falls 6%
08:52 , Graeme Evans
The FTSE 100 index is at a six-week low of 7210 after London’s top flight fel by another 1% or 73.39 points.
Heavily-sold stocks included mining giant Glencore and Rolls-Royce with declines of 5%, while car insurer Admiral dropped 4% and luxury goods group Burberry by 3%.
As well as fears over the impact of sharply higher interest rates on the economic outlook, sentiment has weakened on the back of fresh Covid restrictions in China.
Reckitt Benckiser shares fell 6% or 378p to 6270p as the consumer goods group announced that chief executive Laxman Narasimhan is leaving at the end of the month.
The FTSE 250 index fell 1% or 197.87 points to 18,865,88, with big fallers including Watches of Switzerland and recruitment firm PageGroup after declines of 5% and 8% respectively.
Annual house price growth slows to 10%
08:17 , Graeme Evans
House prices lifted by 0.8% month-on-month in August, Nationwide said today as it reported a softening in annual growth to 10% from 11% in July. The average price stood at £273,751, which represents a near £50,000 increase over two years.
A shortage of housing stock has meant that price growth has remained firm, despite the impact of inflation and higher borrowing costs.
Nationwide chief economist Robert Gardner added: ““There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer enquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels.”
He expects the market to slow further as pressure on household budgets intensifies in the coming quarters.
FTSE 100 weakens, pound below $1.16
07:56 , Graeme Evans
The new month is continuing where the last one left off, with CMC Markets forecasting the FTSE 100 index will decline 40 points to 7,244.
London’s top flight fell by 1.9% during August, but the damage caused by the deteriorating economic outlook was greater for the FTSE 250 index after a decline of 5.5%.
Stock market sentiment has weakened since last Friday’s Jackson Hole speech by Federal Reserve chair Jerome Powell, in which he highlighted the need for a “restrictive policy stance” through higher interest rates for some time.
US stock markets have since fallen for four sessions in a row, with the Dow Jones Industrial Average down by another 0.9% last night.
Demand fears caused by the economic outlook and the latest Covid restrictions in China have left Brent crude at $95 a barrel, compared with $105 on Monday.
And the flight to the safe haven dollar has continued, with the pound now below $1.16 despite the prospect of another big interest rate rise by the Bank of England this month. Capital Economics warned yesterday sterling is heading for a record low of $1.05.