US dollar strength and the impact of China’s Covid lockdowns remain the focus for traders ahead of a big week for economic updates.
Wednesday’s US inflation figure, with an expected fresh 40-year high of 8.8%, is likely to push the US Federal Reserve towards another big hike in interest rates next month.
The rates speculation has lifted the US dollar index towards 20-year highs, while there are fresh concerns about China’s economy after curbs were reimposed today to deal with fresh outbreaks.
FTSE 100 Live Monday
Markets hit by China Covid fears
Dollar strength continues, near to euro parity
US inflation and bank earnings due this week
Rail and bus revival speeds Go-Ahead
12:12 , Simon Hunt
London bus and train operator Go-Ahead today insisted the transport sector is pulling away from Covid and bouncing back to normality.
Tthe company, which runs the Thameslink, Southern and Gatwick Express networks, said it expected rail revenues to be in line with its predictions “within the range’ set out in the group’s interim results of between £25 million and £30 million.
Go Ahead also said that its London and International bus division was expected to deliver an operating profit at least in line with pre-pandemic 2019 levels, which was £51.2 million, while its regional bus passenger volumes have now reached 85% of pre-Covid levels.
London is ‘fintech capital of the world,’ Deputy Mayor says
11:43 , Simon Hunt
The Deputy Mayor for Business has hailed London as the “fintech capital of the world” but warned the city must “remain open” to continue to thrive as tech investors gather in the Square Mile for a two-day conference to mark London Fintech Week.
“London is truly the fintech capital of the world – we’ve got over 3,000 fintech companies which is more than any other city [but] we’ve got to remain open for talent at all levels”, Rajesh Agrawal told the Standard.
London is the world’s top destination for fintech investment, with $6.3 billion (£5.3 billion) raised in the first six months of 2022 alone, according to figures from the Global Startup Ecosystem Report. London’s tech ecosystem has a total value of $314 billion, more than treble the likes of European rivals Berlin ($94 billion) and Paris ($89 billion).
Top funding rounds in 2022 have included $312 million for digital payments business GoCardless and $200 million for software payments provider, Paddle.
FTSE 100 under pressure, Joules down 20%
10:29 , Graeme Evans
A spike in Covid cases in China piled more pressure on markets today as heavyweight miners bore the brunt of fears over weaker demand.
The prospect of further lockdowns after the discovery of an Omicron subvariant in Shanghai left Hong Kong’s Hang Seng index 3% lower and led to more jitters in commodity markets.
Copper fell another 1% to extend recent falls, while iron ore is at levels not seen since December as stockpiles of steel build up following a downturn in China’s property sector.
Anglo American and Chile-based copper miner Antofagasta led the fallers board, with their declines of 4% contributing to the FTSE 100 index dropping 66.81 points to 7129.43.
London’s weaker performance comes ahead of a busy week for economic updates and the start of the US earnings season. The main focus will be Wednesday’s US inflation figure, with an expected 40-year high of 8.8% set to fuel interest rate rise expectations.
Hargreaves Lansdown analyst Susannah Streeter said today: “The uncertain outlook is keeping stock markets volatile as worries wax and wane about scorching inflation and a global slowdown while Covid fears rear up again.”
The FTSE 250 index fell 0.5% or 94.45 points to 18,818.50, with airline stocks including easyJet and Wizz Air among those most under pressure.
There was much-needed cheer from the housebuilding sector today after low-cost firm MJ Gleeson said profits will be significantly ahead of the City’s £49 million forecast.
Having fallen by a third this year, Gleeson shares rallied 10p to 524p. Analysts at Liberum raised their target price to 900p, pointing out that demand continues to be strong with sales rates in the last eight weeks up 16%.
Joules shares lost 20% on AIM after the retailer said it had appointed KPMG debt advisory to assist with improving profitability, cash generation and liquidity headroom.
Net debt of £21.4 million at the end of May means the company has £11.3 million of headroom within its banking facilities, in line with board expectations. Joules said: “Whilst the group continues to manage its cash resources carefully over its seasonal borrowing peak, it expects to have sufficient liquidity to manage its working capital requirements over this time.”
Shares dropped 6.9p to 26.25p, having fallen from December’s 190p due to concerns about weakening consumer confidence.
Celsius looks at bankruptcy as crypto trader crisis grows
09:56 , Simon Hunt
Beleaguered crypto lender Celsius Network is today exploring a possible bankruptcy filing as it becomes the latest victim of the crash in the sector.
The New Jersey-based company is understood to have called in law firm Kirkland & Ellis for restructuring advice as it considers options for its survival, according to the Wall Street Journal.
It comes after Celsius suspended customer transfers and withdrawals on its platform citing “extreme market conditions”.
The company said in a blog post: “We are taking this necessary action for the benefit of our entire community in order to stabilise liquidity and operations while we take steps to preserve and protect assets.”
The price of bitcoin fell a further 4% over the past 24 hours as its market cap dropped below $400 billion, according to data from CoinMarketCap.
Last week, New York-based cryptocurrency broker Voyager Digital filed for bankruptcy after hedge fund Three Arrows Capital defaulted on a $675 million loan from the company, while crypto mining business Compass Mining fired 15% of its workforce and slashed executive pay.
FTSE 100 down 0.9%, airlines lower
08:58 , Graeme Evans
The FTSE 100 index is down 0.9% or 65.58 points to 7130, led by mining stocks after China reported a resurgence in the number of Covid cases.
The prospect of fresh lockdowns to deal with the country’s latest spike in infections weighed on the price of copper, leaving shares in Antofagasta and Anglo American more than 5% lower.
Airlines stocks also came under more pressure, with British Airways owner IAG down 3% and Wizz Air and easyjet off 4% and 3% respectively in the FTSE 250 index.
In a session when the UK-focused FTSE 250 index weakened 144 points to 18,768, other big fallers included Watches of Switzerland and Aston Martin Lagonda.
Dollar strength continues, euro near parity
08:24 , Graeme Evans
The pound and euro are both weaker today, with the US dollar index continuing to trade at near its highest level in 20 years.
The euro fell 0.5% to $1.01 and is close to parity with the greenback for the first time in two decades, reflecting fears that Europe’s energy crisis will drive the region into recession.
The pound is also below $1.20 at levels last seen in March 2020 as the UK’s economic and political uncertainty continues.
Wednesday’s US inflation figure, with an expected fresh 40-year high of 8.8%, may trigger a fresh flight towards the dollar given the increased chances of a 0.75% rise in US interest rates next month.
FTSE 100 set to fall, economy updates in focus
07:56 , Graeme Evans
The FTSE 100 index is expected to trade lower as attention turns to a busy week for economic updates and the start of the second quarter US earnings season.
The main focus will be Wednesday’s US inflation figure, with an expected fresh 40-year high of 8.8% set to put more pressure on policymakers at the US Federal Reserve to increase interest rates by another 0.75%.
On the same day, the UK’s May GDP figure will give some insight into how far rising fuel and energy costs have derailed levels of UK activity.
China’s quarterly GDP and retail sales figures follow on Friday, where the impact of country’s recent Covid lockdowns is set to be revealed.
Meanwhile, heavyweight banks including Citigroup, Morgan Stanley, JPMorgan Chase and Wells Fargo will launch the latest US earnings season from Thursday.
There’s likely to be a hit from lower levels of dealmaking activity, with the focus also on how higher US interest rates have impacted margins and consumer confidence.
Ahead of these events, US futures markets are pointing lower after last Friday’s robust jobs report allayed recession fears but raised the prospect of another big rates rise.
Asian markets, however, came under pressure and the FTSE 100 index is forecast by CMC Markets to open 60 points lower at 7136 after a resilient performance last week.