FTSE 100 closes lower and Wall Street struggles as investors watch for cues

Wall Street mixed as investors watch for cues (zz/NDZ/STAR MAX/IPx)

The FTSE 100 (^FTSE) and European stocks lost momentum after a positive start on Wednesday, with London's premier index closing in the red. Wall Street was mixed as investors wonder whether the drag on stocks is temporary or a more solid retreat.

• London’s benchmark index lost 0.3% and was finished the session at 8,225 points

• Germany's DAX (^GDAXI) slipped 0.1% and the CAC (^FCHI) in Paris lost 0.7%

• The pan-European STOXX 600 (^STOXX) fell 0.6%

• Wall Street was mixed, with benchmark S&P 500 (^GSPC) down around 0.1% while the Dow Jones Industrial Average (^DJI) lost about 0.3%. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) was up about 0.3%.

• The pound was lower against the US dollar (GBPUSD=X) at 1.2625

• Shares in Deliveroo have been given a boost after reports of takeover interest from US rival DoorDash (DASH).

Follow along for live updates throughout the day:

LIVE COVERAGE IS OVER20 updates

Wed 26 June 2024 at 11:54 am GMT-4, Pedro Goncalves

That is all from us but do follow our US blog for the latest moving markets across the pond.

Thanks again,

PHG

US new home sales fell in May

Wed 26 June 2024 at 10:43 am GMT-4, Pedro Goncalves

Sales of new US single-family homes dropped to a six-month low last month, new data from the Commerce Department shows.

New home sales declined 11.3% to a seasonally adjusted annual rate of 619,000 units last month, the lowest since November.

US New Home Sales Crashed In May

"The US housing market is stuck, and we are not convinced it will become unstuck anytime soon..."https://t.co/vfmdxQwsmP

— FTMFW (@FTMFW77) June 26, 2024

The average rate on the popular 30-year fixed mortgage hit a six-month high of 7.22% in early May, before coming down slightly to 7.03%.

US stocks edge lower as investors watch for cues

Wed 26 June 2024 at 9:35 am GMT-4, Pedro Goncalves

US stocks slipped on Wednesday after the S&P 500 and Nasdaq snapped a three-day losing streak, as investors watched for signs of life in the tech-driven rally and weighed the prospects for rate cuts.

The benchmark S&P 500 (^GSPC) fell around 0.2% while the Dow Jones Industrial Average (^DJI) dropped about 0.4%. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) was just below the flatline as Nvidia (NVDA) extended its rebound.

Read the full article here

Alliance Trust and Witan join forces to create £5bn investment trust

Wed 26 June 2024 at 9:27 am GMT-4, Pedro Goncalves

Alliance Trust and smaller rival Witan Investment Trust have announced their intention to merge, creating one of the largest domestic investment trusts with assets of £5bn.

Dean Buckley, chair of Alliance Trust, said the merger was a “key milestone” for the industry and would result in lower management fees and other charges for investors.

Both Alliance Trust and Witan have multi-manager structures in which stock picking is outsourced. The combination is expected to see Alliance Witan be of sufficient size to enter the FTSE 100 index.

Laith Khalaf, head of investment analysis at AJ Bell, said: “This is a blockbuster merger of two of the biggest and oldest names in the investment trust world. The deal will result in lower annual charges for investors, as well as preserving the long dividend track records of both trusts. The share price of both trusts rose on the back of the news, especially Witan, which suggests the market thinks the deal provides decent value to both sets of shareholders. The new combined trust will be called Alliance Witan.

“The £5bn merger will probably catapult Alliance Witan into the FTSE 100, where it will sit alongside global competitors F&C Investment Trust and Scottish Mortgage."

The deal is expected to be completed in early October.

Bond markets react to general elections

Wed 26 June 2024 at 9:22 am GMT-4, Pedro Goncalves

The yield in 10-year UK bonds has been edging higher in what could reflect growing uncertainty in markets ahead of the general elections. Paula Bejarano Carbo, economist at the National Institute of Economic and Social Research (NIESR), said:

“In the second quarter of 2024, the 10-year UK government bond (gilt) yield has fluctuated around 4.2%, rising from 4% in the first quarter of the year, driven by slightly rising but volatile short-term interest rate expectations and more recently, a rising term premium.

Both developments may reflect increased uncertainty in markets following the announcement of the UK general election. Further, upwards-trending co-movements in term premia estimates in both British and European economies following the European Parliament elections are suggestive of spillovers of international risk and uncertainty.”

Younger investors predict a change of government will prompt stock market rally

Wed 26 June 2024 at 8:42 am GMT-4, Pedro Goncalves

Younger retail investors are predicting that a change of government will prompt a surge in UK markets and boost their stock market holdings.

A survey of 1,000 UK-based retail investors found that about two-thirds of respondents aged 18 to 44 think a change in Downing Street will push up the value of British-listed stocks.

The figure fell to 44% of total retail investors when including all age ranges, versus 30% who said the opposite, according to the research by trading platform eToro.

While 68% of people who said they were Labour voters said they thought a new Government would be a boon to UK shares, about a quarter of Tory voters agreed.

Dan Moczulski, UK managing director at eToro, said: “When Labour won power in 1997 the FTSE 100 rallied by 35% over the next 12 months.

“While we’re unlikely to see anything quite so dramatic this time around, the FTSE 100 has already returned 7% so far this year, indicating that markets are comfortable with the expected outcome of this election.

“With inflation, UK stocks and sentiment beginning to turn a corner, the mood music is clearly right for investors heading into this election.”

Sir Keir Starmer’s Labour Party is the favourite to win the General Election on July 4.

Yen falls to weakest level since 1986

Wed 26 June 2024 at 7:59 am GMT-4, Pedro Goncalves

The value of the Japanese yen has plummeted to the lowest level against the dollar in 38 years despite repeated warnings from Japanese officials that they would be ready to act.

The yen has fallen to 160.39 to the dollar, raising the risk that the Bank of Japan could intervene to prop up the value of the currency.

The yen has weakened in recent months, as investors have lost confidence that the Bank of Japan will be able to raise interest rates, due to Japan’s weak economy.

Southwest Airlines cuts revenue guidance

Wed 26 June 2024 at 7:49 am GMT-4, Pedro Goncalves

Southwest Airlines Boeing 737 Max 8 with registration N8783L shown shortly before landing at LAX, Los Angeles International Airport (Angel Di Bilio)

US operator Southwest Airlines (LUV) has cut its second-quarter forecast for revenue per available seat miles (RASM), a proxy for pricing power, citing uneven travel demand, sending its shares down 9% in pre-market trading.

Southwest Airlines now expects revenue per available seat mile to fall by up to 4.5% in the three months to June, down from a previous estimate of a decline of 1.5% to 3.5%.

Wall Street set to open higher as Nvidia rebounds

Wed 26 June 2024 at 7:25 am GMT-4, Pedro Goncalves

Wall Street is set to open higher as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) are all in the green.

David Morrison, senior market analyst at fintech and financial services provider Trade Nation, said Nvidia should drive gains across Wall Street this session.

US stock index futures were all modestly higher in early trade. This follows yet another mixed session yesterday which saw gains for the S&P 500 and NASDAQ, and small losses for the Dow and Russell 2000. This is entirely consistent with the sharp recovery in NVIDIA, a constituent of both the NASDAQ and S&P. Yesterday’s rally followed a bout of hefty profit taking since last Thursday. Yesterday NVIDIA gained 9% and was up another 2% first thing this morning. So far, investors are viewing NVIDIA’s sell-off as an opportunity to build up additional exposure. But the stock is still around 8% below the high hit last week. Let’s see if investors remain so convinced of the chip designer’s future that they drive it up to new highs. If so, then it will restore the company’s status as the stock market’s bullish bellwether. If not, then further weakness could easily sour sentiment in general, even if there is perceived value outside the tech leaders.

A glance at the charts of the major US stock indices suggests a period of uncertainty and indecision as far as investors are concerned. On one hand, the market appears relatively relaxed with the prospect of two, or maybe even just one, 25 basis point rate cut from the Federal Reserve this year. Instead, they’ve transferred their hopes of much looser monetary policy to come in 2025. There’s nothing particularly daunting on the horizon, so there’s no reason to reduce market exposure. On the other hand, inflation remains sticky, recent economic data releases suggest that the economy is slowing, next year’s rate cut predictions could get rolled back as quickly as this year’s and there’s a huge amount of money concentrated into a small number of overvalued corporations. That’s before considering the shocking US debt situation and the Presidential Election in November. Of course, this is what makes a market. So, while things are relatively quiet on the surface, there’s quite a bit bubbling underneath.

Trending tickers: Deliveroo, Chipotle, Rivian and FedEx

Wed 26 June 2024 at 7:05 am GMT-4, Pedro Goncalves

FedEx driver delivers a package to a home as heavy rain falls over parts of South Florida on Wednesday. (MATIAS J. OCNER, Associated Press)

The latest investor updates on stocks that are trending on Wednesday.

Deliveroo (ROO.L)

Shares in Deliveroo have been given a boost after reports of takeover interest from US rival DoorDash (DASH).

Chipotle (CMG)

Shares in Chipotle were higher in pre-market trading as investors are looking forward to see the 50-to-1 stock split trade when the Wall Street bell rings.

Rivian (RIVN)

Shares in the EV maker were higher in pre-market trading following the announcement that Volkswagen (VOW3.DE) will invest up to $5bn into a partnership with it.

FedEx (FDX)

FedEx shares soared more than 15% in pre-market trading after the company reported results that topped analysts’ estimates in both earnings and revenue.

Read the full article here

UK mortgage rates ease slightly

Wed 26 June 2024 at 6:49 am GMT-4, Pedro Goncalves

Mortgage rates this week have slightly reduced compared to last week, as lenders are starting to respond to recent positive news about the UK economy and the prospect of the first base rate reduction later in the summer, according to Rightmove.

• The average 5-year fixed mortgage rate is now 5.02%, down from 5.57 % a year ago

• The average 2-year fixed mortgage rate is now 5.42%, down from 5.99% a year ago

• The average 85% LTV 5-year fixed mortgage rate is now 5.01%, down from 5.58% a year ago

• The average 60% LTV 5-year fixed mortgage rate is now 4.42%, down from 5.35% a year ago

• The average monthly mortgage payment on a typical first-time buyer type property when taking out an average five-year fixed, 85% LTV mortgage, is now £1,133 per month, down from £1,191 per month a year ago

"As we've seen some high-profile rate cuts from high street lenders this week, with others likely to follow suit, we expect average rates to reduce further over the next couple of weeks. This will be welcomed news for home-buyers and timed well for any post-election bounce in activity," Matt Smith, Rightmove's mortgage expert said.

Chipotle's 50-for-1 stock split : What it means for investors.

Wed 26 June 2024 at 6:08 am GMT-4, Pedro Goncalves

The logo of Chipotle is seen on one of their restaurants in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly (REUTERS / Reuters)

Chipotle's first-ever stock split is one of the largest in the history of the New York Stock Exchange. My Yahoo Finance US colleague Brooke DiPalma writes:

Chipotle (CMG) investors will notice a difference in their portfolios this morning.

The burrito giant conducted a 50-for-1 stock split, the company's first split ever and one of the largest in the history of the New York Stock Exchange.

Chipotle CFO Jack Hartung told investors he believes this will make shares more "accessible to our employees as well as a broader range of investors" on a call following the company's first quarter results.

Shareholders who owned the stock as of the market close on June 18 received 49 additional shares for each one held. When the market opens Wednesday, shares will trade on a post-split basis, meaning one share worth $3,283.04 as of Tuesday's close will trade as 50 shares worth roughly $65.66 per share.

Pre-split, Chipotle stock was the third-highest-priced in the S&P 500 (^GSPC), after NVR, Inc. (NVR) and Booking Holdings (BKNG). Its post-split stock price is still higher than when the company went public in 2006 at $22 per share.

Read the full article here

Profits jump at AO World

Wed 26 June 2024 at 5:54 am GMT-4, Pedro Goncalves

FTSE 250-listed AO World posted sales of just over £1bn and said profits quadrupled to £34m.

The online retailer posted a 186% surge in underlying pre-tax profits to £34.3m for the year to March 31. On a statutory basis, pre-tax profits jumped from £7.6m to £34.3m.

Tumble dryers were one of the biggest sellers during the winter, as the UK experienced the 8th wettest winter on record.

AO World said that, despite “ongoing macro-economic challenges”, it remains confident of delivering double-digit sales growth in 2024-25 and seeing underlying pre-profits rise to £41m.

"The outlook is upbeat, with double-digit revenue growth and adjusted pre-tax profit of between £36 million and £41m expected in the coming financial year," Richard Hunter, head of markets at Interactive Investor.

"The share price has reacted accordingly of late, with an increase of 34% over the last year comparing to a gain of 13.3% for the wider FTSE250. In historic terms, however, there is a gulf between the current price and the heady highs of January 2021 when the company was trading at levels of over 430p at the height of the pandemic and indeed perceived prospects for the company.

"As such, the shares are down by 54% over the last three years, although significant progress has since been made, the scale of which has prompted the market consensus to have risen to a buy on renewed growth prospects.”

Deliveroo likely to face more takeover bids

Wed 26 June 2024 at 5:46 am GMT-4, Pedro Goncalves

Analysts at Jefferies said the takeover talks between Deliveroo and Doordash may open the door to more interest in the London-listed food deliverer.

In this instance, the talks have failed.But such is the strength of the financial, industrial and strategic logic of a Deliveroo takeover, we would not be surprised to see similar such headlines to re-emerge in the short term.In our view, the key to unlocking a recommended offer from Deliveroo is understanding the sensibilities of the founder CEO, Will Shu. This may only be the start.

De Beers reveals drop in sales of rough-cut diamonds

Wed 26 June 2024 at 5:44 am GMT-4, Pedro Goncalves

Anglo American has reported another dip in rough diamond sales from De Beers as it warned of a "protracted" recovery in demand.

The diamond producer revealed it sold $315m (£248.6m) of rough cut diamonds in its latest cycle, which was down from $383m (£302.3m) in its previous cycle and $456m (£359.9m) in the same period last year.

"The recent annual JCK jewellery show in Las Vegas confirmed a resurgence in retailers' interest in natural diamonds in the US but ongoing economic growth challenges in China mean we continue to expect a protracted U-shaped recovery in demand," De Beers CEO Al Cook said.

Anglo announced in May that it intends to either divest or demerge the De Beers division "to improve strategic flexibility".

LGIM to partially divest Glencore stake over thermal coal concerns

Wed 26 June 2024 at 5:39 am GMT-4, Pedro Goncalves

Investment management Legal & General is divesting its ESG funds from Glencore due to concerns over its coal production.

The decision applies to funds covering around £176bn in assets under management.

According to The Guardian, LGIM will divest Glencore shares held in its Future World fund range, LGIM’s ESG fund ranges, and all auto-enrolment default funds in L&G Workplace Pensions and the L&G Mastertrust. The decision applies to funds covering around £176bn in assets under management.

Glencore, which is the world’s biggest coal shipper, is “phasing down” its coal portfolio, as part of a plan to only achieve net zero emissions by the middle of the century. However, that means that some coal mines would run until 2050.

“LGIM remains concerned that Glencore has not disclosed plans for thermal coal production that are aligned with a net zero pathway," the fund manager said.

LGIM has also decided to divest its stake in US retail chain TJX, the parent company of UK chain TK Maxx.

Phoenix Group to explore the sale of over 50s insurer SunLife

Wed 26 June 2024 at 5:33 am GMT-4, Pedro Goncalves

Phoenix Group has dropped to the bottom of the FTSE 100 after the insurer said it is exploring a sale of its SunLife business.

Phoenix said it had received a "a number of initial expressions of interest from third parties", but warned there could be no certainty at this stage that a disposal will occur".

SunLife is a leading provider of financial protection products direct to the over 50s market in the UK and reported profit after tax of £16m in 2023.

Deliveroo jumps amid US takeover talks

Wed 26 June 2024 at 4:12 am GMT-4, Pedro Goncalves

Shares in Deliveroo have been given a boost after reports of takeover interest from US rival DoorDash.

The takeaway delivery giant saw shares jump as much as 7% in morning trading on Wednesday amid speculation that the group was in the sights of the San Francisco-based competitor.

Deliveroo was reportedly approached by DoorDash last month over a possible acquisition, but the discussions are said to have ended after the pair were unable to agree on value.

It comes after rumours also swirled in 2022 that DoorDash was mulling a takeover of Deliveroo.

Nvidia rebound fuels Nasdaq rally as Dow falls 300 points

Wed 26 June 2024 at 4:00 am GMT-4, Pedro Goncalves

Across the pond, US stocks closed mixed on Tuesday, pulled in opposite directions by the Nasdaq and the Dow, as AI chipmaker Nvidia (NVDA) rebounded from a three-day skid to surge nearly 7%.

The tech-heavy Nasdaq Composite (^IXIC) finished the day up roughly 1.3%, while the benchmark S&P 500 (^GSPC) rose around 0.4%, both breaking three-session losing streaks. The Dow Jones Industrial Average (^DJI) remained the only major index in the red, slipping 0.8%, or about 300 points, after a surge to start the week.

Japan’s Nikkei 225 hits over 2-month high

Wed 26 June 2024 at 3:59 am GMT-4, Pedro Goncalves

Stocks in Asia were mostly higher as chip firms tracked the overnight Nvidia rebound.

The Nikkei (^N225) rose 1.3% on the day in Tokyo, reaching a two-month high of 39,726.39, powered by robust tech stock performance, especially those tied to US firms like Nvidia.

Meanwhile the Hang Seng (^HSI) finished basically flat in Hong Kong and the Shanghai Composite (000001.SS) was 0.8% higher by the end of the session.

Semiconductor-related stocks such as Advantest jumped more than 6%, while Taiwan Semiconductor Manufacturing Company, SK Hynix and MediaTek increased 1.38%, 4% and 3.25% respectively.

Watch: How does inflation affect interest rates?

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