Yahoo Finance LIVE: FTSE and US markets up despite PMI disappointment
How major markets are performing on Friday
The FTSE and European markets were mixed by the end of the day on Friday, even as the government released promising UK retail sales data, while US stocks rose.
In London, the FTSE 100 (^FTSE) was up 0.2%. The CAC (^FCHI) fell 0.3% in Paris and Germany's DAX (^GDAXI) was almost flat.
Meanwhile, Wall Street stocks moved higher on Friday, but were poised for weekly losses having sold off after the US Federal Reserve signalled that interest rates will stay higher for longer.
S&P 500 (^GSPC) gained about 0.4% after the opening bell, while Dow Jones Industrial Average (^DJI) was broadly flat. The Nasdaq 100 rose around 0.7%, after all three major gauges closed Thursday with hefty declines.
Traders are mindful of the latest purchasing managers' index (PMI) figures released on Friday morning, which showed output in contraction for September in the UK and across the eurozone.
"The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
"The steep fall in output signalled by the flash PMI data is consistent with GDP [gross domestic product] contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement."
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Earlier, UK retail sales data was published showing volumes estimated to have risen by 0.4% in August, partially recovering from a fall of 1.1% in July, according to the Office for National Statistics (ONS). The bump was driven by food sales and a strong month for clothing.
"These were partially offset by internet sales, which dropped slightly as some people returned to shopping in person following a very wet July. Fuel sales also fell, with increased prices hitting demand," said ONS senior statistician Heather Bovill.
The percentage of retail sales taking place online fell from 27.4% in July to 26.9% in August.
The moves follow a better than expected inflation reading on Wednesday this week, which showed price increases slowed to 6.7% in the year to August, down from July’s 6.8%, despite a rise in fuel prices. A decline in food prices led the pullback.
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"As inflation has fallen back and earnings growth has risen ahead of prices, there are signs that more confident consumers are starting to spend again," said Lisa Hooker, PwC leader of industry for consumer markets. "Some retailers have already observed that consumers are shopping earlier for Christmas goods, often to help budgeting."
"The hope is that the impact of recent mortgage interest rate rises and increasing petrol prices do not derail the green shoots that have appeared in time for the critical run up to Christmas," she added.
The more domestically-linked FTSE 250 (^FTMC) was almost flat by the end of the day in Europe.
Follow along for more live updates:
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As we prepare to close out the day, here's Axel Rudolph from IG on the dollar's recent winning streak:
This week's Fed hawkish pause, in which the central bank left the door open for one more rate hike ahead of year-end, propelled the US dollar to six-month highs. The US dollar basket is on track for its tenth consecutive weekly gain as the sharp rise in the oil price is taking a breather. In the US private sector activity stagnates, falling to its lowest level since February, while in the Eurozone activity contraction eases slightly and in the UK it falls the most in 2 1/2 years.
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Small update on the volatile Ocado stock, which was down as much as 8.5% yesterday. It has recovered somewhat after taking a beating.
The knock came after Exane downgraded the stock to "underperform" citing growth concerns in its retail business. It put the price target at 390p.
Stock was up around 5% by noon in London on Friday.
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Here's an update from our reporter Zuhur Jabir Umran on latest ONS figures:
Recent research from the Office for National Statistics (ONS) found that The cost of living crisis continues to loom on 90% of UK adults.
As a result of soaring inflation, more than half of UK adults reported that their household expenses have risen in September, compared with a month ago.
The price of food shopping is reported to be the largest downward contributor with 69% admitting to spending less on non-essentials.
Meanwhile homeowners faced higher mortgage rates in response to inflation hikes, with 42% reporting that it is now somewhat difficult affording repayments.
Fuel prices were among the highest, with 53% reporting their gas or electricity bills had increased. - L
But what does it all mean?
According to the survey:
September data pointed to a reduction in UK private sector output for the second month running. Moreover, the rate of decline accelerated to its fastest since January 2021. The loss of momentum reflected a steeper drop in service sector activity than seen during August, which more than offset a slower decrease in manufacturing production.
Meanwhile, on the upside, input prices are falling, despite worries about energy bills.
"A combination of weak demand and lower cost inflation contributed to the slowest increase in average prices charged by private sector companies since February 2021," the survey added.
"The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
"The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement."
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A quick look at the UK's PMI:
Flash UK PMI Composite Output Index(1)at 46.8 (Aug: 48.6). 32-month low.
Flash UK Services PMI Business Activity Index(2) at 47.2 (Aug: 49.5). 32-month low.
Flash UK Manufacturing Output Index(3) at 44.6 (Aug: 44.1). 2-month high.
Flash UK Manufacturing PMI(4) at 44.2 (Aug: 43.0). 2-month high.
Reminder that everything below 50 counts as contraction.
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Eurozone economy likely to contract this quarter, says PMI
The eurozone economy is set to contract in Q3, according to new data tracking business activity, which showed output is still in contraction.
HCOB's flash eurozone composite purchasing managers' index (PMI), compiled by S&P Global and seen as a good gauge of overall economic health, rose to 47.1 in September from August's 33-month low of 46.7.
While that was still below the 50 mark separating growth from contraction it beat expectations in a Reuters poll for a slight dip to 46.5.
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Another victim of treasury yields? Gold.
"Gold succumbed to the rise in treasury yields, but the downside has been somewhat limited as the precious metal is finding some buyers in search of safe haven assets. Resistance awaits at $1933 for gold should bond yields show signs of easing," said Tim Waterer, chief market analyst at KCM Trade. "The USD has steadied for the moment, but the DXY remains comfortably above the 105 level."
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The pound (GBPUSD=X) is also under pressure today, down 0.2% so far to trade at $1.22. It's currently testing six month lows amid uncertainty about inflation and the central bank rate path.
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Chart: Six-month GBP/USD, Yahoo Finance UK
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Neil Wilson, chief market analyst at Finalto, says stocks are feeling the heat today partly because of bond yields:
Stocks are ending the week under pressure as bond yields lurch to fresh cycle highs following the Fed’s hawkishness and a raft of central bank announcements that cement the view that (in most cases) rates are going to stay higher for longer. The benchmark US 10yr Treasury note yield hit 4.5%, the highest in 16 years as investors fretted about inflation and the ability of central banks to ease in a slowing economy, whilst the 2yr rose above 5.2%, its highest since 2006.
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Coming up, we have:
UK PMI CBI Industrial trends survey Eurozone PMI
Watch: What's moving the markets today
