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London open: Stocks fall but DS Smith bucks trend after update
London stocks fell in early trade on Monday following heavy losses in Asia, amid worries the US Federal Reserve will maintain its hawkish stance after a better-than-expected jobs report last week.
At 0840 BST, the FTSE 100 was down 0.5% at 6,959.32, while the pound was up 0.2% against the dollar at 1.1103.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “’October’s early optimism has evaporated and pessimistic sentiment has returned about the after-effects on the global economy of the big offensive on inflation. Stocks in Asia retreated, following in Wall Street’s footsteps, after US indices on Friday fell back amid expectations the Federal Reserve will continue to ramp up interest rates following a buoyant jobs report.
“This weakness across equities is expected to persist through the trading sessions to come, with the FTSE 100 has also opened lower amid worries that as the era of cheap money disappears so fast, economies are heading for a hard landing. Nervousness is set to persist ahead of key data in the UK and the US on consumer and producer prices later this week and investors will be hanging on any indications about the Fed’s future moves from the minutes of the Federal Open Market Committee which are due to be released in Wednesday.”
Investors will also be eyeing the start of the US earnings season, which kicks off on Friday with the big banks.
On home shores, meanwhile, the Bank of England announced three additional measures earlier to support an “orderly end” to its emergency bond-buying scheme. The Bank said it will increase the maximum auction size to up to £10bn per day from £5bn.
It will also launch a Temporary Expanded Collateral Repo Facility (TECRF), which will enable banks to help to ease liquidity pressures facing their client LDI (liability driven investment) funds through liquidity insurance operations, which will run beyond the end of this week.
Finally, the BoE said it “stands ready” to help the LDI pension industry through its regular Indexed Long Term Repo operations.
In equity markets, energy firms SSE and Centrica were under the cosh. Airlines were also under pressure, with BA and Iberia parent IAG, Wizz Air and easyJet all down.
National Grid fell as it said trading for the first half of its fiscal year was in line with expectations and forecast annual underlying earnings to be more marginally weighted to the second half than usual after including a full six-month contribution of National Grid Electricity Distribution (formerly Western Power Distribution).
Elsewhere, RS Group – formerly Electrocomponents – was knocked lower by a downgrade to ‘neutral’ at JPMorgan.
On the upside, paper and packaging group DS Smith surged to the top of the FTSE 100 after saying its performance for the full year was set to be ahead of expectations. Peers Smurfit Kappa and Mondi also racked up healthy gains.
Unite Group was trading up after the student accommodation provider said full-year earnings were on track to come in at the top end of expectations as student numbers continue to grow.
Moneysupermarket jumped to the top of the FTSE 250 after a rating upgrade by RBC Capital Markets.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Smith (ds) Plc | +10.92% | +26.40 | 268.20 |
| 2 |  |
Smurfit Kappa Group Plc | +5.67% | +139.00 | 2,591.00 |
| 3 |  |
Mondi Plc | +4.91% | +66.50 | 1,420.00 |
| 4 |  |
Kingfisher Plc | +2.53% | +5.20 | 210.80 |
| 5 |  |
Bt Group Plc | +1.98% | +2.45 | 126.45 |
| 6 |  |
Vodafone Group Plc | +1.85% | +1.86 | 102.38 |
| 7 |  |
Associated British Foods Plc | +1.52% | +19.00 | 1,268.00 |
| 8 |  |
Legal & General Group Plc | +1.31% | +2.90 | 224.70 |
| 9 |  |
Tesco Plc | +1.20% | +2.40 | 203.10 |
| 10 |  |
St. James’s Place Plc | +1.18% | +11.60 | 994.60 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Centrica Plc | -3.86% | -2.74 | 68.20 |
| 2 |  |
Diageo Plc | -3.01% | -112.50 | 3,621.00 |
| 3 |  |
International Consolidated Airlines Group S.a. | -2.88% | -2.92 | 98.30 |
| 4 |  |
Rentokil Initial Plc | -2.55% | -12.10 | 463.10 |
| 5 |  |
Burberry Group Plc | -2.50% | -47.50 | 1,852.50 |
| 6 |  |
Fresnillo Plc | -2.18% | -17.20 | 770.40 |
| 7 |  |
Tui Ag | -2.02% | -2.25 | 109.30 |
| 8 |  |
Rolls-royce Holdings Plc | -2.01% | -1.42 | 69.18 |
| 9 |  |
Hiscox Ltd | -1.87% | -16.60 | 870.40 |
| 10 |  |
Astrazeneca Plc | -1.85% | -186.00 | 9,844.00 |
Monday newspaper round-up: Amazon, Tesco, US banks
Amazon is investing more than €1bn (£880m) to add thousands more electric lorries, vans and cargo bikes to its sprawling fleet of delivery vehicles across Europe over the next five years. The online retailer said it would invest £300m in the UK, where it plans to have as many as 700 electric HGVs by 2025, up from just five today, and more than triple its fleet of electric vans to 10,000 across the continent. – Guardian
Thousands of Tesco staff have been forced to take a large real-terms pay cut as the supermarket puts a squeeze on store managers while offering bigger wage rises for lower-paid workers. In the latest pay battle amid the cost of living crisis, the retailer’s team managers, who earn about £30,000 a year, say they have received as little as a 3% pay rise. The official rate of inflation is close to 10%, and expected to hit 11% this month. – Guardian
Sweeping new rules designed to prevent a repeat of the BHS pensions scandal will cost businesses £30bn and push hundreds of companies to the brink of collapse, the Government has been warned. The industry consultant LCP said that proposals meant to make final salary pensions safer will tip swathes of the private sector into chaos by forcing employers to pump billions of pounds into underfunded retirement schemes. – Telegraph
Thousands of limited liability partnerships incorporated in Britain “bear the hallmarks” of shell companies used for financial crimes, according to research that prompted warnings of “glaring gaps” in proposed legislation. More than 21,000 partnerships, 14 per cent of the total set up over the past 20 years, “share almost identical characteristics” with those known to have been used in corruption and money laundering schemes, a report from Transparency International UK found. Almost 950 “suspect” partnerships were registered at an address in Cardiff, near Companies House. The researchers said the report was the “first to expose the scale of abuse of this type of company, with a conservative estimate putting the economic damage caused in the hundreds of billions.” – The Times
Investors are preparing for America’s biggest banks to reveal a sharp drop in quarterly profits when earnings season returns this week. An economic slowdown and sustained volatility in global markets has drawn a clear line under Wall Street’s bumper run during the early years of the pandemic. Dealmaking has fallen, knocking investment banking fees, and lenders are also preparing for the impact of a significant downturn. – The Times
