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London open: Stocks in the red on inflation fears; Barratt slumps
London stocks fell in early trade on Wednesday as a jump in oil prices sparked worries about inflation.
At 0820 BST, the FTSE 100 was down 0.5% at 7,400.91.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The downbeat mood on the markets is continuing, with little to lift sentiment in sight, as oil prices stay elevated and inflationary fears are pushed back up. Brent Crude is still hovering around $90 a barrel, after jumping sharply on news that Saudia Arabia and Russia appear intent on extending voluntary cuts through to the end of the year.
“Riyadh’s decided to take 1 million barrels a day out of the market until the end of December, and Moscow following suit with a similar, but smaller, reduction has led to concerns about supply on world markets.
“While higher prices are certainly good news for Saudi Arabia’s coffers, it’s set to cause fresh pain at the fuel pumps as elevated crude costs filter through. It’ll also cause another headache for central bankers. Energy prices are big inflationary drivers, and just at the time when the price spiral appears to be moving more obediently downwards, high crude prices could cause upset.
“The expectation that the Fed might have to push up interest rates again, after a pause this month, has sent US Treasury yields higher, and the uneasy sentiment is expected to hang around.”
On the macroeconomic front, the S&P Global UK construction PMI for August is due at 0930 BST. It’s expected to have fallen to 49.8 – contraction territory – from 51.7 in July.
In equity markets, housebuilder Barratt was in the red as it reported a fall in annual profits, cut its dividend and said there would be no share buyback this year as higher borrowing costs hit mortgage affordability.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Rate rises throughout the year have pushed up borrowing costs for buyers, making mortgage affordability much more difficult. Add to the mix the closure of the Help to Buy scheme and the fallout from the fiscal event back in September 2022 and you’ve got a potent cocktail, which saw Barratt’s net private reservation rates fall by around a third last year. All of this translated to a steep decline in underlying operating profit.
“But it’s not all doom and gloom. Build cost inflation looks set to ease to mid single-digits this year. And a sharp reduction in land spend last year more than offset the share buyback programme, helping to keep Barratt’s net cash position broadly flat at a mighty £1.1bn. That provides plenty of flexibility to smooth out any future bumps in the road.”
Elsewhere, Darktrace slid as its full-year results met analysts’ estimates but the cybersecurity firm cut guidance for full-year 2024 adjusted EBITDA margins to between 17% and 19%.
Stationery and books retailer WH Smith was weaker despite saying that full-year figures will be in line with expectations as strong trading at its airport and train station locations offset a weak performance on the high street.
Ashmore lost ground after it posted a fall in annual profits as assets under management declined 13% as customers withdrew their cash amid volatile markets.
On the upside, B&M European Value Retail was a high riser, having tumbled on Tuesday on the back of a downgrade by JPMorgan. Shore Capital raised the shares to ‘buy’ from ‘hold’ as it said the acquisition of up to 51 Wilko stores is expected to enhance the company’s presence and growth potential.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Johnson Matthey Plc | +0.96% | +16.50 | 1,735.00 |
| 2 |  |
Segro Plc | +0.81% | +5.80 | 720.80 |
| 3 |  |
Sage Group Plc | +0.68% | +6.60 | 979.60 |
| 4 |  |
Shell Plc | +0.08% | +2.00 | 2,471.00 |
| 5 |  |
British Land Company Plc | +0.06% | +0.20 | 312.00 |
| 6 |  |
Centrica Plc | +0.03% | +0.05 | 156.05 |
| 7 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 8 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 9 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
| 10 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Compass Group Plc | -2.41% | -48.50 | 1,964.50 |
| 2 |  |
Persimmon Plc | -2.20% | -23.00 | 1,020.50 |
| 3 |  |
Burberry Group Plc | -2.15% | -47.00 | 2,141.00 |
| 4 |  |
Smurfit Kappa Group Plc | -2.09% | -68.00 | 3,186.00 |
| 5 |  |
Prudential Plc | -2.07% | -19.80 | 935.00 |
| 6 |  |
Barratt Developments Plc | -1.94% | -8.60 | 434.70 |
| 7 |  |
Associated British Foods Plc | -1.91% | -38.00 | 1,956.00 |
| 8 |  |
Rolls-royce Holdings Plc | -1.87% | -4.10 | 215.10 |
| 9 |  |
Berkeley Group Holdings (the) Plc | -1.82% | -73.00 | 3,936.00 |
| 10 |  |
Smith (ds) Plc | -1.82% | -5.60 | 302.30 |
US close: Stocks fall on gloomy data, but oil prices jump
US markets finished with moderate losses on Tuesday, with the S&P 500 pulling back from a one-month high as investors returned to their desks after the Labor Day holiday with a risk-off approach.
Weak economic data from around the world dampened sentiment during the trading session, while a surprise oil production cut by Saudi Arabia and Russia sent crude prices to their highest level this year.
The Dow fell 196 points (-0.6%) to 34,642, the Nasdaq edged 11 points lower (-0.1%) to 14,021, while the S&P 500 declined 19 points (-0.4%) to 4,497, as it pulled back from a one-month high registered on Friday before the long weekend.
The S&P 500 closed Friday’s session at 4,516, its highest finish since 7 August, after the all-important non-farm payrolls report raised hopes that the Federal Reserve will hold off from tightening monetary policy any further at its next meeting.
Cementing hopes further on Tuesday were comments from Fed governor Christopher Waller, a well-known hawk, who said the central bank “can proceed carefully” after recent improvements in data. “There is nothing that is saying we need to do anything imminent, anytime soon, so we can just sit there [and] wait for the data,” Waller said.
In other news, oil prices surged after Saudi Arabia and Russia extended voluntary production cuts until the end of the year in an attempt to tighten markets and keep prices elevated. Brent crude hit a high of $91.15 a barrel during the trading session, its highest price since November 2022, before settling at $90.04, up 1.2% on the day.
“Oil prices have rallied as traders have gotten the message loud and clear that OPEC+ is not in the mood to ease supply anytime soon,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.
Economic picture remains mixed
In China, the Caixin/S&P services purchasing managers’ index (PMI) fell to an eight-month low of 51.8 in August from 54.1 in July, below consensus expectations of 53.0.
Meanwhile, S&P’s Eurozone composite PMI slipped for the fourth straight month to a 33-month low of 46.7 in August, from 48.6 in July, below consensus estimates and the flash reading of 47.0.
Meanwhile, US factory orders fell 2.1% in July, according to the Commerce Department, after four straight months of gains. However, analysts were forecasting a bigger fall of 2.3%.
In more positive news, Goldman Sachs said that the likelihood of the US economy falling into recession over the next year has dropped to just 15%, down from a prediction of 20% in July and 35% in March.
Stock movers
Disney finished lower after the entertainment giant pressed customers of Spectrum cable to switch to its Hulu live TV channel, as its disagreement over distribution with Spectrum’s parent company Charter Communications continues. Disney removed EPSN and ABC from Spectrum’s cable service last Thursday.
Warner Bros Discovery closed with small gains despite the negative news that full-year EBITDA could be between $300-500m lower as operations continue to be impacted by the ongoing writers strikes.
Airbnb and Blackstone were on the rise after it was announced that both stocks will be included in the S&P 500 when the quarterly rebalancing of the index happens on 18 September. Other changes include Deere replacing Walgreens Boots Alliance on the S&P 100.
Wednesday newspaper round-up: Living standards, North Sea oil production, property funds
The UK air traffic system failure that resulted in more than 2,000 flights being cancelled has been blamed on “an extremely rare set of circumstances”, as the aviation regulator opened an inquiry into the meltdown that caused chaos for passengers. The Civil Aviation Authority announced its own independent review as it submitted an initial report from Nats, the air traffic control services provider, into the incident to the transport secretary, Mark Harper. – Guardian
UK workers’ living standards will flatline next year, leaving them on track to be 4% worse off heading into the next election than they were in 2019, according to a leading thinktank. The Resolution Foundation, which focuses its research on low- to middle-income households, said in a report that “never in living memory have families got so much poorer over the course of a parliament”. – Guardian
North Sea oil production has plunged at its fastest pace in a decade as fears grow over a potential Labour government and Rishi Sunak’s windfall tax deters investment. Crude oil output slumped by 13pc in the first six months of this year compared with the same period in 2022, a report by Offshore Energies UK (OEUK) found. – Telegraph
Ontario Teachers’ Pension Plan has signalled its continued confidence in the UK, snapping up the wealth management group Seven Investment Management for £255 million in cash. Ontario, one of the biggest pension funds in the world with C$250 billion in investments, is buying a majority stake in the business from Caledonia Investments, the listed investment vehicle of the Cayzer family. – The Times
Investors are pulling their money out of property funds at a rate not seen since the chaos of the mini-budget last autumn. A net £121 million was withdrawn from property funds in August, according to data from Calastone, which tracks fund flows. Property funds have suffered outflows in each of the past 13 months, with August’s decline the largest since October last year when the mini-budget unnerved bond markets and sent yields and borrowing costs sharply higher. – The Times
