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London open: Stocks fall amid bond market selloff; Tesco rallies
London stocks fell in early trade on Wednesday following weak US and Asian sessions, as worries about higher-for-longer rates rattled investors.
At 0820 BST, the FTSE 100 was down 0.4% at 7,441.23.
Stocks in the US and Asia slid and US Treasury yields jumped after better-than-expected JOLTS job openings data sparked fears over interest rates.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Chill winds of worry are swirling about high interest rates settling in and there is set to be little respite from the sell-off. Investors have again been reminded by central bank policymakers in the US that the screws may have to be tightened on monetary policy again, and kept there for some time, to stop inflation whipping higher again.
“This fresh bout of anxiety has been prompted by new jobs data in the US indicating that vacancies unexpectedly jumped in August. This has added to worries about labour market tightness, and led to expectations that not only will there be another interest rate hike, to try and dampen down demand in the economy, but that any prospect for rate cuts has been pushed further into the distance.”
Turmoil in Washington added to the downbeat mood, after Kevin McCarthy – who helped to broker the debt ceiling agreement – was ousted as Speaker of the House of Representatives.
“This not only bodes ill for future debate on the debt ceiling, with fresh impasse expected, but this bout of political dysfunction could have much wider policy repercussions,” said Streeter.
On the macro front, the S&P Global/CIPS UK services purchasing managers’ index for September is due at 0930 BST, while across the pond, the ADP report for September is at 1315 BST.
In equity markets, Tesco rallied as it hiked its retail profit and cash flow targets after a strong first half, with sales rising on the back of easing inflation.
Group sales excluding fuel were up 8.9% year-on-year to £30.7bn in the six months to 26 August, with inflation falling across the half and volume and sales mix trends ahead of expectations.
Spirent Communications tumbled more than 30% as it cut its near-term outlook, highlighting an “extremely challenged” telecommunications market and the fact its largest customers have delayed their expenditure and technology investments.
In broker note action, Relx was lifted by an upgrade to ‘buy’ at Goldman Sachs, while Severn Trent was boosted by an upgrade to ‘neutral’ from ‘underweight’ at JPMorgan Cazenove.
Caterer Compass Group was higher after an upgrade to ‘sector perform’ at RBC Capital Markets, but Legal & General fell after a downgrade to ‘hold’ at Jefferies.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Tesco Plc | +2.89% | +7.50 | 267.10 |
| 2 |  |
Smurfit Kappa Group Plc | +2.49% | +66.00 | 2,718.00 |
| 3 |  |
Smith (ds) Plc | +2.21% | +6.10 | 282.20 |
| 4 |  |
Aviva Plc | +2.00% | +7.50 | 383.10 |
| 5 |  |
British Land Company Plc | +1.80% | +5.50 | 311.80 |
| 6 |  |
St. James’s Place Plc | +1.79% | +14.20 | 808.20 |
| 7 |  |
National Grid Plc | +1.57% | +14.60 | 946.60 |
| 8 |  |
International Consolidated Airlines Group S.a. | +1.55% | +2.25 | 147.05 |
| 9 |  |
Compass Group Plc | +1.54% | +30.50 | 2,016.00 |
| 10 |  |
United Utilities Group Plc | +1.49% | +13.60 | 926.60 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Whitbread Plc | -1.99% | -68.00 | 3,347.00 |
| 2 |  |
Bae Systems Plc | -1.87% | -19.00 | 996.00 |
| 3 |  |
Carnival Plc | -1.81% | -17.00 | 919.80 |
| 4 |  |
Rolls-royce Holdings Plc | -1.51% | -3.20 | 208.90 |
| 5 |  |
Ferguson Plc | -1.36% | -180.00 | 13,100.00 |
| 6 |  |
Fresnillo Plc | -1.23% | -6.60 | 530.20 |
| 7 |  |
Astrazeneca Plc | -1.01% | -110.00 | 10,798.00 |
| 8 |  |
Direct Line Insurance Group Plc | -0.97% | -1.60 | 163.05 |
| 9 |  |
Barratt Developments Plc | -0.96% | -4.00 | 414.70 |
| 10 |  |
Scottish Mortgage Investment Trust Plc | -0.78% | -5.20 | 659.20 |
US close: Stocks slide as investors digest jobs data
Wall Street encountered renewed strain through the close on Tuesday, with stocks experiencing a notable dip while bond yields persistently edged higher.
Investors were also in a holding pattern ahead of Friday’s non-farm payrolls report.
The Dow Jones Industrial Average closed down 1.29% at 33,002.38 points, while the S&P 500 slid 1.37% to 4,229.45 points, and the technology-centric Nasdaq Composite recorded a decline of 1.87% to 13,059.47 points.
In the currency arena, the dollar was down against sterling and the euro, dropping 0.04% and 0.05% to trade at 82.77p and 95.49 euro cents, respectively.
Conversely, it managed to claw a minor ascent of 0.09% against the yen, changing hands at JPY 149.16.
“As the US 10-year Treasury yield hits 4.75% and that of the 30-year bond advances past the 4.80% mark, both at 2007 highs, global stock indices resume their September rout and trade in multi-months lows,” said IG senior market analyst Axel Rudolph.
“Stronger-than-expected US job openings, indicating a robust labour market, reinforce the ‘rates higher for longer’ fear that market players have and leads to risk-off sentiment with oil, gold and silver also seeing declines.”
Job openings surge, Fed officials contemplate interest rate adjustments
In economic news, fresh data from the US Department of Labor revealed a significant augmentation in job openings, which soared by 7.7% month-on-month in August, landing at 9.610 million, topping the consensus forecast of 8.83 million.
Contrastingly, the ‘quits’ rate, a metric often used to gauge worker confidence by indicating the percentage of workers leaving their jobs voluntarily, steadfastly maintained its position at 2.3%, aligning with its pre-pandemic level.
“Other aspects of the JOLTS report were more benign,” said Nancy Vanden Houten, lead US economist at Oxford Economics.
“The job openings to unemployed ratio ticked lower because of the rise in unemployment in the household survey in August.
“The quits rate, which is a good leading indicator of wage pressures, held steady and suggested that wage growth will continue to moderate.”
Elsewhere, monetary policy discourse shifted toward hawkish tones among Federal Reserve officials.
Overnight, three key figures from the Fed expounded their views, presenting a stance that tends towards the proactive management of inflationary pressures and macroeconomic stabilisation.
Notably, Michele Bowman voiced her perspective at a bankers’ conference in Canada, expressing a readiness to endorse a hike in the federal funds rate in forthcoming meetings should incoming data suggest a deceleration or stagnation in progress towards achieving the 2% inflation target.
McCormick stumbles after earnings report, Krispy Kreme rises
In equities, McCormick & Co shares plummeted 8.46% following the release of its third-quarter earnings.
While the company’s profits aligned with market expectations, the sales figures disheartened investors, falling shy of the anticipated mark.
On the upside, Krispy Kreme increased by 0.64% following an announcement that it was actively exploring strategic options for Insomnia Cookies, including a potential all-cash sale.
Wednesday newspaper round-up: Rail strikes, HS2, Apple
Rail passengers in England face another day without trains on Wednesday as a strike by train drivers halts most services. Members of the Aslef union are on strike for the second time in four days, in a 24-hour walkout timed to coincide with the final day of the Conservative party conference in Manchester. – Guardian
Lobbyists from TikTok, Amazon and gambling and crypto companies paid more than £3,000 a head to sit with ministers as part of the Conservative party’s business day, where Rishi Sunak set out his pitch to stop big corporations being wooed by Labour. Senior ministers including Michael Gove, the levelling up secretary; John Whittingdale, a media minister; Robert Jenrick, the immigration minister; and James Cartlidge, a defence procurement minister, hosted tables of guests who had paid for access to the “policy” discussions. – Guardian
The Conservative Mayor of the West Midlands has launched a last-ditch effort to save HS2’s northern leg by securing private funding to finish the troubled project. Andy Street, the former John Lewis boss, is understood to have urged Rishi Sunak to strip the government-owned organisation HS2 Ltd of control over the multibillion-pound scheme and instead put a development corporation in charge. – Telegraph
The Canadian investor chaired by Mark Carney is buying a family-run British renewable energy company in a deal worth nearly $1 billion. Brookfield Asset Management said that its second Global Transition Fund was acquiring Banks Renewables, which is controlled by Harry Banks, 82, the Durham-based businessman. – The Times
Apple has bowed to demands by China to ban apps not licensed under a new censorship regime from its phones, the latest in a line of companies to accept Beijing’s rules to operate in the country. After talks last week between company leaders and Communist Party authorities, Apple posted an update to its website for App developers. – The Times
