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London open: FTSE tumbles amid global selloff
London stocks tumbled in early trade on Monday amid a global market selloff, after Japan’s Nikkei fell more than 12%, suffering its worst session since Black Monday in 1987.
At 0835 BST, the FTSE 100 was down 2.1% at 8,006.28, amid speculation of a potential emergency rate cut by the Federal Reserve.
Sentiment took a knock on Friday after the non-farm payrolls report for July came in much weaker than expected, fuelling concerns the Fed may have made a mistake by not cutting rates last week.
Richard Hunter, head of markets at Interactive Investor, said: “The non-farm payrolls report showed that just 114,000 jobs had been added in July, against estimates of 185,000 and sharply lower than the 179,000 figure for June, which itself was revised down from an initial print of 206,000. At the same time the unemployment rate, which had been expected to remain stable at 4.1%, increased to 4.3%. The reading followed weak jobless claims and manufacturing data from the previous day which had taken investors by surprise.
“The main concern now is whether the Federal Reserve’s reluctance to reduce interest rates thus far is now translating into a policy error which will see the economy glide into recession. At the same time, speculation is now rife that a 0.5% rate cut is now firmly on the cards, with the vague possibility that it could come by way of an emergency announcement prior to the September meeting.”
In equity markets, Wood Group tanked after Dubai-based engineering and consultancy firm Sidara said it won’t be making a firm takeover offer for the company due to “geopolitical risks and financial market uncertainty”.
Wood Group said at the end of May that it was evaluating a fourth and final “unsolicited, preliminary and conditional” takeover proposal from Sidara at 230p a share.
Sidara originally had until 5 June to either announce a firm intention to make an offer or walk away, but the ‘put up or shut up’ deadline was pushed back to 9 August.
Shipping services firm Clarksons was also sharply lower as it reiterated its expectations for the full year but posted a drop in interim profit and revenue.
Elsewhere, Lloyds was knocked lower by a downgrade to ‘neutral’ at Citi.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Diageo Plc | +0.19% | +4.50 | 2,384.50 |
| 2 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 3 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 4 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
| 5 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
| 6 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
| 7 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 8 |  |
Smurfit Kappa Group Plc | +0.00% | +0.00 | 3,656.00 |
| 9 |  |
Reckitt Benckiser Group Plc | +0.00% | +0.00 | 6,498.00 |
| 10 |  |
Standard Life Aberdeen Plc | +0.00% | +0.00 | 274.10 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Melrose Industries Plc | -7.31% | -35.30 | 447.30 |
| 2 |  |
Scottish Mortgage Investment Trust Plc | -5.48% | -44.60 | 768.60 |
| 3 |  |
Carnival Plc | -5.09% | -54.00 | 1,006.50 |
| 4 |  |
Severn Trent Plc | -4.79% | -127.00 | 2,526.00 |
| 5 |  |
Glencore Plc | -4.62% | -18.70 | 386.35 |
| 6 |  |
United Utilities Group Plc | -4.39% | -46.50 | 1,012.50 |
| 7 |  |
Vodafone Group Plc | -4.32% | -3.12 | 69.14 |
| 8 |  |
Fresnillo Plc | -4.01% | -23.00 | 550.00 |
| 9 |  |
Rolls-royce Holdings Plc | -3.99% | -18.50 | 445.40 |
| 10 |  |
Shell Plc | -3.96% | -110.00 | 2,667.00 |
US close: Stocks sharply lower for second-straight session
Wall Street stocks closed sharply on Friday amid resurgent fears of a potentially oncoming recession.
At the close, the Dow Jones Industrial Average was down 1.51% at 39,737.26, while the S&P 500 lost 1.84% to 5,346.56 and the Nasdaq Composite saw out the session 2.43% weaker at 16,776.16.
The Dow closed 610.71 points lower on Friday, extending losses recorded in the previous session as fears that it may be too late for the Fed to start cutting rates if it wants to avoid a recession sent shares sharply lower.
Friday’s primary focus was July’s nonfarm payrolls report, which revealed hiring in the US slowed abruptly last month, prompting talk in markets of “policy mistakes” by the central bank and of a “growth scare”.
According to the Department of Labor, non-farm payrolls rose by 114,000 in July, below economists’ expectations for an increase to 175,000. Hiring for the prior two months combined was also revised down by 29,000 and the rate of unemployment jumped by two-tenths of a percentage point from the month before to 4.3%, ahead of consensus estimates for an unchanged reading of 4.1%
“The sharp slowdown in payrolls in July and sharper rise in the unemployment rate makes a September interest rate cut inevitable and will increase speculation that the Fed will kick off its loosening cycle with a 50 bp cut or even an intra-meeting move, although it’s worth noting that the Sahm Rule has not actually been triggered yet,” said Stephen Brown, deputy chief North America economist at Capital Economics.
Corporate earnings were also in focus on Friday after online retail giant Amazon missed Wall Street estimates with its second-quarter earnings and issued disappointing full-year guidance, while Intel shares sunk after announcing it would be making layoffs, and tech giant Apple shares ticked lower despite posting a Q3 earnings beat.
Monday newspaper round-up: Manufacturing, defences, financial services jobs
Imported food coming into the UK through Brexit border posts is being sent back to Europe to be tested due to a lack of laboratory capacity in Britain, food bodies have said. The SPS Certification Working Group, which represents 30 trade bodies covering £100bn worth of the UK’s food supply, has written to the government warning that members are being advised that some samples of imported foods are being sent to countries such as Germany to be tested before they can be released at the border. – Guardian
Britain’s trade union and manufacturing leaders have warned that major international manufacturers are holding back investments in the UK until Labour shows it is committed to boosting the industry. A month after Keir Starmer’s landslide victory, the heads of the Trades Union Congress (TUC) and Make UK, which represents 20,000 employers across the UK, have joined forces to warn the government that rapid action is required to launch a long-term industrial strategy, or risk losing billions of pounds in investment abroad. – Guardian
Britain must work more closely with the EU to shore up the Continent’s defences, according to the boss of a major Royal Navy helicopter supplier. Clive Higgins, chief executive of defence giant Leonardo UK, backed the Government’s efforts to foster closer ties with Brussels as cash-strapped administrations on both sides of the Channel look to stretch their military budgets further. – Telegraph
An independent report that upheld claims that a senior executive at the Financial Conduct Authority had behaved in an “aggressive, unpleasant and bullying” way has been withdrawn after the regulator admitted it had botched its handling of the complaint. The Financial Regulators Complaints Commissioner had published a “final report” that said the authority should apologise to the creditor of a collapsed payments firm over the alleged conduct of Mark Steward, its former director of enforcement and market oversight. – The Times
The number of jobs in financial services in London has continued to decline, with the amount of new vacancies in the second quarter falling by 25 per cent compared with the same period last year. The rise of offshoring in the sector, the impact of Brexit as well as slower economic growth in the UK and elsewhere have prompted a long-lasting slowdown in hiring in financial services. – The Times
