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FTSE 100 ends higher on bank and energy stock gains

London’s blue chips finish on the front foot as US stocks rise on strong jobs data

  • FTSE 100 up 24 points
  • Informa and Rolls lead London leaderboard
  • Wall Street higher midday

5:05pm: FTSE 100 ends higher, US stocks up midday   

The FTSE 100 finished the week on a positive note, gaining 24 points, or 0.3%, to 7,304, on recovery hopes following news of a Pfizer coronavirus (COVID-19) pill.

“Today’s news out of the US that Pfizer has developed a COVID-19 pill, which is 89% effective in preventing hospitalisation, may well be weighing on the AstraZeneca share price a touch, but it has pretty much turbocharged the airlines and hospitality sector,” CMC Markets UK chief market analyst Michael Hewson said.

Notable movers included Britain’s THG, which climbed nearly 4% after investment manager Blackrock revealed it owns a 5.37% stake in the online consumer brands company.  

3:05pm: FTSE 100 heading to a higher close 

After surging to post-pandemic highs earlier, the FTSE 100 is battling to maintain positive momentum as we head towards the final close of an eventful week. 

However the blue chip index is holding onto its positive above the 7,300 level.

“A long-awaited solid NFP reading has provided a boost for stock markets, pushing US indices to new record highs across the board,” says Chris Beauchamp, market analyst at IG.

“Coupled with the ‘steady as she goes’ mandate from the Fed earlier in the week, enthusiasm for stocks has returned once again, with European markets also gaining in the final session of the week. US indices in particular have enjoyed a strong period, and while the final weeks of the year usually see further gains there is some concern that a lot of good news is being priced in at these levels.

“Earnings season has delivered plenty of good news too, with corporate America showing that the recovery remains strong, while profitability is improving as well. But questions should perhaps now be asked about what, aside from sheer bullish momentum, can keep us moving higher from here.

“That volatility has risen this afternoon is perhaps a sign that we should expect a November interruption to the bullish narrative. Complacency appears to be creeping in to markets after a solid year for equities, and as the supply chain narrative begins to lose its power to shock the hunt will begin for other problems to monitor. At the very least, stocks do look vulnerable to some profit-taking at these levels.” 

Retail investor favourite Rolls-Rocye is now the top riser, edging out Informa, with both topping 5% gains.

Biggest bue-chip fallers today are, Darktrace PLC, Croda International PLC and Ocado Group plc, all down over 3%.

2pm: Highs all round

Stocks in London and New York are enjoying that Friday feeling, with the Footsie hitting a 21-month high and Wall Street indices notching new all-time highs.

The FTSE is up 40 points to 7,319.85 even though the pound has now returned to flat, but that’s still around its lowest since early October.

Over the Atlantic, the blue chips of the Dow Jones are leading the way, up 0.9% above 36,400, with the S&P 500 rising 0.7% and the techies of the Nasdaq up 0.4% with the likes of Tesla, Netflix and Adobe weighing. 

Pfizer is a big riser, up 9%, after its very encouraging antiviral news, with board member Scott Gottlieb telling US media that the Covid-19 pandemic could be “over” in the US by January.

This has also boosted travel stocks Stateside, as we saw earlier in London, with Boeing leading the Dow, with other risers including casino owner Caesars Entertainment and hotel company Marriott International (NYSE:MAR). 

Uber Technologies was another on the accelerator pedal as it delivered a first profitable quarter – on an adjusted basis though – as its rideshare business has rallied and its food delivery business goes well. On a statutory basis, it swung to swing to a US$2.4bn net loss, as the value of China’s Didi Chuxing was marked down.

Peloton Interactive (NASDAQ:PTON), a new name to many last year when its exercise bikes became a big thing during lockdown, was one of the losers as it lowered guidance again

3-month performance of notable pandemic winners

Roku -32.6%
Novavax -30.3%
Fiverr -30.3%
Zoom -33.6%
Moderna -45.3%
Peloton -52.8%

— Morning Brew ☕️ (@MorningBrew) November 5, 2021

12.46pm: Strong US jobs data

The US jobs report has come in stronger than expected, lifting stock market spirits too, especially in Wall Street, where futures markets are now indicating a stronger start than earlier. 

Some 531,000 new jobs were created in October, according to the non-farm payrolls report, versus the 450,000 average forecast and up from September, which was revised higher to 312,000 from the 194,000 initial reading.

This was reassuring for the US economy after jobs growth slowed in the prior two months.

Unemployment in the US is now at 4.6%, down from 4.8% last time and better than the 4.7% expected. Wage growth was 4.9% as expected, up from 4.6%. The US labour force participation rate remained at 61.6%, which is a concern to some.

“It was a big beat today, it is pretty clear that the US economy is firing on all cylinders now,” said Naeem Aslam, market analyst at AvaTrade.

“The strong US NFP data has strengthened the US dollar and made the gold price bleed even more. The moves in the currency markets have been even more intense especially for the EUR/USD and GBP/USD. As for the equity markets, we are seeing more bids coming up but in terms of the Fed and their monetary policy, I think the participation rate is something which they can use as an excuse for their current stance on the monetary policy.”

Futures markets now see the Dow Jones and S&P 500 rising 0.2%, with the Nasdaq up 0.1%.

In London, where the FTSE 100 had pared much of its earlier gains, the index has perked up again, up 33 points ot 0.45% to 7,312.5. 

This is with the pound, which earlier dropped from 1.350 to below 1.343, has stiffened to 1.3440. 

BT Group no longer leads the risers, with events group Informa PLC (LSE:INF) up 5% and Rolls-Royce Holdings (LSE:RR.) up 4.9% making surges after the news of Pfizer’s antiviral earlier.

Surging travel-related stocks is the main theme, with Rolls joined at the top of the leaderboard by aerospace parts supplier Melrose Industries PLC (LSE:MRO), British Airways owner International Consolidated Airlines Group (LSE:IAG) and Intercontinental Hotels Group PLC (LSE:IHG).  

11.58am: US stocks tipped for slight rise

Stock indices in the US are predicted to join London and Europe’s on the front foot as investors await the key October employment report, due out before the opening bell.  

Futures for the Dow Jones are pointing to a 0.1% gain in pre-market trading, while the broader S&P 500 index and tech-powered Nasdaq are at 0.2%.

US stocks had a mixed finished the day before, following the Federal Reserve’s decision earlier in the week to begin to slow its bond-buying program later this month, signalling that the economy can now handle an unwinding of coronavirus pandemic stimulus.

“We’ll cap off a very busy macro week today with the US jobs report for October,” commented Jim Reid, a strategist at Deutsche Bank. “In terms of what to expect, our US economists are looking for a +400,000 increase in non-farm payrolls, which in turn would send the unemployment rate down a tenth to a post-pandemic low of 4.7%.”

Reid noted that the last couple of jobs reports have seen some downside surprises, but if realised, the addition of more than 400,000 positions would be the strongest jobs growth in three months. 

Ahead of today’s employment report, Reid said there has been some fairly positive labour market data, with the ADP report of private payrolls exceeding expectations on Wednesday at 571,000 versus the 400,000 expected, while weekly initial jobless claims for the week through October 30, 2021, fell to a fresh post-pandemic low of 269,000 against the 275,000 that were expected. 

“The Fed made it clear this week that labour market evolution after the delta variant will be a key determinant in the future path of monetary policy,” Reid concluded.

Back in London the FTSE has come off a bit from its earlier high, now up 35 points or 0.5% at 7,315. 

11.01am: New high for FTSE

London’s blue chips are among the best performing in Europe this morning, helped by an extra slump in the pound. 

Sterling fell on the back of the Bank of England inaction yesterday took a further leg lower this morning as governor Bailey gassed on with the BBC, now down 0.6% against the dollar to 1.3431 and 0.4% versus the euro to 1.1640.

Having been anticipating an interest rate hike yesterday, markets are now pricing in a first BoE hike in February, bringing a potential three-month delay to the tightening schedule.

“While the week had been dominated by talk of monetary tightening, the end result has simply brought a gradual decline in the rate of monetary expansion at the Fed,” says Joshua Mahony, senior market analyst at IG.

At Caxton FX, Michael Brown suggested football fans in the City might have been chanting “are you Carney in disguise?” comparing the current governor with his predecessor.   

“Yes, the ‘unreliable boyfriend’ act is being played out all over again down on Threadneedle Street.”

He said the unreliable boyfriend act led to the pound having its worst day in over a year, falling to one-month lows, losing more than two big figures over the last 24 hours. 

“Given how expectations of BoE tightening have been underpinning the sterling bull case for some time, the quid now looks incredibly vulnerable to further downside, particularly if the bottom of the recent range gives way.”

At Deutsche Bank, FX strategists said their bearish GBP view has been helped by the dovish BoE surprise yesterday.

“A simple chart of GBP against real rate differentials [see above] suggests EUR/GBP has quickly moved back to “fair value” of around 0.86pence. If UK real rates keep dropping, as we think they will, there should be more GBP weakness to go.”

But a weak pound generally helps the FTSE, due to its preponderance of overseas-earnings multinationals, and the index is up 40 points or 0.55% at almost 7,320. 

10.50am: Pfizer up, Moderna down

Pfizer has just announced that its experimental Covid-19 antiviral treatment cuts the risk of hospitalisation or death by 89%.

This is based on interim results of a Phase II/III clinical study. 

Pfizer said it plans to submit data from interim analysis of study as part of an ongoing rolling sumission to the US and EU regulators as soon as possible.

“Today’s news is a real game-changer in the global efforts to halt the devastation of this pandemic,” says the compaby’s CEO Albert Bourla.

“These data suggest that our oral antiviral candidate, if approved or authorized by regulatory authorities, has the potential to save patients’ lives, reduce the severity of COVID-19 infections, and eliminate up to nine out of ten hospitalizations.

“Given the continued global impact of COVID-19, we have remained laser-focused on the science and fulfilling our responsibility to help healthcare systems and institutions around the world while ensuring equitable and broad access to people everywhere.”

Pre-market trading points to an 8%-plus rise for Pfizer shares, while vaccine maker Moderna trading down 6%.

9.45am: Banks up as Bailey speaks

The Footsie has advanced further, helped by banks and other financials sector stocks, including Lloyds (LSE:LLOY).

Shares in the black-horse lender fell sharply yesterday when the Bank of England resisted widespread expectations that it was going to raise interest rates for the first time since the Covid-19 pandemic. 

Some people are still stewing about the muddled messaging from the Bank and its leaders in recent weeks, having steered markets towards expecting an interest rate rise, before swerving in yesterday’s meeting.

Here’s Neil Wilson at Markets.com, who has quite possible been ranting all night: “A key part of the central banker role is communication. Meetings take place infrequently, maybe 8 times a year, so in the gaps in-between, when trading days are long, markets lust for guidance in other forms. Policy makers are generally free between meetings to make speeches, give Q&As, do TV interviews etc. Sometimes they are compelled by lawmakers to explain their policies, too.

“Naturally what they say is comprehended, dissected and assessed by the market as to what their words imply for the course of monetary policy. There is never an absolute: nobody will say ‘we are going to raise rates next month’. That is why you have the meeting and produce an official statement. But you can make it clear to the market what you think about the state of things and where you think is the likely or appropriate course of monetary policy. 

“After an uneasy start in his job, Jay Powell, the Fed chairman, is very good at doing this. Perhaps not quite as adept as Mario Draghi at carefully steering market expectations, but close. He has spent six months painstakingly guiding the market to expect this week’s announcement on tapering asset purchases. No tantrum, barely much of a reaction even. Talk of rate hikes is scorned.

“Contrast this with the performance of Andrew Bailey, the relatively new head of the Bank of England. Loose – in retrospect – remarks over recent weeks led the market to expect an interest rate rise yesterday, only to be confounded by not just a failure to deliver on that but an apparent indifference to the fact that policy was so poorly communicated. ‘It is not our responsibility to steer markets on interest rates,’ he said. Oh, right? That’s kind of the antithesis of the job description, but you’re the man in the hot seat I suppose.

“Frequently handing over to [monetary policy committee colleagues Ben] Broadbent and [Sir Dave] Ramsden to answer questions he seemed unable to tackle, Bailey’s remarks were problematic. For example, he cautioned on the scale of rate bets seen in markets – saying he thinks the market has priced in too many rate rises. Maybe he shouldn’t have been stoking those expectations with hawkish remarks on inflation.

“Then, in response to a later question about whether the market was right or wrong, he said: ‘None of us are going to endorse the market curve at any point in time.’ That is just untrue. Michael Saunders on Oct 9th: ‘I think it is appropriate that the markets have moved to pricing a significantly earlier path of tightening than they did previously.’ 

“In response to a question about stagflation he rambled on about its etymology, said the bank doesn’t really use that word, so no before handing over to someone else to actually attempt an answer to the question. Even if you don’t use the word ‘stagflation’, you know the question is about falling growth and higher prices.

“It seems like the BoE thinks ‘we’ll say something and the market can make of it what it likes, that’s not our business”. To a degree, that’s true. You can’t account for what others make of your statements. But you can be a lot more careful about those statements in the full knowledge that the market will read something into them since you are the governor of the Bank of England and not just anybody.

“There were several opportunities in recent weeks to lean against the aggressive market pricing, to gently nudge the market in the right direction, but the governor elected not to do that. The feeling is now that the BoE under Bailey has lost credibility and we will not be able to read as much into his remarks as we have done.

“This is not a good situation for a central banker to be in. I leave you with this, among the listed candidate requirements from the BoE’s job spec for Governor: ‘The ability to communicate with authority and credibility internally, to Parliament, the media, the markets and the wider public’.” 

Earlier on BBC radio, Bailey has been shooting the breeze again, saying that the MPC “won’t bottle” the decision to raise rates, when it was put to him that the Bank was not being as independent as it should be, with the government wanting to run the economy hot and the MPC’s job being to ‘take the punchbowl away’.

“We do think interest rates will need to rise and they will rise,” Bailey stressed, adding that it was a deliberate move to outline his clear commitment to higher interest rates.

He also said energy prices, particularly gas, are the biggest single cause of current inflationary pressure and, “we think, based on a lot of evidence from the past, that these shocks are temporary”.

9.10am: More prices rising – houses this time

Inflation is everywhere, with UK property prices having been rising a long time before all these Jonny-come-lately energy prices started butting in. 

The average UK home has risen to an all-time high price of £270,000 according to data from the Halfiax, defying expectations that the end of the stamp duty holiday would prove a sticking point.

The Halifax house price index was up 8.1% last month compared to October last year, compared to the 7.4% rise in September and the fastest growth since June.

Earlier this week, Nationwide reported that the average house price topped £250,000 for the first time, based on its mortgage approvals. 

“With the Bank of England expected to react to building inflation risks by raising rates as soon as next month, and further such rises predicted over the next 12 months, we do expect house buying demand to cool in the months ahead as borrowing costs increase,” said Russell Galley, managing director at Halifax.

“That said, borrowing costs will still be low by historical standards, and raising a deposit is likely to remain the primary obstacle for many. The impact on property prices may also be tempered by the continued limited supply of properties available on the market.”

8.45am: Surprise rise

FTSE 100 defied calls of a weak start and was firmly in the blue as traders await the latest round of US jobs numbers.

Financial spread bet firms had expected the blue-chip index to open down twenty points from last night’s close of 7,280, but after an hour’s trading had turned these predictions on their head and was up 25 at 7,305.

BT Group PLC (LSE:BT.A) was again the biggest riser as speculation of a bid from French Billionaire Patrick Drahi continues to swirl. The group also restored divided payments yesterday and said it did not need a partner to fund the roll-out of network arm Openreach’s fast fibre. Shares were up 3.8% to 165.8p.

More red ink from  International Consolidated Airlines Group (LSE:IAG) (International Consolidated Airlines Group (LSE:IAG)) SA, the owner of British Airways, which forecast operating losses before exceptionals of around €3bn for 2021 though losses more than halved in the third quarter.

IAG added it hopes to return to profitability in 2022 following “a significant recovery” in bookings as Coronavirus (COVID-19)-travel restrictions are lifted. Longhaul is recovering faster than shorthaul and there are also nascent signs of a recovery in business travel, the group said in its earnings release. Shares fell 3% to 164.5p.

Looking forward, US jobs data will dominate today, with a strong bounce-back forecast for non-farm payrolls after a couple of disappointing months.

Market expectations are hovering around 450,000 jobs, with another fall in Initial Jobless Claims overnight suggesting that the job market is finally moving, said Jeffrey Halley, a senior market analyst at Oanda.

“A print north of 500K likely stirs the inflation, taper, and hiking noise again, and could see that rally in bonds overnight evaporate along with gold.

“Conversely, another disappointing number sub-350K is likely to have the opposite effect and will see the US Dollar given an end-of-week slapping.”

6.50am: Early Markets – Asia / Australia

Asia-Pacific shares were mostly lower on Friday as trading in Hong Kong-listed shares of Chinese property developer Kaisa Group and several of its units were suspended after missing a payment on a wealth management product.

China’s Shanghai Composite fell 1% while Hong Kong’s Hang Seng index slumped 1.66%.

In Japan, the Nikkei 225 slipped 0.61% and South Korea’s Kospi dipped 0.47%.

Australia’s S&P/ASX200 was an exception, closing 0.39% higher at 7,456.90 points, after hitting a seven-week high earlier in the day when it jumped 0.7% to 7,477.2 points.

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