FTSE 100 upbeat with AstraZeneca leading the way; Wall Street expected to rebound after slump - Proactive Investors UK

• FTSE 100 adds 68 points
• Brent crude slips back
• Next shares hit new peak

3.47pm: Markets shake off global concerns

Investors seem to be shrugging off the many and varied causes for concern, at least for the moment.

So worries about rising inflation and possible interest rate hikes, the US debt ceiling, the energy crisis and the fate of beleaguered Chinese property group Evergrande have all been put on the back burner.

And with Wall Street in positive territory after Tuesday's rout, the FTSE 100 is back near its highs for the day.

The leading index has added 68.39 points or 0.97% to 7096.49 after earlier touching 7103.

AstraZeneca PLC, up 4.3%, continues to lead the way after it took full control of rare disease group Caelum Biosciences.

Next PLC is also in favour as it upgraded its sales forecasts once more. It hit a new peak before slipping back a little, but is still up 3.52%.

Royal Mail PLC is missing out, however, down 7.47% after a downgrade by UBS analysts.

Over in the US, the Dow Jones Industrial Average is up 0.46% or 158 points, helped by US Treasury bond yields easing.

This could all change according to how hawkish the four main central bank bosses are when they hold a virtual conference later at the ECB Forum on Central Banking.

Craig Erlam, senior market analyst at OANDA, said: "In all honestly, I don't think we'll get any surprises from the heads of the Fed, ECB, BoJ and BoE today. All have been quite consistent in their views in recent days and communication between central banks and the markets have been very clear. Of course, as the situation evolves in the coming weeks, those views may change but in the meantime, I expect we'll hear more about the transitory nature of inflation."

2.47pm: US investors pause for breath

Wall Street has opened modestly higher after Tuesday's rout.

The Dow Jones Industrial Average is up 0.13% while the more broadly based S&P 500 is up 0.14% and the tech-heavy Nasdaq Composite is 0.27% better.

Investors are pausing for breath as US Treasury bond yields ease after hitting three month highs on Tuesday.

Meanwhile the FTSE 100 is off its highs and is now up 40.25 points or 0.57% at 7068.35, having earlier reached 7097.

2.39pm: Opec set to raise production

The weakness in the oil price, with Brent crude down 0.72% at US$78.52 a barrel, is partly due to reports that OPEC+ is likely to stick to its output plans when it meets next week.

The Opec group plus Russia and other allies agreed in July to increase production by 400,000 barrels per day, to phase out 5.8m barrels of cuts.

Reuters is reporting sources saying they will keep to this agreement, with the oil price soaring to above US$80 a barrel in recent days.

Meanwhile the American Petroleum Institute last night reported a 4.13mln barrel weekly gain in US crude stocks,

12.36pm: US shares set for opening rise as bond yields ease

US stocks are set for a rebound after Tuesday's slump, as US Treasury bond yields eased.

The yields hit a three month high on Tuesday on concerns about a hike in interest rates to deal with rising inflation. This left the tech-heavy Nasdaq index nursing its biggest fall since March, while the broader S&P 500 suffered its biggest single-day drop since May. 

Naeem Aslam, chief market analyst at Avatrade, said: "Following rise in treasury yields, the price of technology stocks has reached rock bottom. Stock prices of Alphabet, Facebook, Amazon, and Microsoft took a substantial beating. This is because a rise in yields has an adverse impact on the valuations of high-growth companies, as the present value of future earnings takes a hit. As a result, the Nasdaq index dropped 423 points.".

But after the rout, futures for the Nasdaq-100 rose 0.95% in pre-market trading, while Dow Jones Industrial Average futures added 0.57%, and those for the S&P 500 index gained 0.71%.

Federal Reserve chairman Jerome Powell did little to allay concerns of tighter US monetary policy when he appeared before the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday to discuss the state of the economic recovery. Powell and US Treasury Secretary Janet Yellen also warned of the risks if Congress fails to pass a bill to fund the government and raise the country's debt ceiling next month, adding to market jitters.

Han Tan, chief market analyst at Exinity Group, said; "Investor sentiment is hunting for a clear signal amid the cacophony stemming from a multitude of fears. These include a potentially "catastrophic" default by the US Treasury, in Janet Yellen's estimation, possible contagion out of the China Evergrande saga and even the risk of stagflation."

Skyrocketing prices for natural gas, oil, and cotton have only amplified the notion that inflationary pressures may decimate the Fed's "transitory" view, which could, in turn, crimp global economic prospects, Tan said.

He added: "Recent price action could herald  a potential end to the heady days of risk-taking activities that have been aided by the Fed's ultra-accommodative stance."

Back in the UK, the FTSE 100 is holding on to most of its early gains, up 60.2 points or 0.86% at 7088.3.

AstraZeneca PLC is now the biggest riser, up 3.05% after the company exercised its option to acquire all remaining equity in rare disease group Caelum Biosciences.

Next PLC still remains strong after lifting its sales guidance, adding 2.95%.

11.14am: Weaker pound helps overseas earners

Despite the strength in the leading index, there are still plenty of things for investors to be concerned about.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdow, said: ''Fears of stagflation are stalking the financial markets with the fuel and wider supply chain crisis threatening to slow recovery as businesses grapple with the ogre of sharply rising prices.

"The worry that the UK won't quickly break free from the constraints caused by driver shortages and the bottlenecks of goods and raw materials, has seen the pound struggle to recover from its slide against the dollar. Rising bond yields are the last thing the government needs to be staring at right now, given that they push up borrowing costs, at a time when the economy is already under strain with furlough ending and looming tax rises risk knocking consumer confidence.

"But the FTSE 100, stuffed full of multinationals which benefit from a weaker pound, has risen, with plumbing and heating distributor Ferguson leading the charge upwards in early trade after a broker upgrade.

"Next was also among the top risers, with investors shrugging off warnings of price hikes to come and delays in the run up to Christmas due to supply chain concerns. Although the British Retail Consortium has warned costs are starting to filter through to store prices, shoppers, for now, seem still set in splashing the cash mode. That sentiment has also helped lift JD Sports in the top flight, amid speculation that the thirst for expensive trainers won't be quenched any time soon."

Fergusson PLC is up 2.98%, Next PLC is 2.62% higher and among the overseas earners, Anglo American PLC has added 2.29%.

Overall the leading index is up 65.8 points or 0.94% at 7093.9, just a whisker off the day's high of 7096.

10.51am: Pricing pressures to hit mail business, say analysts

Royal Mail PLC is the biggest faller in the leading index, after a broker downgrade.

Its shares have lost 5.93% to 450.8p as UBS slashed its rating from buy to sell and cut its price target from 590p to 440p as it believes the company faces rising costs.

UBS said: "We expect increasing opex cost pressures are coming at a time when the pricing power within the industry is likely to decline as more parcel sortation capacity is added in 2022. We expect peak uncertainty around: i) UK parcel volumes in the fourth quarter; and ii) wage inflation ahead of the negotiations with CWU (current agreement ends March)."

It believes Royal Mail could potentially unlock value by spinning off its  Dutch based logistics business GLS but added: "We believe this is unlikely to happen until more clarity on the new run rate of parcel/letter volumes and union negotiations emerges (first quarter of 2022).

Still, the company's fall has done little to dent the FTSE 100, which is up 64.40 points or 0.92% at 7092.5.

10.00am: Brent crude dips after recent gains

The FTSE 100 continues to gain ground, up 56.02 points or 0.8% at 7084.12.

Next PLC is the top riser, currently up 2.72% at 8300p.

Oil companies are among the fallers as crude comes off its recent highs.

Brent is down 0.72% at US$78.52 a barrel while West Texas Intermediate - the US benchmark - has slipped 0.78% to US$74.70.

So Royal Dutch Shell PLC has seen its A shares dip 0.32% while BP PLC is off 023%.

Meanwhile the pound's weakness continued, down 0.19% at US$1.3515, which helps the overseas earners in the leading index.

Neil Wilson at Markets.com said: "Sterling moved to fresh year to date lows... Some have pinned this on fuel (lorry driver) shortages and panic buying. Others have raised the stagflation klaxon because of the fuel problems. This looks like finding a narrative to suit the price action. Nothing changed yesterday relative to the day before. Much like we saw in the bond and equity markets, things move. And cable maybe is seeing a flushing out of some weak hands post the Bank of England hawkishness. What we have seen is the way sterling moves in a risk-on, risk-off fashion and yesterday was clearly risk off. Expectations for the Bank to raise rates before the Fed may create problems if the Bank has to walk that back in the face of a tougher economic backdrop."

9.50am: Mortgage approvals dip in August

UK mortgage approvals have come in slightly stronger than expected in August, although they were weaker than the month before as the stamp duty holiday effectively came to an end.

Mortgage approvals for house purchase slipped from 75,100 in July to 74,500, according to Bank of England figures, but this was higher than the forecast figure of 73,000.

Dean Esnard, director at London-based Magni Finance, said: "August was definitely quieter than the months before, but that's expected during the summer holidays. September has picked up again although there is not as much intensity as buyers feel there is more room for negotiation now that the market has cooled down."

Rhys Schofield, Managing Director at Peak Mortgages and Protection: "August was a bit quieter but then again it always is as any estate agent will tell you. This is a sign of a normal market returning, which is something we didn't see last year. September, though, was back with a bang and we'll likely find ourselves rushed off our feet until Christmas. The bottleneck is the number of houses coming onto the market. Demand still massively outstrips supply so prices, for now at least, can only go one way."

On credit, the Bank said: "Consumers borrowed an additional £0.4 billion in consumer credit, on net. The effective rate on new personal loans remained below the January 2020 level at 5.87%, but was the highest since March 2020."

9.16am: Retailer hits record

Next PLC shares have hit a new peak after its latest update.

They climbed as high as 8408p as the company upgraded its guidance, although they have now slipped back to 8280p - a mere 4.53% rise.

Richard Hunter, head of markets at interactive investor, said: "Historically Next has had the habit of cautious projections being followed by far superior results, and these numbers are no exception...

"The new pre-tax profit estimate for the full year of £800mln compares to a figure of £750mln at the July trading update. The expected reduction in online sales as stores reopened across the country has not yet meaningfully materialised, while full-price sales have turbocharged numbers against a backdrop of pent-up demand...

"Inevitably, Next is at pains to point out that challenges remain. The longer term issue of whether heightened pandemic online sales are here to stay is as yet unknown. The wider issue of cost inflation could also impact margins, while the group is also experiencing the difficulties arising from supply chain blockages in terms of stock, with staff shortages running into the peak season also a possibility.

"Even so, trading since these half-year numbers, which run to the end of July, has continued to explode, with full-price sales 20% ahead of 2019 levels and significantly in excess of the 6% previously guided.

"Next is a tightly run ship which is able to respond to a fluid trading environment both in terms of evolving fashion trends as well as financial challenges. The company is not only exceeding pre-pandemic levels of trading, but has also demonstrated that the measures it has taken in the interim leave it strongly placed to benefit from the new environment."

8.48am: AstraZeneca and Next lead the way

Crisis, what crisis?

UK investors have shrugged off the range of worries which have been dogging global markets, and pushed the leading index higher in early trading.

Despite the energy crisis, queues at petrol stations, the spectre of inflation and the growing expectation of interest rate rises, the FTSE 100 is up 47.6 points or 0.68% at 7075.70.

US treasury yields, which rose to a three month high of 1.537% on Tuesday on the interest rate speculation, have eased back to 1.514%, while US futures are also pointing to a slight recovery after yesterday's rout.

But there is still much for the markets to fret about, notably in the world's two biggest economies.

In the US, the Federal Reserve has shown a more hawkish tone in recent days, with a tapering of its bond buying programme now expected before the end of the year.

There is also the small matter of the debt ceiling, with a standoff between the Democrats and Republicans.

Naeem Aslam, chief market analyst at Avatrade, said: "Republicans have stalled the Biden administration's attempt to lift the country's debt ceiling in front of the Senate, despite the fact that the US Treasury has less than three weeks before it runs out of funds to cover its short-term obligations.

"Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell have both warned of the potentially dire ramifications of the government failing to lift the debt ceiling. According to the Treasury, the government has until October 18 to reach an agreement, after which the department will be left with inadequate cash to satisfy its obligations, and the government will face default. Investors should incorporate a potential government shut down in their risk assessment frameworks over the next few weeks."

And in China there have been blackouts, while the fate of beleagured property developer Evergrande is still uncertain.

Jim Reid at Deutsche Bank said: "The power crisis in China is further dampening sentiment there, and this morning Bloomberg have reported that the government are considering raising prices for industrial users to ease the shortage.

"Separately, we heard that Evergrande would be selling its stake in a regional bank at 10 billion yuan ($1.55bn) as a step to resolve its debt crisis, and Fitch Ratings also downgraded Evergrande overnight from CC to C."

At the moment though, investors are accentuating the positive.

AstraZeneca PLC is the biggest riser in the UK blue chip index, up 2.94% after the company exercised its option to acquire all remaining equity in rare disease group Caelum Biosciences.

Fergusson PLC has climbed 2.83% on further consideration of this week's results.

And Next PLC, which rarely disappoints, has added 2.72% after the retailer upgraded sales guidance for the fourth time this year after its recent performance topped expectations.

6.50am: FTSE to open higher

The FTSE 100 is called 4 points higher at 7,032 as volatility continues.

Once again it is fears about surging energy prices, supply chain disruptions, and concerns about more persistent inflation that is sparking a move out of the more highly valued areas of the stock market.

"European markets had a poor day yesterday, all of them down over 2%, with the notable exception of the FTSE100 which was helped in no small part by its hefty energy component, and a sinking pound, which helped to keep it above the 7,000 level," said Michael Hewson at CMC Markets.

"The pound is also suffering as a consequence of the entirely self-inflicted fuel crisis, that has seen petrol station forecourts run dry, and concern over an economic slowdown."

"We do have some UK lending data later this morning and this should give us an idea as to whether UK consumers are starting to rein back on spending against a backdrop of rising prices, with the latest mortgage approvals and consumer credit data for August."

6.50am: Early Markets - Asia / Australia

Stocks in the Asia-Pacific region fell on Wednesday following an overnight tumble on Wall Street as rising yields hit tech stocks.

The Nasdaq Composite plunged nearly 3% after 10-year US bond yields rose to 1.5375%.

China's Shanghai Composite slipped 1.55% while Hong Kong's Hang Seng index dipped 0.20%

In Japan, the Nikkei 225 slumped 2.67% and South Korea's Kospi declined 1.74%.

Australia's S&P/ASX200 shed 1.5% to hit a four-month low of 7,159.60 after bouncing to 7,210 at open.

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