FTSE 100 closes firmly lower as inflation fears pummel markets
- FTSE 100 loses 2.47%
- US stocks fall across the board
- Antofagasta edges higher
5.05pm: FTSE closes sharply lower
FTSE 100 closed sharply in the red on Friday as inflation fears spooked global markets.
The UK’s top share index finished over 175 points lower, or 2.47%, at 6,947. The midcap FTSE 250 also went lower, plunging over 530 points, at 22,167.
On Wall Street, the Dow Jones Industrial Average lost over 454 points at 34,288. The S&P 500 shed over 42 points, at 4,145. The Nasdaq shed around 65 at 13,336.
“Inflation fears have hurt market sentiment today, as European markets maintained the pessimistic tone established in the US yesterday,” said Joshua Mahony, senior market analyst at IG.
“An overnight jump in Chinese PPI data highlighted how commodity prices are lifting factory costs, with traders worried that input costs will feed into consumer prices which could result in a more hawkish central bank approach.”
The analyst also noted that while yesterday’s US share selloff was geared heavily towards those high P/E growth names, today had seen traders take on a more indiscriminate ‘risk-off’ approach, even with commodities dropping off.
3.59pm: Sell-off worsens again
The sell off is getting worse again, and it is clearly not only tech stocks that are suffering from fears of higher inflation and rising interest rates.
The FTSE 100 is now down 197.08 points or 2.77% at 6926.6, with the Dow Jones Industrial Average off 1.84%, the S&P 500 1.58% lower and the tech heavy Nasdaq falling 1.34%.
To put this in context, the UK blue chip index has fallen to its lowest level since…May 4 i.e a week.
But a slide is sometimes hard to stop once it gets going.
With all the rest falling, some are falling a little less than others.
a sell everything kinda day for the FTSE 100 pic.twitter.com/czNH7ix0ei
— Neil Wilson (@marketsneil) May 11, 2021
Michael Hewson at CMC Markets said: “When Renishaw’s owners announced that they were looking to sell the business in March, the shares shot up to a record high, with the company which makes precision products for the aerospace, healthcare and dental industry amongst many other high value areas, expected to make a highly valued acquisition to any possible interested party.
“Today the shares have dropped sharply as various interested parties have cooled their enthusiasm due to a lofty price tag, and reports that the existing owners are demanding certain commitments to R&D spend.”
3.14pm: US job openings beat forecasts
US job openings came in higher than expected, another measure of the growing strength of the US economy with increased demand for workers.
The JOLTS job opening survey showed a record high of 8.1mln in March – the survey has been going since December 2000 – compared to an expected figure of 7.5mln and the previous month’s 7.4mln.
— Julia Pollak (@juliaonjobs) May 11, 2021
US markets are still sharply lower, with the Dow Jones Industrial Average down 0.95%, the S&P 500 0.93% lower and the Nasdaq Composite off 1.02%.
Meanwhile the FTSE 100 is off its worst levels, down 162.42 points or 2.28% at 6961.26.
3.10pm Proactive North America headlines:
Algernon Pharmaceuticals Inc (CSE:AGN) (FRA:AGW) (OTCQB:BTHCF) hits 50% of enrollment target for Phase 2 lung fibrosis and chronic cough trial of ifenprodil
OTC Markets Group Inc (OTCQX:OTCM) h says OTCQX Market reaches 500 company milestone with addition of its first Danish company, Astralis
2.40pm: Wall Street opens in the red
Wall Street began Tuesday’s session firmly in the red as worries about inflation and a tech sell off sent the main indices lower in early trading.
Shortly after the opening bell, the Dow Jones Industrial Average was down 0.75% at 34,482 while the S&P 500 dropped 1.13% to 4,141 and the Nasdaq sank 1.89% to 13,148.
Back in London, the FTSE 100 had recovered some lost ground into late afternoon but was still down 187 points at 6,936 at around 2.40pm.
2.20pm: Market decline continues
And it continues. The FTSE 100 is now down 207.92 points or 2.92% at 6915.76.
But Nick Hyett, equity analyst at Hargreaves Lansdown, is not convinced the market’s fears about inflation – which have hit tech stocks in particular – are entirely justified.
He said: “All things being equal higher inflation implies higher interest rates, and higher interest rates are particularly toxic for companies that promise little in the way of profits today, but rapid growth in the years to come. That’s a pretty accurate description of many tech stocks, and the US market is increasingly dominated by US tech names.
“However, despite the market jitters investors shouldn’t be abandoning the tech sector just yet. This time last year the oil price had just plummeted into negative territory for the first time ever, and that alone means costs are going to be higher now than they were a year ago, in turn driving goods prices higher. A temporary boost in inflation was inevitable.
“What matters is whether inflationary pressure is sustained – there’s no convincing evidence that’s the case yet.”
1.53pm: Share slide accelerates
The sell-off is gathering pace.
The FTSE 100 is now down 187.73 points or 2.64% at 6935.95.
The Dow Jones Industrial Average is set to open down 0.8%, the S&P is expected to fall 1.24% and the Nasdaq Composite 1.98%.
Technology stocks continue to be in the firing line, with Tesla for example down 7% pre-market.
Neil Wilson at Markets.com said: “It’s a bit indiscriminate – lots of the big reflation plays are off heavily which suggests this is a ‘sell everything’ kind of day (which could be why bonds are not moving as impetus to buy and drive yields down is offsetting the inflation stimulus to sell and drive yields up)…
“We’ve run up a fair bit and the technical setup was extended with US stocks in particular looking overbought.”
12.39pm: Tech stocks to fall again
With the concerns about inflation it is probably no surprise that Wall Street is expected to open sharply lower.
And technology shares are set to bear the brunt of the selling again, with investors seeking lower risk assets which are likely to give a better return in an environment of higher inflation and rising interest rates.
So the Dow Jones Industrial Average is expected to open down around 0.45% or 140 points at 34,602. The S&P 500 is set for a 0.78% fall while the tech heavy Nasdaq Composite is forecast to drop 1.38%.
Sophie Griffiths, market analyst at OANDA, said: “With China and the US, the world’s two largest economies, showing signs of rising inflationary pressures, investors are getting nervous. The overriding fear is that pandemic stimulus combined with reopening economies will spark a sharp drive high in inflation, forcing central banks to take action, tightening policy and potentially slowing down economic recovery…
“US indices are pointing to further losses, with the tech sector once again taking the hardest hit. Big tech’s blowout earnings numbers from just a few weeks ago have already long since been forgotten, with other market dynamics in play now.”
On the data front, there will be some attention given to the latest US jobs opening figures (the JOLTS or job openings and labour turnover survey) after Friday’s very disappointing non-farm payroll numbers. Expectations are for a rise in openings from just under 7.4mln to 7.5mln.
Back in the UK, the FTSE 100 is down 162.13 points or 2.28% at 6961.55.
12.09pm: Silver miner shines – a little
Rejoice, we have a rising share price in the leading index.
Otherwise it is downhill all the way, with the FTSE 100 off 2.2% or 156.62 points at 6967.06.
The more broadly based FTSE 250 is also under the cosh, down 2.07% or 469.82 points at 22,227.37.
It is not just the UK market suffering:
For today, Europe major indices are suffering one of their worst days this year:
Germany DAX -2.4%
France CAC 40 -2.1%
UK FTSE -2.3%
Spain IBEX -1.6%
Italy FTSE MIB -2.0%#XglobalMarkets
— XGLOBAL Markets (@xglobalmarkets) May 11, 2021
10.56am: Leading shares still ahead for the month so far
Sell in May and go away as the old City adage has it?
Until now, with the leading index hitting 14 month highs during the month, perhaps not the best idea.
Even with the current fall of 146.86 points or 2.06%, the index is sitting at 6976.82, just about ahead of the game since the start of May. (The FTSE 100 closed at 6969 at the end of April, up 3.8% on the month and the best performance since November 2020.)
But with inflation worries to the fore again and tech stocks slumping, could things get much worse?
Chris Beauchamp, chief market analyst at IG, said: “The volatility of the past 24 hours has once again caught investors napping. In contrast to expectations, 2021 has been a quiet year overall for major indices, with downward shocks confined to growth names and upward surges mostly concentrated in various esoteric alternative assets driven by a speculative frenzy.
“But as we move into the poorer period of the year for markets from the strong October-April period it will be harder for indices to maintain their sang-froid. Inflation worries are not going away, and are going to get louder and more insistent.”
10.17am: E-commerce group in demand
The e-commerce group has jumped 11.31% or 67.43p to 663.43p after it increased the size of a placing to investors after strong demand.
It will now raise US$320mln, up from US$270mln, selling 38mln new shares at 596p each. In addition Japanese giant Softbank will take a $730mln stake in the company and also pay up to US$1.6bn for a stake in the its technology subsidiary.
AJ Bell investment director Russ Mould said: “One UK technology-orientated name which is doing very nicely indeed is sports and health products online platform The Hut Group or THG for short.
“THG is raising a large amount of money, some of which is coming from Japanese investor Softbank which has also struck a deal giving it the option to invest in THG’s Ingenuity division.
“The Ingenuity platform is already used by Nestle, Nintendo and Homebase, and has been compared to Ocado’s out of the box web-based groceries solution for global supermarkets.”
Overall the FTSE 100 is now down “just” 140.47 points or 1.97% at 6983.21.
9.47am: Leading shares slump
Still no risers on the FTSE 100, although it is just about off its worst levels.
The leading index is down 161.14 points or 2.26% at 6962.54 having fallen as low as 6953.
After Friday’s US non-farm payroll report came in below expectations and eased fears of an overheating economy, the tide has turned again and investors are worried about inflation once more. The day’s data from China has fuelled these concerns.
Neil Wilson at Markets.com said: “If you are looking for inflation signals, China’s factory gate prices are a pretty good leading indicator. So today’s report showing that producer price inflation rose 6.8% from a year earlier in April, the fastest pace in more than three years, could be of concern. Tomorrow’s US CPI numbers are going to be closely watched. ..Whatever the Fed tries and sticks to in terms of its employment mandate, the bond market will move if inflation takes off. The wage component of the jobs report was underappreciated. A lack of employees will drive up wages and end prices.”
No surprise that one of the fallers is Scottish Mortgage Investment Trust PLC (LON:SMT), which is heavily exposed to technology stocks. With the 2.5% drop on the Nasdaq Composite and investors deciding to move into stocks which will benefit from recovery, the trust’s shares have dropped 45.5p or 3.99% to 1094p.
8.48am: Triple digit losses at the open
After a couple of worry-free days, the spectre of inflation came back to haunt global financial markets.
The American jobs data miss last week appeared to have quelled concerns only for a sharp spike in commodity costs and surging factory prices in China to unsettle the livestock ahead of US CPI data later this week.
Fears of a pre-emptive rise in interest rates prompted a 2.5% drop in the Nasdaq that then sent ripples through Asia’s main bourses.
Why this should then have such a pronounced effect on the Footsie, which should be a beneficiary of the switch out of growth and into value stocks, was a bit of a head-scratcher.
Still, the market’s immediate reaction isn’t always measured or logical.
You had to shift down to the FTSE 250 to find the day’s risers, with none on the Footsie at all. And even then the moves were piecemeal.
Morrisons (LON:MRW) nudged up a penny after what can best be described as a solid if unspectacular first-quarter trading statement.
“There have also been some notable early successes from the gradual easing of lockdown, with fuel sales close to pre-pandemic levels and with an increase in sales of food to go products positioning the group well for the coming months,” said Richard Hunter, head of markets at Interactive Investor.
“Alongside a sharp decrease in relative Covid direct costs, the door will be open to greater overall profits.”
Proactive news headlines
The City Pub Group PLC (LON:CPC) said trading has been encouraging since pubs were allowed to reopen for outdoor trading, with 24 of its 45 pubs open at present but unable to serve thirsty customers indoors.
Coinsilium Group Limited (LON:COIN) said its subsidiary Nifty Labs has started development work on a new non-fungible token (NFT) project to create an ‘NFT on Bitcoin’ marketplace platform powered by the RSK blockchain, a smart contract platform secured by the Bitcoin network.
Kromek Group PLC (LON:KMK) achieved significant revenue growth during the second half of the 2021 financial year, after orders and shipments of the company’s medical, nuclear and security screening detection technology resumed midway through the first half.
Mobile payments specialist Bango PLC (LON:BGO) has entered into a partnership with NTT DATA to expand payments across Asia. Merchants using the Bango Platform to offer online payments can now expand their footprint to users in Indonesia, Malaysia, Thailand, Hong Kong, Philippines, and other key Asian markets.
Tirupati Graphite PLC (LON:TGR) announced that its planned investor webinar on the Investor Meet Company platform has been rescheduled to 19 May at 10:30am BST. The live presentation from executive chairman Shishir Poddar and two other directors is open to all existing and potential shareholders, with questions invited in advance or during the event.
AEX Gold Inc (LON:AEX, TSXV:AEX) notified that its annual and special general meeting will take place online on June 9 at 10am Toronto time.
6.50 am; Snapback predicted
The FTSE 100 is likely to be yanked back from its recent 14-month highs as inflation worries send global stock markets into a tizzy.
After faltering at the start of the week, with a six-point drop, London’s benchmark of blue-chip shares has been called 87 points lower on Tuesday by spread-betters in the City.
Wall Street suffered a major nosebleed overnight after its record highs last week, with a tech sell-off leading to the Nasdaq tumbling 2.6% and the S&P 500 dropping 1%, while Dow Jones notched another record but ended with a 0.1% decline.
Asian markets are in charging lower this morning, with the Nikkei falling 3.2% and the Hang Seng retreating 1.7%.
“What is most interesting about the price action overnight is how quickly the inflation theme has remerged,” said market analyst Jeffrey Halley at Oanda.
“Precisely one day, in fact, after a very deflating US jobs number on Friday. A very dovish set of comments from Chicago Fed Evans were also ignored. Inflation nerves just won’t go away.”
He added: “The falls overnight on equity markets, notably technology, are likely to be just as much due to extended shorter-term valuations and nervous investors than to inflation prospects. Goldman Sachs may also be partially responsible, publishing a report on technology stocks highlighting that regulatory risks are the biggest threat to the big-tech story.”
Further twists and turns in the inflation story are possible this week with official inflation data to be is released tomorrow, followed by 10-year and 30-year bond auctions.
However, says Halley, if tonight’s JOLTs job openings report for April comes in much lower than the forecast 7.5mln jobs tonight, “I expect the inflationistas to breathe easier once again” – for now.
Around the markets
Pound flat at US$1.4132
Brent Crude Oil down 0.9% at US$67.69
Gold flat at US$1,836.88
Bitcoin down 6.5% (over 24 hours) at US$55,084.7
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mostly lower on Tuesday, with Taiwan leading declines across the region following a +4% drop for the benchmark Taiex in afternoon trade.
The Hang Seng index in Hong Kong fell 1.83% while the Shanghai Composite in China gained 0.19%.
In Japan, the Nikkei 225 tanked 3.14% and South Korea’s Kospi declined 1.36%.
Shares in Australia slipped, with the S&P/ASX 200 trading 1.07% lower.
Proactive Australia news:
St George Mining (ASX:SGQ) (FRA:S0G) has completed a $7 million private placement, issuing a total of 85,365,854 shares at a price of $0.082 per share to institutional and sophisticated investors.
Triangle Energy (Global) Ltd (ASX:TEG) and Pilot Energy Ltd (ASX:PGY) have executed joint venture agreements and access deeds formalising the WA-481-P upstream joint venture and the Cliff Head Wind and Solar joint venture.
Maximus Resources Ltd (ASX:MXR) has received strong gold intersections of up to 10.5 g/t gold within wide zones of mineralised stockwork at S5 prospect around 300 metres south of the historic high-grade Wattle Dam Gold Mine in Western Australia.
Tietto Minerals Ltd (ASX:TIE) has received bonanza grade gold results from infill drilling at Abujar‐Gludehi (AG) deposit, part of its 3.02-million-ounce Abujar Gold Project in Côte d’Ivoire, West Africa, which is on track to be West Africa’s next gold mine.
Miramar Resources Ltd (ASX:M2R) extended the Marylebone target strike length to 1.7 kilometres during recent phase-2 aircore drilling, which returned 4-metre composite assays between 0.25 g/t and 1 g/t gold at depths of 44 to 60 metres within the Gidji joint venture project in Western Australia.
Arafura Resources Ltd (ASX:ARU) (OTCMKTS:ARAFF) (FRA:REB) has completed a feasibility study update for its 100%-owned Nolans Neodymium-Praseodymium (NdPr) Project in the Northern Territory, confirming ultra-low operating costs of US$24.76 per kilogram of NdPr oxide.
Twenty Seven Co Ltd (ASX:TSC) (FRA:U9V) is set to start auger drilling at the 100%-owned Yarbu Gold Project, around 160 kilometres northeast of Southern Cross and about 90 kilometres northwest of TSC’s Mt Dimer Project in Western Australia.
Marvel Gold Ltd (ASX:MVL) (FRA:GR2) plans to unlock the value of its advanced Chilalo Graphite Project in Tanzania by spinning it out into a newly incorporated, wholly-owned subsidiary Evolution Energy Minerals Limited, which proposes to undertake an IPO to facilitate listing on the ASX.
European Lithium Ltd (ASX:EUR) (FRA:PF8) (VIE:ELI) is set to add to its strategic lithium endowment in the heart of Europe after entering a Collaboration Agreement with Jadar Resources Ltd (ASX:JDR) (FRA:R1E) on its Austrian tenements.