FTSE 100 Live 30 September: No respite for sterling amid flight to US dollar

A rally for mining stocks means the London market will hobble over the finishing line still higher than where it started an increasingly fraught third quarter of the year.

The rotation into commodities followed some respite in the decline for iron ore prices, ensuring that shares in the likes of Anglo American and Rio Tinto are up by 2%.

The FTSE 100 index lifted 38.28 points to 7,146.44, despite worries persisting over the health of China’s economy after the latest manufacturing purchasing managers index showed factory activity contracted for the first time since the start of Covid-19.

The focus is now on whether China’s seven-day Golden Week holiday, which starts tomorrow and is a key barometer of economic health, sees a surge in domestic travel.

There’s also little end in sight for the country’s Evergrande crisis after Reuters reported that some offshore bondholders had not received interest payments due on Wednesday.

The fate of the debt-laden property firm is among several worries to cloud the outlook for global markets in recent days, with rising energy prices and the prospect of earlier-than-expected rises in interest rates adding to the volatility.

The worries have accelerated the flight to the US dollar, with sterling now at its lowest level against the greenback since December. It was little changed today at $1.34, reflecting a backdrop of stagflation fears and further rises in natural gas prices.

IG chief market analyst Chris Beauchamp said: “Talk of the pound being knocked around like an emerging market currency is back again, and is as usual somewhat wide of the mark, since it has not exactly been a great week for the euro, yen, or Aussie, but it does show that a seismic shift to the US currency is underway.”

The FTSE 100 index has benefited this year from the TINA effect — there is no alternative — as shares remain attractive due to poor returns on cash and government bonds. It is more than 10% higher over the year and will finish the September quarter 1% higher.

Stocks struggling today included Rolls-Royce after hitting an 18-month high earlier this week on the back of a deal with the US Air Force. Shares fell 2% or 3.3p to 141.3p.

The FTSE 250 index was 105.15 points higher at 23,256.12, led by online review business Trustpilot as shares jumped 5% or 17.8p to 375p.

Virgin Money is to close 31 branches leading to the loss of 112 jobs, the latest sign of banks withdrawing from the high street.

In a statement headlined “update on acceleration of digital strategy”, the bank said customers are “increasingly adopting” online banking.

While the move seems logical, it will prompt further questions from MPs, worried that some consumers will be left without a branch to go to.

Boohoo has lowered its full year sales guidance as global supply chain disruption and the high street reopening threatens to put the brakes on the fast fashion giant’s turbo-charged growth, sending its shares down 11%.

Shares in the online retailer dropped 28.4p to 227.6p, despite revenue in the six months in the August jumping 20% to a record £975.9 million.

Investors looked to focus on higher shipping costs, up £26 million in two years, contributing to pre-tax profits tumbling 64% to £24.6 million and a number of headwinds the AIM-listed retailer is grappling with.

Read the full story HERE.

Oxford Nanopore’s shares have got off to a flying start in one of London’s biggest stock market flotations this year.

The gene sequencing firm was initially valued at £3.4 billion after shares were priced at 425p, compared with a previous indicative price range of between 375p to 450p.

They were later changing hands at 552p, a jump of 30% amid strong demand from institutions during conditional dealings.

Oxford Nanopore, which was spun out from the University of Oxford in 2005, is raising proceedsof £350 million through the issue of new shares.

The biotech’s desktop and portable products enable the real-time and low-cost analysis of DNA and RNA by researchers both in the lab and in the field. It sequenced the genetic code of the Covid-19 virus to track the emergence of variants around the world and is also used in cancer research, viral outbreak surveillance and crop science.

Chief executive Gordon Sanghera said today his company is still “only in the foothills of a long and exciting journey”

“I believe that our unique technology will open up many new possibilities for positive impact, both through enabling new discoveries in scientific research, and through more accessible, faster, richer biological insights in health, agriculture, food and understanding environments.”

Shares in Diageo rose by as much as 2% in early trading following a pre-AGM update from the drinks giant.

Chief executive Ivan Menezes told investors that the FTSE 100 firm, behind brands from Johnnie Walker to Guinness, is seeing its north American business “performing strongly, despite some supply chain constraints”.

In a statement, Menezes said the company expects organic operating margin to benefit from a further recovery in sales numbers, and said the group is managing rising inflationary pressures – including supply chain issues.

Prices in September reached £248,742, with a modest annual slowdown to 10% from the 11% growth seen in August, according to mortgage lender Nationwide.

The firm’s chief economist Robert Gardner said that house prices still remain around 13% higher than before the pandemic began.

Read the full story HERE.

It’s felt like an increasingly turbulent month for investors, but as the final trading day of September gets under way the FTSE 100 index is broadly unchanged on where it started.

The performance across the third quarter is 1% higher with the top flight 8% better off in the year-to-date after being helped by the TINA effect — there is no alternative — as shares remain attractive due to poor returns on cash and government bonds.

Deutsche Bank analyst Jim Reid said: “Markets are hobbling into the end of Q3 today even if they’ve seen some signs of stabilising over the last 24 hours.”

He noted that equities were showing signs of recovery as sovereign bond yields take a breather after being sent higher in recent sessions by expectations of tighter monetary policy in the UK and US.

Tech stocks continue to be under pressure as rising US bond yields create a drag on the value of high growth sectors. Wall Street’s Nasdaq closed slightly lower last night and the FANG+ index, whose nine-strong membership includes Facebook, Twitter, Tesla and Alibaba, declined by 0.7%.

A rush towards the US dollar has left sterling at its lowest level versus the greenback this year, having fallen to $1.34 yesterday amid pessimism about the UK economic outlook in a week when stagflation fears have come to the surface.

Sterling was little changed this morning, but with experts forecasting further declines.

Oanda’s Jeffrey Halley said there were range of explanations for US dollar buying, with markets increasingly pricing in a Federal Reserve move on the tapering of economic support and higher US yields, as well as hopes that a debt ceiling deal will be reached in Washington.

Halley said: “The US dollar may also be receiving inflows from haven buyers nervous about negative developments around the world.

“You could take your pick from any or all of that smorgasbord as a reason to buy US dollars, but when looked at in totality, you would struggle to find a reason to sell US dollars and perhaps that is part of the answer.”

CMC Markets analyst Michael Hewson added: “This uncertainty about the global outlook has prompted a rush into the US dollar, with the pound getting hit particularly hard over rising concerns about the economic outlook, which has prompted an unwinding in sterling long positions amid pessimism over the next 12 months.

“Recent events have also called into question whether the Bank of England would be able to raise rates, even if it were inclined to, especially if the economy were to slow sharply.”

Meanwhile, he expects the FTSE 100 index to open 20 points higher at 7,128.

London’s premier index more than reversed its Tuesday losses during trading yesterday as investors continue to balance the risks of surging energy prices, supply chain disruptions, and concerns about more persistent inflation.