- FTSE 100 gains 71 points
- Scottish Mortgage in demand
- Vodafone among the losers
4.45pm: February boost
The FTSE 100 had a good first session of the new month, rising 71.41 points, or nearly 1.0% higher to finish at 7,535.78 points.
Its counterparts on Wall Street weren't faring quite so well.
"A stumble on the open for Wall Street has only slightly diminished what is another broadly positive day for equity markets," Chris Beauchamp, chief market analyst at online trading platform IG said in a Tuesday note.
“Wall Street looks a bit exhausted after two back-to-back sessions of big gains, but this should be a passing phase, and is compensated for by the bounce in Europe.”
3.55pm: Miners give UK market strong support
It looks like leading shares are starting the new month on a positive footing.
After adding 1.1% in January, the FTSE 100 is up 63.79 points or 0.85% to 7528.16 on the first day of February.
Miners are among the leading risers, helped by fairly positive news from the global manufacturing PMIs.
Fresnillo PLC (LSE:FRES) is up 4.16%, Anglo American PLC (LSE:AAL) has added 3.02% and Antofagasta PLC (LSE:ANTO) is up 2.66%.
Rio Tinto PLC (LSE:RIO) has risen 3.01% despite what it admitted was a disturbing report into its workplace culture.
Russ Mould at AJ Bell said: "“The revelations about the workplace culture at Rio Tinto are genuinely jaw dropping – they tick about all the negative boxes you can find. Sexual assaults and harassment, racism and bullying.
“In that context an increase in the share price in response looks a little odd, but perhaps it reflects market appreciation for Rio at least fronting up and taking the bull by the horns when it comes to fixing these deep-rooted problems."
Elsewhere Vodafone Group PLC (LSE:VOD) has fallen 1.55% after recent excitement caused by the presence of an activist investor on its share register, while BT Group PLC (LSE:BT.A) is down 1.33%.
3.05pm: US factories see weaker growth in January
The US economy has made a subdued start to the year.
The manufacturing PMI fell to 57.6 in January, down from 58.7 in December according to the Institute of Supply Management.
This was higher than the expected reading of 57.5, but still marked the weakest reading since December 2020
Earlier PMI data from IHS Markit told the same story.
The headline figure dropped from 57.7 in December to 55.5 last month to the lowest since October 2020, although this was better than the inital estimate of 55.
Chris Williamson, chief business economist at IHS Markit said: “The Omicron outbreak has hit manufacturing hard, exacerbating existing headwinds by subduing demand, creating further supply chain issues and causing widespread staff shortages, often through absenteeism due to the surge in COVID-19 infections. The steep downturn in the survey data are indicative of manufacturing production falling in January."
2.54pm: Jittery start to the month for US markets
US markets have started mixed and jittery in New York on the first day of the new month.
The Dow Jones Industrial Average added around 37 points at 35,168 in early deals.
The S&P 500 added around one point at 4,516. The tech-laden Nasdaq though dropped 16 points to stand at 14,223.
It comes after January this year was the worst trading month for the S&P and Nasdaq since March, 2020, when the pandemic took hold.
Traders were put off stocks last month as they tried to digest the implications of the US central bank's shift towards tightening this year.
On the corporate front, oiler Exxon Mobil Corporation (NYSE:XOM) today saw its shares add over 2% as it reported it had earned $2.05 per share in its fourth quarter, beating consensus of $1.93. Revenue fell below Wall Street forecasts, while Exxon also announced a new $10bn stock buyback program.
United Parcel Service (NYSE:UPS) shares gained over 13% after the multinational shipping titan beat estimates with its quarterly results, issued upbeat guidance and unveiled a 49% dividend increase.
Back in the UK, and the FTSE 100 remains relentlessly positive.
The leading index is currently up 68.27 points or 0.91% at 7532.64.
2.15pm: Is January's tentative start for UK market a sign of things to come?
The FTSE 100 may have climbed 1.1% last month but the FTSE All Share has been a bit more negative.
Could this signal where the rest of the year is going, given that we are now in a period when interest rates are set to keep rising as central banks act to deal with inflationary pressures?
Russ Mould, investment director at AJ Bell, said: “There is an old stock market saying that ‘so goes January, so goes the year,’ so the tentative start to 2022 may have some investors wondering quite what may be coming next, as the FTSE All-Share fell by 0.4% in January.
“However, it would be wrong to write off 2022 as bad job just yet. That was the index’s sixth January fall in seven years and the All-Share generated healthy capital returns in 2016, 2017, 2019 and 2021 so perhaps investors are better off focusing on the fundamental issues of profit and cash flow growth, dividend yield and earnings cover and above all valuation rather than quirks of the calendar when it comes to designing their portfolio for the year – and years – ahead."
The UK market is notably lacking in the big technology stocks that have been falling in the US in recent times.
So it is likely to continue to benefit as investors move back into more defensive areas with guaranteed earnings now rather than at some point in the future.
Mould said: "Thanks to the oils, miners and banks who populate the FTSE 100 in particular, the All-Share has a leaning toward sectors for whom inflation is not necessarily a bad thing, at least from an investment point of view, as demand for real rather than paper assets could help the commodities plays and a steeper yield curve may boost net lending margins at the financials (even if a careful eye must be kept on loan loss provisions). All three areas can be seen as value, cyclical plays on an economic recovery which may be able to offer earnings growth today."
1.41pm: UK markets on the rise
Leading shares continue on their merry way higher.
The FTSE 100 is up 77.13 points or 1.03% at 7541.5.
Meanwhile the mid-cap FTSE 250 is doing even better, climbing 1.47% to 22,249.
11.59am: US markets to pause for breath
US stocks look set to edge lower on the first session of February following a surprisingly strong end to the turbulent previous month, as investors await manufacturing data and earnings from more big-name companies.
Futures for the blue-chip Dow Jones Industrial Average futures were 0.3% lower, as were contracts for the tech-laden Nasdaq-100, while those for the broader S&P 500 index shed 0.4%.
Traders are hoping that the volatile market performance seen in January - which was the S&P 500’s worst month since March 2020 - can be put behind them. Markets slumped last month as investors worried that the Federal Reserve is getting set to tighten policy just as economic growth seems to be slowing.
On the economic front the latest Institute of Supply Management survey is expected to show US factory activity continued to rise in January, but at a moderating pace.
Investors are looking to earnings for some clarity on the impact of heightened inflation and lingering coronavirus (COVID-19) pandemic.
Among companies reporting results, Alphabet is set to post earnings after the market closes, alongside General Motors, PayPal and Starbucks.
Peter Garnry, head of equity strategy at Saxo Bank said: "The Nasdaq 100 has seen earnings per share grow 5% quarter on quarter in the fourth quarter and revenue increase by 16.7% compared to a year ago highlighting that US technology companies still offer a rare pocket of high growth.
"Equity valuations on Nasdaq 100 companies are still elevated and the overall downside risks persist in US equities due to tightening financial conditions, but the earnings season is showing why the US technology sector still has a place in the portfolio during inflation."
Back in the UK, the FTSE 100 is now up 72.97 points or 0.98% at 7537.34, just shy of its high for the day.
11.50am: UK mortgage approvals rise
More signs of the strength in the UK housing market, following the Nationwide survey earlier.
Mortgage approvals for house purchase - an indicator of future borrowing - rose to 71,000 in December, above the 12-month average up to February 2020 of 66,700, according to the latest Bank of England figures.
Approvals for remortgaging (which only capture remortgaging with a different lender) rose slightly to 44,900 in December.
Net borrowing of mortgage debt by individuals amounted to £3.6bn in December, down from £3.8bn in November.
Iain Swatton, head of intermediaries at the mortgage switching platform Dashly, said: "There's still a significant amount of demand for property, and this is reflected in the fact that approvals nudged up slightly in December. Remortgage activity is also strong, as people seek to lock into lower rates ahead of potentially several interest rate increases this year.
"The property and mortgage markets are facing headwinds in the form of inflation and rate rises, but people are still out to move into different types of home often further away from where they work following the pandemic. The race for space and the new WFH culture will continue to drive transactions in 2022."
10.42am: Scottish Mortgage leads the way
Leading shares remain in a positive mood after the latest UK housing and manufacturing figures.
The FTSE 100 is off its best levels but still well ahead, adding 57.63 points or 0.77% to 7522.
Tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT) is now the biggest riser, up 2.97% after a strong rebound on Nasdaq.
“Like a prize fighter on the ropes, the US tech sector produced a stunning fightback overnight and helped provide a positive cue for European markets this morning,” said AJ Bell investment director Russ Mould.
Data firm Experian (LSE:EXPN) is also on the way up, adding 2.34%.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said: "Big data and payments firms had been on the receiving end of the severe case of the jitters, but a bout of bargain hunting has helped restore value with information analytics firm Experian (LSE:EXPN) another top gainer on the FTSE 100."
9.43am: UK manufacturers see growth despite Omicron
UK factories saw reasonable growth in January although marginally less than in the previous month.
The final reading of the IHS Markit/CIPS manufacturing PMI came in at 57.3, down from 57.9 in December but above the initial estimate of 56.9.
Markit said UK manufacturing output grew at the fastest pace for six months and employment strengthened, as companies responded to improved new order intakes, rising backlogs of work and addressed shortfalls in capacity.
It said the marginal dip in the headline index reflected slower growth of new orders and a further easing in the rate of increase in vendor lead times.
Rob Dobson, director at IHS Markit, said: “UK manufacturing made a solid start to 2022, showing encouraging resilience on the face of the Omicron wave, with growth of output accelerating as companies reported fewer supply delays.
"Causes for concern remain, however, as new orders growth slowed, exports barely rose, staff absenteeism remained high and manufacturers' ongoing caution regarding supply chain disruptions led to the beefing up of safety stocks.
“There was some positive news on the supply chains front. Although pressure on vendors remains severe, and still sufficient to stymie output growth and cause difficulty in obtaining required inputs, supplier lead times lengthened to the lowest degree since November 2020 to suggest that the current period of abnormal stress has hopefully passed its peak, despite the surge in cases linked to Omicron.
"This also lessened the upward pressure on prices, with input costs and output charges both rising at less elevated rates in January.”
But Duncan Brock, CIPS group director said price inflation remained "at stomach-churning levels."
He said: "Prices rose for another month and every month for the last two years as higher food, energy and material prices continue to act as a drag on business costs and recovery in the UK marketplace.”
Earlier Eurozone factories also made a good start to the year.
The region's manufacturing PMI came in at 58.7 in January, up from 58 in December albeit a little below the initial estimate of 59.
The Eurozone manufacturing sector strengthened at the start of 2022, with the #PMI up to a 5-month high despite the #Omicron wave. Production, new orders and employment all rose at faster rates, while input cost inflation eased to a 9-month low. Read more: https://t.co/N2EloAMMyt pic.twitter.com/GDyX2Ofunt
— IHS Markit PMI™ (@IHSMarkitPMI) February 1, 2022
9.15am: Vodafone turns lower
After a strong gain for Vodafone Group PLC (LSE:VOD) on Monday following news that active investor Cervian Capital had taken a stake, the mobile phone group has come back to earth.
Its shares are down 2.06%, making it the biggest faller in the FTSE 100 ahead of its third quarter trading update tomorrow.
But that has not stopped the leading index from remaining positive, and it is now up 64.17 points or 0.86% at 7528.54.
8.34am: Grocery sales drop and prices rise, says Kantar
UK consumers face paying an extra £180 a year for their shopping basket, according to research firm Kantar.
In its latest report on the grocery sector it said price inflation was 3.8% in January, a 0.3 percentage point rise from December.
Fraser McKevitt, head of retail and consumer insight at Kantar, says: “Prices are rising on many fronts, and the weekly shop is no exception. Like-for-like grocery price inflation, which assumes that shoppers buy exactly the same products this year as they did last year, increased again this month. Taken over the course of a 12-month period, this 3.8% rise in prices could add an extra £180 to the average household’s annual grocery bill. We’re now likely to see shoppers striving to keep costs down by searching for cheaper products and promotions. Supermarkets that can offer the best value stand to win the biggest slice of spend.”
Supermarket sales fell by 3.8% over the 12 weeks to 23 January 2022, said Kantar, reflecting tough comparisons against the high demand of the lockdowns at the start of 2021.
Online purchases were down year-on-year by 15%, although this is in comparison with the strict lockdown we faced in January 2021 when the public was staying indoors when possible.
Only three retailers recorded year-on-year growth in the 12 weeks, those being Ocado Group PLC (LSE:OCDO), up 2.3%, as well as Lidl (up 1.2%) and Aldi (up 1.1%).
Tesco PLC (LSE:TSCO) saw a 1.9% fall but moved its market share up from 27.3% last year to 27.9%.
J Sainsbury PLC (LSE:SBRY) sales were down 4.8% but Morrisons saw the biggest decline, down 8.5%.
8.22am: Positive start to the month for leading shares
Ahead of the latest snapshot of the major economies in the form of manufacturing reports for January, leading shares are heading higher.
In a good start to the month, the FTSE 100 is up 68.18 points or 0.91% at 7532.55 in early trading.
Miners are among the leading risers, with Anglo American PLC (LSE:AAL) adding 2.18% and Rio Tinto PLC (LSE:RIO) rising 2.06%.
Following the strong peformance on the Nasdaq in New York, the tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT) is 2.04% better.
Meanwhile all eyes will be on the final manufacturing purchasing managers index for January.
According to an intial estimate, the index slipped to 56.9 points last month, from 57.9 in December,
7.52am: House prices jump 11.2% annually in January
The boom in the UK housing market continues, with the strongest start to the year since 2005.
According to the Nationwide, annual house price growth increased to 11.2% in January, from 10.4% in December, with the average price up to £255,556 from £254,822.
The monthly change was 0.8% compared to 1.1% in December.
Robert Gardner, Nationwide's Chief Economist, said: "Annual house price growth accelerated to 11.2% in January, the strongest pace since June last year, and the strongest start to the year for 17 years. Prices rose by 0.8% month-on-month, after taking account of seasonal effects, the sixth consecutive monthly increase.
“Housing demand has remained robust. Mortgage approvals for house purchase have continued to run slightly above pre-pandemic levels, despite the surge in activity in 2021 as a result of the stamp duty holiday, which encouraged buyers to bring forward their transactions to avoid additional tax."
But will the surge continue, especially with the recent rise in UK interest rates and another move higher expected this week.
Gardner said: “While the outlook remains uncertain, it is likely that the housing market will slow this year. House price growth has outstripped earnings growth by a wide margin since the pandemic struck and, as a result, housing affordability has become less favourable.
“For example, a 10% deposit on a typical first-time buyer home is now equivalent to 56% of total gross annual earnings, a record high. Similarly, a typical mortgage payment as a share of take-home pay is now above the long run average, despite mortgage rates remaining close to all-time lows...
“High inflation and growing confidence that the Omicron variant will not derail the wider economic recovery has led to increased expectations that policymakers will increase interest rates further in the months ahead. This will further reduce housing affordability if it feeds through to higher mortgage rates, although to date a significant proportion of the rise in longer term interest rates seen in recent months has been absorbed by lenders.”
6.50am: Markets set to remain buoyant
The FTSE 100 is set for a strong start on Tuesday as we begin a new month, with the London index a rarity in world markets for still being in positive territory since the start of the year.
After celebrating its second positive month in succession, the benchmark is predicted to rise 42 points at the open, having started the week with a 1.7-point decline.
Today's focus, as we begin the new month of February, will be on the latest manufacturing PMI surveys, as well as UK lending data from the Bank of England ahead of its meeting in two day's time.
Overnight, US stocks finished the month in never-say-die fashion, led by a barnstorming fightback for the recently wobbling Nasdaq, which jumped 3.4%, followed by the S&P 500’s 1.9% gain and a rise of 1.2% for the Dow Jones.
It was not enough to prevent it from being the Nasdaq’s biggest monthly loss since the initial pandemic-panic of March 2020, while European stocks endured their worst month since October 2020.
The ups and down can be explained by continued uncertainty over the glide path for monetary tightening by central banks, in particular the US Federal Reserve, said Michael Hewson at CMC Markets, with incessant speculation about the number of possible rate hikes we might get to see this year.
“The consensus now appears to be between four or five, although some forecasts have come in as high as 7, as we get the equivalent of rate hike bingo to see who can outdo each other when it comes to forecasts.
“While bond markets continue to get buffeted by all manner of forecasts, the reality is we’ll probably be lucky to see three rate rises, but it's always fun to spin the roulette wheel of speculation.”
As to whether stock markets can fall much further, David Grosvenor, director of macro strategy at Oxford Economics, said the drawdown “may have a bit further to go as investors grapple with a more hawkish Fed and slowing earnings momentum.
“However, we do not think it is the beginnings of a new bear market and we remain modestly overweight on global equities over our tactical horizon, albeit with a relative underweight on the growth-heavy U.S. market.”
6.50am: Early Markets - Asia / Australia
Asia-Pacific shares rose as markets in mainland China, Hong Kong, South Korea and Singapore were closed for a holiday.
The Nikkei in Japan gained 0.28% while Hong Kong’s Hang Seng index surged 1.07%.
Australia’s S&P/ASX200 closed 0.49% higher at 7006 points after the country’s central bank said it was still too early to discuss rate increases.
RBA governor Philip Lowe said: “As the board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.
“While inflation has picked up, it is too early to conclude that it is sustainably within the target band.”