FTSE 100 Live: US jobs report, Eurozone inflation soars, Shell launches $5.5bn buyback, bitcoin under pressure

·19-min read
 (ESI)
(ESI)

House prices rose by another 1.1% last month as the property market continues to defy expectations.

Today’s report from high street lender Halifax shows a new record average price of £276,091, representing a rise of over £24,500 or 9.8% during 2021. This is the strongest annual growth since July 2007, driven by a lack of available homes for sale and low mortgage rates.

On financial markets, the FTSE 100 index is experiencing a calmer session after falling 0.9% yesterday. However, US jobs figures due to be published later today have the potential to cause further turbulence.

FTSE 100 Live Friday

  • Average house prices rose 9.8% in 2021

  • Shell announces $5.5 billion buyback

  • FTSE 100 steady ahead of US jobs report

  • Eurozone inflation hits 5%

  • Bitcoin under pressure

FTSE 100 'an island of calm' as US indices in the red following jobs report

17:14 , Naomi Ackerman

The FTSE 100 index fell 0.9% yesterday, but today it has closed up 27 points, or 0.37%, at 7478, after a strong end to the day.

By contrast, over on Wall Street markets were turbulent following the release of closely-watched US jobs figures.

Data released by the Bureau of Labor Statistics revealed US employers added 199,000 jobs in December, well short of the over 400,000 predicted by economists.

Although this headline expectation was missed, the data also showed the US unemployment rate dropped again last month, and strong wage growth.

The figures increased expectations that the US Federal Reserve will raise interest rates for the first time since Covid hit.

After many fluctuations, by midday in New York the S&P 500 was down 13 points, or 0.27%, at 4683, and the tech-focused Nasdaq Composite was down 112 points, or 0.7%, at 14969.

(Long periods of low interest rates have helped lift the tech sector in recent years, and its stocks are sensitive to rate rises).

Chris Beauchamp, Chief Market Analyst at IG, said the FTSE 100 "appears once again to be an island of calm amid the panic".

He said: "Most indices are firmly in the red.

"This time it’s the sharp drop in the unemployment rate and the bounce in earnings [shown in the jobs report] that has caused the lurch lower in stocks. A Fed rate hike in March is now a very real possibility, thanks it seems to the rude health in which the US economy finds itself."

That’s all from us on the blog today. Join us again tomorrow for more market action.

‘The drug of cheap money is set to be withdrawn’

16:28 , Oscar Williams-Grut

The main story in markets this afternoon continues to be that US jobs report miss. Analysts think that the weaker than expected numbers won’t derail the Fed’s plans to hike rates as soon as March.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, says: “The realisation has dawned on investors that the drug of cheap money is set to be withdrawn a lot sooner than first forecast.”

Caleb Thibodeau at Validus Risk Management says: “There is certainly no reason for any trepidation on part of the Fed from this employment report. A strong unemployment rate and continued upward pressure in wages overshadow the miss in the headline today. Overall, the labour market is in good health and agrees with the Fed’s hawkish pivot.”

Aaron Anderson, SVP of research at Fisher Investments, says: “We look at monthly employment reports as important data, but short of wildly unexpected numbers they’re not very telling for where stocks go next.

“It’s important to remember that monthly payroll reports are lagging indicators that are largely already priced into stocks. The data can also be subject to large revisions, so investors need to be careful not to overreact one way or the other in the short term.

“Fixating on what December’s payroll report means for markets is a fool’s errand. These reports aren’t very useful for forecasting stocks – they’re lagging, not leading data.”

Rupert Thompson, Chief Investment Officer at Kingswood, said: “With unemployment falling and wage growth remaining high, the Fed should not be too worried by the disappointing employment gains and these numbers look unlikely to persuade the Fed to alter its tightening plans and current hawkish rhetoric.”

Analysts react to the US jobs report and missed forecasts

13:54 , Naomi Ackerman

Richard Flynn, Managing Director at Charles Schwab UK, said the report “may heighten investor caution”.

He pointed to the report’s confirmation of strong wage growth - a key input for high inflation.

Flynn said: “Investors’ uneasiness about inflation is justified, with the Consumer Price Index (CPI) well above the five-year average of its annual change.”

He added: “Looking ahead to 2022, it’s too early to tell for certain the impact that Omicron will have on the US economy. However, if the threat of future lockdowns fades, a more confident growth outlook may emerge, and along with it, a potential acceleration in the labour supply.”

US jobs report: Employment growth slows

13:49 , Naomi Ackerman

The anticipated latest US jobs report has just been published.

Data released by the Bureau of Labor Statistics revealed US employers added 199,000 jobs in December, well short of the over 400,000 predicted by economists.

There had been 249,000 positions created in November.

On the positive side, the report did reveal the US unemployment rate dropped again last month, decreasing 0.3 points to 3.9%.

Pay rises on the way at Sainsbury’s

13:36 , Joanna Bourke

Sainsbury’s has revealed new wage rises (PA Wire)
Sainsbury’s has revealed new wage rises (PA Wire)

Supermarket chain Sainsbury’s has become the latest retailer to announce pay rises, with basic hourly rates of at least £10 per hour coming in.

The FTSE 100 grocer, also behind Argos, said the hourly rate for store workers will rise from £9.50 to £10 an hour.

The increase in inner London is to £11.05 from £10.10, and to £10.50 from £9.75 in outer London.

Read the full story HERE.

Bitcoin down 10% this week

12:23 , Oscar Williams-Grut

The price of bitcoin continues to come under pressure amid a broader sell off for growth and risk assets.

Bitcoin is down 1.2% at $42,361 at typing time, its lowest level since September. The world’s biggest cryptocurrency is now down 10% since Monday.

Russ Mould, investment director at AJ Bell, says: “The extreme volatility in Bitcoin continues, as it falls to its lowest level since September at less than $41,000 having traded at a record high of $69,000 in November. Whatever the merits of the cryptocurrency such wild swings would preclude it from supplanting traditional currencies any time soon.”

Bitcoin has been caught up in a global sell-off for risky assets and growth assets after the US Federal Reserve signaled it was likely to raise interest rates at a quicker pace than previously anticipated. That will create opportunities for returns in less risky areas and should drive up the cost of capital for many businesses. That’s particularly bad for growth-focused tech companies, many of which rely on cheap funding to keep the party going.

Analysts at Bank of America said in a note this week that the “bubble in long duration tech, crypto, [and] leverage assets [is] simultaneously popping.”

Exscientia’s $5.2bn deal with Sanofi

11:54 , Simon Freeman

French drugmaker Sanofi has signed a deal worth up to $5.2 billion to use Oxford-based biotech Exscientia’s AI technology to develop 15 potential new cancer and immunology medicines.

Exscientia, which went public with a $510 million IPO on the Nasdaq last year, will get $100 million upfront plus milestone payments and royalties reaching up to 21% if a drug successfully reaches the market.

The company, which was backed early on by The Bill and Melinda Gates Foundation, deploys machine-learning to speed up the design and development of promising new therapies.

Founder and CEO Andrew Hopkins said testing AI-designed drug candidates against patient tissue models has the potential for improved accuracy over conventional approaches.

“When you consider the change this represents — testing candidates against actual human tissue years before a clinical trial — it’s transformative,” he said.

It came as AstraZeneca subsidiary Alexion signed a $730 million deal to develop, license and market Swiss firm Neurimmune’s heart drug NI006.

Shell must tread carefully as gas prices spike

11:48 , Oscar Williams-Grut

John F Kennedy once said: “In a crisis, be aware of the danger — but recognise the opportunity.”

For Shell CEO Ben van Beurden and his colleagues, the opposite might be true: when grasping opportunity, be aware of the danger.

The oil major today told investors that profits from its gas trading business were set to be “significantly higher” thanks to surging prices. In the same update, Shell announced plans to return another $5.5 billion to investors through a buyback.

The two are unrelated: the funds for the buyback come from the sale of its Texas oil business last year, not the gas bonanza. But management should be wary of the public conflating the two.

Read today’s City comment in full on Shell’s difficult balancing act.

Shell shells out

11:23 , Simon Freeman

Shell is to hand the remaining $5.5 billion (£4 billion) proceeds from the sale of its Permian Basin oilfields to investors “at pace” amid mounting pressure to accelerate a shift to clean energy.

The oil and gas major — which this week reclaimed its crown as the most valuable UK company with a £130 billion market cap — sold the 175,000 barrel-a-day US operation to Texas-based ConocoPhillips for $9.5 billion.

It will use $2.5 billion to shore up its balance sheet and distribute the remainder through a programme of share buybacks as it faces pressure from activist investors, pension funds and environmental campaigners.

In an update, the company also said its natural gas trading business had overcome supply chain snarl-ups which hit profits earlier in 2021 to post “significantly higher” earnings in the fourth quarter.

But its oil trading and refining unit is on track to post a loss, with earnings suffering the impact of Hurricane Ida in the Gulf of Mexico.

Shell is ditching its dual Anglo-Dutch listing and moving its HQ to London this year to simplify its structure. Shares rose 0.2% to 1,721p.

More inflation -- this time in Europe

11:21 , Oscar Williams-Grut

New Eurozone inflation data is out this morning and, yet again, it has overshot forecasts.

The consumer price index for December came in a 5%, against expectations of 4.7%.

Jesús Cabra Guisasola, senior associate at Validus Risk Management, said: “Some of the contributors for this increase can be found in the Spanish and Italian inflation figures which increased at the fastest pace in decades. Both economies reported inflation at 6.7% and 4.2% compared to a year ago, mainly driven by the surge in electricity prices which continue pushing households’ expenses up.“In contrast, Germany and France reported a slowdown in the inflation figures, with an increase of 5.7% and 3.4% in prices compared to a year ago, and down from the previous month’s 6% and 3.5%.“During last month meeting, Christine Lagarde mentioned that inflation is likely to remain elevated in the near term with a slowdown during 2022. Hence, we should not expect these mixed figures to change the dovish stance from the ECB in the coming months and continue with the plan of ending the net asset purchases under the emergency program by March.“The divergence between ECB and Fed’s policy stance could lead to the EUR continuing to depreciate versus the USD during 2022 if the Fed decides to deliver the three hikes that most market participants are currently pricing in before the end of the year.”

C&C shares down: Plan B ruins Magners firm’s Christmas

11:05 , Naomi Ackerman

Shares in C&C fell this morning after the Magners cider maker said key hospitality trade in December was "significantly impacted" by Plan B restrictions.

The Dublin-based group, which also makes Bulmers and Tennent's lager, said the month's performance fell behind expectations and warned that its second half operating profits "will be affected by the nature, extent and duration of government restrictions".

C&C has raised cash from investors since Covid hit, slashed costs and raised prices, and today said it has more than enough liquidity.

The FTSE 250 firm was performing well before the pandemic, with revenue for the 12 months to the end of February 2020 at €1.7 billion.

Analysts at Jefferies said they "are mindful that the external environment is volatile".

The company's stock fell 3%, or 6.9p, to 229.7p, this morning.

Used car market has ‘defied economics’, says Lookers boss

10:51 , Naomi Ackerman

Lookersboss today said the used car market boom has “defied economics“ and is likely to ease in the second half of 2022.

Mark Raban said the listed dealership is being “very cautious”, despite expecting record pre-tax profits for 2021.

He told the Standard: “The exam question is: How long is this going to continue for? We will certainly see this continue throughout the first half of the year, and I think it will start to ease generally as we get into the second half.

“What has been going on in the market has defied economics. Used car prices do not go up, they depreciate. It’s been very exceptional, so we are being very cautious.”

Global chip production has slowed amid supply chain and logistics issues in the pandemic, stalling production and supply of new cars.

Consumers face long wait times for new models and this, along with pandemic savings and wariness of public transport, has helped the used car market soar.

Read the full story here

Strong start to 2022 for IAG and Lloyds

10:31 , Graeme Evans

A new year has brought a dramatic change of fortunes for BA owner IAG and Lloyds Banking Group after their shares powered ahead in the first week of 2022.

The easing of travel restrictions and improved outlook for bookings means IAG has risen 12%, while Lloyds is 10% stronger as the City increasingly factors in a series of margins-enhancing UK interest rate hikes in 2022.

Lloyds shares today touched their highest level of the pandemic at 53.2p before settling 0.2p higher at 52.2p, while IAG drifted 1.8p at 159.7p in a lacklustre session.

The FTSE 100 index stood 2.74 points higher at 7453.13, with gains of 3% for mining giants BHP and Rio Tinto keeping the top flight in positive territory.

Fallers included discounter B&M, down 9.2p to 610p despite yesterday's strong Christmas update. Analysts at Deutsche Bank have a “sell“ rating and 560p target amid concerns about the subdued earnings outlook.

The FTSE 250 index fell 118.62 points to 23,297.20, with bakery chain Greggs off 4% or 124p to 2977p. Shares enjoyed a strong 2021 but are down sharply this week on CEO Roger Whiteside's retirement plans.

Shipping broker Clarkson led the FTSE 250 as it said stronger-than-expected trading will mean 2021 profits of at least £69 million. Shares rose 150p to 3970p but analysts at Liberum have a 4,600p target.

Clarkson, which brokers deals for the huge tankers that carry crude or for dry cargoes of iron ore or grain, has benefited from a rebound in trade volumes after 2020’s pandemic-induced recession as well as the impact of rising freight rates.

AJ Bell investment director Russ Mould reckons investors should keep a close eye on Clarkson even if they do not own the shares as about 85% of world trade is carried on ships, making the company a fair guide to global economic health.

Mould added: “ A strong economic upturn could yet prompt an imbalance between demand for ships and supply of them, boosting shipping rates and also demand for Clarkson’s broking, financing and data services.”

Air Partner also picked up speed due to strong freight demand, including for the transportation of vaccines. It upgraded its profits guidance on 17 December and did so again today, sending shares up 2p to 88p.

The cryptocurrency market has not fared so well in 2022 but bitcoin steadied at $42,501 after falling towards $40,000 overnight.

Aston Martin takes £15 million profit hit from delivery delays

09:33 , Oscar Williams-Grut

Aston Martin Lagonda has taken a £15 million hit from delays shipping its new Valkyrie sports cars.

The high-end auto company delivered just 10 of the new models in the final few months of 2021, which was fewer than planned.

CEO Tobias Moers blamed “supply chain challenges and huge complexity in the production ramp-up” but said Valkyrie production was now on track. He said there was “tremendous demand” for the cars, which Aston Martin claims are “as close as possible to a Formula One car without being restricted to the track”.

Valkyries are high margin and delivery delays mean full-year profits will suffer. Revenues should be in-line with forecasts thanks to overall shipments meaning targets.

The auto maker touted success in the luxury SUV market, where it now claims to have 20% market share after shipping just over 3,000 DBXs in the first full year of production.

Shares rose 21p, or 1.5%, to 1391p.

Read the full story.

Miners rally, Clarkson surges in FTSE 250

08:44 , Graeme Evans

A strong contribution from the mining sector means the FTSE 100 index is marginally into positive territory, up 5.42 points to 7455.79.

Iron ore miners BHP and Rio Tinto top the risers board after gains of 35.5p to 2280.5p and 86p to 5164p respectively.

There's also further cheer for Lloyds Banking Group shareholders after the lender rose another 0.35p to 52.35p, the highest level since the pandemic struck as the City increasingly factors in a series of UK interest rate hikes in 2022.

The FTSE 250 index stands 35.77 points lower at 23,381.15. Shipping broker Clarkson is up 4% or 160p to 3980p after it reported stronger than expected trading and forecast 2021 profits of at least £69 million.

Rates outlook hits Nasdaq

08:18 , Graeme Evans

Wall Street expects the addition of around 400,000 US jobs in December and for the unemployment rate to reduce slightly to 4.1%. November’s result of 210,000 was significantly lower than expected, so a bounce back is expected.

Richard Hunter, head of markets at Interactive Investor, said a strong number could give the green light for earlier than expected interest rate rises in the US if the Federal Reserve believes full employment is close to being achieved.

This prospect has led to selling pressure on the Nasdaq, which is down by over 3.5% after the first four days of trading.

Hunter said: “With many of the larger tech companies trading at extremely high valuations given future growth prospects, these stocks are particularly sensitive to a rising interest rate environment.

“At the same time, interest rates should settle at a relatively low level by historical standards, which in turn could provide some future relief to the sector.”

The IPOs to watch out for in 2022: Monzo, BrewDog and more

08:16 , Joanna Bourke

After a record 2021 for IPOs in the UK, when more companies went public than in the whole of 2020 and 2019 combined, eyes now turn to which businesses will join the stock market in 2022.

Although the IPO pipeline for 2022 is reasonably strong, 2021 will be a hard act to follow,” says Susannah Streeter, senior investment analyst at stock broker Hargreaves Lansdown.

Read more HERE.

Halifax: The average UK house price gained more than £24,500 last year

08:12 , Joanna Bourke

An estate agent’s sold sign outside a property (Chris Ison/PA) (PA Wire)
An estate agent’s sold sign outside a property (Chris Ison/PA) (PA Wire)

The race for space seen during the pandemic continued last month, with the average UK house price gaining more than £24,500 in 2021.

Halifax said typical house prices reached a record £276,091 in December, which was up 9.8%, or £24,537, from the £251,554, achieved a year earlier.

That marked the strongest year-on-year cash rise since March 2003, the mortgage lender added. In London prices rose 2.1% over the year to £525,351.

But growth is expected to slow this year as more normal market conditions start to return.

Read more HERE.

Shell launches new share buyback ‘at pace'

07:42 , Oscar Williams-Grut

Shell has used its first UK board meeting since voting to ditch the Netherlands as its HQ to vote through huge windfall for shareholders.

Investors are set to get $5.5 billion through a share buyback, funded through the recent sale of its Permian business in the US for $9.5 billion. The buyback will happen “at pace” and comes after an initial $1.5 billion from the sale was returned to shareholders through a buyback last month.

Shell overtook AstraZeneca this week to once again become the biggest FTSE 100 company, benefitting from the buyback blitz.

All eyes on US jobs report

07:35 , Graeme Evans

The release of December's US payrolls report means investors can expect another jittery session after the turbulence triggered by Wednesday's Federal Reserve minutes.

With Omicron spreading across the US and weekly jobless claims edging up from their lowest levels in 1969, there is a risk that today's report could disappoint.

November's figure showed the unemployment rate falling back to 4.2% from 4.6% and the participation rate up to 61.8% as more people returned to the workforce.

The headline number for payrolls growth came in below expectations at 210,000, but there's a chance this figure could be revised higher in today's report.

November's result prompted Federal Reserve policymakers to accelerate the winding back of their asset purchase scheme, although minutes released on Wednesday also pointed to the potential need for an earlier-than-expected hikes in interest rates.

The comments from the Fed's December meeting spooked Wall Street as bond yields rose and put pressure on high growth tech stocks. US markets finished lower last night, despite a more resilient pattern of trading earlier in the session.

The FTSE 100 index fell by 0.9% yesterday but is still higher so far in 2022. CMC Markets predicts the top flight index will today open unchanged at 7450.

Oanda's senior market analyst Jeffrey Halley added: “Lots of noise, but little substance probably describes the last 24 hours in global markets.”

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