Wall Street and FTSE rise as traders weigh up US jobs data and Middle East conflict

Well that’s all for today, thanks for following along.

Be sure to join us again tomorrow when we’ll be back for more of the latest market news and all that’s happening across the global economy.

Until then, have a good evening.

Financial markets are in danger of suffering a “sharp correction” that triggers a credit crunch in the UK, the Bank of England has warned.

Policymakers said a sudden crash risked driving up the cost of borrowing for households and businesses.

It comes against a backdrop of concerns about economic growth, escalating tensions in the Middle East and $1 trillion of bets against US bonds ahead of November’s election.

However, the Financial Policy Committee (FPC) led by governor Andrew Bailey also said falling interest rates would soften the blow for roughly 3 million households on fixed-rate mortgages who are yet to refinance on to more expensive deals.

The FPC warned that share price valuations remained “stretched”, adding: “Markets remain susceptible to a sharp correction, which could affect the cost and availability of credit to UK households and businesses.”

France plans around €60bn (£50bn) of spending cuts and tax rises next year as Michel Barnier battles to take control of its widening budget deficit.

The Telegraph has the details..

Finance minister Antoine Armand insisted the measures would be targeted at high-income groups and limited in time, a day after France’s new prime minister pledged to tackle the country’s “colossal” debt.

Government officials told the AFP that savings are required to bring the budget shortfall to 5% of economic output from around 6.1% this year.

Slightly more than two-thirds of the total will come from spending cuts across ministries, with just under €20bn will be generated by temporary tax increases.

Armand said:

And sticking with results from US companies…

Tesla marginally missed expectations for the number of deliveries of electric cars in its third quarter.

It delivered 463,000 vehicles in the July-to-September period, compared to the 469,000 average expected by analysts polled by London Stock Exchange Group.

Wall Street on average had expected the carmarker to deliver 469,828 vehicles.

The figures mean that Tesla will have to manage 516,000 deliveries in the fourth quarter to match last year’s total of 1.81 million.

Shares in Nike (NKE) slid as much as 8% on Wednesday on the back of the sportswear brand reporting fiscal first-quarter revenues that missed estimates.

Nike posted revenues of $11.59bn (£8.72bn), which fell short of analyst estimates of $11.65bn and was also 10% lower compared to the same period last year.

While the company reported first-quarter earnings per share of $0.70, which beat Wall Street estimates of $0.52, this was still 26% lower than last year.

Nike also withdrew its full-year guidance and said it was postponing its investor day, amid the transition of CEO, as Elliot Hill is set to replace John Donahoe on 14 October.

“A comeback at this scale takes time, and while there are some early wins, we have yet to turn the corner,” Nike CFO Matthew Friend said on the company’s earnings call Tuesday night.

Dan Coatsworth, investment analyst at AJ Bell, said:

US hiring increased more than expected in September, with 143,000 jobs created in the private sector according to the latest data from employment agency ADP. It was more than the 125,000 predicted by analysts.

Job creation showed a widespread rebound after a five-month slowdown, with the manufacturing sector adding staff for the first time since April.

It compared with 99,000 new jobs in August, according to ADP’s data.

The ADP numbers are a precursor to the closely followed non-farm payrolls data, which show the pace of job creation in the US economy. The non-farms are vital to the Federal Reserve’s monetary policy judgements, as the central bank considers when to cut interest rates.

Nela Richardson, chief economist at ADP, said:

Here’s a quick look at what’s happening in equity markets today…

• Asia-focused Prudential (PRU.L) was the standout performer on the FTSE 100, likely still boosted by the round of stimulus measures announced by China last week.

• Oil giants BP (BP.L) and Shell (SHEL.L) were among the top gainers on the FTSE 100, while heavily-weighted miners also advanced, with Rio (RIO.L), Anglo American (AAL.L), Glencore (GLEN.L) and Antofagasta (ANTO.L) all up.

• Defence firms BAE Systems (BA.L) and Babcock (BAB.L) were also in the black amid escalations in the Middle East.

• Saga (SAGA.L) surged after it confirmed it is in talks with Belgian insurer Ageas about a potential partnership arrangement for its insurance business.

• On the downside, JD Sports Fashion (JD.L) slumped as it held annual guidance after delivering a 2% rise in half-year profit despite what it called a “volatile market”. The company reported profit before tax and adjusting items of £405.6m for the six months to 3 August, compared with £398m a year earlier. Revenue jumped 5.2% to £5bn. The JD share price decline was likely due to negative read-across from Nike (NKE), whose shares fell sharply after the sportswear retailer withdrew its annual revenue forecast and posted a 10% drop in first-quarter revenue.

UK motorists might be heading towards higher petrol and diesel prices when they fill up the tank in a couple of weeks as oil prices surged amid rising tensions in the Middle East, a situation that could lead to the cost of everyday goods jumping.

Currently the fuel prices in the UK are 134.79p for petrol and 139.36p for diesel, according to figures from RAC.

At the moment, the cost of filling a 55-litre family car is almost £4 cheaper than a month ago. Average prices for petrol and diesel across UK forecourts are nearly 7p per litre cheaper than a month ago, sinking to their lowest level in almost three years.

Global markets are on edge as they asses the sudden escalation in Middle East tensions, but investors are being urged to remain calm, stay invested, and ensure their portfolios are diversified.

Iran’s missile strikes against Israel, in retaliation for the killing of Hezbollah leader Hassan Nasrallah, have heightened fears of a broader regional conflict.

MSCI’s global equities index registered losses on the news.

Nigel Green, the CEO of deVere Group, said:

“Yields on US Treasuries and other government bonds are likely to fall as demand increases, pushing prices higher. US Treasuries, in particular, are seen as one of the safest places to park money during times of geopolitical turmoil, and this trend is expected to continue as tensions flare.”

Global stock markets are expected to face increased volatility in the coming days as the situation evolves.

The UK’s credit reporting system is under fire for being confusing, error-prone, and lacking transparency, as Which? is urging for reforms.

The consumer advocacy group said “people are being left out of pocket and in the dark because a credit report system that is confusing and riddled with errors lacks transparency and accountability”.

Which? added that errors on credit reports are leaving individuals financially vulnerable, with many consumers unaware of mistakes until it is too late.

A survey conducted by the consumer body of more than 4,000 people found that one in three respondents (32%) who checked their credit report discovered inaccuracies. These mistakes could result in being denied financial products or even being refused a mortgage, potentially derailing major life plans.

While correcting these errors should be a straightforward process, Which? found that most consumers end up doing the bulk of the work themselves. Under the current system, consumers must notify their credit reference agency (CRA) of errors, which are then marked as in dispute while the CRA contacts the lender. However, many told Which? that this process was anything but simple.

Read the full article here

Starling Bank has been fined £29m by the UK’s financial watchdog for failings over its financial crime controls, which the regulator described as “shockingly lax”.

The Financial Conduct Authority (FCA) said the challenger bank also repeatedly breached a requirement not to open accounts for high-risk customers.

It said Starling grew quickly, from approximately 43,000 customers in 2017 to 3.6 million in 2023, but measures to tackle financial crime “did not keep pace with its growth”.

It said it identified “serious concerns with the anti-money laundering and sanctions framework” at the bank.

Therese Chambers, joint executive director of enforcement at the FCA, said:

Eurozone unemployment remained at 6.4% in August, new data has confirmed.

This is a continued record low, despite a weakening economy, however, economists expect the rate to increase in the coming months.

Bert Colijn, chief economist at ING, a Dutch investment bank, said:

Saga (SAGA.L) has confirmed it is in talks with Belgian firm Ageas over a tie-up for its insurance arm as the company looks to reduce debt.

Shares at the over-50s group rose more than 12% in early trading in London after it said the firms are in discussions over a “potential partnership arrangement”.

A deal is not guaranteed however, and a further announcement will be made in “due course”, it said.

In March, European insurance giant Ageas abandoned an attempt to buy Direct Line Group after its proposals were repeatedly rebuffed.

JD Sports (JD.L) has said that its UK business has been hit by falling sales after disruption in the Red Sea stalled deliveries and the cold wet spring reduced demand for camping kit and clothing.

Sales at the retail group were down 5.3% in the six months to 3 August as “key product lines” had been delayed by Houthi attacks off Yemen delaying or rerouting shipping.

The early date of Easter also fell outside the camping season for the first time since 2018, which added to poor weather woes which reduced demand for seasonal outdoor living products such as tents and camping equipment.

It posted a 6.8% rise in total revenues to £5bn over the 26 weeks to August, compared with the prior year and at constant currency rates.

Compared like-for-like, which strips out the impact of new store openings in the latest period, sales edged up by 0.7%.

Global stock markets are now entering what is set to be an eventful fourth quarter, with the US election and more interest rate decisions looming.

Markets continued to rally to round off a strong end to the third quarter, with the S&P 500 (^GSPC) closing at a new record high on Monday.

However, US stocks fell on Tuesday, as investors digested the latest jobs and manufacturing data, as well as comments from Federal Reserve chairman Jerome Powell, who said policymakers aren’t in a hurry to lower rates.

This tempered traders’ bets of another 0.5% interest rate cut, after the Fed recently announced its first rate reduction in four years, lowering its range by a bigger-than-expected 50 basis points.

The European Central Bank also made its second 25 basis-point rate cut of the year in September. And while the Bank of England kept rates on hold at its latest meeting, it had already announced a rate reduction in August, with markets betting on a next cut in November.

Keeping an eye on central bank policy decisions and monitoring how effectively rate setters can navigate a “soft-landing” for the economy, as more jobs and inflation data are released, is one focus for asset managers and market strategists in the fourth quarter.

But the major market event on their minds is the US presidential election on 5 November. With the outcome of this still unclear, the theory is that many investors decide to “move to the sidelines” in the run-up to that date and await more clarity.

Find out more here

Online electricals retailer AO World (AO.L) has agreed a takeover of musicMagpie (MMAG.L) in a deal worth around £10m.

AO World said it will pay 9.07p a share in cash for the Stockport-based business, which buys and sells refurbished electronics and used computer games, consoles, books, films and music.

AO World founder and chief executive John Roberts said adding a “top-tier trade-in service” is “essential” for the group.

The deal is expected to complete in the first quarter of next year.

The latest Trade Costs Index by HaMuch, the best place to find the country’s best tradespeople, reveals that the average hourly cost of hiring a tradesperson has increased by 2% in the past three months alone,

However, boiler engineers are now briefly available at a more affordable price.

The most recent Index reveals that: –

• On average, the hourly cost of a tradesperson in Q3 2024 stands at £32. This is an increase of 2% compared to Q2’s average rate of £31 per hour.

• However, some trades have implemented a much more significant bump to their hourly rate over the past three months.

• The profession to increase their rate the most is electricians. In Q2, the average hourly cost of an electrician was £32, but in Q3, that cost rose to £35, a quarterly increase of +9.1%.

• Following a +7% increase over the past three months, locksmiths now command the highest rate of all trades people at an average of £45 per hour.

• Meanwhile, roofers now charge an average of £29 per hour after an increase of +4.9%, while painter-decorators (+4.2%), builders (+2.9%), and plasterers (+1.5%) have also implemented rate increases since Q2.

• However, there are two areas of the trades to have actually reduced their average rate over the past three months.

• Carpenters/joiners now charge an average hourly rate of £27 which is -2.3% below the average Q2 charge of £28 per hour.

• The biggest price drop has come from plumbers and heating engineers.

• In Q2, an average rate of £45 per hour made plumbers and heating engineers the highest paid of all tradespeople, but following a quarterly decrease of -8.1%, they now charge an average of £41 per hour, which means a boiler engineer is now more affordable than a locksmith.

Investors are flocking to safer assets on the back of the rising tension in the Middle East, pushing US Treasury bond yields down while gold hovers near record high.

The US dollar also traded close to its strongest in nearly three weeks against the pound and the euro.

Charu Chanana, a strategist at Saxo Capital Markets, said:

Gold (GC=F) has rallied nearly 30% this year so far, hitting a series of record highs in the process, mainly in anticipation of interest rate cuts by global central banks.

Oil prices surged almost 4%, before pulling back slightly, after the largest intra-day move since April 2023.

It comes as investors around the world are weighing the risk of threats to energy supplies after Iran’s missile attack on Israel threatened to escalate the Middle East conflict.

The Israeli prime minister has vowed to retaliate after Tehran fired a wave of at least 180 missiles at Israeli cities in the centre and south of the country yesterday.

BP (BP.L) and Shell (SHEL.L) were among the top gainers on London’s FTSE 100 index, thanks to the higher oil (BZ=F) prices, both rising around 2.8%.

TotalEnergies (TTE.PA), France’s oil supermajor, rose by 3% after opening, while Italy’s Eni (ENI.MI) gained 2.5%.

Mohit Kumar, chief economist for Europe at investment bank Jefferies, said:

Investors are weighing up whether Israel will respond directly to Iran, while Israeli forces continued to strike Beirut, Lebanon’s capital. Israel has also been fighting in Gaza, to its west, for almost a year after the attacks by Hamas on 7 October last year.

Stocks in Asia were mixed overnight amid the sharp escalation of tensions in the Middle East.

The Nikkei (^N225) slipped 2.1% on the day in Japan, continuing a retreat since the ruling Liberal Democratic Party chose Shigeru Ishiba to lead the government.

Meanwhile, the Hang Seng (^HSI) was more than 6% higher in Hong Kong, riding a wave of investor enthusiasm over recent moves by Beijing to rev up the Chinese economy.

But regional trading was thin, with the Shanghai Composite (000001.SS) and mainland Chinese markets closed for a weeklong national holiday.

Oil prices extended gains after Iran fired dozens of missiles into Israel, potentially raising the risk of disruptions to supplies.

Across the pond on Wall Street, the S&P 500 (^GSPC) fell 0.9% to 5,708.75 as news from the Middle East overshadowed an upbeat report showing US job openings rose unexpectedly in August.

Despite the American jobs market continuing to show resilience, the tech-heavy Nasdaq (^IXIC) fell 1.5% on the day to 17,910.36 and the Dow Jones (^DJI) finished 0.4% lower

In the bond market, the yield on 10-year US Treasury notes fell to 3.74% from 3.78% late on Tuesday.