• FTSE 100 ends 9 points lower
• US stocks weak but ease off worst
• Target warning unnerves retailers

4.50pm: Footsie almost flat

The FTSE 100 index ended modestly lower on Tuesday, with earlier bigger falls reduced in the afternoon as Wall Street also eased off opening lows although investors retained their caution over inflation and global growth ahead of US CPI numbers due at the end of this week.

At the close, the UK blue-chip index was down 9.29 points, or 0.1% at 7,598.93, above the day’s low of 7,570.67 but below the session peak of 7,617.53.

In New York, around London’s close, the Dow Jones Industrial Average was 54 points, or 0.2% lower at 32,816, while the broader S&P 500 index and the tech-laden Nasdaq Composite were both down 0.1%.

 Chris Beauchamp, chief market analyst at online trading platform IG, commented: “What threatened to turn into a nasty afternoon for risk assets seems to have been headed off for now by a wave of buying.

“Target’s warning about rising inventories and the hit to margins seemed to be the spark markets had been looking for to drive a fresh big move lower, but it looks like this bear market rally isn’t rolling over just yet.

“Insider buying in tech stocks continues at a heavy pace, and this seems to have provided some comfort to the broader market. It is also interesting that equities have weathered the RBA’s increased pace of rate hikes, but with the ECB and US CPI still to come this week the big issues are set to make a return.”

Beauchamp also noted: “A cut to the World Bank’s growth forecasts has reminded investors of the broader problems, even as some of the gloomiest predictions are reined in. The immediate earnings impact appears to be priced in, as demonstrated by the rebound following Target’s warning, but this equity bounce could be under serious pressure by August as the next US reporting season gets underway.”

3.55pm: Retailers help pull Footsie lower

Leading shares continue to lack direction as we head into the close.

The FTSE 100 is just in the red, down 2.66 points at 7605.56 in the wake of the Tory confidence vote and continuing concerns about inflation and rising interest rates.

Commodity companies are among the gainers, with miners helped by a positive note from Jefferies.

Rio Tinto PLC (LSE:RIO) has risen 2.54% while Anglo American PLC (LSE:AAL) has added 1.22%.

The oil price continues to strengthen, with Brent crude up 1.18% to US$120.92 a barrel, helping to lift BP PLC (LSE:BP.) by 1.74% and Shell PLC (LSE:SHEL, NYSE:SHEL) by 1.19%.

But retailers have come under pressure after the latest weak shopping numbers from the British Retail Consortium.

JD Sports Fashion PLC (LSE:JD.) – which has also been hit by a provisional price fixing ruling relating to Rangers replica kits – is down 4.99%.

B&Q owner Kingfisher PLC (LSE:KGF) is off 3.49% while Marks and Spencer Group PLC (LSE:MKS) has fallen 2.55%, Currys PLC (LSE:CURY) has lost 1.19% and ASOS PLC (AIM:ASC) is off 8.11%.

 Michael Hewson, chief market analyst at CMC Markets UK, said: “After such a positive session yesterday, European markets have slipped back on a trifecta of concerns over higher prices, higher rates and shrinking margins, after the Reserve Bank of Australia surprised consensus by hiking its headline rate by more than expected.

“Sentiment was also hit by disappointing economic data. German factory orders data for April, slumped more than expected, by -2.7%, while in the UK the latest retail sales numbers from the British Retail Consortium showed like for like sales in May declined 1.5% year on year.

“High value items like furniture and electronics, were the biggest casualty of the retail sales numbers, as consumers prioritised lower value items to help preserve a semblance of a cash buffer.

“This morning’s BRC report served to impact on the retail sector with weakness across the board, a trend that was exacerbated further after US retailer Target issued a profits warning on the current quarter.”

2.55pm: US markets in negative territory

US stocks have opened lower, showing yesterday’s gains to be short-lived as inflationary pressures continue to weigh on the minds of investors.

Just after the open, the Dow had shed 245 points at 32,671 points.

The S&P 500 dipped 39 points at 4,083 points and the tech-heavy Nasdaq had lost 172 points at 11,889 points.

Retail giant Target Corporation (NYSE:TGT) had dipped about 7% just after the open after the company said it was aiming to reduce its excess inventory by offering discounts, cancelling orders, and revaluating its expenses.

Fellow retailers Walmart Inc (NYSE:WMT) and Costco (NASDAQ:NA:COST) were also down about 2% each, with Home Depot Inc (NYSE:HD), Lowe’s Companies, Inc. (NYSE:LOW), and Best Buy Co Inc (NYSE:BBY) down about 3% each. 

City Index and FOREX.com market analyst Fawad Razaqzada said choppy price action continued to dominate markets as investors weigh the impact of central bank policy tightening on inflation and economic growth.

“We are still in a bear market and with central banks ending quantitative easing (QE) and reducing their balance sheets, the good days of the stock markets may well be behind us,” he said.

OANDA senior market analyst Craig Erlam said the lack of momentum in equity markets and the economy was hardly surprising given the sheer uncertainty around inflation, interest rates, and the economy.

“Central banks are racing to catch up but that may come at a great cost,” Erlam said.

He noted that the RBA’s decision to hike interest rates by 50 basis points came as quite a shock to the markets, with 25 priced in ahead of the meeting.

“It was the biggest hike in more than two decades and another sign of policymakers belatedly recognizing the urgency of the inflation problem. And there’s plenty more to come,” Erlam said.

Meanwhile the FTSE 100 remains marginally in the red, down 14.54 points or 0.19% at 7593.68.

2.02pm: US trade deficit narrows

The US trade deficit has come in a little better than expected, and has narrowed over the previous month’s figure.

The deficit in goods and services fell from a record high of US$107.7bn in March to US$87.1bn.

Analysts had been forecasting a figure of US$89.5bn.

April exports were up US$8.5bn from March at US$252.6bn.

Imports fell US$12.1bn to US$339.7bn.

US Trade Balance (USD) Apr: -87.1B (exp -89.5B; R prev -107.7B)

— LiveSquawk (@LiveSquawk) June 7, 2022

12.50pm: Footsie falters but Rio rises

Leading shares have drifted lower as investors sit on their hands after the Tory confidence vote and amid continuing concerns about inflation and the cost of living crisis.

The FTSE 100 is down 10.73 points or 0.14% at 7597.49 having climbed earlier to 7617.

Rio Tinto PLC (LSE:RIO) is now the biggest riser, up 2.33% at 6089p.

The move follows Jefferies lifting its recommendation from hold to buy and its price target from 6700p to 6800p.

Among the fallers JD Sports Fashion PLC (LSE:JD.) is now down 4.1% following a provisional price fixing ruling on Rangers replica kits and other items.

11.40am: US stocks set to drop back

US markets were expected to open lower, further reversing yesterday’s short-lived gains and signaling that investors are wary amid elevated levels of inflation and rising interest rates.

A spike in oil benchmark oil prices, an unexpectedly large interest rate increase in Australia, and a rise in benchmark US bond yields all serve to underscore the prevailing mood of caution and suggest that trading will continue to be choppy.

Futures for the Dow Jones Industrial Average lost 0.4 % in pre-market trading, while those for the broader S&P 500 index shed 0.4%, and contracts for the Nasdaq-100 were also down 0.4%.

“Risk appetite wanes as the US 10-year yield stretches above the 3% psychological mark. The US stock indices failed to extend gains on Monday, as Friday’s strong jobs report ruled out the expectations that the Federal Reserve would slow tightening as a result of heavier pressure on the economy,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Inflation is the only metric that matters for the Fed right now, and tension among investors will likely remain high before Friday’s CPI release in the US,” she noted.

On Friday,  headline US inflation is expected to come in around the 8.3% level for May and there is still doubt whether price pressures have peaked. If inflation beats expectations, equities may be in another bout of selling.

US trade data for April is expected to show a slight narrowing in the deficit in April. If the narrowing does not materialize, share prices could take a knock.

Ozkardeskaya noted some favorable developments on price pressures with signs of improvement in the global electronic chip shortage along with lower shipping and fertilizer prices.

“But energy prices aren’t easing. The barrel of US crude extended gains to $121.50 on Monday, and last week’s announcement that OPEC would pump more oil didn’t help improve the price pressure. A further rise in crude oil seems inevitable after the bears failed the OPEC test last week. On the topside, the next resistance stands at $130 per barrel,” she added.

Back in the UK, the FTSE 100 has just about edged into positive territory, up 2.72 points at 7610.94.

10.50am: Biffa bounces but Ted Baker looks threadbare

UK companies continue to attract predatory interest, but there have been a couple of contrasting fortunes so far today.

Waste disposal group Biffa PLC (LSE:BIFF) has bounced 26.52% to 411.2p after it revealed a 445p a share offer from private equity group Energy Capital Partners.

It said if a bid was made at this level, it would be “minded to recommend it to Biffa shareholders.”

Russ Mould, investment director at AJ Bell, said: “We seem to be facing the Great British Take Off when it comes to UK companies being acquired and delisted from the stock market. Biffa looks to be the next candidate to be served up a takeover offer from private equity, implying it could leave the stock market for the second time in its history.

“The company started out life as a haulage business supporting coal fired power stations. It was acquired by Severn Trent in 1991, demerged in 2006 and subsequently floated on the UK stock market. Two years later it was bought by a private equity consortium. In 2016 the company relisted and more recently caught the market’s eye thanks to the surge in interest for anything ESG-related.

“It’s easy to see why private equity would want to own Biffa. Its services are in demand whatever the economic climate and a lot of inflationary pressures can be passed on to customers thanks to inflation-linked pricing structures for many of its contracts.

“Strategically it has made good progress with investments in plastics recycling and energy from waste services. Steady money coming in, an opportunity to increase scale and an undemanding equity valuation are all key attractions for private equity and Biffa ticks these boxes.”

But takeover target Ted Baker PLC (LSE:TED) has dropped 19.44% as the fashion retailer said its preferred bidder had decided not to make an offer.

It said there were other non-binding proposals on the table and it would now determine whether to proceed with any of them.

Victoria Scholar, head of investment at interactive investor said: “Although Ted Baker did not disclose who the preferred bidder was, Sky News reported at the end of May that US-based Authentic Brands Group which owns Juicy Couture and Reebok was working on a bid worth more than 150p-a-share.

“It is no secret that UK high street retailers have been struggling in recent years amid the rise of e-commerce low price point competitors like Pretty Little Thing and Boohoo, leading to the collapse of once fashion giant TopShop.

“Ted Baker already had a difficult time with another potential acquirer after US private equity firm Sycamore Partners issued three takeover proposals but eventually walked away, leading to a plunge in its share price. With record low UK consumer confidence, the cost-of-living crisis, the possibility of a recession and shaky equity markets, it is understandable that Ted Baker is desperate for a buyer and explains why investors are shunning the stock this morning.”

10.38am: Tobacco giant in the spotlight

British American Tobacco PLC (LSE:BATS) is leading the risers after a positive note from Barclays.

Its shares are up 1.9% at 3599.5p after the bank’s analysts issued an overweight rating and raised their target price from 4200p to 4400p.

That has done little for the market, which remains in the doldrums.

The FTSE 100 is currently down just 0.62 points at 7607.6 in the wake of the confidence vote on Boris Johnson.

9.44am: UK service sector continues to see slower growth and higher prices

The UK service sector saw a sharp slowdown in growth in May although the performance was better than forecasts.

According to the latest S&P Global/CIPS report, the service sector purchasing managers index came in at 53.4, down from 58.9 in April but up from the initial reading of 51.8.

That meant the composite PMI – which comprises services and manufacturing – was 53.1, better than the 51.8 forecast.

UK S&P Global/CIPS Services PMI May F: 53.4 (exp 51.8; prev 51.8)
– S&P Global/CIPS Composite PMI May F: 53.1 (exp 51.8; prev 51.8)

— LiveSquawk (@LiveSquawk) June 7, 2022

The month-on-month fall of 5.5 index points was larger than any seen since the survey began in July 1996, apart from those due to COVID-19 lockdowns.

It was also the weakest headline index reading since February 2021, which S&P said mostly reflected subdued business and consumer confidence, with worries about the economic outlook also contributing to softer demand patterns in May. Travel, leisure and entertainment was the main exception, with hospitality businesses widely commenting on strong consumer demand due to the removal of pandemic restrictions.

Companies reported margins continued to be squeezed by rising inflation.

So growth expectations for the year ahead dipped for the fourth month running to the lowest since October 2020.

Tim Moore, economics director at S&P Global Market Intelligence, said: “May data illustrate a worrying combination of slower growth and higher prices across the UK service sector. The latest round of input cost inflation was the steepest since this index began in July 1996, while the monthly loss of momentum for business activity expansion was a surveyrecord outside of lockdown periods

“There were bright spots in customer-facing parts of the economy during May, buoyed by a rapid recovery in consumer spending on travel, leisure and entertainment. However, hospitality businesses widely reported constraints on recovery from a lack of candidates to fill vacancies and difficulties meeting demand due to ongoing global supply chain disruption

“Service providers are increasingly concerned about the near-term business outlook, with price resistance among consumers and escalating cost of living pressures set to dampen spending during the second half of 2022. Growth expectations have dropped in each month since the invasion of Ukraine and are now the weakest since October 2020.”

9.05am: Kingfisher falls back

B&Q owner Kingfisher PLC (LSE:KGF) is leading the fallers, down 2.06% and now helped by the dip in UK retail sales in May.

Paul Martin, UK head of retail at KPMG which helped compile the survey, said: “For the second month in a row UK retail sales declined, highlighting that consumers are becoming more sensitive to the cost of living. Non-food purchases related to the home, such as furniture, home appliances and computing, suffered the biggest falls in spending in May”.

JD Sports Fashion PLC (LSE:JD.) is close behind after the provisional price fixing ruling on Rangers clothing, down 1.95%.

Overall the market remains in the red, but not by much, with the FTSE 100 6.69 points lower at 7601.53 despite the worse than expected confidence vote for Boris Johnson.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The FTSE 100 has largely shrugged off the political drama of yesterday’s no confidence vote, with a dramatic reaction avoided. However, the situation has put a ceiling on progress, with no meaningful additions to the 75 point gains the FTSE began the week with.

“Political turmoil is always bound to leave a mark on UK investor confidence, but the full extent of any market moves will depend on how quickly the saga is truly put to bed. There’s still plenty of uncertainty looming about the stability of the current government, and until those jitters have gone, the market will struggle to find its place.”

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8.29am: German factory orders slump

Germany’s manufacturing sector saw a surprise drop in growth in April, according to a new report.

Factory orders fell by 2.7% after a 4.7% decline in March, and nowhere near the 0.3% increase expected.

The German statistics office said: “The increased uncertainty caused by the Russian invasion of Ukraine continues to lead to weak demand, especially from abroad.”

Naeem Aslam, chief market analyst at Avatrade, said: “Economic conditions are becoming dire for the largest economy of the Eurozone. Weakness in economic data means an economic disaster for the rest of the Eurozone and the ECB needs to calibrate its next monetary policy move very carefully now.”

8.14am: Flat start for Footsie

Leading shares have made an uncertain start after yesterday evening’s political turmoil.

The FTSE 100 is hovering around its closing level, down just 1.09 points at 7607.13.

Sterling continues to slip after Boris Johnson narrowly won Monday’s confidence vote but faced a bigger than expected rebellion amongst Tory MPs.

The pound is now down 0.4264% at US$1.269 against the dollar and off 0.3765% against the euro to €1.1669.

Victoria Scholar, head of investment at interactive investor said: “Although the leader came out victorious, the triggering of the confidence vote itself along with the fact that 41% of Tory MPs failed to back him are both politically corrosive leaving the Prime Minister wounded. History suggests that this could mark the beginning of the end of his time as prime minister.

“The pound held onto gains after the result of the confidence vote was announced, trading higher against the US dollar but has since lost ground this morning with US$1.24 the next support level to watch.

“The currency is suffering amid a lack of international investor confidence in the UK both economically and politically with criticism of Johnson’s leadership expected to continue and the potential for government legislation to be blocked by members of his own party.”

Jeffrey Halley at Oanda said: “The UK has a post-Jubilee railway strike yesterday, and Boris Johnson survived a no-confidence vote. In BoJo’s case, TINA came to his rescue, there is no alternative. The railway strike is what I believe will be a summer/autumn/winter of discontent for the UK as the cost of living soars and the Bank of England waves the white flag.

“War in Eastern Europe and a UK Government still seemingly intent on invalidating the Brexit agreement over Northern Island all add up to me struggling to find a reason for GBP/USD to ever see a 1.3000 handle in 2022.”

Among the fallers JD Sports Fashion PLC (LSE:JD.) is down 1.74% after the Competition and Markets Authority provisionally found that the retailer, along with Elite Sports and Rangers Football Club broke competition law by fixing the retail prices of Rangers replica kits and other items.

JD said it would set aside a £2mln provision for any penalty imposed.

It said: “The CMA’s findings are, at this stage, only provisional and the group will now review them with its advisers. The CMA will consider any representations that are made before issuing its final findings. As the CMA has noted, JD has co-operated fully with the CMA and, provided this continues, JD will receive a reduction on any financial penalties that the CMA may decide to impose.”

6.55am: Leading shares set to struggle

The FTSE 100 is expected to retreat on Tuesday after Prime Minister Boris Johnson scraped through a no-confidence vote overnight.

London’s blue-chip index has been called 23-36 points lower on spread-betting platforms, having started the week with a 75-point gain to just over 7,608.

Asian markets are mostly in the red this morning, led by the ASX after the Reserve Bank of Australia raised its headline interest rate by half a percentage point, a bigger move than expected, following a quarter point move a month ago.

Wall Street’s main indices finished slightly higher overnight: the Nasdaq climbed 0.4%, the S&P 500 0.3% and the Dow Jones was only just above flat.

The pound is down 0.4% against the dollar at 1.247, and 0.3% versus the euro, after spikes yesterday.

This was not much of a reaction to the outcome of yesterday’s confidence vote in Prime Minister Boris Johnson, said market analyst Michael Hewson at CMC Markets.

“Markets are more concerned about the direction of the UK economy and the Bank of England’s attempts to address it,” he said.

Newspaper headlines this morning suggested that it was a worse than expected result for Johnson, with some noting that after the same proportion of MPs voted against Margaret Thatcher in an equivalent poll 1990, she resigned two days later.

Earlier, UK retail sales data was released for May by the British Retail Consortium, showing year-on-year growth in total sales values decreased to -1.1% in May, from -0.3% in April. 

“The further decline in the year-over-year growth rate of the BRC’s measure of retail sales values in May is a bad sign, as sales fell back a year ago, after they rocketed in April 2021 to a record high as soon as non-essential shops reopened,” said economist Samuel Tombs at Pantheon Macroeconomics.  

Later this morning there will be PMI data on the UK services sector.