- The FTSE 100 closes at 7,053 points
- The UK services sector has been the weakest performer since the lockdown
- One million electric vehicles on the road
4.45pm: FTSE 100 falls at end of day
Liz Truss has failed to calm UK investors after her speech at the Tory party conference in Birmingham, where she redoubled promises that her policies will lead to growth and claimed the “disruption” caused will be worth it.
In contrast, the FTSE lost 0.5% at the close to end at 7,053 points.
That said, OPEC’s move to cut part of daily oil production has led to a rebound in crude prices, says Chris Beauchamp, chief market analyst at online trading platform IG.
“Stocks are eating away the gains of the last two sessions, with OPEC’s decision to take a big cut in production not helping buyers maintain control,” Beauchamp wrote. “The prospect of cutting two million barrels a day of oil production raises the specter of inflation again, just when the market began to hope that at least the price of oil had calmed down.”
15.56: It’s official: OPEC+ confirms the production cut
OPEC+ has agreed to cut its output by 2 million barrels a day to support oil prices, despite US President Biden visiting Saudi Arabia to persuade them not to curb pumping.
Here is the official statement confirming the biggest cut since the pandemic.
FULL STATEMENT: The OPEC+ statement.
The group cuts production by 2 million b/d from the required production levels in August; extends the cooperation agreement with Russia until the end of 2023. The group justifies its decision by “the uncertainty surrounding the economic outlook and the global oil market” pic.twitter.com/3JjMUcOk9W
— Javier Blas (@JavierBlas) October 5, 2022
The move is likely to help Russia, which faces an oil embargo from the European Union following the invasion of Ukraine.
Oil prices are rising, with Brent crude now up 1.18% at US$92.88 and West Texas Intermediate up 1.04% at US$87.42.
3.43pm: Ocado leads the market on the downside
Leading stocks are off their worst levels heading into the close, but remain firmly in the red.
The FTSE 100 was down 62.06 points or 0.88% at 7024.4 after trading in a range close to 110 points during the day.
Supermarkets were among the decliners after Tesco PLC (LSE:TSCO), down 4%, said it expected full-year profit to be at the lower end of its target range.
If Tesco faces problems as its customers suffer the cost of living crisis, investors believe others must too. So Ocado Group PLC (LSE:OCDO) has fallen 8.48% and J Sainsbury PLC (LSE:SBRY) is down 4.68%.
Still in the retail sector, Next PLC (LSE:NXT) is down 6.3% at 4713p after analysts at Deutsche Bank cut their price target from 6200p to 5700p with a hold recommendation.
Following last week’s results, they said: “It has been a number of years since Next’s management has taken such a cautious view on the outlook for its business for the outside year and this time there was little reference to the real consumer. Sales expectations for the remainder of the second half have been cut by -3% to give -2% full price sales. This translates into a small PBT downgrade of 2% to £840m (from £860m).
“However, this is not the main news. The main call was the potential impact of the currency change in 2023 and the wider impact on maintaining high levels of consumer inflation. We asked the prices higher required for clothing retailers to maintain % EBIT margin and Next suggested this is unlikely to be achieved in 2023, putting pressure on gross margin.”
But news that OPEC+ plans to cut production by 2 million barrels per day helped lift Shell PLC (LSE:SHEL, NYSE:SHEL) by 0.96% and BP PLC (LSE:BP.) by 0 .67%.
UK Prime Minister Liz Truss discussed defense spending in her conference speech, which has seen BAE Systems PLC (LSE:BA.) add 0.59%.
3.09pm: US service sector falls
The US services sector slipped in September compared with the previous month, but was still slightly better than expected, according to the Institute for Supply Management.
???????? *US SEPTEMBER ISM SERVICES GAUGE FALLS TO 56.7 VS 56.9; EAST. 56 *US SEPTEMBER ISM SERVICES EMPLOYMENT INDEX TO 53 AFTER 50.2 *US SERVICES ORDERS INDEX FALLS TO 60.6 FROM 61.8 *SERVICES PRICES PAID INDEX US SEP AT 68.7 AFTER 715.
— Christophe Barraud???????? (@C_Barraud) October 5, 2022
3:00 p.m.: Wall Street is back in the red
In the US, after two days of solid gains, the tides have turned with stocks firmly in the red, fueled in part by stronger-than-expected jobs data.
ADP private sector payrolls rose by 208,000 in September, from an upwardly revised 185,000 in August and above analysts’ consensus expectation of 200,000.
Forex.com market analyst Fiona Cincotta noted that while weak data earlier in the week fueled expectations that the Fed might consider a less brutal stance, the market appears to have come to its senses.
“With inflation still more than four times the Fed’s 2% target and the labor market still strong, any favorable pivot is likely still a long way off,” Cincotta said.
Just after the market opened, the Dow Jones Industrial Average was down 267 points or 0.9% at 30,049, the S&P 500 was down 36 points or 1% at 3,754 and the Nasdaq Composite was down 115 points or 1% to 11,064 points. .
Twitter Inc (NYSE:TWTR) (Twitter Inc (NYSE:TWTR)), which soared 22% yesterday after news that Tesla Inc (NASDAQ:TSLA) (Tesla Inc (NASDAQ:TSLA)) CEO Elon Musk will go ahead with his After all, the $44 billion purchase of the social media platform was down about 2.3% at $50.70 a share.
Back in the UK, the FTSE 100 is currently well off its lows, down 35.51 points or 0.5% at 7050.95, after falling to 6977.
But the pound remains down 1.3149% to $1.1299, well below the level it was at before Liz Truss began speaking, as markets continue to wait for news on how the proposed tax cuts will be funded by the UK government.
14.53: When is 2mln not 2mln?
A 2 million bpd cut in OPEC+ production, which must be discussed by ministers before a final decision, may not be as simple as it seems.
According to Bloomberg, several countries are already producing less oil than their quotas, so they would be meeting the new limits without having to cut current production.
In reality, the move would only result in a real cut of 880,000 barrels per day, according to Bloomberg calculations based on September production figures.
A look at what #OPEC+ quota cuts would mean in practice. A 2 million b/d cut would remove just 880,000 b/d from the market (and have no impact on Russia), according to Bloomberg calculations, given the extent of the members’ supply woes. H/T @JLeeEnergy. pic.twitter.com/PxUVcjk481
— Paul Wallace (@PaulWallace123) October 5, 2022
2.34pm: Oil producers move to support prices
Oil prices are rising on news that OPEC+ is recommending a production cut of 2 million barrels per day.
The measure, an attempt to support the price amid fears that an economic slowdown would affect demand, will be authorized by the full ministerial meeting.
That’s more than initially expected of 1 million barrels, although speculation of a bigger move had been growing in recent days.
BREAKING: OPEC+ panel recommends 2M B/D cut in output cap | #OOTT
— Javier Blas (@JavierBlas) October 5, 2022
Brent crude, which was marginally lower earlier, is now up 0.73% at $92.47 a barrel, while West Texas Intermediate added 0.62% to $87.06.
1.55pm: UK mortgage burden rises
Back to the UK, and there are more concerns about the mortgage market.
Sky’s Ed Conway notes the rising mortgage burden:
You will have seen a lot of charts over the last few weeks. But this one really matters. The mortgage burden – the % we spend on our repayments – is climbing to the highest level since the late 1980s. The last time it reached these levels preceded the biggest housing crash in the modern history pic.twitter.com/6gVHXpXxi0
— Ed Conway (@EdConwaySky) October 5, 2022
13.47: Improvement in the US labor market – ADP
The U.S. labor market was slightly stronger than expected in September, according to the latest report from payroll provider ADP.
Businesses added 208,000 jobs, compared with an estimate of 200,000, as schools reopened and pandemic concerns receded.
But ADP said job growth still remained below the average of the past three months.
*Review* US ADP Employment Change September: 208K (est 200K; prev 132K; prevR 185K)
— LiveSquawk (@LiveSquawk) October 5, 2022
A strong labor market is likely to make the US Federal Reserve more hawkish about raising interest rates, but Friday’s key non-farm payrolls figures will give more clues about the state of the northern labor market – American
Meanwhile, the latest US trade balance was more or less in line with forecasts and showed a drop from the previous month.
US Trade Balance August: -$67.4B (Est -$67.7B; Prev -$70.7B)
— LiveSquawk (@LiveSquawk) October 5, 2022
12.50pm: Gold stands up during Truss’ speech
As well as the pound falling during the Prime Minister’s speech, bond yields also rose, said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown:
He said: “As Prime Minister Liz Truss took to the stage to try to shore up support between her party and the country, the pound fell further back and government borrowing costs rose slightly.
“He may have hoped that his triple-digit growth pledge would have further calmed markets, but with nothing new to offer on the table, his words have so far failed to have the desired effect. The pound fell below 1 .14, hovering around $1.135 and 10-year gilt yields rose slightly to a whisker below 4%.
“Liz Truss took to the stage with the lyrics to M People, hoping the title would bring an aura of optimism to her speech. But the words I’m moving, you’re moving, might not hit the mark. correct. for those…