FTSE 100 ends higher, extending recent gains, with Wall Street also on the up

• FTSE 100 closes 64 points higher
• US stocks also advance led by Nasdaq
• UK house prices hit record levels

4.50pm: Never mind the heat

The FTSE 100 index closed higher on Monday, extending recent advances into a new week, helped by early gains on Wall Street as investor concerns about inflation and interest rate rises ease off for now.

At the close, the UK blue-chip index was 64.23 points, or 0.9% higher at 7,223.24, below the session peak of 7,268.88 but well above the opening low of 7,159.01.

In New York, around London’s close, the Dow Jones Industrial Average was 173 points, or 0.6% higher at 31,461, while the broader S&P 500 index added 0.8% and the tech-laden Nasdaq Composite gained 1.3%.

Craig Erlam, senior market analyst, UK & EMEA, OANDA commented: “Maybe the heat is getting to everyone - getting closer to 40C here in London and my fan just isn't cutting it - or perhaps the doom and gloom has become a bit tiresome but the two-day rally we've seen on the back of so little looks a little hopeful to me.

“As ever, I'll caveat this with the fact that stock markets are severely discounted compared to earlier this year and not everyone is sold on the inevitability of a recession, or a particularly deep one, but what we saw on Friday just doesn't reflect anything worth getting overly excited about.”

He added: “The Fed probably won't hike by a full percentage point next week but they probably will by 1.5-1.75% over the next two meetings and that 25 basis points just isn't the deal breaker for the economy.

“And if we can discount consumer sentiment and inflation expectations when they're not good, we can't hang our hats on them when they surprise to the upside. The retail sales data on the other hand is encouraging and households continuing to dip into savings as incomes are severely squeezed could make all the difference.”

“Better than expected earnings from Goldman Sachs (NYSE:NYSE:GS) and Bank of America (NYSE:BAC) may be helping the positive mood at the start of the week, although I think it's way too early to be looking at earnings season as a tailwind for equities. I guess that will depend on just how pessimistic investors have become in the run-up to it,” Erlam concluded.

3.45pm: Picking up

Michael Hewson, chief market analyst at CMC Markets reflects on the week's open.

"European markets have picked up where they left off on Friday with another strong performance, after Fed officials dialled back expectations of a 100bps rate rise next week."

"While sentiment today seems a lot more buoyant, one needs to be careful before drawing too many conclusions from two consecutive strong sessions. Last week the DAX dropped to its lowest levels in 18 months before bouncing back, and is still quite close to that, so today’s gains may well be no more than another bear market rebound."

"The FTSE100 has also seen a strong session driven predominantly by energy and basic resource stocks as metals price and crude oil rallies on the back of a weaker US dollar. Amongst the gainers we’ve seen decent gains for the likes of Harbour Energy, BP (LON:BP) and Shell (LON:RDSa)."

3.14pm: US stocks open higher

US stocks opened higher, following the lead set by the FTSE 100.

The Dow Jones was up 0.48%, while the S&P 500 climbed 0.58%.

The tech-laden Nasdaq gained 1.03% in early trading on Monday.

2.57pm: Crude climbs

Brent Crude has pushed past US$105.50 per barrel, meaning it is up around 4.6% today.

2.47pm: IEA issues warning

The International Energy Agency has warned that Europe must slash its gas consumption ahead of winter to make up for cuts to Russian energy supplies.

Executive director Fatih Birol said in a report that the current gas crisis has put Europe in a precarious situation.

“The situation is especially perilous in Europe, which is at the epicentre of the energy market turmoil. I’m particularly concerned about the months ahead.”

He added some progress had been made in diversifying gas supplies but warned that not enough had been done.

2.08pm: Prices at the pump should go down

The AA said the cost of filling up a tank should be £10 cheaper within the fortnight.

Petrol and diesel had been spiralling out of control since Russia’s invasion of Ukraine.

According to AA, the price has already fallen by 2.8p from record highs per litre, knocking £1.50 of the tank of fuel.

Wholesale petrol had peaked above £1 a litre on June 1.

“Wholesale petrol’s trajectory, if sustained, would lead to savings from the record highs- providing the fuel trade is prepared to pass them on,” said AA spokesperson Luke Bosdet.

“So far this morning, even with oil rebounding, wholesale petrol remains below 80.5p a litre.”

“The problem is that, in many places, the price cuts are quite simply not happening despite more than six weeks of falling costs.”

1.50pm: Insurers hit with downgrade

Jefferies hit insurers Admiral, Direct Line and Sabre with downgrades following the latter two issuing profit warnings in the last two weeks.

Consequentially, Admiral tumbled 6% on London’s blue-chip index, making it the second largest faller after GSK.

Analysts warned that margins are expected to deteriorate significantly as rising costs continue to bite.

Jefferies also said that raising insurance costs will do little to prevent worsening margins in the coming months.

Admiral, which is on the FTSE 100, is now rated underperform with a slash in target price to 1,525p from 2,300p.

1.10pm: Gazprom (MCX:GAZP) issues force majeure

Gazprom’s export arm has send a notice to a least one customer in Europe declaring force majeure on gas deliveries.

The export arm was linked to the gas situation in Germany last week which saw Nord Stream 1 close for maintenance work.

9.47am: House prices hit another record

House prices hit a sixth consecutive record, up 9.3% in the year to a record £369,968, according to Rightmove.

Although buyer demand is down 7% in the year, it is still 26% higher than in 2019.

However, while the number of sellers is up 13%, that figure is 40% down from three years ago, with this imbalance keeping prices higher.

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown (LON:HRGV) said “Asking prices are booming again in July, as the white-hot market convinces sellers they can keep pushing prices skywards. However, that’s only half the story.”

“Asking prices tend to obscure more subtle moves in the market, and we’re seeing a number of small but important changes. With the number of buyers continuing to fall, and the number of sellers starting to rise, the imbalance that has pushed prices higher even as tougher times have hit could be starting to unwind, which would pour cold water on the overheated market.”

“During the white heat of the market, buyers have had to offer well over the asking price in order to secure the property, with many of them drawn into bidding wars. As the market slows slightly, this kind of activity is less likely.”

9.18am: Quick snapshot

Amazon (NASDAQ:AMZN) Fresh has joined the price war underway among the grocery chains to keep customers during the cost of living crisis. The grocery arm of Amazon will match hundreds of prices in line with discounts offered by Tesco (LON:TSCO).

Direct Line fell 14% after becoming the second car insurer to issue a profit warning in the space of a week. Like peer Sabre, Direct Line said claims costs were rising by 10% due to inflation in the prices of used cars, repairs and car parts.

Prices of properties coming to market hit a sixth consecutive record, according to Rightmove. A continuing desire to move and low numbers of supply of homes for sale are driving prices higher it said.

DeepVerge revealed its environmental division, Modern Water, was picked to supply 27 fully integrated Microtox solutions to monitor water toxicity and pollution in Qatar for the 2022 World Cup.

Ondo InsurTech signed an agreement with insurance provider Admiral to provide its LeakBot product to UK customers. It measures air and pipe pressure and detects issues before they are exacerbated.

OnTheMarket announced that that Foxtons (LSE:LON:FOXT) signed a deal for its properties to go on its website. London-based Foxtons (LSE:FOXT) will use OnTheMarket.com for residential sales and lettings.

8.53am: Direct Line takes a hit

Insurer Direct Line tumbled 13% after becoming the second motor insurer to issue a profit warning in a matter of weeks.

The company said that soaring inflation was hitting the prices of used cars and car parts, which in turn was pushing the cost of claims up.

As a result, claims costs were rising 10%, higher than expected and greater than the rate of increase in premiums.

Direct Line’s operating ratio, which measures claims and costs as a proportion of premiums will be between 96% and 98%, worse than the 93% and 95% originally forecasted.

Further to that, it also announced it has cancelled its £100mln share buyback, but that it was confident it will be able to continue to deliver on its dividend.

8.20am: FTSE starts strong

The FTSE 100 made a stronger-than-anticipated start to proceedings, buoyed by the positivity across Asia’s main markets and Wall Street’s performance after hours on Friday.

The blue-chip index opened 65 points higher at 7,224.27, though events in Mainland Europe – including wildfires, gas exports from Russia and political instability in Italy - all have the potential to unsettle.

Leading the risers were the miners, which staged a rebound after the recent sell-off.

Topping the Footsie was Antofagasta (LON:ANTO), up 4.5% on the back of the reviving copper price.

Following in its wake were Anglo American (LON:AAL) (up 3.3%), Glencore (LON:GLEN) (up 3%) and Rio Tinto (LON:RIO) (up 2.8%).

Still, worries over the Chinese economy and the prospect of recession remain.

Scottish Mortgage Investment Trust, one of the UK’s biggest investors in Silicon Valley, was up 3%, mirroring the gains seen in the US tech sector recently.

Shares in GSK fell 18% after it spun out the consumer division Haleon Monday morning. This should be reversed Tuesday when the share consolidation kicks in.

Haleon itself made its debut at 330p a share, valuing the business at £30.4bn – which is around what analysts had been expecting ahead of the demerger.

6.36 am: FTSE 100 set for positive start

The FTSE 100 looks set to make a positive start to the trading week buoyed by the performance of Asia’s main markets and Wall Street’s positive close after hours on Friday.

However, sentiment is likely to teeter on a knife edge with the potential gas rationing in Germany and political turmoil in Italy.

The former first: All eyes will be on Russia’s next move in the escalating economic war that accompanied the Ukraine conflict.

If Moscow gives the go-ahead for the resumption of material gas supplies to Western Europe after maintenance on the Nord Stream 1 pipeline, then a crisis will be averted.

An escalation of hostilities will hit Germany hardest. And as the Financial Times pointed out its options are ‘few, imperfect and unpleasant’.

Fissures in Italy’s coalition may add to the political instability in Europe after Prime Minister Mario Draghi has tendered his resignation.

Although refused by President Sergio Mattarella, it is seen as hastening elections scheduled for next spring.

In summary, the political and market outlook appears a decidedly mixed one.

“Today’s European open looks set to continue this firmer theme, with a slightly weaker US dollar helping to support sentiment, as commodity prices also rebound from recent lows,” said Michael Hewson of CMC Markets.

“Over the last few weeks commodity markets have been falling back sharply, oil prices finishing lower for the fifth week in succession, and hitting their lowest levels since February, while copper prices have performed even more poorly. Since their March peaks, copper prices have fallen over 25%, hardly a sign of a booming economic outlook.

“Add into the cocktail, concerns over political risk in Italy and the collapse of the government there, as well as concern over valuations as US earnings season gets underway in earnest, and the picture so far looks slightly unsettling, especially with inflation still on the up.”

As mentioned, it is a big week for corporate news on both sides of the Atlantic. In the US updates from Tesla and Netflix (NASDAQ:NFLX) are scheduled, while here in the UK Royal Mail (LON:RMG) and Ocado (LON:OCDO) are among the those reporting. We’ll also receive an update on the state of the British economy with data on wages and inflation.

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