Lucy Harley-McKeown
FTSE slides as US stocks end big quarter at records
How major markets are performing on Monday
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The FTSE 100, European and markets fell on Monday in London, as investors anticipate the next lot of US jobs data on Friday. Volatility has also set in amid continued conflict between Israel and Lebanon.
Meanwhile, US stocks bid farewell to the month and the quarter with fresh records as investors reacted to Federal Reserve Chair Jerome Powell vowing to do what it takes to keep the economy humming, while signaling he won't rush future rate cuts.
The FTSE 100 (^FTSE) fell 0.9% by the end of the session, while the DAX (^GDAXI) was down 0.6% in Germany and Paris's CAC 40 (^FCHI) dropped 1.8%.
Across the pond, the S&P 500 (^GSPC), the Nasdaq Composite (^IXIC) closed high, and the Dow Jones Industrial Average (^DJI) finished just above the flatline.
Hezbollah leader Hassan Nasrallah was killed by an Israeli air strike on Friday, which also killed 20 other figures in the organisation. Abbas Nilforoushan, a senior general in Iran's Revolutionary Guards Corps was also killed via an air strike, according to state media reports. Meanwhile other Hezbollah top figures have also been killed.
The death toll in Lebanon in the last two weeks is more than 1,000. On Monday afternoon, media outlets were reporting that Israel was increasingly threatening a ground invasion.
Due to the conflict, oil prices are set to be volatile. In today's session they have already whipsawed up and down. Brent Crude (BZ=F) rose 0.7% in early trade to hover around the $72-a-barrel mark, before dipping briefly and then rising in the afternoon. Crude (CL=F) also rose 0.5% to $62.50 per barrel before heading 0.3% lower.
Rightmove (RMV.L) was among the top fallers in the FTSE 100 on Monday, down 8.2% after it rejected a fourth offer by the Rupert Murdoch-backed REA Group. The online estate agency platform, which is currently the market leader, said the offer undervalued the company and was 'unattractive'.
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How US stocks are faring in early trade
Sterling builds on three months of gains against the dollar
From our commodities update:
Sterling has pushed higher against the dollar to secure three consecutive months of gains against the US currency as it recaptured the 1.3400 threshold to stay at the highest level since March 2022.
The British pound is on track for additional gains, buoyed by a robust UK economy and the Bank of England's measured approach to interest rate cuts, according to insights from leading investment banks.
Currently trading at approximately $1.3421, the pound is expected to rise to $1.35 by year-end, as predicted by Bank of America and Barclays. Goldman Sachs has set an even more optimistic target, forecasting a climb to $1.40 over the next 12 months.
Sterling has emerged as the top performer among the G10 currencies this year, appreciating over 5% against the dollar and 4% against the euro. Its strong rally began in late April, following a brief dip below $1.23.
On a trade-weighted basis, the pound is at its highest level since the UK voted to leave the EU in 2016, now just 2% shy of its value on the referendum's eve.
The pound has gained from a weaker dollar, which dipped on Friday following the release of US inflation data indicating a decrease in price pressures for August.
Frasers tables 'possible offer' to takeover Mulberry
The Guardian already used the pun I had in mind, but it is — indeed — handbags at dawn, with a potential takeover of bagmaker Mulberry by the Fraser Group.
The fashion conglomerate already owns a 37% stake in the luxury leather maker but is considering a bid for the whole bag after Mulberry said on Friday it is trying to raise capital with the placement of ￡10.75m of shares.
The acquisition would add Mulberry to Frasers roster of Sports Direct, Evans Cycles, the House of Fraser department store, luxury streetwear chain Flannels and multiple brands from Slazenger to Jack Wills.
Aston Martin stock tanks as it warns on profits
Fast carmaker Aston Martin saw its stock fall as much as 28% on Monday after its CEO said it would make 1,000 fewer cars than planned. It also warned on profits.
The move wiped more than ￡370m off its market cap.
New CEO Adrian Hallmark said supply chain problems and weak demand in China were partly to blame for the shaky start, and expectation of fewer deliveries.
Meanwhile, Stellantis — the owner of Vauxhall — also slashed its profit margin forecast, outlining plans to slow production.
The updates are symptoms of a slowing car market which is becoming increasingly competitive.
Housing 'high on political agenda', rates likely to fall further
Andrew Codling, managing director at RBC Capital Markets said:
"New mortgage approvals in August came in at 64,858 up 3.8% on July posting their highest level since September 2022, the impact of the so called 'mini-budget' was far from 'mini' and homebuyers and housing market investors will be hoping that Labour's first budget in October will not upset the current housing market recovery.
"We expect mortgage rates to fall further in the coming months and with wages continuing to rise the outlook for the UK housing market remains on the up and with housing so high on the political agenda it would be a shock if the budget stopped the recovery in its tracks."
Mortgage approvals climb for third consecutive month: BoE
New borrowing data from the Bank of England shows mortgage approvals were on the up again in September.
The bank said:
Individuals borrowed, on net, ￡2.9bn of mortgage debt in August, compared to ￡2.8 billion in July.
Net mortgage approvals for house purchase rose from 62,500 in July to 64,900 in August, the highest level since August 2022 (72,000). Similarly, approvals for remortgaging increased from 25,200 to 27,200 over the same period.
Jonathan Samuels, CEO of Octane Capital, said:
"We haven’t quite seen the reduction in mortgage rates that you might expect following August’s base rate reduction, however, it remains very early days and what we have seen is a significant cut to rates across all lending segments when compared to this time last year.
"This increased level of borrowing affordability has come as a result of increased market stability following the Bank of England’s original decision to hold rates at 5.25% in September of last year and, with market conditions continuing to improve, it’s only a matter of time before we see further rate reductions."
UK GDP grows less than first estimated in Q2
Chancellor Rachel Reeves is due to deliver the budget at the end of October. Photo: Reuters (REUTERS / Reuters) The UK economy expanded less than anticipated in the second quarter of the year as chancellor Rachel Reeves prepares to deliver her first budget.
According to the Office for National Statistics (ONS), the UK’s gross domestic product (GDP) rose by 0.5% in the three months to June, a downward revision from earlier estimates of 0.6% growth.
The latest figures indicate that the UK is continuing its recovery from last year's recession, albeit at a slower pace than previously thought. Growth was primarily driven by the services sector, while both manufacturing and construction sectors underperformed, contributing to the subdued overall GDP figure.
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Housing affordability improving
Robert Gardner, Nationwide's chief economist, said:
“Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters.
"These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards. Nationwide has just published its September and Q3 house price index." Meanwhile, most regions saw a pickup in annual house price growth."
House price rises gain pace in September
UK house prices rose by 0.7% in September, with this uptick lifting the annual growth rate to 3.2%, the fastest pace since November 2022.
The average UK house price in September is ￡266,094. Despite this recovery, average prices remain approximately 2% below the all-time highs seen in the summer of 2022, according to figures from lender Nationwide.
Recent trends suggest a positive shift in affordability for potential buyers. "Income growth has continued to outpace house price growth in recent months," Robert Gardner, Nationwide's chief economist, said.
He attributed this improvement partly to a decline in borrowing costs amid expectations that the Bank of England will further reduce interest rates in the near future. However, while activity in the housing market is gradually increasing, it remains subdued compared to historical norms.
Data for the third quarter of 2024 reveals that most regions experienced a resurgence in annual house price growth. Northern Ireland emerged as the standout performer, with prices surging by 8.6% compared to Q3 2023. Scotland also demonstrated significant improvement, with annual growth accelerating to 4.3%, up from just 1.4% in the previous quarter. In Wales, prices recorded a more modest year-on-year increase of 2.5%.
How US stocks are faring in premarket
Traders will be looking to fresh payroll data for more clues about whether the Federal Reserve will deliver another big rate cut. Earlier in September, the central bank cut rates 50 basis points.
Monday trade in Asia
Continued conflict in the Middle East took the shine out of equity markets in China, which were on the up following more stimulus measures by the People's Bank of China. Meanwhile, the Nikkei (^N225) was 4.8% lower as traders fret about interest rates.
In Hong Kong, the Hang Seng (^HSI) rose 3.4%, while the SSE Composite (000001.SS) jumped more than 8%.
Last week in the US
Our US colleagues wrote on Friday:
Stocks traded mixed on Friday but closed the week on a high as investors embraced an inflation report seen as crucial to the Federal Reserve's next decision on interest rate cuts.
The Dow Jones Industrial Average (^DJI) gained 0.3% and finished with a fresh record. The S&P 500 (^GSPC) lost 0.1%, but is coming off a record-high close from the prior session. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) sank about 0.4%.
Despite the mixed trading on Friday, the stock gauges all recorded wins for the week after confidence in the economy returned to the market. The Dow and the S&P added about 0.7%, while the Nasdaq rose 1%.
A solid GDP reading, combined with continued cooling in inflation, has cemented growing conviction that the Fed can nail a "soft landing" as it embarks on a rate-cutting campaign.
Good morning!
Hello from rainy London. Lucy Harley-McKeown here, ready to bring you the market news of the day.
We've already had a UK house price update and the latest data from the ONS on GDP. Later we'll be looking to new credit data and speeches by Bank of England officials.
Let's get to it.