London’s FTSE 100 was on course to extend its losing run to four at midday on Wednesday as US election and UK budget jitters knocked the mood.
US interest rate concerns are also hanging over equities. Traders have fretted over a slower than hoped Federal Reserve rate cutting path, putting pressure on equity and bond prices.
The odds of a rate hold by the Federal Reserve next month have increased to around 11%, according to the CME FedWatch Tool. Though such an outcome is still seen as unlikely, the chances of a hold had stood around 6% this time last week.
The FTSE 100 index traded down 39.32 points, 0.5%, at 8,267.22. The FTSE 250 was down 122.90 points, or 0.6%, at 20,826.75, and the AIM All-Share fell 2.96 points, 0.4%, at 731.20.
The Cboe UK 100 was down 0.5% at 827.96, the Cboe UK 250 lost 0.6% at 18,403.22, and the Cboe Small Companies fell 0.2% to 16,844.93.
The CAC 40 in Paris was 0.8% lower, and Frankfurt’s DAX 40 lost 0.3%.
Stocks in New York are called to open lower. The Dow Jones Industrial Average is called down 0.5%, the S&P 500 down 0.3% and the Nasdaq Composite 0.4% lower.
‘A few key themes are developing this week. The first is a slowdown in stock markets. The main US stock market recorded its first back-to-back loss in weeks on Tuesday, while the Nasdaq eked out a small gain. This week’s stock market price action suggests that the 50th record high for the S&P 500 could be a tough ask with the US election so close. European indices are mostly flat to lower, as they have also lost their anchor as we lead up to some key geopolitical risks,’ XTB analyst Kathleen Brooks commented.
The concept of ’Trump trade’ has also been a narrative this week.
‘Although the pound has decent yield support, it is not protecting the pound, and GBP/USD remains below $1.30. Losses for EUR/USD have been sharp, and this pair is back below $1.08. A strengthening US dollar is part of the Trump trade, with traders buying the US dollar as the US presidential election polls narrow. Thus, with 2 weeks to go before the US election, it is hard to see the dollar fall in a meaningful way ahead of this event,’ Brooks said.
The pound was largely flat at $1.2975 early Wednesday afternoon, from $1.2973 at the time of the London equities close on Tuesday. Versus the dollar, the euro ebbed to $1.0779 from $1.0808. Against the yen, the greenback jumped to JP¥152.80 from JP¥151.06.
Some pre-budget worries are also hurting sterling, Ebury analyst Matthew Ryan commented.
‘The prospect that next week’s first Labour budget will place a greater tax burden on both individuals and businesses has further clouded the outlook for GBP and made gains in the UK currency rather hard to come by. While Labour have pledged to not put up taxes on ’working people’, a range of tax increases are potentially on the cards, including changes to capital gains, inheritance, and employer National Insurance taxes,’ Ryan added.
UK Chancellor Rachel Reeves has said she is ‘sympathetic towards the mess’ her Cabinet colleagues have faced, after it was reported that Prime Minister Keir Starmer was facing backlash from his ministers over cuts that could come at next week’s budget.
Reeves has told the BBC it is ‘perfectly reasonable’ that ministers ‘set out their case’ to Number 10 and Number 11 ahead of the fiscal event, and warned problems cannot ‘just be magicked away’.
The prime minister has previously warned that the budget next Wednesday would be ‘painful’, and ministers have been referring to the ‘black hole’ in the public finances since they entered office.
Reeves will be looking to raise up to £40 billion from tax hikes and spending cuts in order to avoid a return to austerity.
Gold rose to $2,751.82 an ounce early Wednesday afternoon, up from $2,739.35 late Tuesday afternoon. It hit a record high above $2,758 on Wednesday morning.
Pepperstone analyst Michael Brown commented: ‘Whatever the catalyst, said momentum appears as solid as ever, with short gold positions right now very much akin to picking up pennies in front of a steamroller.’
A barrel of Brent was quoted at $74.37, down from $75.86 late Tuesday.
In London, WPP shot up 4.5%, the best large-cap performer.
It backed guidance after a third-quarter revenue rise, though it cautioned on a tough comparative and tricky market conditions for the final stretch of the year.
Third-quarter revenue rose 1.4% on-year to £3.56 billion, the advertising firm said. Excluding pass-through costs, however, revenue fell 2.6% to £2.77 billion.
For the whole of 2024, the advertising firm still expects like-for-like revenue, excluding pass-though costs, outcome ranging from a 1% fall to flat from 2023. It said the fourth-quarter is ‘facing a tougher comparative’ than the third, as well as ‘macro uncertainty’.
JD Sports rose 1.9%, after its €520 million bid for French peer Courir got a European green light, after the athleisure firm offered an Iberian competition concern remedy.
The European Commission, the EU’s antitrust regulator, gave consent for the purchase after the companies offered commitments to address the bloc’s concerns.
The remedies offered include divesting all Courir stores in Portugal and several shops in certain parts of France to Snipes, a ‘direct competitor’ in the leisure sports goods market, the commission said.
Elsewhere in London, Man Group fell 2.8%. UBS cut the stock to ’neutral’ from ’buy’.
World Chess jumped 33%. It unveiled plans to launch a world competition tour, showcasing the sport’s biggest stars, akin to the ATP Tour in tennis.
‘The WCT has been designed to revolutionise competitive chess by providing an annual structured, high-profile series of events where players can compete for prestigious titles, major prize pools, and global recognition,’ World Chess said.
It will feature grand slams, a year-end championship and a points-based ranking system.
Chief Executive Officer Ilya Merenzon commented: ‘It’s about time chess reached a permanent position among major sports. For the first time, the sport will have a structured tour with short, thrilling formats and major prizes, accessible to both elite players and aspiring talents. Our aim is that chess will have its own version of the ATP Tour.’
World Chess said it will look to bring the tour to a ‘global audience’ with ‘high-quality live broadcasts and digital streams’.
World Chess floated back in April of last year. It is seeking to promote ‘the mass market appeal of chess’.
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