FTSE 100 lower, down 53 points, demand for oil to fall during Q4 – IEA

FTSE 100 lower, down 47 points, after heavy falls in US and Asian markets
UK inflation rate eases in August aided by falling fuel prices
UK house prices post highest annual rise since 2003 – ONS
Global demand for oil is set to grind to a halt between October and December as the economic slowdown deepens, but is expected to bounce back next year, the International Energy Agency said in its monthly oil report today.

This assumes that China will ease its Covid lockdowns, while growth in air travel should boost demand for jet fuel from airlines.

The Paris-based think tank said:”Global oil demand remains under pressure from the faltering Chinese economy and an ongoing slowdown in OECD economies.”

“Non-OECD countries will cover three quarters of 2023’s gains if China reopens as expected.”

The IEA cut its forecast for demand growth this year by 110,000 barrels per day to 2m bpd, while sticking to its 2023 growth forecast of 2.1m bpd.

10.30am: Housing prices rise 15.5% in year to July – ONS

UK average house prices increased by 15.5% over the year to July 2022, up from 7.8% in June 2022, the highest annual rise since May 2003.

The Office for National Statistics (ONS) said the jump mainly reflected a base effect from the falls in prices seen this time last year, as a result of changes in the stamp duty holiday.

Average UK house prices increased by £6,000 between June and July this year, compared with a fall of £13,000 between the same months last year.

The average UK house price was £292,000 in July 2022, which is £39,000 higher than this time last year.

Average house prices increased over the year in England to £312,000 (16.4%), in Wales to £220,000 (17.6%), in Scotland to £193,000 (9.9%) and in Northern Ireland to £169,000 (9.6%), the ONS said.

10.05am: Dunelm furnishes strong growth in profits

Homeware retailer Dunelm Group PLC was a rare riser on Wednesday after reporting a 32.4% rise in full year pre-tax profits to a record £209mln, on total sales of £1.6bn, up 16.2% on the year.

The retailer said its active customer base grew 8.5% over the year and paid a final dividend of 26p a share, up from 23p a year earlier.

Shares advanced 3.4% to 745p bucking the weak market trend.

Chief executive Nick Wilkinson said: “We feel confident and well prepared to weather the current economic pressures.”

“That said, the operating and economic environment is extremely challenging.”

Dunelm said sales have remained “robust” in the first 10 weeks of the new financial year and that it’s on track to deliver full year 2023 results in line with analysts’ expectations for pre-tax profit of £178mln.

Analysts at Peel Hunt were upbeat: “There is no sign of trading down, or weakness in any category” it said.

“Indeed, Dunelm enters full year 2023 with record brand awareness, active customers and an intent to double down on value.”

“We see strong market share growth and a 35+% three-year dividend return” the broker added.

9.30am: Shares in Aston Martin head south on potential legal action

Aston Martin Lagonda is facing a lawsuit from two former dealers who claim they are owed about £150mln for underwriting the development of its troubled Valkyrie hypercar, The Financial Times reported.

The luxury car maker revealed that Nebula Project AG (a Swiss company owned by Andreas Baenziger and Florian Kamelger) had filed a case against Aston in London, the report said although details are not public.

The case centres on a deal to underwrite the development of the £2.5mn Valkyrie hypercar, according to two people with knowledge of the matter, the FT said.

When the carmaker began developing the Valkyrie in 2016 it turned to Baenziger and Kamelger to underwrite the project.

They were guaranteed royalty payments of about 3%, worth about £150mn, once the cars were on sale, according to three people with knowledge of the arrangement at the time.

However, last year Aston claimed the pair had withheld Valkyrie customer deposits from the company, and sued them to recoup the £15mln it said it was owed.

At the same time, it cancelled the contract.

The FT quoted a statement on Tuesday evening from Aston chair Lawrence Stroll who said: “We are confident in our legal position and believe their counterclaims are retaliatory and without merit.”

8.55am: Back to square one

Back to square one was how Richard Hunter, head of markets at interactive investor said after the heavy falls in global equity markets, following the hot US CPI report, obliterated recent market gains.

By 8.50am the FTSE 100 was trading 73 points lower at 7,313, with the broader FTSE 250 down 157 points at 19,010.

“The implications from the hotter than expected numbers are clear” Hunter said.

“Whereas the recent market rally was predicated on an assumption that inflation had peaked, it remains more resilient than had been hoped, such that the Federal Reserve will have little option but to continue with its aggressive monetary policy.”

“The likelihood of a 0.75% hike at the September meeting has now become a near certainty, with a minority of economists floating the possibility of a blow-out 1% increase.”

The theme continued at home with UK inflation numbers out this morning which came in slightly weaker than expected.

“The expectation is that the Bank of England won’t now push down quite as hard on the monetary brake pedal as the Federal Reserve is forecast to do in terms of rate hikes after the US inflation snapshot came in higher than expected” Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown (LON:HRGV) said.

.“The slight drop in UK inflation, the first in 11 months, will ease pressure on give policymakers and give them a bit more breathing space.”

“But inflation is still uncomfortably high” and with “signs of continued upwards pressure on wages amid the fight for talent” “the Bank of England can’t rest easy” she cautioned.

“Rates are still expected to head upwards when policymakers meet next week but a lower rise of 0.5% is now looking more likely.”

8.30am: Deutsche Bank downgrades abrdn to sell

Deutsche Bank has taken a more cautious stance on asset manager, abrdn PLC, downgrading the stock to sell from hold with a reduced price target of 135p, down from 175p.

Analyst Rhea Shah said there are downside risks to the shares from both an earnings and capital perspective with a 25% cut to the dividend now forecast beginning with the final payout for 2022.

Additionally, Deutsche also values the excess capital locked within the Indian stakes at a 5% larger discount to reflect concerns around the uses of sale proceeds.

8.10am: FTSE 100 opens lower after heavy falls in global markets

The FTSE 100 opened sharply lower on Wednesday reflecting heavy falls in global markets spooked by stronger than expected US CPI numbers yesterday which quashed hopes that weaker inflation would ease the pressure on the Federal Reserve to keep its aggressive stance on raising interest rates.

At 8.10am the blue-chip index was trading down 4o points to 7,346, with the broader FTSE 250 down 87 points to 19,084.

Inflation in the UK eased to 9.9% in August, down from 10.1% in July, and slightly below market expectations “sustaining, rather than increasing, the pressure on the MPC to act” Samuel Tombs, chief UK economist at Pantheon Macroeconomics said.

He forecast the headline rate of CPI inflation will rise to almost 11% in October but with an increasing confidence that this will prove the peak “and that it will ease rapidly in 2023.”

7.45am: Businesses face delays in getting Government energy support – FT

The Financial Times reported that companies have been warned by UK government officials that they will have to wait longer than households for help from its £150bn energy package, due to the difficulty of launching a support system before November.

The report said the prospect of weeks of delays is increasingly worrying business leaders, since hundreds of thousands of companies reach the end of their fixed-price energy contracts at the start of October.

Executives have been told in recent meetings with the government of the risk the scheme may not be ready until November, although officials said they still hoped the scheme would go live next month.

“It is not worked through yet,” said one government official. “I don’t know whether it will come in before November. There’s some debate about whether it can be brought forward and happen before then.”

7.25am: UK PPI below expectations in August

Producer input prices rose by 20.5% in the year to August 2022, down from 22.6% in the year to July 2022 and below forecasts for a rise to 22.6%, according to The Office for National Statistics.

Producer output (factory gate) prices rose by 16.1% in the year to August 2022, down from 17.1% in the year to July 2022 and below forecasts for a rise to 17.5%.

Crude oil and petroleum products provided the largest downward contributions to the change in the annual rates of input and output inflation, respectively.

On a monthly basis, input prices decreased by 1.2% and output prices decreased by 0.1% in August 2022; this is the first time the monthly rates have been negative since August 2020 and September 2020, respectively.

7.15am: UK inflation rate eases in August

The Consumer Prices Index (CPI) rose by 9.9% in the 12 months to August 2022, down from 10.1% in July, according to The Office for National Statistics (ONS) and below expectations for an increase to 10.1%.

On a monthly basis, CPI rose by 0.5% in August 2022, compared with a rise of 0.7% in August 2021.

The ONS said a fall in the price of motor fuels made the largest downward contribution to the change in both the CPIH and CPI annual inflation rates between July and August 2022, while rising food prices made the largest, partially offsetting, upward contribution to the change in the rates.

6.55am: FTSE 100 seen lower after US markets tumble

The FTSE 100 is expected to open lower this morning following heavy falls in the US overnight following the stronger than expected US CPI numbers.

Spread betting companies are calling the lead index down by around 50 points.

US markets nursed heavy losses at the close rattled by stronger than expected inflation data which quashed hopes that the Federal Reserve could relent and scale back its policy tightening in the near future.

All three major US stock indexes veered sharply lower, snapping four-day winning streaks and notching their biggest one-day percentage drops in over two years.

The Dow Jones Industrial Average slid 1,276 points, or 3.9%, to 31,105, the S&P 500 tumbled 178 points, or 4.3%, to 3,933 and the Nasdaq Composite slumped 633 points, or 5.2%, to 11,634.

On this side of the pond we will get our own inflation reading this morning.

Michael Hewson chief market analyst at CMC Markets UK said: “In July we saw food prices driving the gains, although recent declines in petrol prices might help with the month on month numbers.”

“Nonetheless yesterday Kantar reported grocery price inflation of 12.4% in August which suggests that economist forecasts of a modest decline to 10% in today’s August numbers might be optimistic.”

“Core prices could be more of a problem given they rose sharply to 6.2%, in July, and if the US is any guide yesterday could move higher still.”

“This would be more of a worry for the Bank of England and could force them to move by 75bps next week, with the potential for more to come by year end. At least this week’s delay gives the Bank of England the luxury of waiting to see what the Fed does before they make a decision on 50bps or 75bps.”