FTSE 100 slides to seven-month low as Wall Street falls – as it happened

Graeme Wearden

from on 2018-10-23 20:09 (#41CR4)

Worries about trade wars, Brexit, Italy's budget, China's economy and Saudi Arabia all blamed as shares decline

9.09pm BST

And finally, here's Richard Partington on today's market action:

Wall Street and European stock markets followed Asian shares lower on Tuesday, as investors around the world took fright at the increasingly fractious global geopolitical outlook.

Investors are growing increasingly worried about a cocktail of risks that could act as a significant drag on the world economy. Potential headwinds include the trade dispute between the US and China, rising US interest rates, the fallout from the death of the Saudi journalist Jamal Khashoggi and the budget dispute between the EU and Italy.

9.07pm BST

Despite that late revival, the New York stock exchange has closed in the red. But things aren't as bad as they looked earlier.

The Dow has closed down 126 points, a drop of 0.5%, which means it clawed back most of its early losses.

Stocks erase early losses, but still finish down for the day https://t.co/QbCjMPoT6X pic.twitter.com/bvy3R1zZmi

US Closing Prices:#DOW 25191.5 -0.50%#SPX 2740.66 -0.55%#NDX 7118.67 -0.32%#VIX 20.98 +6.82%

8.53pm BST

The EC's refusal to accept Italy's budget led to an unedifying confrontation between European commissioner Pierre Moscovici and an Italian MEP.

My colleague Daniel Boffey has the details:

Pierre Moscovici, the commissioner for economic and financial affairs, said the commission would hold talks with Rome with an open mind. "The opinion adopted today by the commission should come as no surprise to anyone, as the Italian government's draft budget represents a clear and intentional deviation from the commitments made by Italy last July," he said.

"However, our door is not closing. We wish to continue our constructive dialogue with the Italian authorities."

A #Strasburgo, HO CALPESTATO (con una suola Made in Italy!!!) la montagna di BUGIE che #Moscovici ha scritto CONTRO il #NostroPaese !!! L'Italia merita RISPETTO e questi #EuroImbecilli lo devono capire, non ABBASSIAMO PIiTM LA TESTA !!! Ho fatto bene ??? pic.twitter.com/Dx5OeM0RMs

8.20pm BST

Hello.... The US stock market is continuing to recover from its early lows.

The Dow's now just 0.2% lower, or 60-odd points, having been 400+ down at the start of trading.

7.57pm BST

Mike O'Rourke, chief Market strategist at JonesTrading, is also concerned by Caterpillar and 3M's earnings.

He told Marketwatch:

"Caterpillar citing rising costs shows that the trade war is hitting home. It's industrials like Caterpillar that struggle when you're at a cyclical top."

6.59pm BST

Back in New York, shares are climbing off their lowest points... but they're still in the red.

These figures bring home loud and clear the ramification of the brewing trade war and come at a time when traders are starting to realise that the chances of a US - Sino trade deal being achieved are diminishing. This US - Sino trade spat is here to stay and that is frightening for the outlook of companies.

Costs are increasing and fears that tighter trade conditions will slow global growth is making even the most level-headed trader nervous. When Caterpillar, a bellwether for economic activity starts to struggle, the smart money is seeing that as a signal to sell out of riskier assets.

5.10pm BST

Britain's blue-chip stock index has been skittled to its lowest level since March, amid another jittery day in the markets.

The FTSE 100 has closed down 87 points, or 1.25%, at 6,955, a seven-month closing low.

5.02pm BST

Day One of the Saudi Future Investment Initiative has been roundly overshadowed by the latest developments in the murder of Jamal Khashoggi.

One attendee has got in touch with some observations:

1. Apparently there are 3,000 attendees. I was advised that the original number was 3,500, so it seems 500 chose not to turn up. The event is taking place in the massive convention centre alongside the Ritz Carlton. Hotel.

2. Interesting to note that the first comment at the opening was drawing focus on the Kashoggi affair. The speaker articulated the fact that the "terrible event that happened" is clearly "not in our Saudi DNA or the way we are. We decry what has happened and also want to thank the attendees that have come to Riyadh for the F.I.I. From abroad - your presence here is welcome and most appreciated". This overt recognition and expression of Saudi contrition and reinforcing the fact that the Saudi government is clearly distancing itself from the events in Istanbul.

4.42pm BST

October has been a bad month for equities, points out Neil Wilson of Markets.com.

"US equity markets turned sharply lower as investors turned chicken to the tune of some very risk-off mood music. However with earnings growth still very strong the valuations may start to look very attractive. US markets opened down around 2%, dipping to three months lows as they followed the selloff in Europe this morning which has shown no signs of abating.

It of course early in the US session to make great pronouncements and these prices are moving a lot but the general tone is not good.

3.59pm BST

The sell-off on Wall Street is accelerating. The Nasdaq is now down 2.5%, meaning it could slide into correction territory.

The Dow has been lurching around too, dragged down by Caterpillar (which has tumbled by almost 10% today).

3.50pm BST

Back in the US, motorbike manufacturer Harley-Davidson has reported a slump in sales to American consumers -- just months after Donald Trump pushed for a boycott.

"Our expectations for the impact of recently enacted tariffs includes incremental costs of approximately $15 million to $20 million for steel and aluminum and approximately $25 million for EU tariffs.

Additionally, China increased its tariffs volume on foreign motorcycles produced in the United States by 25 percentage points and the U.S. has increased tariffs on certain products imported from China. We believe this will increase our 2018 cost by approximately $3 million. In total we now expect to incur approximately $43 million to $48 million of increased costs related to the tariffs during 2018."

In August, the president said a boycott of Harley would be "great."

US sales drop 13% for the quarter. Worst decline in 8 years. https://t.co/O579ppUAtP

3.28pm BST

The Italian government has hit back, warning that it will not change its 2019 budget despite the EC's demand for a rewrite.

"There isn't any B plan.

I said that the deficit at 2.4 percent of GDP is the cap. I can say this will be our cap."

3.17pm BST

If Italy doesn't revise its budget, then the EC could launch an "Excessive Deficit Procedure" against it.

That could result in a large fine, and closer scrutiny of Italy's tax and spending plans. That could also worsen relations between the two sides, potentially alarming the markets or fuelling eurosceptic feelings.

3.11pm BST

Commissioner Pierre Moscovici hopes that a compromise can be found....

1/2 The opinion adopted today should come as no surprise to anyone, as the Italian Government's draft budget represents a clear and intentional deviation from the commitments made by Italy last July.

2/2 However, our door is not closing: we wish to continue our constructive dialogue with the Italian authorities. I welcome Minister Tria's commitment to this end and we must move forward in this spirit in the coming weeks.

3.09pm BST

This is why the EC has a problem with Italy's new tax and spending plans:

. @VDombrovskis "In July 2018, the Council recommended that Italy should make a structural improvement of 0.6% of GDP. Draft budgetary plan presented by Italy instead provides for a structural deterioration amounting to 0.8% of GDP in 2019, very off the commitments". @eunewsit

3.03pm BST

Newsflash: The European Commission has rejected Italy's 2019 budget, and demanded a rewrite.

As many analysts had predicted, Brussels has concluded that the Italian tax and spending plans breach EU guidelines.

"Today, for the first time, the Commission is obliged to request a euro area country to revise its draft budget plan,"

"But we see no alternative than to request the Italian government to do so. We have adopted an opinion giving Italy a maximum of three weeks to provide a revised Draft Budgetary Plan for 2019.

"The Italian Government is openly and consciously going against the commitments it made.

BREAK: Trouble in the EU as it rejects Italy's budget. Italy has three weeks to respond. Full statement HERE: pic.twitter.com/OS5uwDu8mw

2.54pm BST

Boom! Global stock markets have slumped to their lowest level in over a year.

Today's losses in America, Europe and Asia have dragged the MSCI All-Country World Index to levels last seen in September 2017.

Caterpillar's third quarter earnings beat forecasts with progress across most end markets. But the tone of the report made clear earnings momentum was not the main story in the quarter.

The impression was compounded by 2018 earnings forecasts remaining untouched, for the first time since two straight quarterly upgrades.

2.45pm BST

Technology companies and banks are leading today's sell-off in New York, as October continues to prove a volatile month.

2.40pm BST

Ouch! The New York stock exchange has opened sharply lower.

2.37pm BST

Here's our news story about the drop in UK factory orders:

2.31pm BST

A reminder of the big sell-off in Asia overnight:

2.23pm BST

European stock markets are still deep in the red, as traders grimace and anticipate the start of trading in New York.

In London, the FTSE 100 is now down 77 points at 6965, a drop of 1.1%, which would be its lowest closing point in seven months. This won't help investor confidence to claw its way back from the lows reported earlier.

Hopes that we may see a Chinese-led recovery have been dashed for the time being. After a strong two-day rally, Chinese stocks fell back sharply overnight [-2.2%]. As a result, the losses for European indices sharply increased at the open this morning while US index futures also fell across the board.

Chinese equities, which had been hit the hardest this year, rebounded at the end of last week and start of this in part because of the Chinese government promising to provide more stimulus to stabilize its economy and offset the impact of US tariffs hurting its exports. In addition, there was some speculation that the US and China were going to put aside their trade spat and come to an agreement of some sort at the G20 meeting in Argentina next month, where US President Donald Trump and Chinese President Xi Jinping were likely to meet.

2.01pm BST

Marketwatch says Caterpillar's prediction of further rising prices (partly thanks to tariffs) has spooked investors:

Though Caterpillar narrowly beat expectations for profit and warnings in the quarter, the outlook for more rising costs spooked investors. Caterpillar's shares fell 5.9% in premarket trading on Tuesday.

Caterpillar said it would raise prices 1% to 4% world-wide next year on most machines and engines to offset some of the higher costs. Other manufacturers have also said they are passing on higher costs by raising prices.

1.38pm BST

Defence group Lockheed Martin may have bucked the gloom, by posting strong results and hiking its sales forecast for the rest of the year.

Our team achieved another quarter of strong growth leading us to improve our expectations for our full-year financial results."

1.10pm BST

Hold onto your hats! The Dow is now expected to tumble by 400 points, or more than 1.5%, at the open - partly due to those results from Caterpillar and 3M.

Dow is set for 400-point drop at the open after 3M, Caterpillar earnings disappoint https://t.co/LgpgS1wgIh pic.twitter.com/sDsAyMn4sl

1.07pm BST

In another blow, US conglomerate 3M has also posted underwhelming results.

The group's industrial sales were flat in the last quarter, while healthcare sales fell 2.8%, consumer sales fell 3.4% and electronics and energy dropped by 4.8%. However, total sales grew 7.0 percent in Safety and Graphics.

12.59pm BST

Caterpillar's results also show that consumers are paying the price of Donald Trump's trade disputes:

Caterpillar is dealing with tariffs by making the customers pay for it https://t.co/UKrh2AMjki pic.twitter.com/FLFEyNg8hA

12.55pm BST

NEWSFLASH: Caterpillar, the construction equipment giant, has just reported results -- and Wall Street isn't happy.

Caterpillar has warned that it is facing "supply chain challenges across the industry".

Manufacturing costs were higher due to increased material and freight costs.

Material costs were higher primarily due to increases in steel prices and tariffs. Freight costs were unfavorable primarily due to supply chain inefficiencies as the industry continues to respond to strong global demand.

"This was the best third-quarter profit per share in our company's history.

Our global team continues to do excellent work focusing on our customers' success and executing our strategy for profitable growth."

"This was the best third-quarter profit per share in our company's history," said Caterpillar CEO Jim Umpleby Tuesday.

Stock -7% pre-market. $CAT

11.50am BST

In further gloomy news, UK manufacturers have reported the sharp fall in orders since the EU referendum.

The CBI, which represents Britain's bosses, reports that new orders at UK factories fell at the fastest pace in three years in the last quarter.

"This is a sobering set of figures demanding immediate action at home and abroad.

"Planned investment is being scaled back in the face of deepening Brexit uncertainty, so it's vital that the Chancellor incentivises manufacturers to spend in areas that will help them become more productive.

11.24am BST

No wonder the FTSE 100 is falling.

UK investor morale has hit its lowest level in at least 23 years, according to financial services firm Hargreaves Lansdown.

'Investors are in grim mood, as time is running out on Brexit negotiations with little progress on show. Sentiment was dented by the financial crisis, but not to the extent we are seeing today.

That's perhaps because the crisis unfolded in an unscheduled fashion, while the timeline on the UK's withdrawal from the EU is there for all to see. A looming early Budget and a stormy October on the markets will do little to settle nerves.

11.01am BST

Over in Ankara, Turkey's president has told its parliament that the murder of Jamal Khashoggi was a premeditated and meticulously planned political assassination.

Recep Tayyip ErdoAan vowed to pursue the investigation into Khashoggi's death, calling on Riyadh to hand over those responsible. Here's a link to our liveblog.

Erdogan calls on Saudi Arabia to hand gang responsible for Khashoggi violent murder to be tried in Istanbul. Asks Riyadh to identify "the local collaborator" that it alleges dumped his body. Adds no-one believes a small group planned killing. Who sent gang to Istanbul, he asks.

"I do not doubt the sincerity of King Salman. That being said, independent investigation needs to be carried out. This is a political killing"

President ErdoAan: "Pinning such an incident on a few security and intelligence officials satisfies neither us nor the international community.

Conscience of the humanity will be contented only if all, from those giving the order to those executing it, are held to account."

Getting away with murder, chart edition https://t.co/UGGPM1GgUN

10.57am BST

Here are the best and worst performers on the FTSE 100 today, as the index wallows at a seven-month low.

10.40am BST

Newsflash: Britain's FTSE 100 has slid to a new seven-month low, as world stock markets extend today's losses.

The unresolved US-China trade war (and fears about the latter's economy), the US withdrawal from the INF Treaty, the Khasohoggi-related friction between the West and Saudi Arabia, Brexit (all of it, but specifically the rising chances of a no deal divorce), and, perhaps most pertinent to Tuesday, the ongoing EU-Italy budget dispute.

A calamitous cavalcade of market concerns, of such seriousness that it is a surprise the global indices ever manage to edge into the green.

10.22am BST

The futures market is indicating a bad start on Wall Street later today. The Dow is now expected to drop by over 1%.

Dow futures pointing to a 300-point drop at 5:15AM ET. S&P down 38 points, while Nasdaq -120 pts $DIA $SPY $QQQ pic.twitter.com/c2sanvA1C3

9.46am BST

Newsflash: Britain's technology company Dyson has decided to build its first electric car in Singapore.

Our existing footprint and team in Singapore, combined with the nation's significant advanced manufacturing expertise, made it a frontrunner.

Singapore also offers access to high-growth markets as well as an extensive supply chain and a highly skilled workforce.

Dyson is truly global in its development, delivery and realisation of technology. This decision is good news for the exceptional teams we have in both the UK and Singapore.

9.32am BST

Saudi Arabia still expects to sign tens of billions of dollar of deals at its investment conference, despite those high-profile withdrawals following Jamal Khashoggi's death.

Reuters explains:

Saudi Arabia brushed off an outcry over the killing of journalist Jamal Khashoggi and went ahead on Tuesday with an investment conference boycotted by Western political figures, leading international bankers and company executives.

Speaking at the opening session, prominent Saudi businesswoman Lubna Olayan said the killing of the Washington Post columnist was "alien to our culture" and voiced confidence that the kingdom will "emerge stronger".

9.23am BST

We're live-blogging president ErdoAan's speech on Jamal Khashoggi's death, here:

9.18am BST

WSJ reporter Rory Jones says the Saudi investment conference is underway - despite scores of big names pulling out.

No sign of Crown Prince Mohammed bin Salman yet at @FII2018 and @SoftBank's Masayoshi Son is no longer speaking. Event kicked off with heads of Saudi, UAE and Russian sovereign wealth funds. Moderator acknowledges #Khashoggi, calling his killing "alien" to Saudi culture

The high-profile pull-outs from the FII include JP Morgan's Jamie Dimon, the head of the IMF, Christine Lagarde, Glencore chairman Tony Hayward and many more - even Uber's boss, Dara Khosrowshahi, despite the PIF's $3.5bn investment in his company. Separately, Richard Branson has suspended the Gulf state's $1bn investment in his space project, Virgin Galactic.

Rarely have so many business leaders been seen running in the same direction, in this case away from Saudi Arabia at speed.

Boycotting Saudi FII? This chandelier studded ballroom at Riyadh's Ritz-Carlton looks packed. I had to push my way in. No sign of MBS so far. pic.twitter.com/mXfQEGpRUX

9.15am BST

In another blow to Saudi Arabia, Japanese billionaire Masayoshi Son has abandoned plans to speak at its Future Investment Initiative (FII), which started today.

Michael Amon of the Wall Street Journal reports that Son may still be present, but he won't be on the stage.

BREAKING: Softbank's Masayoshi Son won't speak at FII, event spokesman says. He could show up on the sidelines.

Son is arguably Saudi Arabia's closest foreign investment partner. His cancellation came long after other CEOs abandoned ship and shows how serious the #khashoggi crisis is for Saudi.

8.56am BST

Saudi Arabia's stock market has also dropped in early trading, down 1.2%.

Traders will be worrying about Riyadh growing isolation following Jamal Khashoggi's murder, and the prospect of Turkey releasing the "naked truth" about the killing later today.

"I am not satisfied with what I've heard.

We're going to get to the bottom of it."

#CrownPrince meets with the U.S. Secretary of the Treasury and stresses the importance of Saudi-US strategic partnership, where it holds an important role in the future in line with the Kingdom's #Vision2030 pic.twitter.com/5LyloSOMTK

To make clear @stevenmnuchin1 cancelled his speaking engagement at Saudi investment conference. He is in Saudi (as part of 6 country Middle East trip) visiting the Terrorist Financing Targeting Center and having meetings in preparation for Iran sanctions.

In his meeting with the Saudi Crown Prince, @stevenmnuchin1 addressed combating terrorist financing, implementing Iran sanctions, Saudi economic issues and the Khashoggi investigation.

8.27am BST

Mike van Dulken of Accendo Markets points out that the US stock market fell yesterday, helping to trigger today's losses in Asia and now Europe.

The negative opens come after Asia's rally cooled, retracing Monday's jump amid fresh fears about global trade, geopolitical tensions and the US midterm elections.

Wall Street added to downbeat sentiment with banks and financials leading the slide as worries mount over the strength of earnings from the remainder of corporates set to report.

8.17am BST

Boom! As feared, European stock markets have slumped to their lowest point in almost two years.

Germany's DAX dropped 1.35% in early trading, France's CAC and Spain's IBEX both lost 1%, and Italy has shed 0.8%.

Geopolitical tensions, Italian budget woes and the ongoing standoff between the European Commission and Italy are making investors nervous. Given that there is no solution about the trade war between the US and China stand is making things a bit more arduous today.

We need to have a solution to the Italian budget. Investors are going to keep a close eye on the European Commission's decision today about the Italian budget. The commission may end up doing something which is unprecedented- it may ask Italy to revise and resubmit its budget. It is widely expected that the commission is going to have a negative opinion about the budget, but the question is if Italy will be ready to comply with the request?

8.10am BST

Ouch. Britain's blue-chip stock index has fallen close to an eight-month low at the start of trading.

The FTSE 100 is down 51 points, or 0.8%, at 6991, close to its lowest level since April

7.58am BST

Today's selloff has pushed stocks across Asia to the brink of a bear market (more than 20 percent off their recent highs.

MSCI Asia Pacific Index has dropped to its lowest since May 2017, with losses across the region.

Among the steepest decreases were in Japan, Hong Kong and China, where shares had had the biggest jump in more than two years Monday.

Global equities as measured by the MSCI World Index face their worst month since August 2015. S&P 500 Index futures declined 1% and Euro Stoxx 50 contracts opened more than 1% lower, indicating the rout will spread to U.S. and European markets. The yen gained and gold ticked higher.

7.44am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The US dollar outperformed on Monday on the back of Italy and Brexit risk while the mere utterance of a protracted equity correction remains a highly sensitive topic that investors fear could morph from a wall of worry into a towering wall of pain.

Risk aversion continues to permeate every pocket of the markets whether triggered by President Trump's latest tweets on immigration or the blustery headwinds from Riyadh to Rome; markets remain shrouded in a thick blanket of risk.

Offenders Will Be Punished pic.twitter.com/xFL4bH93sD

European Opening Calls:#FTSE 7005 -0.54%#DAX 11427 -0.84%#CAC 5025 -0.57%#MIB 18818 -0.78%#IBEX 8751 -0.63%

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