Must read: FTSE 100, US jobs report, UK house prices, Twitter/Threads, Coca-Cola

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS

European markets have opened in the red again, with the FTSE 100 leading the declines, rounding up a dismal week.

The mood music for markets has certainly soured after the FTSE 100 hit its lowest closing level since November and the Stoxx 600 suffered its biggest daily drop since March.

UK gilt yields jumped, pricing in concerns about further monetary tightening. JP Morgan warned that under ‘some scenarios’ the Bank of England could raise interest rates to 7% with the risk of a ‘hard landing’ for the UK economy next year. However, the analyst team’s base case is for the bank rate to peak at 5.75% in November. 

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Meanwhile stateside, the ADP private payroll report saw 497,000 job additions in June, double consensus estimates, pointing to a tighter-than-expected labour market which could have an upward effect on inflation and in turn prompt more aggressive tightening from the Fed.

Markets are anticipating the Fed will resume hiking rates this month after pausing last month. Later today, the US non-farm payrolls report is due, with the ADP figure potentially paving the way for another hotter-than-anticipated reading, which could act as a further headwind to equities while providing support for Treasury yields and the US dollar.

UK HALIFAX HOUSE PRICE INDEX 

According to the Halifax, UK house prices fell by 0.1% in June month-on-month and slumped by 2.6% year-on-year, the biggest annual drop since 2011. The average home now costs £285,932 after three straight months of declines. Halifax predicts that the squeeze on household finances will continue to put downward pressure on house prices over the coming year. 

Mortgage rates have been increasing sharply, with two-year fixed deals averaging 6.52% according to the latest data from Moneyfacts, while five-year deals surpassed 6% for the first time in 2023. The Bank of England’s desperate attempts to bring sky-high inflation back down towards its 2% target is starting to have a major ripple effect across the housing market, dampening demand for properties and in turn weighing on prices. This is, of course, the intended effect of monetary tightening, but there’s no shying away from the pain it is causing for those on variable rate mortgages and in terms of the wealth effect for many homeowners who are seeing their prized asset drop in value.

While a drop in house prices will be a welcome development for those looking to get onto the property ladder, the cost of borrowing is still a major deterrent, with the era of rock bottom interest rates now nothing more than a nostalgic memory.

TWITTER / THREADS 

Twitter is threatening to sue Meta Platforms Inc Class A (NASDAQ:META) over its new rival microblogging site, Threads. Twitter’s lawyer Alex Spiro sent Meta’s CEO Mark Zuckerberg a letter saying his company hired employees from Twitter who ‘continue to have access to Twitter’s trade secrets and other highly confidential information.’ However, a Meta spokesperson rebuked these claims arguing ‘no one on the Threads engineering team is a former Twitter employee’. 

The launch of Threads this week has been an almighty success, with over 30 million sign ups and 95 million posts already. No doubt this will be making Elon Musk feel extremely nervous about the risk that Threads could take Twitter’s throne. Zuckerberg has made some bad calls lately, such as piling billions into the metaverse. But Threads has the potential to be a major success, capitalising on a gap in the market brought about by the rise in discontentment among Twitter users and advertisers.

The threat of legal action of course is a considerable headwind to watch and there will be other road bumps along the way. But with Meta riding high on its impressive rally so far this year, continued growth at Threads could provide further momentum for the business.

COCA-COLA HBC 

Coca-Cola HBC AG (LSE:CCH) is bucking broader market negativity, trading at the top of the FTSE 100 after raising its full-year profit outlook following a strong performance in June. The bottling company now expects organic EBIT growth of between 9% and 12%, sharply higher than its previous guidance for between -3% and +3%. In May, Coca-Cola HBC said it expected full-year profit to reach the top end of guidance. 

Coca-Cola HBC has been benefitted from strong demand for soft drinks and price increases, helping the business to weather headwinds from energy and commodity price inflation. Shares are up around 30% year-on-year, sharply outperforming Fevertree Drinks (LSE:FEVR) which is in the red, having struggled with a jump in glass bottling and glass shortages in the UK.