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FTSE 100 nears May 2015 highs after data and sterling fall

Last updated: 12:21 03 Oct 2016 EDT, First published: 07:48 03 Oct 2016 EDT

Brexit
FTSE 100 shares had a good start to the fourth quarter, helped by good manufacturing data and hopes that the pound's sharp fall on Monday will help exporters.
 
The UK government’s Brexit plan hit sterling against the US dollar. The pound slumped 0.8% to $1.28 on Monday after Prime Minister Theresa May said at the weekend that the UK would begin the formal process of leaving the European Union by the end of March 2017.
 
The currency is now hovering just above the 30-year low it hit earlier this summer following the Brexit vote.
 
If May sticks to her timetable, Brexit should happen in 2019. Philip Hammond, the UK finance minister, outlined that the UK economy will be in for a rocky ride over the next two years and that he is keen to conclude negotiations with the EU as fast as possible while maintaining economic strength in the bargaining process. Fiscal looseness is also tabled for the new government in order to maintain business confidence.
 
The FTSE100 blue-chip ticker closed up 1.2% at 6983 – close to bursting 7,000. The ticker was last at those levels in May 2015.
 
The top gainer was builders’ merchant Travis Perkins (LON:TPK) up 3.1% at 1592p. The top decliner was broadcaster ITV (LON:ITV) down 1.8% to 183.8p after brokers at Barclays lowered their target price on the stock from 200.0 to 190.0p.
 
The FTSE 100 has Britain’s most international stocks as constituents. So they benefit from sterling sliding from translation of earnings on overseas outposts as well as from more competitive exports.
 
The more UK-centric FTSE 250 mid-cap ticker ended up 1.75% at 18,183 and was led higher by fund manager Henderson Group plc (LON:HGG) up 16.7% to 270.7p after agreeing to a $6bn tie-up with US-based rival Janus Capital, alongside a proposal to cancel the company's FTSE 250 listing, although the Australian listing will be kept.
 
Combined, they will have more than $320bn assets under management when the transaction completes in the second quarter of 2017.
Other fund managers to benefit from the uplift were Jupiter Fund Management PLC (LON:JUP), Aberdeen Asset Management (LON:AND), and Aldermore Group plc (LON:ALD).
 
Second-largest gainer was steel, mining and vanadium miner Evraz (LON:EVR) up 12.2% to 180.7p amid reports that four more Chinese cities had imposed measures designed to dampen demand, bringing the total number of local authorities which had taken such measures to seven. Other mid-cap commodities stocks to rise included KAZ Minerals plc (LON:KAZ).
 
Ibstock plc (LON:IBST) benefited fro Travis’ gains too, up 7.1% to 173p.
 
The FTSE AIM 100 Index ended up 0.8% at 3,959 and the FTSE AIM All-Share Index up 0.7% at 824.
 
Rarely ever have nearly half the stocks moved upwards, but today was such a day. A total of 46% of stocks rose, 19% fell and 35% were unchanged.
 
The aptly named Altitude Group saw only the sky as the limit as the stock gained the most of any in London on Monday, up 58.5% to 86p. The company said it knew of no reason for the share jump.
 

Midsession

The top-share index was within spitting distance of the psychologically important 7,000 level in the lunchtime session, as Brexit issues returned to the fore.

It was as if the government had performed an old-fashioned currency devaluation, as the pound tanked following the commitment by Prime Minister Theresa May to invoke article 50 – kicking off the process of Britain’s withdrawal from the European Union – by March 2017.

The Footsie, comprised as it is of many multi-national companies that get paid in dollars but report their results in sterling, took heart from sterling’s plunge in the wake of May’s comments, and coming up to 12.30pm was up 1.2%, or 85 points, at 6,985.

For once, speculation about Deutsche Bank’s predicament took a back seat, helped by it being a market holiday in Germany today. Late last week hopes rose that the troubled German bank would be successful in petitioning for a lower fine to be imposed by the US Department of Justice for various misdemeanours.

“Sterling is showing weakness across the board today, having fallen in dramatic fashion to 1.2845, after trading at 1.34 only two weeks ago. The capitulation appears to be coming from negative sentiment taken from Theresa May’s Article 50 plans, revealed at this weekend’s Tory party conference, which some commentators have interpreted as a ‘hard Brexit’,” speculated Jordan Hiscott, the chief trader at ayondo markets.

“Interestingly, manufacturing PMI data, released earlier this morning, showed that output is at its highest level since 2014 - this should in theory boost the currency,” Hiscott noted.

The manufacturing Purchasing Managers’ Index (PMI) reading for September rose to 55.4 from 53.4 in August; a value about 50 indicates expansion.

The appropriately named Altitude Group PLC (LON:ALT) was high as a kite this morning, prompting the company to issue a statement saying it knew of no reason for the rise. The announcement from the provider of technology solutions for small-to-medium sized businesses saw the share price pull back from 89.625p to around 80.25p, which is still a 48% increase on the day. Octopus Investments, which announced on Friday it had sold off more than half a million Altitude shares in the second half of September must be cursing its luck …

St Peter Port Capital Limited (LON:SPPC) was enjoying a rare spell in the limelight, as it said it was commencing a review of strategic options to maximise value for shareholders, including a potential sale of the company.

Shares in the investment company hardened to 15p, up from 12.25p overnight.

Collectibles specialist Stanley Gibbons Group PLC (LON:SGI) was getting stamped on after an update that read more like a confession note than a set of final results.

The shares shed 11% at 11.625p as the company plunged into the red, with an adjusted loss before tax of £4.9mln versus a restated profit before tax of £5.1mln the year before.

Turnover at £59.1mln was being 28% below budget and 15% lower than the prior year, but the real kick in the nether regions was a 43% reduction in net assets as a result of the restatement of prior years’ results and a significant reduction in the carrying value of certain other assets.


Open

The Footsie is at a 52-week high and making a run at the 7,000 level after Prime Minister Theresa May’s weekend comments on Brexit.

Having apparently come down more in favour of a so-called “hard Brexit” side of the equation, May’s comments sent sterling plummeting and equities surging.

Shortly after 9.00am, the FTSE 100 index was up 63 points at 6,963.

Drugs giant AstraZeneca PLC (LON:AZN) added a bit of a turbo boost to Footsie’s advance, rising 1.5% on news that MedImmune, its global biologics research and development arm, has licensed out a Crohn’s disease treatment it has in development to Allergan PLC (NYSE:AGN).

The FTSE 250 mid-cap index was up 138 points at 18,009, helped by a 17% hike in the share price of Henderson Group PLC (LON:HGG). The fund manager is to merge with Janus Capital Group Inc (NYSE:JNS) in the semi-mythical “merger of equals”, with Henderson shareholders set to end up accounting for 57% of the shares in the combined group and Janus stockholders 43%.

On the other hand, Janus gets top billing in the newly named Janus Henderson Global Investors group, which will have a market capitalisation of around US$6bn and assets under management in excess of US$320bn.

“On the face of it, the deal makes a lot of sense and the groups complement each other. Scale can help keep costs down for fund groups, allowing them to offer more competitive fund pricing, while still delivering good active performance,” suggested Mark Dampier, head of Investment Research at wealth management titan Hargreaves Lansdown.

Among small caps, Tethys Petroleum Ltd (LON:TPL) rose by just over a third after a favourable court ruling.

The Central Asia and Caspian Region-focused oil and gas exploration and production company said the  Almaty City Court's Board of Appeals had found in favour of Tethys by dismissing the previously announced appeal of the claimant and upholding the earlier Court decision on August 24, 2016 to lift the seizure order over the company's assets.

The Court's decision is effective immediately, there is no right of further appeal and restrictions over the operation of the company's bank accounts in Kazakhstan have been lifted, the company said.

Cash shell StratMin Global Resources PLC (LON:STGR) put on a spurt, rising 15% to 1.875p, as the share subscription by directors past and present plus current members of the management team became effective. In all, £344,500 will be raised through the issue of shares at 2.5p a pop.

In similar vein, shares in European Metals Holdings Limited (LON:EMH) climbed 3.5p to 33.75p as its largest shareholder, Rare Earth Minerals plc (LON:REM) subscribed for A$2.6mln shares.

There was some good news for long-suffering shareholders in low cost African airline fastJet PLC (LON:FJET), as it sold its Airbus A139 aircraft for US$8.0mln, sending the shares 11% higher to 24.5p.

Kodal Minerals PLC (LON:KOD) was the biggest faller in early trading, shedding around one-sixth of its value at 0.11p as it issued shares at 0.03125p a throw, raising £750,000 to advance its exploration programme at its Bougouni lithium project in Mali.


8.30am - Reasons to be cheerful

The FTSE 100 got off to a better-than expected start as it rose more than 30 points 6,929.13 after Prime Minister Theresa May provided more clarity about her Brexit plans.

We might, with a fair wind, see the index of blue-chip shares nudge above 7,000 this week – but remember we have been here before.

Any small tremor from the European banker sector appears likely to upset the market, although the reports over the weekend paint a more optimistic picture of Deutsche Bank and its negotiations with US Department of Justice.

It has been suggested the German giant will be offered a settlement of US$5.4bn, compared with the current US$14bn deal on the table for its part in America’s mortgage-backed securities scandal.

Monday sees the markets kick into to the final quarter of 2106.

Volatility aside, the FTSE 100 posted its best three-month performance in more than three years in the June-September quarter with a gain of just over 5%, according to CMC Markets.

The renewed market optimism has prompted the accountants E&Y to predict 2017 will be a bumper year for IPOs after a sluggish summer.

It said there were six new listings raising £225.3mln in the third-quarter.

That is down from 13 in the previous three months, though it is the same number as Q3 last year.

6.30 AM - Preview and Brexit 

The FTSE 100 looks set to for a positive open after Prime Minister Theresa May told the Tory party conference work to uncouple from the European Union would begin in March.

The index of blue-chip shares is predicted to open 13 points to the good at 6,912.33.

Predictably, the Brexit news acted as a further depressant on the pound, which fell 0.22% to US$1.2944.

Hard Brexit 

“May has also made it clear that immigration control is going to take priority over membership to the EU single market,” said Angus Nicholson, analyst at the spread betting firm IG.

“Hard Brexit is now the path that the Tory party has chosen and that is unlikely to be relished by markets as these fears certainly seemed to have weighed on the pound over the past two weeks.”

That said, the added clarity provided by the British PM allied to some vaguely positive reports about the Deutsche Bank settlement boosted Asia’s main markets.

Asia markets start well

In Japan the Nikkei index was up almost 0.9%, while Hong Kong’s Hang Seng and Shanghai stock markets posted gains of 1.1% and 0.2% respectively.

Here in the UK, the flow of scheduled corporate is expected to slow with the third quarter reporting season more or less over.

The highlight of the week in this regard will be trading figures of Wednesday from the grocer Tesco (LON:TSCO), which is locked in a battle for customers with the German discounters Aldi and Lidle as well as its natural foes ASDA, Sainsbury (LON:SBRY) and Morrisons (LON:MRW).

*Gold up 0.4% at US$1,318.4 per ounce.

*Brent Crude trading 0.3% lower at US$50.02 a barrel.

City Headlines

*The value of initial public offerings globally has fallen by about a third this year compared to the same period in 2015, illustrating the difficulties new listings have faced during a period of market volatility and political uncertainty – FT.

*Google will this week launch the first smartphones that carry its own brand and design, as part of a batch of new devices aimed at competing in markets with Apple and Amazon – FT.

*Small investors are likely to be given the chance to buy shares in a proposed £10bn stock market listing of O2 in what would be the first big retail offer since the government floated Royal Mail three years ago – Times.

*Companies will take more than 20 years to fill the shortfalls in their pension funds, according to Goldman Sachs, which says that the collapse in bond yields since the Brexit vote has hugely inflated the cost of future pension promises – Times.

*Cuadrilla is “confident” that the government will this week approve its plans to frack in Lancashire, in a “pivotal moment” for the U.K. shale gas industry, its chief executive Francis Egan has said – Telegraph.

*Tesco is facing a claim for £150mln from 60 shareholders seeking to recoup losses following accounting irregularities at the supermarket chain – Telegraph.

*The food giant behind Soreen fruit bread and Ginsters pasties has paid its family owners an £18 million dividend after profits at the group leapt last year. Leicestershire-based Samworth Brothers, which employs 8,500 people, made the payment after profit increased 27% to £47mln – Daily Mail.

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