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FTSE 100 consolidates gains as sterling's woes continue

Last updated: 11:30 08 Aug 2018 EDT, First published: 01:42 08 Aug 2018 EDT

Sterling's decline
  • FTSE 100 index up 46 points

  • China trade figures below forecasts, US adds more tariffs

  • Paddy Power Betfair unseats riders after cutting full-year guidance

Close: The Pru leads London higher

The final hour of trading saw the FTSE 100 consolidating his gains, with bookie Paddy Power Betfair plc (LON:PPB) the only heavy faller.

The bookie tumbled 580p to 7,540p after it cut its 2018 profits guidance but that did not stop the FTSE 100 closing 46 points higher at 7,764.

“It is not hard to find the cause of the FTSE 100’s out-performance today, with the index up over half of 1%. The pound continues its slide versus the dollar on fears of a ‘No Deal’ Brexit, providing at least a pleasing tailwind for UK stocks,” observed Chris Beauchamp, the chief market analyst at IG Group.

“Outside of the British Isles, however, there is little sign of yesterday’s bullishness, as trade war fears knock back equities after Tuesday’s strong session. However, the losses in the US are relatively minimal, which suggests we may see the move higher resume once yesterday’s rally is fully digested,” Beauchamp ventured.

Prudential’s results today have gone some way to clawing back the under-performance versus the FTSE 100 that has dogged the insurer for most of this year,” he noted.

Prudential PLC (LON:PRU) ended the day as the top blue-chip performer, rising 3.7% to 1,822p on the back of its interim results.

The company – which is in the process of demerging its UK and European asset management arm M&G Prudential – posted IFRS operating profit of £2.5bn for the first half ended June 30, up 2% on the previous year at actual foreign exchange rates.

 

3:30pm: FTSE 100 hold gains as pound weakness continues

The FTSE 100 held the positive ground through Wednesday afternoon, as the pound remained weak.

Trading at 7,758 the index was up 40 points or 0.52%, meanwhile, the pound was down 0.54% to US$1.2869.

“In stark contrast to its peers, the FTSE shot up 0.4% on Wednesday, lifting back above 7750 in the process,” said Conner Campbell, analyst at Spreadex.

“The main reason for this was the pound’s ‘no deal’ Brexit-ruined start to August; sterling dropped half a percent against both the dollar and the euro, hitting 11 and 10 month lows against the respective currencies.

“The pound gradually got worse as the day went on, with reports that Brexit might not actually be discussed at September’s EU summit in Salzburg appearing to contribute to the decline.”

On Wall Street, the Dow Jones opened on the back foot losing 52 points or 0.2% to 25,576 while the S&P 500 and  the Nasdaq were both similarly lower.

2:15pm: FTSE 100 stays positive, Wall Street futures point lower

The FTSE 100 stayed positive, despite New York futures pointing to a weaker session.

Trading at 7,773 the London index was up 55 points or 71%.

Wall Street futures, meanwhile, indicate a lower start with the Dow Jones seen down 29 points, while the S&P 500 and Nasdaq.

11:55am: FTSE 100 strengthens into lunch

Heading into lunch, the FTSE 100 was at its strongest point of the day, with the weak pound continuing to provide the trading impetus on an otherwise quiet session.

Trading at 7,786, the London index was up 67 points or 0.88%.

“While the rest of Europe wilted in the face of the USA’s latest tariffs on Chinese goods, the FTSE benefited from the continuation of sterling’s awful August,” said Connor Campbell, analyst at Spreadex.

“With the threat of a ‘no-deal’ Brexit – something highlighted by both Mark Carney and Liam Fox in the past few days – at the forefront of investors’ minds the pound took another troublesome tumble.”

He added: “All this meant that the FTSE actually ended up jumping 0.6%, lifting above 7770 with 7800 in its sights. This was in contrast to the trade war-spooked, and euro-weary, DAX and CAC, with both the German and French indices falling 0.2%.”

11:45am: SEC delays Bitcoin ETF decision, sends cryptos into fresh slump

Cryptocurrency values were falling on Wednesday after a delay by the US Security and Exchange Commission (SEC) kicked sentiment in the bits.

Bitcoin was down 3.4% or US$230, changing hands at US$6,486. At this level, Bitcoin’s total circulation was worth US$112bn.

At the same time, the price of Ethereum was 2.88% or US$10.95 lower at US$369, giving the digital currency a total worth of just over US$37bn.

The finance watchdog was due to decide whether or not to approve the first-ever Bitcoin exchange-traded fund (ETF), but, it has now postponed the decision until the end of September.

This application was made by VanEck and Solid X and it comes after the SEC’s recent rejection of a Bitcoin ETF application made by the Winklevoss twins, Tyler and Cameron.

Several players have applied or are understood to be in the process of applying for permission to launch Bitcoin ETF, which would, in theory, make investing in cryptocurrency much more accessible to retail investors who could simply buy into the ETF.

The news was taken as a potential blow to the cryptocurrency market’s credibility. Indeed, perceptions are particularly sensitive to all matters relating to the regulatory environment in established financial centres such as New York.

“The selloff witnessed on Bitcoin continues to highlight how extremely sensitive the cryptocurrency remains to the ETF developments," said Lukman Otunuga, analyst at FXTM.

“Cryptocurrencies could receive a solid boost and end up becoming the main talking point across financial markets if the SEC approves a Bitcoin ETF in September.”

The analyst added: “Although the current trajectory for Bitcoin is tilted to the downside, the outlook could change if a Bitcoin ETF becomes reality.”

11:00am: FTSE 100 continues higher as pound weakness supports

The FTSE 100 is not a patriotic benchmark. Its constituents are multinational and conglomerate, and most generate the majority of their earnings in US dollars.

This is obvious, but it is also quite forgivable for those that upon a cursory glance become confused that pound weakness is good for London’s largest stocks.

It is why the index is able to take on the chin, the apparent Brexit chaos and talk of a ‘no deal’ withdrawal from the European Union.

On Wednesday, the pound was down 0.25% at US$1.2907 and the FTSE 100 had support.

Trading at 7,757, the index was up about 40 points or 0.5%.

“The FTSE is back in the green today, with an underperforming pound continuing to help UK stocks over their mainland European counterparts,” said Joshua Mahony, analyst at IG Markets.

“Fears over a potential hard-Brexit have ramped up of late, with Liam Fox speculating that a no-deal looks more likely than a positive outcome from negotiations.”

9:30am: FTSE 100 again shrugs off trade tensions, rises 30 points

Picking up where Tuesday left off, the FTSE 100 moved higher, shrugging off any further trade and tariff tensions.

At 7,748, the London index was up 30 points or 0.39% in the morning.

“A potentially dull session got off to a relatively quiet start, with the FTSE avoiding the losses seen elsewhere as investors ignored news that the US had added another $16 billion in tariffs on Chinese goods overnight,” said Connor Campbell, analyst at Spreadex.

8.45am: Upbeat early progress

The FTSE 100 got off to a subdued but positive start, advancing 9 points to 7,727.38 early on as the residents of London’s dealing rooms kept a wary eye on the impact of the Sino-American trade war.

The latest data revealed the hostilities were having a real financial effect on China, which posted a US$28bn trade surplus – around US$11bn below expectations.

Closer to home, the pound had another lacklustre session, haunted by Brexit worries.

The end-of-season dribble of interim results continued with bookmaker Paddy Power Betfair’s (LON:PBB) shares falling 2.6% on what can best be described as mixed half-term report.  

Down among the mid-caps, Hill & Smith Holdings (LON:HILS), the galvanizing group, saw its shares slump 18% after it sounded the earnings alarm.

A bout of profit-taking after an in-line trading update left Bellway (LON:BWY) shares 2.4% lower. It also led to a flurry of selling activity across the sector.

Negative commentary around the viability of Sirius Minerals’ (LON:SXX) fertiliser project in North Yorkshire knocked the stock 2.3% lower; this despite a valiant effort by City broker Liberum this morning to educate the sceptics/cynics.

Proactive news headlines:

Restaurant booking app BigDish PLC (LON:DISH) will rebrand its recent acquisition Tablepouncer as it starts a roll-out across the UK. The UK restaurant market is ripe for disruption, says Joost Boer, BigDish’s chief executive and Tablepouncer has given it an immediate foothold here.

InnovaDerma PLC (LON:IDP) is to sell its fast-growing Roots haircare range through Tesco stores from November. The supermarket will stock the product in 432 of its largest stores in the initial launch.

Galantas Gold Corp (LON:GAL) told investors that the Omagh mine’s gold processing plant has now started operations, from the underground development of the Kearney gold vein. The plant was recently upgraded, so it’s expected to operate part-time until late 2018 or early 2019, when stoping (bulk mining) begins.

Genedrive PLC (LON:GDR) has partnered with the Foundation for Innovation of New Diagnostics (FIND) in a study agreement to evaluate its hepatitis C virus (HCV) identification kit.

Abzena PLC (LON:ABZA) has successfully manufactured a potential new cancer drug that incorporates the company’s Composite Human Antibody platform. The ‘Abzena Inside’ technology was deployed to enhance Clevegen, a pre-clinical treatment being developed by Faron Pharmaceuticals (LON:FARN).

Motif Bio PLC (LON:MTFB, NASDAQ:MTFB) said the grant of two US patents pushes its exclusivity over antibiotic iclaprim out to 2037. It follows what’s called a notice of allowance for patents governing the drug’s use to treat bacterial infections, including acute bacterial skin and skin structure infections, hospital-acquired bacterial pneumonia and Staphylococcus aureus lung infections in patients with cystic fibrosis.

Plexus Holdings PLC (LON:POS) has received a second order for its POS-SET connector for well abandonment operations in the North Sea.

African Battery Metals PLC (LON:ABM) has agreed two acquisitions, picking up Cobalt Blue Holdings (CBH) and Regent Resources Interests Corp (RRIC), which own highly prospective cobalt-nickel exploration assets in Cameroon and Cote d'Ivoire. The company said that it will diversify the geo-political and commodity exposure.

Franchise Brands PLC (LON:FRAN) has announced that from today until 31 December 2018, it will commence a discretionary programme to purchase ordinary shares in the company, up to a value of £200,000.

6.45am: FTSE 100 set to nudge higher

The FTSE 100 is expected to open slightly higher on Wednesday as bullish sentiment carries over from yesterday, for once unmarred by trade tensions rumbling in the background.

Spread betting firm IG expects the FTSE 100 index to open around 5 points higher at 7,723, following a strong finish on Wednesday when the index closed up 54 points at 7,718, back above the psychologically important 7,700 level.

David Madden, market analyst at CMC Markets UK, said that the positivity amongst investors was in spite of a slide in China’s trade surplus, which he said was “no surprise”, given the current tensions with the US, adding that the “disappointing trade figures put China in a difficult position, given the standoff with Washington DC in relation to trade”.

In the US markets yesterday, the Dow Jones Industrial Average closed up 126 points at 25,628, while the S&P 500 closed up 8 points at 2,858 and the Nasdaq closed up 23 points at 7,883.

The rise in US equities in spite of the US/China trade spat has mainly been bolstered by a strong earnings season, with key heavyweights such as Apple Inc (NASDAQ:AAPL) and Google parent Alphabet Inc (NASDAQ:GOOG) beating expectations.

There was also an uplift from electric car maker Tesla Inc (NASDAQ:TSLA), which closed up around 11% at US$379.5 following comments by chief executive Elon Musk that the company could go private.

In Asia today, the Japanese Nikkei 225 was down 22 points at 22,642 while Hong Kong’s Hang Seng was up 136 points at 28,382 as tech and energy stocks offset the disappointing Chinese trade figures.

On the currency markets, the pound was up 0.1% at US$1.295 against the dollar and flat at €1.114 against the euro.

Madden said that the pound had “lost a lot of ground due to the growing fear of a no-deal Brexit”, adding that the “positive bump the pound received on Tuesday morning on the back of the upbeat Halifax UK house price report didn’t last long”, which suggest that confidence in the currency is “still weak”.

Financial sector under the spotlight as insurance and gambling heavyweights report

Keeping with the financial focus of the week, Wednesday will see the insurance sector in focus as Prudential reports its interim results.

In keeping with the theme of financial products focusing on potential outcomes, bookmaker Paddy Power Betfair will also be posting its half-year numbers, with investors paying particular attention to its US ventures.

The economic data diary will be largely empty by contrast, although there will be a few bits and pieces from across the Atlantic with US crude oil inventories and mortgage applications expected.

Significant announcements expected on Wednesday August 8:

Interims: Prudential PLC (LON:PRU), Paddy Power Betfair PLC (LON:PPB), Glencore PLC (LON:GLEN), PageGroup PLC (LON:PAGE), Hastings Group PLC (LON:HSTG), Hill & Smith Holdings PLC (LON:HILS), Morgan Sindall Group PLC (LON:MGNS), Mereo BioPharma Group PLC (LON:MPH), Share PLC (LON:SHRE), Stocks Spirits Group PLC (LON:STCK), Spirax-Sarco PLC (LON:SPX), TI Fluid Systems PLC (LON:TIFS)

Trading update: Bellway (Q4) (LON:BWY), UDG Healthcare PLC (Q3) (LON:UDG)

Economic data: US crude oil inventories, US MBA mortgage applications

Around the markets:

• Sterling: US$1.29, up 0.14%
• Gold: US$1,213.2 an ounce, up 0.22%
• Brent crude: US$74.63 a barrel, unchanged

City Headlines:

• Financial Times: Elon Musk announced on Twitter that he wanted to take Tesla private in a deal that would value the company at US$70 billion.
• The Daily Telegraph: Disney and 21st Century Fox buy time until autumn to decide on Sky, after declining to raise their bid from £14 per share, short of Comcast’s £14.75 per share offer.
• The Times: Walt Disney’s film division registered upbeat sales on the back of box office successes of Avengers: Infinity War and Incredibles 2, as profits climbed to US$2.9 billion in last quarter.

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