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Market ReportFTSE 100

FTSE 100 closes firmly in red as resource stocks suffer

Global markets are in the red after Donald Trump said he was not happy with the progress of talks with China.

wall street
Anglo American plc was the top Footsie loser
  • FTSE 100 closes firmly lower

  • Sterling down

  • Marks & Spencer top riser

  • Resource stocks lag 

  • Inflation falls to 2.4% in March

 

FTSE 100 joined other European indices to close firmly in negative territory on Wednesday as US shares fell and resource stocks took a hit.

The UK index of leading shares closed around 92 points lower, or 1.17%, at 7,785.

It comes on the back of two straight days of record closes.

Fiona Cincotta, market analyst at City Index, said: “Renewed fears over a potential trade war with China, in addition to concerns that OPEC could ease the self-imposed production cut in oil, sent the FTSE tumbling on Wednesday.”

But she noted that Footsie and its US dollar earning constituents fared slightly better the other European benchmarks, thanks to the weaker pound.

Against the US dollar, sterling was down 0.03% at 1.1400 after UK inflation fell to 2.4% last month – its lowest level since March 2017.

The fall from 2.5% in March was partly due to the earlier Easter, which meant the seasonal rise in air fares was not included this time around.

On Wall Street at the time of writing, stocks are also seeing red, with the Dow Jones Industrial Average down nearly 109 points at 24,725 and the  S&P 500 off 16 at 2,716. The Nasdaq is down 14 at 6,879.

In companies, top riser on FTSE 100 was Marks & Spencer plc (LON:MKS), which surged  5.17% to 306.9p after tanking yesterday after the retailer  reported pre-tax profits dropping 62%.

The top laggard was mining behemoth Anglo American plc (LON:AAL), which shed 5.01% to 1,829.8p.

 

3.40pm: US new home sales fall, weekly crude inventories rise

US new homes sales fell less than expected in April, data from the Commerce Department revealed.

Sales dropped 1.5% to a seasonally adjusted annual rate of 662,000 units last month, compared to analysts’ expectations for a 2% decline to 679,000 units.  

However, data for March sales was revised down to 672,000 units from 694,000.

Separately, data from the Energy Information Administration showed US crude inventories increased by 5.8 million barrels to 438.1 million barrels last week. Economists had been expecting crude stocks to fall by 2 million barrels.

In reaction, Brent crude fell to 0.6% to US$79 per barrel and West Texas Intermediate crude dropped 0.3% to US$71 per barrel. 

Prices were also under pressure from reports of a potential increase in OPEC crude output to cool the market’s recent rally.

3.10pm: US composite PMI reaches three-month high

A gauge measuring US manufacturing and services activity rose to a three-month high in May.

IHS Markit’s composite purchasing manager’s index rose to 55.7 from 54.9 in April, above the 50 level that indicates expansion.

The services PMI rose to 55.7 in May from 54.6 a month earlier while the manufacturing PMI edged up to 56.6 from 56.5. 

“The flash May PMI surveys point to an encouragingly solid pace of economic growth of 2.5-3% with monthly job gains running at just over 200,000, though the interesting action is coming on the prices front," said IHS Markit's chief business economist, Chris Williamson. 

2.40pm: US stocks open lower 

US stocks opened on the back foot as concerns over trade tensions and geopolitics persisted.

The Dow Jones Industrial Average fell 130 points to 24,705, the S&P 500 dropped 10 points to 2,713 and the Nasdaq declined 41 points to 7,336.

US President Donald Trump added to worries about trade tensions after saying he was not happy with the progress of talks with China. He is also reportedly looking at measures to cut European Union steel and aluminium exports to the U.S. by about 10%.

Trump has said he would now not be meeting North Korea leader Kim Jong-un next month

Company-wise Target Corporation (NYSE:TGT) shares slumped 4.8% after reporting lower-than-expected earnings and revenue in the first quarter.

On the upside, Tiffany & Co (NYSE:TIF) jumped 12% after its first quarter earnings beat market forecasts while Ralph Lauren Corp (NYSE:RL) gained 7.9% after its fourth quarter results topped consensus estimates. 

2.00pm: Comcast preparing offer for most of Fox

Comcast Corporation (NASDAQ:CMCSA) said it is preparing an all-cash offer for most of Rupert Murdoch’s 21 Century Fox (NASDAQ: FOXA) to rival Walt Disney Co’s (NYSE:DIS) US$52.4bn bid.

The news comes after Comcast undermined Fox’s bid to buy the rest of Sky PLC (LON:SKY) it does not already own with a higher offer.

Now it is trying to gatecrash Disney’s proposed deal to buy Fox’s entertainment assets. Fox has already agreed to sell the assets to Disney. 

1.30pm: Why are London house price falling?

1.10pm: Global markets struggling

The UK blue-chips’ morning struggles have continued into the afternoon, with a number of things going against them.

Donald Trump’s latest comments that a much talked about meeting with Kim Jong-un next month is unlikely to happen and that China is to blame managed to reignite geopolitical and trade war tensions which seemed to have abated in recent weeks.

The renewed uncertainty has weighed on global markets overnight and into today, although it hasn’t stopped the dollar from adding to its recent gains.

Oilers and miners nurse losses

The double-whammy of geopolitical tensions and a stronger dollar has weighed on the miners, with a spate of red across the blue-chip diggers.

BHP Billiton plc (LON:BLT) and Glencore PLC (LON:GLEN) are two of the worst hit, down 2% (to £17.44) and 2.9% (to 378.5p), respectively.

Oilers are having to deal with similar issues plus rumours that OPEC will look to ease its production cuts soon, which has weighed on BP PLC (LON:BP. (down 2.3% to 574.8p) and Royal Dutch Shell PLC (LON:RDSB) (down 2.3% to 574.9p).

Not even the ailing pound, down almost 1% against the dollar to US$1.332, could spark the blue-chips into life.

Sterling has taken a battering from some more soft economic data, including falling house price and lower-than-expected inflation.

All of that leaves the FTSE 100 down 54.5 points, or 0.7%, at 7,822.9, which is where it has been for most of the day.

Defensive stocks back in play

There were a few bright spots. Despite reporting a 62% fall in pre-tax profits this morning, Marks and Spencer Group Plc (LON:MKS) jumped up 5.3% to 307.4p, making it the top Footsie riser.

Excluding one-off costs associated with store closures, the retailer’s profits were actually above forecasts, while the dividend was held steady.

Defensive stocks were also finding their way back into investors’ portfolio, with tobacco firms  Imperial Brands PLC (LON:IMP) (up 1.5% to £28.25) and British American Tobacco plc (LON:BATS) (up 1.3% to US$£38.09) both making decent gains.

Talk of a bid approach from Barclays PLC (LON:BARC) sent Standard Chartered PLC (LON:STAN) climbing 1.5% to 778p.

12.40pm: US stocks to follow global markets lower

The US markets are called to open lower when the bell rings in New York in just over an hour’s time.

The uncertainty caused by president Trump’s comments have hit most of the world’s major exchanges, and the Dow Jones is no different, with spread betting firms predicting a 177-point fall to 24,662 when trading begins.

Things aren’t much prettier on the other US exchanges: the tech-heavy Nasdaq is seen 63.1 points lower at 6,382.2, while the broader S&P 500 is expected to open 17.5 points in the black at 2,707.6.

12pm: Dairy Crest top FTSE 250 loser

Cheese and milk company Dairy Crest PLC (LON:DCG) dipped this morning after unveiling plans to raise the best part of £70mln through a discounted share placing.

Dairy Crest wants to use the money to increase cheese production by more than a third to 77,000 tonnes a year on the back of soaring demand.

It plans to issue the new shares at 495p, an 8% discount to yesterday’s closing price of 536.5p.

News of the fundraise came as the company announced a 345% leap in full-year pre-tax profits to £179.2mln, while revenue grew 10% to £456.8mln.

Shares fell 8% to 493.8p, making it the top loser on the FTSE 250.

11.45am: Team17 shares climb 30% on AIM debut

Among the small caps, Team17 Group PLC (LON:TM17) shares surged on their AIM debut this morning.

The video game label and indie development partner priced its shares at 165p last week, giving it a market cap of £217mln.

But the stock is already up to 215p, according to the London Stock Exchange – a tidy gain of 30% for the day so far.

Team17 raised net proceeds of £42.8mln from the IPO, while selling shareholders, which included chief executive Debbie Bestwick, received £59.4mln.

11.25am: Barclays weighing up bid for Standard Chartered

Standard Chartered PLC (LON:STAN) saw its shares rise on Wednesday amid reports that Barclays PLC (LON:BARC) is considering a possible merger with the rival lender.

The Financial Times said Barclays' senior board members were exploring a deal with another bank and that chairman John McFarlane was keen on the idea of a possible combination with Standard Chartered.

In late morning trading, Standard Chartered shares were up 1.6% at 779.4p, while Barclays shed 0.8% at 209.5p.

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11.10am: Oilers lead FTSE lower

European markets have followed their Asian counterparts lower this morning, amid concerns that the mooted meeting between North Korea's Kim Jong-un and Donald Trump next month is unlikely to go ahead.

To make matters worse, Trump blamed China for the possible delay or cancellation, reigniting trade war fears that had been waning over the past couple of weeks.

'Trump throwing curveballs'

“Donald Trump continues to throw curve balls for a market which is hanging on his every word on US-China relations,” said IG market analyst Joshua Mahony.

The FTSE 100, like most of the European indices, is down 54.3 points to 7,823.2 in mid-morning trading.

Not even the weak pound – which boosts the blue chips’ overseas earnings – could lift the index. Sterling has slipped below US$1.34 to US$1.336, with lower-than-expected inflation data (2.4% in March) doing it no favours.

Oil stocks are among the worst hit, with rumours in the City swirling that OPEC might look to ease its supply restriction, given the recent surge in prices of the black stuff.

Royal Dutch Shell PLC (LON:RDSB) is down 2.7% to £27.51 while fellow oil supermajor BP PLC (LON:BP.) has lost 2.2% so far to sit at 575.7p.

M&S top riser

Despite reporting a 62% fall in pre-tax profits this morning, Marks and Spencer Group PLC (LON:MKS) is the top blue-chip riser, up 1.8% to 297.8p.

Excluding one-off costs associated with store closures, the retailer’s profits were actually above forecasts, while the dividend was held steady.

Water supplier Severn Trent PLC (LON:SVT) is also in the black, rising 1.9% to £20.95 as it unveiled a £100mln investment drive after reporting a 4% rise in full-year profits.

10.45am: M&S to lose its FTSE 100 crown next week?

After reporting a 62% fall in pre-tax profits this morning – as a result of hefty one-off cost related to store closures – could Marks and Spencer PLC (LON:MKS) be relegated from the FTSE 100 ahead of next week’s quarterly reshuffle?

The retailer has held a spot on the index since the Footsie began back in 1984, but the changing retail landscape has left it “teetering on the edge of relegation”, according to Hargeaves Lansdown analyst Laith Khalaf.

“The M&S share price would have to move dramatically downwards for the retailer to be automatically ejected from the blue chip index,” Khalaf says.

“However, an appreciation in the share prices of a few other companies of a similar size could nudge it out of the picture. In that respect M&S is a bit like an underperforming football team, who has left relegation in the hands of those around it in the table.”

He adds: “If M&S is ejected from the FTSE 100 it would be a hugely symbolic moment, made more poignant by the fact that Ocado looks likely to enter the blue-chip index. It paints a picture of the old economy and the new, passing each other in very different directions.”

10.25am: A tweet for the pound bulls

10.15am: Inflation eases pressure on BoE … for now

The lower-than-expected inflation reading is likely to ease pressure on the Bank of England and its governor, Mark Carney, to raise interest rates.

Had the reading have been at 2.5% - what economists had predicted – or higher, there might have been a few voices talking up a rate rise. Higher interest rates can be used by central banks to bring down inflation.

“The retreat of inflation is pushing back hike expectations but if it can hold above the Bank's 2% target for the rest of the year and, critically, GDP is firm enough, there is probably still room for the MPC to vote for a hike by year end,” said Markets.com analyst Neil Wilson.

10am: Pound slides after inflation data

Sterling was weak ahead of the release of the inflation data and the numbers did little to arrest the fall.

At 10am, the pound was down 0.5% to US$1.336. Only a few weeks ago, it was within touching distance of breaking through US$1.40.

9.45am: Inflation falls to 2.4%

Inflation fell to 2.4% last month – its lowest level since March 2017.

The fall from 2.5% in March was partly due to the earlier Easter, which meant the seasonal rise in air fares was not included this time around.

The figures did show the effect of the sugar tax – introduced in April – which drove up the prices of soft drinks and juices.

8.45am: Footsie bears early retreat

The FTSE 100 fell back in early trading, giving back all and more of yesterday's gains after declines by US and Asian markets on worries over President Trump’s comments that landmark talks with North Korea’s leader might not happen next month.

Around 8.45am, the UK blue chip index was down 46 points at 7,831 after rising 18 points on Tuesday to close at a new record high of 7,877.

Konstantinos Anthis, head of research at ADS Securities commented: “Following a remark from US President Donald Trump that the historic meeting with Kim Jong Un might or might not happen, the dollar is driving higher against the European and commodity currencies while safe-haven assets like the yen and gold are also ticking to the upside. At the same time, global equities reversed their recent gains and are now trending lower as investors are going on the defensive.”

On currency markets, the pound was weaker once more against the resurgent US dollar, down 0.4% at US$1.3375, but remained flat versus the euro at €1.1411 with traders nervously awaiting the latest UK inflation numbers, due at 9.30am.

The main corporate focus was on Marks and Spencer Group PLC (LON:MKS) which saw its shares rally 5% higher to 307.3p, topping the FTSE 100 leader board as it confirmed that big restructuring costs impacted its annual profits.

M&S posted a 62% plunge in pre-tax profit to £66.8mln for the year to end of March 2018, down from £176.4mln a year ago, mainly due to a one-off charge of £321.1mln for its store closure programme.

M&S shares fell on Tuesday after it announced that it was accelerating its reorganisation with the closure of 100 UK stores by 2022.

Small-cap mobile gaming software group Nektan PLC (LON:NKTN) was the London market’s second-biggest gainer, jumping 36% higher to 30p on news it has partnered with Metric Gaming to enter the US sports betting market.

Last week, the US Supreme Court lifted a federal ban on sports betting and numerous US states are expected to pass legislation to enable gambling across a whole range of events.

Proactive news headlines:

Mobile gaming software group Nektan PLC (LON:NKTN) has partnered with Metric Gaming to enter the US sports betting market. Last week, the US Supreme Court lifted a federal ban on sports betting and numerous US states are expected to pass legislation to enable gambling across a whole range of events.

i3 Energy PLC (LON:I3E) has landed an important acreage package in the vicinity of the group’s flagship Liberator field in the North Sea. The acreage was awarded by the UK authorities via the 30th Offshore Licensing Round.

Amphion Innovations PLC (LON:AMP) has sold a 4.3% stake in drug discoverer Motif Bio PLC (LON:MTFB) to pay down some of its debt.

Scancell Holdings PLC (LON:SCLP) said the European Patent Office has granted a patent for the company's Moditope immunotherapy platform, which comes into effect from June 13.  This provides what's described as "broad protection" for the company's pipeline of Moditope-derived vaccines.

A revaluation of its stake in SkinBiotherapeutics following the skincare subsidiary's flotation in April catapulted OptiBiotix PLC's (LON:OPTI) into the black last year.

Medical imaging services specialist IXICO PLC (LON:IXI) delivered yet another six months of double-digit revenue growth in the first half of its fiscal year, driven by a string of new contract wins. IXICO’s technology platform manages and helps interpret images from MRI and positron emission tomography as well as collating and making sense of biosensor data.

TyraTech Inc (LON:TYR) has seen strong growth in sales of its poultry mite dust and its equine fly repellent, it said, as it announced a narrowing of losses in 2017.

Specialist bank PCF Group PLC (LON:PCF) said its new blanking platform has delivered increased profitability, with the prospect of more to come as the lending portfolio grows.

Galantas Gold Corporation (LON:GAL, CVE:GAL) chief executive Roland Phelps highlighted continuing improvements at the Omagh mine as underground development advances. The company, in a quarterly results statement, said it expects the underground gold mine will restart producing concentrate from development ore in the early part of the third quarter.

Cabot Energy PLC (LON:CAB) has deferred further drilling at its Rainbow prospect in Canada while it upgrades the infrastructure at the site and analyses the latest sidetrack well data. Four sidetracks drilled earlier this year produced 350 barrels per day (bopd) on average on test.

AfriTin Mining Ltd (LON:ATM) has said it will conduct a share placing to raise funds for an accelerated work programme at its Uis Tin Mine in Namibia.

Arc Minerals Limited (LON:ARCM) said it has been notified that its executive chairman, Nick von Schirnding, yesterday purchased 472,900 shares in the company at a price of 3.10p each. Following this transaction, the firm added, von Schirnding holds a beneficial interest in 8,103,975 ordinary shares representing approximately 1.50% of the company's issued share capital.

ClearStar, Inc. (LON:CLSU), the technology and service provider to the background screening industry, announced that its new marketing campaign, "We Work", has earned two Gold Hermes Creative Awards in the category "Electronic/Social/Interactive Media" for its  lead video and newly-rebranded website.

Kore Potash PLC (LON:KP2) the potash development company whose flagship asset is the 97%-owned Sintoukola Potash Project, has announced the appointment of José Antonio Merino as a non-executive directo nominated by Sociedad Química y Minera de Chile SA with immediate effect. It said Antonio replaces Pablo Altimiras, whose resignation was announced on 26 April 2018

6.40am: Footsie reversal expected

The FTSE 100 was set to give back all of yesterday's gains this morning after a weak showing on US markets yesterday.

After rising 18 points on Tuesday to close at 7,877, the FTSE 100 was expected to open at around 7,858, down 19 points.

Last night, US indices finished the day in a sea of red after President Trump indicated that he was not pleased with the US and China’s trade negotiations and warned that the planned US-North Korean summit might not take place.

By the closing bell, the Dow Jones Industrial Index had been hit hardest by the political uncertainty coming from the White House. The Big Board shed 179 points to 24,834 while the S&P 500 lost 8.6 points to close at 2,724.

The tech-heavy Nasdaq, meanwhile, finished down 16 points at 7,377.

Trump promised to let the markets know soon enough whether the North Korean summit would go ahead; meanwhile, US traders will turn their attentions today to the release of the minutes of the May 2 meeting of the Federal Open Market Committee (FOMC).

“We do not expect much news, as the Fed is continuing its gradual hiking cycle with two to three additional rate increases this year; however, we intend to keep an eye on why the Fed removed its phrasing about 'monitoring inflation closely',” Danske Bank said.

Asian markets this morning were hit harder still, with the Nikkei 225 down 264 at 22,697 in Tokyo and the Hang Seng index down 311 at 30,923 in Hong Kong.

Inflation numbers eyed

Back in the UK, inflation figures for April are due out today. “This is, of course, a major indicator for the UK but there will be another one on 13 June ahead of the 21 June Bank of England meeting. In any case, while the headline inflation rate is forecast to remain the same, core inflation is expected to moderate slightly, as is producer price inflation, as the pass-through from a weaker sterling fades,” suggested Marshall Gittler at ACLS Global.

On the corporate front, results are due out from Marks and Spencer Group Plc (LON:MKS), just a day after the bellwether of the High Street confirmed it will close 100 stores in the UK by 2022 as part of a major restructuring plan.

The announcement does not bode well for today's numbers.

In the final quarter of 2017, like-for-like (LFL) food sales in the UK declined 0.4% year-on-year, joining the Clothing & Home division in the ex-growth doghouse; the latter saw LFL sales decline 2.8% from a year earlier.

Credit Suisse has predicted a 4.5% decline in pre-tax profit to £539mln in fiscal year 2018/19, driven by weak like-for-like sales but with less pressure from foreign exchange headwinds. It estimates a 0.4% drop in like-for-like sales in clothing and a 0.5% increase in like-for-like sales in food over the whole year.

Also announcing updates today is water utility Severn Trent PLC (LON:SVT), where the focus will be on upcoming changes to industry regulations, and soft drinks maker Britvic Plc (LON:BVIC), which issues interims just a day after it was revealed that targets set to reduce sugar levels in products such as biscuits had failed to hit Government targets.

You can't pin the blame for that on Britvic but as the soft drinks industry is just starting to get to grips with the imposition of the so-call Sugar Tax, some commentary on how customers are reacting to the new formulations would be appreciated by the market.

Significant announcements expected:

Finals: Marks & Spencer PLC (LON:MKS), Severn Trent PLC (LON:SVT), Dairy Crest Group PLC (LON:DCG), Babcock International PLC (LON:BAB), Great Portland Estates PLC (LON:GPOR), HICL Infrastructure Company Ltd (LON:HICL), Optibiotix Health PLC (LON:OPTI), Vedanta Resources PLC (LON:VED)

Interims: Britvic Plc (LON:BVIC), easyHotel PLC (LON:EZH), Hollywood Bowl Group PLC (LON:BOWL), IXICO Plc (LON:IXZI), Sanderson Group PLC (LON:SBD), Stride Gaming PLC (LON:STR), ZPG Plc (LON:ZPG)

Economic data: UK CPI, PPI, HPI inflation; US new home sales; US flash PMI composite index; US FOMC minutes

Around the markets:

  • Sterling: US$1.341, down 0.21 cents
  • 10-year gilt: yielding 1.523%
  • Gold: US$1,296.40 an ounce, down US$1
  • Brent crude: US$79.07 a barrel, down 50 cents
  • Bitcoin: US$7,925.80, down US$180.65

City headlines:

  • The Times

  • Brexit costs households £900 a year, says Carney: Bank chief accused of playing politics
  • Big food labels ‘miss or ignore sugar targets’
  • Kim summit may be delayed, warns Trump: There are mounting concerns that North Korea’s readiness to relinquish its nuclear weapons has been exaggerated.
  • Boost for car makers as China cuts import taxes: China has announced a steep cut in tax imposed on imported cars
  • Loss-making Tesco Direct website to be scrapped: Hundreds of employees at Tesco could be made redundant
  • Daily Telegraph

  • Shell boss hit by shareholder revolt over £8m pay: More than a quarter of Shell's investors voted against his multi-million euro payout for last year.
  • Ordinary drivers face being priced off the road by electric car proposals: The warning came from Toyota to the business select committee as it heard from car chiefs about the future of electric vehicles.
  • The Guardian

  • Marks & Spencer to close 100-plus stores by 2022 in ‘radical’ plan: Retailer, which has already axed 22 outlets, reveals 14 more that will shut in the next year
  • Business leaders say economic nationalism is biggest growth threat: Poll of CEOs finds backlash from political populism among leading concerns
  •  
  • Culture secretary raises Comcast's hopes in battle for Sky: Matt Hancock ‘not minded’ to intervene as TV giant and Rupert Murdoch vie for control

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