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Market ReportFTSE 100

FTSE 100 closes near flat as traders sit on hands ahead of Fed

The UK blue-chip index closed nearly four points higher at 7,511

The Lloyd's building
FTSE 100 closed little changed
  • FTSE 100 near flat as investors wait on the Fed

  • Resource stocks slide but travel stocks recover

  • US markets up

FTSE 100 closed the day nearly flat as miners lagged, while US stocks were heading higher ahead of the Fed rate decision.

The UK blue-chip index closed nearly four points higher at 7,511.

The FTSE 250 shed over 24 points at 20,436.

On Wall Street, the Dow Jones Industrial Average is up around 58 points at the time of writing, while the S&P 500 is up over three points at 2,922.

In the currency markets, the UK pounsd is up 0.17% against the  Euro and down 0.03% against the US dollar.

David Madden, at CMC Markets, said: "European markets have been lacklustre today as traders are in wait and see mode.

"Playing into the mix is also the continued trade uncertainty that is hanging over the markets. In the latest development of the US-China trade spat, Beijing have cut import tariffs on a wide range of goods, and the reduction will be introduced in November.

"The move is designed to cushion the blow for importers. The action from Beijing suggests they are playing the long game."

Top loser on Footsie was silver giant Fresnillo (LON:FRES), which shed 3.65% to 829.6p.

15.40: A firm start on Wall Street

A firm start on Wall Street has not had a ripple effect on the Footsie, which remains slightly in arrears.

The FTSE 100 was down 7 at 7,501, grimly hanging on to a level above 7,500.

Across the pond, the Dow Jones was up 39 at 26,531 and the S&P 500 was up 2.8 at 2,918.5, as the world and her husband waited for the US central bank to pronounce on interest rate policy.

“The Federal Reserve will raise rates today – that much is certain. There is a roughly 95% chance of the fed funds rate moving up to the 2-2.25% target, which means the decision itself is well baked in to market pricing. This would be the third interest rate rise this year and indicators still point firmly towards a fourth by December,” wrote Neil Wilson at markets.com.

“Therefore, market attention is on a number of other elements contained in both the projections (dots) and the monetary policy statement,” he continued.

“US ten-year yields are the key to watch and seem to [be] eyeing a push up above 3.13%, which could happen if the Fed sounds more hawkish than it has done so far over the last quarter to half year. The chances are that the market pricing for a fourth hike by December has to move up as the current c75% indicated seems like it’s a little behind where the Fed is telling us it will be.

“With the dollar having come off its highs there could well be space for it to enjoy a Fed-inspired rally; however, if the ten-year yield doesn’t push higher and the two-year narrows further the gap, the Fed may have to take the view that is raising rates too quickly, which may ultimately knock the greenback,” Wilson declared.

There has been precious little news flow from UK blue-chips to distract traders from speculating on the Fed’s next steps.

Miners were out of sorts, as were oilers, but travel-related stocks such as package tour operator TUI AG (LON:TUI), which is due to update the market tomorrow, and low-cost airline easyJet PLC (LON:EZJ) recouped some of their recent losses.

2.15pm: Despite expectations of a firm start on Wall Street, the Footsie remains in wait-and-see mode

US stocks are expected to open firmer but that has cut little ice with UK investors, who are watching the Footsie pull back gently.

The FTSE 100 was down 8 at 7,500. In the US, the S&P 500 was expected to open at around 2920.8, having fallen 3.8 yesterday to 2,915.6.

With the oil price heading north it has not been a good month for the major airlines but if the likes of IAG and easyJet think they have problems, they should spare a thought for African no-frills airlines, fastjet PLC (LON:FJET), which lost almost half its value today in the wake of disappointing interim results.

After years of struggles, the bar is set very low for fastjet’s results and there was some cause for optimism in a growth in revenue to US$30.1mln in the first half of 2018 from US$21.2mln the year before.

Shareholders headed for the exits – not helpfully pointed out by a flight attendant – as the company revealed additional funding will be required by the end of October to enable fastjet to continue operating.

The company is currently in active discussions with its major shareholders regarding a potential equity fundraising, in the absence of which the group is not able to continue trading as a going concern.

Shares in fastjet slumped to 3.75p from 6.65p overnight.

An equity injection that was in the works at innovation software specialist Imaginatik Plc (LON:IMTK) has fallen through.

In July, the company said that Vin Murria, the former chief executive of Advanced Computer Software (which bought out by private equity in 2014), was contemplating buying a controlling investment in the company.

Today, the company said that it is no longer in talks with Murria; furthermore, its nominated advisor (nomad), finnCap, has indicated it would cease to be the company’s nomad from the close of business tonight.

The shares plummeted 67% to 2.875p.

11.40am: Footsie becalmed

It’s tempting to suggest this morning has been cancelled due to lack of interest, such is the Footsie’s lethargy.

The FTSE 100 was up 3 at 7,511, having traded within a narrow band ranging from 7,490 to 7,514.

Activity seems to have been put on hold ahead of this afternoon’s meeting of the US central bank; the Fed is expected to crank up interest rates by a quarter of a percentage point.

“For the time being, traders are tolerating the trade spat between the US and China. Yesterday, President Trump stated the US will ‘no longer tolerate abuse’ in relation to trade. The stand-off between Washington DC and Beijing has become more entrenched, and investors aren’t expecting it to be resolved anytime soon,” stated David Madden, a market analyst at CMC Markets.

While blue-chips are mixed and declining to stray much from overnight levels, elsewhere there has been a bit of sharp a movement, such as that experienced by the shares of MITIE Group PLC (LON:MTO), which was down 7.6% at 142.5p.

MITIE said it expects its full-year operating profit to be “flat to slightly down” and that its order book had declined in recent months.

The outsourcing group said its profit had been dented by a soft performance in its social housing unit, an unfavourable contract mix in its cleaning business and the write-off of some mobilisation costs in its care and custody division.

Liberum reiterated its ‘buy’ recommendation and maintained its target price of 240p. “There is a strong pipeline and more focus on growing the order book,” the broker said.

READ: Mitie sees flat to lower annual profit as order book declines

9.45am: The Footsie is barely changed

With an eye on this evening’s interest rate decision by the US central bank, UK investors seem in no mood to chase equity prices higher.

The FTSE 100 was down 3 at 7,505, with miners largely responsible for the decline.

Randgold Resources Limited (LON:RRS), which shot up earlier this week after agreeing to a merger with Barrick Gold, gave back some of those gains, dipping 2.5% to 5,326p, making it the biggest blue-chip faller.

Fellow precious metals miner Fresnillo PLC (LON:FRES) was down 1.9% at 845p while base metals miners Antofagasta PLC (LON:ANTO) and BHP Billiton PLC (LON:BLT), down 1.6% and 1.5% respectively, also found little support.

With the price of oil hitting four-year highs, investors continued to reduce their exposure to airline groups IAG PLC (LON:IAG) and easyJet PLC (LON:EZJ); the former was down 2% and the latter down 1.4%.

“As tends to be the case on Fed Wednesdays – especially ones where a rate hike is expected – the markets got off to a muted start, with little of interest happening after the bell,” said Connor Campbell at Spreadex.

“Despite Brent Crude sitting above $82 per barrel, BP and Shell slipped from Tuesday’s peak, the oil giants unwilling to climb any higher without the black stuff first taking the lead,” he added.

In terms of corporate news flow, FTSE 100 companies have declined to provide any of much significance, leaving the field clear for mid-caps such as Imperial Leather soap maker PZ Cussons PLC (LON:PZC), private equity investment trust Pantheon International PLC (LON:PIN) and roadside recovery group AA PLC (LON:AA.).

PZ Cussons, up 2.8% at 236p, was the top riser after an upbeat statement on the day of its annual general meeting.

READ: Strong trading in the UK and Europe offsets weak Nigeria performance for PZ Cussons

Good trading in Europe and Asia is offsetting challenges to volumes and margins in Nigeria, Cussons said.

Pantheon, up 2.4% at 2,150p, was the next biggest riser after it reported a 4.4% growth in net asset value in a single month.

The AA, however, was left at the side of the road watching all the other mid-cap traffic whiz by after it reported a sharp fall in profits in the first half of the year.

It had previously whinged about the effect of the hot weather but this time, it changed tack to blame bad weather and a “pothole epidemic” for a sub-par performance.

The shares were down 7.9%.

 

8.45am: Investors adopt a defensive posture

The FTSE 100 got off to an indifferent start, falling 15 points to 7,493.03 as traders took a defensive stance ahead of what’s widely expected to the US Federal Reserve’s first-ever September interest rate hike.

“With a rise today more or less a done deal, attention will be less on the fact that this will be the third rate rise this year, than on how the Fed sees the glide path for further policy actions,” said Michael Hewson, a financial commentator at CMC Markets.

Here in the UK, there was a flurry of trading activity in shares of the AA (LON:AA), which fell 4.6% after posting a 65% slide in profits.

It blamed a pothole epidemic and the harsh winter for a steep rise in the number of call-outs it had to attend.

Next Plc (LON:NXT), which on Tuesday surprised with stronger than expected results, again weather-related and linked to the heatwave, was in the shop window Wednesday.

Stock in the retailer, up 1%, benefited from a Goldman Sachs upgrade to ‘neutral’ from ‘sell’.

JP Morgan Cazenove, meanwhile, wiped around 3% from the value of construction firm Keir Group (LON:KEIR) with its downgrade from ‘overweight’ to ‘neutral’.

6.45am: Footsie set to get off on the front foot 

The Footsie was set for a positive start ahead of the interest rate decision by the US central bank’s policy-makers.

Having risen 49 points on Tuesday to close at 7,507, the UK’s blue-chip index was expected to rise another five points or so on Wednesday at the outset.

“In the US, the week's most important event is happening tonight, namely the FOMC meeting,” said Danske Bank.

“We expect the Fed to hike the target range to 2.00-2.25%, but not send any new policy signals. With respect to Fed projections, it will most likely still signal another hike in December (and probably that more FOMC members support this) and three hikes next year (it was divided between two or three additional hikes next year and it would take four members to move it higher),” the bank added.

A positive start was expected despite an indifferent showing yesterday by indices in the US. The Nasdaq Composite rose 14 to 8,007 but the Dow tumbled 70 points to 26,492 and the S&P 500 fell 3.8 to 2,915.6.

In Asia, markets were on the front foot. In Tokyo, the Nikkei 225 was up 75 at 24,016 while in Hong Kong, the Hang Seng index was 500 points higher at 27,999.

Back in Blighty, interim results from online fashion retailer Boohoo Group PLC (LON:BOO) are likely to be the main corporate focus, with the firm’s last trading update in June showing a sales jump, mainly thanks to last year’s acquisition of PrettyLittleThing (PLT), which this summer occasioned a warehouse move by the business.

Analysts at Peel Hunt expect the group to report a 48.5% increase in first-half revenue to £390mln, which should drive 37% growth in underlying earnings (EBITDA) to £38.1mln.

Roadside recovery specialist AA PLC (LON:AA.) is likely to join the list of companies griping about the weather when it updates the market.

An 8% rise in roadside call-outs in July resulted in higher costs, with the company forced to use third-party garages due to an unexpected surge in breakdowns following severe weather.

In February, the group cut its dividend and earnings expectations and unveiled a strategy to invest more into new technologies and roadside improvement, so investors will likely be looking for any news of positive progress in the second half.

Significant announcements expected

Interims: Boohoo Group PLC (LON:BOO), The AA PLC (LON:AA.), Amryt Pharma PLC (LON:AMYT), Armadale Capital PLC (LON:ACP), Billing Services Group Ltd. (LON:BILL), CentralNic Group PLC (LON:CNIC), Corero Network Security PLC (LON:CNS), Crawshaw Group PLC (LON:CRAW), Destiny Pharma PLC (LON:DEST), Minds + Machines Ltd. (LON:MMX), Pelatro PLC (LON:PTRO), Summit Germany Limited (LON:SMTG)

Finals: Accrol Group Holdings PLC (LON:ACRL), Allergy Therapeutics PLC (LON:AGY), James Halstead PLC (LON:JHD), Town Centre Securities PLC (LON:TOWN)

Trading updates: MITIE Group PLC (LON:MTO), PZ Cussons PLC (LON:PZC), SSP Group PLC (LON:SSP), Trifast PLC (LON:TRI), Futura Medical PLC (LON:FUM), NCC Group PLC (LON:NCC)

Economic data: BBA UK mortgage lending data; CBI distributive trades survey; US new home sales; FOMC interest rate decision

Around the markets

  • Sterling: US$1.3171, down 0.013 cents
  • 10-year gilt: yielding 1.491%
  • Gold: US$1,206.80 an ounce, up US$1.70
  • Brent crude: US$81.83 a barrel, down 4 cents
  • Bitcoin: US$6,733.51, up US$45.26

Proactive news headlines

Amryt Pharma PLC (LON:AMYT) has reported increased revenues in the first half of the year following a jump in sales for its Lojuxta cholesterol drug.

Directa Plus (AIM:DCTA) said the world’s first road has been resurfaced with a super-modifier containing the company’s graphene. The producer of graphene-based products said the road surface is on a section of Rome’s Strada Provinciale Ardeatina. It is part of a commercial test of Ecopave, which is based on Directa’s Graphene Plus graphene product.

Live Company Group PLC (LON:LVCG) is considering an equity fundraising to finance the potential acquisition of a “complementary business” and to “accelerate organic growth”, the media firm said on Wednesday. The group said it was in talks with certain institutional and other investors with regard to a potential fundraising, which is expected to be carried out at a modest discount to the recent prevailing market price.

CentralNic Group PLC (LON:CNIC) saw its adjusted earnings nearly double in the first half of the year, with the company saying it was eyeing further acquisitions going forward.

Allergy vaccines specialist Allergy Therapeutics PLC (LON:AGY) continued to gain market share in its most recent fiscal year.

Sareum Holdings PLC (LON:SAR) has selected another candidate molecule to take through the clinic, this time as a potential therapy for certain cancers.

Bushveld Minerals LTD (LON:BMN) delivered £62.1mln in revenue during the six months to June 2018. That translated into profit after tax of £21.1mln, up significantly on the £1.1mln delivered in the corresponding period a year earlier.

Goldplat PLC (LON:GDP) produced 35,431 gold equivalent ounces during the year to 30 June 2018, at higher margins. The overall figure represents a 17% decrease over the previous year.

Connemara Mining Company PLC (LON:CON) ended the six months to June 2018 with €366,000 in the bank, after turning in a loss of €160,000.  Among the highlights of the period were the establishment of a high-grade maiden resource estimate at the Stonepark zinc joint venture.

The chief executive of ImmuPharma PLC (LON:IMM) has told investors he is excited by the “blockbuster potential” of the company’s flagship lupus treatment, Lupuzor.

Stock market star FairFX Group PLC (LON:FFX) enjoyed a strong first half to 2018 despite the weakness of sterling, and has continued the momentum in the second half.

Corero Network Security PLC (LON:CNS) reported that earnings losses have halved in the first half of the year as sales of its SmartWall DDoS mitigation software surged. BP March

Futura Medical PLC (LON:FUM) expects to dose the first patient in the late-stage study of its MED2002 erectile dysfunction gel within the next few weeks, capping off what has so far been an “excellent” year for the company.

Arix Bioscience PLC (LON:ARIX) investee company LogicBio Therapeutics Inc has filed with the US Securities & Exchange Commission ahead of an IPO that will see the business list on the NASDAQ exchange. LogicBio is a specialist in genome editing that is developing drugs for rare diseases.

OptiBiotix Health PLC (LON:OPTI) said it has teamed up with an unnamed pharmaceutical and food supplements group to commercialise its CholBiome product in Bulgaria. With access to 60% of the country’s pharmacies and 15,000 GPs, OptiBiotix’s new partner provides the commercial heft required to get started in this new territory.

Internet domain specialist Minds + Machines PLC (LON:MMX) increased interim revenues by a fifth as the use of its names grew by 38%.

Registrations rose to 1.5 million, with particularly strong growth in the US, though there has been a recent slow-down in high-value one-off sales that will affect top-line revenues.

ITM Power PLC (LON:ITM) has, alongside Johnson Matthey PLC (LON:JMAT), announced the opening of the company’s seventh public access hydrogen refuelling station (HRS) - it is located on Johnson Matthey, in Swindon, and is supported by car makers Toyota, Hyundai and Honda.

Kibo Energy PLC (LON:KIBO) told investors that it moved closer to securing permits for the Mbeya coal to Power Project (MCPP) in Tanzania. The company, in a statement, revealed that the mine element of the project had now been recommended for a special mining licence from Tanzania’s mining commission.

LoopUp Group PLC (LON:LOOP) reported strong growth in half-year profit and said its recently acquired MeetingZone business would deliver greater cost savings than expected.

The AIM-listed company on Wednesday posted a 65% rise in its adjusted underlying earnings (EBITDA) to £2.7mln on revenue, 39% higher at £12mln.

Sound Energy PLC (LON:SOU) said chief executive James Parsons has exercised a total of 1,250,000 options to subscribe for new ordinary shares in the company at an exercise price of 14.2p per share.

Virtual reality (VR) technology provider Immotion Group PLC (LON:IMMO) expects its VR revenue to grow significantly in the second half of the year after it posted its maiden interim results. The provider of ‘out of home’ VR experiences, which floated on AIM in July, posted a maiden operating loss of £1.5mln in the six months to the end of June on revenues of £0.55mln.

Africa-focused property trust Grit Real Estate Income Group Limited (LON:GR1T) increased net assets by 6% in the latest half year, while the number of investments rose to 22. The group raised US$132.2mln through a listing on the main market in London in July to expand a portfolio that already encompasses assets in Botswana, Kenya, Mozambique, Ghana and Mauritius.

Kibo Energy PLC (LON:KIBO) told investors that it moved closer to securing permits for the Mbeya coal to Power Project (MCPP) in Tanzania. The company, in a statement, revealed that the mining element of the project had now been recommended for a special mining licence from Tanzania’s mining commission.

Galantas Gold Corporation (LON:GAL) has raised C$1.57mln after issuing issued 22,137,619 common shares in a private placement. Proceeds will be used for working capital purposes and to continue underground development at the Omagh gold mine in Northern Ireland.

Business headlines

The Times

Roman Abramovich, the Russian billionaire, has been accused of money laundering and having links to organised crime in a leaked Swiss police report.

CMC Markets has blamed the relatively calm financial markets for a fall in profits.

The Daily Telegraph

BMW has issued a profit warning saying it will not be able to meet its profit margin target of between 8% and 10% amid new emissions controls, higher costs from dealing with faults and an intensifying trade war.

Standard Chartered has bowed to pressure from environmental groups and some investors and joined the rush of lenders pledging not to fund new coal power stations.

Prolific corporate dealmaker Andrea Orcel – who once advised on the disastrous takeover of ABN Amro by RBS – has been named the new chief executive of Santander.

John Tonkiss, the new boss of retirement housebuilder McCarthy & Stone, has abandoned growth targets and will slash jobs in a bid to boost margins in the face of a troubled housing market.

The Guardian

Taxpayers are set to pay more than £150 million following the collapse this year of Carillion after it was revealed the bill for redundancy payments is expected to hit £65 million.

Sandwich company Pret a Manger is facing two lawsuits in the US, claiming it deceptively labelled and marketed breads as “natural” when they contained glyphosate.

Daily Mail

Unilever has criticised its own shareholders for opposing the company’s plans to quit the UK.

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