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FTSE 100 closes in the red as Brexit and trade war fears continue to hit sentiments

The International Monetary Fund issued a warning, saying a "no-deal" Brexit would send the British economy into severe shock

Standard Chartered
"Fighting financial crime is central to what we do and who we are," according to Standard Chartered
  • FTSE 100 index down 26 points

  • US-EU trade war fears looms again

  • Pound volatile ahead of EU emergency meeting Wednesday

The FTSE 100 closed firmly in the red as Brexit uncertainty and fears of the return of a tit-for-tat US-EU trade war hit sentiments.

US President Donald Trump on Tuesday lashed out at the EU, threatening to slap tariffs on EU imports in retaliation for Airbus subsidies. This in turn could result in the EU imposing tariffs on US imports.

Joshua Mahony, senior market analyst at IG said: “The worrying factor here is that Donald Trump seems to deem tariffs as his go-to tool whenever he deems a  situation to be unfavourable to the US, and thus there is a good chance that we will see many more threats like this when another issue rears its head.”

 

 

Mahony noted that despite all the talk of there not being a no-deal Brexit, “it remains the default position", especially without the full support of all 27 nations." He warned that UK Prime Minister Theresa May may be faced with making the decision of either a no-deal Brexit or revoking Article 50, if all the 27 EU nations do not agree on extending the Brexit deadline.

Having hit an intra-day low of 7,413 just before 3.00pm, the index of heavyweight shares closed down 26.32 or 0.4% at 7,425.57 while the FTSE 250 was down 83.45 at 19,433.76.

Investors are also cautious ahead of the European Central Bank’s interest rate decision tomorrow and the the publication of the US Federal Reserve meeting minutes.

The pound had a rather volatile day, ahead of the EU’s emergency meeting Wednesday to decide on Brexit.

FXTM analyst Lukman Otunuga said the pound is set for “another wild week” over Brexit uncertainty. “When dealing with Brexit, one should always expect the unexpected and this will remain the mantra until more clarity is provided,” he added.

The pound was down at $1.3039.

 

3.30pm: The Footsie pares losses

 The FTSE 100 remained in the red heading into the final hour of trading as traders fretted over Brexit and trade wars.

Having hit an intra-day low of 7,413 just before 3.00pm, the index of heavyweight shares had recovered a little to 7,424, down 28 points (0.4%).

Standard Chartered PLC (LON:STAN) was defying the trend with a 5.2p rise at 650.8p after it announced it had finally got the US authorities off its back for various historical sanctions compliance misdemeanours.

Under the terms of the resolutions, the group will pay a total of US$947 million in monetary penalties to the various US agencies (including the Department of Justice) and £102 million to the UK’s Financial Conduct Authority.

In the fourth quarter of 2018, the group took a US$900 million provision that included these matters and revealed it will take a further and final charge of US$190 million in the first quarter of 2019.

 

 

2.35pm: Blue-chips turn red as US stocks plunge

The FTSE 100 fell back into the red as US stocks fell out of bed with a bump.

Having endured an up-and-down day so far, the Footsie moved back into the down phase midway through the lunchtimes session and was down 23 points (0.3%) shortly after US markets opened.

Across the Atlantic, the Dow Jones 30-share was down 195 points (0.8%) at 26,146 while the broader-based S&P 500 was off 16 points (0.6%) at 2,880, with investors spooked by president Trump turning his trade war shtick towards Europe.

Oil prices trended downwards today, with the front-month contract for Brent crude shedding 56 cents (0.8%) at US$70.54, contributing to a 1% fall for both BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB).

Noon: Blue-chips seeking direction

The FTSE 100 was little changed, reflecting a steady pound and a desire by traders to wait for Brexit developments.

Meanwhile, trade war concerns – this time between the US and Europe – are weighing on sentiment, both here and across the pond.

The index of blue-chip shares was up 5 points (0.1%) at 7,457.

In the US, futures markets are pointing to a weak start.

“Analyst downgrades on some heavyweight US stocks yesterday just as earnings season gets underway combined with fresh disappointment in the way of economic data is doing little to lift the mood amongst US equity traders. With JOLT job openings looking to be the stand out on today’s economic calendar, and with this number tipped to show a meaningful downturn in the level of advertised vacancies, the pressure is mounting on the Federal Reserve to intervene,” declared James Hughes at Axi Trader.

“Tomorrow’s FOMC meeting minutes have the potential to provide some further clues here, with any clues that quantitative tightening will soon come to an end possibly being sufficient to lend some support to stocks. The stand-off between the White House and the Fed does, however, continue unabated and further intervention here may unnerve the market in general. With the risk of further corporate downgrades and no progress in those US-China trade talks either, the temptation may well be for many to remain on the back foot,” Hughes ventured.

Chris Beauchamp, Hughes’s counterpart at IG Group, cited “ a potential Brexit extension, a looming ECB meeting and an apparent ramping up of trade tensions between the US and Europe” as reasons why markets have been flaccid this morning.

“The EU appears to be willing to grant the extension that the UK craves, but it needs to see evidence that Westminster has done its homework. Despite days of talks between the Conservatives and Labour, there has been little real progress, fuelling suspicion that both sides are merely playing for time, one commodity that is in short supply,” Beauchamp noted.

“Hopes were high last week that trade tensions between the US and China were being resolved, but now the president appears keen to reopen the battle with Europe even before the one with China is resolved. Such a development is not likely to be positive for risk assets, especially after such a strong run and ahead of a vital season for earnings,” he added.

Small caps tend to be less influenced by macro concerns so it is no surprise that they provide the bulk of the day's big movers.

N4 Pharma PLC (AIM: N4P), the pharmaceutical company developing Nuvec, a delivery system for vaccines and cancer treatments, plunged 43% after some disappointing test results.

Sector peer Nuformix Plc (LON:NFX) was having better luck, rising 41% to 3.80p after it signed an agreement for cannabinoid therapeutics development, licensing and commercialisation with privately-owned Canadian company Ebers.  

10.30am: Financial stocks drive the blue-chip index into positive territory

The FTSE 100 has shaken off its early lethargy to burst into positive territory, with financials leading the way.

Banking and insurance stocks were doing most of the heavy lifting as the Footsie advanced 19 points (0.3%) to 7,472.

Insurance giants Prudential PLC (LON:PRU) and Legal & General Group PLC (LON:LGEN) were up 1.4% and 1.2% respectively while banking stalwarts Royal Bank of Scotland Group PLC (LON:RBS) and Lloyds Banking Group PLC (LON:LLOY) climbed 1.6% and 1.0% respectively.

There was a bit of welcome news for the hard-pressed retail sector with data from Barclaycard indicating that essential spending by UK consumers rose by 2.2% year-on-year in March, despite a 0.5% decline in spending in supermarkets.

Non-essential spending rose 3.4% from a year ago, although the credit and debit card company did note that the comparative period was when Britain was in the grip of “The Beast from the East”.

“Pubs and restaurants helped non-essential spending see strong growth this March, recording uplifts of 15.1 per cent and 12.1 per cent respectively, as Brits made the most of the opportunity to relax and dine out,” Barclaycard said.

“In line with the milder weather this March, garden centre spend increased 34.2 per cent year-on-year with shoppers buying tools, plants and other items to spruce up their outdoor space. In contrast, there was no respite for clothing retailers, as sales saw their sixth consecutive month of decline, contracting 2.4 per cent. Department store spending also contracted 4.7 per cent as the retail sector continues to face challenges,” Barclaycard added.

So, bad news for Debenhams but its management probably has other things on its mind at the moment.

Laura Suter, a personal finance analyst at AJ Bell, noted that, although consumer confidence has fallen to its lowest level in the last five years, that has not stopped the typical Brit enjoying a night down the boozer or shirking the washing-up in order to enjoy a restaurant meal.

“As Debenhams’ woes continue, it will surprise no-one that the high street continued to have a tough time in March, with spending in department stores down again, and clothes retailers seeing their sixth month in a row of falling spend,” she commented.

9.40am: Footsie's somnambulism continues

 The FTSE 100 got off to a subdued start before continuing with a comatose spell of inaction.

The top-shares index was down just a couple of points (0.0%) at 7,450.

Some might argue that investors were seeking something meaty to get their teeth into and respond to but Russ Mould takes the opposite view.

“Perhaps it is no wonder the markets are struggling for direction when investors have so many things to think about,” Mould suggested.

“Whether it is Brexit – where Theresa May is heading to Paris and Berlin to try and secure an orderly exit from the EU – or trade wars, with tensions between the US and EU beginning to ramp up even as hopes for a resolution to the battle between the US and China continue to wax and wane, it is little wonder people are sitting on their hands.

“Sterling was higher after UK peers and MPs pushed through legislation compelling May to seek a delay to Brexit rather than crashing out with no deal,” he added.

Drugs giant GlaxoSmithKline PLC (LON:GSK) defied the trend – if you can call a 0.02% fall a trend – after it revealed the US Food and Drug Administration (FDA) had approved approved Dovato, a treatment of HIV-1 infection developed jointly by Glaxo and Pfizer.

Shares in Glaxo ambled 2.1p (0.1%) higher to 1,590.3p.

 

8.35am: Cautious start for Footsie

The FTSE 100 index eased back in early trade on Tuesday, reversing Monday’s modest gains after mixed performances overnight from US and Asian markets

After around half an hour of trading in London, the UK blue-chip index was nearly 14 points lower at 7,438 having gained 5 points on Monday.

Jasper Lawler, head of research at London Capital Group commented: “There is a definite sense of caution which is keeping traders subdued as they shift their focus towards a busy second half to the week. The wait and see mood is expected to hang around today ahead of key events that make up a 'Super Wednesday'. These include the crucial Brexit EU summit, the ECB policy announcement and Fed minutes. Then there is the start of the US earnings season on Friday, which could set the tone for the coming weeks."

He added: “Investors are waiting for the next catalyst before considering extending current gains. With US/China trade talks over for now, the focus is shifting back towards Europe in more ways than one, that's a reason to think any rally could be hard to come by.”

On the corporate front, trading in Debenhams PLC (LON:DEB) shares was suspended today as it looks set to be taken over by lenders after an improved rescue deal from Mike Ashley’s Sports Direct International PLC (LON:SPD) came too late.

Sports Direct said on Tuesday morning that it would underwrite a £200mln rights issue after Debenhams rejected the sportswear retailer’s weekend offer of £150mln.

However, Debenhams said Sports Direct missed the deadline to prevent its pre-pack administration from going ahead, meaning it will fall into the hand of lenders and wipe out shareholders.

Proactive news headlines:

Shares in alkaline fuel cell power technology company AFC Energy PLC (LON:AFC) surged in early deals after the company revealed it had improved its technology. The new high-power density alkaline fuel cell technology has the potential to be used in applications where the space and weight of power generation are important considerations and will sit alongside and complement AFC's existing large-scale stationary fuel cell system.

Collagen Solutions PLC (LON:COS) expects full-year revenue to rise more than market forecasts, driven by deals to develop collagen products on behalf of third parties. The company, which uses collagen and/ or tissue to make everything from heart valves to bone grafts through to wound dressings, estimates revenue will rise 18% to £4.15mln for the year ended March 31, up from £3.50mln last year, as growth seen in the first half continued.

AppScatter Group PLC (LON:APPS) is planning to raise funds to finance the preparation work for the proposed acquisition of US technology company, Airpush.

OptiBiotix Health PLC (LON:OPTI) has signed a three-year agreement for the distribution of its SlimBiome weight loss product in Bulgaria.

Feedback PLC (LON:FDBK) has appointed the chief executive (CEO) of its operating subsidiary, Feedback Medical, as its own CEO Avacta Group PLC (LON:AVCT) remains on track to begin a Phase I clinical trial of its first Affimer therapeutic candidate next year. Affimers are small, engineered proteins that are capable of binding specific molecular targets, in a similar way to antibodies. Big Pic in November. with immediate effect.

Biotech investor Arix Bioscience PLC (LON:ARIX) has confirmed that its investee company, Autolus Therapeutics PLC (NASDAQ:AUTL), has announced the launch of a proposed public offering in the United States.

Rosslyn Data Technologies PLC (LON:RDT) has inked a refinancing deal which will cover the debt it assumed as part of its acquisition of Integritie (UK) Limited in April 2017 and provide it some working capital.

Cabot Energy PLC (LON:CAB) has decided to relinquish PEL 629 onshore exploration licence in the Otway Basin, onshore Australia, where work has been suspended since June 2014. The company, in a statement, noted that it had received confirmation from the authorities that it is approved to vary current commitments for a nominal fee.

Active Energy Group PLC (LON:AEG) struck a resolute tone as it said that the commerciality of its Polish ‘SuperFuel’ venture won’t be dented by a denied application for European Union funding.

Savannah Resources PLC (LON:SAV) has boosted resources at the Mino do Barroso lithium project in Portugal by 17% to 23.5mln tonnes. Within that, the measured and indicated resource now totals 13.3mln tonnes grading 1% lithium oxide.

i3 Energy PLC (LON:I3E) told investors it has secured a drill rig for its summer drill programme, which sets the Liberator field development in motion. The company, in a statement, said it had hired the Borgland Dolphin semi-submersible drilling rig for the programme, with drilling due to start between 15 July and 15 August.

Photonstar LED Group PLC (LON:PSL) is having to rethink its plans after shareholders vetoed its latest fundraise. The company had intended to raise £200,000 but shareholders did not grant a pre-emption waiver.

Bluebird Merchant Ventures Ltd (LON:BMV) has received a positive response to its application for a permit to develop the Gubong gold mine in South Korea.

IronRidge Resources Limited (LON:IRR) has announced the appointment of Kieran Daly as a non-executive director of the company with immediate effect, replacing Bastiaan Van Aswegen who is retiring. The group noted that Daly formally joins the board as part of the company's strategic alliance with mining company Assore Limited. which has a 31.27% shareholding in IronRidge.

6.40am: Weak start predicted

The FTSE 100 index is expected to slip back on Tuesday, reversing Monday’s modest gains after mixed performances overnight from US and Asian markets with all eyes on the Brexit situation.

Spread betting firm IG expects the blue-chip index to open around 5 points lower at 7,446 having gained 5 points on Monday.

Overnight on Wall Street, the Dow Jones Industrials Average closed almost 84 points, or 0.3% lower at 26,341, giving back some of its recent gains as investors eyed the start of the latest US corporate earnings season, CPI inflation numbers and the release of Federal Reserve meeting minutes, all due on Wednesday.

But Asian markets managed slight gains today, with Hong Kong’s Hang Seng index adding 0.3% and Japan’s Nikkei 225 index up 0.1% helped by hope for continuing Sino-US trade negotiations.

On currency markets, the pound remained cautious against the US dollar and the euro as traders await the next twists in the Brexit saga, with no important economic data due for release.

Brexit watch

The clock is ticking down to Wednesday afternoon’s emergency summit in Brussels at which Theresa May will ask EU leaders for another extension to the Article 50 date which currently could see the UK leave the bloc without a deal this Friday, 12 April, although a private members bill passed into law by parliament last night seems to rule out that possibility.

If the prime minister can strike a deal with the opposition Labour party, with talks still ongoing, there may be time to get a final ‘meaningful’ vote on the Brexit deal she has already agreed with the EU in on Tuesday afternoon, otherwise she will be approaching the leaders empty-handed and is likely to face a rocky reception.

With Brexit on a knife-edge, and May seemingly as intractable as ever, it is anyone’s guess what the end of this week might bring.

Sumo finals developing well

There will be little on the corporate front to divert attention from Brexit either on Tuesday, with small caps dominating the corporate results diary.

Full-year results from games developer Sumo Group PLC (LON:SUMO) are likely to meet expectations, according to analysts at Peel Hunt, after a trading update in January provided them with comfort for 2018.

The City broker expects the AIM-listed group to report 2018 adjusted pre-tax profit of £9.1mln, up from £7.5mln in 2017, on sales of £34.1mln, up from £28.6mln.

The Peel Hunt analysts said they await the important launch of Team Sonic Racing on 21 May across Nintendo Switch, Playstation 4, Windows and Xbox One, which drives its royalty revenue growth forecasts going forward. 

They also pointed out that Sumo has yet to announce the next two pieces of its own IP, set to launch this year, as well as at least two more big-name deals.

Significant announcements expected on Tuesday April 9:

Finals: Sumo Group PLC (LON:SUMO), City Pub Group PLC (LON:CPC), Destiny Pharma plc (LON:DEST), Anexo Group PLC (LON:ANX), Luceco PLC (LON:LUCE), One Media IP Group PLC (LON:OMIP), Mission Marketing Group PLC (LON:TMMG), Anexo Group PLC (LON:ANX), Property Franchise Group PLC (LON:TPFG)

Interims: Avacta Group PLC (LON:AVCT), Nanoco Group PLC (LON:NANO)

Economic data: US JOLTS job openings; US NIFB business optimism index

Around the markets:

  • Sterling: US$1.3077, down 0.1%
  • Gold: US$1,297.10 an ounce, unchanged
  • Brent crude: US$71.18 a barrel, up 0.1%

City Headlines:

  • Theresa May on Monday night paved the way for Britain to take part in next month’s European parliamentary elections, infuriating Conservative Eurosceptics – Financial Times
  • UK high-street spending falls for first time in 11 months, according to BRC survey - Reuters
  • Debenhams is on the brink of falling into the hands of its lenders after the company and its financial backers rejected a £150mln cash injection from Mike Ashley’s Sports Direct – The Guardian
  • Centrica chief executive Iain Conn received a 44% pay rise for 2018, despite a difficult year - The Guardian
  • Standard Chartered is to shell out nearly $1bn to settle long-running regulatory probe into alleged breaches of sanctions against Iran and financial crime controls - The Times
  • Ed Bramson, the activist investor who is pushing for Barclays to shrink its investment bank, has warned there is a “real threat” that the UK lender will have to raise fresh capital unless it curbs its trading operations – Financial Times
  • The jury has been discharged in a landmark fraud trial of four former Barclays bosses connected to two emergency fundraisings in 2008 when the UK's banking system was on the brink of collapse - The Daily Telegraph
  • Pinterest said it planned to raise as much as $1.3bn from investors at a valuation of up to $11.3bn, below the price of its most recent private share sale - Financial Times
  • Creditors to Patisserie Valerie have rejected plans by KPMG to wind down the business, obstructing the administration of the collapsed café chain - The Times
  • Jaguar Land Rover has begun its week-long factory shutdown as part of its plans for Brexit - The Guardian
  • US casino giant Wynn makes $7.1bn takeover bid for Australia’s Crown Resorts – Financial Times
  • Dan Loeb, the head of Third Point Capital, is planning to raise up to $1bn to raise its stake in Sony and agitate for change The Daily Telegraph
  • The Competition and Markets Authority said that if its 18-month investigation into the funeral service providers found evidence of problems, it could intervene on the price of funerals - The Times
  • Cash is in crisis as bank branches close, more shops refuse to accept notes and coins and the cost of handling traditional currency spirals, the Bank of England has warned - The Daily Telegraph

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