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FTSE 100 closes near break-even as traders fear China growth may be unsustainable

On Wall Street, stocks were in the red at the time of writing despite positive Chinese data and a batch of positive earnings reports

Inflation
With US blue chips shortly expected to open mildly, the FTSE 100 index moved up to session highs, adding 8.5 points at 7,478.50

FTSE 100 closed a shade higher on Wednesday but was off earlier highs, while  FTSE 250 lagged.

On Wall Street, stocks were in the red at the time of writing despite positive Chinese data and a batch of positive earnings reports.

Footsie closed up 1.40 points at 7,471 with 7,475 seeming to be a sticking point.

The FTSE 250 fell around 65 points at 19,858.

Fiona Cincotta, at City Index, said: "Miners were under pressure in early trade as concerns over the health of the Chinese economy hit metal prices.  Economic growth of 6.4% in China was well received, however fears that it was not sustainable weighed on sentiment resulting in a mixed impact on the market.

"BHP also cut its iron ore production guidance in a third quarter trading update. Bunzl was the biggest drag diving 10% in the worst one day decline in three decades, as first quarter sales slowed."

3.25pm: Wall Street falls just into the red shortly after open

The US markets slipped into the red shortly after the opening bell on Wednesday, with a muted reaction and some disappointing corporate earnings weighing on the main indices.

The Dow Jones Industrial Average was down 0.2% in the first hour of trading, while the S&P 500 was down 0.1% and the Nasdaq 0.07% lower.

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One of the key fallers in the morning was computing firm IBM (NYSE:IBM), which sank 3.1% to US$140.6 after an earnings miss for the first quarter.

The slip in the US seemed to have caused gains to pull back in London, with the FTSE 100 down 1 point at 7,468.

2.20pm: US trade balance improves

The FTSE 100 index ticked into positive territory as Wall Street futures added to earlier gains following news of an improvement in the US trade balance in February thanks to US companies cutting imports on assumption of a 1 January tariff hike that failed to materialise.

The US trade deficit narrowed to US$49.4bn in February, the best reading since June 2018, US$1.752bn less than January, with imports growing just 0.2% month-on-month as exports increased by 1.1%, led by a 4.3% jump in autos.

This came after a US$8.8bn decline in the US trade deficit in January resulting primarily from a 3% month-on-month drop in imports.

In reaction to the data, economists at ING said: “The improvements in the US trade balance in the first two months of the year suggest a decent chance of a narrowing in the current account deficit that hit $138.4bn in 4Q18.

“As a proportion of GDP, it could edge down to 2.2% of GDP in 1Q19 from 2.3%, which isn’t bad relative to recent history.”

With US blue chips shortly expected to open mildly, the FTSE 100 index moved up to session highs, adding 8.5 points at 7,478.50, well off earlier lows at 7,445.12.

1.25pm: US markets point to slightly higher start

Wall Street is expected to begin Wednesday with some slight gains as earnings season picks ups the pace and traders process the positive economic data from China.

Spread-betters at IG are expecting the Dow to open around 0.1% higher, with PepsiCo Inc (NASDAQ:PEP) one of the stocks getting some fizz in the pre-market after it reported a 2.6% rise in revenue to US$12.9bn on the back of better snack sales. The conglomerate's shares were up 1.6% at US$124.4

However, the prospect of a higher start in the US failed to provide much lift in London, with the FTSE 100 7 points lower at 7,462 in the early afternoon.

12.15pm: UK consumer spending falls at a softer pace in March

Consumer spending in the UK continued to decline year-on-year (YOY) in March, although the shrinkage rate was less than previous months.

According to data from Visa’s UK Consumer Spending Index, spending fell 0.2%, a slower rate of decline than January and February which fell recorded YOY declines of 1.2% and 1.8% respectively.

The index also added more evidence of the rise of online shopping as eCommerce spending rose 0.5% while face-to-face spending on the high street fell 0.7%.

Food and drink spending saw the most marked reduction at 3.6%, while spending on household goods rose sharply by 5.4%.

Annabel Fiddes, principal economist at IHS Markit, who compiled the survey, said the data showed annual consumer spending had fallen on an annual basis for the last six months as “heightened political and economic uncertainty” weighed on consumer confidence and spending decisions.

“Combined with other timely economic indicators, such as the PMI surveys, the CSI data point to a relatively sluggish UK economic performance through Q1. Furthermore, HIS Markit anticipate real GDP to expand by just 0.8% in 2019, down from 1.4% in 2018.”

Shortly after midday, the FTSE 100 was down 7 points at 7,461.

11.45am: FTSE 100 little changed late morning

Going into lunchtime the FTSE 100 had recovered from an initial tumble but had ended up relatively flat.

The blue-chip index was down four points at 7,465, with key fallers including miners BHP and Rio Tinto as well as consumer supplies firm Bunzl.

Meanwhile, stagnant inflation had done little to the pound, which was up 0.01% at US$1.304 against the dollar as the likelihood of an interest rate hike from the Bank England in May now looked increasingly unlikely.

However, analysts at the EY ITEM club said that there could be potential for interest rate rises later in the year provided the UK left the EU with a deal by the newly extended deadline of 31 October, although a 'no deal' exit could lead to a "very different outlook".

"We strongly lean towards the view that the Bank of England would most likely cut interest rates in the event of a “no deal” Brexit as economic activity would likely take a significant hit."

10.15am: Unchanged inflation lets BoE “sit on its hands”

The Bank of England has been given “cover to sit on its hands” by today’s unchanged inflation figures, said Tom Stevenson, investment director for Personal Investing at Fidelity International.

However, Stevenson added that the central bank was stuck on the “horns of a Brexit dilemma” as the strong jobs market illustrated the danger of leaving interest rates at their historically low levels, but the ongoing uncertainty meant the rest of the economy was “clearly struggling”.

“Until there is more political clarity, the Bank will remain unable to begin its desired normalisation of monetary policy.”

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The sentiment was echoed by analysts at ING who said that the rest of the year looked to be “a fairly benign period for consumer price inflation”, which gave the BoE another reason to keep rates on hold.

Brexit was also rearing its head in the latest set of house price data which showed growth of 0.6% in February, its lowest for seven years, while London prices slumped 3.8% in their biggest annual fall since August 2009.

Ben Brettell, senior economist at Hargreaves Lansdown, said while the drop in house prices reflected efforts by policymakers to cut down on riskier mortgage lending, uncertainty over Brexit had “clearly” played a large part in London’s faltering market.

The stagnant inflation rate had done little to move the pound, which was down 0.02% against the dollar at US$1.304 while the FTSE 100 was down 9 points at 7,460.

9.45am: UK inflation comes in at 1.9% for March

The UK’s consumer price inflation (CPI) was 1.9% in the month of March, the same level reported in February and below the Bank of England’s 2% target.

Inflation was kept steady as rises in fuel prices over February and March was offset by drops in food and recreational goods.

The core CPI rate, meanwhile, was also unchanged from February at 1.8%.

The rate is lower than many had been expecting as a recent pick up in wage growth was thought to have been putting upward pressure on inflation.

Shortly after the data was released the pound was relatively steady against the dollar at US$1.304, while the FTSE 100 was 19 points lower at 7,454.

8.50am: Unsettled start for Footsie

The FTSE 100 opened the session in listless fashion, shedding 8 points to 7,461.65 with investors keeping their powder dry ahead of UK inflation data due later.

A mini sell-off in the mining sector left Rio Tinto (LON:RIO) and BHP (LON:BHP) 2.6% and 2.2% lower respectively amid fears over the health of the Chinese economy. BHP also cut its 2019 iron ore production guidance in a third-quarter trading update.

However, the big mover was distribution group Bunzl (LON:BNZL), which sounded the earnings alarm having been hit by a weak retail market.

On the up after results, Mediclinic International Plc (LON:MDC) rose 8% despite a drop in profitability. The performance of the private healthcare group’s Swiss operation was the highlight, according to US investment bank Jefferies, which restated its ‘buy’ recommendation on the stock.

Proactive news headlines:

Block Energy PLC (LON:BLOE) told investors that ongoing production from the 16aZ well at the West Rustavi field validates its expectation beating initial results. Production rates from the well are presently constrained due to capacity restraints at surface  but the company highlighted that the rate remains consistent with the initial 1,100 barrels of oil per day result earlier this month.

Powerhouse Energy Group PLC (LON:PHE) has signed its first revenue generating contract with its exclusive partner, Waste2Tricity Limited (W2T).

Learning Technologies Group PLC (LON:LTG) is buying a US recruitment software group in a deal worth up to US$30mln. It is putting down an initial US$12mln for Breezy HR, whose products are used by 10,000 companies in 72 countries.

Hurricane Energy PLC (LON:HUR) has announced the spudding of the Warwick Deep exploration well, the first to be drilled in partnership with Centrica-backed Spirit Energy. It is the first of three planned wells in the programme which will assess the Greater Warwick Area (GWA), which comprises the Lincoln discovery and the previously untested Warwick prospect.

Graphene product specialist Directa Plus PLC (LON:DCTA) more than doubled annual revenues as its raft of commercial partnerships started to generate orders. Total income in 2018 rose to €2.5mln (€1.23mln) with sales of €2.25mln (€1mln) if grants are excluded.

Amryt Pharma PLC (LON:AMYT) chief executive Joe Wiley said the company has created the “commercial platform and critical infrastructure to make this a significant business and cash generator”. He was speaking following the release of full-year results for the group, which revealed turnover had grown 13.3% to €14.5mln in the 12 months to December 31.

A full quarter of production from its newest plant helped Iodine producer Iofina PLC (LON:IOF) to a record start to the year.

Galileo Resources PLC (LON:GLR) has raised £500,000 in a share placing the help fund the advancement of its Star Zinc project in Zambia. The exploration firm said it had placed 100mln new shares with institutional and retail investors at a placing price of 0.5p each, a 13.8% discount to its last close price of 0.58p on 16 April.

RM Secured Direct Lending PLC (LON:RMDL, the investment trust specialising in secured debt investments, announced that its investment manager, RM Capital Markets Limited acquired 29,084 ordinary shares in the company at 101.50p each on 16 April 2019. Following the purchase and taking into account a distribution of its holding to some staff members of the Investment Manager as part of its 2018 remuneration policy, the investment manager's total holding in the company is 961,008 ordinary shares.

appScatter Group PLC (LON:APPS) said that, further to the announcement of 8 April 2019, the board is still waiting for the remainder of the £2.2mln share and once all the funds have been received the company will issue a further announcement applying for all the new Ordinary Shares to be admitted to AIM.

KRM22 PLC (LON:KRM) said yesterday that it has been notified that on 15 April 2019 Stephen Casner, its chief executive officer USA acquired 1,000 ordinary shares in the company at a price of 8p each. It added, following this transaction, Casner has an interest in 513,143 ordinary shares representing 2.81% of the company’s entire issued share capital.

Shefa Yamim (A.T.M.) Ltd. (LON:SEFA) said that, following its announcement on 11 April 2019, the planned 10 to 1 share split will now become effective on 23 April 2019, not 17 April 2019 as originally announced.

6.45am: FTSE set to start lower

The FTSE 100 is expected to open slightly lower on Wednesday as traders await the latest batch of UK inflation data.

Spread-betting firm IG expects the FTSE 100 to open around 9 points lower after closing up 33 points on Tuesday at 7,469.

Markets in the US made slight gains on Tuesday, driven mainly by stronger earnings from the financial sector. The Dow Jones Industrial Average up 0.26% at 26,452, while the S&P 500 was up 0.05% at 2,907 and the Nasdaq was up 0.3% at 8,000.

Asian markets, meanwhile, were mixed with the Japanese Nikkei 225 up 0.3% at 22,289 and Hong Kong’s Hang Seng was down 0.2% at 30,071 on the back of Chinese economic growth data that came in within Beijing’s predictions at 6.4% for the last quarter but just above expectations of 6.3%.

On the currency markets, the pound was 0.11% higher against the dollar at US$1.306, although fell 0.12% to €1.155 against the euro on reports that cross-party Brexit talks between the Conservatives and Labour were stalling.

UK inflation data rolls in

UK inflation figures recently dropped below the Bank of England’s 2% target rate following lower commodity prices at the end of 2018.

However, given the fact that wage growth has been picking up, some economists expect this to feed into the CPI numbers on Wednesday and possibly lift inflation above that target rate again.

BHP to clarify guidance

Although iron ore prices have been strong of late on the back of a number of supply constraints, both BHP and fellow miner Rio Tinto recently put their production guidance under review due to a tropical cyclone that crashed into Western Australia’s coast and impacted their joint operations at Pilbara.

On 2 April, BHP – which will issue third quarter production news on Wednesday - said it was reviewing its 2019 guidance of 273mln-283mln tonnes and cost forecasts, but an initial estimate was for a 6mln-8mln tonne reduction in output.

More news on 2019 guidance will also be key.

Significant announcements expected for Wednesday April 17:

Trading update: BHP Group PLC (LON:BHP), Segro PLC (LON:SGRO), Bunzl PLC (LON:BNZL)

Interims: Countrywide PLC (LON:CWD)

Finals: Amryt Pharma PLC (LON:AMYT), Mediclinic International Plc (LON:MDC), Serica Energy PLC (LON:SQZ), AFI Development PLC (LON:AFRB)

AGMs: Diversified Gas & Oil PLC (LON:DGOC)

Economic data: UK CPI, RPI, PPI, HPI inflation; US balance of trade; US Fed Beige Book

Around the markets:

  • Sterling: US$1.306, up 0.11%
  • Brent crude: US$71.99 a barrel, up 0.38%
  • Gold: US$1,277.8 an ounce, down 0.7%

City headlines:

  • Apple and Qualcomm have agreed to put an end to one of the longest-running and most expensive disputes in the tech industry, settling their numerous multibillion-dollar legal fights and paving the way to bring Qualcomm chips back into the iPhone – Financial Times
  • Britain’s second biggest supermarket chain Asda has been accused of trying to disguise a pay cut for thousands of staff, as the campaign against its proposed changes to contracts escalates – The Times
  • Two leading shareholder advisory firms have called for a boardroom shake-up at Boeing following two fatal accidents involving its 737 Max aircraft – FT
  • Pay growth in Britain has risen at the fastest rate in more than a decade, as companies keep hiring despite growing fears over Brexit – Guardian
  • One of the largest damages claims to be brought in the English courts is back on after the Court of Appeal revived a £14 billion lawsuit against Mastercard on behalf of 46 million UK consumers – Times
  • Global equity markets are poised for a “melt-up” as signs of healthier economic growth in the US and China will lure big investors back to stocks, according to BlackRock’s Larry Fink – FT
  • Shareholder advisory firm Pirc has urged Royal Bank of Scotland investors to vote down chief executive Ross McEwan's £3.6 million 'excessive pay packet' – Daily Mail
  • Netflix added 9.6 million new subscribers in the first three months of the year even as it increased prices and faced stiffer competition from rivals including Amazon, Apple and Hulu - Guardian
  • The troubled government contractor G4S announced a rise in revenues yesterday in a surprise trading update ahead of a possible bid from a Canadian rival - Times

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