FTSE 100 closes higher
US stocks higher
Trade talks boost stocks
FTSE 100 closed higher on Monday, in tune with other global markets, as traders feel US-China relations have improved.
The UK's premier share index closed around 73 points higher at 7,499, while FTSE 250 was also up - around 170 points to 19,632.
On Wall Street, the Dow Jones Industrial Average finished around 133 points higher at 26,733, while S&P 500 gained around 21 points.
"President Trump met with Xi Jinping over the weekend at the G20 summit, and some progress was made with regards the trading relationship," said David Madden, analyst at CMC Markets.
"Both sides agreed not to impose additional tariffs on each other, and Donald Trump has decided to relax the restrictions on US companies that deal with Huawei, provided it doesn’t impact national security. The Beijing government pledged to purchase more farming equipment from the US as a gesture of good faith. Traders are viewing the lack of negative news, as good news for the stock markets."
The gold price lost around 19 cents to US$1,391an ounce, while Brent crude was up a tad at US$64.89 a barrel
4.00pm: Footsie homing in on a triple-digit gain
US stocks came off the top a shade after the headline ISM manufacturing index fell to 51.7 from 52.1.
The Dow Jones industrial average was up 186 points (0.7%) at 26,786 while the S&P 500 rose 25 points (0.9%) to 2,967.
“While the headline ISM manufacturing index was slightly better than hoped, the uncertainty caused by the protracted nature of US-China trade talks will continue to weigh on the US manufacturing sector, supporting the case for precautionary policy easing from the Federal Reserve,” said James Knightley, the chief international economist at ING Economics.
“The ISM manufacturing index, historically one of the best lead indicators for overall economic activity in the US economy, fell again in June although not by as much as feared,” he added.
Back in Blighty, the FTSE 100 was making a valiant effort to end the day with a triple-digit gain; the index was up 90 points (1.2%) at 7,515.
2.35pm: Dow Jones opens with a 250+ points gain
US markets were quick out of the traps, with the two major indices rising by around 1% in early deals.
The Dow Jones industrial average was up 264 points (1%) at 26,862 while the broader-based S&P 500 was 34.5 points (1.2%) higher at 2,976.3.
In the UK, the FTSE 100 was up 84 points (1.1%) at 7,510, having traded sideways over the lunchtime trading session.
“This weekend’s trade truce between the US and China delivered a nice start to the trading week for equities all around the globe. All the major indices are higher on the reset of trade talks between the world’s two largest economies,” noted Edward Moya at Oanda.
“President Trump softened his tone on supplying Chinese tech giant Huawei and signalled he will not raise tariffs, while China will buy more US farm goods. The concessions from both sides are hardly anything for both sides to brag about, this meeting basically just brings us back to where we were in talks in late April,” Moya suggested.
Rupert Thompson, the head of research at asset management firm Kingswood, said equities were also being sought after on the expectation that the US central bank would cut rates soon.
“All the same, equities are only likely to be able to sustain further significant increases if global growth bottoms out at a level which will support further gains in corporate earnings. While Fed easing should clearly help in this respect down the road, growth is at the moment still heading in the wrong direction. The latest raft of business confidence surveys showed sentiment across the globe deteriorated further in June,” he opined.
Turning to UK company news, 7digital Group PLC (LON:7DIG), which provides broadcast services to retailers, factories and the like, emerged from the doghouse following the publication of its results for 2018.
The future of the company has been in doubt following the loss of a significant contract in January but the share price rebounded 26% to 0.17p after the company laid out its new strategy, Spinal Tap style (“You are witnesses at the new birth of Spinal Tap ... hope you enjoy our new direction”), in its results statement.
The company intends to focus on three verticals: mobile telecommunications (specifically mobile virtual network operators); retail loyalty programme providers; and automotive systems providers.
Sticking with the audio theme, LightwaveRF PLC (LON:LWRF) shares flashed 9.7% higher at 7p after the smart lights maker teamed up with US tech giant Google in a deal that will enable it to sell Google’s Mini and Nest Hub smart speakers as a bundle with its own voice-controlled lights and sockets.
1.15pm: US stocks expected to join the party
The FTSE 100 briefly managed a “ton-up” ahead of what is expected to be a strong US open.
Even now, the FTSE 100 is not far off a triple-digit rise – up 97 points at 7,523.
“The weekend meeting between Trump and Xi Jinping has provided a welcome boost for markets, with US indices heading towards record highs,” said Joshua Mahony at IG Markets.
The spread betting firm is predicting the Dow Jones will open 256 points higher at 26,856.
The FTSE 100's advance has been helped by the weakness of sterling but even the FTSE 250, which has mid-cap constituents that are less dependent on overseas earnings, was up 175 points (0.9%), with media group Future PLC (LON:FUTR) leading the way.
Future's shares rose 7.5% to 1,042p after the group said full year results would be better than expected.
A healthy looking oil price – Brent crude is up US$1.77 (2.7%) at US$66.51 a barrel on futures markets – has lit a fire under the share prices of oilfield support services providers John Wood Group PLC (LON:WG.) and Hunting (LON:HTG), up 4.8% at 473.6p and up 5.1% at 536.5p respectively.
“Being ‘between a rock and a hard place’ has been the description of OPEC’s situation in the run-up to today’s meeting (1 July), losing market share to booming US shale oil production on the one hand, while facing weakening oil demand growth along with slowing global growth on the other. It is true that OPEC as a whole is losing market share, but this burden is not evenly distributed as it is Venezuela and Iran, who are taking almost all the pain. The other OPEC members (and OPEC+ members) are basically not taking any heat at all,” suggested Bjarne Schieldrop, chief commodities analyst at SEB, the Nordic corporate bank.
“It is clear that the global economy is still in a slow-down mode and so is global oil demand growth. Global oil demand growth is rarely below +1% year-on-year unless the global economy is in a recession and as far as we can see we are not there yet,” he added.
11.50am: Osaka afterglow
Just 15% of the Footsie’s constituents are in the red as investors rush into the market after the weekend’s events at Osaka.
The FTSE 100 was up 83 points (1.1%) at 7,509, despite some iffy macroeconomic data.
House purchase mortgage approvals fell to 65,400 in May, from 66,000 in April; economists had pencilled in a figure of 65,500.
Net consumer credit rose by £800mln in May,which was below the £1bn average of the previous six months, and lower than the consensus forecast of £900mln.
Meanwhile, Howard Archer, the chief economic advisor to the EY ITEM Club, has weighed in on the manufacturing purchasing managers’ index (PMI) released earlier today, claiming it was “a pretty dismal survey all round”.
“The June manufacturing purchasing managers’ survey points to a weaker second quarter for the manufacturing sector as the boost from stockpiling in the first quarter unwinds, and domestic and foreign demand soften. Manufacturing output was also hit hard in April by car producers bringing forward their summer shutdowns in case of a disruptive Brexit. Significantly, it was reported that high stock levels at both manufacturers and their clients are weighing on output and new order intakes,” Dr Archer wrote.
“Indeed, the purchasing managers survey pointed to manufacturing activity contracting for a second month running in June and at the sharpest rate since February 2013. The PMI fell back to 48.0 in June from 49.4 in May, 53.1 in April and a 13-month high of 55.1 in March. This took it further below the 50.0 level which indicates unchanged activity.
“The manufacturing PMI averaged 50.2 over the second quarter, which was down from an average of 53.3 in the first quarter of 2019,” he added.
Reflecting the risk-on mood of investors, defensive favourites such as utility companies United Utilities PLC (LON:UU.), Severn Trent PLC (LON:SVT) and National Grid PLC (LON:NG.) are among the few blue-chips to lose ground – although nationalisation fears might also be weighing on these stocks as much as “risk on” sentiment.
House builders were underperforming in the wake of the house purchase approvals data, giving back some of the handsome gains made following reports that Boris Johnson is planning to slash stamp duty on houses if he makes it into 10 Downing Street.
Clothing retailers such as Next PLC (LON:NXT), down 1.7% at 5,430p; Marks and Spencer Group PLC (LON:MKS), down 1.0% at 208.5p and Primark owner Associated British Foods plc (LON:ABF), down 1.1% at 2,436.5p, were also off the pace after the weekend heatwave came too late to offset what otherwise had been a fairly disastrous month for the retail trade.
10.40am: Manufacturing sector still going through a soft patch after Brexit inventory build-up
UK investors have reacted phlegmatically to a decline in manufacturing.
The index of blue-chip shares was up 80 points (1.1%) at 7,506, not far off its high for the day, despite the Markit/CIPS manufacturing purchasing managers' index (PMI) falling to 48.0 in June, from 49.4 in May, which was below the consensus forecast of 49.5. A value of less than 50 indicates a contraction in activity; June was the first time since early 2013 that the index has been below 50 for two months in a row.
“June’s manufacturing survey confirms that the sector is going through a soft patch, but there is light at the end of the tunnel,” claims Samuel Tombs at Pantheon Macroeconomics.
“The PMI now is only trivially higher than the Eurozone’s—47.6 in June—following an eight-month-long period of outperformance. Demand predictably has softened, now that customers have built up inventories in case a no-deal Brexit,” Tombs continued.
“We’re hopeful, however, that manufacturing output will edge up in Q3, given the robust outlook for households' real incomes, recent positive news on the global trade war and the possibility of another stockpiling boost ahead of the October Brexit deadline,” Tombs said.
Markit's press release noted that employment in the sector fell for the third straight month, with job losses seen in the intermediate and investment goods sector, reflecting lower workloads.
Business optimism dipped to its third-lowest level in the series history during June.
On the plus side, the sun is shining, although with the Wimbledon tennis tournament now underway with the qualifying singles matches, it is anyone's guess how long that will last.
News from the Footsie companies has been sparse, as it often is on a Monday.
AstraZeneca PLC (LON:AZN) had two bits of news to cheer investors; the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) has recommended a change to the European marketing authorisation for the company's Forxiga drug in patients with type-2 diabetes (T2D) and has issued a positive opinion to add a self-administration option for Astra's Fasenra.
Shares in Astra were actually underperforming the market, up just 0.3% at 6,457.5p.
United Utilities Group PLC (LON:UU.) and Severn Trent PLC (LON:SVT) were among the small band of fallers, sliding 1.3% to 772.6p and 0.8% to 2,031p respectively, after the GMB union stepped up its campaign for water companies to be nationalised.
The union said shareholders have received £4.7bn in dividends over the past five years, while owners of the water companies have also received £1.4bnin interest on loans and have accrued a further £520mln in interest.
“Bills up 40% above inflation, billions of litres of water lost in leaks as families face hose-pipe bans and all the while shareholders are trousering billions in profit,” exclaimed Tim Roache, the general secretary of the GMB.
9.50am: Leading shares consolidate early gains
Investors are in “risk on” mode after the presidents of the USA and China agreed over the weekend to restart trade talks.
London's index of heavyweight shares responded positively to the news, climbing 66 points (0.9%) to 7,491, although there seems to be no shortage of pundits advising traders to hold their horses.
“I wouldn’t get too excited at this point, however,” advised Marshall Gittler at ACLS Global.
“In an interview on Fox News, White House National Economic Council director Larry Kudlow said that there are no firm promises and no timetable for completion of a potential sweeping trade agreement, and that China still needs to address the issues that the US has said caused the discussions to fall apart in early May, according to Bloomberg News,” Gittler observed.
Gittler also observed that the China manufacturing purchasing managers' index (PMI) came in a bit worse than expected, which has dampened some of the enthusiasm.
The reading was 49.4, versus the consensus forecast of 49.5, while the Caixin/Markit manufacturing PMI fell sharply to 49.4 from 50.2 (expectations: 50.1). A reading below 50 indicates contraction.
With the Osaka G20 excitement now behind us, aside from the Ivanka Trump “butting in” tweets in the Twittersphere, attention now turns to the two-day OPEC meeting, where the thorny subject of production cuts will be on the agenda.
“OPEC+ is expected to carry on with its low production regime at least until the first quarter of 2020 to cope with a slower global demand and rising US shale production,” said Ipek Ozkardeskaya, at London Capital Group.
“The two biggest producers, Saudi Arabia and Russia agreed on further cuts at the G20 meeting on Saturday and OPEC Secretary-General Mohammad Barkindo said that a longer horizon would give a stronger certainty to the market and that most of the forecasts are ‘shifting toward 2020’. OPEC will certainly do what the market demands to support the oil prices. Hence, an extension of the production cuts for another six to nine months seems plausible,” Ozkardeskaya said.
Brent crude was trading US$1.86 (2.9%) higher at US$66.60 on the futures market, giving a boost to the likes of BP PLC (LON:BP.), up 2.0% at 559.75p, and Royal Dutch Shell (LON:RDSB), up 1.8% at 2,677.25p.
8.35am: Flying start for Footsie
London's blue-chips got off to the expected flying start in the wake of the weekend's trade rapprochement between the presidents of China and the USA.
The FTSE 100 was up 68 points (0.9%) at 7,493 in early deals
“US President Donald Trump and China’s President Xi Jinping agreed to a truce at the G20 Summit this past weekend,” Kallum Pickering at Berenberg Bank commented.
“Two key points were mostly in line with what markets had anticipated: 1) trade talks between the US and China have resumed; and 2) the US’s threat to impose a 25% tariff of $300bn of Chinese imports will be delayed – with no specific time-limit. As with previous such announcements, the detail is lacking. The US and China may thus have different takes on exactly what was agreed,” he noted.
For now, at least, markets a prepared to believe that an escalation of the trade war has been averted.
By my tally, so far #China gets:— Eunice Yoon (@onlyyoontv) June 29, 2019
-no new tariffs
-access to US tech for Huawei
-better visa treatments for Chinese students
-truce on #tradewar (resumption of talks)
-bigger purchases for farmers
On the foreign exchange markets, sterling has lost around a quarter of a cent against the greenback, which usually gives a fillip to the many big dollar earners among the Footsie's constituency list.
Pound Sterling today more and more down pic.twitter.com/cTGkfCjE1t— JerryFurmanto #FBPE People's Vote (@Jerryfurmanto) June 28, 2019
Proactive news headlines:
Mosman Oil & Gas Ltd (LON:MSMN) has parted ways with the first oil field it operated in the USA as it is no longer deemed a material asset.
Highlands Natural Resources PLC (LON:HNR) is to start selling its cannabidiol (CBD) products in the UK in July - the same time as it begins US sales. The oil and gas company, which expanded into cannabis in March, said the first product lines to be sold in the UK will be CBD tinctures available in natural, peppermint, melon and blood orange flavours at strengths of 500mg or 1,000mg.
Sativa Group PLC (LON:SATI) opened its first cannabidiol (CBD) wellness retail outlet in Bath at the weekend and initial trading was ahead of expectations. The Goodbody Wellness store was launched on Friday evening by Crispin Blunt, MP for Reigate and co-chair of the All Party Parliamentary Group for Drug Policy Reform.
Scancell Holdings PLC (LON:SCLP) has provided a half-year update on progress for its various clinical studies. The company will begin recruiting patients with advanced melanoma for UK Phase 2 clinical trials of its SCIB1 novel cancer immunotherapy in the coming weeks, following regulatory approval in April.
Coinsilium Group Limited (LON:COIN) is confident it is entering a “highly productive period” amid growing awareness of cryptocurrency and blockchain technology and a recovery in the digital asset markets.
Block Energy PLC (LON:BLOE) has negotiated a substantial oil storage leasing agreement that will enable it to re-start production from its West Rustavi field in Georgia. Paul Haywood, Block’s executive, said the agreement gives it access to 90,000 barrels of storage capacity just 30km away at state oil group GOGC's main facility near Sartichala.
Hurricane Energy PLC (LON:HUR) is to move onto the next well in its drill programme after deciding to plug and abandon the Warwick Deep well, located off the west coast of the Shetland Islands.
Premier African Minerals Ltd (LON:PREM) closed out 2018 with just US$16,000 in cash. During the period the company raised net proceeds of US$1.715mln, but found its ability to proceed with key projects in Zimbabwe stymied by ongoing political confusion there. Overall losses rang in at nearly US$7.8mln.
IronRidge Resources Ltd (LON:IRR) has completed detailed face mapping and sampling within 145 primary hard-rock artisanal mining pits at the Zaranou gold license in Côte d'Ivoire. The company also updated on other exploration activities across its portfolio of projects in Côte d'Ivoire.
Bacanora Lithium PLC (LON:BCN) has signed the investment and offtake agreement with Gangfeng Lithium that was first announced in May. Ganfeng is the world's largest lithium metals producer in terms of production capacity and the world's third largest lithium compounds producer.
Alliance Pharma PLC (LON:APH), the international healthcare group, announces that John Dawson, its founder and former CEO, has decided to step down as a non-executive director from the company’s board, with effect from 30 June 2019, after 23 years of service.
Personal Group Holdings PLC (LON:PGH), a technology-enabled employee services provider in the UK, has announced the appointment of Maria Darby-Walker as a non-executive director with effect from 28 June 2019. The group noted that Darby-Walker has a wealth of marketing, brand and communications experience working with the boards of major blue-chip companies such as Rio Tinto, Rolls-Royce, Cadbury and Barclays.
Kavango Resources PLC (LON:KAV), the exploration group targeting the discovery of world class mineral deposits in Botswana, announced that it has appointed Turner Pope Investments to act as joint broker to the company with immediate effect.
Thor Mining PLC (LON:THR) (ASX:THR) announced that it is to issue 4,687,500 new ordinary shares in the company at a deemed share price of 0.80p per share in lieu of marketing and communications services valued at £37,500.
6.35am: Trade truce set to lure buyers back into the equity market
The FTSE 100 index is expected to jump higher on Monday, building on Friday’s gains following strong advances by Asian markets after a meeting between the US and Chinese presidents at the weekend showed progress on trade dispute issues, with talks to resume.
Spread betting firm IG expects the UK blue-chip index to open around 50 points higher at 7,475 having added 23.30 points on Friday.
Pre-weekend on Wall Street , the Dow Jones industrial Average closed 73 points, or 0.3% higher at 26,599.96 reflecting optimism over the outcome of President Trump and President Xi’s meeting, and US stock futures pointed to bigger gains to come today in New York after the positive news.
Also reflecting relief at the trade talks progress, markets in Asia rose today, with Japan’s Nikkei 225 index leaping 1.9% higher, helped too by the historic meeting between President Trump and the leader of North Korea, Kim Jong-Un in the demilitarised zone of the divided country at the weekend which dialled-down conflict issues on the peninsula.
Meanwhile blue-chips in Shanghai gained 2.1% on the US trade talks optimism, shrugging aside another weak manufacturing purchasing managers index (PMI) for China which simply raised expectations for a further easing in monetary policy by the People’s Bank of China.
US payrolls eyed at end of week
Traders could turn more cautious as the week progresses, however, as they look to the June US jobs report, due on Friday, which could herald an Federal Reserve rate cut later in the month.
On the domestic front, the latest UK purchasing managers surveys will be the main focus this week, kicking off with the manufacturing PMI report on Monday.
May’s PMIs pointed to weakness in the UK economy for the second quarter following Britain’s delayed exit from the European Union.
According to economists at RBC Capital: “June IHS/Markit PMIs will leave us with a full three months’ PMI data for the second quarter, but we do not think that this month’s results will significantly alter the growth message from the April and May surveys.”
At the start of a new month, almost nothing is featuring on the UK corporate diary for Monday, although as the first week of July progresses a few interesting snippets will emerge, including updates from supermarkets group J Sainsbury PLC (LON:SBRY) and Primark owner Associated British Foods plc (LON:ABF)
Significant events expected on Monday:
AGMs: Boston International Holdings PLC (LON:BIH)
Economic data: UK manufacturing PMI; UK mortgage approvals; US ISM manufacturing; US construction spending; US manufacturing PMI
Around the markets:
- Sterling: US$1.2698, down 0.1%
- Gold: US$1,193.71 an ounce, down 0.1%
- Brent crude: US$66.36 a barrel, up 0.2%
- Donald Trump has become the sitting US president to visit North Korea after crossing from the demilitarized zone that divides the Korean Peninsula – Financial Times
- Jeremy Hunt said he would willingly tell people whose companies went bust after a no-deal Brexit that their sacrifice had been necessary, annoying business groups - The Guardian
- The UK economy is “in stasis” and is likely to remain that way until October as the lack of clarity over Brexit continues, the British Chambers of Commerce has warned - The Times
- Prudential’s UK business is likely to push ahead with its demerger in the next few months - Financial Times
- HSBC is lobbying to convince Chinese government that it is not responsible for the arrest of Huawei’s finance director - Financial Times
- HSBC has started testing a new artificial intelligence (AI) system to tackle the more “sophisticated end” of criminal activity - The Daily Telegraph
- The six largest lenders of Britain posted a bumper combined profit of £22bn last year, according to analysis by The Banker magazine - Daily Mail
- EU-based traders face threat of imprisonment in Switzerland from today if they flout a ban on trading hundreds of Swiss stocks following the breakdown of talks between Brussels and Bern - Financial Times
- Libra, Facebook’s proposed digital currency, will cause immediate tax problems for users in Europe, according to leading tax lawyers - Financial Times
- The world’s biggest divorce settlement will be made official this week as Amazon billionaire Jeff Bezos hands over Amazon shares worth US$38bn to his soon-to-be ex-wife MacKenzie Bezos - The Guardian
- Chubb is set to become the first of the big US insurers to announce a ban on coverage for coal companies - Financial Times
- Anheuser-Busch InBev is planning to expand in Asia via acquisitions through a planned public listing in the fast growing region - Financial Times
- P&O owner swoops on London IPO candidate Topaz in US$1.3bn deal – Sky News
- Superdrug has halved its dividend from £50mln to £20mln amid a “challenging” environment on Britain’s high streets - The Daily Telegraph
- Jaguar Land Rover is poised to build its next-generation electric cars its Castle Bromwich plant in Birmingham, delivering a huge boost to 2,500 workers - Daily Mail
- Beijing is planning a new stock exchange modelled on the US’ Nasdaq to channel billions of dollars’ worth of domestic savings through China’s technology companies.