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FTSE 100 closes firmly in red as trade fears spook markets

The UK's index of leading shares closed down over 127 points at 7,158, while FTSE 250 also tanked around 199 points

FTSE 100 Donald Trump
US President Donald Trump shoots the breeze with NATO's Jens Stoltenberg in London
  • FTSE 100 index closes 127 points down
  • US stocks lower
  • Sterling higher as construction PMI beats expectations

5pm : FTSE 100 slumps on trade worries

FTSE 100 index closed in the red on Tuesday and Wall Street shares also slumped as markets reacted strongly to yet more trade woes.

The UK's index of leading shares closed down over 127 points at 7,158, while FTSE 250 also tanked around 199 points.

"Once again it’s been an intervention by President Trump that’s upset the applecart, when in an impromptu question and answer session with journalists he held open the prospect that there would be no US, China trade deal, until after the US elections next year," said Michael Hewson, chief market analyst at CMC Markets.

"This insouciance about the prospect of putting off any deal has completely upended market expectations that we were potentially millimetres away from a deal, and also flies in the face of the optimism that has seen markets rally strongly over the last few weeks."

On Wall Street, the Dow Jones Industrial Average shed over 390 points at 27,392, while the broader based S&P 500 shed around 36 points at 3,077. Financial stocks were under pressure and the 10-year Treasury bond  yield headed towards the biggest decline in over three years.

4pm: FTSE 100 down to worst level since October 

The Footsie can only hope to get this day over and done with, as it marks its worst performance in six weeks.

The index had lost 131 points or 1.81% to 7,154 as it headed to the closing bell, having earlier hit lows not seen for six weeks.

Meanwhile, the pound kept going strong inching up 0.44% to US$1.2998, as the latest Kantar poll suggests the Conservatives are not losing ground.

It is only day-one for President Trump in London, where he is attending the NATO summit, but he has already scared off the markets with a laidback approach over the incumbent US-China deal deadline.

“In some ways, I think it’s better to wait until after the election if you want to know the truth. But I’m not going to say that, I just think that,” he said, although he did mention Beijing wants the deal now.

Down for the fourth day in succession, the FTSE has borne the brunt of today’s selling, said Michael Hewson, chief market analyst at CMC Markets, hindered by virtue of the fact that it is more heavily weighted to US dollar earners than its European cousins.

“The prospect of increased tariff tensions, a stronger pound and a weak commodity prices has also combined to send it to its lowest levels since mid-October,” Hewson said.

2.45pm: Trump and strong pound keep bashing the FTSE

US stocks opened lower and the FTSE 100 index headed for an after-lunch nosedive as the woes over a delayed US-China trade deal ramped up, not helped by the strong pound performance.

The blue chips have lost a whopping 147 points or 2% to 7,139, pressured by the pound enjoying the 0.42% upward ride to US$1.2996.

That means the FTSE is suffering more than its peers, as in comparison the Dow Jones index lost 235 points or 0.8% to 27,557 after the Wall Street opening bell.

The S&P 500 and the Nasdaq Composite were hit as well, losing 33 points or 1% and 113 points or 1.03% respectively.

The markets are fearing a new round of tariffs is round the corner, with the pre-Xmas deadline for a trade deal now seeming unrealistic.

According to analysts, they would be a major problem for everyone, and it would feel like erasing all the improvement made so far in the delicate relationship between Washington and Beijing. 

However, a mere statement from either party confirming talks are still underway would push for a rebound, as markets are notoriously sensitive to trade news.

“The lack of urgency implied by Trump’s comment does not mean that they are not still working on a deal,” Connor Campbell, financial analyst at Spreadex, told Proactive, however.

Evraz (LON:EVZ) is the biggest faller on the Footsie, leading a phalanx of commodities-related stocks lower, including the index's oil heavyweights, Shell (LON:RDSB) and BP (LON:BP.)  

12.15pm: Trump sees US-China trade deal "after election"

The FTSE 100 index was firmly in the red around midday, dropping 85 points or 1.2% to 7,201 on expectations for fresh falls on Wall Street today as President Trump continued on the offensive in his ongoing global trade battles.

The market seems to feel the 15 December 2019 date for a US-China trade deal is likely to be pushed back, as Trump might as well wait until next year, or even after the November 2020 presidential election.

Fresh off Air Force One in London, where he is attending a NATO meeting, Trump said he had “no deadline” to reach a China trade deal yet and added that “in some ways I like the idea of waiting until after the election”.

Trump's comments came during a meeting with the NATO Secretary-General Jens Stoltenberg on Tuesday morning.

“Combined with the barrage of tariff threats on the EU, the comments can be taken as a sign that the White House has no qualms about levying further tariffs and is happy about using trade as an economic, political and diplomatic weapon,” Neil Wilson, chief market analyst at Markets.com commented in a note.

Markets need to reprice, Wison added, although nothing is set in stone and a rebound is only “a tweet away”, but "we can be almost certain it will not be seen in 2019".

Meanwhile, on currency markets, the pound kept up its forward momentum, rising 0.4% to US$1.2994 helped by another better-than-expected UK purchasing managers' index - this time from the construction sector.

However, Rabobank analysts noted that the ongoing sterling wave depends on upcoming political events, and said it is not all puppy dogs and rainbows from now on.

The Dutch bank's analysts see potential for the pound to reach the US$1.32 ballpark if Boris Johnson is returned as prime minister after December 12, but those gains are unlikely to hold if the UK crashes out of the EU with no deal.

Assuming the Brexit Withdrawal Agreement is passed through parliament and the UK leaves the EU on January 31, trade talks will start and the Tories believe they will be wrapped up in a few months.

However, EU chief negotiator Michel Barnier was reported to have said they will take between two and three years, clashing with the end of transition period coming on December 2020.

If the government does not ask for an extension, which UK cabinet member Michael Gove recently stated, the pound is set to dive towards the US$1.15 area as a result of a no-deal.

11.00am: FTSE 100 dragged lower by global giants

Analysts say President Trump’s comments from last night are still reverberating around the City and hitting global firms such as BHP Group PLC (LON:BHP) and Reckitt Benckiser Group PLC (LON:RB).

The commodity giant and the consumer goods company both lost 3% to 1,675p and 5,876p respectively and the renewed trade tensions are partly to blame, analysts say.

Meanwhile, the pound was being supported by political polling.  

The latest polls suggest there will be a Tory government with a stronger majority as of next Friday, with Boris Johnson's party gaining an extra point from last week to 44% support, while Labour’s voters remain unchanged at 32%.

“The FTSE 100 stands out this morning, but for the wrong reasons, remaining firmly in the red while markets on the continent move higher,” said Chris Beauchamp, chief market analyst at IG.

The blue chip index has kept descending as the morning has progressed, losing 8 points or 1.19% to 7,199, with BHP joined by fellow mining heavyweights Glencore (LON:GLEN), Antofagasta (LON:ANTO) and Anglo American (LON:AAL) near the bottom of the pile.

Not helping matters, the pound is up 0.3% at US$1.2984, hitting the overseas focused index, with Pearson (LON:PSON) and BAE Systems (LON:BA.) prime examples.

9.45am: PMI construction index better than expected

London's blue-chip stocks extended their losses mid-morning as the pound got some relief from above-forecast UK construction data.

The IHS Markit construction purchasing managers’ index (PMI) for October performed better than expected against rather grim forecasts, coming in at 45.3 for November compared to 44.2 in October. On Monday, Markit's manufacturing PMI also beat forecasts.

The construction PMI outdid the market’s bleak expectations of 44.0, however, it remains well below the stable 50.0 mark as political uncertainty restrains potential customers from commissioning new work.

The not-as-bad-as-expected news lifted the pound 0.25% against the US dollar, to US$1.2974, which helped push the FTSE 100 down 47.79 points or 0.64% to 7,239.23.

8.35am: Dull start for Footsie

The FTSE 100 index was subdued in early morning trade as a bounce-back following a 60-point fall yesterday failed to materialise. Sentiment remains a little shaky after the US president opened trade hostilities on multiple new fronts on Monday.

In opening deals, the UK index of blue-chips was 4 points lower at 7,282.23 

“Equity markets took a dive on Monday as Donald Trump upped the stakes in the trade war and broadened his field of fire to include allies in Europe and South America,” said Neil Wilson, senior analyst at Markets.com. 

“After the heavy losses, bulls are trying to rally the troops but sentiment is pretty shaky after taking such a bruising,” he added.

Topping the Footsie risers’ list was Rightmove (LON:RMV) after Wall Street investment bank Goldman Sachs turned less bearish on the stock, moving its recommendation to ‘neutral’ from ‘sell’. The stock was bid up 2.5% in early deals.

On the flipside, the miners were on offer after Trump’s latest trade tirade, with Anglo American (LON:AAL) leading the lemming leap.

Among the mid-caps, Serco (LON:SRP) was in demand after JP Morgan Cazenove upped its recommendation on the public services group to ‘overweight’. The shares nudged 2% higher.

Proactive news headlines:

Genedrive PLC’s (LON:GDR) shares surged on Tuesday as the company achieved “high clinical accuracy” in a recent trial of its screening test designed to reduce the risk of antibiotic-induced hearing loss in infants. The diagnostics firm said the test had achieved a diagnostic sensitivity of 100% and a specificity of 100% across 303 samples and was unaffected by common bacteria and interfering substances that may be found in a patient.

Collagen Solutions PLC (LON:COS) said it was investing in "people, capabilities and technology” as it delivered its third consecutive half of double-digit top-line growth. Presenting its interim results, it explained it had been affected by capacity constraints within the collagen manufacturing operation. It was also held back by the timing of delivery of development contract milestones. Against this backdrop, the biomaterials specialist grew revenues by 14% to £2.23mln in the six months ended September 30. Tissue sales more than doubled.

Arc Minerals Limited said it has acquired a further 5% interest in Zaco Limited from Mumena Mushinge, a non-executive director of Arc, for a total cash consideration of US$37,500, increasing Arc's interest in Zaco to 52.5% from 47.5%. Nick von Schirnding, Arc’s executive chairman stated "I am very pleased that we have increased our stake in Zaco to 52.5% giving us a controlling interest in this exciting prospect, which contains a number of anomalies which we are drilling."

Centerra Gold has terminated its strategic alliance with Erris Resources PLC (LON:ERIS) after almost four years. The partners had been in a joint venture on exploration ground in Sweden owned by Erris. "Erris Resources is grateful for the consulting and exploration partnership with Centerra Gold over the past four years, which from our experience is a typical duration for such joint ventures,” said Erris chief executive Anton du Plessis.

BB Healthcare Trust PLC (LON:BBH) said it aims to target a dividend each financial year equal to 3.5% of its Net Asset Value as at the last day of the Company's preceding financial year. For the financial year ended 30 November 2019, the company paid an interim dividend of 2.425p per ordinary share in August 2019 and in due course is intending to propose a final dividend of 2.425p per ordinary share. For the financial year ending 30 November 2020, the target total dividend will be 5.0p per ordinary share, and the firm intends to declare an interim dividend of 2.5p per share, and a final dividend of 2.5p per share for the financial year ending 30 November 2020.

KRM22 PLC (LON:KRM) the technology and software investment company that focuses on risk management for capital markets, today announced the appointment of Steve Sparke as a non-executive director of the company. The group said Sparke will replace Matt Reed, its independent non-executive director, who is stepping down with immediate effect to focus on other business commitments. KRM22 noted that Sparke has over 30 years' experience in the Exchange Traded Derivatives and Commodity industry and was recently COO of Marex Spectron.

ADES International Holding PLC (LON:ADES) said it was notified on 2 December 2019 that its CEO, Dr. Mohamed Farouk Abdelkhalek purchased 600 of the company's ordinary shares at average price of US$ 12.283 each. Following this transaction, the group noted that Abdelkhalek has direct and indirect beneficial interests in 2,075,619 shares representing 4.75 % of the company's issued share capital.

ImmuPharma PLC (LON:IMM), a specialist drug discovery and development company, announced that Dr Tim Franklin, its commercial advisor, will be presenting at the Biotech Showcase 2020, to be held between 13-15 January 2020, at the Hilton, San Francisco Union Square. Commenting on the event, Dimitri Dimitrou, ImmuPharma CEO said: "We are delighted that Dr Franklin, who was an integral part of the ImmuPharma team involved in the Avion negotiations, will be representing ImmuPharma and presenting at this prestigious Biotech Showcase. This will be a great opportunity to refocus the industry's and investors' minds on the significant potential within ImmuPharma's pipeline."

6.45am: FTSE 100 expected rebound 

The FTSE 100 is tipped to rebound higher on Tuesday morning, a day after European stocks had their worst session in two months on the back on the back of Donald Trump’s new tariff tirade.

London’s blue chip index is seen rising 10 points to 7,296 by spread-betters, following a 60-point fall the day before.

Overnight, Wall Street joined in the blood-letting, with a 268-point or 1% dive for the Dow Jones to 27,783.04.

The US President’s unexpected announcement that he would be reintroducing steel and aluminium tariffs on Brazil and Argentina seemed to be the trigger, followed by a blast from commerce secretary Wilbur Ross that tariffs will be increased on China if there is no deal by 15 December.

The S&P 500 fell 0.9% and the Nasdaq Composite tumbled 1.1% lower. 

Washington is also threatening to increase tariffs on the EU following a World Trade Organisation ruling against EU claims that all illegal subsidies had been removed.

The White House also proposed a 100% tariffs on French goods in retaliation for France's proposals to target US technology companies in the form of a digital tax.

“This sudden new belligerence from the US appears to have caught markets on the hop,” said Michael Hewson at CMC Markets.

“The big question now is whether the US really means what it says, or whether this will be just another occasion when the US talks tough, only to back away at the last minute. If history is any guide the Europeans are likely to find US crosshairs start to move increasingly their way, the closer to next year’s US election we get,” he added.

Asian markets are mixed as they play catch-up, with the Shangai Composite up 0.1% but most others in the red, such as a 0.6% decline for Japan’s Nikkei 225 and a 0.2% dip for Hong Kong’s Hang Seng. 

On the data front, later in the morning there will be the latest UK construction purchasing managers’ index report from IHS Markit, which is predicted to dip to 44.0 from October’s 44.2. A day earlier, the UK manufacturing PMI was not quite as bad as forecast.

Any beat would be rather a blue note as the numbers are mostly down to bleak forecasts, with both sectors hunched under the cloud of current economic and political uncertainty.

Among London’s company news, the curtain is being raised on a pair of updates from transatlantic-focused companies.

Although Cineworld Group plc (LON:CINE) may try and play it straight, critics cannot ignore a backdrop of plot twists that include mysterious short-sellers and whispers about our hero being taken private.

City chatter indicates the Anglo-American chain may be snatched away from the loving arms of the London Stock Exchange if its continues to slum it around five-year lows.

Analysts at Canccord Genuity suggested that the low share price “could be the catalyst” for chief executive Mooky Greidinger's family to wrestle the FTSE 250-listed business private. The shares are the most shorted in the City, with 18% of the stock out on loan as hedge funds bet on a further plunge.

The market is still not sure whether last year’s £2.7bn acquisition of American cinema chain Regal was a sensible move, while the update will reveal whether Hollywood blockbusters such as ‘Frozen II’ and the launch of ‘Star Wars IX: The Rise of Skywalker’ just before Christmas can help it reach its year-end target.

Consensus projections point to a 6% revenue dip year-on-year, with the US and UK down by 5% to 6%, while adjusted underlying earnings are seen remaining flat at US$1.1bn.

For those who want more of a kitchen sink drama, perhaps Ferguson PLC (LON:FERG) will provide a gripping tale with its quarterly round-up. 

Even more than Cineword, the plumbers’ merchant is overwhelming focused on the US these days but has faced a tricky time on both sides of the Atlantic, with a possible demerger on the cards too.

Former US boss, Kevin Murphy took over from long-time chief executive officer John Martin last month as the FTSE 100 group disconnects its low-margin UK segment, Wolseley.

But market watcher Richard Hunter at Interactive Investor said the planned demerger could “add further distractions and cost in what could be a challenging economic time in the company’s core US market over the next year”.

So, all eyes will be on progress in the US, which has not enjoyed the gushing growth that had been expected, with little growth in the past year, with some mixed economic data coming out of the world’s largest economy.

Significant announcements expected on Tuesday:

Finals: Gooch & Housego PLC (LON:GHH), Hyve Group PLC (LON:HYVE), Image Scan Holdings Plc (LON:IGE), Oxford Metrics PLC (LON:OMG),

Interims: Collagen Solutions PLC (LON:COS), Consort Medical PLC (LON:CSRT), Falanx Group Limited (LON:FLX), Ramsdens Holdings PLC (LON:RFX), Solid State PLC (LON:SOLI), Tekmar Group PLC (LON:TGP), Uls Technology PLC (LON:ULS)

Trading announcements: Ferguson PLC (LON:FERG), Cineworld Group plc (LON:CINE), Wizz Air Holdings PLC (LON:WIZZ)

Economic data: UK Construction PMI, US Auto sales

City headlines:

Financial Times

  • US proposes 100% tariffs on French goods over digital tax, with Trump administration targeting champagne and handbags on day of trade war escalation.
  • Utility investors prepare for fight over UK nationalisation after Labour pledges on water and telecoms trigger pre-emptive defensive moves and talks with lawyers.
  • Tory party wary of week of potential electoral danger as final leaders’ debate and Liberal Democrat performance cause worries but main fears centre around the visit from Donald Trump.

The Times

  • The consortium that has agreed a £2.6 billion takeover of Inmarsat has warned that it will abandon the deal if the High Court today allows a group of hedge funds to reopen negotiations.
  • Virgin Atlantic is set to remain in British hands after Sir Richard Branson abandoned plans to sell a significant stake in the airline to Air France-KLM.
  • Big-name stores are being urged to put opt-out buttons on their websites to stop customers using buy now, pay later schemes to get into unsustainable debt.
  • With its millennial pink billboards, pop-up puppy grooming events for shoppers and “no interest, no fees” promise, the Swedish start-up bank Klarna is easy to underestimate.
  • People who invested in businesses via failed peer-to-peer platform Lendy have discovered their money was not ring-fenced as promised, raising new questions for the City regulator.

Guardian

  • Forecasts that Black Friday would leave shopping centres deserted as consumers shopped online or boycotted fake bargains have been confounded by figures revealing a sharp rise in sales.
  • Tesco, Sainsbury’s, Asda and the UK’s largest asset manager are among 67 major companies and investors who have written to Brazil’s far-right president, Jair Bolsonaro, urging his government to stop further deforestation of the Amazon for soy production.
  • Bosses at TSB will have their bonuses docked for failing to meet gender balance targets intended to raise the number of women in senior roles by 2020.
  • Christine Lagarde has said the European Central Bank should do more to help tackle the climate emergency, as she came under pressure from MEPs to step up action against global heating.
  • Volkswagen has employed a range of “progressively more innovative” arguments to claim the software fitted to millions of its vehicles is not a defeat device designed to cheat emissions tests, the high court has heard.

Telegraph

  • The Trump administration has threatened to slap 100pc tariffs on up to $2.4bn (£1.9bn) of French goods in retaliation to the country’s digital tax against US tech companies, with a target as soon as mid-January focused on handbags, porcelain, yoghurt and other products.  
  • Housebuilder Bovis has been stung by a major shareholder revolt over plans to hike its bosses' bonuses, with a rebellion by more than 30pc of shareholders over the proposal at its annual meeting.

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