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FTSE 100 retreats as macro fears outweigh earnings news

Last updated: 17:15 05 Oct 2016 BST, First published: 16:59 05 Oct 2016 BST

Stock market bear

Despite a belting performance by Tesco PLC (LON:TSCO) today, the top-share index spurned the chance to hit an all-time high.

The FTSE 100 closed at 7,033, down 31 points.

Tesco sent short-sellers running for cover as it surged 9.8% to its highest level for two years on the back of a sparkling trading update.

“Few can argue with a 60% leap in gross operating profit, matching the most bullish market forecasts, despite steady-to-lower half-year revenues, but it’s also true that Britain’s biggest supermarkets have been under unprecedented short-selling pressure for around two years,” noted Ken Odeluga, a market analyst at spread betting firm City Index.

“Short positions in Tesco big enough to require regulatory disclosure (typically multi-million pound bets by hedge funds) are now lower than the dark days of 2014, but at 3.58% of outstanding shares, Tesco shorts are a persistent fly in its ointment,” Odeluga opined, adding that once the short-covering is over the shares could pull back.

Trading has not been so good for another retailer, Topps Tiles Plc (LON:TPT). The shares slipped 9.75p to 101.75p as the company said like-for-like sales growth in the final quarter of its financial year had been 1.4%, bringing down the growth rate for the whole year to around 4.2%.

In the small cap space, tech stocks were setting the pace.

RapidCloud International PLC (LON:RCI), the Asia-focused cloud computing services provider, was the top performer, rising 32% to 18.75p, though if the management knew of the reason for the rise it was keeping it to itself.

The management of sector peer NetDimensions (Holdings) Limited (LON:NETD), meanwhile, felt obliged to respond to the sharp rise in the share price by confirming it had received an unsolicited takeover approach.

The shares hit a 52-week high of 69.25p at one point, before pulling back to 59.1p, which was still a 29% gain on the day.

Jersey Oil & Gas PLC (LON:JOG) jogged 16% higher to 6.25p and the reasons for this rise were also a mystery until it emerged after trading finished that major shareholders David & Monique Newlands have acquired a 4.87% stake in the independent oil and gas company.

It will soon be the end of the line for Impact Holdings (UK) PLC, which is proposing to delist from Aim.

The shares dived 41% as the specialist lender said trading in its shares was so illiquid it was not worth the listing fees to remain a publicly quoted company.


2.00pm  -  FTSE 100 lower as ECB fears counter Tesco

London’s blue chip index languished in the red on speculation the European Central Bank might start to rein in its bond buying programme tomorrow.

The concerns outweighed a surge in the share price of Tesco where a whole army of short-sellers seemingly got burnt by a better than expected trading update.

Shares in the supermarket chain jumped by almost 13% but this was not enough to stop FTSE 100 easing 38 points to 7,036.

Tesco PLC (LON:TSCO) jumped to 213p after underlying sales figures that were far better than the market expected.

It coupled them with some serious self-help initiatives designed to improve the grocer’s finances, while winning back shoppers from the likes of Aldi and Lidl.

Tesco’s rivals also got a bump up. Wm Morrison (LON:MRW) rose 5p to 225.86p and Marks & Spencer (LON:MKS) by a similar percentage. Sainsbury’s (LON:SBRY) though was flat.

Shares regarded as yield-based stocks, such as utilities and property, were among the worst performers.

United Utilities (LON:UU.), for example, fell 3% to 964p as Bloomberg reported the €80bn bond buying programme being undertaken by the ECB might be reduced in scope.

At its last meeting, ECB president Mario Draghi had indicated an extension to the scheme had not been discussed.

BP (LON:BP.) was flat at 470.2p despite a bullish write-up from analysts at Barclays.

They reckons BP's portfolio is now "simpler" and operations "more efficient" across both the upstream and downstream businesses and at ‘overweight’ is the top pick among the oil majors.

Among the smaller companies, Premier African Minerals PLC (LON:PREM) rose 237% to 0.4p as Zimbabwe-based miner forecast profitability by end of year after assessing options at its RHA tungsten mine.

DP Poland PLC (LON:DPP) rose 14% to 55.5p as the Domino’s pizza franchise holder in Poland raised £3.2mln for expansion at a very modest discount to yesterday’s market price.

Insurance group Hastings Group Holdings PLC (LON:HSTG) was a notable faller as Goldman Sachs and its associates reduced their stake to 51% from 58% through a share sale at 216p. Shares dropped 7.7p to 220.8p.

NetDimensions (Holdings) Limited  (LON:NETD) surged 37% to 63p on a bid approach for the management software specialist. 


12.15pm  -  FTSE 100 lower despite Tesco surge. Other main movers.

FTSE 100 down 35 points to 7,039 even though Tesco adds more than 12% on better sales numbers.

Paddy Power up 3.3% to 143p is the other notable FTSE 100 riser. United Utilities (LON:UU.) down 26p to 969 props up the index alongside gold miner Randgold Resources (LON:RRS) down 155p to 7,175p.

On the FTSE 250, Centamin (LON:CEY), in contrast to fellow gold miner Randgold, is going well on a bullish production update. Shares rose 2% to 148.1p.

Intellectual property group IP Group (LON:IPO) leads the 250 fallers dipping 5% to 160p.

Elsewhere, Central Asia Metals Ltd (LON:CAML) up 6% to 191.2p. Copper production rises by 38% to a new quarterly record of 4,102 tonnes.

Premier African Minerals PLC (LON:PREM) up 30% to 0.42p. Zimbabwe-based miner expects profitability by end of year after assessing options at RHA tungsten mine.

DP Poland PLC (LON:DPP) up 11.4% to 54.2p. Domino’s pizza franchise holder in Poland raises £3.2mln for expansion at a very modest discount to market price.

Hastings PLC (LON:HSTG) down 4% to 219.1p. Goldman Sachs and a group of other owners sell 7% of the insurance company through a placing at a price of 216p.


11.00am - FTSE 100 still  down as attention turns to Friday's non-farms payrolls

Britain's blue chips were still trailing after Wall Street stocks lagged last night and attention turns to the job creation numbers stateside on Friday.

Investors are increasingly eyeing a possible rate rise at the end of the year stateside and non farm payrolls are expected to have increased in September, adding to this theory.

FTSE100 is down over 28 at 7,045 at the time of writing after almost closing at an all-time high on Tuesday. Randgold Resources (LON:RRS) is the biggest laggard - down 2.59% to 7,140p.


10.30am - Tesco adds £1.5bn but Footsie still falls 

Not even a major recovery by Tesco and good data from the UK’s all-important services sector could keep FTSE 100‘s head above water.

Having moved within sight of an all-time high yesterday, Footsie was 24 points lower at 7,049 despite the best efforts of the UK’s largest supermarket.

Tesco PLC (LON:TSCO) led the hit parade with a 10% rise to 208.3p after it posted underlying sales figures that were far better than the market expected.

It coupled them with some serious self-help initiatives designed to improve the grocer’s finances, while winning back shoppers from the likes of Aldi and Lidl.

Tesco’s rivals also got a bump up. W Morrison (LON:MRW) rose 3.2p to 223.8p and Sainsbury’s (LON:SBRY) and Marks & Spencer (LON:MKS) rose by similar percentages.

Britain’s service sector is also faring better than expected according to the latest survey from the influential CIPS/Markit pairing.

The Service Sector PMI came in 52.6 and though this was lower than August it was comfortably ahead of forecasts.

Any number above 50 indicates a sector is expanding and it confirms that the UK has recovered from its Brexit shock said CIPS/Markit.

 “Across the three sectors [Services, Construction and Manufacturing] the pace of economic growth signalled was the strongest since January, fuelling greater job creation as companies shrugged off short-term Brexit worries and enjoyed the benefits of a weaker currency,” so said Chris Williamson, chief economist  at market.

BP (LON:BP.) was flat at 468.8p despite a bullish write-up from analysts at Barclays.

They reckons BP's portfolio is now "simpler" and operations "more efficient" across both the upstream and downstream businesses and at ‘overweight’ is the top pick among the oil majors.

Among the smaller companies, Premier African Minerals PLC (LON:PREM) rose 27% to 0.42p as Zimbabwe-based miner forecast profitability by end of year after assessing options at its RHA tungsten mine.

DP Poland PLC (LON:DPP) rose 11% to 54p as the Domino’s pizza franchise holder in Poland raised £3.2mln for expansion at a very modest discount to yesterday’s market price.

Insurance group Hastings Group Holdings PLC (LON:HSTG) was a notable faller as Goldman Sachs and its associates reduced their stake to 51% from 58% through a share sale at 216p.


8.30am - Tesco is 'owning it'

As predicted, the FTSE 100 slid a little in the opening minutes of trade after a stellar Tuesday during which it flirted with and ultimately retreated from a new all-time high.

The index of blue-chip shares opened down 13.64 points at 7,060.7.

Tesco PLC (LON:TSCO) led the hit parade with a 9% rise early doors after it posted underlying sales figures that were far better than the market expected.

It coupled them with some serious self-help initiatives designed to improve the grocer’s finances, while winning back shoppers from the likes of Aldi and Lidl.

Laith Khalaf, senior analyst at the money manager Hargreaves Lansdown, was cautiously optimistic about the prospects for the food retailer, although there was also a note of caution on the pension deficit.

“The green shoots of recovery continue to sprout at Tesco, but the mammoth in the room is the pension deficit which has more than doubled in just six months, thanks largely to loose monetary policy pushing bond yields down to exceptionally low levels,” he said.


7.00am: Preview - minor retreat expected

After the flirtation yesterday with a new all-time, London’s blue chips are set for a more subdued opening today.

Financial spread bet firms see FTSE100 shedding around 20 points when trading gets started, compared to the 90 point gain seen Tuesday.

That close was well off the best of the day, when hopes that a low pound would help some of the big FTSE 100 constituents had seen it hit 7,120. The all-time high is 7,135.

US markets were also off the pace a little with the Dow Jones Industrial Average down 85 to 18,168 and falls also for the S&P 500 and Nasdaq.

Google launched a couple of new mobile phone handsets, branded the Pixel, to a mixed response.

Both feature the Google Assistant, which the spin doctors at Google claims has certain advantages over similar features on rivals phones, such as Siri on the iPhone.

Asian markets were largely flat.

Commodities

Crude oil (WTI): up US$0.46 to US$49.15

Gold: up US$5 to US$1,272

Pound: US$1.273 

Newspaper headlines

The government is to restart the sale of £16 billion of Bradford & Bingley mortgage loans, offering a further sign of renewed confidence in the economy, reports the Times

SVG Capital has agreed a deal to sell half of its assets to the private equity firms Pomona and Pantheon and wind itself down, in the latest twist in its race to block a hostile takeover by HarbourVest, writes the Telegraph.

A web site backed by property tycoon Nick Candy is scrambling to secure cash from Chinese investors after missing a deadline. Audioboom, which hosts podcasts listened to more than 50million times a month, was hoping to announce a £6.3million cash injection by the end of September, the Mail writes. 

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