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FTSE 100 ends higher before Fed rate decision

Last updated: 17:32 15 Mar 2017 GMT, First published: 06:28 15 Mar 2017 GMT

traders
  • FTSE edges higher before Fed rate decision

  • Pound rises 0.52% against the dollar, to $1.2219

  • Sterling up 0.3% against the single European currency to 1.1491 euros

 

FTSE 100 shares ended higher on Wednesday, thanks to buoyancy in the pharma and mining sectors while a US rate card was considered in the bag, priced and sold on the market.

However, the market was now anxious to know what hints the US central bank would provide about future rate hikes, their timing and regularity.

The benchmark FTSE 100 closed up 0.2% at 7,368, helped by strong gains for mining shares.

The biggest winner on the FTSE 100 was pharmaceuticals firm Hikma (LON:HIK), which rose 8% to 2297p after reporting stronger than expected annual results.

In second place was Glencore (LON:GLEN), leading miners higher as it added 2.9% to 325.1p.

Conversely, house builders were among the losers, with Persimmon (LON:PSN) down 1.1% to 2073p and Taylor Wimpey (LON:TW.) falling 0.6% to 190.1p.

Analysts said that a warning from the Royal Institution of Chartered Surveyors (RICS), was weighing on building shares.

RICS said the UK construction industry could lose almost 200,000 workers from the European Union after Brexit.

The mid-cap FTSE 250 had a less stellar day but still ended up 0.07% at 18,963 and led by Marshalls Plc (LON:MSLH) up 9.7% to 348.1p after the specialist landscape products group Marshalls reported a 31% jump in full-year profit on Wednesday thanks to an improvement in operating margins.

The FTSE AIM 100 Index ended up 0.2% to 4476 and the FTSE AIM All-Share Index up 0.2% to 919.

London gainers and losers were evenly mated at 36%.

 

1515 GMT - FTSE 100 enjoys a day in the sun; all eyes to the Fed

  • FTSE 100 up 19 points to 7,377

  • Chancellor backs down on national insurance increases

  • Hikma Pharma the top riser among the blue chips

  • Yellen set to deliver speech around 6pm UK time

 

It’s been a glorious day here in London (well, as glorious as any March day can be) and it’s been a fairly bright day for the FTSE 100 as well.

The blue chip index got off to a quick start and has consolidated its position ever since. It currently sits at 7,377 – 19 points up on yesterday’s close.

After the sprightly open, labour market figures threatened to derail progress although the Footsie quickly bounced back.

Figures from the Office for National Statistics showed employee earnings rose 2.2% in the three months to January, less than the 2.4% forecast and below the 2.6% in the previous quarter.

The flip side to the announcement was that unemployment hasn’t been lower since 1975.

The pound didn’t take the news in its stride quite so well. Like the FTSE 100, sterling got a flier to recapture most of yesterday’s losses against the dollar and euro.

It’s still up on both currencies, to €1.148 and US$ 1.22, so all-in-all it’s been a better-than-expected day for the pound.

The issue of Scottish independence weighed on the currency yesterday, but a YouGov poll which suggested most Scots still favour being in the United Kingdom seems to have lifted some of the pressure.

In terms of market movers, it’s been a fairly quiet day as traders sit on their hands and wait for Fed chair Janet Yellen to deliver her speech later on.

Hikma Pharmaceuticals PLC (LON:HIK) was the day’s top riser among the blue chips, up 8% after solid results and a decent outlook.

Glencore PLC (LON:GLEN) (up 2.5% to 324p) was buoyed by a bullish note from heavyweight bank Goldman Sachs, while fellow miner Antofagasta PLC (LON:ANTO) (up 2.2% to 806p) also climbed throughout the day.

In the small caps, it was a weird day for Infinity Energy (LON:INFT) which almost tripled. Quite why, no one is sure, including the company itself.

It came out and said it had “very limited cash resources” and is still reliant on the financial support of its major shareholder. Whatever the reason was, shares gained more than 190% to 0.22p.

Heavy rain has hampered Metals Exploration Plc (LON:MTL) plans to get its Runruno gold mine in the Philippines up to full speed.

Progress has been slower expected due to incessant rainfall and other factors that have restricted the effective mining of waste materials.

Shares in the company, which is controlled by property developer siblings the Candy brothers, dropped 14% to 40.

The Chancellor has been in the headlines after he had something of a shocker as he backtracked on last week’s plans to hike national insurance contributions for the slef-employed.

He said that a “clear view” had emerged among colleagues and the public that rasing contributions wasn’t the best thing to do.

It also might’ve had something to do with the fact that, had it gone ahead, the proposal would’ve broken a key Tory pledge ahead of 2015’s general election.

All eyes now turn to the Fed which is scheduled to release its latest policy statement at around 6pm UK time this evening.

It is almost universally expected that the Fed’s chair, Janet Yellen, will raise US interest rates for only the third time since the financial crisis.

A recent poll by US broadcaster CNBC ahead of today’s announcement showed that 100% of the analysts surveyed are expecting a rate rise this month, with 70% forecasting that the Fed will hike rates again in June.

Although most analysts, up until a week or two ago, were expecting three rate hikes this year, a fourth one definitely isn’t out of question.

 

1.15pm...FTSE 100 holds onto gains; Glencore buoyed by Goldman upgrade

After a strong start, the FTSE 100 has managed to hold on to its earlier gains so far this afternoon.

The blue chip index was up 14 points to 7,372 shortly after 1pm.

Hikma Pharmaceuticals PLC (LON:HIK)was still leading the way among the big boys, up 7% to £22.77 after impressing investors with its full-year results and outlook for 2017.

Glencore PLC (LON:GLEN) has been the other standout performer so far today. The miner is up 2.5% to 323.5p after Goldman Sachs upgraded its recommendation to ‘buy’.

In a note to clients, Goldman said the “sentiment towards commodities and mining has turned negative” adding that although it expects prices to ease in the coming months and years, there is still a lot of upside for miners.

“If prices taper slowly (which is our view) the significant free cash flow generation would likely see net debt fall – which means valuations even at lower commodity prices can be higher,” said analyst Eugene King.

King said he was upgrading Glencore in particular because of its exposure to copper and zinc, “two commodities where we see upside”.

In the small caps, Active Energy Group PLC (LON:AEG) jumped 13% higher to 2.8p after it raised £11.57mln via the issue of five-year convertible loan note to existing and new investors.

The cash will be used to accelerate the development of the company’s CoalSwitch technology.

AEG said it plans to build the first commercial-scale plant that will burn the revolutionary biomass product that can be burned by old, coal-fired generation facilities without the need for a retrofit.

Away from companies, the big news this afternoon has come courtesy of the Chancellor who has backed down on plans to hike national insurance contributions (NICs) for the self-employed.

Philip Hammond had announced the proposals in last week’s Budget that, if they’d have gone ahead, would’ve broken  a 2015 manifesto pledge to not increases taxes, national insurance or VAT.

In a letter to his fellow Tory MPs, Spreadsheet Phil said: “In the light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measure set out in the Budget.”

Given that the measure was slated to raise about £2bn for the government to fund spending in other areas, it does beg the question ‘where will that money no come from?’

It also means that those who thought they would be getting a tax hike next April, will actually be getting a tax cut…

Forex has been high on the agenda for a lot of investors and traders this week, given the tumbling pound and the possibility of a US interest rate rise later on today.

Although the prospect of a raise across pond will likely weaken the pound, there could be some good news for the blue chips on the FTSE 100.

Many of the multi-nationals on the index generate revenues in dollars but report in pounds, meaning that a stronger dollar would result in higher reported earnings.

"There is the clear advantage for UK firms with heavy US exposure – Ashtead for example,” said ETX Capital analyst Neil Wilson.

"We also have banks and insurers – like Prudential – who are likely to benefit from rising global interest rates.”

On top of that, Donald Trump is set to outline his budget plans tomorrow which could provide a boost for the pharma and defence sectors, Wilson 

 

10.15am...FTSE 100 follows sterling higher

The FTSE 100 continued its rally from yesterday afternoon into this morning, where it has been in the black from the get-go.

The blue chip index is currently 18 points up on yesterday’s close at 7,376.

 Hikma Pharmaceuticals was the main mover on the index, dragging the FTSE 100 higher after surging 8% to a near seven month high of £22.93.

The group saw core operating profits rise by 2.4% in 2016 while investors also cheered the outlook for Hikma’s generics divisions – the main drag last year – which should be back on track in 2017.

Glencore PLC (LON:GLEN) was another of those boosting the FTSE. The mining giant opened 2.5% higher after banking heavyweight Goldman Sachs upgraded its recommendation for the stock to a ‘buy’ from ‘neutral.

Goldman also upped its price target to 390p, citing a favourable exposure to zinc, the price of which the bank thinks will rise in the coming year.

Sterling also clawed back some of yesterday’s after making a strong start to the morning. It was back up to €1.15 and US$ 1.22 against the euro and dollar respectively, but slowing wage growth in the UK weighed on the pound which is now slightly below those levels.

This morning’s rise seems to have come from a weaker dollar as well as a poll showing that the majority of Scots still favour remaining in the United Kingdom.

Elsewhere, the treasury announced this morning that it has cut its stake in Lloyds Banking Group PLC (LON:LLOY) to below 3%, with the finishing line now in sight for the UK taxpayer.

The government has now recovered £19.5bn of the £20.3bn it spent to bail the bank out and with the remaining stake worth about £1.5bn, taxpayers are set to make a small profit on the investment.

As often criticised public figures who are both billionaires, Mike Ashley and Donald Trump share an unlikely bond.

That bond seems to have deepened today after Ashley’s sport s retailer Sports Direct International PLC (LON:SPD) accused a shareholder lobby group of spreading “fake news”; a phrase often used by The Donald.

Sports Direct said a report by Pensions and Investment Research Consultants, or PIRC as it’s otherwise known, “incorrectly claims that Sports Direct had a chief executive-to-average employee ratio of 400:1, the second highest in the FTSE 350”.

The company said the true ratio was nearer to 9:1, while adding that Ashley, the current chief executive, “does not draw a salary, and never has”.

 

9am...FTSE 100 makes sprightly start; Hikma stars

The FTSE 100 got off to a reasonably sprightly start ahead of the US Federal Reserve interest rate decision, which looks like a foregone conclusion.

The index of blue-chip shares added 21 points to 7,379.08, led higher by the rejuvenated miners.

The stand-out individual performer was a druggie rather than a digger - Hikma Pharmaceuticals (LON:HIK), whose shares advanced 7.5% after the publication of a better than expected set of prelims.

Prudential (LON:PRU) enjoyed a second day in the sun as the brokers continued to upgrade earnings forecasts after its full-year results on Tuesday.

Delving down into the second-tier, it was all about oil services. Betrothed Wood Group (LON:WG) and Amec Foster Wheeler (LON:AMFW) were up 3% each as the City gave the thumbs up to their planned nuptials.

Meanwhile, smaller rivals Hunting (LON:HTG) and Petrofac (LON:PFC) were in demand as analysts and investors began to see the merits of wholesale consolidation in a sector that has struggled for the past two years.

Sticking with oil (production rather than services), the stand-out performer among the small-caps early on was Magnolia Petroleum (LON:MAGP) thanks to a boost to its reserves, a story covered in depth earlier by Proactive.

 

Proactive news headlines

Savannah Petroleum PLC (LON:SAVP) has signed up a drill contractor for a new programme of up to 9 wells, starting in the first half of this year. Shares climbed 15% to 33.8p.

Active Energy Group PLC (LON:AEG) has raised £11.57mln via the issue of five-year convertible loan note to existing and new investors, with the cash set to be used to accelerate the development of the company’s CoalSwitch technology. 

AEG said it plans to build the first commercial-scale plant that will burn the revolutionary biomass product that can be burned by old, coal-fired generation facilities without the need for a retrofit. Shares rose 13% to 2.8p.

Magnolia Petroleum PLC (LON:MAGP) gushed higher on a doubling of reserves across its US onshore projects.

New wells coming on stream boosted proved reserves by 112% to 283,000 barrels, while gas reserves rose more than 300% to 2.3bn cubic feet.

Combined, the new reserves are worth more than US$4mln, compared to a market value of £2.5mln (US$3mln) even after a 45% rise this morning to 0.137p.

Clinigen PLC (LON:CLIN) increased underlying interims profits by 34%, helped by an 'outstanding' performance from acquisition Link Healthcare.

Haydale Graphene Industries PLC’s (LON:HAYD) US arm AMC has won a US$2.6mln contract for coatings for advanced cutting tools used to make jet engine and wind turbine blades. Shares rose 6% to175p.

Learning Technologies Group PLC (LON:LTG) said its offer for NetDimensions has been declared unconditional.

StatPro Group PLC (LON:SOG) said 2016 was a pivotal year for the group, as it increased revenue by 24% to £37.6mln and adjusted underlying earnings (EBITDA) by 26% to £5.1mln. Shares rose 2% to 89p.

Scotgold Resources Limited (LON:SGZ) has told investors that an update to the bankable feasibility study at its Cononish gold mine has added “significant value” to the project.

Sound Energy PLC (LON:SOU) has confirmed it has observed gas shows whilst drilling in the TE-8 well's target reservoir - drilling operations continue and further details will follow its completion.

Magnolia Petroleum PLC (LON:MAGP) has revealed a significant rise in reserves, as part of its period reassessment (tied to the redetermination of its debt facility) and it has in turn increased its borrowing headroom. The reserves assessment was carried out as part of a six-monthly redetermination of Magnolia’s bank debt, and under the process the company has unlocked further headroom with US$2.21mln up from US$1.89mln.

Berkeley Energia PLC (LON:BKY), which is developing the Salamanca uranium mine in Spain, reported “strong interest” from financiers and looking to get involved in the project.

6.45am … Fed watch key …

The Footsie is expected to rally modestly this morning after falls yesterday, despite weakness in US and Asian markets, with all eyes directed towards the latest Federal Reserve policy meeting although no decision on US rates will be released until after London's close.

Spread betting firm London Capital Group expects the FTSE 100 index to open around 12 points higher at 7,369, having shed 9 points yesterday.

Following recent hints from Fed policymakers - most especially chair Janet Yellen - and after a stronger than expected US jobs report at the end of last week, markets are braced for a 25 point US interest rate rise, the first of this year, following on from the two moves made at the end of 2016 and 2015.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: “The Federal Reserve (Fed) is expected to announce 25 basis points increase in interest rates today. While the Fed has little chance to hold fire, the major focus is on whether it will be a hawkish or a dovish hike. “

She added: “At the beginning of the year, the Fed was expected to proceed with three rate hikes in 2017. A hawkish stance would shift the expectations toward four rate hikes instead. In fact, depending on how the fiscal policy evolves, the Fed could hike rates up to 100 basis points to cool down an eventual overheating in the economy.”

UK interest rate thoughts will also be at the back of investors’ minds ahead of Thursday’s Bank of England policy meeting, with unemployment and average earnings data, due for release today, expected to show the continued resilience of Britain’s economy in the face of Brexit vote worries.

However, given Brexit uncertainties, few commentators expect the BoE to consider hiking UK interest rates this year, or even next year.

It is also Election Day in the Netherlands, with results due on Thursday. Although the far-right PVV party should be one of the biggest winners, its leader Geert Wilders is unlikely to find allies to form a coalition, but that will just add to market uncertainty.

On the corporate front, generics drugmaker Hikma Pharmaceuticals PLC (LON:HIK) will be the only FTSE 100-listed firm to report results on Wednesday.

The market is expecting Hikma to report 2016 adjusted pretax profit of around US$300mln on sales of around US$1.9bn.

In a preview of Hikma’s numbers, Graham Spooner, investment research analysts at The Share Centre said: “In the last trading update it reduced its guidance for the Generics business for 2016 but kept a positive outlook for 2017.

“Investors will therefore be keen for an update here and a guidance of what drug launches are likely to be made. It also reported difficulties due to the weakness of the Egyptian pound.”

Significant announcements expected on Wednesday:

Finals: Fusionex International (LON:FXI), Gem Diamonds Ltd (LON:GEMD), Hikma Pharmaceuticals PLC (LON:HIK) Marshalls PLC (LON:MSLH), Robert Walters PLC (LON:RWA), StatPro Group PLC, Brooks Macdonald Group plc (LON:BRK)

Interims: Clinigen Group (LON:CLIN) , Forterra PLC (LON:FORT) , Thinksmart Ltd (LON:TSL)

Around the markets:

  • Sterling: US$1.2156, down 0.03%
  • Gold: US$1,210.90 an ounce, unchanged
  • Brent crude: US$48.51 a barrel, up 1.66%

City Headlines:

  • Mike Ashley goes shopping for Debenhams, takes stake above 11% - The Times
  • Pressure is on Unilever to meet investor expectations – Financial Times
  • Apple found guilty of price-fixing in Russia over iPhone prices – Financial Times
  • Three Mobile hack affected 76,000 more customers than thought – Daily Telegraph
  • Petrol price war sparked as Asda, Morrisons and Tesco cut fuel costs – The Independent
  • Yum agrees £300 million chicken takeaway – The Times
  • Canadian and Kuwaiti investors buy 26% stake in Thames Water – The Independent
  • Cobalt’s meteoric rise at risk from Congo’s Katanga – Financial Times
  • Saudis promise OPEC deal still stands despite rise in output – The Times
  • Brexit to put 200,000 U.K. construction jobs at risk – The Independent
  • Jobs at risk as Jones Bootmaker teeters on brink of administration – The Guardian
  • Secret US-UK trade talks for banking giants: Plan to ensure transatlantic partnership thrives after Brexit – Daily Mail

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