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FTSE 100 ends higher on day Brexit negotiations begin

The FTSE 100 closed 60 points up at 7,523 as the government begins Brexit negotiations.
David Davis will fight Britain's corner

FTSE 100 ended Monday 60 points higher at 7,523 as the first day of Brexit negotiations got underway and US stocks soared.

That was on the back of the tech rebound as traders bought into the shares, which have been heavily sold off in recent days.

The Dow Jones is up 106 at the time of writing to a new record high, as is the S&P 500, which gained over  16 points.

European shares are also doing well after President Macron took the majority of the seats in the French assembly, buoying confidence he can push through his economic reforms.

David Madden, analyst at CMC Markets, said that the Brexit talks had appeared to start off on the right foot.

"The process of extracting the UK from the EU, will certainly be time consuming, so investors aren’t waiting for some fast agreement, but as the process is staggered, they will be paying close attention at every turn," he said.

Sterling is down 0.22% against the US dollar as the pound continues to get pummelled by the political and economic uncertainty in the UK, along with higher inflation and low interest rates.

3.49pm: FTSE rises, pound falls as traders await outcome of Brexit talks

The FTSE 100 rose 62 points to 7,525.60 as investors awaited the outcome of the first day of Brexit talks.

Brexit Secretary David Davis and the EU’s chief negotiator Michel Barnier held their first meeting on the UK’s exit from the bloc and are due to give a statement later.

However, the two are reportedly unlikely to make much progress on the talks given that the government is said to be uncertain on the direction they should take Brexit following pressure to take a softer stance after the Conservatives shock general election losses. Theresa May is also yet to confirm a deal between the Tories and the DUP to form a government.

The pound rose as the Brexit talks began early in the session but reversed the gains after Fed policymaker William Dudley suggested the central bank was on track for further interest rate rises, citing a strong labour market.

The pound fell 0.15% versus the dollar at US$1.2764.

The appointment of Silvana Tenreyro to the Bank of England also weighed on sterling, according to Connor Campbell, financial analyst at Spreadex.

“The currency had initially seemed pleased that Brexit negotiations had started on time, despite the recent political uncertainty threatening the start date,” he said.

“However, the appointment of Silvana Tenreyro to the Bank of England took the edge off of its gains, largely because the new Monetary Policy Committee member likely won’t be as hawkish – at least not to begin with – as the outgoing Kristen Forbes (who, remember, has voted for a rate hike for 2 months in a row).”

In corporate news, G4S jumped as the security group re-joined the FTSE 100 following its demotion to the FTSE 250 in December 2015 after a series of scandals, including its handling of a contract for the 2012 London Olympics.

Sainsbury’s rallied on news the supermarket is in talks to buy convenience store operator Nisa.

The group was also buoyed by a sector-wide rally following a slump at the end of last week following news of Amazon's US$13.7bn deal to buy Whole Foods Market. Marks & Spencer also gained.

Ocado surged on reports that it may be a potential takeover target after Amazon agreed to buy Whole Foods.

InterContinental Hotels shares declined following a downgrade by Credit Suisse to 'neutral' from 'outperform'.

Housebuilders and property stocks, British Land, Hammerson and Land Securities dropped as data from Rightmove revealed that asking prices for houses in the UK fell in June at the sharpest rate in over four years. 


2.53pm: US stocks rise, led by rally in tech stocks

The Dow Jones Industrial Average has reached a record high, rising 70 points to 21,454 on the back of a rally in technology shares.

The Nasdaq and the S&P 500 are also higher, up 58 points to 6,210 and 11 points to 2,444, respectively.

Amazon led technology stocks higher with its shares increasing 1.33% to US$1,000.96 following last week’s announcement that it had agreed to buy Whole Foods. Apple jumped 1.57% to US$144.55 each. 


2.20pm: Pound reverses gains against dollar after hawkish remarks from Fed's Dudley

The pound has reversed earlier gains against the dollar, falling 0.16% to US$1.2763.

The greenback was strengthened by comments from New York Federal Reserve President William Dudley who suggested the central bank remains on track to raise US interest rates further.

Dudley welcomed the Fed’s recent rate increases, adding that he expects wage growth to accelerate and the labour market to tighten.

The Fed last week raised interest rates by 25 basis points following an improvement in the labour market.


1.27pm: Bank of England appoints new MPC member to replace Kristin Forbes

The Bank of England has appointed Silvana Tenreyro, an economics professor at the London School of Economics, to the Monetary Policy Committee. She will join as an external member and will replace US economist Kristin Forbes, who departs on 30 June.

The news comes after the central bank voted five by three to keep interest rates unchanged at 0.25% and cap its quantitative easing programme at £435bn despite inflation far exceeding its 2% target.





12.23pm: Whole Foods acquisition to boost Amazon's revenue, says Wedbush analysts Inc. (NASDAQ:AMZN) is expected to increase spending to drive growth of online ordering and delivery of groceries following its deal to buy Whole Foods Market Inc. (NASDAQ:WFM) for US$13.7bn, according to analysts at Wedbush Securities.

The analysts said they see the acquisition giving Amazon’s revenue a boost but only a slight lift to earnings per share due to further spending. 

“We expect incremental top-line growth to be largely absorbed by increased spending as Amazon augments its grocery delivery capabilities,” they said.

However, Amazon has plans to cut costs by culling jobs at Whole Foods, Bloomberg has reported. The e-commerce group is said to be considering replacing Whole Foods cashiers with technology.

Meanwhile, Wedbush also expects Amazon will use the grocery stores of Whole Foods as distribution centres. Following the acquisition, the number of Amazon's refrigerated US locations grows by 440 Whole Foods Market stores from an estimated 20 fulfillment centres.

“As a result, Amazon is positioned to quickly expand its Amazon Fresh offering, through which Amazon Prime subscribers pay an additional US$14.99 per month for grocery delivery,” Wedbush said.

“Amazon may eventually offer expedited grocery delivery, potentially in an hour or less, to the vast majority of the US population once it has built up its delivery network.

Wedbush added that Amazon Fresh customers may no longer have to make delivery reservations days or weeks in advance and see Whole Food stores as ideal outlets for popular Amazon products such as Echo, Fire TV, and Kindle “given the favorable demographics of the customer base”.

The analysts gave Amazon an 'outperform' rating and a target price of US$1,250. Shares in Amazon rose 0.94% to US$997.0 in US pre-market trading. 



11.52am: FTSE and pound gain with Sainsbury's a top riser

The FTSE 100 is up 0.59% to 7,507.82 points even as the pound strengthened against the dollar in anticipation of Brexit negotiations.

Sterling rose 0.07% versus the dollar at US$1.2792. 

“Although much will be discussed in the talks ranging from the status of expats, the UK’s mammoth divorce bill, and Northern Ireland’s borders, investors may be more interested in the tone and stance of the European negotiators,” said FXTM research analyst Lukman Otunuga.

Otunuga added: “With political instability in Westminster placing the UK in a vulnerable position and Conservatives in a weaker position following the election, the outcome of the Brexit talks may heavily depend on what Europe wants. Although the prospect of a soft Brexit has the ability to support Sterling, I feel the currency remains vulnerable to further downside amid the confusion and ongoing uncertainty that Brexit presents.”

In company news, J Sainsbury plc’s (LON:SBRY) shares rose on news of a potential takeover of convenience store operator Nisa.

Ocado Group plc (LON:OCDO) was also on the front food amid reports that the online grocery delivery group could be a takeover target after Amazon agreed to buy Whole Foods.

Outsourcer Capita plc (LON:CPI) shares jumped after Jefferies upgraded its rating on the stock to 'buy' from 'hold'.

Cairn Energy PLC (LON:CNE) slumped after saying it was seeking US$1bn in damages from Vedanta to claw back US$104mln of dividends owed by Vedanta Ltd, the company founded and chaired by the Indian entrepreneur Anil Agarwal. Cairn is taking its fight to The Hague, in the Netherlands, where final hearings for the tribunal are scheduled for January.


10.58am: Sainsbury rallies on prospect of Nisa deal 

J Sainsbury plc (LON:SBRY) shares are up 2.2% to 257.90p on news that it is poised to sign an exclusivity agreement with corner shop group Nisa.

The deal will temporarily bar Nisa from courting other buyers. Nisa buys and distributes on behalf of more than 2,500 independently owned stores around the UK and has a turnover of £1.43bn.

It has been working with bankers at Lazard on a potential sale since Tesco unveiled plans to buy its rival Booker and has in recent days narrowed its list of buyers to Sainsbury and the Co-operative Group.

In contrast, Sky plc (LON:SKY) is under the cosh ahead of Ofcom’s ruling on 21 Century Fox’s proposed takeover of the broadcaster.

Ofcom has been investigating whether Rupert Murdoch’s Fox would be a “fit and proper” owner  of Sky and is expected to announced the outcome of the review this week.

Fox agreed an £11.7bn deal to buy the 61% of Sky it does not already own in December. Shares fell 0.57% to 959.50p in morning trading. 


09.55am: Pound gains verus dollar

The pound has strengthened against the dollar as Brexit talks begin today in Brussels with a question mark hanging over whether the government will seek out ‘soft’ or ‘hard’ deal.

Sterling rose 0.16% to US$1.2804. 

Subjects for the negotiations include the status of expats, the UK's divorce bill and the Northern Ireland border. The talks are due to begin at 10.00am. 

Neil Wilson, senior market analyst at ETX Capital, said: “The big question is what alimony is due, who gets to keep the house and car, and where the kids should live. It’s not you it’s me, Britain is saying.

“The EU will take its perfidious partner back any time, although with stricter rules. The trust is gone. Some think it’s better off without an unreliable spouse anyway.

“So it’s in this acrimonious environment that the process begins and that is going to make it tough going for investors looking for clues about whether we get a soft or hard Brexit, something that is between the two, or no Brexit. It would be easier for Britain if it knew what it wanted in the first place.”


08.53am:London stocks gain ahead of Brexit talks

London stocks rose at the open, tracking gains in Europe following Emmanuel Macro’s victory in France’s parliamentary elections.

The FTSE 100 rose 0.67% to 7,514.03 points in early trading.

Macron's centrist Republic on the Move (LREM) party and its centre-right Modem ally won 350 seats out of 577 in the lower house. Markets showed relief that the large majority will mean Macron won’t face a deadlocked parliament.

"The positive opening comes as traders welcome another Macron victory in France, this time in Parliamentary elections, which give hope to him passing reforms that can help both the French economy and thus Europe,” said Mike van Dulken of Accendo Markets.

Meanwhile, the pound is broadly flat against the dollar as Brexit negotiations are set to kick off today.

The Conservatives go into the talks without having formed a government after failing to secure a majority in the general election.

Theresa May is yet to confirm an agreement between her Conservatives and the Democratic Unionist Party.

On the company front, shares in Sky plc (LON:SKY) fell ahead of Ofcom’s ruling on 21st Century Fox’s proposed takeover of the broadcaster. 


Proactive news headlines…

88 Energy Ltd (LON:88E) told investors it has successfully completed the first of two planned stages of fracking in the Icewine-2 appraisal well in Alaska, where the company plans to conduct production tests in the coming weeks. In a statement, the company said the Stage 1 stimulation operation into the lower zone in the HRZ shale was a success; it was executed over the weekend as planned and all proppant was placed in the reservoir.

Atlantis Resources PLC (LON:ARL) has started negotiations over the site for the Wyre Valley tidal barrage project on the Lancashire Coast. The tidal wave group has partnered with Natural Energy Wire for a tidal power scheme with 160 Mw of generating capacity to be located on land owned by The Duchy of Lancaster. The negotiations concern a long term lease for the site. The river Wyre’s estuary has one of the highest tidal ranges in the UK.  It is also tidal for 23km and being relatively narrow seen as ideally suited to extracting power from the tidal flow.

The American regulator has approved a cryopreserved formulation of ReNeuron Group Plc’s (LON:RENE) cell therapy for degenerative diseases of the retina. The US Food & Drug Administration (FDA) green light means its human retinal progenitor cells (hRPC) can be frozen for shipping and storage and thawed at the point of use. 

Sareum Holdings Plc (LON:SAR) is to highlight its research pipeline at the 6th annual International Cancer Cluster Showcase at the San Diego Convention Center. Tim Mitchell, chief executive, will be showcasing Sareum as one of three companies from the UK "Golden Triangle" biotechnology cluster (London, Oxford and Cambridge).

Xtract Resources PLC (LON:XTR) has signed an agreement with two contract miners in Mozambique for the extraction of alluvial gold from the western half of its Manica mining concession near the border with Zimbabwe. The agreement allows for monthly payments against the monthly run-of-mine performance, with initial mining to take place no later than 1 September 2017, subject to environmental controls.

Work undertaken by African Mining Consultants on the Misisi gold project in the Democratic Republic of Congo has confirmed an interim inferred mineral resource of just over 1 mln ounces of gold at an average grade of 2.27 grams per tonne gold. Misisi is owned by Casa Mining Limited, a private vehicle, in turn approximately 45%-owned by Ortac Resources Limited (LON:OTC), assuming the conversion of a loan note.

Europa Oil & Gas (Holdings) Plc (LON:EOG) told investors it has secured an extension for Frontier Exploration Licences (FEL) 2/13 and 3/13, as well as the conversion of Licence Option 16/2 into a FEL. The first exploration phase will now run to July 2019, allowing the company more time to mature the exploration inventories for the assets.

Mosman Oil And Gas Limited (LON:MSMN) has raised £600,000 though a share placing as it continues efforts to find secure new opportunities. The injection of capital is also expected to support the group following its recent acquisition of interests in two producing oil properties in the United States.


06.53am: FTSE 100 set to open higher

The FTSE 100 looks set to kick off the trading week firmly in positive territory as Britain prepares for the start of Brexit negotiations.

The index of blue chip shares will open 55 points to the good at 7,518.54, according to the spread betting firms, with traders taking their cue from buoyant Asian markets overnight.

Sentiment during the day will no doubt be shaped by the mood music from Brussels where the UK’s Brexit secretary, David Davis, sits for the first time across the negotiating table from Michel Barnier, who is in charge of the EU delegation.

Subjects under negotiation include the status of expats, the UK's ‘divorce bill’ and the Northern Ireland border.

Mosque attack

Back at home, the City will have one eye on the unfolding story at London’s Finsbury Mosque, where one person dead and ten injured after a van driver ploughed into Muslims leaving prayers in the early hours of Monday.

It looks set to be a quiet week for corporate news with updates from the building supplies giant Wolseley (LON:WOS) on Tuesday and housing group Berkeley (LON:BKG) on Wednesday the most noteworthy scheduled releases.

  • Pound worth US$1.2789.
  • Brent crude down 15 cents at US$47.22 a barrel.
  • Gold is off US$2.20 per ounce at US$1,254.30.

Business Headlines

  • Theresa May has been urged to keep trade as free as possible to promote economic growth in the decades to come, as she enters Brexit negotiations on Monday – Telegraph.
  • Saudi Arabia is seeking to present investors with a pristine set of financials for its state energy giant as the kingdom targets a US$2 trillion valuation ahead of its planned initial public offering in 2018 – FT.
  • Big banks in the US are forecast to step up pay-outs to shareholders, as they clear the latest round of tests designed to ensure they could withstand a catastrophic shock to the system – FT.
  • Price comparison websites across Europe are preparing to file for damages against Google in the expectation that European Union antitrust regulators will slap a hefty fine on the internet company over its shopping service – Times.
  • Co-op Bank could announce a deal this week that would lead to the struggling lender’s hedge fund owners and the Co-op Group agreeing a £700 million bailout package, averting a wind down that would leave millions of customers and thousands of pensioners facing uncertainty – Times.
  • London-focused Berkeley Homes is on track to report soaring profits in its full-year results this week despite a slowing market in the capital – Telegraph.
  • Jangada Mines, the Brazilian mining project that claims to be one of the “best undeveloped platinum projects in the western hemisphere”, is to raise £2mln by listing on London’s junior AIM market – Telegraph.
  • Barclays and a number of its former executives are expected to learn this week whether the Serious Fraud Office intends to bring criminal charges in relation to emergency fundraising at the height of the financial crisis – Guardian.
  • ITV’s hunt for a chief executive has narrowed to a shortlist that includes a senior Sky executive, the boss of an insurance group and the head of a Scottish broadcaster – Guardian.

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