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FTSE 100 ends lower as May makes offer for EU nationals

Last updated: 23:04 23 Jun 2017 BST, First published: 06:41 23 Jun 2017 BST

brexit

 

FTSE 100 closed Friday down around 15 points as oil staged a bit of a recovery and the pound firmed against the dollar.

Uncharacteristically after days of late, the FTSE 250 gained - adding over 26 points to close at 19,685, while its bigger brother finished at 7,424.

It comes as Prime Minister Theresa May continues talks in Brussels at an EU conference.

Media headlines now however seem to centre on whether she blocked then PM David Cameron from giving full rights to EU citizens living in the UK in the days after the Brexit vote on June 23 last year.

The topic of the UK's offer to EU citizens when the country 'brexits' is now very much in focus. May has made an offer, which is reportedly below the EU's expectations.

In stocks, independent broadcaster ITV (LON:ITV) was the biggest gainer on Footsie, adding 3.34% to 182.8p, while the biggest faller was Smurfitt Kappa Group (LON: SKG), down 2.48% to 2,359p.

ITV rose after broker heavyweight Morgan Stanley upgraded the stock to 'overweight' from 'equalweight'.

The pound gained 0.30% against the US dollar and was down 0.10% against the Euro.

4.12pm:  FTSE flat, pound hold gains

The FTSE 100 was flat at 7,438.68 points in late afternoon trading as oil prices edged higher and the pound held onto gains.

Oil prices rose after a monitoring committee made up of OPEC members and producers outside the group said they would stick to their deal to limit output.

The committee said compliance to the deal reached 106% in May, the highest since the deal was first clinched late last year.

Brent crude increased 0.63% to US$45.51 per barrel and West Texas Intermediate gained 0.60% to US$43.00 per barrel.

However, the recovery failed to inspire more of a rebound in energy stocks, with sharers in BP and Royal Dutch Shell still slightly lower.

Connor Campbell, financial analyst at Spreadex, said the commodity is “still in serious trouble”.

“At the start of the week Brent Crude was trading above $47 per barrel – god, go back 2 months and it was grazing $55 per barrel. Even if it has found a bottom there is little reason for investors to pour back into the oil sector.”

 

The pound has maintained its Brexit anniversary rally against the dollar, rising 0.44% to US$1.2738.

3.43pm: Snapchat defends SnapMap

Concerned parents are laying the smack down on Snapchat over an update to its mobile app that shows publicly posted images and videos on a searchable map.

SnapMap, which was launched on Wednesday, allows users to search for places, including schools, and view videos and pictures posted by children inside.  The app also lets people locate where their friends are on a map.

Parents expressed outrage after St Peter's Academy in Staffordshire warned parents that SnapMap lets people "locate exactly where you are, which building you are in and exact whereabouts within the building".

One parent called the app "dangerous" while another said she could not find the setting to disable it, the BBC reported.

Snap told the BBC that the location detection feature was designed to allow users find their friends to meet at places where they might get lost, such as a crowded festival.

 

 

3.21pm:  SFO ends probe into Bank of England's liquidity actions

The Serious Fraud Office has there was no evidence Bank of England broke the law during the financial crisis in closing its investigation into the central bank.

The probe centred on the actions the Bank took to prevent financial markets from seizing up. The Bank ran liquidity auctions between 2007 and 2007, giving UK banks access to capital.

The SFO investigated whether the BoE gave preference to certain financial institutions in the bidding process to the detriment of other firms.  

 

2.48pm: US manufacturing and services PMIs fall 

US manufacturing and services activity expansion slowed in June, according to preliminary data from Markit. 

The purchasing managers' index for manufacturing fell to a nine-month low of 52.1, compared to 52.7 in May and analysts' forecasts of 53.0. A level above 50 signals expansion in sector activity while a figure below that indicates a contraction. 

Services PMI fell to a three-month low of 53.0 from 53.6, missing estimates of 53.5.

The composite PMI measure, combining services and manfacturing, also reached a three month-low of 53.0 in June, down form 53.6 in May.

The dollar weakend against major currencies, falling 0.11% versus the yen, 0.24% versus the pound and 0.32% against the euro.

 

1.46pm: ECB calls for more powers over London's euro-clearing market

The European Central Bank has called for more legal powers over London’s lucrative euro-clearing market.

The central bank has asked to be handed a “significantly enhanced role” in the City’s financial sector, where about 98% of all euro-denominated derivatives are handled by UK-based clearing houses.

The ECB -- which estimates that €101bn of euro-denominated derivatives trading is cleared in the UK each day, accounting for more than 90% of the total --  wants more power to supervises clearing activities.

The monetary authority emerged from a legal battel with Britain over where clearing house should be based two years ago.

The European Commission has also called to be given the authority to move euro clearing away from London after Brexit.

 

 

12.31pm: UK public raises long-term inflation expectations 

The UK public has raised its long-term inflation expectations in the wake of mixed messages from the Bank of England on when to raise interest rates.

A Citi/YouGov survey showed that the public predicts inflation will average 3.1% in the long term, compared to 3.0% a month ago.

But forecasts for the year inched up just 0.005 percentage points to 2.62% despite inflation reaching 2.9% last month and economists expecting a further rise as a weaker pound following the Brexit pushed up import costs.

 

BoE Governor Mark Carney on Tuesday said interest rates should remain low due to weak wage growth and Brexit uncertainty, sending the pound lower. But he was slapped down by BoE’s chief economist, Andy Haldane, who suggested rates might need to rise later this year.

 

12.10pm: FTSE in the red as pound strengthens 

London stocks dropped in midday trading as the pound gained and as traders remained bearish on oil prices.

The FTSE 100 fell 48 points to 7,401.38 while the pound rose 0.45% versus the dollar to US$1.2739.

Brent crude increased 0.19% to US$45.31 per barrel and West Texas Intermediate edged up 0.18% to US$42.82 per year. However doubts that planned OPEC production cuts will address the global supply glut continued to weigh with energy shares on the back foot.

BP plc (LON:BP. shares dipped 0.69% to 453.55p, Royal Dutch Shell fell 0.70% to 2,051.0 and BHP Billiton slid 0.57% to 1,141.50p.

“The bearishness surrounding Brent crude, and the pound’s Brexit anniversary gains, kept the FTSE in the red this Friday,” said Connor Campbell,  financial analyst at Spreadex.

“Combine that with sterling-inspired losses in the banking and pharmaceutical sectors and the FTSE didn’t stand a chance, the UK index falling more than half a percent to dip under 7400.”

Pharmaceutical stocks Shire and AstraZeneca slumped with shares down 2.0% to 4,530.50p and 1.42% to 5,430p respectively.

Genedrive pc (LON:GDR) fell 3.58% to 40.98p even as the UK medtech company said it was poised to become the first company to launch a decentralized Hepatitis C diagnostic.

On the upside, ITV jumped 2.77% to 181.80p after Morgan Stanley raised its rating on the stock to 'overweight' from 'equal weight', saying the valuation is attractive as its shares have come under pressure from weak advertising revenues and worries about being exposed to a potentially weakening UK economy.

Centrica gained 1.36% to 290.20p  as JP Morgan upgraded its rating to ‘neutral’ and raised the target price to 205p from 180p, citing the government's decision to seek further consultation on energy market reforms rather than pressing ahead with a market-wide price cap. 

 

 

11.14am: Pound vulvernable to further losses, says FXTM analyst

The pound is up 0.32% versus the dollar at US$1.2723 in late morning trading but still remains weak, said FXTM research analyst Lukman Otunuga.

“It’s remarkable that today marks exactly one year since Britain voted to leave the European Union, yet Sterling still remains at depressed levels with the currency struggling to nurse the deep Brexit wounds” Otunuga said.

“Although there was some optimism in the latter half of 2016 when economic data unexpectedly displayed resilience against Brexit, the visible signs of slowing growth in the first quarter of 2017 were a massive wakeup call. Since then, the pound has found itself pressured from all directions as the ongoing Brexit developments, political instability in Westminster and influx of depressing economic data weigh heavily on the currency.”

He added that growing uncertainty at home and abroad should leave the pound “highly vulnerable to losses with bears exploiting the technical bounce to drive prices lower”. 

 

10.53am: Eurozone manufacturing PMI rises but services falls

Eurozone manufacturing activity growth unexpectedly accelerated in June but the services industry slowed, data from Markit showed.

Markit’s flash reading of the purchasing managers’ index for manufacturing rose to 57.3 from 57.0 the previous month, beating expectations of 56.8 and above the 50 level that separates expansion from contraction.

The services PMI dropped to 54.7 from 56.3, missing forecasts of 56.1.

The composite index, which combines services and manufacturing, fell to 55.7 from 56.8, compared to estimates of 56.6.

Chris Williamson, chief business economist at IHS Markit, said: “Despite the June dip, the average expansion in the second quarter has been the strongest for over six years and is historically consistent with GDP growth accelerating from 0.6% in the first quarter to 0.7%.”

 

10.26am: ITV and Centrica surge on upgrades

ITV plc (LON:ITV) is a top riser on the FTSE 100 after Morgan Stanley raised its rating on the stock to 'overweight' from 'equal weight', saying the valuation is attractive as its shares have come under pressure from weak advertising revenues and worries about being exposed to a potentially weakening UK economy. 

"Timing is always tricky but typically the right moment to buy TV stocks is when advertising starts to improve,even if this is just on a second derivative basis (i.e. it starts to become less bad). June 2017 should mark the low point for ITV advertising. We forecast the Q1-Q4 quarterly progression at ITV in 2017 to be -9%, -8.4%, -5.3% -3.3%."

Centrica plc (LON:CAN) shares jumped 1.41% to 209.30p as JP Morgan upgraded its rating to ‘neutral’ and raised the target price to 205p from 180p.

The broker cited the government’s decision to seek further consultation on energy market reforms rather than pressing ahead with a market-wide price cap. The previous plans for a price cap were omitted from the Queen's Speech on Wednesday.

“In doing so, the government has effectively taken off the table the ‘worst case’ scenario we had feared. While investors should feel some relief at this development, there is a caveat: the specter of price regulation still hangs over the industry, with Ofgem to explore further options to help the energy market ‘work better for all consumers’.”

 

09.52am: Bookies under the cosh as CMA launches enforcement action

Bookmakers' shares fell as Competition and Markets Authority said it was stepping up its investigation against gambling firms as it "believes people aren’t getting the deal they expect from sign-up promotions and operators are unfairly holding on to people’s money".

Neil Wilson, senior market analyst at ETX Capital, said bookmakers have suffered from a steady decline in the past 10 months. Ladbrokes is down 30% since a late August peak, while Paddypower Betfair is 12% lower and William Hill is down 18%, he said.

The investigation comes as the government reviews fixed-odds betting terminals after it emerged that gamblers lost more than £10,000 a day in using them.

"This review is critical – these machines account for around half of betting shop revenues," Wilson said. 

"The government review is likely to see the maximum stake on these machines reduced from £100 to around £10-20, but it depends on the amount of pressure Labour can exert on the government now the Conservatives have lost their majority – Labour has pushed for a cap of £2."

 

08.50am: FTSE 100 opens in the red as pound strengthens 

The FTSE 100 opened in negative territory on the anniversary of the Brexit vote, as the pound strengthened and energy stocks remained under pressure even as oil prices stabilised.

London’s top tier index fell 27 points to 7,412.17 in early trading.

Oil prices edged up slightly, Brent crude rose 0.02% to US$45.23 per barrel and West Texas Intermediate increased 0.07% to US$42.77 per barrel. However a lack of substantial recovery meant energy stocks continued to decline. BP plc (LON:BP. fell 1.16% to 451.45p and Royal Dutch Shell plc (LON:RDSA) dipped 0.85% to 2,407.50p.

“Major downside moves in oil has a tendency to pull stocks with it, but when we see a bounce back in the price of oil, we just see a stabilising in shares,” said David Madden, market analyst at CMC Markets.

“The enormous volatility in the oil market is unsettling investors around the world. The fear of falling inflation and reduced growth prospects is at the forefront of traders’ minds. It is not unusual for us to witness rallies but the big picture is that oil has been falling since March, and now the sell-offs are becoming even more severe.”

The pound rose 0.37% versus the dollar to US$1.2729 and increased 0.17% against the euro to €1.1390.

Bank of England policymaker Kristin Forbes, who is leaving the central bank’s Monetary Policy Committee at the end of the month, said she feared the pound’s weakness would have a lasting effect on inflation. In her final speech as an MPC member she said she was concerned that central banks were becoming more reluctant to raise interest rates than in the past.

Forbes was one of three MPC members to vote in favour of a rate hike at the BoE’s policy meeting last week.

Meanwhile, Theresa May laid out some of her plans for Brexit at an EU summit in Brussels yesterday, saying that EU workers who have been here five years will retain their full rights.  Those who have been here less than five years will be given a two-year grace period to build up the five years’ worth of residence.

On the company front, pharmaceutical stocks reversed earlier gains on the hopes of reduced regulation under US President Donald Trump’s policies. Trump yesterday announced he would  reduce key benefits provided by Barack Obama’s Affordable Care Act and dramatically cut and restructure Medicaid, America’s public health insurance programme for low-income and disabled people.

Shire Plc (LON:SHP) fell 1.66% to 4,549p and AstraZeneca plc (LON:AZN) dropped 1.22% to 5,441.0p.

Centrica plc (LON:CAN) gained 1.21% to 208.90pas the owner of British Gas welcome’s the government’s decision to omit an energy price cap from its legislative plans and as it announced plans to expand its consumer and business services divisions.

 

Proactive news headlines…

Redx Pharma Plc (LON:REDX) has received approval from the UK regualtor (MHRA) and the Ethics Review Committee for its Clinical Trial Application for the Porcupine inhibitor RXC004.

The approval provides permission for Redx to initiate a Phase IB/ Phase IIA study of RXC004 in patients suffering from gastric, biliary and pancreatic cancer.

Clinigen Group PLC (LON:CLIN) founder Peter George has sold 500,000 shares at 875p per share. His beneficial interest in the pharmaceutical services group is now 2.81mln share or 2.44%.

Eland Oil & Gas PLC (LON:ELA) released details of an equity reorganisation to allow major shareholder Helios Natural Resources to convert some non-voting shares into voting shares, addressing the dilution of its influence created by a recent share placing.

Earlier this month, Eland raised £15.2mln through the issue of new equity – placing shares at 27.55mln at 55p each.

Falcon Media House (LON:FAL) has signed a Memorandum of Understanding with the UK arm of Indian conglomerate Tata to collaborate on a B2B streaming service aimed at brands and content rights holders.  

E-commerce enabler Blur PLC (LON:BLUR) is to cut more costs and will look to bolster its cash position as it repositions its platform towards larger customers.

Trinity Exploration & Production PLC (LON:TRIN) now has a clear strategic focus, to grow reserves and production to maximise cash flow, the company highlighted in a statement ahead of today’s annual general meeting. The Trinidad-focussed company noted that whist production has declined in recent years, from 3,600 barrels per in 2014 to around 2,500 bopd due to a lack of investment, the group’s asset ‘remains intact’ and production growth will be possible with new investment.

Russia –focused gold miner Petropavlovsk PLC (LON:POG) has appointed Ian Ashby as its new chairman to replace founder and mining veteran Peter Hambro. Hambro was voted out of office at the company’s annual general meeting yesterday after he was opposed by a group of shareholders speaking for over 30% of the shares.

European Wealth Group Limited (LON:EWG) launched an £8.8mln fund-raising today designed to make the integrated wealth management group “debt free with working capital flexibility and balance sheet strength to allow it to pursue its stated strategy.”  The AIM-listed firm said it has entered into a subscription and underwriting agreement with shareholders Astoria and Kingswood to raise total gross proceeds of approximately £9.2mln.

Crystal Amber Fund Limited (LON:CRS), the investment group run by veteran investor Richard Bernstein, has said it believes the recent fall in its share price primarily reflects the decline in that of Hurricane Energy PLC (LON:HUR), its largest investment.

06.41am: FTSE 100 to make cautious start

The  FTSE 100 index is expected to make a cautious start on the day of the Brexit vote’s first anniversary after a fairly busy week, with no corporate news or economic data scheduled on Friday to provide any fresh direction.

Spread betting firm CMC Markets expects the UK blue chip index to open around 12 points lower at 7,4267, having lost 8.5 points yesterday.

US markets also ended modestly lower overnight, with the Dow Jones shedding 12.74 points at 21,397, while Asian markets were fairly flat today, just supported by a rally in oil prices as crude pulled back from this week’s 10 month lows.

David Madden, market analyst at CMC Markets UK said: “The enormous volatility in the oil market is unsettling investors around the world.

“The fear of falling inflation and reduced growth prospects is at the forefront of traders’ minds. It is not unusual for us to witness rallies but the big picture is that oil has been falling since March, and now the sell-offs are becoming even more severe.“

Today is exactly one year since the shock UK vote to leave the European Union, with Brexit negotiations having only finally kicked-off this week.

The referendum occurred on June 23 2016, although the results didn’t impact markets until the following day when the pound started a slide that has seen the UK currency drop around 20% versus the US dollar, to over 30 year lows.

READ: One year on: BT, Royal Mail and ITV among worst-hit FTSE 100 stocks since the Brexit vote

Conversely, as dollar-earning, internationally-focused stocks such as miners and oils have benefited from sterling’s drop, the FTSE 100 index has jumped by over a fifth in value, hitting all-time intra-day highs, within one point of the 7,600 level, earlier this month.

Laith Khalaf, senior analyst at Hargreaves Lansdown: “A year after the referendum, Brexit talks have now finally begun, which may cause some to reassess their investment strategy. However, the performance of capital markets over the last year tells us that the financial effects of Brexit are about as predictable as the British weather.”

Lack of other direction

Whether you are raising a glass or drowning your sorrows on the anniversary of the Brexit referendum there will be little else to provide any distraction on Friday.

AIM-listed Boohoo.com will hold its annual general meeting at its head office in Manchester but little new news is expected given the online fashion retailer only issued a first-quarter trading update on June 8.

READ: Boohoo raises full year revenue guidance after strong first quarter trading

Boohoo then raised its revenue guidance for the year to February 2018 to 60% growth, compared to a previously estimated 50% increase, following strong trading in the three months to 31 May.

Finally, the only US data to be released across the pond in the afternoon will be May new home sales, with traders hoping for a rebound after an 11.4% drop in the seasonally-adjusted annual rate to 569,000 units in April.

Significant events expected on Friday June 23:

AGMs: Boohoo.com PLC (LON:BOO), Griffin Mining Ltd (LON:GFM), Oracle Coalfields (LON:ORCP); Trinity Exploration & Production (LON:TRIN)

US data: May new home sales

Around the markets:

  • Sterling: US$1.2738, up 0.44%
  • Gold: US$1,258.40 an ounce, up 0.72%
  • Brent crude: US$45.51 per barrel, up 0.63% 

City Headlines:

  • Competition and Markets Authority sets BAE free – The Times
  • Intercontinental Hotels launches new budget chain – The Independent
  • M&S fashion chief will leave behind £1.7mln as she departs Halfords – The Guardian
  • Burberry appoints American retail veteran to its board as it targets US sales – Daily Mail
  • Amazon to follow Whole Foods acquisition with fashion empire – The Independent
  • Norwegian Airlines are launching low-cost flights to Argentina – The Independent
  • Boeing wins battle of the deals at Paris Air show – Financial Times
  • Qatar Airways looks to buy 10% stake in American Airlines – Daily Telegraph
  • Uber employees petition for Kalanick’s return – Financial Times
  • McDonald’s launches home delivery in the U.K. after tie-up with Uber – Daily Telegraph
  • Bank of England too timid to make hard decisions, says Kristin Forbes – The Times

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