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FTSE 100 closes 51 up with engineer Rolls Royce in the driving seat

With an hour and a quarter of trading to go, the UK benchmark index was ahead 58 points at 7,430, just easing back from the afternoon peak of 7,438.90
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In early trading on Wall Street, the Dow Jones gained 60 points at 21,952, while both the broader S&P 500 and Nasdaq composite index were also higher
  • FTSE 100  closes 51 higher

  • US blue chips hit new records in early trading

  • Rolls-Royce top gainer; Apple earnings eyed

 

FTSE 100 closed Tuesday higher as European benchmarks did well and engineering stalwart Rolls Royce plc (LON:RR.) accelerated higher.

The UK blue chip index closed up 51.66 points at 7,423, while FTSE 250 also did well, rising over 82 points to close the afternoon session at 19,863.

On the back of eurozone gross domestic product numbers and German unemployment statistics, the CAC 40 added 0.65% and the DAX gained 1.10%.

Top gainer on Footsie was engine maker Rolls Royce, which closed 10.25% higher at 979p as first half profits more than doubled, and coming in higher than expected.

Commentators did mention however that a portion of the profits rise was due to currency movements. 

On the losing side, Fresnillo (LON:FRES) the silver giant was top laggard, shedding 2.6% to 1,496p.

 

3.15pm: Earnings the main driver

The FTSE 100 index held solid gains in late afternoon trading, as US blue chips continued to notch up record gains in early trading, with better than expected earnings the main focus in both London and New York.

With an hour and a quarter of trading to go, the UK benchmark index was ahead 58 points at 7,430, just easing back from the afternoon peak of 7,438.90.

On currency markets, the pound maintained some modest gains versus the dollar, up 0.2% at US$1.3230, and added 0.3% against the euro at €1.1187.

In early trading on Wall Street, the Dow Jones gained 60 points at 21,952, while both the broader S&P 500 and Nasdaq composite index were also higher, driven again by strong corporate earnings – with tech giant Apple Inc  (NASDAQ:APPL) due to report after the close.

As of last Friday, 73% of the S&P 500 companies that have reported earnings so far posted sales numbers above estimates, according to FactSet.

In London, earnings were also the main driver for gainers, with BP PLC (LON:BP.) the biggest contributor to the blue chip advance,  up 2.9% to 458.75p after the oil major beat second quarter profit expectations.

Engine maker Rolls Royce (LON:RR.) was the best blue chip performer, climbing 9.3% higher to 970.5p after reassuring first half results which saw profits rise more than expected .

Testing firm Intertek  PLC (LON:ITRK) was also in demand after numbers, adding 8.7% a 4,677p, as was British Gas-owner Centrica PLC (LON:CNA), ahead 2.2% at 202.6p.

And Direct Line Insurance Group PLC  (LON:DLG) took on 5.9% at 396.5p as Britain's largest motor insurer reported a 9.5% rise in first-half profit, helped by strength in auto premiums. Peer Admiral PLC (LON:ADM), which reports earnings on August 16, gained 2.7% at 2,123p.

On the second line, FTSE 250-listed lender CYBG PLC (LON:CYBG) gained 8.5% at 289.8p after confirming its full-year targets, and saying costs would be at least 10 million pounds lower than previously thought.

And hedge fund Man Group PLC (LON:EMG) added climbed 4.8% at 167.6p after reporting a 19% rise in first half assets under management.

2.15pm: US consumption, income data dull

The Footsie pushed back up towards session highs as US stock futures held steady despite data showing Americans increased spending in June by the smallest amount in five months as income growth flat-lined.

With 15 minutes to go until the New York restart, the FTSE 100 index was up 63 points at 7,435, fractionally below the morning peak of 7,436.01.

US consumer spending was up 0.1% in June, matching the smallest increase of 2017,  in line with economists’ forecasts.

Income growth, meanwhile, was unchanged, failing to rise for the first time since last November.

And the PCE index - the Federal Reserve’s preferred measure of inflation - was also flat in June, while the 12-month rate fell to 1.4%, down from 2.2% a year earlier.

On currency markets, sterling ticked high again versus the dollar, up 0.1% at US$1.3217, and was up 0.3% against the euro at €1.1190.

1.25pm: Bitcoin chaos predicted

A split in the Bitcoin community is set to create a new incompatible version of the cryptocurrency , according to a report on the BBC.

The BBC News website said a group of insiders is unhappy with existing plans to speed up transaction times and plan to offer existing investors a matching amount of a new virtual asset - called Bitcoin Cash.

The report said this could put pressure on the value of original bitcoins. One expert has warned there could be trading "chaos" over the coming days, with several popular Bitcoin platforms refusing to support the new coins.

12.30pm: Gains maintained as US stocks seen higher

The Footsie remained firmer in early afternoon trading awaiting an expected positive open again on Wall Street, but the UK benchmark drifted off highs as a firmer pound had a slight impact.

Around midday the FTSE 100 index was up about 38 points at 7.410, staying below the morning peak of 7,436.01 but still buoyed by well-received results from the likes of Rolls-Royce PLC (LON:RR.) and BP PLC (LON:BP.).

In New York, the Dow Jones is expected to extend its push into record territory today with another flow  of US earnings also key, including numbers from drugs firm Pfizer Inc (NYSE:PFE) and – after the market close – tech giant Apple Inc (NASDAQ:AAPL).

On currency markets, sterling was firmer against the euro, up 0.2% at €1.1179, but turned flat versus the US dollar at US$1.3207.

Joshua Mahony, market analyst at IG, said: “In a week where economic concerns are likely to take centre stage, today looks like a well-balanced battle between corporate and economic concerns amid the impending release of Apple earnings to counterbalance the release of UK manufacturing PMI, eurozone GDP, and US core PCE inflation data.”

He added: “This morning’s UK manufacturing PMI survey gave the pound another boost, following a sharp rise into a 10-month high against the dollar yesterday.

“Particular encouragement will be drawn from the strong export performance, with the continued decline in the value of the pound, relative to the euro, making UK producers increasingly competitive within our greatest export market. “

11.4am: Rollers on the rise

Rolls Royce PLC (LON:RR.) shares remained the top FTSE 100 gainer approaching lunchtime, up over 9% to 970.5p and potentially on course for their best daily gain in almost 18 months after first half results revealed a better than expected return to profitability.

Mike van Dulken, head of research at Accendo Markets, said: “Whilst FY guidance for profits and cash flow remains unchanged, investors are relieved at the implication that earnings will be better balanced this year, in other words slightly less skewed towards the second half.

“An upgrade of sorts that offers potential for a bullish revision to FY guidance later in the year and/or a surprise beat of FY guidance. More importantly it suggests the turnaround strategy is working and quashes some of yesterday’s cash-flow concerns, although the CFO does caution that some first half benefits may not necessarily be repeated and that headwinds continue to blow.”

Meanwhile, George Salmon, equity analyst at Hargreaves Lansdown said: “While the engine may not be roaring just yet, it looks like Warren East has at least got things ticking over at Rolls-Royce.”

He added: “The most closely watched figure in these results was the group’s free cash flow. Recent difficulties, which have included weakness in Civil Aerospace servicing and headwinds in the Marine business, have seen cash flow turn negative over the last few years.

“While it was never likely this would perform a volte-face quickly, a £339mln outflow is well ahead of expectations. With cost-cutting continuing, and production of the flagship Trent engines ramping up, there are plenty of reasons for investors to be positive.

“However, there’s no getting away from the fact it will likely be a few years before Rolls is firing on all cylinders.”

Overall the FTSE 100 index was up around 47 points at 7,418.

11.00am: Eurozone GDP slightly disappoints

The eurozone economy grew at its fastest annual pace in six years in the last quarter, according to preliminary data today from the region's official statistics office, but first quarter growth estimates were pared back.

Eurostat said second-quarter eurozone GDP grew at an annualised rate of 2.1%, the strongest advance since the first quarter of 2011, with the quarter-on-quarter growth estimated at 0.6%, largely in-line with economists' forecasts.

However, first quarter growth in the region was revised modestly lower to 0.5% from an original estimate of 0.6%.

Dennis de Jong, managing director at UFX.com, said: “Today’s positive GDP results will be music to the ears of ECB president Mario Draghi, as well as welcome reading for economies across the eurozone, with Europe’s recovery appearing to be building on firm foundations.

“Draghi has held firm in his refusal to budge on interest rates, which seems to be paying off well. It certainly won’t have gone unnoticed that the eurozone’s GDP growth is now twice as fast as Britain’s – summing up the confusion the UK government seem to have over their preferred strategy for Brexit negotiations.”

On currency markets, the pound extended earlier gains versus the euro after the data, up 0.4% to €1.200 reflecting the first-quarter GDP revision. Against the dollar, sterling also remained higher, up 0.2% at US$1.3233.

The FTSE 100 index was unmoved by the Eurozone data, however, and the gains by the pound, still adding 56 points at 7,428 in late morning trading.    

10.00am: Footsie strong, UK data upbeat

The FTSE 100 index remained buoyant in mid-morning trading, buoyed by a batch of well-received results from the likes of Rolls-Royce PLC (LON:RR.), Direct Line Group PLC (LON:DLG), and BP PLC (LON:BP.),  and by a batch of positive UK data.

After two hours of trading, the UK blue chip index was up over 56 points at 7,428, just below the early peak of 7,436.01, having added just 3 points yesterday after a rise in the pound impacted international stocks.

On currency markets today, the pound remained higher versus the US dollar, up 0.2% at US$1.3231, and also added 0.3% against the euro at €1.1193 ahead of Eurozone GDP data.

Today’s domestic economic pointers saw manufacturing growth recover from a seven-month low in July, helped by the biggest influx of new export orders since 2010.

Markit/CIPS UK Manufacturing Purchasing Managers' Index rose to 55.1 from a downwardly revised 54.2 in June, exceeding the 54.4 consensus forecast.

Chris Williamson, chief business economist, at  IHS Markit, said: “Recent months have seen a variety of indicators on the health of the manufacturing economy in mid-2017, ranging from the CBI survey showing the fastest output growth for 20 years to Office for National Statistics data depicting one of the steepest declines seen since the global financial crisis.

“The truth most likely lies somewhere in the middle, with PMI data registering steady, albeit slowing, expansion in recent months.”

Meanwhile, data released overnight showed UK house prices rose for a second month in a row in July after falling between March and May, according to the latest survey from Nationwide.

The mortgage lender said house prices rose 0.3% month-on-month in July,  slower than June's 1.1% jump, but above forecasts for a 0.1% increase. In annual terms, house prices were 2.9% higher, slowing from a rise of 3.1%in June.

And another survey showed UK consumer confidence steadied last month after falling sharply in the aftermath of June's inconclusive general election, although it still marked the weakest two months in four years.

Pollsters YouGov and the Centre for Economics and Business Research said their consumer confidence index rose to 107.3 in July, up from 107.1 in June.

8.45am: Bullish start

Buoyed by Asia and Wall Street, the FTSE 100 opened 33 points higher at 7,404.83.

The big piece of macro data emanates from the Eurozone later this morning with second-quarter GDP figures set for release.

The number crunchers are expecting to see three months of solid growth with a consensus figure of around 0.6%.

That would broadly match the expansion of the US economy, and would be double the number posted by the UK.

An undershoot on the consensus figure and bad news on manufacturing could see a bout of the collywobbles on the markets, economists warned.

Here in the UK there has been much wailing and gnashing of teeth following British Gas owner Centrica’s (LON:CAN) decision to hike energy prices.

However the market liked the news with the stock up 2% early on.

The top riser on the Footsie was the insurer Direct Line (LON:DLG) after it unveiled plans to lift the dividend by almost 40%. The shares were up almost 7% early on.

Proactive news headlines:

Wealth manager Tavistock Investments PLC (LON:TAVI) is at an “inflection point”, its chairman Oliver Cooke said, with the company now generating cash alongside operating profits. Turnover for the year ended March 31 was up 22% at £36.4mln giving EBITDA of £537,000, up  421%. Cash generation was £497,000 in the second half.

Real Good Food (LON:RGD) has warned profits will miss forecasts made only four weeks ago when it raised £15mln to fund an expansion drive. The cake decoration and bakery products group said results for the year to March 2017 had been affected by two substantial sugar purchase claims discovered by the auditors.

Premier African Minerals Limited (LON:PREM) has received an independent report confirming the prospectivity and size potential of the Zulu Lithium and Tantalum Project in Zimbabwe. Hains Engineering, an independent geological consulting group with significant experience in industrial minerals and lithium, conducted the review.

TechFinancials Inc (LON:TECH) is to receive a dividend of US$1.02mln from its subsidiary DragonFinancials. The trading software developer owns 51% of the Asia Pacific-based DragonFinancials, which declared a total interim dividend of US$2mln.

BT Sport is joining BBC Three in jumping on the eSports bandwagon by broadcasting the Elite Series being run by Gfinity Plc (LON:GFIN). BP in April 2017.

The new board of blur Group PLC (LON:BLUR) is performing a strategic review and will use recently raised funds to implement a new growth plan. The company released full-year results the day after trading resumed in the shares, showing losses narrowed dramatically in 2016.

Sound Energy PLC (LON:SOU) has revealed progress towards the commercialisation of its gas discoveries in eastern Morocco, where proposed pipeline route has been cleared by the local authority. In a statement, the company told investors that the Wilaya of the L'Oriental Region has approved the proposed pipeline route that will be needed to transport gas from Sound’s projects in the region into the existing Gazoduc Maghreb Europe (GME) pipeline

Rose Petroleum PLC (LON:ROSE) has given Magellan Gold Corporation just over two weeks to complete the proposed acquisition of its San Dieguito de Arriba gold mill operation in Mexico. The non-core asset sale was announced in March, with Magellan paying a US$100,000 deposit, but the buyer was supposed to have deposited a further US$900,000 of cash into escrow and previously, in June, Rose granted a 60-day extension to the option period.

Empyrean Energy PLC (LON:EME) told investors that drilling is expected to start in California later today. The programme, for the Dempsey 1-15 well in the Sacramento basin, is expected to have between 30 to 40 days of drilling.

Galantas Gold Corporation (LON:GAL) has hit grades of up to 11 grams per tonne gold in a stringer vein at its Omagh gold mine in Northern Ireland during tunnelling work. Development at Omagh continues, as the company works its way down towards the main Kearney veins.

Amur Minerals Corporation (LON:AMC) has hit a record exploration intercept in terms of thickness and continuity at its Kun-Manie nickel sulphide deposit in the Far East of Russia. The company is midway through a resource expansion programme there.

Thor Mining PLC (LON:THR) chairman Mick Billing spoke of a “a busy and productive period for the company” as he updated on quarterly activities. Of particular interest was the Pilot Mountain tungsten project. “The continued positive results at Pilot Mountain demonstrate the significant and increasing value of this project and we are very keen to commence the next drilling program in the next 2 to 3 weeks,” said Billing.

6.45am...London expected to start on the front foot

London’s blue chips are set for a bright start as Asian stocks followed Wall Street higher overnight.

Financial spread bet firms see FTSE 100 rising by as much as 40 points when trading gets underway, after adding just three on Monday to 7,372.

It’s a big oil day in London with BP reporting and the recent uptick in the price of crude will have helped.

Oil prices in the US rose to US$52 yesterday as talk grew that some of the oversupply that has dogged the Industry for months might be coming to an end.

Oilers helped the Dow Jones Industrial Average, which closed 60 points higher at 21,891, though this was off its best for the day.

Asia had a good day, recovering from the North Korea-inspired jitters of Monday, with Tokyo, Hong Kong and Shanghai all well in the blue near the close.

Commodities/Currencies

Gold: US$1,276 up US$3

Oil (Brent) :  US$52.77 up 5c

£/$: 1.3218 pound higher

News headlines:

Nicky Morgan, the Conservative MP and newly elected chair of the Treasury select committee, has called on the Bank of England to provide comprehensive details on whether the UK is prepared for a ‘hard’ Brexit, the Guardian writes.

Ratings agency Moody’s has warned that UK household debt is growing to worrying levels at a time of heightened economy uncertainty, The Telegraph reports. The collateral underpinning asset-backed securities (ABS) and retail mortgage-backed securities (RMBS) is now rated as having a negative outlook due to the perceived likelihood of a deterioration in British consumers’ financial position.

UK retailers would support increasing the contactless spending limit as the speed of making payments has lifted transactions, City AM writes, citing Barclaycard research. Three-quarters of retailers who have introduced contactless payments into shops have experienced an uplift in transactions of 30% on average.

BAE Systems has been ordered to pay £360,000 to a secretary after a manager directed a sexist comment towards her, the Financial Times reports. The manager has said “women take things more emotionally than men”.

The UK statistics body has said that the retail prices index does not measure inflation properly and should not be used, according to The Times.  The measure of inflation that affects 11 million pensioners, £407 billion of government bonds, all new student loans and 45%of all rail fares has serious shortcomings, the ONS said

 

 


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