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FTSE 100 stays weak, but off lows as US stocks rally

At 3.15pm, the UK benchmark index was down 64 points at 7,325, above the session low of 7,296.49 but still set for its worst week in nine months having dropped nearly 250 points in the last three sessions of the week
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In early trading on Wall Street, Dow Jones Industrial bounced 42 points higher to 21,886, with both the broader S&P 500 index and Nasdaq Composite also snapping back
  • FTSE 100 index down 64 points at 7,325

  • US stocks rally after weak US CPI data

  • But worries over North Korea/US tensions remain

3.15pm: Footsie stays weak despite US gains

The FTSE 100 index remained lower in late afternoon trading despite US stocks managed to post an early rally after softer than expected US inflation data although worries over heightened US/North Korea tensions remained.

At 3.15pm, the UK benchmark index was down 64 points at 7,325, above the session low of 7,296.49 but still set for its worst week in nine months having dropped nearly 250 points in the last three sessions of the week.

In early trading on Wall Street, Dow Jones Industrial bounced 42 points higher to 21,886, with both the broader S&P 500 index and Nasdaq Composite also snapping back after two sessions of sharp falls on threats from North Korea to attack the US military base on Guam, and promises to retaliate from Donald Trump. 

New York shares got a lift after US consumer prices remained weak for a fifth straight month in July, only up a seasonally adjusted 0.1%, giving a 1.7% annualised increase, raising hopes that there might not be another US interest rate hike this year..

However, Jameel Ahmad, VP of Market Research at FXTM said “traders are still not convinced that this will be enough to soften the negative stance towards inflation from the Federal Reserve.”

He added: “This will probably not change the weakening US interest rate outlook at this stage, and will not provide enough encouragement from traders to reload USD buying positions.”

Miners weigh on FTSE 100

Big falls from heavyweight mining stocks remained the main drag in London as the North Korea tensions weighed on commodity prices, with Anglo American PLC (LON:AAL) the biggest FTSE 100 faller, down 3.3% to 1,236p, while BHP Billiton plc (LON:BLT) lost 3% at 1,334p, and Antofagasta PLC (LON:ANTO) shed 2.9% at 911p.  

But among the minority blue chip gainers, bottler Coca Cola HBC PLC (LON:CCH) was up 0.5% to 2,605p, extending the gains seen on Thursday when it posted strong first-half results helped by positive broker comment, with Citigroup raising its target price to 2,900p after raising full-year earnings per share estimates by around 9%.

In the FTSE 250, Domino's Pizza Group PLC (LON:DOM) fell 3.1% at 271.6p after the pizza delivery company said it has created a partnership with its largest franchisee in London in order to take advantage of the "significant growth opportunity" in the capital.

As part of the deal,  Domino’s will pay £24mln to the franchisee for a 75% stake in a newly formed company, which will own the franchisee's 25 existing Domino's stores in London.

And among the small caps, Vitesse Media PLC (LON:VIS) saw its shares jump 46% higher to 2.75p after the media and events company announced the appointment of a new CEO and said it is considering a placing of shares in order to raise £2mln to repay the company's current debts, fund the development of its Events business and expand the capability of its existing digital platforms.

1.45pm: US inflation still soft

The Footsie came off its lows in early afternoon trading as US stocks futures ticked higher following weak US inflation data which dented expectations for further Federal Reserve rate hikes this year, although fears over heightened US/North Korea tensions came the mood depressed. 

At 1.45pm, the FTSE 100 index was 70 points lower at 7,319, holding off the session low of 7,296.49 but still set for its worst week in nine months.

Futures for the Dow Jones Industrial rallied to points o.1% higher, however, after the data showed US consumer prices remained soft for a fifth straight month in July, only up a seasonally adjusted 0.1%, giving a 1.7% annualised increase..

The core CPI, which excludes volatile food and energy costs, also rose 0.1%, to an annual rate of 1.7% as well - economists had expected both inflation measures to increase by 0.2%.

Naeem Aslam, chief market analyst at Think Markets UK Ltd, commented: “The CPI data was very muted and not something which the Fed is going to be happy to look it. The next Fed rate move is under question and inflation equation is going to help the doves on the committee.

“If you look at the gold price after the CPI data, it tells you that the Fed is not going to be in any rush to increase the interest rate this year. Perhaps we are done with the interest rate for this year.“

11.30am: No respite for Footsie

The  FTSE 100 index eased off its lows in late morning trading, just clinging on to the 7,300 level but still notching up a near 250 drop over the last three session as investors dumped riskier assets on worries over escalating tensions between the US and North Korea.

At 11.30am, the UK blue chip index was off 83 points at 7,306, just hauling itself off the session low of 7,299.97, and set for its worst week in nine months, with US stock futures also pointing to falls again in New York today, with the the latest US CPI inflation numbers eyed as well.

Dennis de Jong, managing director at UFX.com, commented: “The global sell-off continues apace with the posturing between the US and North Korea showing no signs of stopping.

“Not content with his threats of ‘fire and fury’, President Trump has ramped up the aggressive rhetoric another couple of notches and global markets are watching on uneasily.”

He added: “Trump has warned that North Korea should be ‘very, very nervous’, yet it’s the markets that are feeling exactly that at present.”

Oil majors featured among the majority blue chip fallers, with Royal Dutch Shell PLC (LON:RDSA) losing 1.2% at 2,175.5p and BP PLC (LON:BP) down 1.6% at 450.15p as crude prices fell around 0.5% to US$51.64 a barrel reflecting gains by the dollar and worries over the North Korean threats.

Broker comment a feature

Blue chip drugmaker Shire Plc (LON:SHP) was also a faller, down 1.3% to 3,826p the victim of negative broker comment, with Barclays Capital cutting its stance to ‘equal-weight’ from ‘overweight’, while Liberum Capital reduced its target price for the group, with Shire shares down nearly 1% at 3,839.5p.

But even a broker upgrade failed to have an impact in the depressed market for financial stocks today, with Royal Bank of Scotland Group PLC (LON:RBS) following the sector lower, down 1% to 255.7p despite HSBC upgrading its rating for the state-owned lender to ‘hold. From ‘reduce.’

Further down the food chain, FTSE 250-listed Dixons Carphone Group PLC (LON:DC.) dropped 8% to 244.2p after French broker BNP Paribas double-downgraded its rating for the electricals retailer to ‘underperform’ from ‘outperform’.

PHSC big small cap faller, but some bright spots

Among the small caps, PHSC PLC (LON:PHSC) was one of market’s biggest fallers, shedding dropping 12% to 11p after the health, safety, hygiene and environmental consultancy reported a wider full-year pretax loss and it warned on the effects of weak sterling and "political uncertainty".

But on the upside, Highlands Natural Resources Plc (LON:HNR) added 7% at 22.5p after the AIM-listed explorer said it has achieved a “major milestone” after it started drilling the first well at its East Denver shale oil and gas project in Colorado.

And Asiamet Resources Limited (LON:ARS) rose on news JPMorgan Asset Management is to become a significant shareholder in the miner after subscribing in a placing which will raise £6mln for the firm.

The 4.3p placing price represented a discount of approximately 9.3% to Asiamet’s closing middle market price yesterday, but in early morning trading, AsiaMet shares were up 3.2% at 4.85p.

9.50am: Fear Index jumps

As global stock markets extend their sharp falls amid worry over the intensified stand-off between the US and Borth Korea, the VIX - the so called Fear Index - has reached its highest level since Donald Trump's election as US President in November.

Neil Wilson, senior market analyst at ETX Capital said: “Volatility is back: the VIX just popped to its highest since the election of Donald Trump as jitters about North Korea roil risk sentiment. It’s about time the market woke up – nothing like the prospect of a nuclear stand-off to sharpen mind of investors who had become a tad complacent.

“It comes amid another bloodbath for European stocks. The FTSE and CAC in particular are taking a pasting, while the DAX is trading below its 200-day moving average. The FTSE is now about 250 points, or more than 3%, below its high of the week hit on Tuesday.”

Around 9.50am, the FTSE 100 was 87 points lower at 7,302, just above the session low of 7,301.37.

8.45am: Hard hats on

The  FTSE 100 index dropped back again at open as investors continue to take cover as the rhetoric between the US and North Korea intensified.

Around 8.45am, the UK blue chip index was down 60 points at 7,330, taking a now three-session plunge to over 200 points.

Overnight on Wall Street, the Dow Jones Industrial slumped by over 200 points and Asian markets continued the sell-off today after US President Donald Trump said North Korean leader Kim Jong-un had "disrespected his country" and would not be "getting away with it.”

North Korea has threatened to attack the US territory of Guam in the western Pacific amid an escalating war of words over its nuclear programme and a series of recent missile tests.

Markus Huber, trader at City of London Markets Limited, said: “While not necessary unexpected, as the US had to respond to threats made by North Korea that they will fire rockets due to land just off the coast of Guam soon, new comments by US President Trump last night propelled stocks lower.

“Even as the odds appear still to favour a scenario where no direct military action will take place in the short-term between these two countries, growing uncertainty is spooking traders leading them to keep reducing their risk exposure.

He added: “Later today in the US, inflation data is due to be released. While they are important figures and possibly determine when the Fed will raise rates for the final time this year in light what is going on in politics it is likely that these numbers will fade rather quickly into the background.

“Just how risk averse traders have become should become clear towards the end of the trading day today. In the recent past North Korea often has undertaken missiles tests over the weekend, depending if another one will take place and where it will land this could bode badly for next week as the US might be pushed into a corner where it has to retaliate in order not to appear weak.”

Miners, oils, financials slide

Heavyweight mining and oil stocks lead the slide in London, with  commodities trader and miner Glencore PLC (LON:GLEN) the worst FTSE 100 faller, down 3.6% at 319.6p, while Rio Tinto PLC (LON:RIO) also lost 3.6% at 3,355.5p, while on the second line explorer Tullow Oil PLC (LON:TLW) dropped 4.5% at 166.5p.

Financial stocks also suffered reflecting the stock market’s slide – and after recent sector results – with Prudential PLC (LON:PRU) shedding 1.8% at 1,793p and Legal & General Group PLC (LON:LGEN) off 1.6% at 297.9p.

South African insurance and banking group Old Mutual PLC (LON:OML) was also a blue chip faller despite reporting a 76% jump in first half pre-tax profit boosted by asset disposals as its moves towards a “managed separation” of its businesses.

The interim dividend was hiked, but the firm said it will take a "conservative approach" towards setting its full-year payout, and Old Mutual shares shed 0.8% at 199.8p.

The day’s biggest market gainer, however, was Scotsman and Yorkshire Post newspapers publisher Johnson Press PLC (LON:JPR) which jumped 14% higher to 15p after the Daily Telegraph reported that a Scandinavian media investor is plotting to rescue the debt-laden group.

The Daily Telegraph noted that Christen Ager-Hanssen, whose private equity firm Custos owns the Metro freesheet in Sweden, bought more than 5% of Johnston Press on Wednesday.

Proactive news headlines:

Highlands Natural Resources Plc (LON:HNR) said it has achieved a “major milestone” after it started drilling the first well at its East Denver shale oil and gas project in Colorado. It will first drill and case the Wildhorse well, designed to target the Niobrara B horizon, before immediately shifting the rig to drill and case the adjacent Powell well, which targets the Niobrara C formation.

Asiamet Resources Limited (LON:ARS) has raised a total of £6mln through a placing of 139,534,884 new common shares at a price of 4.3p each, with significant shareholder support for the fund-raising. The AIM-listed miner said the net proceeds will be used to fund completion of the definitive feasibility study for the company's 100% owned flagship Beruang Kanan Main (BKM) project, drilling of high priority targets nearby BKM, and expansionary drilling at the Beutong Porphyry Project.

Horizonte Minerals Plc (LON:HZM) has told investors that the feasibility study at its Araguaia nickel project in Brazil is now at an “advanced stage” after making “significant progress” since the turn of the year. The study is on track to be delivered in the final quarter of 2017 into the start of 2018, Horizonte added.

Orosur Mining Inc. (LON:OMI) has seen strong demand for a funding to cover a drilling campaign on its acreage in Colombia. A placing at 14.7p was oversubscribed and the money means work can start at Anza (in Colombia) without having to divert funds from the producing San Gregorio mine in Uruguay.

VinaCapital Vietnam Opportunity Fund (LON:VOF) has taken a sizeable stake in FPT Digital Retail JSC (FPTR), a leading mobile phone distributor in Vietnam.   VOF has invested US$11mln into FPTR, the largest investment among a group of institutions that have bought a 35% stake from the mobile phone group’s parent FPT Group.

Canadian Overseas Petroleum Limited (LON:COPL) says discussions over funding for an appraisal well on its OPL 226 licence offshore Nigeria are advancing well. Investment bankers Cofarco and Zeus Capital are in discussions with a number of oil traders, merchant banks and service providers, COPL said.

Trinity Exploration PLC (LON:TRIN) has agreed the sale of a block of producing assets in Trinidad to neighbour Range Resources PLC (LON:RRL). The assets are offshore the west coast of the island and will release capital to invest in the company’s operations on the other side of Trinidad, said Trinity.

6.45am: Slump to be extended

The Footsie is seen falling again at the open, extending a two-day slump as tensions between the US and North Korea intensify, with little other news or data to provide much alternate direction to the prospect of nuclear war.

Spread betting firm CMC Markets expects the FTSE 100 index to open another 50 points lower at 7,394,having plunged 108 points yesterday and 44 points on Wednesday.

Overnight on Wall Street, the Dow Jones Industrial slumped by over 200 points and Asian markets continued the sell-off today after the US President, Donald Trump issued another round of fiery rhetoric against North Korean plans for an attack on a US military base in the Pacific.

The US President said North Korean leader Kim Jong-un had "disrespected his country" and would not be "getting away with it.”

David Madden, market analyst at CMC Markets UK, said: “The tension between the US and North Korea is still dominating the news and it is looming over the financial markets. The uncertainty surrounding the situation has been the main driver of the markets recently, and the enormous surge in the volatility index (VIX) tells us exactly what traders are thinking.”

Investors have been fleeing to safer haven investments such as gold, the Swiss franc, and the US dollar. On currency markets today, the pound was down 0.1% versus the dollar at US$1.2991, but added 0.1% against the euro at €1.1037.

The only alternate focus on Friday will be the latest US CPI data, with inflation in the country having been falling rapidly recently, undermining the need for further Federal Reserve interest rate hikes.

In June, the headline CPI rate fell to 1.6%, while core inflation – excluding food and energy – was 1.7%.

The core CPI rate has fallen short of consensus expectations for the past four months but this streak may come to an end in July, according to HSBC, which is forecasting a 0.2% monthly rise, although the year-on-year rate of core CPI inflation is forecast to hold steady at 1.7%.

HSBC also expects the headline US CPI rate to increase by 0.2% in July, pushing the year-on-year rate up to 1.8%.

Old Mutual numbers

There will be little on the UK corporate news front to excite either, with interims from investment group Old Mutual PLC (LON:OML) the only blue chip news scheduled.

The FTSE 100-listed firm has  been active with both disposals and acquisitions over the past year as it moves toward a managed separation, splitting the company in four, which it expects to be materially complete by the end of 2018.

Earlier this month Old Mutual’s 54%-owned South African banking subsidiary, Nedbank reported a drop in earnings in the first half of 2017, but hiked its dividend and strengthened its capital position.

Significant events expected on Friday August 11:

Interims: Old Mutual PLC (LON:OML), TT Electronics PLC (LON:TTG), Touchstone Exploration PLC (LON:TXP)

Trading update: Volution Group PLC (LON:FAN)

Economic data: US consumer price index

Around the markets:

  • Sterling: US$1.2991, down 0.1%
  • Gold: US$1,278.00 an ounce, up 0.4%
  • Brent crude: US$49.91 a barrel, up 0.7%

City Headlines:

  • Talktalk fined after customer details stolen again – The Times
  • Scandinavian media investor plots Johnston Press debt rescue – Daily Telegraph
  • Supergroup Boss Euan Sutherland’s pay surges to £1.7mln – The Times
  • Royal Mail pre-privatisation retirement fund delivers £8.5bn bill to the taxpayer – City AM
  • Monarch Airlines in brace position over profits – The Times
  • Glencore tycoon eyes electric car bonanza: Profits up at mining giant as commodities prices recover – Daily Mail
  • VW considers reimbursing UK drivers of old diesel cars – Financial Times
  • Thousands of Asda workers face redundancy or reduced hours – The Guardian
  • Lidl makes it a sparkling summer as Brits go big on the bubbles – Daily Express
  • Snapchat takes another hit on Wall Street – Daily Telegraph
  • Battle for power at Uber as investor sues ex-CEO Travis Kalanick alleging fraud – Daily Telegraph
  • Uber’s longest serving executive, Ryan Graves relinquishes operational role – Financial Times
  • Facebook takes on the TV channels with new ‘watch tab’ which lets users chat and connect with others when viewing – Daily Mail
  • Airbnb faces EU clampdown for not paying ‘fair share’ of tax – The Guardian
  • Chelsea owner Roman Abramovich gets another £100mln richer as steel maker Evraz pays first dividend since 2014 – Daily Mail
  • Print advertising decline continues to hit News Corp – Daily Telegraph
  • Noble Group rejected takeover offer from London-based fund – Financial Times
  • Dalian Wanda reshuffles US$1bn of assets – Financial Times
  • Buoyant Bitcoin stirs fears of a crypto-currency bubble bursting – The Independent
  • Walkers puts future of its most-loved crisp flavours to public vote – The Independent

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