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FTSE 100 closing in on record high; Pearson top riser

Last updated: 17:45 18 Oct 2017 BST, First published: 06:41 18 Oct 2017 BST

Markets up
  • FTSE 100 closes 14 points off closing high

  • Dow Jones in New York hits new records above 23,000

  • Pearson biggest gainer on Footsie

  • 'Black Monday' crash has 30th anniversary tomorrow

 

 

The FTSE 100 index dropped a tad in the last hour of trading to close at 7,542,  up 26.70 points.

At around 3.40pm, the UK blue-chip index had been up nearly 30 points at 7, 545, below last Thursday’s closing record high of 7,556.24.

Tomorrow is the 30th anniversary of the 1987 financial crash.

FTSE 250 also finished higher on the day, up over 128 to 20,259, despite continued bluster and noise over Brexit preparations

The top riser again on Footsie was education publisher Pearson (LON:PSON), which added 3% to 687p after heavyweight US broker Morgan Stanley lifted its price target to 800p from 780p and Credit Suisse hiked it as well to 710p from 690p.

Pharma firm Shire (LON:SHP) was the biggest loser, shedding 3.11% to 3,719.5p, while consumer products giant Reckitt Benckiser PLC (LON:RB.)  also lost ground, down 2.53% to 6,857p.

The firm announced plans to reorganise the business as it issued its second full year sales warning for the year and said third quarter revenue fell after a cyber-attack in June disrupted operations.

3.45pm: Aegon de-risks ahead of 1987 crash anniversary

The FTSE 100 index looks set to end not far from last week’s closing peak, while the Dow Jones in New York has reached new record highs as traders prepare to mark the 30th anniversary of the 1987 crash by financial markets tomorrow.

Around 3.40pm, the UK blue chip index was up nearly 30 points at 7,545, below last Thursday’s closing high of 7,556.24, while the Dow soared above the 23,000 level today

Recalling the events of 30 years ago, Nick Dixon, investment director at Aegon said: “On 19 October 1987 financial markets across the world started to plummet in what became known as Black Monday.  The UK market was down 25% and the US down 33% by the end of the sUBSequent week.” 

He added: “The crash reflected a sudden change in market sentiment and the prospect of rising inflation. While the crash itself was short lived, it left a deep impression on many investors. Thirty years on and financial experts are again questioning whether markets are overvalued.  Investors have experienced over eight years of strong growth, even in the face of unexpected political events like Brexit and Trump.”

Dixon points out that in light of “rich valuations” Aegon has de-risked asset allocations in its Core Portfolios. 

He concluded: ““While we do not expect dramatic falls of the nature we saw 30 years ago, elevated valuations have shifted the market environment considerably in recent months.  Now is therefore the time to take a more cautious and circumspect approach.”

3.15pm: US stocks jump higher

The Footsie held firm in late afternoon  trading as US stocks surged to fresh record highs in early deals helped by another batch of corporate earnings, notably overnight from tech giant IBM Corp (NYSE:IBM).

Around 3.05pm, the FTSE 100 index was over 31 points higher at 7,547, just below the day’s peak of 7,552.10, and above the low of 7,516.17.

On currency markets, the pound slipped back 0.2% against both the dollar and the euro, at US$1.3164 and €1.1190 respectively, with  the latest UK labour market data having failed to add to expectations for a UK rate rise by the end of this year.

In early trading in New York, the  Dow Jones opened  above the 23,000 level for the first time ever today, surging 0.5% higher to 23,115, with the broader S&P 500 index also pushing higher, although the tech-laden Nasdaq Composite was a touch lower.

Craig Erlam, senior market analyst said: “(US) Companies started reporting third quarter results last week and while the number has picked up this week, it will likely dominate more and more over the coming weeks.

“Coming on the back of impressive second quarter results and in a more positive global economic environment, expectations are quite high for Q3, even taking into account the detrimental impact of the hurricanes towards the end of the quarter.”

1.00pm: Dow seen breaching 23,000

The FTSE 100 index pushed up to session highs in lunchtime trading, lifted by expectations for opening gains in New York, with the Dow Jones set to push above the 23,000 level helped by solid earnings from tech giant IBM Corp (NYSE:IBM). 

Around 1pm, the FTSE 100 index was up almost 27 points at 7,543, just below the day’s peak of 7,5435.93, and above the low of 7,516.17.

Spread betting firm IG expected  the Dow to start at 23,041, up 44 points from last night’s close and starting the session above 23,000 for the first time ever.

On currency markets, sterling was also unchanged against both the dollar and the euro, at US$1.3173 and €1.1213 respectively, after the UK latest UK labour market data failed to change expectations for a UK rate rise by the end of this year.

Chris Beauchamp, chief market analyst at IG said: “ It’s not been a great week for sterling bulls. First inflation comes in as expected, disappointing those hoping for a bounce in prices, and then the wage gap stays firmly in place.

“This should send a firm signal to the BoE to not get too excited about possible rate increases.”

He added: “A brief spike above $1.32 for cable was reversed as the pair headed back to the lows of the day. It looks like the rally off the October lows has faded away.

“The FTSE 100 took a brief knock as the pound rallied, but normal service has been resumed, with the index broadly in the same place it was a week ago.”

Pearson extends gains

Among the gainers in London, educational publisher Pearson plc (LON:PSON) extended yesterday’s rally which followed a reassuring trading update from the FTSE 100-listed firm, with the stock up another 2.3% at 882p.

Yesterday’s biggest FTSE 100 faller, Merlin Entertainment PLC (LON:MERL) drifted lower again, down 1.5% to 372.3p following yesterday’s disappointing update, shrugging aside upgrades from both Credit Suisse and ShoreCap today on valuation grounds.

Consumer products firm Reckitt Benckiser PLC (LON:RB.) was also a blue chip faller, down 1.4% at 6,937p after it announced plans to reorganise the business as it issued its second full year sales warning for the year and said third quarter revenue fell after a cyber-attack in June disrupted operations.

And global miner Rio Tinto PLC (LON:RIO) shed 1.6% at 3,652p after it was hit with a £27.4mln fine by the UK financial regulator for failings in its financial reporting process relating to the US$3.7bn purchase of mining assets in Mozambique, and said US and Australian regulators have also now begun to investigate the issue.

11.50am: Bitcoin retreats

Cryptocurrencies like bitcoin are in a "speculative bubble" and are unlikely to become mainstream currencies, according to a research paper from Swiss bank UBS.

The bank noted that here are over 1,000 cryptocurrencies, bitcoin being the biggest by market capitaliation, and many have seen huge rises in value over the past few years.

Bitcoin itself is up over 470% in the year-to-date, although the cryptocurrency is down over 5% today and has seen widespread selling this week.

Analysts at UBS said: "We think the sharp rise in cryptocurrency valuations in recent months is a speculative bubble.”

They added that it is "highly doubtful" that these will ever become mainstream currencies.

A number of other banks have recently suggested that bitcoin is a ‘fraud’, including Jamie Dimon, boss of JPMorgan Chase & Co (NYSE:JPM).

10.45am: UK data fails to excite

The Footsie drifted off early highs in mid morning trading, while the pound stayed lower against the dollar and flat against the euro after the latest UK labour market data did nothing to change the City's expectations for a UK rate hike before the year-end.

Laith Khalaf, senior analyst at Hargreaves Lansdown commented: ‘Unemployment might be at a record low, but the UK has a sticky problem with wage growth. This can be in large part attributed to the three Ps - productivity, public sector pay, and pensions.”

He added: “UK productivity growth is low, which means employers aren’t seeing the same output gains from workers they once did, meanwhile public sector pay has been capped in order to keep government borrowing in check.

“At the same time the roll out of the government’s automatic enrolment programme has seen employers forced to pay into a pension for their staff, which has no doubt diverted some money that would otherwise have flowed into pay packets.”

Khalaf continued: “Poor wage growth against a background of rising inflation spells trouble for the UK consumer, and for businesses which rely on consumer spending. So far the damage appears to be fairly muted however, as consumer spending has held up surprisingly well. An interest rate rise could change that.

“Paying off your mortgage comes higher in the pecking order than buying a new iPhone, no matter how good the camera is.”

At 10.45am, the FTSE 100 index was nearly 19 points higher at 7,535, just easing back from the session high of 7,543.38. 

10.10am: Footsie fairly unmoved by data

UK pay growth has lagged behind inflation again, official data showed this morning, but the figures are likely to cement expectations that the Bank of England will soon raise interest rates for the first time in a decade.

The Office for National Statistics said UK average earnings, including bonuses, rose by an annualised 2.2% in the three months to August, and it slightly revised up growth in the three months to July to 2.2% as well. Economists had expected wage growth to stay flat at 2.1%.

Excluding bonuses, the ONS said earnings rose by 2.1%, also a touch stronger than forecasts for 2.0%. Wages have steadily fallen behind inflation which hit 3% in September, its highest level in more than five years.

Today’s data also showed the UK unemployment rate between June and August held at its 42-year low of 4.3%, while the number of people in work rose by 94,000 people in the same three month period, albeit about half the increase in the three months to July, and the employment rate was 75.1%, falling slightly from the previous reading.

There was little market reaction to the data, with the FTSE 100 index up about 26 points at 7,542 around 10.05am, while on currency markets, the pound stayed 0.2% lower versus the dollar at US$1.3166 and was flat against the euro at €1.1207 with a UK rate rise by the year end now largely priced in.

8.40am: UK blue chips advance

The FTSE 100 opened 17 points higher at 7,533.28 as traders looked to the positive performances of Wall Street and the major Asian markets as they waited for UK jobs data later Wednesday morning.

The headline unemployment rate is predicted to be around 4.3%, according to economists, which would represent a 42-year low.

The devil, however, is likely to be in the detail, with the market looking at wage growth following Tuesday’s above-trend inflation number that effectively nailed on a rise in base rates.

On the market, British Airways owner International Consolidated Airlines Group (LON:IAG) was flying higher after a price target upgrade by the influential investment bank Credit Suisse sent the stock up 1.8%.

But in the dog house was Nurofen-maker Reckitt Benckiser (LON:RB.), which is blaming a recent cyber-attack for a fall in third quarter sales. The stock, off 10% in the last three months, fell a further 1% early on.

Proactive news headlines:

Sula Iron & Gold PLC (LON:SULA) issued a strategy update in which it said it is considering adding further assets to the portfolio while it works on bringing in a partner to develop its Ferensola gold project.

Asiamet Resources Limited’s (LON:ARS) drilling programme at BKZ in Kalimantan, Indonesia continues to deliver high grades of a number of metals. The third in what is now an eight-hole programme of shallow drilling confirmed at least 100m of continuity of high grade mineralisation.

Eckoh PLC (LON:ECK), the global provider of secure payment products and customer contact solutions, traded in line in the first half of its financial year.

Atlantis Resources Limited (LON:ARL) has asked the government for a separate deal to get its MeyGen project included as part of the UK’s next round of renewable power sUBSidies. The AIM-listed firm is developing the MeyGen tidal power project in the Pentland Firth but missed out in the recent renewable power auction in which eleven contracts awarded starting in 2021/2022.

Having given the market a heads-up on its plans last month, RM Secured Direct Lending PLC (LON:RMDL) intends to place some “C” class shares to raise funds.

Digital marketing specialist Be Heard Group PLC (LON:BHRD) has secured a new contract win with London taxi giant Addison Lee. Be Heard’s digital media and analytics agency agenda21 has been selected to help drive Addison Lee’s business expansion into other parts of the UK.

Silence Therapeutics PLC (LON:SLN) has been granted yet more patents from US authorities for its innovative chemical modification technology. Silence said the patents significantly strengthen its claim to ownership of technology used in competitors’ late-stage drugs – specifically products being developed by US giant Alnylam Pharmaceuticals Inc (NASDAQ:ALNY).

Regenerative med-tech Tissue Regenix Group PLC (LON:TRX) is on the hunt for a new chief executive after Antony Odell stepped down. Odell had been in the role since 2008 and will be replaced temporarily by non-executive chairman John Samuel, who will step into an executive role until a new CEO is found.

Pan African Resources PLC (LON:PAF) has successfully concluded a wage agreement at its Barberton gold project in South Africa with the National Union of Mineworkers.

Shanta Gold Limited (LON:SHG) said Investec Bank is continuing due diligence while it evaluates the potential impact of changes to the mining and fiscal regime in Tanzania. Investec has offered a new US$50mln loan facility that will replace the gold miner’s existing US$40mln arrangement with EXIM Bank.

Amur Minerals Corporation (LON:AMC) updated on its operations at the Kun-Manie project where it is evaluating possible open-pit mining opportunities. The company is testing four drill defined deposits and it said new results can allow it to assess the economic potential of the open-pit only project, with sUBSequent analysis set to determine the potential to access deeper ores via underground mining.

Vast Resources PLC (LON:VAST) told investors it has made “significant progress” as it finalises the Baita Plai association licence in Romania, relating to the Baita Plai Polymetallic Mine.

Hummingbird Resources Ltd (LON:HUM) told investors that the Yanfolila mine, in Mali, remains on track and on budget, to deliver first gold by the end of the 2017. The mine developer, in a statement, reported that the construction phase of the project was around 86% complete at the end of the third quarter.

6.45am: FTSE 100 to prove its 'bouncebackability'

The Footsie is seen bouncing higher today, reversing yesterday's late fall after gains overnight in the US and Asia, with the pound subdued ahead of more key UK data.

On Wall Street, the Dow Jones ended up 0.2% higher yesterday having briefly broken above the 23,000-point mark for the first time, helped by some solid earnings reports, while the broader S&P 500 gained 0.07% and the tech-laden Nasdaq Composite dipped 0.01%.

Shares in IBM (NYSE:IBM) jumped nearly 5% after hours as a shift to newer businesses such as cloud and security services helped it beat quarterly revenue estimates.

Spread betting firm London Capital Group expects the FTSE 100 index to open about 22 points higher today at 7,536, having shed 10.80 points yesterday while sterling stagnated after as forecast UK inflation data.

With inflation hitting 3% in September, today’s UK labour market data is expected to show wage growth lagging once again, with the increase of 2.1% in the three months to July, leaving workers suffering a 0.4% decline in real wages, and a similar figure is forecast today.

The drop in real wages in July overshadowed an 181,000 increase in employment in the period and a 75,000 fall in unemployment with the jobless rate down to 4.3% from 4.4%.

Ipek Ozkardeskaya, senior market analyst at London Capital Group said: “British households could continue seeing their purchasing power further decline before the economy benefits from the softer pound in terms of improved exports. It is now a certainty that the high inflation requires a BoE rate hike sooner rather than later. Market assesses 80% probability for a November rate hike. “

Reckitt has something to prove

On the corporate front, health-to-hygiene group Reckitt Benckiser PLC (LON:RB.) issues a third quarter trading update which will be a chance for boss Rakesh Kapoor to prove that the company is back on track after its profit warning in early July.

The FTSE 100-listed firm then abandoned its target to grow sales by 3% on an underlying basis, cutting that to 2% as it cited a cyber-attack in June, changes to India’s tax system and ongoing problems at its Korean operations where one of its humidifier disinfectants was linked to a number of deaths.

Reckitt’s sales fell 2% on a like-for-like basis in the second quarter, after a flat showing in the first, so the group is still assuming the second half will show marked acceleration.

Rathbone flows to grow

Meanwhile investment firm Rathbone Brothers PLC (LON:RAT) will also issue a third quarter trading update on Wednesday, a period which saw the firm enter and terminate £2bn merger discussions with privately-owned peer Smith & Williamson.

Analysts at Barclays Capital are forecasting Rathbone to report investment management flows of £0.3bn, in line with the previous two quarters, plus a further £0.1bn of unit trust flows, bringing overall group flows to £0.4bn.

The analysts expect the FTSE 250-listed firm to report assets under management of £37.1bn as at the end of September, split between £32.3bn for investment management and £4.8bn for unit trusts.

Significant events expected on Wednesday October 18:

Economic data: UK unemployment, average earnings; US housing starts; Fed Beige Book published

Trading updates: Reckitt Benckiser Group PLC (LON:RB.), Rathbone Brothers PLC (LON:RAT)      

Finals: Softcat PLC (LON:SCT)                      

Interims: U And I Group PLC (LON:UAI)

Around the markets:

  • Sterling: US$1.3181, down 0.1%
  • Gold: US$1,283 an ounce, unchanged
  • Brent crude: US$52.07 a barrel, up 0.4%

City Headlines:

  • Sainsbury’s to cut 2,000 jobs across UK – The Guardian
  • Rio Tinto and former execs charged with fraud in U.S. as miner handed £27mln UK fine – Daily Telegraph
  • British Gas owner Centrica refuses to rule out legal bid to block energy price cap – Daily Telegraph
  • Shell set to open its first electric car charge points in the UK as it prepares for shift away from petrol and diesel – Daily Mail
  • Opposition mounts to tycoon Kwek Leng Beng’s bid for hotels chain Millennium & Copthorne – The Times
  • Revolution Bars suitor leaves empty handed as investors reject £100 million bid – Financial Times
  • Oil services company Wood hired to help design Gulf of Mexico gas terminal – Daily Mail
  • Shire shows activists’ growing addiction to UK companies – City AM
  • IBM hints at return to growth with third-quarter revival – Financial Times
  • Amazon and eBay profiting from fraud by sellers who dodge VAT, MPs say – The Independent
  • Facebook’s head of hardware lab to leave as talk of artificial intelligence chip emerges – Daily Telegraph
  • General Motors to test self-driving cars in New York City – Financial Times
  • Goldman Sachs sees US-Iran standoff as long-term threat to oil supply – The Independent
  • Alphabet to build futuristic city in Toronto – Financial Times
  • Airbus buys major stake in Bombardier after U.S. government imposes 300% duty – Daily Express
  • Activist targets Credit Suisse despite signs of turnround success – Financial Times
  • Volvo unveils new Polestar electric sports car – The Independent
  • Vale searches for partner to invest in world’s largest nickel mine – Financial Times
  • CAA fuels claims that Monarch was ‘worth more dead than alive’ – The Times
  • Bernstein launches ETFs linked to in-house research – Financial Times
  • Richard Branson reveals conmen targeted him twice – The Guardian
  • Bitcoin is a ‘speculative bubble’ that is unlikely to ever be real currency, says UBS – Daily Express
  • Russia launches own cryptocurrency dubbed the Cryptoruble – Daily Express

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