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FTSE 100 joins global shares to head lower; retail sales disappoint

Last updated: 18:07 19 Oct 2017 BST, First published: 06:50 19 Oct 2017 BST

Bank of England
  • FTSE 100 closes down 19 at 7,523

  • US stocks retreat led by tech issues

  • Pound down; UK retail sales drop

  • European markets weak as Spain imposes direct rule on Catalonia

 

FTSE 100 closed down nearly 20 points as the pound weakened and there was disappointing news on UK retail sales.

The UK blue-chip index lost 19.83 to stand at 7,523, while the FTSE 250 shed a 128 points to close at 20,131.

Other European indices and Wall Street shares also lost ground.

Against the Euro, the pound shed 0.71%, while against the US dollar it lost 0.29%. 

The retail sales for last month (September) fell 0.8% month-on-month - worse than the 0.1% consensus forecast and the figure for August, which was revised to growth of 0.9%.

Commentators were unsure whether to attribute the fall to a definite squeeze on household consumer budgets or simply waiting to make purchases later nearer Christmas.

Connor Campbell, financial analyst at Spreadex, summed it up thus: "There remained a general lack of cheer on the markets this Friday, cemented by a negative open in the US."

He noted the Dow Jones dropping 90-ish points after the bell, the heightening of tensions in Spain and the movements in the UK pound.

The FTSE 100, he said, was hampered by the performance of some of its constituents, namely Unilever (LON:ULVR)  which fell 5.49% to 4,299p after its underlying third quarter sales missed estimates by a third.

HSBC Holdings plc (LON:HSBA) was another loser Footsie as the Treasury ordered the FCA and the Serious Fraud Office to investigate whether it and Standard Chartered were exposed to the corruption scandal in South Africa. Shares shed 0.47% to 744.81p.

Smurfit Kappa Group (LON:DKG) added 3.61% to 2,240p and was top riser.

 

2.45pm: UK rate hike worries

Consumers are vulnerable to a hike in interest rates, Moody’s said in a report today, with the ratings agency noting  that debt levels for UK households are high and still growing.

Moody’s comments came a day after the UK City regulator, the Financial Conduct Authority said over four million Britons were having difficulty paying their monthly bills -- especially younger consumers and renters.

With data this week showing UK inflation topping 3%, well above the Bank of England’s 2% target rate,  but wage growth still lagging, the central bank is expected deliver its first increase in borrowing costs in a decade by the end of this year, reversing last year’s rate cut that followed Britain’s vote to leave the European Union.

But Annabel Schaafsma, managing director of structured finance for Europe, the Middle East and Africa at Moody‘s said: “As real income declines, UK consumers are vulnerable to an economic downturn and any increases in inflation or interest rates could cause problems for household finances, especially for those on lower incomes.”

Currency markets have largely priced in the move, with sterling drifting 0.2% lower versus the dollar in afternoon trading to US$1.3183, while it was flat against the euro at €1.1134.

Despite the pound’s decline, the FTSE 100 index remained weaker, down 30 points at 7,512, as US stocks joined in a retreat by global markets today amid worries over the situation in Spain, which has imposed direct role on the rebel region of Catalonia.

In early New York trading, having hit all-time highs in recent sessions, the Dow Jones shed 92 points at 23,066, while  the other US benchmarks were also lower.

12.25pm: Footsie sinks back towards lows

The FTSE 100 index dropped back towards session lows at lunchtime as news Spain is to impose direct rule on Catalonia, which last month voted for independence, spooked markets globally.

Around 12.20pm, the UK blue chip index was down 39 points at 7,504, just holding off the session low of 7,485.42.

European markets remained under pressure as the Spanish government said it is to suspend Catalonia’s autonomy and impose direct rule after the region’s president refused to abandon the push for independence.

The announcement of the unprecedented measure came after the Catalan president, Carles Puigdemont, threatened a unilateral declaration of independence if the Spanish government did not agree to talks on the issue.

US stock futures also pointed to hefty falls today in New York on the European political fall-out fears, with technology-related shares such as eBay Inc. and Apple Inc. set for the biggest declines.

The US earnings season will continues, with results from Philip Morris International and Verizon Communications Inc, and traders will also mark the 30th anniversary of the 1987 crash.

‘Black Monday’ anniversary

David Cheetham, chief market analyst at XTB.com pointed out: “Today marks the 30th anniversary of Black Monday which saw the largest single-day decline seen in US stocks in their history.

“With stock markets in the US setting more record highs yesterday doom mongers suggest that a similar drop could lie ahead but the price action at present is markedly different.

“The Dow was already 17% off its record highs in 1987 heading into Black Monday and given the extremely low levels of volatility seen recently there is little to suggest that we’ll get anything but a continuation of the slow and steady grind higher that has been evident throughout much of the year. Markets don’t crash from all-time highs.”

11.45am: Spain worries remain

The FTSE 100 index remained lower approaching midday with European equities cautious awaiting an update on Catalonia’s fight with Madrid over independence.

Around 11.45am, the UK blue chip index was about 26 points lower at 7,516, albeit above the session low of 7,485.42.  

There was also a fairly sanguine attitude from European markets with Germany’s DAX, France’s CAC and even the IBEX in Spain rallying from the day’s lows. US stock futures also plunged out-of-hours but came off their lows as well.

Neil Wilson, senior market analyst at ETX Capital said: “Stakes are rising on this one. Puigdemont says it may be necessary to declare independence, while Rajoy about to use the nuclear option and invoke article 155. It looks like the two sides are boxing themselves into a corner and it does appear that a declaration of independence is likely.

“The spat between Madrid and Catalonia will get worse before it gets better and this ought to keep the pressure on the euro and European equities into next week.”

He added: “Whilst the euro budged a little, we are not seeing much impact on the single currency at present. It seems insulated for the time-being but escalation will surely be euro-negative running into the ECB meeting next week, particularly as there are indications the ECB is going to take tapering as slowly as it possibly can.”

10.25am: Latest data disappoints

UK retail sales suffered an unexpectedly sharp slowdown in September, dragging quarterly growth to its weakest annual rate since 2013, suggesting consumer demand remains uncertain.

In its latest batch of data, the Office for National Statistics said UK retail sales volumes fell 0.8% in September, reversing a jump in August and undershooting all economists’ forecasts .

Third-quarter growth slowed to a year-on-year rate of 1.5%, its lowest since the second quarter of 2013.

James Smith, ING’s economist for Developed Markets said: “As the real wage squeeze continues to persist, shoppers appear to be remaining cautious when it comes to non-essentials.

“Non-food retailers - which includes department stores - saw sales drop by 1.5% in September, whilst internet retailers continue to dominate the high street. Both of these developments back up what we've seen in other data from Visa and the British Retail Consortium.”

There was little real market reaction to the data, which is not expected to dent prospects for a first Bank of England rate hike in almost a decade before the year is out, although the FTSE 100 index came off its lows, but was still down 22 points at 7,520.

On currency markets, the pound was 0.3% lower versus the dollar at US$1.3159, but had turned flat against the euro at €1.1148 with the single currency impacted by worries over Catalan independence moves from Spain.

9.00am: Weak start for Footsie

The FTSE 100 fell back in early trading, reversing all and more of yesterday’s gains, despite another record-breaking performance overnight on Wall Street, reflecting European uncertainties and caution ahead of more key UK data.

Around 9am, the UK blue chip index was down about 40 points at 7,502, having gained 26.7 points yesterday, helped by the gains in New York.

On currency markets, sterling was weaker against both the dollar and the euro, at down 0.1% US$1.3195 and 0.3% €1.1166 respectively, as investors awaited the latest UK retail sales data following strong inflation and lagging wages data over the past few days.

Connor Campbell, financial analyst at Spreadex, said: “The pound could really do with a surprise retail sales bounce to recover what has been a tough few days of trading.

“As it stands, however, analysts are expecting a drop from 1.0% in August to -0.1% in September, which would be the worst reading in 4 months. “

Brexit backdrop caution

He added: “Providing the backdrop to this data release is the 2 day EU summit in Brussels. While Brexit isn’t the only thing on the cards, from a market perspective it’s likely the most important element.

 “The bloc’s leaders are expected to declare there has been insufficient progress in negotiations with the UK to greenlight parallel trade talks, though reports suggest they will try and do so in such a way to prevent Theresa May’s ongoing leadership crisis from reigniting (which, in and of itself, is a pretty bleak assessment of the PM’s current position).”

Unilever weak; Travis Perkins resilient

On the news corporate front, consumer products giant Unilever PLC (LON:ULVR) was the top FTSE 100 faller, down 3% at 4,409.5p after it said disruption from natural disasters in the Americas and the impact of poorer weather in Europe adversely affected its third quarter.

The Marmite spread to Dove soap maker - which earlier this year fought off a US$143bn takeover bid from US firm Kraft Heinz Co (NYSE:KHC) - reported a 1.6% decline in turnover to €13.2bn in the third quarter, including a currency impact of 5.1% as a result of a stronger euro.

But on the up, building supplies firm Travis Perkins PLC (LON:TPK) was a good FTSE 250 gainer, up 3.7% to 1,526p after the Wickes stores firm said it is on track to achieve full year expectations as it reported an improvement in underlying quarterly sales growth despite a challenging market backdrop.

Proactive news headlines:

Shares in MySQUAR Limited (LON:MYSQ) jumped at the opening  bell on Thursday after the Myanmar-language social media, entertainment and payment platform signed a deal that will see it provide Wi-Fi and digital content services in Myanmar Railways trains.

Plexus Holdings PLC (LON:POS) was in demand this morning after the oil and gas engineering services group sold off its Jack-up business for up to £42.5mln. A subsidiary of TechnipFMC PLC (NYSE:FTI) is the buying party and will pay £15mln in cash upfront for the jack-up wellhead exploration equipment and services business, plus up to an additional £27.5mln over the next three years.

Landore Resources Limited (LON:LND) has raised gross proceeds of £1mln through a subscription of 50,000,000 new ordinary shares at a price of 2.0p each. In a brief statement, the Canada-focused miner said the monies raised will be used by the company to finance working capital and exploration expenditure.

Stobart Group Ltd (LON:STOB) saw profits jump by more than 650% in the first half of its financial year, largely thanks to the partial disposal of its stake in Eddie Stobart Logistics PLC (LON:ESL).

Sareum Holdings PLC (LON:SAM) expects to receive first news in February of the clinical progress of its cancer treatment licensed to US firm Sierra Oncology.

Dosing has started in the Phase II study of Allergy Therapeutics PLC’s (LON:AGL) injected, aluminium-free, hay fever vaccine. Results are expected in the second half of 2018, following which Allergy will expects to start work on the parameters for the Phase III trial.

Emerging markets investor APQ Global Limited (LON:APQ) sees the current stand–off between North Korea and the US as the biggest threat to financial markets. 

Keywords Studios PLC (LON:KWS) has completed a bolt-on acquisition, buying video game software development company d3t for £3mln, of which £2.4mln is in cash.

The percentage of StatPro Group PLC's (LON:SOG) annualised revenue that is recurring had risen to 83% by the end of September from 75% a year earlier, the company said in a trading statement that confirmed it is trading in line with the board's expectations.

The ramp-up of production continued in the third quarter at Shanta Gold Limited’s (LON:AHG) New Luika gold mine in Tanzania, with total ore mined underground almost doubling quarter-on-quarter.

Stripping out the profit made last year from the disposal of a stake in a portfolio company, Braveheart Investment Group PLC (LON:BRH) saw profit improve to £191,000 in the first half of the current financial year from £172,000 the year before.

Tertiary Minerals PLC (LON:TYM)  has revealed it is in advanced discussions regarding acquisition opportunities in the fluorspar and industrial minerals sector in a corporate and operational update today.

Europa Oil & Gas (Holdings) PLC (LON:EOG) has noted the latest decisions related to the planning application for its proposed Holmwood well, in southern England. Surrey County Council on Wednesday approved an application to install a security fence for Holmwood drill site, though the planning committee also decided to defer a decision over the traffic management scheme attached to the project.

Capital Drilling Ltd (LON:CAPD) told investors that revenue for the third quarter amounted to US$30mln, up 26% from the same period of last year. The company noted that the revenue tally was similar to the preceding quarter, but said it was the group’s strongest third quarter since for five years. It added that fleet utilisation for the quarter was 52%, with 48 rigs in use.

Galantas Gold Corp (LON:GAL) has highlighted the accelerated development work at the Omagh Gold Mine, in Northern Ireland. The acceleration of mine development follows the resolution of issues related to blasting operations, and it said that the underground development totals more than 90 metres.

6.50am: FTSE 100 seen on back foot

London’s FTSE 100 is expected to start Thursday on the back foot as European uncertainties continue, but, Wall Street equities again set new highs.

European concerns remain on Spain and Catalonia (while Brexit uncertainty still simmers in the background) as Thursday marks a somewhat ominous deadline, with Madrid potentially needing to take governance from Barcelona.

“Spanish PM Rajoy could well be forced to trigger article 155 of the Spanish constitution and seize direct control of the Barcelona parliament, unless Catalan President Puigdemont clarifies what he meant in his speech last week,” explained Micheal Hewson, analyst at CMC Markets.

“As if to pre-empt that there were reports last night that any attempt to do that would prompt a declaration of independence in response.

“It’s hard to see how this one can end well.” 

Spanish political turmoil may be welcome distraction for Brexit negotiators, who have yet to make much progress, as Thursday is also due to see the start of a European summit.

In New York’s Dow Jones ended Wednesday up 160 points or 0.7% closing at 23,157, meanwhile, the S&P 500 and Nasdaq made marginal gains to finish at 2,561 and 6,624 respectively.

Asian equities were mixed. Japan’s Nikkei was up 91 points of 0.43% trading at around 21,454, whereas Hong Kong’s Hang Seng was lower, changing hands at 28,660. The Shanghai Composite was 0.43% lower at 3,367.

Australia’s ASX 200 saw positive territory, up 0.1% at 5,896.

In London, the FTSE 100 is seen starting lower with CFD and spreadbetting group IG Markets calling the blue-chip benchmark at 7,534 to 7,538 just over an hour before Thursday’s dealing gets underway.

Significant events expected Thursday October 19:

Trading updates: Travis Perkins PLC (LON:TPK), Unilever PLC (LON:ULVR)

Finals: Tristel PLC (LON:TSTL)

Interims: Stobart Group Ltd. (LON:STOB)

FTSE 100 ex-dividends (-1.55 points): BAE Systems PLC (LON:BA.), Smiths Group PLC (LON:SMIN)

Around the markets (as at 9am):

  • Sterling: US$1.3188, down 0.1%
  • Gold: US$1,279.90 an ounce, unchanged
  • Brent crude: US$51.86 a barrel, down 0.4%

City Headlines:

  • UK banks exposed to money laundering in South Africa - BBC News
  • UK's low pay culture traps people in poorly paid jobs - The Guardian
  • BAE and Cammell Laird join forces to bid for 'budget' frigates contract - Telegraph
  • US FDA approves Gilead cancer gene therapy; price set at $373,000 – Reuters
  • Ford to recall 1.34 million trucks in North America for door latch fix – Reuters
  • Blue Apron Is Laying Off Hundreds of Workers After a Tough Few Months - Fortune
  • China reports 6.8% third-quarter GDP growth, meeting expectations - CNBC
  • UK fintech startups are on track for a record-breaking year of investment in 2017 - City AM

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