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FTSE 100 finishes sharply lower as financial stocks weigh

FTSE 100, which has been hitting record highs over the past weeks, hit a five week low
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Is the bull run finally coming to an end, or is it just a blip?
  • FTSE 100 closes 1.09% lower

  • Dow Jone and major US indices lag

  • Three corporate giants team up to create own healthcare firm

The FTSE 100 took a beating to close 1.09% lower, or around 83 points, at 7,587.98, in tandem with the slide seen in other European markets.

The footsie, which has been hitting record highs over the past weeks, hit a five week low, dragged lower by financials and the commodities, which saw investors lock in profits.

“With a good ... return so far this month in the bag, it makes a lot of sense to take some money off the table,” Ken Odeluga, market analyst at City Index said.

Banks were badly hit, with RBS (LON:RBS) down 2.73% at 292.0p and Barclays (LON:BARC) down 2.84% at 201.75p

On the commodities side, Anglo American (LON:AAL) fell 2.3% while Antofagasta plc (LON:ANTO) lost 1.74% to 935.6p.

On Wall Street, shares are also lower, with the Dow Jones down 1.24% to 26,113.

3.30pm: Stocks’ slide down to ‘boiling frog syndrome’​

“The rise in the yield available from Government bonds has not happened overnight but it has finally started to draw investors’ attention in a classic case of ‘boiling frog’ syndrome: the water has been getting slowly hotter (bond yields going slowly higher), with the frog (or in this case investors) barely noticing at first, but the heat is now reaching a level whereby the first signs of discomfort are perhaps becoming evident,” said AJ Bell Investment Director Russ Mould.

“Bond prices may be going down and bond yields higher either because markets are pricing in higher global growth and inflation, with low unemployment and higher oil playing a role here, or they are accepting that central banks are starting to tighten policy, or a combination of the two.

“Stock market investors may not feel inclined to fret about either explanation as both could be taken as a positive, since they suggest economic and corporate earnings growth could prove robust and dividend yields well underpinned.”

 

3.15pm: FTSE drops 1%​

The European markets have shown very little sign of life today, with the global bonds sell-off being blamed for the indices’ dreary performances.

Just to recap (excuse the repetition), the sell-off of bonds has pushed up bond yields which increase the cost of borrowing for companies. That can then in turn hit share prices.

The FTSE 100 is currently down 1%, or 72.9 points, to 7,598.6.

Banks are taking a beating given that they often keep a lot of bonds on their balance sheet.

Barclays PLC (LON:BARC) is the footsie’s worst performer, down 3.4% to 200.6p, with Royal Bank of Scotland Group PLC (LON:RBS) (down 2.6% to 292.5p) and Standard Chartered PLC (LON:STAN) (down 3% to 814p) not too far behind.

Among the handful of risers, Informa PLC (LON:INF) looks like it will take the day’s top gainer award.

The events and business company – up 1.3% to 696.4p – confirmed it has made a £3.9bn formal offer to buy rival UBM PLC (LON:UBM).

In the short announcement, Informa also told investors that it was on track to hit full-year expectations.

Consumer goods firm Reckitt Benckiser PLC (LON:RB.) has been firm all week so far, and has advanced another 1.1% today to £68.65.

 

2.50pm: US stocks open in the red

The spreadbettors were pretty bang on when they predicted a 200-plus point fall for the Dow Jones at this morning’s opening bell in New York.

The index – made up of 30 major companies – fell 249.8 points at the start of trading to 26,189.6, weighed down by rising bond yields and a drop in the shares of healthcare companies (see below).

The S&P 500 lost 24.3 points to 2,829.2, while the Nasdaq dropped 78.7 points to 7,387.7.

It’s the second day in a row that US stocks have opened lower.

 

2.30pm: Blockchain and football

 

2pm: Look ahead to Britvic’s update tomorrow

Drinks maker Britvic Plc (LON:BVIC) has edged 1.1% lower today ahead of Wednesday’s first-quarter trading update.

The FTSE 250 group has done alright for itself since the competition authorities put the mockers on the planned takeover by smaller rival AG Barr, the maker of Irn Bru.

At the time of the mooted merger, the company was looking like a lame duck but despite the impending introduction of a sugar tax and the success of Fever-Tree in the mixers market, Britvic’s share price has been decidedly perky – up by a third over the last year and three-quarters over the last five years.

Organic revenue growth in the year to the end of September was 2.5%, and the group highlighted that more than two-fifths of revenue is now earned outside of the UK.

The company is into the third year of its business capability programme – a restructuring, by any other name – and recently increased its guidance of cost benefits from the programme.

Shareholders will be interested to learn what plans the company has for expansion now it appears to have set its house in order.

 

1.15pm: Amazon, Berkshire Hathaway and JP Morgan to form healthcare group

US healthcare stocks are taking a pounding in pre-market trade across the pond on the news that Amazon.com Inc (NASDAQ:AMZN), Berkshire Hathaway Inc (NYSE:BRK.A) and JP Morgan Chase & Co (NYSE:JPM) are joining forces to start their own company that provides healthcare to their US employees and their families.

The three firms said they aim to improve employee satisfaction and reduce costs of healthcare through the independent entity, which will be "free from profit-making incentives and constraints”.

To start, the healthcare company will focus on technology solutions and will be led by Todd Combs, an investment officer at Berkshire Hathaway; Marvelle Sullivan Berchtold, a managing director at JPMorgan Chase; and Beth Galetti, a senior vice president at Amazon.

Berkshire Hathaway boss Warren Buffett said combining resources with Amazon and JPMorgan mean they can attract the country’s best talent, check the rise in health costs and enhance patient satisfaction and outcomes.

UnitedHealth Group Inc (NYSE:UNH), CVS Health Corp (NYSE:CVS) and Cardinal Health (NYSE:CAH) are all down by around 6% in pre-market trading.

 

12.55pm: FTSE 100 struggling amid bonds sell-off

The FTSE 100 is really struggling to gather any momentum today, with the global sell-off in bonds weighing heavy.

The sell-off has served to push up yields, which in turn increases the cost of borrowing for companies, which then impacts share prices.

Wall Street is also suffering which means there is little for the footsie to look to for inspiration.

As a result, the index of blue-chip shares is down 0.7%, or 52.4 points, to 7,619.2.

Housebuilders responded negatively to the news that new mortgage approvals hit a three-year low in December.

Persimmon PLC (LON:PSMN) shed almost 2% to £25.68, while rival Barratt Developments PLC (LON:BDEV) was nursing a 1.6% fall to 606.5p.

Royal Bank of Scotland Group PLC (LON:RBS) is still out of favour, down 2.1% to 293.8p, as the Treasury committee hears more tales about its Global Restructuring Group ‘turnaround’ division.

Fellow bank Barclays PLC (LON:BARC) is also in the red; down 2.3% to 202.9p.

Among the few blue chip winners is events and business company Informa Group PLC (LON:INF) (up 1.8% to 699.4p) which confirmed it has made a £3.9bn formal offer to buy rival UBM PLC (LON:UBM).

In the short announcement, Informa also told investors that it was on track to hit full-year expectations.

Confirmation of the bid, outlined two weeks ago, sent UBM to the top of the FTSE 250, with the stock up 4.4% to 907.5p.

 

12.25pm: US markets set for another day in the doldrums

As we mentioned earlier, US stocks aren’t exempt from the effects of the global bonds sell-off currently taking place.

The major indexes across the pond are expected to be nursing heavy losses from the get-go when trading kicks off in New York later this afternoon UK time.

“Informing the Europe-wide decline is the [200] point drop expected from the Dow Jones later this afternoon, a decline that comes on top of the index’s near 200 point fall on Monday,” said Spreadex analyst Connor Campbell.

“That would leave the Dow at a 5 day low, with equities investors seemingly concerned about the rise in US bond yields – the Treasury yield is at a near 4 year peak – and what that suggests about US inflation expectations, and therefore the Fed’s 2018 schedule, ahead of Wednesday’s central bank meeting.”

As Campbell alluded to, the Dow Jones is set to open 218 points lower at 26,221; the broader S&P 500 is seen 13.2 points in the red at 2,839.5; while the tech-heavy Nasdaq is expected to lose 28 points at the opening bell to sit at 6,958.1.

 

11.45am: Eurozone growth hit 10-year high in 2017

The eurozone’s economy grew at its fastest pace for a decade last year, according to official figures.

The bloc’s economy grew by 2.5% in 2017, the strongest growth since the 3% rate it recorded back in 2007.

Eurostat added that the Eurozone grew by 0.6% in the final three months of last year.

 

11.35am: RBS bosses only ‘focused on financial gain’

Tony Boorman, managing director of consultancy Promontory Financial Group, has been giving evidence to the Treasury Select Committee this morning.

His firm was commissioned to write a report on how Royal Bank of Scotland Group PLC’s (LON:RBS) Global Restructuring Group treated small and medium sized businesses.

“The focus was…almost entirely on the commercial interests of the bank and, in particular during the early period that we were asked to look at, the collection of charges from customers.”

 

11.20am: Regulators grilled on Carillion collapse

The Work and Pensions and Business, Energy and Industrial Strategy committees are holding a joint hearing on the collapse of construction contractor Carillion PLC (LON:CLLN).

Stephen Haddrill, chief executive of the Financial Reporting Council, and Sarah Albon, boss of the insolvency service are giving evidence.

MPs want to know how Carillion’s long-standing financial troubles went unnoticed before its collapse earlier this month.

 

11.05am: Domino’s delivers with solid Q4 numbers and guidance upgrade

Domino’s Pizza Group PLC (LON:DOM) was one of the top risers on the FTSE 250 this morning as it revealed underlying pre-tax profits for 2017 should be “slightly above” forecasts after a strong finish to the year.

The pizza delivery giant sold £321.8mln worth of pizzas, dough balls and cookies in the three months to December 24 – a year-on-year jump of 18.2% (Q4 2016: £272.4mln).

Even when stripping out the impact of new stores and currency movements, the group still recorded like-for-like growth of a shade over 10%.

The X Factor Final on December 2 was “the catalyst” for Domino’s biggest day of sales during 2017, the company said, with sales up 25% compared to the average Saturday across the year.

Shares are currently up 2.2% to 358.4p, although they had been as high as 368p not long after the opening bell.

 

10.50am: Why are zinc prices on the rise?

Have a listen to what Proactive's mining expert Alastair Ford has to say on the soaring prices of zinc...

 

10.30am: Bonds sell-off goes global

The pound lost ground on the dollar for the second day in a row which, in theory, should be a fillip for the FTSE 100, but even that wasn’t enough to keep the blue chips in the black on Tuesday Morning.

The UK’s benchmark index, along with its European peers, headed lower as investors reacted to a global sell-off in bonds which has pushed up yields.

Rising bond yields increase the cost of borrowing for companies, which can in turn hit share prices.

As a result, the FTSE 100 is down 0.6%, or 46.1 points, to 7,625, echoing falls seen both across the pond on Monday and in Asia overnight.

A dip in the price of copper hit mining stocks, with Anglo American PLC (LON:AAL) (down 2.4% to £17.13) the top faller and Chilean outfit Antofagasta PLC (LON:ANTO) (down 1.5% to 937.6p) not too far behind.

Banks have enjoyed a decent few months so it’s perhaps unsurprising to see them starting to give up some of those gains, while renewed uncertainties are also taking their toll somewhat.

Barclays PLC (LON:BARC) has shed 1.9% to 203.7p, while bailed-out Royal Bank of Scotland Group PLC (LON:RBS) is off by a similar percentage to 294.5p.

The winners today are few and far between, but consumer goods giant Reckitt Benckiser Group PLC (LON:RB.) is doing its best to prop up the footsie.

Its stock is currently up 1% to £68.53, while Rolls-Royce Holding PLC (LON:RR.) is enjoying another in the lukewarm sun – up 0.6% to 866.8p.

 

8.45am: FTSE 100 off after Wall Street wobble

The FTSE 100 started the session on the back foot as predicted after the sharp falls on Wall Street overnight. However the damage wasn’t quite as bad as predicted with the index of blue chip shares off 25 points at 7,646.23.

Those US worries precipitated a minor wobble by the mining sector, which is sensitive to the growth prospects of the world’s largest economy, having led the FTSE 100 gains on Monday.

Leading the fallers with a 2% fall was Glencore (LON:GLEN), followed closely by BHP Billiton (LON:BLT) and the copper specialist Antofagasta (LON:ANTO).

Dropping down to the FTSE 250, Domino’s Pizza (LON:DOM) served up a 3% rise after its latest trading statement showed the business to be trading well and ahead of expectations.

“The company is doing what is has always done; focusing on the consumer and serving them with a great product, straight to the door with the minimum of fuss,” said Danny Cox of Hargreaves Lansdown.

“Domino’s dominates the UK pizza sector and can throw more marketing resources behind the brand than any rival can hope to.

“The group set a new record for store openings last year and looks set to continue opening at pace in the UK and overseas.”

Greencore (LON:GMC), the convenience food group, topped the mid-cap risers, advancing 4% after providing its own update, which showed it was performing robustly.

Proactive news headlines:

Ferrum Crescent Ltd (LON:FCR) has posted a maiden JORC resource for its Toral zinc-lead project in Spain. The resource rings in at 16.9 mln tonnes of ore grading 6.9% zinc equivalent. Director Laurence Read spoke of the company's aspiration to move now towards a preliminary economic assessment.

Goldplat plc (LON:GDP) produced nearly 8,800 ounces of gold equivalent during the quarter to end December 2017. Stocks at the recovery operations have hit their highest level since 2013, and production at the Kilimapesa mine in Kenya should increase now that disruptions related to the election are over.

IXICO Plc (LON:IXI) said it had landed a US$2.7mln contract to deploy its digital technologies in research being carried out by a global pharmaceutical company into progressive supranuclear palsy (PSP). The seven-year deal, which starts immediately, builds on a relationship with an existing customer.

Amryt Pharma PLC (LON:AMYT) has signed a fourth distribution deal in three months for Lojuxta, which is used to treat a rare and life-threatening cholesterol disorder. The agreement, covering Romania and Bulgaria, is with Romastru Trading, part of the Pharaon Healthcare Europe conglomerate.

Scancell Holdings Plc (LON:SCLP) expects to submit an investigational new drug (IND) application for its SCIB1 skin cancer drug candidate in the first half of 2016.

Symphony Environmental PLC (LON:SYM) has repeated its call for plastics in future to made of oxo-biodegradable material. Symphony highlighted the benefits of its d2w controlled life plastic in a film shown by the BBC World Service.

Obtala Ltd (LON:OBT) told investors it is raising £4.5mln of new capital and unveiled a new acquisition to further expand its forestry business. It has entered into an agreement to acquire NSMS, an Ivory Coast based forestry operation, which is expected to compliment the Woodbois business which was acquired six months ago - the Woodbois trading arm has worked with NSMS for ten years.

Wolf Minerals Ltd (LON:WLFE) has boosted quarterly production of tungsten concentrate at its Drakelands mine in Devon by 22%. Sales rose by 36% against a backdrop of improving tungsten prices. The company remains in discussions with major creditor RCF.

Chartered financial analyst Paraag Amin is to join marketing automation specialist dotdigital Group PLC (LON:DOTD) as chief financial officer.

Strategic Minerals Plc (LON:SML) (USOTC:SMCDY), the diversified mineral development and production company, has announced that its three directors, Alan Broome, Peter Wale and John Peters have exercised a total of 15,000,000 vested options. The group said th2 exercise of these options completes all vested options expiring 30 June 2018, while a further 25,000,000 vested options exist, all held by the Company's three Directors, with an expiry date of 30 June 2019.

6.45am: Sharp drop predicted after US reverse 

The FTSE 100 is forecast to drop back in early trading on Tuesday, reversing modest gains in the previous session, following further sharp falls overnight falls by US markets on rising bond yields and inflationary worries.

Spread betting firm CMC Markets expects the UK blue chip index to open around 54 points lower at 7,617 having added 7.42 points on Monday.

Overnight in New York, the Dow Jones shed 177 points to 26,439, although the broader S&P 500 index rose 1.2%.

Michael Hewson, chief market analyst at CMC Markets UK, commented: “The US 10 year yield pushed above the 2.7% level for the first time since April 2014, while the 2 year yield rose to its highest level since September 2008 ahead of this weeks Fed rate meeting, and the prospect that US policymakers could well revise their forecasts higher for the US economy in light of the recent tax changes brought in by the Trump administration earlier this month.”

He added: “The rise in yields appears to be also being driven by rising inflation expectations after a string of US companies announced that they would be passing on some of the proceeds of the recent tax cuts in the form of bonuses or wage increases.”

On currency markets, the pound was steady versus the dollar overnight with all eyes on that first Federal Reserve policy meeting of 2018, which starts later on Tuesday, although it is expected be one of the more uneventful FOMC meetings in some time.

The likelihood of a hike on Wednesday evening is near zero, and the fact that there is no press conference or update to economic projections means only the statement will be in focus.

Pizza on the menu

On the corporate front, Domino’s Pizza Group PLC (LON:DOM) will deliver its latest trading update on Tuesday, with further progress expected after its third quarter update back in October showed solid like-for-like sale growth.

That was on fairly weak comparatives though, and questions remain over margins and the long-term sales growth trends.

Elsewhere, first half results from Imperial Leather soap to St Tropez tanning products group PZ Cussons PLC (LON:PZC) are likely to be dull reflecting lower profitability in Europe and Africa amid challenging trading conditions in these key markets.

But Numis analysts expect property portal ZPG Plc (LON:ZPG) to issue a reassuring and solid trading update, although they do not expect any major surprises this early in the year.

The analysts noted that ZPG’s outlook comments at the time of the results confirmed that 2018 had started well across both divisions and that management remained comfortable with market expectations for 2018.

Significant events expected on Tuesday January 30:

Trading updates: CYBG PLC (LON:CYBG), Domino’s Pizza Group PLC (LON:DOM), ZPG Plc (LON:ZPG), Greencore PLC (LON:GNC),  Restore Plc (LON:RST), UDG Healthcare PLC (LON:UDG), Avocet Mining PLC (LON:AVM),

Interims: Filtronic PLC (LON:FTC), NWF Group plc (LON:NWF), PZ Cussons PLC (LON:PZC)

Finals: Oxford Biodynamics PLC (LON:ODB)

Economic data: UK consumer credit; UK mortgage approvals; EU preliminary Q4 GDP; US consumer confidence; US Case-Shiller house prices index; US FOMC meeting begins

Around the markets:

  • Sterling: US$1.4167, down 0.01%
  • Gold: US$1,352 an ounce, down 0.8%
  • Brent crude: US$64.80 a barrel, down 1.2%

City Headlines:

  • Apple shares fall as iPhone X production halve – Daily Telegraph
  • Unhappy Monday for fashion group: The company behind the Joe Bloggs and Elizabeth Emanuel fashion brands has gone into administration and is selling its assets - The Times
  • GKN vultures Melrose pledge £150mln for pensions to help write off a £700mln black hole – Daily Mail
  • Relx boosts cybercrime defences in £580mln Californian deal – The Times
  • US files ‘spoofing’ charges against UBS, HSBC and Deutsche Bank – Daily Telegraph
  • Peppa Pig-owner Entertainment One buys US production house behind Saving Private Ryan and Grey’s Anatomy – Daily Mail
  • Sky Bet hires bankers to take advantage of buoyant stock market - CityAM
  • Elliott Advisors said to be in takeover talks with Waterstones – The Daily Telegraph
  • Jamie Dimon to remain JPMorgan chief for 5 more years – Financial Times
  • US insurer MetLife reveals big charge after pension blunder – Financial Times
  • Russian oil and gas pipemaker TMK to IPO US unit in New York – Financial Times
  • US chipmaker Maxim leaps on talk of US$20bn bid from Renesas – Financial Times
  • Tesla tycoon begins selling £400 flame throwers to fund a tunnel-digging company – Daily Mail
  • Canadian cannabis groups agree $670 million tie-up in latest sign of consolidation – Financial Times
  • French fraud officials investigate Nutella deal that sparked brawls - The Guardian
  • VW condemned for testing diesel fumes on humans and monkeys – The Guardian
  • France’s Sanofi beats Novo Nordisk with €3.9bn Ablynx deal – Financial Times
  • AMS revenues climb 252% as iPhone success boosts Apple suppliers – Financial Times
  • Wanda sells US$5.4bn stake in property unit to Tencent-led consortium – Financial Times
  • Brexit could cause energy shortages and higher gas and electricity bills, says Lords committee – The Independent
  • John Lewis, M&S and Debenhams yet to commit to new Bangladesh factory safety deal – The Independent
  • EU threatens trade war with US as furious Trump brands bloc ‘unfair – Daily Express
  • Bitcoin and Ethereum price collapses as crackdown spooks investors following £380mln heist – Daily Express

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