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FTSE 100 closes in red, despite US market turnaround

Last updated: 17:30 22 Feb 2018 GMT, First published: 06:40 22 Feb 2018 GMT

Royal Bank of Scotland

 

FTSE 100 closed down around 29 points at 7,252, despite US markets gaining ground after yesterday's sell-off.

US traders appear to have embraced the idea of interest rate rises, which may take effect faster than previously thought.

"A further tightening of monetary policy would suggest the US economy is performing well, and in the long-run is positive news," said David Madden at CMC Markets.

The Dow Jones is up 324 points, or 1.32%, at the time of writing.

Back in the UK, FTSE 250 also lagged, dropping almost 53 points at 19,736.

In the currency markets, the pound added 0.16% against the US dollar, but dropped 0.17% against the Euro.

The top loser on Footsie is developer Barratt Developments plc (LON:BDEV), which shed 2.75% to 551.80p, while the top gainer was utility Centrica plc (LON:CNA), which added 7.53% to 142.15p.

Barclays (LON:BARC) , the banking behemoth, added 4.4% to 211p after it unveiled a double digit rise in pre-tax profits, and pledged to more than double the dividend next year.

 

3:30 pm: FTSE 100 set to lose 1%, UK banks remain trading feature as attentions turn to Royal Bank of Scotland Plc

With just less than an hour of trading remaining for Thursday in London, the FTSE 100 looks set to lose around 1%.

The blue-chip index was down 71 points or 0.98% trading at 7,209, meanwhile, the FTSE 250 was down 152 points or 0.77% at 19,636.

Barclays Plc (LON:BARC) led the banking stocks which, as reporting week continues, has been a stand out trading feature.

Lloyds Banking Group Plc (LON:LLOY) was again very actively traded, following on from Wednesday’s results inspired rally – though the black-horse bank’s shares were down 0.9% at 69p.

Attentions will be quickly turning to Royal Bank of Scotland Plc (LON:RBS), up 0.47% at 278.7p, as it is the next name on the schedule with its financials out tomorrow morning.

There’s faint potential for the bailed out bank to reach something of a watershed. After a decade of making losses, RBS is teetering on the brink of being back in the black, having posted profits of £1.3bn for the first nine months of 2017.

Nonetheless, analysts full-year estimates are pencilling in £2.2bn of conduct charges in the fourth quarter, which is expected to push the state-owned lender into a loss of £592mln, its tenth consecutive year in the red.

Eyes will be firmly on RBS come 7:00am on Friday.

 

 

 

 

2:45 pm: FTSE 100 struggles to get off the back foot, Wall Street stocks open higher

By Thursday afternoon the FTSE 100 continued its struggle to get off the back foot, with the blue-chip benchmark down nearly 1%.

Changing hands at 7,215 the index of London’s top 100 shares was down 66 points or 0.9%, meanwhile, the FTSE 250 lost 114 points or 0.58% to 19,675.

Over in New York, meanwhile, the Dow Jones opened strongly as it added 175 points, 0.71%, to change hands at 24,973. At the same time, the Nasdaq advanced 46 points or 0.65% to 7,262 whereas the S&P 500 lowered by around 0.55% to 2,701.

Wall Street investors have been reacting to yesterday’s Federal Reserve meeting minutes, which suggested interest rates might rise more quickly, as well as the positive US employment statistics.

“Today’s positive jobless claims data will encourage President Trump, with figures remaining significantly under the 300,000 mark and only just above the 45-year low achieved at the start of 2018,” Dennis de Jong, UFX managing director, said in a note.

“Claims haven’t remained this low for this long since the 1970s when the US labour market was much smaller, and the decrease in continuing claims would indicate that more jobs have been created within the ever-tightening labour market.”

2:30 pm: Bitcoin and cryptocurrencies slump as volatility returns

Volatility reared its head again in the cryptocurrency market as the price of Bitcoin slumped almost 5% to drop below US$10,000.

The digital currency lost US$513 or 4.9% to change hands at US$9,942.

At the same time the Ethereum price slipped US$34 or 4% to trade at US$816.70, meanwhile, the Ripple XRP was down 10.24% to 94 American cents per token and the Litecoin digital currency lost 9.18% to US$197.37.

“Bitcoin continues to be a volatile as ever, having almost double in price in two weeks since bottoming around $6,000 on 6 February,” said Craig Erlam, analyst at Oanda.

1.20pm: Finger-lickin' good news from KFC

KFC has re-opened 690 of its 900 UK stores after it was forced to close them because it had run out of chicken.

But it has not said how many of the stores are serving a full menu.

The chicken supply shortage, which started a week ago, followed KFC’s decision to switch suppliers from Bidvest to DHL. 

DHL said "operational issues" caused the supply disruption. 

KFC said yesterday that some of its stores would remain closed for the rest of the week while others will have shortened hours.  

12.45pm: US stock futures fall 

US stocks look set to fall again after minutes from the Federal Reserve hinted at more interest rate rises.

Dow Jones Industrial Average futures fell by 102 points to 24,680, S&P 500 futures dropped 5 points to 2,692 and Nasdaq futures shed 33 points to 6,726.

Equities finished lower on Wednesday after minutes from the Federal Reserve’s January meeting showed policymakers felt the US economy is stronger than at the end of 2017 and they see an “increased likelihood” of more rate hikes. 

“The minutes from the January meeting, like the statement that accompanied it, were quite hawkish and pointed to at least three rate hikes this year,” said Oanda’s Craig Erlam.

“While this is now strongly priced in – more than 50% - there is potential for a fourth and more again next year, something that appears to be worrying investors and shaking confidence in equity markets. “

In companies, Pandora Media Inc (NYSE:P) shares rose in pre-market after reporting quarterly revenue that beat analysts’ expectations. 

Avis Budget Group Inc. (NASDAQ:CAR) shares rose after the car rental company swung to a profit in the fourth quarter and sales beat forecasts. 

Wayfair Inc. (NYSE:W) slumped after the online home retailer reported a worse-than-expected fourth quarter loss.

 

12.00pm: Lunchtime trading 

The FTSE 100 fell 67 points to 7,214 as traders weighed a surprise downward revision to the estimate for fourth quarter UK economic growth.

UK GDP is estimated to have risen 0.4% quarter-on-quarter, down from the 0.5% previously expected. 

In reaction, the pound fell against the dollar and the euro. 

British American Tobacco PLC (LON:BATS) was still on the back foot after reporting a drop in organic sales volumes and BAE Systems PLC (LON:BA.L) slumped after saying it expects flat 2018 profits.

Moneysupermarket.com PLC (LON:MONY) shares plunged after the price comparison website said earnings would not grow this year as it restructures the business.

Playtech PLC (LON:PTEC) tanked as first quarter revenue fell on troubles at its Asia business.  

On the upside, Barclays PLC (LON:BARC) topped the FTSE 100, after saying it would restore dividend to a level before it cut payments two years ago.

Centrica PLC (LON:CAN) gained after announcing plans to cut costs through job cuts and selling its UK nuclear investments.

RSA Insurance PLC (LON:RSA) rallied as 2017 operating profits beat forecasts.

11.30am: Pound falls as rate hike bets recede after UK GDP 

The pound has weakened after the unexpected downward revision to fourth quarter UK GDP prompted some analysts to say the Bank of England should hold off on another interest rate hike.

Sterling is down 0.32% versus the dollar at US$1.3874 and down 0.32% against the euro at €1.1294.

“The unexpected slowdown in UK growth has been a reality check for Poundwatchers, and suddenly made Mark Carney’s hawkish tone sound discordant,” said John Dolan, senior dealer at forex company FEXCO Corporate Payments.

“With the UK sliding to last place in the G7 economic leaderboard for 2017, early indications are that 2018 is off to a slow start too.

“The Bank of England cannot allow itself to raise rates too soon for fear of sabotaging Britain’s already sputtering economic growth.”

11.00am: UK retail sales growth slows

UK retail sales growth slowed for the third month in a row in February, according to the latest quarterly Distributive Trades Survey by the Confederation of British Industry (CBI).

The survey revealed 32% of respondents said sales volumes rose from a year ago in February while 24% said they fell, giving a balance of +8%.

Most retailers, however, expect sales volumes to pick up again next month with 34% expecting them to rise and 13% to fall.

Investment intentions for the next 12 were at their highest since August 2015, the survey showed.

“While trading conditions remain tough, it’s encouraging to see retailers’ investment intentions improving to their highest since August 2015, in addition to signs of renewed business optimism for the first time in more than a year,” said CBI head of economic intelligence, Anna Leach.

10.30am: UK economy still fragile, says Pantheon

Pantheon Macroeconomics said the GDP data suggests that the UK economy remains in a fragile state and does not need to be cooled with another interest rate hike in May.

“The downward revision to Q4 GDP puts the U.K. back at the bottom of the G7 growth leaderboard for 2017,” it said.  

Jacob Deppe, head of trading at Infinox, said the slowing momentum experienced at the end of last year seems to have been dragged into the start of 2018. 

“January’s weak retail sales figures, and the news that factory orders fell to a four-month low, all point towards continued weakness in the UK economy,” he said.

“Real wages continue to fall as inflation remains stubbornly stuck at 3%, and unless the inflationary pressure eases the Bank of England may be forced to raise interest rates as early as May. Increased costs could stifle growth later in the year, even if first quarter GDP outperforms current expectations.”

10.00am: Higher inflation drags on economy 

Higher inflation was the reason that the UK’s economy has not expanded more than the previous estimates, as it put a strain on consumers, according to Naeem Aslam, chief market analyst at Think Markets UK.

"Brexit is the biggest elephant in the room and this dominates all stories," Aslam added.

"The longer the uncertainty remains around this issue, the worst the effect would be on the economy and it would create more obstacles for business and consumers."

Chris Williamson of IHS Markit said the biggest downturn in the fourth quarter was seen in the mining, oil and quarrying sector but thinks this should be temporary and sees some bounce back in the first quarter.

“However, other areas of the economy look worryingly weak," he said.

"Construction output fell 0.7%, less than the 1.0% previously estimated but still indicating that the building sector is technically in recession. Business investment was meanwhile flat, and household spending rose a modest 0.3%."

9.30am: UK GDP revised lower

The Office for National Statistics has revised its estimate of UK gross domestic product lower for the fourth quarter.

The second estimate for GDP was 0.4% quarter-on-quarter growth, down from the 0.5% in the preliminary report in January. The annual rate was also revised down to 1.4% from 1.5%.

Economists had expected the estimates to remain unchanged.

The downward revision reflected a change to estimated output of production industries, the ONS said. 

8.40am: FTSE tracks declines in US

The FTSE 100 opened in the red, tracking declines in the US and Asia after the Federal Reserve meeting minutes suggested further monetary tightening was on the horizon.

The London index dropped 65 points to 7,216p around 8.30am.

US equities finished lower after minutes from the Fed's meeting in January suggested it could raise interest rates again soon.

"With ‘a majority of participants’ arguing that ‘a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate’, the notes from January’s Fed get-together caused the Dow Jones to tailspin, the index shedding more than 1% by the end of the session," said Connor Campbell, financial analyst at Spreadex

"This in turn infected the Asian session, before blighting the European open."

Investors are also awaiting the second estimate of fourth quarter UK gross domestic product, which is expected to confirm the economy grew by 0.4% quarter-on-quarter and 1.5% year-on-year.

Barclays PLC (LON:BARC) topped the FTSE 100 after reporting a 2017 loss, but saying it would restore dividend to a level before it cut payments two years ago.

British Gas owner Centrica PLC (LON:CNA) gained as it cut 2017 debt and revealed plans to reduce costs by selling its UK nuclear investments and shunning mergers and acquisitions.

RSA Insurance PLC (LON:RSA) rallied as it saw its 2017 operating profits beat forecasts boosted by a strong performance from its Canadian and Scandinavian businesses.

British American Tobacco PLC (LON:BATS) slumped as it reported growth in full year sales and profits but a decline in organic volumes.

Sector peer Imperial Brands (LON:IMB) also fell on a negative read-across.

Anglo American PLC (LON:AAL) shares decreased as a drop in commodity prices overshadowed strong 2017 results. Lower commodity prices also dragged other mining stocks lower, including Antofagasta PLC (LON:ANTO) and Randgold Resources Ltd (LON:RRS).

Proactive news headlines:

Pre-clinical data for a potential cancer-treating combination using Sareum Holdings PLC’s (LON:SAR) Chk1 inhibitor has been presented to the American Association of Cancer Research’s annual meeting. In a poster presentation, US firm Sierra Oncology, which has exclusively licensed Sareum's cancer candidate SRA737, will demonstrate that the molecule synergizes with niraparib, a poly ADP-ribose (PARP) inhibitor.

Gas-to-power specialist Tlou Energy Limited (LON:TLOU) (ASX:TOU) said the process of connecting to the regional electricity grid in Botswana is well advanced. In its interim results statement covering the second half of 2017, managing director Tony Gilby said the period had been a very productive one for the company.

Columbus Energy Resources PLC (LON:CERP) has updated on its interests in Spain, where the operations are now being closed down due to the expiry of the company’s concession. Dismantling operations are now complete, and the concession will be formally closed shortly.

6.40am: FTSE 100 set to open lower

The FTSE 100 is expected to drop on Thursday morning following weakness across global equities benchmarks after the US Federal Reserve meeting minutes hinted at further US rate hikes.

CFD and spreadbetting firm IG Markets sees the FTSE 100 opening down 61 points, at 7,206 to 7,210, with about an hour and half to go until the open.

“The US central bank believes it will reach its inflation target of 2%, but they are not afraid of the cost of living becoming too high,” said David Madden, analyst at CMC Markets.

“Traders are fearful the US central bank might quicken their pace of interest rate hikes.”

Jasper Lawler, analyst at London Capital Group, meanwhile, said: “The stock market, focused on the fact that the Fed still had concerns of undershooting inflation. This caused the stock market to pop higher, hitting session highs.

“The bond market, however, focused in on the fact that the Fed was considering hiking rates at a faster pace. This sent 10yr treasury yields to a fresh 4 year high of 2.94%, causing a reversal in the Dow of some 300 points, as it then tumbled to finish 166 points lower.”

Overall the message appears to be that recent stock market volatility may be sticking around for longer than some hoped.

New York’s Dow Jones finished Wednesday’s trading session down 166 points or 0.67% changing hands at 24,797 while the S&P 500 lost 0.55% to 2,701 and the Nasdaq closed 0.22% lower at 7,218.

In Asia, Japan’s Nikkei shed 234 points or 1.07% to 21,736 and Hong Kong’s Hang Seng gave up 0.93% to trade at 31,133, whereas the Shanghai Composite climbed 64 points or 2.03% to 3,263.

Australia’s ASX 200, meanwhile, was ever so slightly higher at 5,950.

In terms of specific corporate news, the morning’s attentions are likely to be on Barclays PLC (LON:BARC) as the UK bank releases final results to expectant investors, following Lloyds Banking Group PLC (LON:LLOY) rallying on promises of increased shareholder pay-outs that came with its results on Wednesday.

Significant events expected on Thursday February 22:

Finals: Anglo American PLC (LON:AAL), BAE Systems PLC (LON:BA.), Barclays PLC (LON:BARC), British American Tobacco PLC (LON:BATS), Centrica PLC (LON:CAN), RSA Insurance PLC (LON:RSA), Intu Properties PLC (LON:INTU), KAZ Minerals PLC (LON:KAZ), Macfarlane Group PLC (LON:MACF), Morgan Sindall Group PLC (LON:MGNS), Playtech PLC (LON:PTEC), Rathbone Brothers PLC (LON:RAT), Vitec Group PLC (LON:VTC)

Interims: Go-Ahead Group PLC (LON:HOG), Hays plc (LON:HAS), Wilmington PLC (LON:WIL)

Trading update: Hansard Global PLC (LON:HSD), Safestore Holdings PLC (Q1) (LON:SAFE)

Ex-dividends: To knock 9.1 points off FTSE 100 index - Carnival PLC (LON:CCL), Diageo PLC (LON:DGE), GlaxoSmithKline PLC (LON:GSK), Imperial Brands PLC (LON:IMB)

Economic data: UK second reading Q4 GDP; US weekly jobless claims

Around the markets:

  • Sterling: US$1.3897, down 0.15%
  • Gold: US$1,323 per ounce, down 0.49%
  • Brent crude: US$65.02 per barrel, down 0.35%
  • Bitcoin: US$10,891, up 4.16%

City headlines:

  • Ford's US president leaves after inappropriate behaviour - Telegraph.co.uk
  • Scramble to keep Unilever in London - The Times
  • London to Amsterdam Eurostar tickets have now gone on sale - Evening Standard
  • Poorer Britons face three years of income stagnation, says report - The Guardian
  • Boston Dynamics robot fights back against armed man to open door and enter room - The Independent
  • Uber rolls out cheaper Express Pool service that rivals transit buses - USA TODAY

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