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FTSE 100 closes in red amid trader tensions but Tesco soars

Last updated: 17:27 11 Apr 2018 BST, First published: 06:44 11 Apr 2018 BST

Tesco store
  • FTSE 100 closes around 9 pts down

  • Tesco soars

  • US benchmarks mixed

  • US inflation moves into negative territory in March

 

FTSE 100 closed in the red as traders were put off shares due to tensions surrounding the US, Russia and Syria.

President Trump earlier stoked the fire by suggesting that the US would consider air strikes in Syria and taunting Russia.

He said, "You shouldn't be partners with a Gas Killing Animal who kills his people and enjoys it!" he told Russia in a tweet - his preferred communications medium.

FTSE 100 closed around 9.6 points lower at 7,257, while FTSE 250 she around 20 points at 19,654.

In the currency markets,  the pound was off 0.07% against the Euro but up 0.11% against the US dollar.

Top riser was supermarket supertanker Tesco PLC (LON:TSCO), which added over 7% to 225.40p after reporting a sharp rise in full year profits, which beat forecasts.

The retailer revealed full-year profits of £1.3 billion, while traders were predicting £1.1 billion, noted analyst David Madden at CMC Markets.

"Tesco is still trimming costs, and once Brooker Group is fully integrated into the business it will produce synergies of £140 million over the next two years. Revenue increased for a ninth consecutive quarter, and that is a major accomplishment given the difficult consumer environment," he said.

British Gas owner Centrica plc (LON:CNA) was among the top losers, off 2.56% to 138.90p.

4.00pm: Facebook is not a media company, Zuckerberg says

Facebook chief executive Mark Zuckerberg has told Congress that the group is not a media company at a hearing regarding its data breach.

"I consider us to be a technology company because the primary thing that we do is have engineers who write code and build product and services for other people," Zuckerberg said during his second day of testimony on Capitol Hill.

Zuckerberg is facing questions after political consultancy Cambridge Analytica allegedly gathered data from Facebook profiles for election campaigns without permission.

3.40pm: Ex-Treasury Select Committee chairman Andrew Tyrie to lead CMA

The Competition Markets Authority has appointed Andrew Tyrie, the former head of the Treasury Select Committee, as its chairman.

Tyrie will succeed David Currie at a time when the CMA is investigating major deals including 21st Century Fox’s takeover bid for Sky PLC (LON:SKY), Trinity Mirror PLC’s (LON:TRI) acquisition of the Express and Star newspapers and the Co-operative Group’s proposed offer for Nisa.

As the chair of the TSC, Tyrie gained a reputation for his grilling of Bank of England officials, prime ministers and company executives. 

3.00pm: ING expects three US rates hikes this year

The Federal Reserve is likely to raise interest rates three times this year after core inflation moved back above its 2% target in March, according to ING Research.

Core inflation rose to an annual rate of 2.1% in March from 1.8% in February.

“With the weaker dollar likely to drive prices higher over coming months (particularly as firms have the pricing power to pass these costs on in this strong economic environment), we think core inflation will continue edging higher this year,” ING said.

“And with skill shortages intensifying in the jobs market, we’d expect wage growth to gradually rise too.

“We think this makes it all the more likely that the Fed will hike three more times this year, although policymakers will also be watching closely to see how the recent trade escalations play out over the next few weeks.”

2.30pm: US stocks drop amid geopolitical concerns

US stocks opened lowered after President Donald Trump fuelled geopolitical concerns by indicating he was considering air strikes in Syria.

The Dow Jones Industrial Average fell 179 points to 24,235, the S&P 500 index decreased 13 points to 2,643 and the Nasdaq dropped 31 points to 7,062.

Trump took to Twitter to say:

The tweet sparked fresh concerns about geopolitical tensions amid a US dispute with China over trade tariffs.

 

1.40pm: US inflation unexpectedly declines

Consumer price inflation unexpectedly moved into negative territory in March, driven by a fall in gasoline prices.

CPI dropped 0.1% month-on-month after rising 0.2% in February. Economists were expecting a flat rate.

Core CPI, which excludes volatile food and energy prices, rose 0.2% on the month, in line with February’s growth and analysts' forecasts.

The annual rate of headline inflation accelerated to 2.4% from 2.2%, as expected, while core inflation rose to an annual rate of 2.1% from 1.8%, aslo in line with forecasts.

Meanwhile, US stocks are poised to fall with Dow Jones Industrial Average futures down 245 poitns to 24,106, S&P 500 futures down 24 points to 2,630 and Nasdaq futures down 61 points to 6,563. 

1.20pm: Shop Direct to shut three sites with nearly 2,000 job losses

Another retailer is showing signs of trouble with Shop Direct announcing it will close three sites in Greater Manchester, making 1,992 employees redundant. 

Shop Direct, which owns Littlewoods, will replace the sites at Shaw, Little Hulton and Raven with a new warehouse in East Midlands Gateway.

The group said the reason for shutting the three sites was because they have  “limited accessibility, layout and loading restrictions”, and no longer meet its  “operational ambitions”.

The East Midlands Gateway site will be automated once operational in 2020.

12.40pm: NIESR estimates slowdown in UK economic growth

UK economic growth slowed to 0.2% in the first quarter of this year from 0.4% in the fourth quarter, according to the latest estimate from the National Institute of Economic and Social Research.

“The main reason for the weakness was severe weather in March which is likely to have disrupted activity in all major sectors of the economy,” said Amit Kara, head of UK macroeconomic forecasting at NISER.

“There is a small offset in industrial production growth which recovered in the first quarter after the previous quarter was affected by the Fortis oil pipeline shutdown.”

However, Kara said there could be revisions to the data down the track.

“Take for example the quarterly GDP growth for the final quarter of 2010 when the UK experienced a prolonged period of extreme cold weather,” he said.

“The economy was initially estimated to have shrunk by 0.5% but subsequent data revisions show that the economy expanded by 0.1% over this period.”

12.10pm: FTSE 100 lower in lunchtime trading

The FTSE 100 fell 16 points to 7,250 following disappointing UK economic data and as worries about a trade war between the US and China persisted.

Investors were digesting official data on manufacturing, industrial and construction production for February, which missed expectations.

Meanwhile, fears about the dispute between the US and China over tariffs escalated after IMF boss Christine Lagarde warned global governments of the stark consequences of protectionism.

On the corporate front, Tesco PLC (LON:TSCO) was the biggest risers on the FTSE 100 after reporting a sharp rise in full year profits that beat forecasts.

Sector peer WM Morrison Supermarkets PLC (LON:MRW) was also higher.

McCarthy & Stone PLC (LON:MCS) shares slumped after posting a 52% drop in half year pre-tax profit.

PageGroup PLC (LON:PAGE) was also on the back foot as it reported growth in first quarter gross profit but cautioned on ongoing macro-economic headwinds. 

11.40am: IMF boss warns against protectionism

International Monetary Fund chief Christine Lagarde has warned that the dispute between the US and China over tariffs could tear the current system for world trade apart.

She urged governments around the world to steer clear of protectionism that could hurt growth.

“History shows that import restrictions hurt everyone, especially poorer consumers," Lagarde she told a conference in Hong Kong on Wednesday.

"Not only do they lead to more expensive products and more limited choices, but they also prevent trade from playing its essential role in boosting productivity and spreading new technologies."

11.00am: Prepare for wilder times ahead, anlayst warns investors

Investors may need to be prepared for wilder times ahead as the FTSE 100 and S&P 500 have been behaving calmly despite talk of stock market volatility, according to Russ Mould, investment director at AJ Bell

“Similar quiet periods to match the subdued stock market action of 2015-2017 – such as 1994-1996 and 2004-2006 – were followed by a real spike in volatility which ultimately heralded the market tops of 2000 and 2007,” Mould warned.

“One lesson investors can therefore draw from history – were it to repeat itself – are that we haven’t seen anything yet in terms of volatility.

At the moment the US seems more jittery than the UK, which makes sense given how American stocks trade on much higher valuations than British ones on average, he added.

“Investors in British stocks are, for the moment at least, more sanguine, despite ongoing concerns over Brexit, the prospect of a more aggressive Bank of England and wider worries over what tariffs may mean for global trade and economic growth,” he said.

10.30am: Icy weather only part to blame for lower construction output, says analyst

Blane Perrotton, managing director of the national property consultancy and surveyors Naismiths, said only so much of February’s slowdown in construction production can be explained away by the icy weather.

He said despite a modest upward revision to January's year-on-year figures to a 2.1% decline, the first two months of the year shows activity is slowing.

“The bright spots are getting fewer and further between," he said.

"Housebuilders continue to shine as low interest rates and a chronic shortage of homes keep demand burning bright. Infrastructure too offers some hope, with London’s three flagship projects – the Thames Tideway Tunnel, Heathrow Q6 and Crossrail – together committing to more than £1.7bn of capital expenditure in 2018-19.

“But these strong points are increasingly looking like outliers, as commercial property demand cools and developers concentrate on completing existing projects rather than commissioning new ones."

Perrotton said the economic backdrop remains benign with low interest rates, readily available finance and a resurgent pound bringing down the cost of imported construction materials but confidence remains scarce.

“While order books remain strong outside London, softening demand and investor caution in the southeast mean that, for now, the industry as a whole remains caught in an awkward limbo.”

9.40am: UK trade deficit narrows, manufacturing output falls

The UK’s goods trade deficit with the rest of the world narrowed to £10.2mln in February from £12.2bn a month earlier, the Office for National Statistics revealed.

Economists were expecting a deficit of £11.9bn.

Separately the ONS said manufacturing production in February fell for the first time in almost a year by 0.2% month-on-month. That missed forecasts for a 0.2% rise.

Industrial production edged up 0.1% in February from a month ago, below expectations for a 0.4% increase.

Construction output slumped 1.6% against estimates for a 0.7% gain. The ONS said heavy snow in late February hurt construction but the impact was difficult to quantify.

8.40am: FTSE opens in the red

The FTSE 100 gave back some of the gains made Tuesday, taking its cue from Asia’s main markets where traders locked in profits.

The index of blue-chip shares receded 18 points to 7,248.63.

Tesco PLC (LON:TSCO) shares were in demand early as they shot to the top of the risers’ list with a 3.8% gain after full-year results revealed an 81% surge in operating profits.

Underlying sales, the litmus test for supermarket groups, were up a resilient 2.2% and, importantly for income-seeking investors, the grocer restored the annual payout.

Tesco is enjoying a renaissance, and its turnaround plan is literally paying dividends to shareholders,” said Laith Khalaf, senior analyst at funds group Hargreaves Lansdown.

“The payment announced today puts the stock on a yield of around 1.5%, not a great deal to write home about, but after a three year hiatus investors will be pleased to see the dividend taps flowing again.

“Looking forward Tesco intends to pay out around half its earnings to shareholders, so improved business performance will mean the dividend has scope to grow too.”

Big fish, small pond

Stepping down to AIM, but looking at a company that at £5.3bn is big enough to qualify for the Footsie, results from online fashionista ASOS (LON:ASC) were not as well received as the latest till-roll numbers from Tesco.

Shares in the group fell 10% after its interim results statement revealed the company plans to make considerable investment in infrastructure.

Liberum Capital said profit and sales were in line with expectations so isn’t changing its forecasts.

It rates the stock a ‘buy’ up to £80 – around £17 above the current price.

“ASOS is benefitting from scale and first mover advantage and its strategy is centred around entrenching its position through a centralised distribution network alongside a best-in class product and engagement strategy,” Liberum added.

Proactive news headlines:

Flying Brand Ltd's (LON:FBDU) newly-acquired subsidiary, Imaging Biometrics (IB), has inked a distribution agreement with EnvoyAI, an artificial intelligence exchange platform.  IB Neuro, which measures blood volume in the brain, and the Delta T1 mapping algorithm, are now available for purchase on the exchange.

Ergomed Plc (LON:ERGO), which provides specialist services to the pharmaceutical industry, enjoyed another year of strong growth in its service business in 2017.

An independent technical report to accompany the recent drilling at Landore Resources Limited’s (LON:LND) BAM East gold deposit has indicated 'excellent potential' to expand the size of the resource. Roscoe Postle Associates said there was potential to expand the limits of the deposit at BAM East and to discover zones of additional gold mineralisation along the Junior Lake Shear Zone.

European Metals Holdings Limited (EMH) (LON:EMH) has named Neil Meadows as its chief operating officer, a non-board appointment. The AIM-listed firm said Meadows has previously held the position of chief operating officer at Karara Mining Ltd, managing director of IMX Resources Limited and worked with the Australian Premium Iron Ore Joint Venture on mine infrastructure.

Capital Drilling Limited (LON:CAPD) said it has been awarded a three-year contract with Resolute Mining Limited (ASX:RSG) to provide drilling services in Mali. The drilling solutions company said it would provide surface drilling for exploration and resource development at Resolute’s projects and joint venture operations in the West African nation.

Cabot Energy Plc (LON:CAB) told investors that production in April averaged 950 barrels of oil per day, meanwhile, the measure for the first three months of the year averaged 725 bopd. It is anticipated that another 200 bopd of crude production will be brought online through the second quarter. 

Bushveld Minerals Limited (LON:BMN) said its Bushveld Energy subsidiary has been experiencing increased requests for electrolyte supply and vanadium redox flow battery technology for energy storage projects.

Range Resources Ltd (LON:RRL) told investors it has reached an agreement with Colombia’s Agencia Nacional de Hidrocarburos (ANH) to settle all outstanding claims and disputes between ANH and the consortium of Optima Oil Corporation and the company. Previously, in 2016, ANH sought a US$53mln claim in relation to allegations that work commitments weren’t fulfilled and that invalid letters of credit had been presented.

6.45am: FTSE 100 expected to fall 

UK stocks were expected to give back some of yesterday's handsome gains on Wednesday despite a strong showing last night on Wall Street.

The FTSE 100, which rose 72 points yesterday to close at 7,267, was seen opening 26 points lower at 7,241.

US markets had a bumper day, encouraged by comments from China's president, Xi Jinping, about giving foreign companies greater access to the People's Republic's financial and manufacturing sectors.

The Dow Jones rose 429 points to close at 24,408 while the broader-based S&P 500 climbed 44 points to 2,657.

Xi Jingping's comments gave heart to investors in Hong Kong and Shanghai; Hong Kong's Hang Seng index was up 222 at 30,951 heading towards the end of trading while the Shanghai Composite was up 23 at 3,213.

In Japan, the Nikkei 225 was down 80 at 21,714.

On the home front, retailers old and new will take centre stage this morning.

Supermarket giant Tesco is expected to announce full-year earnings before interest and tax (Ebit) of around £1.65bn.

With the acquisition of Booker now rubber-stamped, analysts will be looking for commentary regarding the integration of the cash-and-carry outfit, and the £200mln of revenue and cost synergies that were targeted at the time of the original announcement.

Elsewhere in the retail sector, online fashion giant ASOS’s strong sales growth is expected to have continued.

The Aim-listed firm’s UK retail sales jumped 23% in the four months to the end of December, while international posted an even punchier 32% growth.

Historically, the group has suffered from growing pains, as increasing sales have outstripped its ability to fulfil them, and as a result, investment in infrastructure has stepped up – expected to be at the upper end of the £200mln-£220mln range this year.

That investment could hold back profits this year, but in the longer term, building scale is key to driving profitability.

On the macro front, the main event will be the release of the minutes of the most recent meeting of the US central bank's policy-making committee.

Significant announcements expected

Trading update: PageGroup PLC (LON:PAGE)

Interims: ASOS plc (LON:ASC), McCarthy & Stone PLC (LON:MCS)

Finals: Tesco PLC (LON:TSCO), Epwin Group PLC (LON:EPWIN), Ergomed Plc (LON:ERGO), Shield Therapeutics PLC (LON:STX), Summit Therapeutics PLC (LON:SUM)

Economic data: UK trade; UK construction output; US CPI; US FOMC minutes; US Treasury Budget

Around the markets

  • Sterling: US$1.4184, up 0.07 cents
  • 10-year gilt: yielding 1.408%
  • Gold: US$1,345.50 an ounce, down 50 cents
  • Brent crude: US$70.75 a barrel, down 29 cents
  • Bitcoin: £4,830.60, up £5.02

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Don’t flout sanctions, banks told: US Treasury warns of ‘consequences’

Trump hails China’s promise to cut tariffs on imported goods

Daily Telegraph

Mark Zuckerberg's testimony to Congress: Facebook boss admits company working with Mueller's Russia probe

IMF warns of contagion risks from a global property slump

Volkswagen poised to axe boss Matthias Mueller

Streaming boom is sweet music for the record industry as revenues rise by 10.6pc

The Guardian

Princess Yachts motors to record profit amid boom in global wealth: Devon-based luxury boat-maker has growing order book after dip in pound and rise in optimism

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