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FTSE 100 closes in red as resource stocks lag and Brexit debate goes on

Last updated: 17:40 12 Jun 2018 BST, First published: 06:40 12 Jun 2018 BST

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  • FTSE 100 closes down 33 at 7,703

  • Trump and Kim meet in Singapore

  • Pound higher against Euro and US dollar

  • Crunch vote on Brexit looms

 

FTSE 100 closed in the red as mining stocks took a hit and traders fretted over Brexit developments.

The UK blue chip index closed down around 33 points at 7,703, while FTSE 250 was also lower, down 77 at 21,241.

It comes amid 48hours of votes on amendments to the EU withdrawal bill made by the House of Lords. Commentators say the outcome could dictate Prime Minister Theresa May's political future.

In the currency markets, the pound is higher, up 0.26% against the Euro, and up 0.24% against the US dollar. On Wall Street, stocks were higher, if not lacklustre, after the much awaited Trump, Jong-Un summit.

The Dow Jones Industrial Average is up nearly six points to 25,328 at the time of writing.

Top loser on Footsie is Anglo American plc (LON:AAL), which shed 3.24% to stand at 1,812.60p.

3.25pm: Footsie struggling for momentum

The FTSE 100 has been unable to mount a comeback this afternoon, even though the pound has reversed earlier gains and is now 0.1% down against both the euro and dollar.

That should help to prop up the blue-chips as it makes their earnings worth more when translated back into sterling.

Alas, that hasn’t been the case, with the index down 15.7 points, or 0.2%, to 7,721.8.

A mix of heavyweight miners and housebuilders are dragging on the footsie.

Barratt Developments PLC (LON:BDEV) (down 2.5% to 564.2p), Berkeley Group PLC (LON:BKG) (down 2.2% to £42.08) and Persimmon PLC (LON:PSN) (down 1.6% to £28.14) have all been hit by a cautious update from FTSE 250 peer Crest Nicholson Holdings PLC (LON:CRST).

Among the miners in the red is Anglo American PLC (LON:AAL), which has dropped 2.5% to £18.27, and Antofagasta PLC (LON:ANTO), which has lost 1.7% to £10.74.

British Gas owner Centrica PLC (LON:CNA) has been the day’s top riser throughout, rising 3.4% to 149.5p, after analysts at Jefferies issued a bullish ‘buy’ note on the stock.

3pm: FCA to take no action against Scottish Widows

The Financial Conduct Authority (FCA) has closed a long-running investigation into Lloyds Banking Group PLC’s (LON:LLOY) Scottish Widows unit without taking any action.

The FCA said that there was "insufficient basis for taking any enforcement action" but added that it would raise several matters uncovered by the investigation with the life insurer and pensions provider.

The regulator had been investigating Scottish Widows and five other insurers since March 2016 after conducting a review of their treatment of longstanding customers.

Scottish Widows is the second insurer to escape FCA penalties after the regulator closed its investigation of Police Mutual in September 2017.

2.50pm: Mixed start in US

It was a mixed start over in the US as the Federal Reserve begins its two-day policy meeting, while the Trump-Kim meeting has failed to impress investors on both sides of the pond.

The Dow Jones Industrial Average is down 30.9 points, or 0.1%, to 25,291.5; while the Nasdaq and S&P 500 have both made small gains in early trading over in New York.

2.40pm: Parliament to vote on EU Withdrawal Bill

Two days of voting kicks off this afternoon as MPs vote on the EU Withdrawal Bill – a key piece of legislation that Theresa May needs to pass if she is to make her government’s Brexit strategy work.

The MPs will vote on issues such as whether Parliament gets a “meaningful” vote on any final deal struck between the UK and the EU, as well as a piece of legislation which would force the PM to negotiate a customs union with the EU.

Some MPs have already come out and said they won’t be backing May, so it will be a real test of her leadership. Here’s what to expect:

2.20pm: US inflation hits six-year high

US headline inflation rose to 2.8% in May, with transport, tobacco and housing the main contributors. Core inflation also came in as expected, rising 2.2%.

“With core CPI on the rise, the Fed is set to hike tomorrow and signal two more rate increases in 2H18,” said ING’s team of economists.

The pound has reversed this morning’s gains and is now broadly flat against the euro and dollar at €1.135 and US$1.338.

1.35pm: Pound pares gains

Still, the FTSE 100 has been unable to take advantage of that. Like most of its European counterparts, the index has been stuck in a malaise following Trump’s meeting with Kim Jong-un earlier today.

Despite its significance, the summit has had little impact on the financial markets, with worries of a trade war between the US and its European allies dictating any movements.

The FTSE 100 is currently down 24.0 points, or 0.3%, to 7,713.5, although it had threatened to go below 7,700 at one point.

Leading the blue-chips lowers are the housebuilders, victims of a cautious update from their FTSE 250 peer Crest Nicholson Holdings PLC (LON:CRST), which itself is down 5.7%.

That’s weighing on Barratt Developments PLC (LON:BDEV) (down 2.7% to 563.8p), Berkeley Group PLC (LON:BKG) (down 2.5% to £41.96) and Persimmon PLC (LON:PSN) (down 1.6% to £28.16).

Miners are also nursing losses, with Anglo American PLC (LON:AAL) (down 2.7% to £18.23), BHP Billiton plc (LON:BLT) (down 1.4% to £17.44) and Antofagasta PLC (LON:ANTO) (down 1.7% to £10.75).

British Gas owner Centrica PLC (LON:CNA) is among the risers, advancing 3% to 148.9p after its stock was upgraded by Jefferies’ analysts.

Rolls-Royce Holding PLC (LON:RR.) is another in the black, recouping some of yesterday’s losses after the discovery of another engine issue prompted a mini sell-off.

12.55pm: US stocks to open lower ahead of inflation data

The US markets are expected to follow European counterparts and open in muted fashion ahead of inflation due later this afternoon (UK time).

The Dow Jones is expected to open 7 points in the red at 25,316.8, while the tech-heavy Nasdaq is called 3.9 points lower at 7,165.8.

The broader S&P 500 is expected to fare a little better, opening flat at 2,782.3.

“The US has its own intriguing bit of data this Tuesday in the form of May’s inflation reading, which is forecast to remain at 0.2%, though reaction may be lIMIted given how locked on a rate hike on Wednesday appears to be,” said Spreadex analyst Connor Campbell.

12pm: ‘Uncertain outlook’ hurts Ted Baker share price

British fashion chain Ted Baker PLC (LON:TED) has reported a rise in sales over the past five months, despite the impact from the ‘Beast from the East’ and snowstorms along the US east coast earlier in the year.

Total retail sales increased by 0.7% during the 19 weeks ended June 9. Online was the main driver, with sales in that division climbing by a third.

Still, Ted’s stock is down 3.2% so far today on a far from rosy outlook. The FTSE 250 group said trading conditions remain “challenging” across most of its global markets.

11.35am: Department stores need to adapt

While high street retailers have been hit hard by the shift to online and weakening consumer confidence, department stores have arguably had it worse.

To try to counteract that, they're coming up with new ways to get people through their doors.

11.25am: Another Alzheimer’s drug failure …

AstraZeneca PLC (LON:AZN) and Eli Lilly and Co (NYSE:LLY) have called time on the Phase III trials of their Alzheimer’s drug after interim data suggested it was ineffective at treating the neurodegenerative disease.

Results from the AMARANTH and DAYBREAK-ALZ trials, which were testing lanabecestat on patients with mild Alzheimer’s disease, were not due to be published for another year or so.

But the two pharma giants said on Tuesday they were stopping the studies on recommendations by an independent data monitoring committee which found that the drug was unlikely to meet its primary endpoints.

Alzheimer’s is proving a particularly hard nut to crack for Big Pharma: 99% of all drugs designed to treat it have failed clinical trials in the past ten years.

There are currently only four approved drugs which treat the symptoms of the disease which affects tens of millions of people around the world.

11.15am: Kepler turns sours on Tate & Lyle

Tate & Lyle PLC (LON:TATE) has headed lower this morning after European broker Kepler Cheuvreux turned sour on the FTSE 250 food ingredients business.

Kepler analysts knocked Tate & Lyle down to ‘reduce’ from ‘buy’, questioning the firm’s ability to top its “peak-year” performance in 2017/18.

“Although we expect the current year to be quite sIMIlar EBIT-wise, we see big downside risks to the Sucralose and Commodities businesses (together c.30% EBIT) from 2019/20 onwards,” read a note to clients.

“We think the market misunderstands the dynamics there, and we are 10% below consensus EBIT numbers for 2019/20 and 15% for 2020/21.” Shares are down 2.3% to 663.2p.

10.50am: 2018 rate rise ‘less likely after latest wage data’

“Wage growth dipped unexpectedly in the three months to April, pouring cold water on hopes the Bank of England might raise interest rates at its August policy meeting,” said Hargreaves Lansdown senior economist Ben Brettell.

“The Bank views wage growth as a key indicator when considering whether to raise rates. Disappointing figures here, combined with confirmation that the economy grew by just 0.1% in Q1, should put paid to any talk of a summer rate rise.

“Policymakers had been thought to be considering raising rates in August, but I still think a rate rise this year looks unlikely. The Bank will almost certainly want confirmation that the Q1 growth figure was just a blip before raising borrowing costs.”

10.30am: Pound’s strength is Footsie’s weakness

The pound’s gains this morning have weighed on the FTSE 100, with traders already unsure on what to make of the historic meeting between Donald Trump and Kim Jong-un.

Around three-quarters of UK blue-chips’ earnings are generated abroad and a stronger pound makes them worth less when converted back.

As a result, the FTSE 100 index is down 19.7 points, or 0.3%, to 7,718.3 mid-way through the morning session.

Housebuilders and miners weigh

Housebuilders dominated the fallers list on the back of cautious trading updates from FTSE 250-listed Bellway PLC (LON:BWY) and Crest Nicholson Holdings PLC (LON:CRST), which are down 2.5% to 5.9% respectively.

They dragged Barratt Developments PLC (LON:BDEV) (down 2.7% to 563.6p), Berkeley Group PLC (LON:BKG) (down 2.5% to £42) and Persimmon PLC (LON:PSN) (down 1.6% to £28.15) with them.

There was a smattering of red among the mining stocks as well, with Anglo American PLC (LON:AAL) (down 1.7% to £18.41), BHP Billiton PLC (LON:BLT) (down 1.1% to £17.49) and Antofagasta PLC (LON:ANTO) (down 1.1% t £10.81) all nursing some losses.

British Gas owner Centrica PLC (LON:CNA) was the chief riser, up 2.1% to 147.7p, after Jefferies upgraded it to ‘buy’ and played down any fears over the looming introduction of a price cap from Ofgem.

10.15am: Pound up on decent economic data

Despite the little miss on wage growth, the pound has managed to claw back most of Monday’s losses this morning and is currently up against all of the major currencies.

Sterling has gained 0.2% to creep back above US$1.34, while it is up by a sIMIlar percentage against the euro to €1.137.

10am: ‘Wage squeeze ending’

“The latest employment data could be described as pretty solid overall, although wage growth has slightly missed the consensus forecast,” said XTB’s chief market analyst.

“Earnings excluding bonuses rose by 2.8% compared to the 2.9% expected but this represents another month of real wage growth with the CPI for April coming in at 2.4%.

“The squeeze on real wages seems to be alleviating somewhat, as inflation has drifted back towards target after peaking near the back-end of last year and we’ll get the latest CPI release out tomorrow, which is expected to remain at 2.4%.”

9.45am: Employment rises but wage growth slows

The number of people unemployed in the UK fell by 38,000 to 1.42mln in the three months to April, according to the latest batch of data from the Office for National Statistics.

There was also a larger than expected rise in the number of people in work – 32.4mln in the February-April period. That was 146,000 more than the prior quarter and 440,000 more than in the year-ago period.

Despite the rise in employment, wage growth fell slightly over the same period. The ONS said average earnings - excluding bonuses - rose by 2.8%, slightly lower than the 2.9% growth rate between January to March.

9.30am: PrettyLittleThing the star for Boohoo

Another storming performance by its PrettyLittleThing arm sent revenues soaring at online fashion group Boohoo.com PLC (LON:BOO). 

Group revenue rose 53% to £183.6mln in the half year to May, but shares slipped in early deals as investors fretted over the performance of the core Boohoo brand.

Almost all of the growth came from PLT, where sales jumped 158% to £79.2mln and margins also climbed, but the original boohoo operation was less spectacular, with sales rising ‘just’ 12% to £97.2mln and margins slipping.

Shares fell 4.4% in morning trading to 211p.

9.10am: Domino’s CFO in ‘shock’ departure

The departure of Domino Pizza Group PLC’s (LON:DOM) chief financial officer has sent the stock 6% lower in early deals to 361.9p.

The pizza delivery group said Rachel Osborne stood down from her post yesterday, leaving the FTSE 250 firm looking for its fourth CFO since 2015.

City broker Liberum described Osborne’s exit as a “shock”, adding: “We question whether there is an internal cultural issue, whether she cannot see a path to maxIMIsing her remuneration scheme or other issues? Whatever the answer is, it does not look good and begs corporate governance questions.”

8.40am: FTSE opens slightly higher

The FTSE 100 opened in subdued fashion as traders absorbed the almost surreal images beamed from Singapore which showed the two pantomime dames of world politics shaking hands ahead of their historic summit.

The index of blue-chip shares rose just seven points to 7,744.87 as Donald Trump and Kim Jong-un ended negotiations that could lead to the de-nuclearisation of the Korean peninsula by signing a joint document.

Trump described the official missive as "important" and "comprehensive," but few other details were offered. A press conference at 9am London time may provide more details.

It's unclear currently what will end up defining market sentiment here in the UK  - will it be jobs data later this morning or the latest Brexit vote?

On the market, housebuilders were on offer in the wake of updates from Bellway (LON:BWY) and Crest Nicholson (LON:CRST), which fell 1% and 5.2% respectively, dragging with them Barratt Developments (LON:BDEV), Berkeley (LON:BKY) and Persimmon (LON:PSN).

The big riser was Centrica (LON:CNA) with a boost coming from an unlikely source as American broker Jefferies upgraded its stance for shares in the British Gas owner to 'buy'.

Metal basher IMI (LON:IMI) was up 4.3% after Morgan Stanley upped its recommendation to 'overweight'.

Proactive news headlines:

Metal Tiger PLC (LON:MTR) and joint venture partner MOD Resources have intersected copper mineralisation in the first drillhole at the A4 Dome target, the first of seven ‘buried domes’ that will be drilled within the T3 Dome Complex in Botswana. The A4 Dome target is around five kilometres long and is located six kilometres west of the now well-established T3 Project.

Trinidad-based oil firm Touchstone Exploration Inc (LON:TXP) told investors that it produced 1,728 barrels of oil per day in the month of May. Presently, it said the current production rate is estimated at around 1,821 bopd.

IXICO PLC (LON:IXI) said an unnamed pharmaceutical client has stopped screening a Phase II/III Alzheimer's Disease trial in which its specialist imaging services were being used. Last September the US$7.7mln contract was extended to 2024. A total of US$2mln in payments have been recognised in the last two years.

Stratex International PLC (LON:STI) has signed an option agreement on two gold exploration projects in Cameroon. The projects were formerly worked on by Reservoir Minerals before it was sold to Nevsun in 2016, and thus are well-known to new Stratex chief Tim Livesy, who used to be chief operating officer at Reservoir. Stratex is also proposing to raise £1mln in new money to support work on the projects, via a placing at 0.5p per share.

Papua Mining PLC (LON: PML) has completed its first phase of reverse circulation drilling at the Double Event prospect, part of the Lighthouse gold project in Queensland, Australia. All drill holes intersected narrow quartz veins of between one and two metres in width, and some drill holes hit several such veins.

What’s more, all holes intersected at least one vein with varying amounts of visible, fresh sulphides including pyrite, arsenopyrite, galena and chalcopyrite.

Echo Energy PLC (LON:ECHO)  has told investors that drilling has now begun for the EMS-1001 well in Argentina. It is the third of four planned wells in the current programme.

Columbus Energy Resources PLC (LON:CERP) told investors it is in a strong position for exceptional growth. Today, the Trinidad focussed oil and gas firm released its financial results statement for the 12-months ended December 31 2017, which was a significant period of change.

Keywords Studios PLC (LON:KWS), the international technical services provider to the global video games industry, said it has issued 513,189 new ordinary shares to the vendors of Mindwalk in respect of the non-contingent deferred share consideration due on the second anniversary of Mindwalk being acquired. The group said there is one further payment due to the vendors of Mindwalk of US$0.5mln which is deferred until the third anniversary post-acquisition.

BB Healthcare Trust PLC (LON:BBH) announced late on Monday that it is satisfied that all inside information which the directors and the company may have to the date of this announcement has previously been notified to a regulatory information service. The company said it is therefore not prohibited from repurchasing its own securities, or issuing new securities, during the closed period which ends on the date it report results for the six months to 31 May 2018.

6.40am: FTSE 100 set to push higher

The Footsie is expected to push higher once again in early trade on Tuesday reflecting gains overnight from Asian markets as the landmark summit between US President Donald Trump  and his North Korean counter-part, Kim Jong Un continues in Singapore.

Spread betting firm London Capital Group expects the UK blue chip index to open about 13 points higher at 7,750, having closed up around 56 points on Monday.

Asian markets were firmer but volatile today, with Japan's Nikkei 225 paring earlier gains back to 0.3%, amid hopes that a deal might be struck by the bitter foes to end the nuclear stand-off on the North Korean Peninsula.

Overnight on Wall Street, however, the Dow Jones Industrial Average was more subdued, closing just 5.78 points higher at 25,322 as investors also awaited the start today of the latest Federal Reserve policy meeting, with a rise in US interest rates expected when it ends tomorrow.

On currency markets, the pound held fairly steady against both the dollar and the euro, ignoring worries over a key Brexit vote today in the House of Commons, and showing little concern either ahead of the first of this week's big batch of UK data, with the latest UK labour market report due at 9.30am.

Although commentators are now predicting that the Bank of England might be unlikely to undertake a hike in interest rates this year following last week’s dovish policy meeting, the latest UK average earnings will still be closely watched.

Excluding bonuses, wage growth is forecast to remain unchanged at 2.9% on a three-month annualised basis, though, including the bonus measure a tick down to 2.5% growth is forecast.

Employment growth is forecast to slow following last month’s very strong 197,000, while the annual unemployment rate is expected to remain at 4.2% for a third consecutive month.

Construction time

On the corporate front, updates from two home builders will be keenly eyed on Tuesday as traders look for any signs that the housing market could be softening as the inevitable progress towards Brexit saps interest.

Half-year results from mid-cap Bellway PLC (LON:BWY) in March were a tad better than the market had been expecting, with revenue up by 15%, driven by unit growth of 6% and an 8% increase in selling prices, which was consistent with guidance given in a February trading update.

The focus for the latest update, therefore will be on whether there has been any slowdown in the sales rate and also whether the firm is still on track to increase output by 600 units over the full-year, as it has predicted.

But fellow mid-cap peer Crest Nicholson Holdings PLC (LON:CRST) provided a nasty surprise with its trading news in May, with a subdued housing market hurting the group’s ability to sell some of its pricier units.

That prompted the company to warn that operating margins would be around the bottom end of its 18-20% guidance range.

Fashion focus

Elsewhere, worries over the UK retail environment will also be a focus, with fashion retailer Ted Baker PLC’s (LON:TED) latest trading update to be eyed closely after the firm flagged up a cautious start to the financial year back in March.

The FTSE 250-listed firm saw its pre-tax profit increase by 12.3% to £68.8mln in the 52 weeks to 27 January 2018, up from £61.3mln a year earlier, as its revenue rose by 11.4% to £591.7mln, up from £531.0mln.

However, the company warned that it anticipates that external trading conditions will remain challenging across many of the group's global markets.

Moving online, clothing retailer Boohoo.com PLC (LON:BOO) will also post a trading update on Tuesday, and investors’ focus is likely to turn back to sales momentum.

Boohoo.com almost doubled sales for the year ended February 28, 2018, up 97% to £579.8mln from £294.6mln, but analysts are concerned whether the firm will be able to sustain such growth.

Analysts at Deutsche Bank said: “We forecast a small pick-up in Boohoo.com brand growth to 22% in the first quarter despite tougher prior year comparatives, and gross margins of 49.4%.”

Significant events expected on Tuesday June 12:

Trading updates: Bellway PLC (LON:BWY), British American Tobacco PLC (LON:BATS), Boohoo.com PLC (LON:BOO), Ted Baker PLC (LON:TED), Trifast PLC (LON:TRI)

Interims: Crest Nicholson PLC (LON:CRST), Iomart Group PLC (LON:IOM), Pressure Technologies PLC (LON:PRES)

Finals: BP Marsh & Partners PLC (LON:BPM), CML Microsystems PLC (LON:CML), Civitas Social Housing PLC (LON:CSH), Halma PLC (LON:HLMA), Motorpoint Group PLC (LON:MOTR), Oxford Instruments PLC (LON:OXIG), Park Group PLC (LON:PKG)

AGMs: Kingfisher PLC (LON:KGF), International Consolidated Airlines Group PLC (LON:IAG)

Economic data: UK labour market data; US FOMC meeting begins; US CPI inflation

Around the markets:

  • Sterling: US$1.3362, down 0.1%
  • Gold: US$1,297.00, an ounce, down 0.2%
  • Brent crude: US$66.18 a barrel, up 0.1%

City Headlines:

  • A US law firm, which is investigating claims on behalf of WPP investors in the wake of the resignation of Sir Martin Sorrell, is preparing a class action against the company - The Times
  • Standard Chartered plans to apply for virtual banking license in Hong Kong – Financial Times
  • TUI’s chairman Klaus Mangold has ruled the tour operator out of the wave of mergers and acquisitions taking place in the sector – Daily Express
  • Vodafone’s controlling stake in its African arm will be reduced as part of efforts to increase black ownership of companies in South Africa – Daily Telegraph
  • Prrivate jet broker Air Partner has concluded a review into an accounting foul-up that resulted in a £4 million hole in its financial statements – The Times
  • Citigroup’s investment bank might shed half of its 20,000 technology and operations staff in the next five years due to automation – Financial Times
  • TSB might have to cough up £110mln a year to its Spanish owners for a botched IT upgrade – Daily Mail
  • Jaguar Land Rover is moving the production of its Discovery off-roader from Solihull plant to its giant new factory in Slovakia, risking job cuts – Daily Telegraph
  • Ofgem could make it harder for new firms to enter the energy market, citing concerns over poor customer service and lack of financial resilience – The Guardian
  • Malaysia’s governing coalition is set to investigate the purchase of Battersea Power Station, the biggest property deal in the UK, as part of “dubious” investments made by the previous administration – The Guardian
  • The price of thermal coal has surged to the highest level since 2012 due to strong Asian demand – Financial Times
  • The price of bitcoin and other virtual currencies fell sharply after South Korean cryptocurrency exchange Coinrail was hacked over the weekend – The Guardian

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