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FTSE 100 trades sideways as big oilers dented by OPEC decision

Last updated: 17:07 25 May 2017 BST, First published: 07:00 25 May 2017 BST

city of london
  • FTSE 100 closes little changed

  • OPEC agrees nine-month extension to production cut

  • First quarter UK economic growth revised down to 0.2%

  • Petrofac hammered as it suspends COO

FTSE 100 failed to hit a record high at the close, but did end firmer - just.

The bluechip benchmark closed up a tad - 2.81 points - to finish the afternoon session at 7,517.

It comes after some disappointing UK growth stats earlier, which  showed it  rising by a mere 0.2% on a quarterly basis, down from 0.3%.

Kathleen Brooks, analyst at City Index, noted: "The UK is now beginning to look like the sick man of Europe with strong GDP figures for Q1 from Spain this morning, where GDP rose 0.8% on the quarter and 3% on an annualised basis, overall Eurozone growth expanded by a 0.5% rate over the first three months’ of the year."

Meanwhile, oil stocks took a hit as the OPEC output cut extension for nine months had not gone as deep as some had hoped.

BP (LON:BP.) shed 1.13% to 473.10p, while Shell (RDSB) fell 0.21% to 2,167.47p. Brent crude eased back 0.3% to $53.80 a barrel.

3i Group (LON:III) was the top gainer on Footsie, adding 3.61% to 871.50p, as broker Canaccord hiked the price target on the stock to 975p from 875p following its full year results.

In the mid-cap index, FTSE 250 closed out around 17 points higher, at 19, 967.

Mid-session...

A late turnaround has set the FTSE 100 on course to hit a record high today.

The blue chip index is currently 9 points up today at 7,524. If it holds onto those gains when the UK markets close in an hour’s time or so, it will hit a new daily closing peak.

After flirting with record intraday highs earlier this morning, the FTSE 100 had been struggling just to keep its head above 7,500 this afternoon before a late rally sent it climbing.

Mixed day for commodities

It was a mixed day for oil and mining stocks which, for a long period, had weighed on the index for most of the day.

Initially traders seemed nervous that OPEC's rumoured nine-month extension to oil production cuts won’t do enough to drain the global supply glut which has depressed markets for more than two years, although things picked up in the afternoon.

“The market couldn’t quite decide how it felt about the deal OPEC reportedly reached this Thursday afternoon,” said Spreadex’s Connor Campbell.

“While nothing has been confirmed the word on the oil rig is that the cabal has agreed to extend the output cap by another 9 months.

"Initially Brent Crude reacted poorly, falling by 1%; it seems that, though the pact is exactly what was expected, investors were disappointed that the notoriously inharmonious group failed to bring the cap under the current 1.8 million barrel a day limit.

“However the black stuff it has now settled at a more manageable half a percent decline.”

S&P 500, Nasdaq open at record highs

The index as a whole got its act together later on, taking a lead from US stocks which got off to a strong start in morning trading as expected.

In fact, the S&P 500 Nasdaq indexes opened at record highs following the release of minutes from the Fed’s May meeting yesterday.

The notes revealed that policymakers were upbeat about the US economy, which they expect to continue to pick up speed.

The S&P 500 is up 0.4% to 2,414, the Nasdaq is 0.5% higher at 6,195, while the Dow Jones also crept up by 0.36% to 21,089.

Rebound in copper price helps miners

The strong opening Stateside coincided with a return to form for the miners, with most reducing their daily losses if not reversing them completely as copper prices rebounded and gold headed higher.

Antofagasta PLC (LON:ANTO) was a fine example of this: having been in the red for most of the trading day, a late surge sent its shares almost 2% higher.

The copper miner was second to 3i Group PLC (LON:III) on the FTSE 100 top risers list, with the private equity investor jumping 3.5% to 870p.

3i was boosted by a bullish broker from analysts at Canaccord Genuity who bumped their price target for the stock up to 975p from 875p.

FTSE 250 at the heart of the action

Easyjet PLC’s (LON:EZJ) decent run continued after fellow budget carrier Wizz Air Holdings PLC (LON:WIZZ) posted a strong set of results.

The same couldn’t be said for telecoms giant BT Group plc (LON:BT.A), which saw its recent rally come to an end as it shed 1.5% to 312p, making it one of the biggest fallers among the blue chips.

Perhaps the best action of the day came on the FTSE 250 though. As mentioned, Wizz Air jumped 11% to £21.60 as it saw double-digit growth in revenues and passenger numbers, while the forecast for the coming year was bullish too.

Another big mover on the second tier – albeit in the other direction – was Petrofac PLC (LON:PFC). The oil services group lost almost a third of its value after it was forced to suspend its chief operating officer amid a fraud inquiry.

UK economy growth slows

Elsewhere, the latest data from the Office for National Statistics showed the UK economy grew at a slower rate than previously expected in the first quarter of 2017.

There had been speculation that growth may have been slightly stronger than forecast but that turned out to not be the case, with the ONS revising down the economic growth rate for the first three months to 0.2% from 0.3%.

Retail and accommodation spending fell in the period, while household spending slowed as people continue to battle rising prices and stagnating wage growth, the ONS said.

1.40pm...FTSE slides as it processes OPEC cuts

At one point this morning, the FTSE 100 looked like it could be set to post a record high close when it jumped up towards 7,530.

That’s most definitely not the case now, with the blue chip index struggling to keep its head above water.

As of 1pm, the FTSE 100 was down 2 points at 7,513.

OPEC deal sparks Footsie decline

After enjoying a positive start to the day, the fall was sparked by reports that OPEC had agreed to extend its production cuts for another nine months to March 2018.

It seems traders had been pricing in something a little more substantial than just an extension to the current deal, with the price of Brent crude falling to US$53.32.

The fall has hampered a number of big oilers and miners on the FTSE 100 which rely heavily on strong oil prices.

BP PLC (LON:BP.) is down 1.1% for the day to 473.4p, while fellow oil giant Royal Dutch Shell PLC (LON:RDSB) has shed 0.7% to £21.58.

The miners have also been hit by the weak oil prices, although they’ve not been helped by iron ore prices which have fallen to seven-month lows.

Anglo American PLC (LON:AAL) is the worst affected and down almost 2% to £10.64, while BHP Billiton plc (LON:BLT) (down 0.9% to £12.01) and Glencore International PLC (LON:GLEN) (down 0.7% to 289p), among others, have also been impacted.

Away from oilers and miners, telecoms giant BT Group plc (LON:BT.A) has seen its recent run come to an end. It’s one of the top fallers on the FTSE 100 and down 1.1% to 313.4p.

Petrofac hammered as it suspends COO

On the second tier, Petrofac PLC (LON:PFC) saw around £630mln wiped from its market value after it suspended chief operating officer Marwan Chedid amid a corruption probe by the Serious Fraud Office.

Chedid’s suspension comes after the firm’s revelation earlier this month that he and chief executive, Ayman Asfari, had been arrested and questioned by police as part of the SFO's ongoing investigation of suspected bribery, corruption and money laundering related to Monaco-based oil services group Unaoil.

Shares shed almost 13% of their value when that news was first revealed and lost another 31% day, meaning the share price has almost halved in a matter of weeks.

“Quite aside from the potential fines stemming from the investigation itself, the demands on management time as the investigation continues could well hold back a business which is only just recovering from the collapse in oil prices two year ago,” said Hargreaves Lansdown’s George Salmon.

Airliners get a boost from Wizz's results

Sticking with the FTSE 250, it’s been a more positive day for Wizz Air Holdings PLC (LON:WIZZ) which is flying high after it published a strong set of results this morning.

Shares in the Eastern and Central Europe-focused airline have jumped more than 10% after it saw passenger numbers, revenues and profits all rise sharply in the year to 31 March.

Fellow low-cost airliner easyJet PLC (LON:EZJ) got a boost from those figures and is up 1.5% today to extend its recent run.

Among the small caps, Minds + Machines Group Limited (LON:MMX) shot up after it appointed a US investment bank to advise it after receiving informal bid approaches.

Headwaters MB will “review the various strategic options open to the company to maximise value for shareholders”, the top-level domain name specialist said in a stock exchange statement.

US stocks set to open higher

Looking ahead to the opening bell across the pond, it looks like being another bright start for the US stock markets.

The Dow Jones is seen as opening 54 points higher at 21,058, while the S&P 500 is tipped to open 4 points up at 2,408.

“The continued lack of Trump-Russia updates is working in the Dow Jones’ favour,” said Spreadex financial analyst Connor Campbell.

“Since its sharp drop last week the index has mounted quite the comeback and, with the futures promising a [60] point rise after the bell, the Dow is less than 100 points from hitting the all-time intraday high struck at the start of March.”

11.35am...Reports: OPEC agrees nine-month cut

OPEC has agreed to extend its production cuts for a further nine months to March 2018, according to reports which are starting to surface.

Big oil producers such as Russia (but, importantly, not the US) will meet later on today to decide if they plan to keep up with new cuts as well.

Towards the end of 2016, OPEC and several other big oil producing countries agreed to slash production by 1.8mln barrels a day to reduce supply and boost prices.

Reports of the extension to that deal haven’t done anything for oil prices in London though, with a barrel of Brent crude still down 0.5% at US$53.70.

As Oanda’s Craig Erlam mentioned below, traders had obviously been pricing in something a little more substantial than just an extension to the current agreement.

Aston Martin revving up for a stock market listing?

Luxury carmaker Aston Martin could be revving up for a stock market listing according to reports after it reported a second successive quarter of profits for the first time in a decade.

James Bond’s go-to car brand posted a pre-tax profit of £5.9mln for the first three months of the year, compared to a loss of almost £30mln for the same period in 2016, as sales of its latest flagship model – the DB11 – took off.

Those figures follow on from the £10mln profit it reported in the final three months of last year and the positive results should improve its prospects for a listing, which could possibly happen as early as 2018.

Fevertree founder cashes in

Shares in Fevertree Drinks PLC (LON:FEVR) lost some of their fizz this morning after one of its founders cashed in a chunk of his shares.

Non-executive deputy chairman Charles Rolls sold off 4.5mln shares in the tonic maker worth almost £75mln due to “significant institutional demand”.

Rolls still has a £200mln-plus stake in the company he co-founded almost 15 years ago.

Investors always get a bit twitchy when a director sells off some of their own shares though, for fear that business may have reached its peak.

This, combined with the effect of a flood of shares hitting the market and the fact they were sold to institutions at a discount, has caused the stock to shed 4% in early deals to £16.72.

Tesco could be set to scrap 5p bags

Tesco PLC (LON:TSCO) could be about to become the first major UK supermarket to do away with single-use carrier bags altogether.

The retailer – one of the UK’s ‘big four’ supermarkets – has launched a ten-week trial at its stores in Aberdeen, Dundee and Norwich where shoppers will have to take their own bags or buy a reusable bag for life.

If successful, the supermarket could scrap the 5p single-use plastic bags at the rest of its outlets.

A Tesco spokesperson said: “We are carrying out a short trial in a few stores to look at the impact on bag usage if we remove single use carrier bags.

“In these stores customers who need a bag can still buy a Bag for Life which they can reuse.”

11.05am...Reaction to GDP figures

“The rather ugly set of growth figures suggest that post-Brexit resilience may not be all it’s cracked up to be,” said ETX Capital senior market analyst Neil Wilson.

“Household spending is slowing, inflation is rising and wages are not keeping pace – the consumer-led bounce since last June could just about be running out of steam.”

10.50am...All eyes on Vienna

All eyes on will be on Vienna later today, with the Austrian capital playing host to an important OPEC meeting where the world’s biggest oil suppliers are discussing plans to cut production.

Oil prices have rallied this week after Saudi Arabia and Russia agreed in principle to extend the current production cuts until next March.

There have been wobbles today though, with rumours that  the extension will be at the same levels for the next six or nine months; seemingly not quite what the markets had been looking for.

“It’s been a classic case of markets buying the rumours and selling the facts,” said Oanda market analyst Craig Erlam.

“It would appear a nine month extension with the potential for deeper cuts was almost fully priced in so when the statements were made, there was nowhere left for prices to go but lower.”

The FTSE 100 is home to some big names in the world of oil and mining which rely heavily on strong oil prices.

Should OPEC formalise the cuts, as is expected, it is hoped that will prop up the price of the black stuff which will in turn boost those stocks. That might be the nudge that the index needs to set a new closing high as well.

 

Proactive news headlines…

Minds + Machines Group Limited (LON:MMX), one of the world's leading owners and operators of internet top-level domains, said it had appointed a US investment bank to advise it after receiving informal bid approaches. Headwaters MB will “review the various strategic options open to the company to maximise value for shareholders”, MMX said in a stock exchange statement.

Canadian Overseas Petroleum Limited (LON:COPL, CVE:XOP) has unveiled plans to raise £3.25mln via a share placing at 0.5p. The proceeds will provide it with the working capital it needs as it executes on its business plan

Bacanora Minerals Ltd (LON:BCN, CVE:BCN) is to raise £7.4mln (around C$13mln) through a share subscription at 86p a share. In London trading the shares advanced 0.125p to 85.125p on the news. The funds will be used to advance the company’s Sonora lithium project in Mexico, and the Zinnwaldi lithium project in Germany.

Mobile live video streaming specialist Servision Plc (LON:SEV) has received the second half of its US$2mln financing deal agreed with Cascade. In return for the US$1mln it has received, Servision has allotted 7.11mln shares to Cascade, which works out at 11.3p a share.

cloudBuy PLC (LON:CBUY), the global provider of cloud-based eCommerce marketplaces, has drawn down the final £1.48mln of its £5.75mln loan note financing. The draw-down necessitated the issue of 535,462 convertible and 940,238 non-convertible loan notes of £1 each to Robert Sella.

European Wealth Group Limited (LON:EWG) is close to refinancing ahead of its loan note repayment obligations that are due next month. The company revealed two new external investors are each prepared to pump £3.1mln into the company in return for shares and representation on the board.

Trading in the shares of Redx Pharma Plc (LON:REDX) has been suspended after the drug discovery company was forced into administration. Liverpool City Council (LCC) has called in a £2mln loan that was made to RedX Oncology, a subsidiary of Redx, and Redx was unable to stump up the money.

Niche prescription products company Alliance Pharma plc (LON:APH) is on target to reduced its net debt to around two times underlying earnings this year. The company’s annual general meeting (AGM) statement said cash flow in the business remains strong and the company looks forward to the year ahead “with much confidence”.

Rambler Metals & Mining PLC (LON:RMM CVE:RAB) expects costs to reduce over the remainder of 2017 as production from its new Lower Footwall Zone at the Ming mine picks up. Grades were lower than expected in the latest quarter as it pushed through into the new mining area, but as more mining stopes from the LFZ come on stream ore production will rise to 1,250 tonnes per day.

Shares in Amryt Pharma PLC (LON:AMYT) were wanted early Thursday as the company released a trading update ahead of its annual general meeting (AGM). The shares rose 5.1% to 27.2p as it confirmed that substantial progress seen since it floated just over a year ago had continued into the new financial year.

Premier African Minerals Limited (LON:PREM) says it is just waiting for permit approval to start shipping wolframite concentrate from RHA to Durban following the receipt of all required permits from the relevant Zimbabwean authorities.

Lead-zinc explorer Ferrum Crescent Limited (LON:FCR) has started drilling at the Toral project in the Leon province in northwest Spain. Drilling is targeting mineralisation within 150 metres of the surface, located above the historic lead-zinc resource (originally assessed by a third party back in 2011 and 2012).

Savannah Resources Plc (LON:SAV) is setting itself up to become a substantial battery lithium producer with the acquisition of an asset near to production in Portugal. The Mina do Barroso prospect in the north of the country already has an approved Mining Plan, Environmental Impact Assessment (EIA) and a 30-year mining licence, which means that with a defined JORC resource a development decision could be made by the end of 2018.

Anglo Asian Mining Plc (LON:AAU) returned to profit and sharply reduced its outstanding debts on the back of higher copper production and a better gold price. Sales of gold ounces dropped more than 16% to 53,281 ounces as Anglo ran into lower grades at its Gedabek mine in Azerbaijan, but the average gold price it received rose by US$92 per ounce.

Canadian Overseas Petroleum Limited (LON:COPL, CVE:XOP) has unveiled plans to raise £3.25mln via a share placing at 0.5p. The proceeds will provide it with the working capital it needs as it executes on its business plan.

 

10.15am...Footsie on track for record close

It’s been a bit of a rollercoaster ride so far this morning for the FTSE 100.

The blue chip index started with aplomb, quickly rising up towards the intraday high of 7,530 it set a couple of weeks ago, before it entered a bit of a lull and fell back below the 7,500 mark at around 9.30am.

It has since recovered though, and is currently up 9 points to 7,524. If it holds onto that level come this evening, it will set a new record close.

Airlines have performed well following a strong set of results from Wizz Air Holdings PLC (LON:WIZZ), with easyJet PLC (LON:EZJ) and British Airways owner International Consolidated Airlines Group (LON:IAG) both up by almost 1%.

Yesterday’s warning that the world’s biggest commodities consumer, China, is likely to see its financial strength ‘eroded’ in the coming in years is still weighing on the miners.

Anglo American PLC (LON:AAL) (down 1.5% to £10.69) and Rio Tinto PLC (LON:RIO) (down 1% to £31.50) are both among the top fallers on the FTSE 100 after Moody’s downgraded China’s credit rating for the first time in thirty years.

China’s is the world’s biggest consumer of commodities, so the predicted slowdown in the Chinese economy will impact the resources sector.

UK economy grows slower-than-expected in first quarter

The UK economy grew at a slower rate than previously expected in the first quarter of 2017, according to the latest data from the Office for National Statistics.

Although the consensus was for no change, there had been speculation that growth may have been slightly stronger than forecast but that turned out to not be the case, with the ONS revising down the economic growth rate for the first three months to 0.2% from 0.3%.

Retail and accommodation spending fell in the period, while household spending slowed as people continue to battle rising prices and stagnating wage growth, the ONS said.

There was some good news though.

“Construction and manufacturing also showed little growth, while business services & finance continued to grow strongly.”

Car manufacturing still going strong

Despite the well-publicised dip in car-building last month, trade body SMMT says the industry is in “good health”, with year-to-date output the strongest since the turn of the millennium.

8.45am...FTSE 100 subdued

The FTSE 100 opened in subdued mood on a quiet day for both corporate and economic news with the index of blue-chip shares edging seven points higher to 7,521.77.

Oil rallied to just over US$54 a barrel as the members of the OPEC cartel meet in Austria to discuss strategy.

The consensus ahead of the gathering is that production cuts will be extended by a further nine months.

OPEC has thus far stopped short of committing to further action beyond next March. However, in a committee meeting yesterday six OPEC and non-OPEC nations agreed to monitor the market and make adjustments if necessary.

The mooted nine-month extension could include an option for an extra three months.

6.45am...FTSE 100 set to extend gains

UK stocks are set to open higher again this morning, following their US counterparts which extended recent gains on Wednesday.

Spread betting quotes indicate the FTSE 100 will open around 22 points higher at 7,532, building on yesterday’s gains.

Across the pond, the Dow Jones (+74 at 21,012), S&P 500 (+6 at 2,404) and the Nasdaq exchange (+24 at 6,136) all set new record highs as Fed minutes appeared to signal there are no major worries on the US economy.

The Asian markets took a cue from Wall Street overnight and traded higher on Thursday.

Japan’s Nikkei 225 edged up 0.4% with Japanese exporters in demand due to yen weakness.

Over in China, the Shanghai composite was 0.45% higher, while the Hang sang index in Hong Kong enjoyed a 0.64% rise.

The recent gains in oil and commodity helped to bolster mining stocks on Australia’s resource-heavy ASX 200 index, which gained 0.36% to 5,787.

Newspaper headlines...

Wood Group's £2.2bn takeover of Amec Foster Wheeler could be thrown off course as the pair have been dragged into the international investigation into alleged corruption at Monaco-based Unaoil.

A circular published to disclose details of Wood Group's acquisition of its energy support services rival reveals that Amec is co-operating with the Serious Fraud Office over its criminal investigation into potential bribery corruption and money laundering, reports the Telegraph.

Shares in Tanzania-focused gold miner Acacia Mining fell 30% on Wednesday after the country accused it of under-reporting the amount of metal in its shipments and kept a ban on exports, the FT reports.

Tycoon Jim Ratcliffe yesterday snapped up around £800m of oil and gas assets in the North Sea in his latest bid to turn his firm into a global force. His private firm Ineos is buying Danish company Dong Energy’s oil and gas business, reports the Mail.

Trading of shares in Redx, a Cheshire-based pharmaceuticals company, has been temporarily suspended after Liverpool council called in administrators over an outstanding loan, the FT reports.

One of the co-founders of Fevertree Drinks is to sell a £40mln tranche of shares in the posh tonic maker. Charles Rolls wants to sell 2.5mln shares to institutional investors via an accelerated bookbuild placing, reports the Times.

Retail tycoon Sir Philip Green is to mount a rescue bid for the Australian arm of Topshop, after the fashion chain’s local franchise partner slipped into insolvency, writes the FT.

Manchester attack

Two men were arrested this morning in connection with Monday's terror attack in Manchester as investigators probed a "network" linked to the suicide bomber. One man was arrested after a property was searched in the Withington area of Manchester, while another was detained elsewhere in the city, Greater Manchester Police said, reports the Telegraph.

British security officials investigating the Manchester terror attack are considering withholding sensitive information from Washington after a series of damaging leaks they fear are endangering British lives. Such a move would break with years of ever-closer counter terrorism work between the US and the UK, writes the FT.

A relative of the Manchester bomber warned the British authorities that he was “dangerous”, it emerged yesterday, amid concerns that chances to stop him were missed, reports the Times.

Commodities/currencies

Gold: Up US$5 to US$1,258

Oil (WTI): up US$0.46 to US$51.82

£/$: 1.2987 pound higher

 

 

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