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FTSE 100 manages to hold onto gains; Severn Trent top gainer

Last updated: 17:47 31 Jul 2017 BST, First published: 06:50 31 Jul 2017 BST

Traders
  • FTSE 100 closes up 3.63 at 7,372; FTSE 250 up 52.95

  • HSBC jumps after strong results, share buy-back

  • Tobacco stocks drift lower

 

FTSE 100 drifted to a fairly lacklustre finish on Monday, closing up around three points at 7,372 but below the 7,400 level .

The FTSE 250 fared better adding almost 53 points at 19,781.

It came as sterling firmed against the US dollar, up 0.43% but weakened 0.08% against the Euro.

In companies, bank group HSBC (LON:HSBA) added 1.8% to 757p as it announced a US$2bn share buyback alongside an increase in first half profits.

The bank expects to complete the buyback by the end of 2017, taking the total amount of stock it has pledged to buy over the past year to US$5.5bn.

"In the past 12 months we have paid more in dividends than any other European or American bank and returned US$3.5bn to shareholders through share buy-backs,” said outgoing chief executive Stuart Gulliver.

Elsewhere, utility giant and defensive stock Severn Trent PLC (LON:SVT) was top riser on Footsie, up 4.09% to 2.240p after the Canadian broker RBC Capital double upgraded its rating to ‘outperform’ from ‘underperform’.

Fags  makers were doing far less well, with Imperial Brands PLC (LON:IMB), down 5.9% to 3,120p and British American Tobacco plc (LON:BATS), down 4.97% to 4,713.5p, the two biggest FTSE 100 fallers.

It was down to the powerful US Food and Drug Administration's announcement on Friday that it would cut nicotine in cigarettes to non-addictive levels.

 

3.00pm: Push higher as Dow hits new records

The Footsie pushed back above the 7,400 level in mid afternoon trading, extending earlier gains as US blue chips advanced at open with the Dow Jones hitting another record high on the last session of July.

With an hour and a half of trading to go in London, the FTSE 100 index was 36 points higher at 7,404, albeit remaining below an early peak of 7,425.52, staying on course for a modest 0.5% gain for the month.

In early trading on Wall Street, the Dow Jones Industrials was up 52 points to 21,882, but both the broader S&P 500 and tech-laden Nasdaq Composite fell back after opening gains. 

The day’s US economic data proved mixed, with the Chicago purchasing managers index falling to 58.9 in July, down from 65.7 in June, but US pending home sales snapped a three-month losing streak, gaining 1.5% in June.

On currency markets, sterling drifted slightly higher against the US dollar, turning flat at US$1.318, but was fractionally lower against the euro at €1.1168 with all eyes on the Bank of England’ latest monetary policy meeting and quarterly inflation report later this week.

Looking ahead to ‘Super Thursday’, Laith Khalaf, senior analyst at Hargreaves Lansdown said: “Markets are pricing in a 40% chance of a rate rise by the end of the year.

“We should bear in mind that even if it materialises, a rate hike would only take us back to where we were at the beginning of last August, before the EU referendum result prompted the Bank of England to cut base rate to 0.25%. “

He added: “The longer term outlook for interest rates is still weak. The Office for Budget Responsibility thinks rates will only rise to 1% by 2022, 15 years after the financial crisis started. And one thing we do know about such forecasts, is that for the best part of a decade they have consistently over-egged the prospects of interest rate rises.”

1.15pm: US stocks seen making firm start

The FTSE 100 index held off earlier highs in early afternoon trading, but remained firmer supported by strength in HSBC PLC (LON:HSBA) and miners, as well as expectations for opening gains on Wall Street.  

The UK blue chip index was up 28 points at 7,396, above opening lows of 7,367.86, but below an earlier peak of 7,425.52.

On currency markets, sterling drifted 0.1% lower versus the US dollar at US$1.317, but was up 0.1% against the euro at €1.1187.

US stock index futures indicated a slightly higher open in New York on Monday with commodity issues supported by factory data from top consumer China, while US economic pointers due later includes pending home sales and the Chicago purchasing managers index.

In London, global banking giant HSBC remained a strong FTSE 100 gainer, up 2% to 758.6p after accompanying above-forecast first-half results with plans for a £2bn share buy-back.

Neil Wilson, senior market analyst at ETX Capital said: “HSBC is upbeat on the global economic outlook but a little more cautious about the UK, from which it is still very well insulated of course. It notes today that the UK is showing signs of slower growth as ‘inflationary impacts of a weaker currency, Bank of England caution over consumer indebtedness and uncertainties over the EU exit negotiations constrain consumer and business confidence and spending’.”

Aside from HSBC, water utility Severn Trent PLC (LON:SVT) was also a good FTSE 100 gainer, up 3.7% to 2,231p after Canadian broker RBC Capital double upgraded its rating to ‘outperform’ from ‘underperform’.

In a note to clients, RBC’s analysts said the upgrade reflects the fact that Severn Trent’s current trading valuation implies a total return that compares favourably against the rest of the utilities sector.

RBC also upgraded its rating for peer United Utilities PLC (LON:UU) to 'outperform'  from 'sector perform' as it believes the market has overpriced the downside risks for the stock, which gained 2.6% at 894.5p.

And a broker upgrade also propelled Royal Mail Group PLC (LON:RMG) higher, up 1% to 400.7p, as HSBC Securities raised its rating to ‘buy’ from ‘hold’ after recent results.

But on the downside, cigarette makers Imperial Brands PLC (LON:IMB) and British American Tobacco plc (LON:BATS) were the two biggest FTSE 100 fallers at lunchtime, down 5.7% to 3,126.5p and 4.5% to 4,738p respectively, still impacted by the US Food and Drug Administration's announcement on Friday that it would cut nicotine in cigarettes to non-addictive levels.

Elsewhere, blue chip engine maker Rolls Royce PLC (RR.L) was also weak, down 2.8% to 903p ahead of interim results due tomorrow, amid reports the company had told investors it may not hit its cashflow target of £1bn by 2020.

Away from the blue chips, SRT Marine Systems PLC (LON:SRT) saw its shares drop over 20% to 34.75p after the maker of vessel tracking technology said a key supply contract will be postponed until next year.

And shares in Utilitywise PLC (LON:UTW)  shed 18% to 48.5p after the company warned of a material impact on 2017 revenue and profits due to changes in its accounting policies.

12.15pm: Sterling rallies despite data

The pound moved off lows in lunchtime trading, with the euro slipping despite eurozone data today showing core inflation accelerated to a four-year high in July, with the headline number unchanged, while unemployment in the region fell to its lowest level since 2009 in June.

The EU's statistics office said the eurozone consumer prices index was stable at 1.3% year-on-year in July, still far below the ECB's objective of just under 2%. But core eurozone inflation, which excludes volatile food and energy prices, accelerated to 1.3% this month, up from 1.2% in June, the highest level since August 2013, confounding expectations for a slowdown.

In a separate release, Eurostat said unemployment in the currency bloc dropped to its lowest level since 2009 at 9.1%, confirming a robust recovery in the region.

The jobless rate went down in Italy and Spain, the two eurozone countries – excluding Greece for  which no fresh data was available - with the highest rates. In Germany, the largest eurozone economy, unemployment fell to 3.8% in June from 3.9% the previous month.

Craig Erlam, senior market analyst  at Oanda said: “The euro was briefly boosted by the euro area data which again showed the economic recovery gaining traction as unemployment fell to its lowest level since February 2009 and core inflation creeping higher.

“While this will be music to the ears of policy makers at the ECB as they prepare for further reductions in asset purchases later this year, it’s worth remembering the low base that the region is recovering from.“

 He added: “Unemployment at 9.1% is still extremely high and when you break that down by country, it becomes much higher again in some places.

“Core inflation is also only at 1.3% which is still well below the ECBs target and with the currency appreciating strongly this year, downward pressures here will continue to build. The central bank should therefore tread very carefully when it comes to removing stimulus, as I expect it will.”

But the gains in the euro proved short-lived and sterling managed to rally higher against the European currency, up 0.1% to €1.1184 in lunchtime trading, while turning flat against the dollar at US$1.3120 to recoup earlier losses.

A firmer pound  helped drag the FTSE 100 index back below the 7,400 level it had regained earlier, although the benchmark was still up around 21 points at 7,389, supported by strength in mining stocks and banking giant HSBC (LON:HSBA) after results today.

11.15am: Metals shine after China data

Strong gains from  the heavyweight commodity sector continued to prop up the FTSE 100 in late morning trade after overnight data from China pointed towards an improving demand picture from the world’s top consumer of metals.

Joshua Mahony, market analyst at IG, pointed out: “The deterioration in both manufacturing and non-manufacturing PMI surveys was overshadowed by a sharp rise in the construction sub-index of the non-manufacturing reading, which jumped to the highest level since 2013.

“With a resurgence in Chinese demand for commodities, there is a reason to believe we will see the likes of copper and iron ore continue their recent ascent, in turn helping prop up the FTSE.”

Among the blue chip miners, Anglo American PLC (LON:AAL) was up 2.7% at 1,265p, Glencore PLC (LON:GLEN) gained 2.5% at 339.5p, and Rio Tinto PLC (LON:RIO) rose 2% to 3,574p.

The FTSE 100 index remained higher in late morning trade, up around 31 points at 7,399.

10.15am: Weak UK data has little impact

The UK housing market lost some momentum last month as mortgage approvals dropped to a nine-month low, while unsecured lending growth slowed further from last year's 11-year high.

Figures from the Bank of England showed the number of mortgages approved for house purchase fell to the lowest since September last year in June at 64,684, down from 65,109 in May and a slightly bigger drop than economists' forecasts of 65,000.

Three months ago the BoE forecast that mortgage approvals would average around 71,000 a month in coming quarters.

Net mortgage lending - which lags behind mortgage approvals - rose by £4.149bn in June, the biggest rise since March 2016 and up 3.1% on a year earlier, the biggest increase since October.

Meanwhile the growth rate in unsecured consumer lending slowed to 10.0% to £1.458bn on an annualised basis in the three months to June, compared with forecasts for £1.5bn, down from May's unexpectedly strong 10.4%.

Consumer borrowing had picked up pace in May with unsecured lending growing at close to the 11-year high recorded in November last year.

The latest data added to the case for the BoE Monetary Policy Committee to keep interest rates unchanged at a record low of 0.25% this Thursday, and chime with other data which showed lacklustre growth in the overall economy in the second quarter.

There was little market reaction to the date, with the FTSE 100 index just holding above the 7,400 level, up 32 points in mid morning trading.

On currency markets, sterling stayed 0.15% lower versus the US dollar at US$1.311, and down 0.1% against the euro at €1.1165.

8.45am: Footsie confounds the pessimists

The FTSE 100 index bounced higher in early trading, lifted by strong gains from heavyweight mining stocks and a jump by lender HSBC Holdings PLC (LON:HSBA) after results and a share buy-back, looking set to end the month of July in positive fashion.

After three-quarters of an hour of trading, the UK blue chip index was around 35 points higher at 7,403, recouping about half of Friday’s late 74 points slide.

Connor Campbell, financial analyst at Spreadex, said: “After enduring a difficult time of it last week the FTSE is looking to close out July above 7400 this Monday.”

He added: “There were a few potential reasons for the FTSE’s substantial gains. That sterling has taken an early dip no doubt helped out the index, with the pound dropping 0.3% against the dollar – it is, however, still above $1.31 – and 0.1% against the euro.

“The oil and, especially, mining stocks were also buoyant after the bell, despite a slightly disappointing manufacturing PMI from China overnight.“

Campbell pointed out that, arguably most importantly, there was also a 3.5% jump from HSBC following the banking giant’s half year update.

He noted: “Pre-tax profit rose 5% to US$10.24bn, easily breezing past the US$9.5bn forecast, with adjusted revenue at US$26.1bn.

“Europe’s largest bank also announced a US$2bn share buyback to take place in the second half of the year, at the lower end of estimates but still enough of a sweetener to send the stock to its highest price since the financial crisis.”

Proactive news headlines:

Premier African Minerals Limited (LON:PREM) has arranged a new financing package to provide working capital and to increase its stake in fertiliser project developer Circum. The additional 1% stake in Circum is costing Premier African roughly US$1.3mln, with the money to come from a £2.9mln new loan agreement and a combined £4.8mln subscription at 0.7p and £3.3mln stand-by facility that will give it access to a further net £1.5mln.

Powerhouse Energy Group PLC (LON:PHE) today reported a very successful test of its gasification reactor. The company said it recorded a maximum peak flow rate of over 50 cubic metres per hour of synthesis gas (syngas), having successfully completed the rebuilding and enhancement of the company's G3-UHt gasification reactor at the Thornton Science Park in Chester.

Regenerative medicines specialist WideCells Group PLC (LON:WDC) said it had been granted a research licence from the UK's Human Tissue Authority, which chief executive João Andrade said opened up a “new dimension” for the company.

Alliance Pharma PLC (LON:APH) on Friday told investors that the UK healthcare regulator has not approved a marketing authorisation submission for Diclectin. The product is a treatment for nausea and vomiting during pregnancy.

Cloud-based portfolio analytics provider StatPro Group PLC (LON:SOG|) has signed a three-year contract with FundBPO Pty, one of Australia’s leading independent fund administrators.

Cloud-based enterprise data analytics platform operator Rosslyn Data Technologies PLC (LON:RDT) has won three contracts worth more than £3.1mln in aggregate over a three-year period.

Redx Pharma PLC (LON:RDX) is expected to exit administration after selling its Bruton’s tyrosine kinase (BTK) inhibitor technology and drug development programme for US$40mln. The deal was struck on Friday with NASDAQ-listed Loxo Oncology Inc (NASDAQ:LOXO).

Shares in Brave Bison Group PLC (LON:BBSN) stampeded higher after the digital media & social video business narrowed losses at the half-year stage. Net revenue in the first half of 2017 shrank to £6.00mln from £9.69mln the year before but the gross profit margin shot up to 48% from 39% the previous year.

Falcon Media House (LON:FAL) has boosted its assets and signed a number of partnerships in the over-the-top (OTT) video streaming market since it began trading in London last year. The group, which listed on the main market of the London Stock Exchange in January 2016, has in the past year announced tie-ups with several companies including Tata Communications, LaserNet Group, Verimatrix and Media Nucleus.

Mining royalty business Anglo Pacific Group PLC (LON:APF) revealed a steep rise in free cash flow as it reported a trading update for the six months to July 31. Anglo Pacific said that free cash flow for the half would be between £18.5mln and £19mln, compared to £4.7mln in the same period of 2016.

Strategic Minerals PLC (LON: SML)(USOTC: SMCDY) will add two new holes to Phase 1 of the drilling programme at the Redmoor tin and tungsten project in Cornwall to be undertaken by joint venture vehicle Cornwall Resources Limited.

Advanced Oncotherapy PLC (LON:AVO) has reached another milestone in the development of its first LIGHT system, a next-generation proton therapy unit. It has announced the final coupled cavity linac (CCL) module is ready for shipment to the Geneva testing facility.

Silence Therapeutics PLC (LON:SLN) has broadened its patent estate in the US with the grant of further protection over its chemical modification technology. It is part of an ongoing process as it eyes companies with drugs in clinical trials that may be piggybacking on its intellectual property.

Victoria Oil & Gas PLC (LON:VOG) highlighted an 11.9% rise in gross gas production from the Logbaba project, in Cameroon, as it reported on its operations in the second quarter. The company said production averaged 14.59mln cubic feet of gas per day during the three months ended June 30, up from just over 13mln cubic feet per day in the same period of 2016.

China-focused Green Dragon Gas Ltd (LON:GDG) told investors that the development of the Greka Shizhuang South project will be expedited, thanks to a regulatory decision. The company said that the China National Development and Reform Commission (NDRC) has approved a project code for the development plan and that means that the separate approval process won’t be needed.

Production at the Kiziltepe mine has come in at 1,370 ounces of gold and 6,780 ounces of silver for the month of July, following a successful start-up earlier this year from owner Ariana Resources PLC (LON:AAU).

Keras Resources PLC (LON:KRS) has increased its exposure to the Warrawoona gold project in Australia through an acquisition of licenses undertaken by 31%-owned investment Calidus Resources.

The growing value of its holding in med-tech portfolio company Belluscura has prompted a surge in profits at IP firm Tekcapital PLC (LON:TEK). TekCapital has a 48% stake in Belluscura, a firm that makes a number of devices used in surgery and that is likely to list separately in the near future.

Pan African Resources PLC (LON:PAF) is selling its Phoenix Platinum subsidiary to Sylvania Resources for a total cash consideration of 89mln rand (£5.21mln).

Ferrum Crescent Limited (LON:FCR) executive chairman, Justin Tooth said today that the miner is looking forward to receiving assay results from its key lead/zinc Toral project in Spain, which are currently anticipated within the next 6 weeks.

Due diligence currently being undertaken by Thor Mining PLC (LON:THR) on its option to acquire the remaining 75% of US Lithium Pty Limited remains ongoing. US Lithium is a private Australian company with interests in lithium-focused projects in Arizona and New Mexico in the United States of America.

Premier Oil PLC (LON:PMO) has completed the Zama-1 exploration well, offshore Mexico, and has confirmed the potentially very significant new discovery.

6.50am: Weak start predicted

Early gains are predicted for the FTSE 100 despite the growing political tensions between the US and Russia and new missile launches from North Korea.

Financial spread bet firms see the FTSE 100 adding up to ten points when trading gets underway from the close Friday of 7,368.

Headlines this morning have been dominated by Russia's expulsion of more than 750 US staff in response to a tougher sanctions being unopposed by President Trump.

Commentors said it is a message from the Kremlin that hopes of better relations between Moscow and Washington have been dashed.

It adds to the headaches for the US president after North Korea boasted it could hit all of the US after its latest missile test at the weekend.

Asian markets were mixed overnight with decent gains in Hong Kong and Shanghai and moderate losses in Tokyo.

China's official manufacturing purchasing-managers' index fell to 51.4 in July from 51.7 in June, lower than estimates but still above 50, which indicates growth.

HSBC buy-back boost

HSBC PLC (LON:HSBA) meanwhile unveiled a $2bn share buyback in the second half of the year after latest quarterly profits rose by 47% to $5.3bn.

The Asia-focused bank has bought back US$5.5bn worth of shares since 2016.

Also scheduled later Monday are the latest lending numbers for mortgages and consumer credit with economists and analysts gearing up for this week’s Bank of England rate meeting and quarterly inflation report.

“Mortgage approvals for June are set to remain steady at 65,000, while net lending is expected to slow down a touch from the numbers seen in May, as declining consumer confidence and rising inflation squeezes wages, not to mention the uncertainty created by the June election result,” said Michael Hewson, analyst at CMC Markets.

The week is another busy one for corporate news with banks leading the way.

Aside from HSBC Holdings (LON:HSBA), there is Standard Chartered (LON:STAN) and Royal Bank of Scotland (LON:RBS).

Away from the financial services sector we also have numbers later in the week from Royal Dutch Shell (LON:RDSA) and Next (LON:NXT).

Markets Round-up:

  • Pound worth US$1.3127
  • Brent crude up 30 cents at US$52.82.
  • Gold US$1274.50, down 80 cents per ounce.

Business Headlines:

  • Financial Conduct Authority to crack down on banks’ lending to vulnerable customers. The City watchdog will force banks to undertake more due diligence on vulnerable customers before lending them money amid a wide-ranging crackdown on high-cost credit – Times.
  • Prudential is about to look for buyers for about £10bn of its annuities business, which could lead to the sale of the entire £45bn division and the transfer of thousands of policyholders to a new provider – Times.
  • The Food and Drug Administration fired a shot across the bows of the tobacco industry on Friday, signalling a potentially more permissive approach to those developing less harmful ways to take nicotine, while also warning companies that it could be forced to strip its cigarettes of that same addictive substance – FT.
  • Rolls-Royce has cautioned investors not to treat its ambitions to generate £1 billion in free cash flow by 2020 as a firm target – FT.
  • Vodafone has begun a fresh three-year programme to turn round its ailing UK business that will see power devolved from its Newbury headquarters.
  • The Bank of England will hold last-ditch talks with the UK’s largest trade union on Monday as the central bank attempts to avert its first strike in 50 years – Guardian.
  • Figures released last week show that Google spent a record amount of almost $6mln lobbying in Washington DC in the past three months – Guardian.
  • Speculation the latest iPhone could be delayed has reached fever-pitch as Apple prepares to report its results. The world’s most valuable company has so far stayed silent on rumours it is facing supply chain issues, but investors are watching closely for possible clues – Daily Mail.

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