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FTSE 100 closes lower as pound strengthens and inflation rises

As trading in London draws to a close, all eyes turn to the launch of Apple's latest iPhone which is scheduled to take place at 6pm UK time
pound coin on chart
The pound is currently up 0.81% against the US dollar
  • FTSE 100 down 16 points to 7,398

  • FTSE 100 closes 12.9 down

  • Inflation hit 2.9% in August

  • Pound higher against US dollar

  • S&P 500 hits record intraday high

FTSE 100 closed 12.9 points lower as the pound strengthened and despite rising US markets.

The UK blue chip benchmark closed at 7,400- down 0.17%, while FTSE 250  was also lower, shedding 28.39 at 19,665.

It  comes after UK inflation data today showed that the consumer prices index (CPI) rose 2.9% last month.

The rise – which takes inflation to its highest level in five years – was mainly the result of higher petrol and clothing prices.

Traders reckoned the Bank of England would now seriously consider raising interest rates to try and bring inflation back towards its 2% target,  sending the pound soaring to its highest level in 12 months.

At the time of writing, sterling is up 0.75% against the Euro and 0.81% higher against the US dollar.

On Footsie, the biggest gainer was Ashtead Group (LON:AHT), up 4.45% to 1,759p, as the industrial equipment rental company posted a solid set of interims.

Miners lagged as the gold price fell 0.58% and the top laggard on the blue chip exchange was Randgold Resources plc (LON:RRS), down 2.94% to stand at 7,765p.

 

3.30pm

As traders suspected might happen, the S&P 500 – the main US stock market index – jumped above 2,490.87 points for the first time to set a new record shortly after the opening bell in New York.

The S&P is currently up 0.3%, or 7.4 points, to 2,495.5. The Dow Jones also opened 0.3%, or 62 points, higher at 22,119.7, not far off its all-time intraday high of 22,179.11.

The Nasdaq Composite completed the full house over in the States, up 0.1%, or 5.7 points, to 6,438.1.

The bulls have been out to play so far this week in the US as concerns over North Korea have eased.

Footsie lower as pound gains

The strong performance from US markets couldn’t spark the FTSE 100 into life on this side of the Atlantic, with the blue chip index still down by 16 points, or 0.2%, at 7,398.

After a quick start to trading today, the higher-than-expected inflation data seemed to breathe air into the theory that the Bank of England could be forced to raise interest rates in the coming months.

While analysts don’t expect any changes to rates when the BoE meets on Thursday, traders seem to be warming to the idea that a hike is on the cards later this year.

The more hawkish sentiment bolstered the Great British pound, which touched 12-month highs against the dollar and sits at US$1.326.

Stronger sterling tends to weigh on the blue chips given that it reduces their foreign-denominated earnings when converted back into pounds and also makes their products more expensive to overseas buyers.

Ashtead top blue chip riser

Ashtead Group PLC (LON:AHT) is still by far and away the day’s top blue chip riser, up still leads the way, up 5.2% to £17.72.

The industrial equipment rental company posted a solid set of interims and said hurricane Irma and Harvey should drive demand for its fleet this year.

Making a late charge towards the top of the leaderboard is Irish packaging giant Smurfit Kappa Group PLC (LON:SKG) which is up 2.3% to £23.84 after Goldman Sachs upgraded it to a ‘buy’.

Analysts at Goldman said Smurfit looked cheap compared to its peers and added that it expects the company to “benefit from rising box process and margins” in the coming months.

Housebuilders bogged down by gloomy BoA note

Housebuilders have traded lower for most of the day after US banking giant Bank of America Merrill Lynch issued another gloomy note on the sector.

Analysts at BoA said the UK housebuilding industry is “not without risk” and that the sector as a whole is “trading at full multiples”.

That weighed on Barratt Developments PLC (down 2.4% to 591.4p), Persimmon PLC (LON:PSN (down 1.8% to £25.08) and Taylor Wimpey PLC (LON:TW.) (down 1.9% to 192.1p) which are all in the red.

JD back in fashion

On the second tier, high street retailer JD Sports Fashion PLC (LON:JD.) was the biggest winner, up 8.1% to 370.4p, after its interim results topped expectations and it said that full-year results should be towards the upper end of forecasts.

Fellow FTSE 250 firm Redrow plc (LON:RDW) went the other way, down 7.9% to 582.5p, after its founders sold off some of their stake in the housebuilder.

1.45pm...Sky dives as Fox takeover referred to CMA

Shares in Sky PLC (LON:SKY) dived after the culture secretary announced she would be referring 221st Century Fox’s (NASDAQ:FOXA) proposed £11.7bn takeover to regulators.

The Competition and Markets Authority will be asked to investigate the deal further due to concerns over both media plurality and broadcasting standards.

The news will come as a blow to Fox owner and billionaire Rupert Murdoch, who will now have to wait at least another six months before he gets a decision.

Fox currently owns 39% of the UK broadcaster but wants total control, although there are concerns that the Murdoch family may have too much influence in the UK media if that happens.

Sky shares fell 2.6% to 927.5p immediately after the news broke.

1.10pm...Record highs expected over in the US

The US markets are poised to open at, or near, record territory when they open shortly as Irma and North Korea fears continue to ease.

“Once again we find ourselves in a scenario in which no news is good news and while underlying risks remain, the longer we go without another nuclear or missile test, the more positive investors will become,” said Oanda’s Craig Erlam.

After posting strong gains on Monday, the Dow Jones is seen as 57 points higher at 22,111 at the first bell, while Nasdaq is expected to open 19.1 points higher at 5,998.

Spread bet firms reckon the S&P 500 will open just shy of 2,500 at 2,492.7 – a gain of 4.8 points.

1pm...FTSE 100 just in the red

The FTSE 100 is still hovering the wrong side of breakeven as it moves into the afternoon session, down 0.2%, or 15 points, to 7,398.

It had been ever so slightly in the black for the first hour or so, but the higher-than-expected inflation data and subsequent strengthening of the pound weighed on the index.

Industrial equipment rental company Ashtead Group PLC (LON:AHT) still leads the way, up 8% to £18.15, after it posted a solid set of interims and said hurricane Irma and Harvey should drive demand for its fleet.

Financial stocks continue to follow the lead set by their US peers yesterday, with Barclays PLC (LON:BARC) (up 2.9% to 191.9p), Lloyds Banking Group PLC (LON:LLOY) (up 2% to 64.7p) and Royal Bank of Scotland Group PLC (LON:RBS) (up 1.9% to 248.2p) all up.

The ‘risk-on’ attitude of traders took some more steam out of gold today, which weighed on precious metals miners Fresnillo PLC (LON:FRES) (down 1.7% to £15.79) and Randgold Resources Limited (LON:RRS) (down 1.9% to £78.45).

Housebuilders Barratt Developments PLC (down 1.2% to 596p), Persimmon PLC (LON:PSN (down 2% to £25.13) and Taylor Wimpey PLC (LON:TW.) (down 1.6% to 192.4p) rounded up the top five FTSE 100 fallers after a bearish sector note from Bank of America Merrill Lynch.

12.25pm...JD Sports back in fashion

JD Sports (LON:JD.) was back in fashion this morning after it comfortably beat expectations with a record set of first-half results.

Falling sales at its rival Foot Locker sparked concerns that the ‘athleisure’ trend was over, while a tie-up between Nike and Amazon had also spooked the market.

But investors returned to JD after it reported a 33% jump in pre-tax profits to £102.7mln, on revenues of £1.37bn – 41% higher than the £970mln recorded in the first half of 2016.

On top of the strong opening six months, the retailer said it expects full-year results to come in at the upper end of expectations following similarly robust trading at the start of the second half.

“A selloff following a lukewarm trading update in the summer had many in the City suggesting investors were too cautious,” said ETX Capital’s Neil Wilson.

“While we’d gotten used to upgrades from JD this had merely confirmed guidance and left many wondering if it was falling behind.

“Concerns about falling sales at Foot Locker and a tie-up between Amazon and Nike had also stoked concerns. Interim results today show all the worry was misplaced.”

Shares popped 8.7% to 372.3p.

12.05pm...Goldman Sachs ploughs £100mln into UK fintech start-up

Investment banking behemoth Goldman Sachs has backed two of its former employees in their new business venture to the tune of £100mln.

Neyber is a London-based fintech startup founded by two ex-Goldman executives which provides loans via employers with the staff benefitting from the competitive rates.

Bupa and London City Airport are two firms that have already signed up to the firm’s services.

Goldman has put in the bulk of the £115mln raised in the latest funding round with the other £15mln coming from existing investors.

11.45am...Culture secretary to give second statement on Fox-Sky merger process

Thanks to the House of Commons Twitter, we know that culture secretary Karen Bradley will deliver her second statement on 21st Century Fox’s (NASDAQ:FOXA) proposed £11.7bn takeover of Sky PLC (LON:SKY) at 1.30pm this afternoon.

Last month the department for digital, culture, media and sport said it had asked Ofcom to conduct further analysis on whether Fox and its billionaire owner Rupert Murdoch would adhere to broadcasting standards in the UK.

Bradley originally said that she was more concerned by the potential impact of media plurality but after allegations that Fox News had colluded with the White House on a story that contained fake quotes, she seemed to become more wary.

Commentators expect the deal to eventually be referred to the competition and markets authority, but the question is: will it be asked to look at media plurality, Fox’s commitment to UK broadcasting standards or both?

11.20am...Housebuilders under the cosh as Bank of America reiterates "cautious stance"

Housebuilders were trading lower this morning after US banking giant Bank of America Merrill Lynch issued another gloomy note on the sector.

Barratt Developments PLC (down 1.2% to 596p), Persimmon PLC (LON:PSN (down 2% to £25.13) and Taylor Wimpey PLC (LON:TW.) (down 1.6% to 192.4p) were all in the red this morning.

Analysts at BoA said the UK housebuilding sector is “not without risk”, with debate of the long-term future of the Help to Buy scheme, the direction of interest rates and weakening consumer confidence.

“Even if the UK avoids a recession, arguably the sector is trading at full multiples,” read this morning’s note.

“However, in the absence of a recession which seems a likely outcome, the evaporation of house price inflation is likely to nibble away at confidence. We maintain our cautious sector stance.”

11am...BoE still unlikley to act this week

The Bank of England's monetary policy committee meets on Thursday to discuss, among other things, interest rates. ETX Capital analyst Neil Wilson doen't expect a rate hike on Thursday, alhtough he does admit that the inflation data gives the MPC something to think about in coming months.

“The inflation data builds a stronger case for the Bank of England to look at hiking rates but it is not yet strong enough for the monetary policy committee to act this week.

“Whilst this inflation report is unlikely to mean the MPC votes for a rate hike Thursday, it does increase the prospect of interest rates raising sooner than the market currently anticipates.

“The MPC has stressed that rates may need to be tightened by a somewhat greater extent than financial markets are suggesting, while governor Mark Carney has said that one hike over the next three years would not be enough to tame inflation.

“The data today supports the Bank’s view that the market may be overestimating the Bank’s tolerance of above-target inflation. The CPI report suggests that Mr Carney and the MPC will lean more heavily on this kind of hawkish rhetoric.”

10.30am...Ashtead expects boost from hurricane Irma

Away from inflation, construction and industrial equipment rental firm Ashtead Group PLC (LON:AHT) was the top blue chip riser as it came out and said that hurricanes Harvey and Irma which recently wreaked havoc in US should be good for business.

Ashtead said it expects demand for its fleet to pick up as people and businesses in Florida and Texas – the two US states most affected – look to rebuild following the storms.

The FTSE 100 company also posted a solid set of interim results, with underlying pre-tax profits rising 21% to £238.5mln. Shares jumped 8% in mid-morning trade to £18.15.

US banking stocks helped to push the Dow Jones over 22,000 on Monday and their UK counterparts followed them today.

Barclays PLC (LON:BARC) (up 2.1% to 190.6p) Lloyds Banking Group PLC (LON:LLOY) (up 2% to 64.65p) and Royal Bank of Scotland Group PLC (LON:RBS) (up 1.4% to 247p) have all made decent gains so far.

Costs Coffee owner Whitbread plc (LON:WTB) saw almost £200mln wiped from its market value after US banking giant Citigroup chopped its rating from ‘buy’ to ‘sell’.

Analysts at Citi’s London arm said its Research Innovation Lab reckons there is only four to five years structural growth left in the market for mochas and macchiatos.

The outlook for Premier Inns wasn’t much better, with revenue per available room likely to grow 0.5%-2% in the period ended 2021, leading to “margin compression”. Shared slipped 2.4% to £36.83.

10am...UK inflation rises to 2.9% in August

After spending the opening hour or so in the black, the FTSE 100 fell sharply following inflation data which showed that the consumer prices index (CPI) rose 2.9% last month.

The rise – which takes inflation to its highest level in five years – was mainly the result of higher petrol and clothing prices.

While the fall in value of sterling since last year’s Brexit vote was a key driver for higher prices, the pound was back on the up immediately following the data.

Traders took a punt that the Bank of England would now seriously consider raising interest rates to try and bring inflation back towards its 2% target, which sent the pound soaring to its highest level in 12 months; up 1.1 US cents to US$1.327.

A stronger sterling generally spells bad news for the blue chips on the FTSE 100, as it makes their foreign-denominated earnings worth less when converted back into pounds and also makes their products more expensive to overseas buyers.

Given that, the FTSE 100 gave up its early gains following the data and is currently 0.1%, or 11 points down, at 7,402.

8.30am...City waits on inflation data

All eyes will be on the inflation number later this morning with City soothsayers suggesting the cost of living will creep up again, strengthening the case of Bank of England’s ‘hawks’ calling for a rise in interest rates.

After unexpectedly holding steady at 2.6% in July, consumer price inflation (CPI) is thought to have risen to 2.8% last month, just shy of its May high of 2.9%.

Remember the Bank’s mandate is to keep the figure below 2%.

The rise has been driven by monetary policy decisions, as well as real-world factors such as a hike to petrol prices, according to Michael Hewson, analyst at CMC Markets.

He thinks the retail price index will hit 3.8% (from 3.6%) in August and he said: “While an uptick in inflationary pressure wouldn’t be welcome, if we also get an improvement on last month’s wages data in tomorrow’s numbers, then that could well add fuel to external [Bank of England Monetary Policy] MPC member Michael Saunders calls to raise rates.

“It could also shift the dial on the prospect of chief economist Andrew Haldane joining him and fellow hawk Ian McCafferty, given the former’s recent remarks when he suggested he would consider a rate rise if wage growth started to gain traction.”

The FTSE 100 marked time early in the session with the index of blue chip stocks up just 3.3 points at 7,416.89.

Leading the Footsie was Ashtead (LON:AHT), the international plant hire group benefiting from the weak pound. Its shares were trading 3% higher after the publication of first-quarter numbers.

The biggest casualty in the top flight was Whitbread (LON:WTB), with Citigroup moving to ‘sell’ from ‘buy’ on the owner Premier Inns and Costa Coffee owner.

Proving the old City adage that it’s better to travel than arrive, shares in InnovaDerma (LON:IDP) succumbed to a bout of profit-taking early on despite some stellar full-year figures.

Up 311% in the past year, the maker of the wildly successful Skinny Tan bronzer saw its stock marked down 9% early on.

Proactive news headlines:

The newest iodine production plant of Iofina plc (LON:IOF) will be called IO#7 and will be built in the core area of the company’s current Oklahoma operations. The new plant will be based around the existing IO#3 plant, which was hitherto Iofina’s highest cost per kilo plant. As IO#7, though, the new plant will have similar production capabilities and cost structure to Iofina’s lowest per kilo production cost plant.

InnovaDerma PLC (LON:IDP) chairman Haris Chaudhry said his company’s financial performance had exceeded nearly every benchmark set, propelled by its Skinny Tan bronzer and sculpting product. “The journey, however, has just begun as we prepare to launch multiple new brands that we have either successfully developed in-house or acquired during the past 12 months,” he said after the release of full-year results.

Pest control technology firm Tyratech Inc (LON:TYR, LON:TYRU) said its products outperformed a recovering US head lice market in the first half of 2017.

Innovative healthcare group Futura Medical PLC (LON:FUM) has hailed the “excellent progress” made in the opening six months of the year as its breakthrough erectile dysfunction gel moves closer to its phase III study. A pharmacokinetic study is set to get underway in the fourth quarter of this year, with the results informing a large-scale phase III trial in the first half of 2018 For the six months ended 30 June, Futura saw revenues rise to £363,000 (£67,000). Cash resources totalled £10.2mln as of the end of the period (30 June 2016: £2.9mln).

Staffing specialist Empresaria Group plc (LON:EMR) has appointed the company’s finance director to the role of chief operating officer to implement  the group’s Invest and Develop strategy. Spencer Wreford, who has been FD since 2010, will carry out both jobs until a new chief number cruncher can be found.

Minds + Machines Group Limited (LON:MMX) has seen a spurt in orders for its .vip domain in China. Since the release of its 2017 premium inventory for China in late June 2017, premium sales in excess of US$3.4mln have been achieved for the .vip top level domain, and around US$2.8mln of those have been closed in the last 10 days.

88 Energy Ltd (LON:88E) confirmed that frack fluid continues to flow back from the Icewine-2 well in Alaska, and hydrocarbons are now flowing too. It is flowing around 55 barrels of frack fluid per day and 2-4 thousand cubic feet of gas, with a maximum rate of 8 thousand cubic feet per day.

Columbus Energy Resources PLC (LON:CERP), the former LGO Energy has been given the environmental go-ahead, a CEC certificate, for a waterflood programme at its Goudron field in Trinidad. Leo Koot, executive chairman, said he was thrilled with the award of the CEC and would begin the Water Injection Pilot "A" Programme immediately, funded from available cash resources.

Sound Energy PLC (LON:SOU) has confirmed the completion of its deal to acquire the assets of Oil Gas Investment Fund (OGIF) in Morocco, namely stakes in the Anoual and Tendrara areas. It means that Sound's stake in Tendrara rises to 75% and it also gains 75% interests in follow-on exploration areas surrounding the gas discovery.

Brave Bison PLC has announced the non-board appointment of Jonathan Kitchen as its commercial director with immediate effect, as its new chief executive officer bolsters the group’s management. Kitchen has spent much of his career in a variety of roles at Dennis Publishing, latterly launching the digital creative agency, Adnostic.

6.45am...London to hold onto gains

London stocks were set to add to yesterday’s gains after a strong showing overnight on Wall Street.

After rising 35 points yesterday to close at 7,414, the FTSE 100 was expected to open around 14 points higher at 7,428.

US shares stormed higher yesterday, with all three of the major indices rising more than 1%.

The S&P 500 climbed 27 points to 2,488 while the Dow Jones soared 260 points to 22,057.

In Asia, approaching the end of trading, the Nikkei 225 was following the US lead, rising 221 points to 19,766 but in Hong Kong the Hang Seng was up just 17 at 27,972.

  • Sterling: US$1.3175, down 0.1%
  • Gold: US$1,325.2 an ounce, down 0.4%
  • Brent crude: US$47.99 a barrel, down 0.2%

City Headlines

  • Royal Bank of Scotland’s finance Chief has warned that credit card lenders face a crackdown on zero balance transfers as regulators weigh up how to combat poor consumer borrowing practices – The Times
  • The Financial Conduct Authority has called for representatives of Standard Chartered to meet it as the regulator examines allegations of bribery connected with the bank’s ownership of an Indonesian power plant builder. – The Times
  • BP has agreed to fold its Argentine assets into a new joint-venture backed by Cnooc of China in a deal that widens both groups’ interests in a country boasting some of the most promising shale oil and gas resources outside the US – Financial Times
  • BP is pushing ahead with its plan to spin off some of its US pipeline assets in an initial public offering (IPO) on the New York Stock Exchange – City AM
  • Vodafone will plough €2bn (£1.8bn) into an ultrafast broadband network in Germany, raising hopes it is preparing to make a similar investment in home turf in the U.K.
  • Capita’s Chief Executive Andy Parker is to formally step down at the end of this week, with finance Director Nick Greatorex taking over the running of the company until a permanent replacement is found – Daily Telegraph
  • More than 20,000 Ryanair passengers have had their flights on Tuesday cancelled due to a strike by French air-traffic controllers. Many other travellers are likely to be affected by the action by members of the U.S.AC-CGT union – The Independent
  • US prosecutors on Monday charged a former Deutsche Bank Executive with participating in “a fraudulent scheme” that duped investors into buying securities backed by loans that were doomed to fail – Financial Times
  • Citigroup cast an early shadow over third-quarter bank results, warning on Monday that trading revenues have continued to fall sharply as banks suffer from low volatility and painful comparisons with the Trump- and Brexit-fuelled trading boom of late 2016 – Financial Times
  • Facebook has been hit with a €1.2mln (£1.1mln) fine in Spain after the country’s data watchdog found it broke privacy laws – Daily Telegraph
  • Google is appealing against the record €2.4bn (£2.2bn) fine imposed by the European Union for its abuse of its dominance of the search engine market in building its shopping comparison service – The Guardian
  • US investment bank Goldman Sachs is gearing up to launch savings accounts and loans in the U.K. from next year, reports claim. – Daily Mail
  • Teva has agreed to sell the rights and business of its Paragard birth-control device to a unit of California-headquartered The Cooper Companies for $1.1 billion, as the Israeli pharmaceuticals giant continues to pursue asset sales to slim down and re-focus its global business – Financial Times
  • A deal to merge the European steel operations of Tata Steel and ThyssenKrupp could be struck this month, after Tata removed a significant obstacle by offloading its U.K. retirement fund – Financial Times
  • Britain’s biggest debt collection company has been forced to delay its planned £1bn initial public offering because it has been caught up in the storm surrounding Provident Financial – The Times
  • Hong Kong billionaire Li Ka-shing agreed to buy an indirect stake in a Japanese maker of electric cars, expanding his investments in an area that’s set to benefit from China’s push to phase out petrol and diesel vehicles – The Independent
  • Toyota is highly unlikely to launch another diesel car, one of its senior Executives has said in a further blow to the scandal-tainted fuel source. – Financial Times
  • Mercedes-Benz is set to offer electric versions of all its cars by 2022. Dieter Zetsche, Chief Executive of Mercedes-Benz owner Daimler, told investors that the company will sell at least 50 electric versions of Mercedes-Benz passenger cars to customers, Reuters reported – City AM

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