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FTSE 100 closes near flat as traders look for direction; Dow Jones surges

Last updated: 17:33 24 Oct 2017 BST, First published: 06:44 24 Oct 2017 BST

ECB
  • FTSE 100 closes up 2.09 at 7,526

  • Sterling slips back versus dollar and euro on rate hike uncertainty

  • Whitbread top loser as Costa Coffee sales slow

FTSE 100 closed slightly higher on Tuesday, as the Dow Jones surged in New York, and traders await more potential catalysts here in the UK and across the pond.

The UK blue-chip benchmark closed 2.09 higher, or 0.03% higher, at 7,526.

FTSE 250 closed  over 18 points down at 20,113, while the Dow Jones is up over 188 points at the time of writing.

Data in the US showed a pick-up in growth in manufacturing and services sectors. The Fed is expected to keep interest rates unchanged next week but economists see a hike in December.

While no speeches are scheduled by the Fed for Tuesday, in focus is chatter on who will take on the role of Fed Chair in early 2018.

Currently, reportedly five people have been named as potential candidates, including the current Janet Yellen.

David Madden, at CMC Markets, said on UK trading patterns today: "Stocks in Europe are experiencing low volatility and as a result the trading ranges have been relatively small."

He added: "The latest UK growth figures will be released tomorrow, and it is likely to have a big impact on the FTSE 100 as is very sensitive to moves in sterling."

The pound lost 0.67% against the Euro and 0.57% against the US dollar.

On  Footsie, copper titan Antofagasta (LON:ANTO) was top dog, up 2.79% to 1,031p,on the back of the rising price of the red metal.

The biggest loser was Whitbread plc (LON:WTB), whose shares lost 4.79% to 3,753p

Whitbread reported a slowdown in like-for-like sales growth in its Costa coffee chain during the first half and profits in the division fell on higher costs.

The group, which also owns the Premier Inn hotels brand, said underlying profit before tax rose 6.7% to £328mln in the six months to 31 August, compared to the same period a year earlier. Revenue increased 7.4% on the year to £1.6mln, in line with consensus forecasts.

 

4.00pm: FTSE flat as ECB, Fed interest rate decisions loom

The FTSE 100 was struggling to find direction in afternoon trading as traders sifted through US and eurozone PMI data ahead of policy decisions from the European Central Bank and the Federal Reserve.

In the eurozone, manufacturing activity expanded further while services growth slowed in October, according to Markit’s PMIs. Overall the private sector remained in growth territory, adding to bets the ECB will taper its QE programme at its policy announcement on Thursday.

Across the Atlantic, US PMIs indicated a pick-up in growth in manufacturing and services sectors. The Fed is expected to keep interest rates unchanged next week but economists see a hike in December on the back of strong economic data.   

US stocks rose in early trading with the Dow Jones up 170 points to 23,444, the S&P 500 up 2 points to 2,567 and the Nasdaq up 10 points to 6,597. Caterpillar and 3M were top risers in the US after their earnings impress investors.

Among London-listed companies, Whitbread remained at the bottom of the FTSE 100 after first half results revealed a drop in Costa profits, as price pressures weighed, and a slowdown in like-for-like sales at the coffee chain.

Mediclinic International was still reeling from Spire Healthcare’s announcement yesterday that it had rejected its takeover offer.

On the upside, miners Antofagasta and Glencore were boosted by a rise in copper prices.

An increase in oil prices also lifted shares in Royal Dutch Shell, BP and BHP Billiton.

St James Place gained after posting quarterly growth in funds under management, supported by a jump in net inflows.

Carillion was still higher after agreeing new credit facilities and deferrals on some debt repayments after two profit warnings this year.

In currencies, the pound was weaker after Bank of England deputy governor Jon Cunliffe raised doubts over an interest rate hike next week. The currency fell further against the dollar after strong US PMIs, down 0.52% to US$1.3130. 

Against the euro, the pound was down 0.67% to €1.1158. 

3.30pm: US private sector activity expands in October

The IHS Markit flash estimate for the US composite purchasing managers' index, which measures output in manufacturing and services industries, rose to 55.7 in October from 54.8 a month earlier.

A reading above 50 signals expansion in sector activity while a level below that indicates a contraction. 

US manufacturing PMI rose to 54.6 from 53.1 while services PMI increased to 55.9 from 55.3.

The data beat analysts expectations and comes ahead of the Federal Reserve's interest rate decision next week. 

 

3.00pm: UK regulator begins probe of Equifax hack

The Financial Conduct Authority has kicked off an investigation into the hacking of US credit reporting agency Equifax, which saw data stolen from nearly 70,000 Britons.

Equifax faces a hefty fine and could lose its right to operate in the UK if the watchdog determined it was negligent with its clients’ data.

The hack in early September saw the personal details of 143 million US citizens stolen. 

Equifax said it was working closely with the FCA and other authorities.

"Cybercrime is a real and ever-present risk faced by all companies, so it is important that Government, regulators and businesses work together to combat this growing threat,” a spokesman said. “We see today’s announcement as a continuation of that process."

 

2.40pm: Oil prices rise as on Saudi comments

Oil prices gained after the Saudi Arabia energy minister confirmed the nation’s commitment to end a supply glut.

Khalid al-Falih told Reuters the focus remained on reducing oil stocks in industrialised countries to their five-year average.

“When we get closer to that (five-year average) we will decide how we smoothly exit the current arrangement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories,” he said.

Brent crude rose 0.38% to US$57.59 per barrel and West Texas Intermediate increased 0.63% to US$52.23 per barrel. 

2.20pm: Barclays considers push into riskier debt trading

Barclays is said to be looking to hire more staff to support a push into riskier debt trading and a return to dealing in complex credit products in the US.

Bloomberg reported that Adeel Khan, a trader who has led the rapid growth in credit trading over the past two years, may allocate capital in the bank’s small business, which has been falling behind its US rivals.

The bank also wants to expand in US structured credit, particularly collateralised debt obligations, a source told the news outlet.

Chief executive Jes Staley has sold its African and European consumer divisions to provide more capital that will allow the investment bank to take more risks and claw back market share after years of cost-cutting.

 

1.55pm: AA demands ousted former chairman repay bonuses 

Insurance firm AA is reportedly demanding former chairman, Bob Mackenzie to repay more than £1.2mln in annual bonuses after he was ousted for gross misconduct.

Mackenzie was dismissed in July following a public altercation. Lawyers for the company, which provides breakdown cover and car insurance, wrote a letter to Mackenzie saying the bust-up provided grounds for clawing back the payments, Sky News reported. 

 

1.10pm: BrightHouse agrees to pay £14.8mln in redress

The Financial Conduct Authority (FCA) has ordered rent-to-own retailer BrightHouse to pay £14.8mln to compensate 249,000 mistreated customers.

BrightHouse, which allows customers to pay for household items such as washing machines and televisions on a weekly basis, will make payments to those who had cancelled agreements after one downpayment but had not been refunded.  The company will also compensate those who signed up to lending agreements that "may not have been affordable".

It follows a 2016 BBC investigation conducted by former Labour leader, Ed Miliband, which found customers ended up paying too much to hire out goods. For instance a £385 washing machine ended up costing more than £1,000.

 

12.30pm: UK economy approaching full capacity, says Hammond

Chancellor Philip Hammond said the UK economy is approaching full capacity when asked in parliament about using public money to finance homebuilding.

Ahead of his 22 November Budget announcement, Hammond said: “Increasing activity in the construction sector is a very good way of creating jobs but ... at 4.3 percent, our economy is approaching full employment, the output gap is extremely small.”

He added that the government will continue with plans to reduce the budget deficit in a “measured and balanced way”.

In response to a question about what he is doing to ensure a Brexit transition deal, he said the government wants to agree the principles of such an agreement as soon as possible. 

 

12.10pm: FTSE 100 flat with mining shares up, Whitbread down

In midday trading the FTSE 100 was flat at 7,524 as the pound fell against the dollar and the euro amid uncertainty about whether the Bank of England will raise interest rates next week.

BoE deputy governor Jon Cunliffe said that while interest rates may have to rise it was more of an “open question” on timing, sending sterling down 0.22% against the euro to €1.1208 and 0.14% down versus the dollar to US$1.3180.

"The pound could well be in for a nervy few weeks, then, with the interest rate situation seeming to only get murkier as the November meeting grows closer," said Spreadex financial analyst Connor Campbell.

Contributing to sterling's losses against the euro was an unexpected rise in the Eurozone manufacturing PMI in October. 

Among companies, shares and Antofagasta and Glencore jumped as copper prices shot higher.

RSA Insurance gained after JPMorgan Cazenove upgraded the stock to ‘overweight’ from ‘neutral’, saying the valuation is now attractive after underperforming in recent months.

St. James Place was on the front foot after posting a 42% gain in net fund inflows to £2.4bn with investors in the three months to 30 September, boosting funds under management to £85.7bn, up 3.2% on the previous year.

Carillion rallied on news it has agreed new credit facilities and deferrals on some debt repayments as it works to turnaround the busines after two profit warnings this year.

On the back foot was Whitbread after it reported a slowdown in like-for-like sales growth in its Costa coffe chain during the first half and profits in the division fell on higher costs.

11.30am: FTSE recovers on weaker sterling

The FTSE 100 has reversed early declines to rise 7 points to 7,531 aided by a weaker pound.

Sterling fell 0.13% versus the dollar to US$1.3181 and 0.20% against the euro to €1.1210 after Bank of England deputy governor Jon Cunliffe again raised doubts about whether he would back an interest rate hike next week.

In an interview with Welsh newspaper Western Mail, published on Monday, Cunliffe said it was an “open question” on whether the Bank would raise borrowing costs in November because the UK economy is suffering weak growth while UK real wages are falling due to the spike in inflation.

“In our August forecast we forecast that rate of growth [GDP] of about 1.5% a year, and it is going to continue for the next two to three years,” he explained. 

“And pay is going to gradually pick up from around 2% to around 3.5% by the end [three year forecast period. And that is going to put some domestic pressure on inflation, as the imported inflation eases off.

“Now if that forecast comes to pass over the forecast period, interest rates will need to go up.”

 

10.50am: Composite PMI decline should not worry ECB, says ING

The weaker Eurozone composite PMI should not worry the European Central Bank too much, according to ING's Ben Colijn. Colijn said businesses have indicated the fastest job growth since the survey started in 1997 and selling prices increased at the fastest pace since June 2011.

"While the drop in the composite PMI could point to a somewhat slower GDP growth in the last quarter of the year, it does seem that growth will remain healthy and that the economy could weather slower asset purchases by the ECB," he said.

"With new orders increasing and export demand picking up, the underlying detail provided enough encouragement for another robust start to the quarter.

10.20am: Eurozone manufacturing PMI rises but services PMI falls 

Eurozone manufacturing activity growth accelerated in October but services eased, Markit data revealed.

The purchasing managers index for manufacturing rose to 58.6 in October from 58.1 in September, above the 50 level that indicates expansion in sector activity. Services PMI, however, fell to 54.9 from 55.8.

The composite PMI, which includes manufacturing and services, dropped to 55.9 from 56.7. 

9.50am: Eurozone banks expect increase in demand for loans

Eurozone banks expect an increase in demand for consumer credit, corporate loans and mortgages in the last three months of the year, according to the European Central Bank's quarterly lending survey.

Higher competition among banks and cheap wholesale and retail funding has led to rising demand for loans.

The ECB's poll revealed that banks will keep their credit standards on corporate loans broadly unchanged but households’ access to consumer credit and housing loans may ease in the fourth quarter. In the third quarter, banks eased credit standards for mortgages and consumer loans while corporate loans remained broadly unchanged. 

“Competitive pressure, banks’ risk perceptions, and cost of funds and balance sheet constraints had an easing impact on credit standards on loans to enterprises in the third quarter of 2017, while banks’ risk tolerance had a tightening impact,” the survey showed.

8.45am: Dull start but Carillion soars

The  FTSE 100 index drifted lower in early trading weighed by overnight falls on Wall Street after a late turnaround led by a 6% slide from General Electric Inc. (NYSE:GE), although a slip by sterling helped limit London’s falls.

Around 8.45am, the UK blue chip index was down about 6 points at 7,518 having closed just 1.22 points higher yesterday as early gains in New York were countered by further strength in the pound.

On currency markets today, sterling eased back 0.1% versus both the dollar and the euro to US$1.3185 and €1.2223 respectively awaiting fresh direction from UK GDP data and the latest European Central Bank council meeting later this week.

Among the early blue chip fallers in London, leisure giant Whitbread plc (LON:WTB) was the worst off, shedding 4.2% to 3,775p after a trading update with like-for-like sales growth at its Costa Coffee operations slowing by more than expected to just 0.6% in the first half.

Insurer Admiral PLC (LON:ADM) was also under pressure, losing 2.1% at 1,875p after US bank JPMorgan Cazenove cuts its rating to ‘neutral’ from ‘overweight’ in a sector review.

But the same broker gave a lift to blue chip peer RSA Insurance PLC (LON:RSA), up 1.4% to 639p with the opposite upgrade in rating, to ‘overweight; from ‘neutral’.

A change of stance also gave a boost to FTSE 250-listed pumps manufacturer Weir Group (LON:WEIR), which added 2.5% to 2,112p as RBC Capital hiked its rating to ‘outperform’ from ‘sector perform.’

But one of the market’s biggest riser was Carillion PLC (LON:CLLN) which soared 13% higher to 49.5p on news it has agreed new credit facilities and deferrals on some debt repayments, offering a lifeline to the troubled construction and services group that has issued two profit warnings this year, and also said it is moving ahead with disposal plans.

The group said it had signed a head-of-terms agreement to sell a large part of its UK healthcare business to outsourcing company Serco Group PLC (LON:SRP) for £50.1mln.

Proactive news headlines:

Tlou Energy Limited (LON:TLOU)  has updated investors on its ongoing seismic programme in Botswana, which is about 40% complete. The 2D seismic programme, spanning the Lesedi and Mamba coal bed methane areas, kicked off earlier this month (on October 8).

Goldplat PLC (LON:GDP) now boasts profitable operations across the board. Recovery plants in South Africa and Ghana continue to perform well, while production continues to increase at the Kilimapesa gold mine.

Rose Petroleum PLC (LON:ROSE) has completed its seismic programme in the Paradox basin, Utah, and the company now expects initial results to be ready before the end of the year. The seismic programme, which covered a 50 square mile area, is a precursor to exploration drilling with the data expected to be used to identify five initial drill targets.

Greka Drilling Ltd (LON:GDL) told investors it has landed two new contracts in China, together worth around US$9mln - one with Greka Guizhou and one with CNPC unit Bohai Drilling Engineering.

Bloomsbury Publishing PLC (LON:BMY) still has the magic touch when it comes to children’s books; it reported a 33% rise in revenues from Children's titles to £31.7mln, which was a major contribution in the 15% rise in half-year group revenues to £72.1mln.

Intellectual property commercialisation specialist Frontier IP Group Plc (LON:FIPP) said the fair value of its portfolio rose by 45% in the year to 30 June.

Seeing Machines Limited (LON:SEE) is talking to a growing number of car industry players as interest in its FOVIO driver monitoring systems (DMS) technology increases, even at the onset of the semi-autonomous vehicle.

Avacta Group Plc (LON:AVCT) has told investors that Affimer reagents continue to excite the scientific community, with a record nine scientific papers on the subject already penned in 2017. The compares with just two written last year, so interest in the area is clearly growing.

Internet of Things (IOT) enabler Telit Communications Plc (LON:TCM) has received the long-awaited certifications for its LTE CAT-1 VoLTE modules. The delay in getting the approvals was one of the reasons why Telit’s first half revenues came in below expectations.

Human microbiome specialist OptiBiotix Health plc (LON:OPTI) has agreed for its cholesterol and blood pressure reducing food additive LP-LDL to be sold in Spain, Chile, Peru and the Middle East in a three year deal with Galenicum Special Ingredients.

Metal Tiger PLC (LON:MTR) has reported strong exploration drilling results outside of the main T3 copper resource in Botswana that it's developing jointly with Australia's MOD Resources. The drill results indicate that in time T3 could become even bigger.

Stratex International plc (LON:STI) has issued a rebuttal of a plan produced by dissident shareholders to add production from Egyptian gold tailings and to move into base metals exploration in Botswana and Namibia. An EGM is being held on 1st November, and Stratex continues to urge shareholders to vote against the resolutions.

An ongoing review of historical data and initial field reconnaissance has highlighted additional gold potential at the Panorama project in the Pilbara region of Western Australia held by Greatland Gold plc (LON:GGP). Amongst the highlights from the northern licence area are multiple historic rock chip samples with an elevated gold response along a 3.2 kilometre zone, including results of 10.5 grams per tonne gold, 14 grams per tonne and 66 grams.

6.45am: Lower on Wall Street reversal

The  Footsie is seen opening lower on Tuesday following a late reversal overnight on Wall Street, although Asian markets held fairly steady today, with markets seeking fresh direction after recent record highs.

Spread betting firm CMC Markets expects the FTSE 100 index to open around 14 points lower at 7,510, having closed just 1.22 points higher yesterday as early gains in New York were countered by further strength in the pound.

US stocks had fallen back by the close, however,  with the Dow Jones shedding 54 points at 23,273, while the other main benchmarks also retreated.

Michael Hewson, chief market analyst at CMC Markets (UK) said: “Even US stocks struggled to build on last week’s gains, slipping back for the first time in six days, despite posting new record highs first.

“This late slide in US markets looks set to translate into a negative open for European markets this morning as investors weigh up the risks that political fragmentation could start to translate into a slowdown in the economic recovery story that has so far characterised this year in Europe.”

Strong coffee needed for Whitbread

The main corporate focus on Tuesday will be first half results from Whitbread plc (LON:WTB) with the FTSE 100-listed leisure giant’s first quarter performance having  seen a solid start to the year thanks to growth at Premier Inn, although slowing growth at Costa Coffee remained a worry.

Costa’s like-for-like (LfL) sales in the three months to the start of June rose 1.1% year-on-year, having increased by 2.0% a year earlier, and that was already a decline from the 2.9% reported the year before that.

Neil Wilson, senior market analyst at ETX Capital thinks that Costa’s LfL sales may decline further in the second quarter, dragging the first half growth below 1%.

Premier Inn’s Q1 performance was strong with like-for-like sales up 4.7% and total sales rising 9.2% after opening 9,000 new rooms over the last couple of years.

ETX’s Wilson said: “Recent IHG results appear supportive of further revenue growth and RevPar growth, where Premier Inn is lagging the sector. The weak (cheap?) pound has boosted tourism, which should act as a tailwind for Premier Inn revenues and revenues per available room. “

Further momentum wanted at Anglo American

Investors will also be looking for further momentum in an improving operational performance from blue chip mining giant Anglo American PLC (LON:AAL), which reports third quarter numbers.

Graham Spooner, investment research analyst at The Share Centre pointed out that commodity prices in general have further improved in the last quarter and investors will hope that the expansion of the Los Broncos and Collahuasi mines have progressed to take advantage of price rises.

Another blue chip firm, St James’ Place Capital PLC (LON:STJ) will also report third quarter numbers, with Numis Securities expecting the wealth manager to disclose funds under management of £85.5bn, and quarterly net inflows of £2.0bn.

And investors will hope for solid first half numbers from Harry Potter books firm Bloomsbury Publishing PLC (LON:BMY) after it released an encouraging first quarter update in July which indicated that revenues were up 19%  in the period due to a strong performance from its Consumer titles.

Significant events expected on Tuesday October 24:

Trading updates: Anglo American PLC (LON:AAL), Brooks Macdonald PLC (LON:BRK), Bunzl PLC (LON:BNZL),  Carpetright PLC (LON:CPR) International Personal Finance PLC (LON:IPF), McBride plc (LON:MCB), Shoe Zone PLC (LON:SHOE)

Interims: Bloomsbury Publishing PLC (LON:BMY), Gear4Music Holdings PLC (LON:G4M), St James’s Place (Q3) (LON:STJ), Whitbread plc (LON:WTB)

Around the markets:

  • Sterling: US$1.3130, down 0.52%
  • Gold: US$1,274.01 an ounce, down 0.64%
  • Brent crude: US$57.44 a barrel, up 0.3852%

City Headlines:

  • BT pension deficit could reduce by £4.4bn as expectations of an interest rate hike mount – City AM
  • Former HSBC banker convicted in US$3.5bn fraud case – The Independent
  • HBOS evidence will be given behind closed doors as former FSA Boss is due to appear in High Court – Daily Mail
  • Smith & Nephew snaps up U.S. tissue repair firm for up to US$210mln – City AM
  • Investments are off menu as Electra ‘drops’ private equity – The Times
  • London Stock Exchange Chief cashes in shares worth £4.5mln after revealing he will stand down – Daily Mail
  • AT&T, Time Warner extend merger deadline awaiting DoJ approval – Financial Times
  • Toys R Us is playing out badly in holiday run-up, Hasbro warns – The Times
  • Weinstein Company faces civil rights investigation – The Independent
  • Fidelity’s Johnson warns staff on sexual harassment – Financial Times
  • Saudi Aramco flotation still on track for next year, says Chief - The Times
  • Deripaska heads for Russia’s first London IPO since 2014 – Financial Times
  • Phones 4U tycoon John Caudwell claims former partner is ‘amazing liar’ – The Guardian
  • Dr Martens gets big in Japan (and bigger worldwide to boot – The Guardian
  • US makes fresh threat to scupper Bombardier deal putting 1,000 UK jobs at risk – Daily Express

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