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FTSE 100 suffers triple-digit fall as investors fret over a trade war coinciding with Brexit

Fears of a trade war have rattled investors, with minerals companies particularly hard hit
Imports arriving by sea
Trump wants to protect US jobs by slapping tariffs on steel and aluminium imports
  • FTSE 100 down 106 points at 7,069

  • GKN tumbles as it considers Dana Inc offer for its Driveline unit

  • PM May's Brexit speech offers nothing new

The Footsie suffered a triple-digit fall as investors fretted over the prospect of a trade war sParked by president Trump.

The FTSE 100 closed at 7,069, down 106 points on the day.

Miners were out in the cold after Trump's bombshell, with Rio Tinto PLC, Anglo American PLC, BHP Billiton plc and Glencore PLC all suffering falls of more than 3%.

Bid target GKN PLC (LON:GKN) declined 3.5% as it said it was considering an offer from Dana Incorporated for its Driveline business, which it was expecting to demerge.

The GKN board believes that “the possible transaction under discussion could provide greater value to shareholders and should, therefore, be explored alongside the demerger, as compared with the Melrose offer, which has been rejected by the board as fundamentally undervaluing the company and its prospects”.

3.00pm: The Footsie's losses widen after sharp setbacks on Wall Street

FTSE 100's losses widened as US stocks started heavily down and the PM's Mansion House speech on Brexit failed to inspire.

The UK Premier repeated the case that the UK would leave the customs union and that "life was going to be different" as she set out five vague rhetorical tests that the UK would look to as it left the EU. She also ruled out a deal like Canada or Norway.

"The speech today comes after Donald Tusk warned during talks with Mrs May on Thursday that there could be no frictionless trade outside of the EU and that friction was inevitable," noted analyst James Hughes at Axitrader.

"The PM has of course already ruled out the UK staying within the single market and customs union after Brexit, but the real stumbling block will come after the EU announced a plan earlier in the week to keep Northern Ireland in the union to avoid a hard border with the Republic of Ireland. What will help Sterling will be strong leadership and a strong stance from the PM."

Hughes said this was a "nothing speech" that gave very little insight, or very little clarity on the matters that have already caused big market swings this week.

"We are no clearer now than we were before the PM’s speech, and the pound and Euro showed that by their lack of interest and movement."

FTSE 100 shed over 96 points at 7,078. Sterling is down 0.34% against the Euro and off 0.10% against the US dollar.

On Wall Street, the Dow Jones is down 306 points, while the S&P 500 is 62 points, or 2.31% lower.

2pm: Mothercare shares down

Shares in baby and toddler products firm Mothercare plc (LON:MTC) tanked over 14% to 21.18p as it warned that profits would be at the lower end of expectations.

But it did say it expected its net debt to be slightly lower than the £50mln it had forecast.

The retailer also cautioned that it may breach its lending agreements and was seeking additional sources of funding.

Meanwhile, Bank of England governor Mark Carney has been back talking with his latest take on crypto-currencies.

He says such currencies like Bitcoin should be regulated to crack down on illegal activities and protect the financial system.

"The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system," Mr Carney said in a speech on Friday.

FTSE 100 is down nearly 8o points now at 7,096.

12pm: Wall Street set for lower open

FTSE 100 lost more ground as attention turns to Theresa May's speech and Wall Street looks set for another weaker open.

Britain's blue chip index is off over 70 points at 7,105 with mining giant Anglo American (LON:AAL) the biggest laggard down 2.33% to 1,701p.

On Wall Street, Dow futures are down 194 points, the index having closed 420 points lower yesterday,  while S&P 500 futures are trading over 13 points lower.

The Nasdaq futures  are down over 53 points.

Yesterday, president Trump dropped a bomb shell by saying he would impose an import tariff on steel and aluminium in a bid to protect US jobs, but is has sParked fears of  a trade war and sent shares south.

In crypto news, Bitcoin has just nudged below the US$11,000 level having made it back there after a week of straddling US$10,000.

11am: May speech at 1.30pm 

FTSE 100, like motorists on certain UK roads, are stuck in negative territory as traders eye a key speech on Brexit from Prime Minister Theresa May  later.

The blue chip index is down 47 at 7,128.

A key sticking point on the UK's departure has been the customs union and trade arrangements, and from draft comments released overnight, May is expected to say that a free trade deal is possible.

She is set to outline five broad-brush 'tests' for a future deal with the European Union once Britain leaves the bloc.

They are to:

  • - Regain control of laws, borders and money, while acknowledging the referendum result “was not a vote for a distant relationship with our neighbours”
  • - Any deal “must be enduring” and not break down
  • - It must protect people’s jobs and security
  • - It must be consistent with the UK remaining a “modern, open, outward-looking, tolerant” nation.
  • - The deal “must strengthen our union of nations and our union of people”.

In stocks, engineering group IMI PLC (LON:IMI) saw its share price tumbling even though it raised its full-year dividend due to its cautious oyutlook.

Cost-cutting and rationalisation has been the focus in recent years and IMI repeated that will remain the plan in 2018.

Shares shed 8.22% to 1,128p.

Meanwhile, Amphion Innovations Plc (LON:AMP) saw its shares gain over 7% to 1.48p after the IP and investment group announced a year’s extension to the redemption of £6mln worth of convertible promissory notes.

Pan African Resources plc (LON:PAF)  also rose 7.71% to 7.68p as it started to increase production again at its Barberton mine complex in South Africa after reaching a new high-grade gold zone.

Barberton, which comprises the Fairview, Sheba and Consort mines, has seen a rise in average grades to 11.5g/t in February from 8.7g/t during July - December.

 

10am: Downturn in construction continues

FTSE 100 is still down as it emerged the downturn in UK construction has entered its fourth quarter, latest figures show.

The Markit/CIPS construction PMI rose to 51.4 in February, compared to 50.2 in January, above the consensus, 50.5.

Despite the modest rise last month, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Output in the construction sector remains on course to contract for a fourth consecutive quarter,,"

"In practice, any PMI reading below 52 has been consistent with falling construction output in the past.

In addition, the new orders index rose only to 49.9 in February, from 48.8 in January, remaining below 2017’s average, 51.4

"The near-term outlook for the construction sector remains bleak," added Tombs.

"Hopes that a Brexit transition deal could be agreed by the end of this month now look forlorn, so businesses will remain reluctant to commit to long-term capital expenditure. Rising mortgage rates will subdue demand for new houses. Meanwhile, public sector investment is set to fall by 4.5% in 2018/19.."

FTSE 100 is down nearly 46 points at 7,129.

 

8.30am: FTSE 100 starts in the cold

As expected, FTSE 100 started in the red, with London Stock Exchange plc (LON:LSE) the big laggard in early deals.

The company's shares shed 1.85% in early deals to 3,869p as the market failed to be cheered by its 2017 numbers.

The group said full-year operating profit increased to £626mln as total income rose by 18% to £1.96bn, slightly above the consensus forecast for £1.9bn.

LSE also said it was making "good progress" on finding a new chief executive with a "strong field of high-quality candidates".

Conversely, on the up was Mondi Plc, which gained 1.98% to 1,876.5p as the packaging group  revealed its pre-tax profit in 2017 rose 5% to €887mln, while revenue for the year also rose 6.5% to €7.1bn.

Mondi also declared a special dividend of 100 cents, saying it reflected the strength of the company's financial position.

"The special  dividend has understandably perked interest among income seekers having boosted the shares’ yield from a middle-of-the-road and safe US Treasury-like 2.9% to a rather more attractive 7.6%," said Mike van Dulken at Accendo Markets.

"It also puts the shares up there with the generous UK housebuilders, Insurers, Telcos and, of course, Utilities.

"That said, the sustainability of the Utilities’ returns is debatable and Telcos have failed to offer anything near the long term capital appreciation of the two aforementioned sectors, or indeed Mondi itself."

FTSE 100 is down around 33 points at 7,141 at the time of writing.

In smallcap world, Galileo Resources (LON:GLR) was a  notable mover, adding 10% to 1.65p as it hailed drill results from three of its first four holes at the  Star Zinc project in Zambia, which  showed very high value zinc intersections.

Looking ahead, eyes and ears will be on PM Theresa May's fourth major Brexit speech due to start at 1.30pm, and expected to contain the notion that Britain cannot have all it wants when it leaves the EU.

Proactive news headlines:

Powerhouse Energy Group Plc (LON:PHE) has updated investors on the successful demonstration plant, at University of Chester’s Thornton Science Park,  where it has been processing waste to create a synthetic gas fuel. The company’s DMG (or Distributed Modular Gasification) system was commissioned in the summer of 2017 and it has been operating safely and efficiently for more than six months.

PCF Group Plc (LON:PCF) has said trading in the first five months of the current financial year has been strong, in line with the AIM-listed specialist bank's management expectations. In a trading statement to be delivered at the group's annual general meeting today, PCF's chief executive  Scott Maybury said that “new business originations in the five-month period to 28 February 2018 were 93% ahead of the comparative period last year at £54.5mln (2017: £28.2mln).”

Technology recruitment company Harvey Nash Group plc (LON:HVN) shrugged off the impact of Brexit uncertainty on business confidence to deliver growth in UK gross profit last year. In a trading update, the group reported a 6% increase in gross profit in the UK & Ireland in the year to January 31, supported by improving demand in the second half for technology recruitment.

Amphion Innovations Plc (LON:AMP) saw its shares gain 7% on Friday after the developer of medical, life science, and technology businesses announced a year’s extension to the redemption of £6mln worth of convertible promissory notes.

Galileo Resources PLC (LON:GLR) hailed drill results from three of its first four holes at the  Star Zinc project in Zambia, which showed very high-value zinc intersections, it said. Notably too, there were also high values found of silver and germanium (Ge), a  metal used in microscopes, cameras and as an alloying agent. Big Pic in February.

Pan African Resources plc (LON:PAF) has started to increase production again at its Barberton mine complex in South Africa after reaching a new high-grade gold zone. Barberton, which comprises the Fairview, Sheba and Consort mines, has seen a rise in average grades to 11.5g/t in February from 8.7g/t during July - December.

European Metals Holdings Ltd (LON:EMH) told investors that it remains “entirely focused” on working with all stakeholders related to its assets in the Czech Republic. The company has issued a statement following public statements by the Minister of Industry and Trade, and correspondence sent to the company, which according to the company,  purported to terminate a Memorandum of Understanding with the ministry.

Personal Group Holdings plc (LON:PGH) has launched its salary sacrifice offer to the employees of Royal Mail Group PLC (LON:RMG) with immediate effect. This service will be provided by the company’s PG Let’s Connect business. In October 2017, the company announced that the intended launch of the Let's Connect service to Royal Mail had been delayed for internal operational reasons, but it has now launched the plan in accordance with the group’s revised schedule.

Amur Minerals Corporation (LON:AMC) said it has completed construction of the 350km long ice road from the Ulak station, on the Baikal-Amur rail line, to its Kun-Manie project a week earlier than last year. The AIM-listed mineral exploration company, focused on base metal projects in the far east of Russia, said that the ice road was completed on 15 February, and nine vehicle convoys are now transporting the supplies to Kun-Manie, nickel sulphide deposit in Russia.

Savannah Resources Plc (LON:SAV) has received permitting approvals for its assets in Oman. It received eight approvals – one for the Maqail South mining licence application, and seven for the Mahab 4 area. Talks are now ongoing over the final outstanding approval, from the Ministry of Housing.

Bacanora Minerals Ltd (LON:BCN) is confident it will start construction at its Sonora lithium mine in Mexico on schedule even though a share placing and offtake deal with Chinese firm Nextview is in doubt. Nextview is in default of a £31.2mln placing, which would have filled the final part of the US$180mln cost of the first phase of construction at Sonora.

Vast Resources PLC (LON:VAST) told investors Andrew Prelea and Craig Harvey had been appointed as directors of the board as it also updated on the Mercuria Energy Trading offtake offer. Both will continue as chief executive and chief operating officer respectively.

I3 Energy PLC (LON:I3E) announced that on 1 March 2018, in relation to the Loan Note Agreement as announced on 6 February 2018, it received notice of exercise from James Caird Asset Management (JCAM) to convert part of the loan with an aggregate par value of US$500,000, into shares. Following this conversion, the value outstanding on the Loan will be US$2,000,000. The group added that it has therefore today allotted 1,516,876 ordinary shares to JCAM.

6.50am: FTSE 100 poised to start lower

FTSE 100 is poised to start in the red after Asian equities were sold off overnight after President Trump in the US triggered fears of a trade war after his talk on tariffs.

He said he will impose import tariffs of 25% for steel and 10% aluminum, which will be implemented broadly, without targeting specific countries.

The move sent Asian stocks tumbling, notably steel and car makers, with the Nikkei 225 crashing 561 points to 21,162 and the Shanghai Composite off 20 points.

That came after a 420 point drop by the Dow Jones on Thursday, with all three US benchmarks closing lower.

The tariffs have heightened fears about countermeasures from China and the EU in response, says Michael Hewson, analyst at CMC Markets.

It is likely to see European stocks, which had already been struggling ahead of this weekend’s Italian election and important SPD vote in Germany, follow stocks in Asia and open sharply lower over concerns that costs will rise and profit margins will hit sharply, he suggests.

FTSE 100 closed yesterday around 56 points lower at 7,175 but spreadbetters at IG Index are today calling it to open 27.5 points below that.

In the UK, apart from more discussion on the Baltic conditions outside everyone's front door, there will be company offerings from London Stock Exchange (LON:LSE), which is expected to report a record increase in full year profits.

It comes despite the group being without a permanent chief executive after Xavier Rolet was forced out by the chairman.

Analysts are forecasting a 25% rise in earnings to £955mln in 2017.

Meanwhile, Mondi Plc (LON:MNDI) will unveil full year results with analysts expecting the packaging and paper company to announce a special dividend.

Significant events expected:

Finals: Essentra PLC (LON:ESNT), IMI PLC (LON:IMI), London Stock Exchange PLC (LON:LSE), Mondii PLC (LON:MNDI), Spire Healthcare Group PLC (LON:SPI)

Interims: Revolution Bars Group PLC (LON:RBG)

Economic data: UK construction PMI; University of Michigan consumer sentiment index

Around the markets:

  • Sterling: US$1.3781, up 0.05%
  • Gold: US$1,314.40 an ounce, up 11.5%
  • Brent crude: US$60.92 a barrel, down 0.11%

 

City headlines

  • Wells Fargo reveals it overcharged wealth management clients - FT
  • Defence group Cobham jumps 18% on reassuring earnings - FT
  • GKN in talks with Dana Corp about auto business deal - FT
  • Twitter seeks help in measuring ‘health’ of conversation - FT
  • MetLife warns of new reserving problems - FT=
  • Dixons Carphone offers jobs to Maplin employees after collapse - Independent
  • Sky to add Netflix to its pay-TV bundles in Europe - Independent
  • Laird agrees £1 billion private equity takeover - The Times
  • Siemens vows to build U.K. rail factory- The Times
  • Carillion Directors dismissed plan to secure £218 million for pension scheme - Guardian
  • U.K. manufacturing growth drops to eight-month low - Guardian
  • Home entertainment spending overtakes print sales for first time - Guardian
  • Burberry hires Kim Kardashian’s wedding dress designer to make it great again - Daily Mail
  • ‘Asos of India’ fashion retailer Koovs plummets 47% as it asks for £50 million to speed up growth plans - Daily Mail
  • National Grid warns the U.K.’s gas supplies are running low - City AM

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