FTSE 100 closes higher
GSK to close Bangladesh drug factory as part of restructuring
US shares lag after GDP figures
Reckitt Benckiser top Footsie riser
FTSE 100 closed out positively on Friday, holding above the 7,700 level though stocks across the pond were lower.
Earlier, US GDP (gross domestic product) was up 4.1% between April and June 2018, slightly below consensus for 4.2%, and well below the top end forecast of 5%.
All three US benchmarks are down at the time of writing.
In London, FTSE 100 added over 38 points to finish at 7,701 - that was up on the week too, marginally - by 0.29%.
Meanwhile, midcap index, the FTSE 250 gained around 100 points to close at 20,868.
In the currency markets, the pound was down 0.09% to 1.251 against the Euro and near flat - 0.01% up - against the US dollar.
Ken Odeluga, market analyst at City Index, said: "The pound remained depressed across Friday after EU Chief negator Michel Barnier rejected a central part to Theresa May’s Brexit plan, making a hard Brexit increasingly more likely.
"With both the EU and the UK standing by their red lines moving forward past this stalemate is next to impossible. A hard, messy Brexit appears to be the way forward and at $1.31 it is very likely that the pound isn’t pricing that in yet," he suggested.
Top gainer on Footsie was consumer goods group Reckitt Benckiser Group plc (LON:RB), which surged 7.91% to 6,810p after results.
The group upgraded its revenue forecast for the year thanks to a strong showing by its formula baby milk operation.
The maker of Durex condoms, Vanish detergent and Airwick air fresheners, reckons top-line growth will now be in the order of 14-15% this year, up from 13-14%.
Reckitt provided the update alongside its quarterly and half-yearly figures.
“We see this as, fundamentally, a very solid company but, until it can demonstrate accelerated ARPA (average revenue per user) growth via new services, which may be difficult in a muted market for estate agents, we feel the valuation is at fair levels where it is now,” said broker Liberum.
3.45pm: GlaxoSmithKline to close Bangladesh drug factory by end of year
The company’s pharmaceuticals business has seen sluggish growth in recent years which made it’s a prime target for a restructuring programme that was unveiled by the company on Wednesday to save £400mln by 2021.
Nakibur Rahman, managing director of GSK’s Bangladesh unit, said while the factory was closing the company would continue its profitable consumer healthcare business in the country.
In late-afternoon trading GSK shares were up 0.7% at 1,548.4p.
The FTSE 100 was up 45 points at 7,705.
2.40pm: Wall Street opens higher with Nasdaq leading gains
US stocks opened on the front foot on Friday morning after a decent showing from the second quarter GDP and strong earnings from several companies bolstered sentiment.
Leading the climb in the main indices was the Nasdaq, which was up 31 points at 7,882 shortly after the open following strong quarterly earnings from retail giant Amazon.com Inc (NASDAQ:AMZN), who posted a record-breaking US$2.5bn in profits for the period.
Meanwhile, the Dow Jones Industrial Average was up 24 points at 25,548, while the S&P 500 was up 2.5 points at 2,839.
There was also positivity from the second quarter GDP data, which showed the US economy grew 4.2% in the period, which despite just missing analyst forecasts of 4.2% was still the fastest pace of growth in almost four years.
1.50pm: US growth undershots (slightly)
US stock index futures turned slightly lower, and the dollar briefly pared some of its gains after US second-quarter growth data proved weaker than expected.
US GDP was up 4.1% between April and June 2018, slightly below consensus for 4.2%, and well below the top end forecast of 5%.
However, the data still shows the US economy expanding at a strong pace, which may keep intact market expectations for future interest-rate hikes by the Federal Reserve, with the next one expected for September.
Naeem Aslam, chief market analyst at Think Markets UK Ltd said “the US GDP data was rock solid but traders aren’t convinced if it is going to stay this much kosher for the second half of this year.”
He added: “We think that the Fed would have to factor in this number more closely now before they make their decision next week. But looking at today’s number, traders are confident that possibility of one more rate is rock solid but two rate hikes for this year is still under a question mark.”
In spite of the slight wobble by the US futures, the FTSE 100 index still remained strong, up around 46 points at 7,709, just below the session peak of 7,711.14.
12.00pm: FTSE 100 inches over 7,700 as morning ends
Heading into the afternoon, the FTSE 100 was just about breaking through the 7,700 level once again as strong index performers and a suppressed pound drove equities upwards.
Due to a series of miserable Brexit news, sterling was heading for its third consecutive weekly fall, with the rejection of UK prime minister Theresa May’s customs plan by EU chief negotiator Michel Barnier a particularly stinging moment.
Joshua Mahony, market analyst at IG, commented: “Theresa May’s Brexit plan seems to lay in tatters, as her battle with Brexiteers in her own rank proved ultimately needless given the ultimate rebuff that was always likely to come from Brussels.
He added: “It is becoming increasingly clear that the EU see it as a hard Brexit, or no Brexit at all, with their insistence that the UK cannot pick and choose meaning that the ability to obtain a ‘softer’ Brexit would also entail free movement of labour and adhering to EU regulations.”
However, one of the winners of the day was FTSE 100 constituent Reckitt Benckiser Group PLC (LON:RB.), whose upgraded revenue forecast sent its stock up 7.8% to 6,807p, taking the blue-chip index with it.
Following closely behind was miner BHP Billiton, whose shares were up 3.2% at 1,726.6p at lunchtime after agreeing to a US$10.5bn deal with BP PLC (LON:BP.) for the oil major to acquire BHP’s entire US oil and gas business.
Mahony said: “Interestingly, despite the fall in BP shares in early trade, this is a boon for the firm who are one of several companies who have been seeking to gain ground in the US oil fields after US corporate tax cuts helped reduce costs where production is already relatively cheap.
He added: “The challenging 2015-2017 period of low oil prices also serves to benefit these new BP assets, with efficiencies that were necessary to make at the time meaning that they acquire a lean and efficient operation which should prove highly profitable now that crude prices have recovered.”
BP shares were up 0.2% at 565.6p.
At midday, the FTSE 100 was up 44 points at 7,707.
11.45am: UK government to terminate probation service contracts early
The British government has said that it will end contracts with private companies such as Interserve PLC (LON:IRV) to run probation services in England and Wales, admitting that they had delivered the benefits expected.
UK Justice Secretary David Gauke said that the outsourcing contracts would end two years early in 2020, with no compensation payments to be made to contract holders.
The Ministry of Justice said it expects the total spend of the contracts to be up to £2.2bn over the life of the contracts, including a £170mln stabilisation package, although this was less than the £3.7bn originally envisaged if the contracts ran until 2022.
This result will vindicate opponents of the partial privatisation, which was introduced by then Justice Secretary Chris Grayling in 2015, as well as displaying a further shift in the UK government’s stance on outsourcing after the collapse of Carillion earlier this year brought the practice under intense public scrutiny.
In late-morning trading, shares in prominent outsourcing firms Interserve and Capita were down 3.5% at 68.1p and up 1.2% at 163.2p respectively.
The FTSE 100 meanwhile was up 36 points at 7,699.
11.00am: China to inject funds into infrastructure to soften economic blow of trade war
A report by Reuters has said the Chinese government is planning to invest more money into infrastructure projects and relax borrowing curbs on local governments to help reduce the impact of its trade war with the US.
Reuters sources familiar with the policy have said that the amount of infrastructure would depend on how the trade war develops, with Beijing having already raised concerns that a sharp slowdown in Chinese economic growth could fuel job losses.
However, the plan stands in contrast to previous statements that the Chinese government had ruled out another stimulus package after a 4trn yuan injection in 2008-09 that helped shield the country from the global financial meltdown but left local governments and state firms saddled with massive debts.
The Chinese economy has already felt a contraction as the government in Beijing pushes to deleverage, driving up corporate borrowing costs and delaying government projects.
10.15am: Dollar hits five-day high ahead of US GDP while sterling on track for third weekly drop
The greenback was up at its highest level in five days as investors awaited any potential surprises from the second quarter reading for the United States GDP.
The strong dollar has been somewhat of an irritation for US president Donald Trump, who has made repeated attempts to talk down the currency to make exports more competitive.
However, the currency has stuck close to a yearly high of around £0.768 against the pound, currently trading at £0.763.
On the other side of the Atlantic, sterling was headed for its third consecutive weekly loss as Brexit continued to weigh on its prospects.
The rejection of key elements of the UK’s Brexit trade proposals by the EU’s chief negotiator Michel Barnier, among other negative headlines, has all piled pressure on the pound, which as of mid-morning trading Friday was at US$1.31, close to its 2018 low of around US$1.30 which it hit last week.
Meanwhile, the FTSE 100 was maintaining its gains, up 16 points at 7,679.
9.30am: ECB survey predicts faster rise in inflation
A survey of professional forecasters by the European Central Bank (ECB) has revealed that inflation in the eurozone could accelerate faster than initially thought, underpinning its decision to wind down its stimulus programme.
The survey showed that headline inflation in the currency bloc was seen at 1.7% this year, above a previous projection of 1.5%, with next year’s rate also rising to 1.7% from 1.6%.
The ECB is targeting to keep inflation just below 2%, with the survey data helping to justify its decision to stay the course at its meeting yesterday after deciding to wind down the stimulus in June.
The survey also forecasts slower growth in the bloc in the near term, cutting its 2018 growth projection to 2.2% from 2.4% while 2019’s forecast was cut to 1.9% from 2%.
In early morning trading, the euro was relatively unchanged at £0.8875.
The FTSE 100 had slowed from a jump start earlier in the morning, up 15 points 7,678.
8.45am: Footsie pushes higher
The FTSE 100 got off to a positive start, rising 35 points to 7,698.05 on an unusually busy Friday.
Sentiment may be shaped later by GDP figures from the US, which will provide us with more details on the state of the world’s largest economy.
In the meantime, investors had plenty to pick through, with a further flurry of FTSE 100 results hitting the wires.
Competition concerns haunted property website owner Rightmove (LON:RMV), which was off around 2% in the opening 40 minutes of trade.
Proactive news headlines:
Tlou Energy Ltd (LON:TLOU) has told investors that it is one of two companies that have been invited to re-tender for a coal-bed-methane fuelled power projects in Botswana. A meeting is now due to take place with the Botswana government on 9 August, ahead of a submission deadline of 12 September.
Cabot Energy PLC (LON:CAB) has announced the appointment of James Dewar as the company’s new interim chairman. "We are delighted that James has agreed to join the board. James is a recognised expert in the field of corporate governance, finance, accounting and control, with extensive industry experience. Everyone on the management team looks forward to working with him,” said chief executive Scott Aitken.
Premier African Minerals PLC (LON:PREM) has identified four alternatives to restart its RHA tungsten mine in Zimbabwe. Engineers are now considering which of the options would involve the lowest capital cost and shortest timeframe.
Cadence Minerals PLC (LON:KDNC) (OTC: KDNCY) said it is pleased to note that investee company Auroch Minerals (ASX:AOU) has received permitting approval to commence a maiden drilling programme at its Arden Base-metals Project in South Australia. Cadence currently owns approximately 7% of the equity in Auroch Minerals.
Kibo Mining PLC (LON:KIBO) has announced that effective immediately, its new legal advisors for the Mbeya Coal to Power Project (MCPP) will be Hogan Lovells International LLP. replacing Norton Rose Fulbright (NRF). The firm said after the senior partner responsible for the MCPP at NRF recently joined Hogan Lovells, the company decided to follow, to ensure continuity and stability in the ongoing sensitive legal work related to the MCPP PPA negotiations. Kibo also announced that an updated corporate presentation is now available to view on the company’s website.
6.45am: Trade worries shelved
The Footsie is expected to open higher this morning as investors took a break from trade worries to await the second quarter GDP reading from the US.
Spread betting firm IG expects the FTSE 100 index to open around 22 points higher at 7,685 after a fairly lacklustre finish on Thursday, in which it closed up just 4 points at 7,663.
The shift away from trade worries follows the recent meeting between US president Donald Trump and European Commission president Jean-Claude Juncker on Wednesday which was seen by many to have somewhat diffused trade tensions that had been recently emanating across the Atlantic.
However, Michael Hewson, chief market analyst at CMC Markets UK, said that while the prospect of tariffs on EU car exports to the US had diminished, “it hasn’t gone away completely”, adding that the market would instead shift its focus towards an escalation with China.
Away from corporate news, the market will turn its attention to US economic growth data for the second quarter.
Economists expect gross domestic product (GDP) in the second quarter to rise 4.2% compared to the previous three months or grow 2.3% compared to the same period a year ago.
Trump will most likely take the credit if GDP reaches such heights, with the economy expected to receive a boost from his tax cuts.
Trump has pledged to hit annual growth “much higher” than 3%, a level not seen in 14 years. Last year, the economy grew by 2.3%.
Regarding the GDP reading, Hewson said: “There is a wide range of estimates around todays interim Q2 GDP number ranging from 3.5%-5%, with market pricing something in the region of 4.1%. Given the strength of the US jobs market, the stimulative effects of the January tax cuts, and the increase in US consumer spending, there is an argument for a number towards the upper end of estimates, at around 4.5%. If we do come in anywhere near here then that should be US dollar positive, as markets price in further tightening.
He added: “On the other hand, the increase in trade tensions which has worried some US business, as well as fairly subdued wage growth, and rising inflation due to high gasoline prices, could take the edge off and see us come in below 4%, which could put downward pressure on the US dollar.”
In the US markets yesterday, the Dow Jones Industrial Average closed up 112 points at 25,527, while the S&P 500 closed down 8.6 points at 2,837. The Nasdaq was the biggest faller, closing 80 points down at 7,852 as a rout in the stock price of social media giant Facebook Inc (NASDAQ:FB) weighed on the index.
In Asia today, the Japanese Nikkei 225 was up 72 points at 22,658, while Hong Kong’s Hang Seng was down 54 points at 28,726. The jump in Japan was mostly driven by tech stocks as retail giant Amazon reported a whopping US$2.5bn in quarterly profits after the US close yesterday.
On the currency markets, the pound was relatively flat at US$1.31 against the dollar and also flat at €1.125 against the euro.
BT to leave investors ‘flying blind’ with Friday trading update
The telecoms giant’s new reporting on key performance indicators (KPIs) will draw attention away from volume-based subscriber metrics towards the value generated from each customer.
Analysts at RBC Capital Markets accused the company of trying to hide bad news, adding that the omission of broadband and mobile net adds is likely to lead the market to "assume the worst".
“While we understand the desire to move away from 'net adds' as the market matures, not disclosing such important metrics may cause concern, given the widely held sceptical view that companies tend to obfuscate bad news. Indeed, reduced disclosure often, in our view, portends badly for future operational performance,” RBC said, suggesting investors will be left "flying blind".
Significant announcements expected on Friday, July 27:
Interims: Pearson PLC (LON:PSON), Reckitt Benckiser PLC (LON:RB.), Rightmove PLC (LON:RMV), Jupiter Fund Management PLC (LON:JUP), Equiniti Group PLC (LON:EQN), Hutchison China Meditech Ltd (LON:HCM), UK Mail Group PLC (LON:UKM), Greencoat UK Wind PLC (LON:UKW)
Economic data: US Q2 GDP
Around the markets:
• Sterling: US$1.3105, unchanged
• Gold: US$1,223.9 an ounce, up 0.14%
• Brent crude: US$74.25 a barrel, down 0.39%
• Financial Times: Facebook shares lost more than $120 billion of their value on Thursday after the social media giant warned of slowing user and sales growth amid concerns over the company's financial prospects and data privacy.
• The Times: Amazon reported its first quarterly profit above $2 billion last night as soaring demand for cloud computing helped the company’s fast-growing Amazon Web Services register its first operating profit above $1 billion.
• The Daily Telegraph: US-EU crunch talks have done little to quell concerns about the future of the Trump administration's trade policy, experts have warned.