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FTSE 100 closes slightly in red as traders sit on hands ahead of central bank updates

FTSE 100 closed down 0.46 points, or 0.01% at 7,700 on Monday
Apple
FTSE 100 closed down and near flat at the close
  • FTSE 100 index closes down a tad

  • UK mortgage approvals hit five-month high

  • GVC jumps on MGM Resorts deal

  • Ibstock slumps on profit warning

FTSE 100 closed in the red, just, after a lacklustre day of trading in Europe and the US.

The UK blue-chip benchmark closed down 0.46, or 0.01% at 7,700.

The FTSE 250 closed up around nine points at 20,878.

On Wall Street, the Dow Jones Industrial Average is down over 95 points at the time of writing, while the tech heavy Nasdaq is off 104 points.

"The FTSE 100 is broadly unchanged while continental Europe is in the red. It has been a lacklustre session today as traders are waiting for central bank updates later this week. The Bank of Japan, Federal Reserve and Bank of England will update the market, and it seems dealers are waiting on the sidelines until then," noted analyst David Madden, at CMC Markets.

He also highlighted that the Nasdaq was firmly in the red as big name tech stocks, like Amazon and  Netflix have fallen out of favour with investors.

"...there is a sense that the once darlings of the market are now past their prime. The exodus from tech stocks could see traditional stocks like Caterpillar receive renewed demand," he said.

Top riser on Footsie was GVC Holdings (LON:GVC), which gained 5.39% to 1,154p after it announced a US$200mln joint venture with US hotel and casino operator MGM Resorts International.

The top loser was multinational Sage Group (LON: SGE), which sank over 5% to 612.80p.

3.50pm: Apple services growth to drive third quarter

Apple Inc (NASDAQ:APPL) reports its third quarter earnings after the close on Tuesday and analysts expect more positive results compared to its tech peers.

“The numbers though are not expected to produce the kind of downbeat surprise we saw from Facebook and Netflix. Instead we expect a steady-as-she-goes performance and some positive guidance for Q4 and beyond,” said Neil Wilson, chief market analyst at Markets.com.

Wilson reckons growth in Apple’s services division, which includes iTunes and iCloud, may support higher multiples as the company reduces its reliance on the iPhone.

Apple’s own guidance for the third quarter includes revenue of US$51.5bn to US$53.5bn. Analysts expect revenues to come in US$52bn, up 15% year-on-year.

3.20pm: British workers taking less sick days, ONS reveals

Official data has revealed that the number of sick days taken by British workers last year fell to a record low.

The Office for National Statistics said the average number of sick days taken by UK workers dropped to 4.1 days in 2017, down from 7.2 days in 1993 when the data was first collected.

The sickness absence rate is 1.7% in the private sector and 2.6% in the public sector.

A minor illness, such as coughs and colds, is the most common reason for a sick day, accounting for 26% of the total.

The general secretary of the Trades Union Congress, Frances O’Grady, said: “It’s time to ditch the myth that UK workers are always throwing sickies. The reality is that people are more likely to go to work when ill than stay home when well.”

2.30pm: US stocks little changed 

US stocks opened little changed as investors digested the latest batch of corporate earnings.

The Dow Jones Industrial Average rose 18 points to 25,477, the S&P 500 was flat at 2,818 points and the Nasdaq dipped 9 points to 7,727.

Caterpillar Inc (NYSE:CAT) shares rose as it raised full year guidance after reporting second quarter earnings that exceeded analysts’ expectations.

Tyson Foods Inc (NYSE:TSN) shares dropped as it issued a caution full year outlook, citing uncertainty over trade policies and tariffs.

First Data Corp. (NYSE:FDC) edged up after posting second quarter earnings and revenue that beat market forecasts.

Away from company earnings, fears about trade tensions eased after US President Donald Trump and European Commission president Jean-Claude Juncker appeared to make progress in trade talks last week.

Looking ahead, the Federal Reserve announces its policy decision on Wednesday with analysts expecting the central bank to keep interest rates unchanged.  

2.00pm: Samuel Smith Old Brewery fined for refusing to provide pension details

British brewery Samuel Smith Old Brewery and its chairman have been fined nearly £30,000 after refusing requests by The Pensions Regulator (TPR) to provide details about the company’s pension schemes.

TPR asked for details of the brewery’s pensions in 2015 but owner and chairman, Humphrey Smith, wrote back and dismissed the request as “tiresome”.

“We are in receipt of your tiresome letter and we are not prepared to divulge the information to your organisation,” he wrote.

TPR launched court proceedings, claiming the company breached the Pensions Act 2004 by neglecting to provide information without a reasonable excuse.

The company, which was founded in Tadcaster in 1758, and Smith pleaded guilty to the offence at a hearing in May and were fined £26,750 as well as costs of £1,240.

1.00pm: US stock futures mixed 

US stock futures are pointing to a mixed open as traders await another raft of corporate earnings and the Federal Reserve’s interest rate announcement.

Dow Jones Industrial Average futures rose 25 points to 25,440 while S&P 500 futures dropped 2 points to 2,815 and Nasdaq futures shed 19 points to 7,281.

The three indices closed lower on Friday with the Dow ending three days of gains as a batch of upbeat second-quarter earnings offset worries about global trade tensions. However, Facebook and Twitter tumbled last week after disappointing earnings.

“Stock markets have been gradually rising in recent weeks, making their way back to the record high levels they achieved earlier in the year before the numerous trade conflicts involving the US heated up,” said Oanda’s Craig Erlam.

“The apparent progress made at the White House last week between Donald Trump and Jean-Claude Juncker has eased some concerns for now but the threats generally remain.”

Caterpillar and Simon Property Group are among the companies expected to post earnings before the open while Apple’s results on Tuesday will be in focus. 

On Wednesday, the Fed is expected to stand pat on interest rates but the market will be looking for clues on the next hike as the central bank continues on a tightening path. 

12.20pm: FTSE 100 reverses in lunchtime trading 

The FTSE 100 recovered from early declines to rise 5 points to 7,706 in lunchtime trading as investors looked ahead to the interest rate decisions from the Bank of England and Federal Reserve later this week.

National Grid PLC (LON:NG. was among the biggest fallers on the FTSE 100 as Ofgem set the revenue the company can earn from a power grid upgrade for the new Hinkley Point C nuclear power station, based partly on the regulator’s experience in tendering contracts to win new transmission links to offshore wind farms.

Ibstock PLC (LON:IBST) shares slumped after issuing a profit warning, blaming lower-than-expected production.

On the upside, GVC Holdings (LON:GVC) was the top riser after announcing a US$200mln joint venture with US hotel and casino operator MGM Resorts International.  

WM Morrison Supermarkets gained after UBS raised its rating on the stock to ‘buy’.

11.30am: Buyers remorse for Brexiteers?

Some 78% of Britons believe the government is doing a bad job of negotiating Brexit, according to a Sky Data poll.

That’s 23 points higher from when Sky last polled on Brexit in March.

Theresa May’s approval rating also declined, with just 24% satisfied with her performance as PM, a 17 point drop.

The poll showed 65% of people think the government will get a bad Brexit deal, up 15 points.

“This may be seen as a case of buyer’s remorse setting in two thirds of the public, which includes a majority of leave voters, now thinking that the outcome of Brexit negotiations will be bad for Britain. Unfortunately for remainers, while the results are no doubt a damaging blow for the government, it still remains highly unlikely that we’ll see another referendum with the poll suggesting the public are seemingly willing to settle for what they deem will likely be a worse lot,” said David Cheetham, chief market analyst at XTB Online Trading.

11.00am: Pound unlikely to get boost from 'dovish' BoE rate hike, says ING

Ahead of the Bank of England’s next policy announcement on Thursday, ING Research reckons the pound is “unlikely to find much love” from a widely expected “dovish” interest rate hike of 25 basis points (bps).

”While we see the Monetary Policy Committee delivering a 25bps rate hike at the ‘Super Thursday’ August BoE meeting, we think the potential for at least 1, if not 2, dissenters (Cunliffe and Ramsden) – as well as cautious rhetoric by Governor Carney in the post-meeting press conference – is unlikely to engender much hawkish spirit in either UK rates or the pound this week, not least as both markets remain dominated by the risk of a no-deal Brexit,” ING said.

It added: “While the UK rates market is underestimating the potential BoE rate hike path under a smooth Brexit scenario, we doubt investors will be broadly willing to bring forward their BoE policy tightening expectations given the obvious near-term political headwinds.”

At 11am, the pound was up 0.15% versus the dollar at US$1.3125 and down 0.10% versus the euro at €1.1231. 

10.20am: Morrisons rallies on UBS upgrade

WM Morrison Supermarkets PLC (LON:MRW) shares received a boost after UBS upgraded the stock to a ‘buy’ rating, citing a slowdown in the expansion of discounter Aldi and Lidl.

UBS said its data shows that discounters have been the key source of the supermarket group’s switching losses in recent years.

“As their new store openings slow, so should pressure on Morrisons to reinvest; we're now expecting an inflection point for margins,” UBS said.

Shares are up 2.1% to 262.10p each. 

9.40am: UK mortgage approvals reach five-month high

UK mortgage approvals reached a five-month high in June, according to data from the Bank of England.

The BoE said lenders approved 65,619 mortgages last month, compared to 64,684 in May and consensus forecasts of 65,500.

Net mortgage lending rose by £3.851bn and consumer lending increased by £1.567bn.

8.45am: Footsie weak

As predicted, the FTSE 100 started on the back foot, falling 36 points to 7,665.41, with the stuttering end to the week on Wall Street having a belated impact on London (via the major Asian markets).

Interest rate policy both at home and in the US will be the focus as we move later into the week.

Monday saw a more sober reflection of the US economic growth data posted Friday.

While the second-quarter provided the strongest reading for four years, the worry is that higher interest rates and a looming trade war will put the brakes on the world’s largest economy.   

The miners, usually reflective of the outlook for China, were swayed by the downbeat assessment of prospects for the US.

The specialists Antofagasta (LON:ANTO), which produces copper, and Fresnillo (LON:FRES), a silver digger, were at the forefront of the sector-wide sell-off. Not far behind were the likes of Glencore (LON:GLEN) and Anglo American (LON:AAL).

The morning’s big riser was GVC Holdings (LON:GVC), owner of Ladbrokes and Coral, which was up almost 7% in early trade.

Providing the Viagra was a US$200mln deal with MGM Grand as the pair look to take advantage of the newly-liberalised market for sports betting Stateside.

Stepping down a division to the FTSE 250, brickmaker Ibstock (LON:IBST) blamed the weather and rising energy prices for an earnings miss. Ignoring the company’s assertion that outlook remained cheery, dealers marked the shares down 13%.

Proactive news headlines:

Mosman Oil & Gas Limited (LON:MSMN) said three more wells at the Welch project have been worked over in July and restored to production In the first 27 days of July, production at Welch was 1,180 barrels, of which 896 barrels was attributable to Mosman. This represents an average aggregate production (before royalties) of around 44 barrels per day. The previous six month average of circa 24 barrels per day had been below well capacity as water injection pump repairs had limited well production.

Canadian Overseas Petroleum Limited (LON:CPOL) (CVE:XOP) has taken a first step towards financing the development of the OPL226 licence offshore Nigeria. COPL’s 50% owned joint venture company Shorecan has agreed a project financing and offtake agreement term sheet for between US$30mln to US$50mln with Mauritius Commercial Bank and commodities trading group Trafigura.

88 Energy Limited (LON:88E) (ASX:88E) and Red Emperor Resource NL (LON:RMP) are to acquire working interests in an oil prospect on the prolific Alaska North Slope. The two companies have executed definitive agreements with Great Bear Petroleum Ventures and Otto Energy to acquire the majority of Great Bear's working interest in the four leases comprising the Western Blocks (ADL 391718; ADL 391719; ADL 391720; ADL 391721) in exchange for drilling a commitment well on the Western Blocks prior to 30 May 2019.

Stem cells specialist Widecells Group PLC (LON:WDC) has launched its innovative insurance product in Spain. It follows a soft roll-out of CellPlan via partner Stem Cell Banco Celulas Madre, a storage service specialist.

Wolf Minerals Ltd (ASX:WLF) (LON:WLFE) has extended its existing bridge facility from £65mln to £69mln, with £2m of the new money available immediately. The move comes as Wolf considers a more strategic long-term restructuring of debt incurred for the construction of the Drakelands tungsten mine in Devon.

Eco (Atlantic) Oil & Gas Limited (LON:ECO) is confident Total will exercise its option to farm-in to the Orinduik Block offshore Guyana. Orinduik is next door to ExxonMobil’s Starbroek block, where 4bn barrels of oil have been discovered so far.

Custodian REIT PLC (LON:CREI) has expanded its portfolio with two new property purchases in the towns of Shrewsbury and Stafford. The UK-focused property investment firm said the first acquisition in Shrewsbury was a 19,730 square feet Audi car dealership at the Battlefield Enterprise Park, located 4 miles from the town centre with the unit currently occupied by Lancaster PLC, part of the Jardine Motors Group, with nearby occupiers including Volkswagen, BMW, Mercedes-Benz, Renault, and Ford.

Profit for the full year will be in line with market expectations, according to Goldplat PLC (LON:GDP). The company produced 35,431 gold equivalent ounces in the year to 30 June, a 17% decrease over the previous year, albeit at higher margins.

Thor Mining PLC (LON:THR) (ASX:THR) has secured a research grant from the Australian government to help fund research of recovery processes at its Kapunda project in South Australia. The AIM-listed miner said the A$2.8mln grant, awarded over a 30-month period, would be used to cover the costs of a demonstration of an In-Situ Recovery (ISR) process as part of its In-Situ Copper and Gold Recovery Trial at the project.

Ironridge Resources LTD (LON:IRR) has identified gold in soil anomalies at the Kineta project in Cote d’Ivoire. The anomalies are coincident with artisanal workings, now largely abandoned.

Construction and commissioning phases are expected to commence at the Salamanca uranium mine owned by Berkeley Energia Ltd. (LON:BKY) in late 2018 and 2019 respectively, subject to receipt of permits. Berkeley Energia has also recently identified further cost savings amounting to a potential €9mln, through the optimisation of plant capacities, outsourcing of peripheral infrastructure and reducing initial throughput for production from the Retortillo deposit.

Connemara Mining Company PLC (LON:CON), the Irish zinc and gold exploration and development company, said it has received notification that Michael O'Reilly has a beneficial interest in 6,840,000 ordinary shares, representing 6.01% of the company's issued share capital with voting rights.

6.45am: Friday's gains set to be erased

The Footsie is expected to retreat on Monday, erasing all of last Friday’s gains following overnight falls by Asian markets after a pre-weekend wobble on Wall Street, with all eyes this week on the interest rate decisions from both the Bank of England and the US Federal Reserve.

Spread betting firm London Capital Group expects the FTSE 100 index to open around 38 points lower at 7,663, having added 38 points last Friday.

On Wall Street last Friday, the Dow Jones industrial average closed 76 points lower at 25,451, with both the broader S&P 500 and tech-laden Nasdaq composite also finishing weaker, the latter weighed by disappointing results from the likes of Intel Corp (NASDAQ:INTC)) and Twitter Inc (NYSE:TWTR).

Asian markets carried on those falls on Monday, with Japan’s Nikkei 225 index shedding 0.7% as tech and energy stocks retreated.

Jasper Lawler, Head of Research at London Capital Group commented: “The markets have opened the new week lower as traders digest Friday’s US tech selloff and look cautiously ahead to a busy week of central bank and corporate updates.

“Volumes are expected be thin as its the summer holidays but this week promises no shortage of high impacting events. With thin volume and a calendar packed with market moving events, big swings could be on the cards for some markets.”

Ratewatch

On currency markets, the pound was steadier against both the dollar and the euro as traders await Thursday’s UK interest rate decision.

Economists at RBC Capital expect the Bank of England’s Monetary Policy Committee meeting to finally raise UK interest rates by 25 basis points, predicting a unanimous 9-0 vote in favour of the move.

However, for the August Federal Reserve FOMC meeting outcome and press statement on Wednesday, the RBC economists expect very little fanfare, and few significant policy tweaks, particularly given that the meeting is not accompanied by a press conference.

Meanwhile, there is no reason to think this week’s key economic pointer, US July non-farm payroll numbers, due for release on Friday, will deviate significantly from the recent trend of gains of around 200,000, fuelling expectations that the Fed will make another rate hike in September.

Earnings continue to roll

Aside from the big economic news, there will also be a deluge of blue chips earnings for traders to digest once again, notably from the banking sector – with Standard Chartered PLC (LON:STAN), Lloyds Banking Group PLC (LON:LLOY), Barclays PLC (LON:BARC) and Royal Bank of Scotland Group PLC (LON:RBS) all due over the four days from tomorrow.

In addition, oil major BP PLC (LON:BP.), British Gas owner Centrica PLC (LON:CBA), fashion retailer Next PLC (LON:NXT), engineer Rolls-Royce PLC (LON:RR.) and British Airways-owner International Consolidated Airlines PLC (LON:IAG) are all also on the earnings docket in the coming week.

However, as traders await those main courses, there will be little real fare around on Monday to prepare for the banquet.

The main attention should be on half-year numbers from Lloyds insurer Hiscox PLC (LON:HSX), as it will be the first-time the firm has reported in US dollars after what UBS called “a sensible transition” away from sterling reporting which brought earnings volatility.

Analysts at the Swiss bank forecast the FTSE 250-listed firm posting a first-half pre-tax profit of US$144mln, versus the consensus estimate of US$152mln, with the interim dividend seen maintained at 13.2 US cents per share.

The UBS analysts said: “We expect continued strong underlying trends in Retail, which is the most important aspect of these results.

Meanwhile, a third-quarter trading update from challenger bank CYBG PLC (LON:CYBG) will also be eyed, particularly after Virgin Money Holdings PLC (LON:VM. - which is being taken over by CYBG - last week reported a first-half underlying pre-tax profit that beat analysts’ expectations but saw its margins being squeezed by tough competition in mortgage lending.

Significant announcements expected on Monday July 30:

Interims: Hiscox PLC (LON:HSX), Forterra PLC (LON:FORT), Dialight PLC (LON:DIA), JKX Oil & Gas PLC (LON:JKX), Keller Group PLC (LON:KLR), Reach PLC (LON:RCH), Senior PLC (LON:SNR)

Trading updates: CYBG PLC (Q3) (LON:CYBG), River & Mercantile Group PLC (LON:RIV)

AGMs: National Grid PLC (LON:NG.), B&M European Retail PLC (LON:BME)

Economic data: UK BoE consumer credit, mortgage approvals; US pending home sales

Around the markets:

  • Sterling: US$1.3107, up 0.03%
  • Gold: US$1,219.30, an ounce, down 0.3%
  • Brent crude: US$68.88 a barrel, up 0.3%

City Headlines:

  • Lloyds is forced to take another provision of more than £400mln to cover payment protection insurance costs as consumers rush to lodge complaints before next year’s deadline – The Times
  • Britain’s biggest chain of estate agents Countrywide is expected to make an emergency cash call around £125mln following four profit warnings in eight months – Mail on Sunday
  • Activist investor Crystal Amber has said that it is willing to increase its stake in the banknote printer De La Rue to pile pressure on boss Martin Sutherland – Sunday Telegraph
  • Apple accessories division is at risk of being caught up in Donald Trump's latest proposals to slap a 10% tariff on Chinese imports – Financial Times
  • Amazon has struck a £600mln deal to enter into Britain’s public sector procurement market with an eye to sell everything from paper clips to bandages to Yorkshire’s schools, social care providers and emergency services – Daily Telegraph
  • Facebook faces more trouble as tax authorities in the US are pursuing the social media giant for a $5.7 billion tax bill over its Irish sUBSidiary – Mail on Sunday
  • Deutsche Bank has shifted half its euro clearing activities from London to Frankfurt, as businesses move from UK ahead of Brexit – Financial Times
  • Suppliers have been asked by supermarkets to begin contingency planning in case Britain crashes out of the EU with no deal, prompting some to consider stockpiling goods such as tea and coffee – Sunday Times
  • Lidl is planning to lead the development of more than 3,000 homes and a primary school in a bid to get planning permission for a flurry of new stores around London - The Guardian
  • Chinese investor C.Banner International Holdings has delayed a potential lifeline of £70mln of new capital to House of Fraser, leaving the department store chain facing a cash crunch - Sunday Times
  • Appian Capital, led by former JP Morgan banker Michael Scherb, is sounding out investors for its second fund, with a view to striking around eight separate deals at a value of US$100mln-US$150mln each – Daily Telegraph
  • Big banks are considering extending credits to firms if they are impacted by Britain crashing out of the EU without a deal in March – Daily Telegraph
  • A group of international experts is working on a plan for a potential free trade agreement between the UK and the US that could pave the way for a new, seamless trading bloc to rival the EU – The Times
  • The Government has delayed the award of the South Eastern rail franchise as concerns mount over the three transport giants – Govia, Stagecoach and Abellio – bidding to run Britain’s fourth-biggest rail franchise – Sunday Telegraph

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