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FTSE 100 closes in red as BHP Billiton warns on Trump and global economy

The UK blue-chip benchmark index closed down around 25 points at 7,565..
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FTSE 100 was hit by a strong pound and BHP Billiton
  • FTSE 100 closes in red

  • Trump bemoans Fed rate hike policy

  • Pound strengthens against US dollar

  • BHP Billiton top loser on Footsie

Counter to European and the US markets, FTSE 100 closed in the red on Tuesday as the stronger pound weighed.

The UK blue-chip benchmark index closed down around 25 points at 7,565, but the  more UK company focused (less US dollar earning constituents) FTSE 250 added over 111 at 20,642.

The French CAC 40 and German DAX were up 28 and 53 points respectively.

The biggest Footsie laggard was mining titan BHP Billiton plc (LON:BHT), which shed 2.10% to stand at 1,610.6p, as, despite paying a record divi, its chief executive warned on the dangers of an escalating trade war.

Fiona Cincotta, analyst at City Index, said: "A stronger pound and disappointing results from BHP Billiton ensured that the FTSE remained in the red across the session.

The pound was up against the US dollar (0.48% at the time of writing), she noted, receiving a boost after data showed that the UK government enjoyed its biggest surplus for 18 years amid a decline in borrowing and an increase in tax receipts.

Meanwhile, the greenback was under pressure across the session as trade tensions thawed between the US and China ahead of trade talks tomorrow, reducing demand for safe havens like gold and the dollar.

3.30pm: Footsie struggling

As we head towards the end of play on Tuesday, the FTSE 100 is down 24.5 points to 7,566.7, weighed down by sterling which has been boosted by a weaker dollar.

A stronger pound works against blue-chips in two ways; it makes their overseas earnings (about 75% of the total) worth less when translated back into pounds, while it also makes it more expensive for foreign firms to buy their products or services.

UK stocks with lots of dollar-denominated earnings, such as British American Tobacco plc (LON:BATS) (down 2% to 4,135p) and Imperial Brands PLC (LON:IMB) (down 1.6% to 2,946p), are nursing losses as a result.

BHP Billiton plc (LON:BLT) is the big faller of the day though, dipping 2.1% to 1,611p after it missed expectations with its full-year results.

At the other end of the leaderboard is WM Morrison PLC (LON:MRW), which is up 2% to 269.1p after the latest Kantar data showed it outperformed its ‘Big Four’ peers in terms of sales over summer.

3.15pm: Quiet day expected on Wednesday

Wednesday will see a smattering of interim results, with infrastructure group Costain drawing investor eyes in addition to the maiden set of post-IPO results from cybersecurity Firm Avast.

However, many investors will be focusing their attention on the minutes of the latest meeting of the Federal Open Market Committee (FOMC) at the US Federal Reserve, which could provide insight into any concerns regarding current US trade policy and potential downsides to the ongoing effect of tariffs and a softening of business sentiment.

There will also be some US data in the form of existing home sales serving as a primer to the US’s new home sales, composite PMI index, and weekly jobless claims that are all due on Thursday.

3pm: US market to register longest bull run ever on Wednesday

Tomorrow, the US market will register the longest bull market in its history (assuming there isn’t a double-digit fall today..!). Here’s what Hargreaves Lansdown analyst Laith Khlaf has to say on the milestone:

“They say bull markets don’t die of old age, but this one’s giving it a fair go. The US market has now been on a rampant charge since March 2009 with only a few blips along the way.

“Many question whether this exceptional period for the US stock market is going to end in tears, though the very fact this issue is so widely raised suggests we are not in the throes of the irrational exuberance of the late 1990s.

“Despite the US economy performing well, the valuation of the stock market does give pause for thought. That said, one could have made the same argument for several years and missed out on some handsome returns.”

2.45pm: S&P 500 nears all time high

It has been a strong start to trading over on Wall Street, with some of the big US exporters benefitting from the dollar’s fall.

A weaker dollar makes American goods and services cheaper for foreign buyers.

Also bumping up the stock market is optimism that this week’s meeting between Chinese and US officials will yield some positive results with regards to the trade war, although some commentators aren’t convinced that will be the case.

The Dow Jones Industrial Average is up 89 points, or 0.4%, to 25,847, the tech-heavy Nasdaq has added 46.1 points, or 0.6%, to 7,867.0, while the broader S&P 500 is 7.7 points, or 0.3%, higher at 2,864.8, just shy of its record high.

2.10pm: Hornby appoints new chairman

Troubled model train maker Hornby Plc (LON:HRN) has appointed non-executive director John Stansfield as its new chairman.

Stansfield has spent 31 years with the group, including 12 as finance director.

The company said Lyndon Davies will step down as interim chairman to focus on his role as chief executive.

Davies started as chief executive last October, taking over from Steve Cooke, who left amid a restructuring at the firm, which has been struggling to turn itself around as sales continue to fall.

Revenue for the year to March fell to £35.7mln (£47.4mln) with a reported loss before tax of £10.1mln (£9.5mln loss).

1.45pm: ‘Sleepy FTSE takes the day off’

“The FTSE 100 is technically negative, though the trading is essentially flat on the day, with London's benchmark index trading sideways, inundated by conflicting corporate and geopolitical messages,” wrote Accendo Markets analyst Artjom Hatsaturjants.

“US dollar weakness, induced by Donald Trump's dovish comments criticising the Fed's monetary policy, is helping some miners, but the benefit is truly minor today on the back of disappointing BHP Billiton full-year results, as well as stronger sterling hurting globally-exposed heavyweights.”

1.20pm: FTSE 100 flat

The FTSE 100 has been hovering around breakeven all day, and it is currently down 1.7 points to 7,589.5.

Supermarket WM Morrisons PLC (LON:MRW) is still the top gainer, rising 1.8% to 268.5p on strong summer sales growth, while fellow retailers Kingfisher PLC (LON:KGF) (up 1.7% to 274.4p) and Ocado Group PLC (LON:OCDO) (up 1.5% to 1,075p) have also enjoyed a good day so far.

Those gains have been offset by the stronger pound though, which has been helped out by Donald Trump talking the dollar down. A stronger sterling makes the blue-chips’ overseas earnings worth less when translated back into pounds.

BHP Billiton PLC (LON:BLT) investors haven’t been impressed with the miner’s final results as net profit fell by more than a third due to impairment charges related to its US onshore oil and gas assets which it has been working to offload. Shares are down 1% to 1,634p.

12.55pm: US to open on front foot

US stocks are set to start Tuesday on the front foot as traders look to more earnings and the trade talks between the US and China scheduled to start on Wednesday.

Wall Street had a positive close with the Dow Jones Industrial Average closing up around 89 points at 25,758. The Nasdaq added around four points and the S&P 500 gained nearly seven.

In futures trade, the Dow Jones added 58, the Nasdaq was ahead by 22 and the S&P 500 gained 5.5 points.

Looking to the start of the regular US session, Spreadex analyst Connor Campbell said: “With the dollar dealt a blow following Trump’s criticism of the Federal Reserve, the Dow Jones is set to continue its recently reignited quest to best January’s 26700-tickling all-time peak.”

12.30pm: Mkango reports 'excellent' first set of results from Songwe Hill drilling

12.05pm: A Love Island boost for supermarkets?

It may not seem the most obvious of links, but ITV’s hit reality show Love Island has apparently boosted supermarket sales … of men’s skincare products.

Data group Kantar said the dating show, which features well-groomed lads as well as lasses, had led to a 16% in men’s moisturisers, lotions and potions.

11.45am: Aggreko upgraded by HSBC analysts

Aggreko PLC (LON:AGK) is one of the top performers on the FTSE 250 after HSBC turned positive on the temporary power generation group, saying it sees high risk but high reward with the stock.

Analysts at the bank upgraded Aggreko to ‘buy’ from ‘hold’ and raised its target price to 1,050p from 740p.

Earlier this month, the company, which is in the middle of a turnaround plan, said it was on track to meet full-year earnings expectations despite reporting a 7% decline in first-half profits to higher fuel costs.

“We think that much of Aggreko’s woes are of a cyclical nature, rather than structural,” HSBC said.

“If Aggreko moves from its current unloved status to the ‘new management turnaround of a fallen angel’ story, we expect the upside to be attractive,” HSBC said.

11.20am: FTSE 100 dips on stronger pound

The FTSE 100 is down 12.2 points to 7,579.1 in late morning trade on Tuesday, with the stronger pound weighing on the index.

The reason for sterling’s perk-up is Donald Trump. The President has criticised US policymakers for hiking interest rates, which have boosted the dollar and made it cheaper for foreign companies to export to the States, undermining the trade tariffs recently imposed on Europe and China.

That has helped to push cable – the USD/GBP exchange rate – back past the US$1.28 level. A stronger pound tends to weigh on the footsie (and vice versa) as it makes their overseas earnings worth less when translated back into sterling.

Packaging giant Bunzl PLC (LON:BNZL) is down 1.1% to 2,326p, putting it at the bottom of the FTSE 100.

WM Morrison PLC (LON:MRW) finds itself at the other end of the table after beating its ‘Big Four’ rivals in the latest set of data from Kantar, growing sales by 2.7% in the three months to 12 August. That sent the supermarket 1.1% higher to 266.8p.

Miners Anglo American PLC (LON:AAL) (up 1% to 1,570p) and Randgold Resources Limited (LON:RRS) (up 0.9% to 5,066p) are also on the up, benefitting from a higher copper price.

10.50am: Trump trying to avoid 'toppy' dollar

Commenting on Donald Trump’s criticism of the US Federal Reserve, Markets.com analyst Neil Wilson says: “Trump’s not thrilled with the Fed raising rates. At the same time, he accused China and the EU of currency manipulation.

Taken together with previous comments, we see a clear pattern of the president willing to talk the USD lower whenever it starts to look a bit toppy.

He adds: “Two ways to look at this: one, if done enough times it can exert a powerful influence over market expectations.

“Two, comments like these will produce diminishing returns for the president. I think on this one the market will come around again and the dollar bounce back, but nonetheless it does appear the market is worried that the president will exert influence on Fed policy.”

10.20am: Britain reports budget surplus for July

Britain recorded its biggest budget surplus for 18 years last month, driven by strong income tax receipts, according to the latest figures from the Office for National Statistics.

The surplus stood at £2bn in July, more than double the figure from a year earlier and comfortably ahead of forecasts of £1.1bn.

The improvement took the deficit for the first four months of the 2018/19 financial year down to £12.8bn – a 40% decreases compared from this time a year ago.

10am: Here’s what Trump said to spook the dollar

As mentioned earlier, the pound has gained against the dollar after Donald Trump criticised the US Federal Reserve’s interest rate policy.

Cable – the GBP/USD exchange – is now comfortably above US$1.28, while the dollar is down against almost all of the major currencies.

Speaking to Reuters, the President said: “We're negotiating very powerfully and strongly with other nations. We're going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated.”

He didn’t elaborate on that but seems to be annoyed that higher interest rates help the dollar to rise, which makes it cheaper for foreign countries to export their good to the US, reducing the impact of Trump’s trade tariffs.

9.35am: House of Fraser’s Oxford Street store to stay open

House of Fraser’s flagship store on Oxford Street in London is to remain open after the department store chain’s new owner agreed fresh terms with the landlord.

The store had been one of the 31 earmarked for closure as part of the company voluntary arrangement set out by House of Fraser announced earlier this summer.

But the chain fell into administration earlier this month before being rescued by Mike Ashley’s Sports Direct International PLC (LON:SPD). Today’s deal is the first since that £90mln takeover.

9.10am: UK shoppers splashed out over summer

Supermarket stocks are in demand this morning after the latest Kantar Worldpanel data showed the UK grocery market grew 3.5% in the 12 weeks to August 12 as shoppers splashed out on branded goods.

J Sainsbury PLC (LON:SBRY) was the worst performer, with sales growing 1.2%, closely followed by Tesco at 1.8%.

Asda, which agreed a merger with Sainsbury’s earlier this year, saw sales rise by 2.6%, while the top performer was WM Morrison PLC (LON:MRW) at 2.7%.

German discounters Aldi and Lidl continued to outpace the rest of the market, growing sales by 12.6% and 8.6% respectively.

8.40am: Trump talk boosts pound

President Trump’s strategy of talking down the dollar had dealers twitchy and hit a bunch of large-caps that make money Stateside.

It meant the FTSE 100 opened around 10 points lower at 7,581.41 on thin initial volumes.

Trump blasted the US Federal Reserve for hiking loan costs overnight – his second intervention of this kind in a matter of weeks.

“The US President’s comments last month, and which he repeated last night, was that he was “not thrilled” with Jerome Powell and the Federal Reserve, for its consistent policy of raising interest rates, saying he should be given more help by the Fed,” said Michael Hewson, analyst at CMC Markets.

“Unfortunately for the President that’s not how it works under the Fed’s mandate and while he has pledged to continue to criticise the Fed if it continues to raise rates, his criticism while unwelcome and unusual for a US President, is unlikely to stop the Fed from hiking again next month, or later this year.”

Back here in the UK, market movements for individual stocks were muted. Shares in housebuilder Persimmon (LON:PSN) rose 1.5% after results, dragging rivals Berkeley (LON:BKY) and Taylor Wimpey (LON:TW.) with it.

The early broker calls came in the second-tier with upgrades to temporary generator group Aggreko (LON:AGK) and pump maker Weir (LON:WEIR).

HSBC moved to ‘buy’ on the former, pushing the shares 5.5% higher, while Credit Suisse believes stock in the latter will ‘outperform’, pushing the price up 1.4%.

6.45am: Shares set to fall 

The FTSE 100 is expected to be initially softer on Tuesday, indicated to start just shy of 30 lower.

CFD and spreadbetting firm IG Markets is calling the London index at 7,572 to 7,576 with just over an hour to go until the open.

It comes amid weakness for the US dollar which dampens the appeal for the benchmark’s many multinational, dollar-earning blue chip stocks.

Mixed messages over monetary policy are a factor for currency traders, with President Trump evidently taking a different view to the Federal Reserve.

“The dollar traded lower for a fourth consecutive session overnight thanks to improved risk appetite and President Trump talking down the dollar (again),” said Jasper Lawler, analyst at London Capital Group.

“Trump taking another swipe at Fed Chair Jerome Powell, pointing Powell out to not be the cheap money guy that he had had initially thought, is not about to change the current path of rate hikes, with the market pricing in a 93.6% probability of a hike in September and 65% chance of a further rate rise in December.

“However, Trump could be sowing the seed for market perception problems later down the line.”

Wall Street earlier closed Monday’s trading on the front foot, with tentative hopes that US trade meetings with China may open up the possibility for a de-escalation in the ‘trade-war’ between the two economic super powers.

The Dow Jones ended Monday up 89 points of 0.35% at 25,758, while the S&P 500 gained 0.24% to finish at 2,857 and, more moderately, the Nasdaq was up just a few points closing at 7,821.

In Asia, Japan’s Nikkei advanced 57 points or 0.26% to 22,256 and Hong Kong’s Hang Seng rose 122 points or 0.44% to 27,721. The Shanghai Composite, meanwhile, added 1.28% to 2,733.

Elsewhere, Australia’s ASX 200 was down just over 1% to 6,280.

Around the markets

  • Pound: US$1.2838, up 0.31%
  • Gold: US$1,195 an ounce, up 0.72%
  • Brent crude: US$72.30 per barrel, up 0.6%
  • Bitcoin: US$6,321, up 1%

Significant announcements due Tuesday:

 

Proactive news headlines 

Ceres Power Holdings PLC (LON:CWR) has revealed a strategic partnership with leading technology and electricals firm Robert Bosch GmbH, which will include a £9mln investment from the German firm. The companies have, in fact, already been working together for several months through an initial agreement announced in January, however, Bosch was not named at the time for confidentiality reasons. 

IXICO PLC (LON:IXI) has said its performance for the current financial year is now expected to be “ahead of market expectations” after forecasting revenue growth of nearly 25%. 

Collagen Solutions PLC (LON:COS) has signed distribution agreements with two new Chinese channel partners as it looks to grow its presence in what is a “significant territory” for the regenerative medicines maker. 

Mkango Resources Ltd (LON:MKA) has hit high grade rare earths across significant widths at the Songwe Hill project in Malawi.

Among the highlights from the first eight holes were 147.2 metres grading 1.6% total rare earth oxides (TREO) and 91 metres grading 1.5% TREO. 

AdEPT Telecom LC (LON:ADT) has issued 200,000 share options to the managing directors of its subsidiaries, Our IT Department and Atomwide.

The options have an exercise price of 353p and have been isused to further align the interest of senior employees with shareholders and to promote the retention of the firm’s senior management team. 

Shares in Thor Mining PLC (LON:THR) have been placed in a trading halt on the ASX, on the request of the Company, pending the release of an announcement in relation to an upgraded definitive feasibility study on the Molyhil project.

Robert Price, the chairman of Highlands Natural Resources PLC (LON:HNR), has revealed that fracking has just commenced at six new wells at the East Denver Project, one of two projects within the Colorado Shale division. 

Tharisa PLC (LON:THS) said it is continuing talks to work out the details of its proposed acquisition of a 90% stake in Salene Chrome Zimbabwe (Pvt) Limited from Leto Settlement. The company said once the parities agree on certain aspects of the deal, a circular will be sent to shareholders. 

Technology and life sciences incubator Amphion Innovations PLC (LON:AMP) has sold shares in an investee company to repay a tranche of a long-standing loan. It will receive around £1mln for stock in Motif Bio PLC (LON:MTFB), bringing its holding in the developer of a next-generation antibiotic down to 8.5%. The line of stock, which had a book value of £1.04mln, was sold at 33.5p a share. 

Strat Aero PLC (LON:AERO) and Braveheart Investment Group (LON:BRH) have brokered a deal that will see the former take control of GyroMetric Systems Limited. GyroMetric has technology that digitally assesses rotating shafts and, for Strat Aero, the deal is part of its strategy to move into areas that revolutionise monitoring and inspection.

Sound Energy PLC (LON:SOU) told investors it has now completed its seismic data acquisition programme in eastern Morocco. The company, in a statement, said that it had captured data covering some 2,850 line kilometres and that the programme was delivered on budget and with zero lost time incidents. 

Business news headlines

  • China defies US pressure as EU parts ways with Iranian oil - Reuters
  • Bank of England chief economist warns on AI jobs threat – BBC News
  • Ex-Lehman Brothers staff slammed over plan for party to 'celebrate' 10-year anniversary of bank’s collapse – Daily Mail
  • Venezuela’s state oil group agrees $2bn Conoco payout – Financial Times
  • UK households face hidden debt of almost £19bn – The Guardian
  • Saudi PIF in talks to invest in aspiring Tesla rival Lucid - Reuters
  • JPMorgan cuts Tesla target over lack of buyout funding – Financial Times
  • Orkney tidal turbine generating 'phenomenal result' – BBC News

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