FTSE 100 indes closes up 22 points
Carney warns of possible house market crash if no deal on Brexit
SSE top laggard on Footsie; TUI top gainer
FTSE 100 closed the last day of the trading week up 22 points, or 0.31%.
It was around that level most of the day and closed at 7,304 - that's up around 0.37% on the week.
David Madden, analyst at CMC Markets, said: "Stock markets are set for a positive finish today as a lack of negative news has encouraged buying.
"The US-China trade dispute is still ongoing, but while there isn’t a war of words, dealers are content to buy back into the market. The slightly dovish update from the European Central Bank yesterday is still echoing around continental Europe."
Meanwhile, US stocks were under pressure, although S&P 500 was positive, as US consumer confidence strengthened to a 14-year high this month, fueling fears on interest rate hikes.
Elsewhere, retail sales were mixed as August reports missed forecasts, and in other data total US factory production increased by 0.4% month-on-month and by 4.9% year-on-year.
The UK pound ticked up 0.21% against the Euro and was off 0.25% against the US dollar.
Top riser on Footsie was travel group TUI AG (LON;TUI), which added 3.81% to 1,377p.
SSE plc (LON:SSE) shares saw the biggest loss on Footsie after the utility and Innogy today named Martin Read as the chairman-designate for the new, independent British energy supply and services company that the two firms have agreed to form.
3.50pm: US consumer confidence index reaches 14-year high
US consumer confidence strengthened to a 14-year high in September, a key survey showed.
The University of Michigan's consumer sentiment index rose to 100.8 this month from 96.2 in August, according to a preliminary reading.
Economists had expected a reading of 96.6.
The higher reading reflected a higher optimism on the jobs market and wages as well as less worries about inflation.
3.10pm: House of Fraser customers fuming after being refused refunds
House of Fraser customers have voiced outrage after being told by the department store group's new owner Sports Direct that it would not refund them for undelivered goods ordered online before the takeover of the troubled high street chain last month.
Sports Direct bought House of Fraser for £90mln last month after the chain went into administration.
The company said the customers will need to chase up administrators at EY to get their money back for goods they ordered online but weren't delivered.
The chances that customers will see their cash again is pretty slim given that there is a long list of creditors waiting for money owed by House of Fraser.
House of Fraser have taken £80 from a coat my mum ordered, cancelled the order, frozen their website, blocked all contact and now released a statement saying she won’t get her money back. It may be negligible for some but that’s full on theft and I don’t understand.— Duke Silver (@wumbernang98) 13 September 2018
I bought perfume from house of Fraser then they said they couldn’t deliver it and now no one is to get a refund. Technically I’ve bought a bottle of perfume from them, they took my money, so if I whipped it off the shelf it’s not really stealing, is it?— Emma (@emmacbrown88) 14 September 2018
2.30pm: US stocks open higher
US stocks have opened higher as traders digest retail sales data, keep an eye on Hurricane Florence and monitor the situation between the US and China on trade.
The Dow Jones Industrial Average gained 37 points to 26,183, the S&P 500 increased 1 point to 2,906 and the Nasdaq edged up 10 points to 8,022.
US retail sales in August registered the weakest performance in six months but the previous month’s figures were revised higher.
"As for the outlook, we have to be cognisant of the near-term risks to retail sales from weather disruption, including Hurricane Florence," said ING Economics.
"This has the potential to lead to some big swings in the data over the next few months, just as we saw last year with hurricanes Harvey and Irma."
Hurricane Florence hit the Carolina coastline early Friday and is expected to cause property losses between US$3bn and US$5bn.
Meanwhile, industrial production rose 0.4% in August after an upwardly revised 0.4% increase in July, beating expectations for a 0.3% gain. Manufacturing production growth slowed to 0.2% in August from 0.3% in July, missing estimates of 0.3%.
The import price index dropped 0.6% in August, marking the biggest decline in two-and-a-half years.
Market participants are keeping their ear to ground for further comments from the US and China after the Trump administration invited Beijing to hold talks for a deal.
1.40pm: US retail sales miss expectations
US retail sales rose by the least in six months in August, reflecting declines in purchases of motor vehicles and clothing.
The Commerce Department said retail sales increased 0.1% last month, well below expectations for a 0.4%. However, July's reading was revised up to 0.7% growth from the 0.5% gain reported previously.
This week the CPI data and US Retail Sales data appear to confirm PEAK GROWTH thesis of Q2 and suggest that its all downhill from here.— Boris Schlossberg (@Fxflow) 14 September 2018
Separate data showed import prices fell 0.6% in August, more than the 0.2% drop that was forecast after a 0.1% decline in July. The export price index dipped 0.1%, compared to estimates for a flat reading and July's 0.5% drop.
US stock futures are higher with the Dow Jones Industrial Average up 23 points, the S&P 500 up 3 points and the Nasdaq up 14 points.
12.45pm: Bank of England planning for the worst with Brexit
Bank of England Governor Mark Carney has hinted that rates may need to rise if the UK crashes out of the EU without a deal.
In a speech in Ireland, he said Brexit has the biggest influence on the outlook for the UK economy and it was the Bank’s job to prepare for the worst-case scenario.
"The MPC will respond to any persistent change in the outlook to bring inflation sustainably back to 2% target while doing what it can to support jobs and activity," he said.
"The appropriate policy response is not automatic and will depend on the balance of the effects on demand, supply, and the exchange rate."
Bank of England (@bankofengland) 14 September 2018
A rate hike would help to stem higher inflation that would come as a result of an expected slump in the pound in the case of no Brexit deal.
Ahead of the speech, Carney gave a briefing to the Cabinet yesterday when he reportedly indicated that interest rates may need to rise even as though he also warned that house prices could crash by 35% over three years without a Brexit deal.
The pound is 0.08% up against the dollar at US$1.3119.
12.00pm: FTSE higher in lunchtime trading
The FTSE 100 added 24 points to 7,305 at the midday mark despite a stronger pound with Shire PLC the top riser on the index.
Shire’s shares gained on news that Takeda has received regulatory approval in China for its takeover of the drugmaker.
Burberry PLC (LON:BBY) is also on the front foot after the luxury fashion brand’s new chief creative officer Riccardo Tisci unveiled his first piece from a new series of 24-hour product releases.
Heading in the opposite direction, SSE shares fell after a profit warning earlier this week.
WM Morrison Supermarkets PLC (LON:MRW) continued to decline despite reporting solid interim results yesterday as investors questioned whether the group could keep up the momentum seen in the second quarter when sales were boosted by warm weather.
Later in the session, market participants will be paying attention to US data on retail sales, import and export price inflation, industrial and manufacturing production and consumer confidence.
11.20am: Shire gains after China approves Takeda takeover deal
The deal has already received unconditional clearances from US and Brazilian regulators and is now awaiting approval from Japan and the European Union.
Takeda expects the acquisition to be completed in the first half of 2019.
10.40am: British Steel to cut 400 jobs
British Steel said it plans to cut up to 400 jobs as it streamlines operations after a weaker pound against the dollar since the Brexit vote hurt the business.
The job cuts include managerial, professional and administrative roles at operations in the UK, Ireland, France and the Netherland.
Chief financial officer Gerald Reichmann said: “We’ve made a strong start to life as British Steel but our external environment is constantly changing. For example, raw materials are all traded in US dollars, so the weakening of the pound and euro have implications for us. Like any business we need to be able to flex and adapt to these changes.”
A spokesperson for the National Trade Union Steel Coordinating Committee said the announcement will come as a “body blow” to the workforce.
“We recognise these are challenging times for UK steelmakers, and it’s high time the government stepped up and delivered for us by supporting investment in strategic steel assets," the spokesperson said.
“However it is particularly disappointing the company has chosen to cut jobs so soon after celebrating a second successful year and first quarter profits of £21m.
Nic Dakin, Labour MP for Scunthorpe, where British Steel’s Scunthorpe Steelworks is based, said it was “devastating news to a workforce that have done everything asked of them over the last two years”.
The news that British Steel is to shed 400 jobs is devastating news to a workforce that have done everything asked of them over the last two years. They have taken a pay cut, seen their pensions change and worked... https://t.co/sY14dNWh3d— Nic Dakin (@NicDakinMP) 14 September 2018
“They have taken a pay cut, seen their pensions change and worked hard to get British Steel on its way,” he said.
“Three years on from the height of the steel crisis the Conservative Government hasn’t taken any steps to level the playing field for the UK steel industry.“
He accused the government of dragging its feet on improving public procurement, tackling unequal energy costs and high business taxes, and supporting capital investment.
10.00am: Stay invested when markets start to wobble, asset manager suggests
People who continued to invest and save during the 2008-09 financial crisis could be sitting on returns of 89%, according to a survey by asset manager Aegon.
Aegon said its analysis shows that £100,000 invested in a mixed investment fund of equities, gilts, cash and bonds before the crash would now be worth £189,000.
In its survey of customers, 45% respondents said they think investment risks are more elevated now compared to 10 years ago while 52% said the fear of another financial crash impacts the amount of risk they are willing to take with their investments.
“When markets start to wobble, many people’s first thought is to sell but this natural instinct is typically the worst course of action,” said Nick Dixon, investment director at Aegon.
“By staying invested you avoid selling assets at depressed prices and benefit from subsequent recovery.”
He added that trying to time the rebound is difficult and most people will be better riding out the storm, particularly if their savings goal for retirement is decades away.
While there are a number of headwinds facing the global economy, including interest rates and trade disputes, those with a long-term view should not see this as a barrier to investing, he said.
“Accepting investment risk – including periods of loss – is necessary to achieve long-term investment returns.”
9.30am: Housebuilder shares drop on Carney comments
Shares in housebuilders are lower after Bank of England Governor Mark Carney reportedly warned the cabinet that house prices could fall as much as 35% over three years if the UK fails to reach a Brexit deal with the EU.
In a meeting with senior ministers on Thursday, Carney said a disorderly no-deal Brexit could send another financial shock through the economy, the BBC reported, citing sources.
The remarks come off the back of a stress test by the Bank in November that showed house prices could drop 35% in a worse-case Brexit scenario.
9.00am: Strong start for Footsie
The FTSE 100 bounced higher in early trading on Friday, rallying after Thursday’s falls, thanks to overnight gains by US, Asian stocks although there was little else for direction at the end of a busy week.
Around 8.55am, the UK blue chip index was 18 points higher at 7,299, boosted by gains from heavyweight miners, although it drifted off an opening peak of 7,323.83.
The UK benchmark 31 points closed lower yesterday in cautious trading in the wake of UK and European central bank meetings and US CPI data.
On currency markets, the pound pushed higher against the US dollar, up 0.2% at US$1.3125, but edged lower versus the euro to €1.1207 as further Brexit deal news is awaited.
Konstantinos Anthis, head of research at ADSS, commented: “With the central bank meetings behind us, investors will now try to translate the guidance received by the ECB and BoE to adjust their positions”.
“At the same time, fresh US data is pending for release today and after the disappointment seen in recent figures, the stakes are high for the dollar.”
US retail sales growth for August is expected to show another solid month, although the pace may have slowed.
Meanwhile, the University of Michigan’s initial consumer sentiment survey reading is forecast higher for September, a minor rebound from August lows, although confidence is still downbeat versus the first half of the year.
Among equities, corporate news was thin on the ground on Friday, with the biggest company reporting FTSE 250-listed pubs operator JD Wetherspoon PLC (LON:JDW), which saw its shares edge lower, down 1.5% at 1,260p, despite posting record annual profits, with the summer performance a touch disappointing given the World Cup boost and warm weather.
The London market’s biggest gainer was AIM-listed Nuformix PLC (LON:NFX), which surged 24.5% higher to 3.05p on news it has passed a pre-clinical milestone for its cancer drug NXP001, triggering a £500,000 milestone payment from partner Newsummit Biopharma.
Meanwhile fellow AIM-listed Character Group PLC (LON:CCT) gained 6% at 530p after the Peppa Pig product licensing company said it will “comfortably” meet market expectations for the full year as its UK business delivered record sales.
Hurricane Energy PLC (LON:HURR) was also in demand, up 2.9% at 53.65p following an update yesterday from the North Sea explorer, boosted by an initiation of coverage by Morgan Stanley with an ‘overweight’ rating.
Proactive news headlines:
Sirius Minerals PLC (LON:SXX) has struck a new U$250mln funding deal which it expects will bridge the gap until Stage 2 project financing is needed, in the second quarter of 2019. Specifically, Sirius has agreed an amendment to an agreement with Hancock British Holdings Ltd, originally made in 2016.
6.50am: Gains expected
The FTSE 100 is expected to open higher on Friday ahead of more economic data from the US, with sterling hoping to hold its gains against consumer sentiment and industrial figures from across the Atlantic.
Spread-betting firm IG expects the FTSE 100 to open around 24 points higher after closing down 31 points yesterday at 7,281.
Jasper Lawler, head of research at London Capital Group, said that following weaker than expected inflation data, investors will be watching US retail sales data closely for “clues over building inflationary pressure”.
He added that US manufacturing and industrial production are expected to tick higher, as is the consumer confidence data, potentially showing the US economy is “doing a good job at shrugging off escalating trade tensions”.
On the currency markets, sterling was edging up 0.08% to US$1.311 against the dollar following disappointing US consumer data, and up 0.07% at €1.121 against the euro.
Following the update from the Bank of England yesterday, comments by Carney that a no-deal Brexit could see interest rate rises and a 35% fall in house prices did little to move markets.
David Madden, market analyst at CMC Markets UK, said that the muted reaction was likely due to the fact that there were “similar warnings” about the EU vote itself in 2016 that ultimately “didn’t play out”, and thus the comments were taken with a pinch of salt.
US stocks gain
Meanwhile, US markets yesterday closed higher amid an uptick in optimism that trade tensions between the US and China could ease, with Madden saying the “lack of threatening language from both sides” following a US desire to restart talks had left traders feeling more positive.
The Dow Jones Industrial Average closed up 147 points at 26,145, while the S&P 500 closed up 15 points at 2,904 and the Nasdaq was up 59 points at 8,013.
In Asia today, easing US-China trade tensions and electronics stocks drove the Japanese Nikkei 225 up 208 points to 23,029 while Hong Kong’s Hang Seng was up 242 points at 27,254.
In the corporate diary, Friday will be all about the publicans as FTSE 250-chain JD Wetherspoon is to report its final results, along with more political commentary from its Brexit-advocating chairman Tim Martin.
The hot weather and a strong run by England at the World Cup have provided some respite for pubs groups over summer, but ‘Spoons is well-known for rarely showing the football while most of its pubs don’t have much of a beer garden, with both likely to have put off some punters.
Also of note, as always, will be Martin’s Brexit rant, which is likely to take up most of the announcement.
Significant announcements expected on Friday September 14:
Trading update: SThree PLC (LON:STHR)
Economic data: US retail sales; US industrial production; US import, export prices; University of Michigan consumer sentiment reading
Around the markets:
- Sterling: US$1.311, up 0.08%
- Gold: US$1,204.96 an ounce, up 0.35%
- Brent crude: US$78.2, up 0.14%
- Bitcoin: US$6,565.89, up 1.2%
- The Times: The Bank of England governor Mark Carney said that house prices would fall by 35% over three years after a chaotic no-deal Brexit
- The Daily Telegraph: Turkey's central bank has raised interest rates to 24% to help rescue the crisis-hit lira despite President Recep Tayyip Erdogan ramping up pressure on policymakers to cut rates
- The Times: The European Central Bank will halve monthly asset purchases under quantitative easing to €15 billion from next month and cease them at the end of December
- Financial Times: Russians with suspicious wealth are coming under direct spotlight of the National Crime Agency as part of the UK’s response to clear the £90 billion tide of “dirty money” coming into London