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FTSE 100 closes higher as trade fears ebb; Kingfisher leads the laggards

The FTSE 100 closed nearly 31 points higher at 7,331, while FTSE 250 added over 42 at 20,500
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Will the Bank of England put up rates?
  • FTSE 100 closes higher 

  • Kingfisher top laggard

  • Miners lead gainers 

  • May to reject Irish border proposal: report    

 

 

Miners peppered the leaderboard as Footsie closed ahead on Wednesday as worries over trade eased.

The FTSE 100 closed nearly 31 points higher at 7,331, while FTSE 250 added over 42 at 20,500.

As for the UK pound, it was down a tad - 0.04% - against the Euro and up 0.08% against the US dollar.

"The big news today was the rise in UK inflation, which has hit a six-month high for August at 2.7%," noted Fiona Cincotta, at City Index.

"Inflation is being driven by several factors, including wage growth and higher prices for key items like clothing, transport and recreational goods.

"While the pound responded positively initially to the news, the data will also mean that the Bank of England will have to raise rates again. The Bank has been inclined to keep them static in the run up to Brexit, in anticipation of economic turbulence, but if this trend continues, may have to reconsider."

On Footsie, miners were the big winners, and copper titan Antofagasta (LON:ANTO) was top dog, adding 5.87% to 837p.

On the losing front, the UK benchmark's biggest laggard was B&Q owner Kingfisher (LON:KGF), which plunged over 6% to close at 247p.

The  company posted a 14.7% fall in first-half pre-tax profits as the French division continues to weigh on the  group.

The FTSE 100 DIY retailer has had to deal with tough trading conditions in both of its core French and UK markets over the past couple years. But while Screwfix is more than propping up the business on this side of the pond, the performance of Kingfisher’s Castorama division “remains weak”.

2.55p: FTSE 100 extends gains as Dow pops up 100 points

The FTSE 100 found stronger footing in afternoon trading, getting a lift as the pound turned lower and as investors on Wall Street brushed past the latest trade flare-up between the US and China.

The benchmark marched up 32 points to 7,332. On Wall Street, the Dow Jones Industrial Average jumped 133 points to 26,379 as trading got underway, and the S&P 500 rose 0.1%. But the Nasdaq Composite slipped 0.1%.

The UK index was trading around highest level since early September, finding relief after the pound dropped after surging above $1.3200 intraday. The pound had soared after the UK’s August inflation reading was surprisingly higher. But sterling was later hit as The Times newspaper reported UK Prime Minister Theresa May will reject the EU’s offer to solve the issue of the Irish border’s post-Brexit status.

“A lot of pessimism around the deal has been priced in and while there have been some signs of positivity of late, this is a perfect reminder that big divisions still exist and it could be a very bumpy ride for the pound into year end,” said Craig Erlam, senior market analyst at Oanda.

He added: “We’ve already seen some paring of the initial losses and traders will now be looking for clarity on exactly what these reports mean for the Irish border and an exit deal.”

11.55am: Footsie fights against loss

The FTSE 100 clawed out of the red in late morning trade as investors kept watch on the possibility that Wall Street will brush past global trade worries and allow US stocks to open higher.

The FTSE 100 rose 5 points to 7,304, recovering after falling in the red earlier after a surprise rise in UK inflation in August. Futures for the Dow Jones Industrial Average and the Nasdaq were modestly higher, but S&P 500 futures edged lower.

Equity markets appear to be taking in stride the escalating trade dispute between the US and China.

Craig Erlam, senior market analyst at Oanda, said: “The latest tit-for-tat between Washington and Beijing has been on the cards for some time and while investors would have preferred to avoid the need for them, they were prepared and it was well priced in. In fact, the US tariffs were probably towards the lower end of expectations so the announcement didn’t really carry the same shock factor that previous announcements or reports have.”

Kingfisher PLC (LON:KGF) was still holding at the bottom of the Footsie, down 3.8% at 254p, while Dixons Carphone PLC (LON:DC) was the top FTSE 250 advancer, rising 3% to 168p.

10:35am: UK inflation surprises saps Footsie, lifts pound

The FTSE 100 turned lower in mid-morning trading, hit as the pound jumped following an unexpected rise in UK inflation to a six-month high.

The FTSE 100 fell 15 points to 7,285, pulling back from an intraday high of 7,336.96.

The benchmark swung down after sterling kicked up above $1.3200. The moves came after the Office for National Statistics said annual inflation rose to 2.7% last month, up from 2.5% in July and confounding widely held expectations for inflation to reach 2.4% in August. 

Checking retail stocks, shares of supermarket chain Tesco PLC (LON:TSCO) shed 0.6% to 233p and J Sainsbury PLC (LON:SBRY) declined 1.2% to 316p.

Alistair Wilson, head of retail platform strategy at Zurich, said: “Inflationary pressures are continuing to strain household spending power. Despite unemployment at its lowest in 40 years and wages showing signs of growth, the pick-up in prices means that workers’ pay packets are unlikely to feel the benefit of any wage increases.”

The FTSE 100 can be vulnerable to gains in sterling as multinational companies generate most of their revenue outside of the UK.  

9.30am: Kingfisher a drag on the Footsie 

The FTSE 100 remained in positive territory in early morning trading, but Kingfisher PLC was the index’s biggest loser following disappointing results from the DIY retailer.

The index gained 19 points to 7,319, helped by gains for miners after China signalled plans for a fiscal stimulus programme as Beijing engages in a trade dispute with the US. 

However, Kingfisher PLC (LON:KGF) shares were slapped down 6.6% to 246p as the company posted a nearly 20% slide in half-year profits, hurt by ongoing troubles at its French business, Castorama.

Richard J Hunter, head of markets at Interactive Investor, said: “The performance at Castorama is weak to the extent that it has stained the overall picture, dragging down gross margins and now needing to be of particular focus to management in the second half, at a time when the transformation of the group in a difficult environment should be the sole objective.”

“All is not lost,” however, for Kingfisher, said Hunter. “The UK, and Screwfix in particular, continues to make a strong contribution, as do operations in Poland.”

Turning to miners, Anglo American PLC (LON:AAL) rose 2.3% to 1,621p and Antofagasta PLC (LON:ANTO) picked up 2% at 806p, trading among top advancers. 

8.40am: Footsie in its 'happy place'

Resilience was the watchword as the FTSE 100 opened 31 points to the good at 7,331.54 in spite of the ramp up in trade hostilities between the US and China.

“Investors may well think that this latest escalation may be it for now, while the US administration appears to be showing no signs of diverging from its view that trade wars are easy to win,” said Michael Hewson of CMC Markets as he cautioned against complacency.  

“Trade Secretary Wilbur Ross’s assertion that China is running out of bullets to retaliate may well be true when it comes to like for like trade tariffs, but it sorely underestimates China’s ability to respond with other measures.

“China can afford to play a much longer game, particularly when it comes to the US electoral cycle. President Xi will be around long after Donald Trump has departed the White House.”

The miners, led by Glencore (LON:GLEN), up 2.5%, were in demand after China intimated it may soften the economic blow from the trade war with a fiscal stimulus programme.

Majors Anglo American (LON:AAL), BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) were not too far behind.

Kingfisher’s (LON:KGF) French DIY woes were apparent to see in the latest set of results, which knocked the share price of the B&Q owner 3% lower in morning trade.

On the broker front, there was one significant early change with the London arm of Deutsche Bank moving its recommendation on FTSE 100 energy group SSE (LON:SSE) to ‘buy’ from ‘hold’. The shares advanced 1.2% on the back of the change of stance.

Proactive news headlines:

Bluebird Merchant Ventures Ltd (LON:BMV), the Asia-focused resource development group, is pleased with progress at its Gubong and Kochang projects in South Korea.

Futura Medical PLC (LON:FUM) has commenced a Phase III study for its MED2002 erectile dysfunction treatment, while its CSD500 erectogenic condom received shelf life approval from regulators.

Seeing Machines Limited (LON:SEE) expects revenues in the current fiscal year to be roughly on par with those in the fiscal year just ended as it implements changes to its Fleet division's business model.

Eckoh PLC (LON:ECK) has revealed that trading in the first five months of its current financial year up to 31 August was in line with expectations. In a very brief statement ahead of its Annual General Meeting, to be held later today, the global provider of secure payment products and customer contact solutions also said its financial position remains strong.

Accesso Technology Group PLC (LON:ACSO) has reported strong growth in its underlying earnings (EBITDA) for the first half of the year as it continued the rollout of its ticketing and eCommerce technology internationally.

Primary Health Properties PLC (LON:PHP) has acquired a modern keyworker accommodation unit for a total consideration of £22.8mln, located next to Wansbeck General Hospital and let to Northumbria Healthcare NHS Foundation Trust.

Ergomed PLC (LON:ERGO), which provides specialist services to the pharmaceutical industry, said it has reduced the company’s cost base after a disappointing first half performance.

ReNeuron Group PLC (LON:RENE) is free to resume discussions with other interested parties after an unnamed US company decided not to pursue a licensing deal for its hRPC platform.

Pan African Resources PLC (LON:PAF) chief executive Cobus Loots reflected on a challenging year which saw the company ‘act decisively’ to reconfigure operations as it aimed for sustainable profitability.

Landore Resources Ltd (LON:LND) is looking forward to a couple of important milestones for the BAM Gold deposit in the coming months, thanks to a successful summer programme of drilling.

Anglo Asian Mining PLC (LON:AAZ) shares surged in early trading Wednesday after the firm declared its maiden dividend amid a jump in profits in its half year results.

Junior explorer Metiminco Limited (LON:MNC) is adding a nickel string to its bow with the acquisition of a direct shipping project in the Solomon Islands.

InnovaDerma PLC (LON:IDP) said its Skinny Tan bronzing products would be stocked in Boots as it provided an overview of a successful year operationally.

SkinBioTherapeutics PLC (LON:SBTX) said first-in-human studies of its SkinBiotix technology are underway. Researchers will be assessing skin irritancy, moisturisation potential and skin barrier function.

Healthcare-focused advisory group Cello Health PLC (LON:CLL) has reported a rise in half-year profits, driven by another six months of strong growth from its Cello Health division.

A strong performance from its portfolio of international brands boosted first half sales at Alliance Pharma PLC (LON:APH).

Real Good Food PLC (LON:RGD) has appointed Steve Dawson as a non-executive director with immediate effect. Dawson has “extensive experience” in both the USA and in food brands.

Drug discoverer Immupharma PLC (LON:IMM) has appointed Stanford Capital Partners and SI Capital as joint brokers

Bloomsbury Publishing PLC (LON:BMY) is to publish the authorised history of GCHQ, Britain’s intelligence and security organisation.

6.45am: Investors set to ignore trade war escalation

Investors seemed inclined to ignore the latest escalation of the trade war between the US and China this morning.

Spread betting quotes indicated that the FTSE 100 would open around 11 points higher after closing a couple of points lower at 7,300 yesterday.

“Markets will naturally focus on the likely retaliation measures from China in response to yesterday's announcement from President Trump adding tariffs worth USD200bn to the Chinese exports,” said Danske Bank.

The Chinese government yesterday responded by announcing retaliatory tariffs of 10% on USD60bn worth of US goods. Furthermore, the Chinese Ministry of Commerce said that it has filed a complaint with the World Trade Organisation over the tariffs imposed by the US.

“In addition, China's Premier Li Keqiang said he will not let the currency devalue to stimulate exports. Hence, China's strategy right now appears to be to respond to US measures but without escalating tensions,” Danske Bank opined.

US markets certainly shrugged off any qualms yesterday about a trade war, with the Dow Jones rising 184 points to 26,247 and the S&P 500 climbing 15.5 to 2,904.3.

In Japan, the Bank of Japan left its monetary policy unchanged this morning. The Nikkei 225 was up 310 at 23,730 heading into the close.

In Hong Kong, the Hang Seng index was up 361 at 27,445.

Focus in the UK today will be on the consumer price index figures.

The UK headline inflation rate is expected to have eased back to 2.4% in August from 2.5% in July, while the core annual inflation rate is tipped to decelerate to 1.8% from July’s 2.0%; the core inflation rate strips out food and energy prices.

On the company news scene, updates from DIY retailer Kingfisher PLC (LON:KGF) and buses and trains group Stagecoach Group PLC (LON:SGC) look to be the stand-outs.

The burger-burning fraternity will have been out in force over the summer, which normally bodes well for B&Q’s sales of BBQ kits but it has been Kingfisher's French business that has been under pressure for a while now, dragging on the decent performance of its Screwfix and B&Q divisions in the UK.

Investors will be keen to receive more details on the measures management is putting in place across the Channel to try to support Castorama, which is getting a new boss in a couple of weeks.

Around the markets

  • Sterling: US$1.3151, up 0.04 cents
  • 10-year gilt: yielding 1.424%
  • Gold: US$1,207.60 an ounce, up US$4.60
  • Brent crude: US$79.05 a barrel, up 2 cents
  • Bitcoin: US$6,343.61, up US$27.18

Business headlines

The Daily Telegraph

  • Tesla shares have plunged sharply after the US Department of Justice launched a fraud probe after chief executive Elon Musk tweeted last month that he had "funding secured" for a buyout of the electric car maker.
  • US regulators have warned that online cryptocurrency exchanges lacked basic consumer protections and may be vulnerable to hacking, price manipulation and insider trading.
  • Online supermarket Ocado has said it expects a surge in growth in the last quarter of the year, following steady sales in its most recent quarter.
  • EU migrants contribute more to the public exchequer than the average British adult, leaving the UK’s finances at risk and making post-Brexit tax hikes more likely, according to Oxford Economics.

The Times

  • Up to 16% of roads will face congestion by 2050 compared with 7% at present, despite rising numbers of driverless cars, according to an analysis by the Department for Transport.
  • In a blow to Unilever, another UK shareholder, M&G Investments, has said that it will vote against the consumer group’s proposed move to relinquish its London headquarters.

The Guardian

  • Honda has warned a no-deal Brexit would cost it tens of millions of pounds in additional tariffs, but the Japanese carmaker said it was committed to its factory in Swindon.
  • Ferrari has announced a new open-top super-car and has already pre-sold the whole production run, despite a likely £1 million-plus price tag.
  • BMW plans to shut its Mini plant for a month after the official Brexit, to minimise the impact of a no-deal departure of the UK that it fears would cause a shortage of parts.
  • Brussels has launched an anti-trust investigation into allegations that BMW, Daimler, Volkswagen, Audi and Porsche, colluded to limit the development of clean emission technology.

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