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FTSE 100 surges higher as Brexit talks reach impasse; pound plunges

Around 4pm, the UK bluechip index was 109 points higher at 7,476, just easing back from the session peak of 7,495 after a strong week
Sterlig drops
Brexit and the negotiation impasse making headlines late on Friday
  • FTSE 100 index finishes strongly

  • Pound dives as May speech admits Brexit impass

  • Kingfisher top Footsie riser

 

Sterling's losses were FTSE 100's gain on Friday, and the UK blue-chip index finished up almost 123 points.

Footsie finished  at 7,490 - up 1.67% on the day, or up 2.5% on the week.

The weakness in the UK pound, accompanied by FTSE 100's gain  due  to its US dollar earning constituents, was due to the latest Brexit wranglings, as the negotiations are now effectively grounded.

"EU leaders have rejected May’s carefully crafted Brexit proposal causing concerns that Britain won’t be able to find a compromise in time for next year’s exit deadline," said Fiona Cincotta, senior market analyst at City Index.

"May said that given that the EU rejected Britain’s proposals without offering an alternative the two sides are now at an impasse in Brexit negotiations.

"European leaders were hoping to have a deal in place by the official EU summit in October, but now this soft deadline has been moved to mid-November when another summit is likely to be held."

The pound is down 1.18% against the Euro and off 1.48% against the US dollar.

Screwfix owner Kingfisher (LON:KGF) was top gainer on Footsie, up 5.6% to 256.30p, while miners were also strong. On the losing front Just Eat (LON:JE. shed 4.8% to 674p.

It came after reports that Uber is in talks to buy rival UK food delivery firm Deliveroo.

4.00pm: US stock mixed after records

The FTSE 100 remained buoyant in late afternoon trading with the internationally-focused index boosted by a drop in the pound after comments from UK prime minister Theresa May indicated that Brexit talks with European leaders in Salzberg were seeing little progress.

Around 4pm, the UK bluechip index was 109 points higher at 7,476, just easing back from the session peak of 7,495 after a strong week.

On currency markets, sterling dropped 1.3% versus the US dollar to US$1.3098, and shed 1.2% against the euro to €1.1138.

Chris Beauchamp, chief market analyst at IG commented: “We are witnessing familiar Brexit reaction in market terms, as a cliff-dive for the pound is matched by a leap higher for the FTSE 100 as the prime minister talks tough after her humiliation in Salzburg.

“Many Britons watching her will be able to sympathise, since no one likes being made to look foolish, but the hardening of rhetoric has just made a ‘no deal’ more likely, and this is why we’re seeing sterling so heavily sold.”

On Wall Street, US bluechips rose in early trading on Friday, with Wall Street extending the recent uptrend and pushing further into record territory.

The Dow Jones Industrial Average was up  61 points, to 26,708, easing back after hitting a new all-time intraday high in early trading.

Meanwhile, the broader S&P 500 index edged up 0.1% to hit new records of its own, but the tech-laden Nasdaq Composite Index retreated 0.3% below its record levels.

3:35pm: Footsie strong after May comments

The FTSE 100, with its catalogue of multi-national dollar earning blue-chips, rallied strongly through Friday afternoon’s deal whilst Theresa May’s post-negotiation debrief sent sterling into tailspin.

At US$1.3070, sterling had lost 1.47% for the day against the dollar.

On the London Stock Exchange, meanwhile, London’s blue-chip benchmark advanced 117 points or 1.6% to 7,484.

Neil Wilson, analyst at Markets.com, described the current state of Brexit and British politics as “an evolving and dynamic situation” whilst noting that the risk of a ‘no deal’ Brexit had now increased further.

Wilson said: “Sterling has nosedived after Theresa May said Brexit negotiations are at an impasse. It is never wise to overreact to a speech, but it does look like we’re getting to the crunch now.No doubt that the humiliation and fallout from the Salzburg conference has had an important impact on the prime minister and the UK position."

He added: “Equally, we know that given the EU’s position combined with the animosity in the Conservative party, the Chequers deal in its original form is dead.

“That much is clear and to a large extent we can see that the prime minister is trying to ably shift her position – or at least prepare the ground to shift her stance more formally - without triggering a leadership challenge or election.”

1:00pm: Wall Street futures point upwards

The FTSE 100 was holding onto the morning’s gains, up 1% at around 7,440, as attention turned to Wall Street’s pre-market moves.

In New York, the Dow Jones Indsutrials was indicated about 65 points higher ahead of the open at around 26,755, meanwhile the S&P 500 and Nasdaq composite were also seen slightly higher.

McDonald's was among the stocks on the move pre-market, after it increased its dividend, meanwhile, Walmart was also in the spotlight due to its efforts to manage the impacts of Chinese and US trade tariffs.

11:20am: Footsie continues to strengthen

The FTSE 100 continued to find support into late morning deals, with the London index up 80 points or 1.1% to 7,447.

With the weekend in sight, traders are juggling several factors including Brexit, new UK borrowing stats, international trade and seemingly improving global risk appetite for equities.

“Sterling is trading lower against all of its major peers today with the conclusion of the EU summit reportedly seeing UK PM May’s Chequers plan widely rebutted which has raised the prospect of a no deal scenario further,” said David Cheetham, analyst at online broker XTB.com.

“The FTSE is on course to post a solid week of gains with the index joining in a broader risk-on move seen in stock markets around the globe with investors giving rising trade concerns short shrift as they drive equities higher.”

10:30am: Brexit talks focus

Brexit remains in the spotlight heading into this weekend, as the market dissect and reflect on the latest phase of negotiations.

“Interestingly we are seeing an outperformance in the FTSE 100 over the domestically-focused FTSE 250, highlighting the ongoing fears over the UK economy,” said Joshua Mahony, analyst at IG Markets.

“The pound has been reversing some of yesterday’s gains, with the recent rise in inflation and retail sales being cancelled out by the growing possibility of a no-deal Brexit.

“Despite claims that yesterday’s rebuttal from the EU leaders of the Chequers proposals was merely a negotiating stance, we are now seeing comments from David Davis that highlight that the plan is unlikely to even pass in the UK.”

In London, the FTSE 100 was up 72 points or 0.98% at 7,439.

9:50am: Pound dives as govt borrowings spike 

The FTSE 100 was up around 60 points or 0.83% to 7,429, while the pound took a dive on weak economic stats.

Friday’s instalment of economic statistics revealed net public sector borrowings of £6.8bn, £2.4bn more than last year. It was higher than expected, as economists had anticipated a figure of £3.4bn.

The pound softened 0.38% to 1.3214 following the update.

Elsewhere, attention remains somewhat focused on an otherwise weakening in the US dollar (the GBP pair aside).

“The exact catalyst behind why the dollar is weakening is not easy to point out, but the main contender is that fading fears over trade tensions are providing traders with a reason to take profit on Dollar positions that have been building for months,” said Jameel Ahmad, analyst at FXTM.

“Another round of reassuring comments from authorities in China indicating that the Yuan will not be used as a weapon during-trade tensions has also been looked upon positively by the market.

“It does go without saying overall that the prospects for more potential weakness in the dollar moving forward would of course be widely welcome news for a long list of currencies across the globe.”

8.40am: Strong start from Footsie

It has been a stellar week for the mining sector, which has advanced 8% in value on the back of fiscal stimulus hopes in China.

The world’s second-largest economy is, of course, a major consumer of the output from these titans of the digging world.

And there is growing expectation that Beijing will pull the trigger on a number of macro initiatives that will diminish the economic impact of US trade tariffs.

The world's biggest miner, BHP Billiton PLC (LON:BLT), up 2% to 1,648p, led the FTSE 100 higher, with the index posting an early gain of 64 points to 7,432

City traders will also have half an eye on the Brexit talks, which continue in Salzburg.

Judging from the coverage in the British newspapers, Prime Minister Theresa May doesn’t appear to stand much chance of pushing through her Chequers blueprint.

“As with any EU summit there are dozens of soundbites, and but the message wasn’t optimistic,” said David Madden of CMC Markets.

“Germany’s Angela Merkel said more work needs to be done, and Theresa May showed Brussels she means business as she is preparing for a ‘no deal scenario’.”

Proactive news headlines:

Cannabis investment vehicle Sativa Investments PLC (NEX:SATI) is moving into Germany as it looks to exploit the growing demand for cannabinoid products in the country.

Westminster Group PLC (LON:WSG) said it had made significant progress with its Iran airport contract and remains committed to starting it as soon as possible.

Savannah Resources PLC (LON:SAV) has submitted an application for an additional mining lease in Mozambique while also reporting a narrowed loss in its half-year results.

Tower Resources PLC (LON:TRP) highlighted that its partner in the Algoa-Gamtoos licence in South Africa, is launching a farm-out process to fund new seismic exploration which would set up future drilling efforts.

Non-executive chairman Paolo Dal Pino has become executive chairman of Telit Communications PLC (LON:TCM) following the departure of the chief executive officer, Yosi Fait.

Avacta Group PLC (LON:AVCT), the developer of Affimer biotherapeutics and reagents, has announced that its CEO, Alastair Smith, CEO will be presenting at an investor evening hosted by Turner Pope Investments to be held on 1 October.

6.45am: Stocks set to nudge higher 

The FTSE 100 is poised to open higher on Friday as a wave of positive sentiment following the latest round of US tariffs continues its way around global markets.

Spread-betting firm IG expects the blue-chip index to open around 23 points higher following a strong finish yesterday, up 36 points at 7,367.

Concerns over the escalating trade war following the latest round of tit-for-tat tariffs eased overnight, as the duties levied by the US were less than expected at 10%, although these are due to rise to 25% by the end of 2018.

The US tariffs, covering US$200bn in Chinese goods, garnered a quick response from Beijing, who imposed their own tariffs of 5% to 10% on US$60bn of US goods.

Jasper Lawler, head of research at London Capital Group, said that the trade spat had become “a long term issue” for the markets, which they are able “to shrug off for the time being”.

“The reality is we will need to wait until Chinese export data early next year to see the real impact of the tariffs on the Chinese economy and before then we have the US midterm elections to get through,” Lawler added.

The optimism was evident in US trading yesterday, with both the Dow Jones Industrial Average and the S&P 500 closing at yearly highs, up 251 points at 26,656 and up 22.8 points at 2,930 respectively. Meanwhile, the Nasdaq closed up 78.1 points at 8,028 bolstered by a strong performance in tech stocks.

In Asia today, the positive sentiment continued, with the Japanese Nikkei 225 up 248 points at 23,923 while Hong Kong’s Hang Seng was up 297 points at 27,778.

On the currency markets, the pound was up 0.05% at US$1.327 against the dollar and down 0.01% at €1.126 against the euro as stronger UK retail sales and inflation data coupled with a softer dollar drove cable to its highest level since mid-July.

Lawler said sterling was proving “resilient” against the issues surrounding the Brexit negotiations, with the Irish border quandary threatening to derail the entire process.

He added that despite the negative headline, “both the EU and Theresa May seem more motivated than ever to get a deal done”, which was offering support to the currency.

Sky to go up for auction after close

The long-running bidding war over FTSE 100-broadcaster Sky PLC (LON:SKY) looks set to finally end at the weekend as the UK’s Takeover Panel said the process would now go to an auction procedure at 5pm on Friday.

Due to run until Saturday evening with a maximum of three rounds, the process will pit US media giants Comcast Corp (NASDAQ:CMCSA) and 21st Century Fox Inc (NASDAQ:FOX) firmly against each other in what has been an unexpected battle over the future of the broadcaster.

The bids won't be made public until after the auction's completion on Saturday evening but no later than 7am on Monday.

During the trading day, however, investors will be sticking with the FTSE 100 for full-year results, and any updates on strategy, from Smiths Group, as well as the outlook for FTSE 250-constituent SIG, when it reports its interims.

In the economic diary, the UK Treasury will be in focus with the latest set of public sector finances for the month of September, while across the Atlantic, there will be the latest date for the US composite PMI.

Significant announcements expected on Friday:

Finals: Smiths Group PLC (LON:SMIN)

Interims: SIG PLC (LON:SHI)

Economic data: UK public sector finances; US composite PMI

Around the markets:

  • Sterling: US$1.327, up 0.04%
  • Gold: US$1,209.1 an ounce, up 0.19%
  • Brent Crude: US$78.74 a barrel, up 0.05%
  • Bitcoin: US$6,541.6, up 0.77%

City headlines:

Financial Times:

  • Donald Tusk, the European Council president, has dismissed Theresa May’s Chequers proposals as unworkable after a private meeting of national leaders and gave her four weeks to save the exit talks
  • The Trump administration has imposed sanctions on the Chinese military's Equipment Development Department for buying Russian fighter jets and missiles

Daily Mail:

  • Boots parent Walgreens Boots Alliance has signed a deal with Chinese e-commerce giant Alibaba to sell its No7 make-up brand

The Times:

  • Retail sales rose by 3.3% in August compared with the same month a year earlier, beating all expectations, driven by a dramatic and unexpected jump in demand for furniture and lighting

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