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FTSE 100 closes lower but up on the week as Italy rattles European markets

FTSE 100 closed the day 35 points lower as the situation in Italy rattled markets
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FTSE 100 and FTSE 250 both lower on the day
  • Lloyds Banking and RBS friendless - knock-on effect from Italian banks

  • HSBC claims to have resolved its mobile app problems

  • FTSE 100 closes lower

  • Wall Street stocks positive

 

FTSE 100  closed the day over 35 points lower to close at  7,510 as the situation in Italy rattled markets.

On the week though as a whole, the UK blue-chip index was up around 0.26%.

"European stock markets are firmly in the red this afternoon as the surge in Italian government bond yields has rattled investor confidence," said David Madden, analyst at CMC Markets.

"The cost of borrowing for the Italian government has jumped today given policies of the coalition."

He added; "Investors are distancing themselves from Italian bonds and stocks, and risk-off sentiment is spreading across Europe. The severe sell-off in European financial stocks is reminiscent of the eurozone debt crisis."

FTSE 250 shed  over 67 points at 20,307 on the day.

In contrast, Wall Street shares were heading north on Friday, with the Dow Jones Industrial Average up around 51 points at the time of writing.

15.45pm: Heading into final hour

The FTSE 100 was making a determined effort to wipe out the day’s losses heading into the final hour of trading.

Despite the albatross that is RSA – down 9.1% - around its neck, the FTSE 100 was down 13 at 7,532, more than 50 points above its low for the day.

Elsewhere in the financial sector, banks were out of sorts, in sympathy with their Italian counterparts.

“Italian bond selling intensified throughout the day as investors dialled into concerns about the Budget deficit, with the 10-yr BTPs getting notably sold off. Yields jumped 33 basis points to trade at 3.25%, approaching but not quite breaching the 4-yr highs seen earlier this year. The fact that the sell-off is so strong despite the fact the 2.4% deficit is maybe less than feared highlights just how dimly investors are seeing this,” opined Neil Wilson at markets.com.

“Italian banks were the most sold equities today as a result with a knock-on effect on French, German and Spanish markets in particular,” he added.

Of the UK players, Lloyds Banking Group PLC (LON:LLOY) and Royal Bank of Scotland Group PLC (LON:RBS) were the hardest hit; both fell 2.5%.

Emerging markets-focused bank HSBC Holdings PLC (LON:HSBA) had problems of its own, with some customers unable to use the lender’s mobile banking app on Friday but the bank said it has now fixed the problem.

 

2.45pm: Footsie perks up as losses at the US open are less severe than expected

US markets did not open quite as weakly as expected, prompting a rally in the Footsie.

The FTSE 100 climbed back above 7,500, by was down 30 points on the day at 7,516.

Across the pond, the Dow Jones was down 30 at 26,410 and the S&P 500 was off 2.4 at 2,911.6.

Advertising and marketing giant WPP PLC (LON:WPP) was friendless, shedding 26p at 1,121p in the wake of reports yesterday that US federal prosecutors have kicked off an investigation into media-buying practices in the US ad industry.

The suggestion is that media buying agencies use their market dominance to secure rebates on advertising space they have purchased that is then not passed on to their clients.

United Utilities Group PLC (LON:UU.) was defying the trend after a trading update. The shares rose 10p to 703.2p after the utility company said current trading is in line with the group's expectations for the six months to the end of September.

2.40pm: Losses lengthen ahead of US open

US blue-chips are expected to fall out of bed when the market opens in about an hour’s time.

Spread betting quotes were pointing to a six or seven points fall to around 2,907 for the S&P 500 while the Dow was expected to dive to around 26,350 from last night’s close of 26,440.

The FTSE 100 saw its losses lengthen to 61 points at 7,485.

READ: US and European shares under pressure Friday; Tesla's Musk accused of securities fraud

12.15pm: Insurers drag the Footsie down

It’s not until an insurance major sends a scare through the sector that you realise how many insurers there are in the Footsie.

The likes of RSA, Admiral, Legal & General, Prudential and Aviva were all in the red after RSA’s downbeat third-quarter update, contributing to the FTSE 100’s 40 point fall to 7,506.

“We highlight that RSA’s London Market business was also weak in 2017 driven by hurricane activity, and this business continues to bring unwelcome volatility. We expect further questions around underwriting standards and the volatility of the book, unhelpful given RSA's elevated valuation and expectations the pay-out ratio can rise,” said UBS in reaction to the profit warning.

“The Buy case on RSA would be that it has cut costs, improved underwriting margins, controlled large loss volatility, and it can now move towards gradually growing the book at improved margins, whilst increasing the pay-out ratio. This profit warning is clearly a blow, and suggests that RSA has further work to do to improve underwriting standards and control large loss volatility, particularly in the London Market business,” it concluded, as it reiterated its neutral rating.

The shares were down 42.6p at 591.4p, compared with UBS’s price target of 634p.

Among the mid-caps, Serco PLC (LON:SRP) was the top riser, advancing 14% to 100.7p.

“Today’s update from Serco suggests a turnaround of the group, previously derailed by financial issues, various contract problems and customers losing faith in the business, is once again heading in the right direction,” said Russ Mould, the investment director at AJ Bell.

“The unscheduled release reveals the outcome for 2018 will be stronger than expected across all major metrics and tellingly it’s not just about cost cutting. The company also points to ‘strong operating performance’.

“The next focus may be on whether the company can return to a positive cash generation and even resume dividend payments, which have been absent of late,” Mould suggested.

“A series of profit warnings took Serco to the edge of collapse five years ago and the liquidation of its peer Carillion earlier this year was a reminder of the stakes for chief executive Rupert Soames and the rest of the management team.

“They seem to be doing the right things in terms of factors which they can control, but the outside political pressure on outsourcing does not look like it will go away any time soon,” Mould concluded.

At the opposite end of the FTSE 250 greasy pole was stock market star Games Workshop Group PLC (LON:GAW).

The fantasy and SF-themed tabletop miniatures group fell 225p to 3,725p after former chairman, Tom Kirby, sold 556,301 shares (1.7% of the company) at 3,650p a pop.

Kirby’s stake now stands at around 4.8%.

 

11.00am: Not so much a market report as a weather report ...

The weather continues to feature prominently in market events today, with the Office for National Statistics (ONS) revising its estimate of the impact of the “Beast from the East”.

The ONS left its estimate of growth in the gross domestic product (GDP) unchanged at 0.4% for the second quarter but downgraded its first quarter number because of a bigger-than-expected hit from last winter's snow.

Growth in the first quarter was revised down to 0.1% from 0.2% previously.

The ONS lowered the annual growth rate in the second quarter to 1.2% from a previous estimate of 1.3%

Furthermore, the ONS reported that business investment in the second quarter fell 0.7%, following on from the 0.5% decline in the preceding quarter.

“The final print of Q2 GDP missed expectations slipping to 1.2%, confirming that economic growth for the first half of 2018 was the weakest 6-month period since 2011, with underlying economic growth continuing to hold below the long-term average. Additionally, the Current Account deficit also surprisingly widened to its largest deficit in 9-months, as UK businesses stall investments due to heightened Brexit uncertainty. The hopes of a Brexit deal being agreed by late November and that Theresa May’s sales pitch to the UN earlier this week will prove successful could drastically improve future prints,” said Balraj Sroya, a sales trader at Foenix Partners.

Howard Archer, the chief economic advisor to the EY ITEM Club, said: “On the expenditure side of the economy, there was a pick-up in consumer spending (up 0.4% quarter-on-quarter). It was likely to have been impacted by the still relatively limited purchasing power and fragile confidence. Real household disposable income rose 0.4% quarter-on-quarter in the second quarter but was up just 0.6% year-on-year.”

“Business investment disappointingly fell 0.7% quarter-on-quarter in the second quarter, which was a second successive decline (it fell 0.2% quarter-on-quarter in the first quarter) and caused it to be down 0.2% year-on-year. This suggests businesses were cautious over investment due to mounting Brexit uncertainty,” Dr Archer speculated.

“The decline in business investment contributed to overall investment falling 0.5% quarter-on-quarter. The overall decline in investment was limited by an increase in spending on private dwellings (up 2.4% q/q). There was also a rise in government investment (up 1.3% q/q). Government spending was down 0.4% quarter-on-quarter and flat year-on-year, highlighting fiscal restraint,” he said.

The FTSE 100 did not seem overly perturbed and was down 13 at 7,532.

10.00am: Insurers under the weather

Insurers were getting it in the neck this morning after the third quarter update from RSA Insurance Group PLC created a storm in the sector.

Despite RSA’s (LON:RSA) 9.3% fall, and the falls of 2% or so by sector peers Direct Line and Admiral, the FTSE 100 was more or less unchanged, down 1 at 7,544.

RSA said pre-tax profit for the year-to-date is higher than 2017 but lower on an underlying basis due primarily to “elevated weather costs”.

The UK and London market business made an underwriting loss of around £70mln with higher weather, large losses and attritional claims; the Marine portfolio was the hardest hit.

Well, it makes a change from retailers complaining about the weather.

The weather has not been overly kind to the travel firms, with holidaymakers less inclined to hop on board an aeroplane to sunny climes when the sun is shining at home.

Despite that, low-cost airline easyJet PLC (LON:EZJ) said the final quarter of its financial year had seen a robust performance, despite disruptions caused by industrial action and air traffic restrictions across Europe.

The budget airline said it predicts headline pre-tax profit for the 2018 financial year of £570mln and £580mln, compared to its previous estimate of £550mln to £590mln.

“Generally, aviation is a tough game. Fortunes are influenced by lots of factors outside companies’ control – weather, the oil price and strikes to name just three. Recent years have also shown that even when macro conditions give carriers a tailwind, intense competition can limit growth,” explained Laith Khalaf, a senior analyst at Hargreaves Lansdown.

“One area easyJet has more control over is its cost base. Unfortunately, non-fuel costs are heading up again, and while easyJet has blamed exceptional circumstances like adverse weather and industrial action, we can’t help but notice they aren’t expected to fall back next year.

Underlying cost control and continued improvements in the recently acquired Tegel operations must be the priorities for the new CEO,” Khalaf suggested.

The shares were down 1% at 1,312p, having fallen as low as 1,279.5p at one point this morning.

8.40am: Shares off to a sluggish start

The FTSE 100 got off to a sluggish start as it drifted four points to 7,541.64 and resisted the positivity emanating from Asia and to a lesser extent Wall Street.

The day’s big faller was the insurer RSA (LON:RSA), whose shares dropped 7% after its third-quarter results were battered by weather-related losses.

The miners were at the vanguard of the Footsie, with Randgold Resources (LON:RRS), which is soon to be gobbled up by rival Barrick Gold, leading the pack with a 2% rise.

Investors clearly weren’t impressed by the prospects for easyJet (LON:EZJ), even though it said its profits would be boosted by rival Ryanair’s (LON:RYA) round of flight cancellations.

The shares fell around 1%, mirroring the caution around travel and holiday-related stocks following the earnings alert from tour operator Thomas Cook (LON:TCG).

Ryanair and British Airways owner IAG also ran into a minor bout of market turbulence.

The prediction of better than expected full-year profits and revenues from the outsourcing group Serco (LON:SRP) sent the stock price soaring 13%.

6.30am: Footsie to resist Asia's pull 

The FTSE 100 is expected to open up just two points higher at 7,547.44, resisting the pull of Asia’s main markets, which are set for a buoyant end to the month.

The Nikkei 225 led the way with a 1.25% gain followed by the two main Chinese stocks indices.

Wall Street finished Thursday in positive territory after a fairly dull session.

In the UK, it’s likely to be a busy day for company announcements as London’s listed businesses rush to file their interim figures before the three-month cut-off later today.

However, it will be a flurry of also-rans with the only notable scheduled news coming from United Utilities (LON:UU.).

On the macro-front, there is very little to write home about with the final adjustment to UK gross domestic product expected.

This will likely show the economy grew 0.4% with business investment rising 0.5%.

  • Pound worth US$1.3083
  • Brent crude US$72.76 a barrel, up 14 cents
  • Gold US$1,137.30 an ounce, down 10 cents

 

Proactive news headlines

Strategic Minerals PLC (LON:SML) expects 2018 results to exceed the record performance it reported last year after delivering a sharp rise in first-half profits.

Immotion Group PLC (LON:IMMO) will roll out its virtual reality brand ImmotionVR into Spain after signing a franchise distribution partnership with a local leisure operator.

Audio-visual interaction specialist Mirada PLC (LON:MIRA) reported an increase in full-year gross profit and revenue, buoyed by contract wins and foreign exchange tailwinds.

Live Company Group PLC (LON:LVCG) swung to a first-half profit as the events and entertainment company delivered a 47% jump in revenues.

Action Hotels PLC (LON:AHCG) said underlying first-half earnings rose 12% as occupancy levels remained robust despite the continued uncertain economic and political climate in the Middle East.

Ariana Resources PLC (LON:AAU) swung to a first-half profit, helped by an uplift in gold production from its Kiziltepe mine in Turkey, and said it was mulling options to diversify the business further.

Drilling is set to get underway shortly at Chariot Oil & Gas PLC’s (LON:CHAR) Prospect S well offshore Namibia. A deep-water drillship is due to arrive at the location within the next 24 hours, with spudding of the well expected shortly afterwards.

Sure Ventures PLC (LON:SURE) said it has raised £1.08mln in gross proceeds through a placing of shares.

Premier African Minerals Limited (LON:PREM) told investors on Friday it remains confident on the prospects in Zimbabwe projects after raising funds to support its operations.

88 Energy Ltd (LON:88E) has expanded its footprint on Alaska’s North Slope, securing additional areas of interest for the group’s planned conventional exploration campaign.

Curzon Energy PLC (LON:CZN) chief executive Stephen Schoepfer highlighted, in the company’s half-yearly results statement, that it is currently evaluating alternative strategies for accelerating development of the Coos Bay coal bed methane (CBM) assets.

Anglo African Oil & Gas PLC (LON:AAOG) executive chairman David Sefton has highlighted that the company remains focused on the drilling of the TLP-103C well, at the Tilapia field, offshore of the Republic of the Congo.

ITM Power PLC (LON:ITM) told investors it has secured UK government funding to advance a possible power-to-gas energy storage project in Runcorn, Cheshire.

Shares in United Oil & Gas PLC (LON:UOG) edged higher on Friday after the operator of the Colter appraisal well signed a rig contract with drilling contractor Ensco.

Concrete products group SigmaRoc PLC (LON:SRC) more than doubled profits as latest acquisitions Allen Concrete and Poundfield chipped in for the first time.

Cradle Arc PLC (LON:CRA) seems to be putting the issues at its Mowana mine behind it, with the company reportedly making “good progress” at the Botswanan copper project.

Tower Resources PLC (LON:TRE) saw its first-half loss widen to US$3.35mln from US$730,129 the year before, largely as a result of writing down the value of its assets in Zambia by US$2.81mln.

Martin Andersson, the executive chairman of Chaarat Gold Holdings Ltd (LON:CGH), said the Kyrgyz Republic-focused mine developer had made good progress in 2018.

Healthcare investor NetScientific PLC (LON:NSCI) has said it was “pleased” with the performance of its portfolio companies as it narrowed its losses in the first half of 2018.

Biotech investment group Amphion Innovations PLC (LON:AMP) is readying its FireStar Software partner company for an initial public offering, possibly as early as next year.

Xtract Resources PLC (LON:XTR) said in its half-year report the alluvial mining operations at its Manica concession in Mozambique remained cash positive during the period.

Since agreeing to purchase the Minto copper-gold-silver mine in Yukon, Northern Canada, Pembridge Resources PLC (LON:PERE) has been working towards completing the deal, it said, as it posted a half-year loss of US$2.2mln.

Eurasia Mining PLC (LON:EUA) is seeing production as its alluvial platinum mine at West Kytlim run well ahead of schedule.

Recruiter Norman Broadbent PLC (LON:NBB) slashed its losses as recent efforts to boost sales started to show through.

Biotech investment group Amphion Innovations PLC (LON:AMP) is readying its FireStar Software partner company for an initial public offering, possibly as early as next year.

Advanced Oncotherapy PLC (LON:AVO), which is developing a breakthrough new proton therapy system for cancer sufferers, said it remains on course to treat its first patients in the second-half of 2020.

Tanzania-focused Aminex PLC (LON:AEX) has confirmed its gas farm-out deal with an Omani industrial group is set to close by the end of November.

Curzon Energy PLC (LON:CZN) chief executive Stephen Schoepfer highlighted, in the company’s half-yearly results statement, that it is currently evaluating alternative strategies for accelerating development of the Coos Bay coal bed methane (CBM) assets.

Amur Minerals (LON:AMC)  said that it would turn its focus to corporate development after a successful 2018 field season and that the time was right to find a long-term strategic partner.

India-based power utility OPG Ventures PLC (LON:OPG) has written off its Gujarat power station after a series of ongoing disputes.

Delays in getting permits for its Honduras operations held back interim revenues at Wishbone Gold PLC (LON:WSBN).

Cabot Energy PLC (LON:CAB) chief executive Scott Aitken described himself as “encouraged” by the record positive cashflow from its Canadian operations.

Kore Potash PLC (LON:KP2) now expects to receive the definitive feasibility study documentation for its Sintoukola potash project in the Republic of Congo next month.

Bakery products firm Real Good Food PLC (LON:RGD) dished up a 20% rise in revenue for the year, supported by the acquisition of healthy snack bar maker Brighter Foods.

Red Rock Resources (LON:RRR) said it expects to receive an interim dividend of more than £0.5mln from its investment in Jupiter Mines (ASX:JMS).

Having taken a step back to review its business, Bezant Resources PLC (LON:BZT) says it now has a “clear focus” on how best to progress its portfolio of copper-gold assets.

The next 12 months should be an “exciting time” for IronRidge Resources Limited (LON:IRR) as the minerals explorer looks to press ahead with the development of its portfolio of projects across Africa and Australia.

PowerHouse Energy Group PLC (LON:PHE) told investors that it has the right strategy to deliver sUBStantive growth over the medium to longer-term, as the company released its half-yearly results statement.

PhotonStar LED Group PLC (LON:PSL) swung to a first-half profit and said its transformation into a software and services business was gathering pace.

Vast Resources PLC (LON:VAST) continues to look forward to the ‘transformational’ commissioning of the BBPM project, in Romania, which promises to generate cash flow to the support the group’s growth plans.

Business Headlines

Financial Times

Global M&A hits all-time high as deal flow hits US$3.3trln

Elon Musk sued by SEC over Tesla take-private claims - electric car maker’s shares drop 12% in after-hours trading following regulator move

UK coal revival reverses gains in clean power drive - utilities increase demand for polluting fossil fuel after rise in natural gas prices

Most UK companies yet to begin Brexit preparations

Andy Haldane calls for corporate governance reform - pointed timing of Bank of England chief economist’s intervention on shareholder interests

Times

Banks, insurers and telecoms providers face an investigation into how they treat long-standing customers after Citizens Advice said that loyalty was costing consumers more than £4bn a year

Sirius Minerals warns its future may be in doubt as mine bill rises

America and China have been urged to “show restraint” after their escalating trade war forced the World Trade Organisation to downgrade forecasts for the next two years

Banks must make greater effort to identify fraudsters by analysing data more effectively and delaying suspect payments from online accounts, according to new industry proposals

Daily Telegraph

Watchdog probes energy suppliers over 'poor' complaints handling

Report reveals Uber drivers make £11 per hour, less than what the company previously claimed

RBS has told staff about plans to create a standalone digital bank to compete with rapidly growing fintech groups like the mobile-only bank Monzo and Revolut

Guardian

Polling companies are facing parliamentary scrutiny over the sale of private polls to hedge funds during the Brexit referendum, which were used to place huge bets on the pound

Jamie Oliver’s business empire slumped to a loss of nearly £20mln last year, dragged down by a grim year at his restaurant chain which was forced to close a dozen outlets in February


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