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FTSE 100 closes sharply lower as sterling gains and miners weigh

Last updated: 17:46 05 Oct 2018 BST, First published: 06:49 05 Oct 2018 BST

non farm payrolls
  • FTSE 100 closes down nearly 100 pts

  • US adds 134,000 jobs in September

  • Unilever to stay in London

  • Antofagasta top Footsie loser

FTSE 100 closed firmly in the red Friday as sterling gained and US stocks tumbled and miners took a hit.

The UK blue - chip index finished down 99.8  points at 7,318, while FTSE 250 was also lower - off 170 points at 19,918.

Footsie was down around 2.5% on the week.

The UK pound is up 0.62% against the Euro at the time of writing, while it is  up 0.57% against the US dollar.

Fiona Cincotta, senior market analyst at City Index, said: "The FTSE is looking as if it could revisit the dip in mid-September if the current selloff continues.

"The London share index clocked a 1.15% decline Friday, more than most other European and US indices, as the selloff in US government paper continues.

"Mining firms were the worst hit and although technically the trigger for the fall came from a decline in copper prices, mining shares did far worse than commodities, as was the case for Antofagasta."

The copper major Antofagasta (LON:ANTO) was the top loser on Footsie, plummeting 5.44% to stand at 827p.

Defensive stocks like utilities fared better on the day and water company Severn Trent plc (LON:SVT) was the top riser, up 1.83% to 1,812p.

3.15pm: Slow start in US as bond yields rise further

The headline numbers may have missed forecasts, but upward revisions to other numbers coupled with a dip in unemployment to record lows has pushed up expectations of further interest rate rises from US policymakers.

As a result, the price of US Treasuries has fallen, sending bond yields up again, which has in turn dampened demand for riskier assets such as equities.

With that in mind, the slow start over in New York is perhaps of no surprise.

The Dow Jones Industrial Average index opened slightly higher but has since fallen back and is now 39.4 points, or 0.1%, down at 26,588.1, while the tech-heavy Nasdaq has dropped 30.5 points, or 0.4%, to 7,849.0.

As for the broader S&P 500, that is as flat as a pancake at 2,901.7.

3pm: Footsie poised for biggest weekly fall in a month

Although not terrible, the jobs data miss has certainly put the brakes on the US dollar, which has been strengthening against its peers of late.

That helped to further boost the pound, which is now closing on US$1.31 having spent most of the week sub-US$1.30.

Sterling’s strength is not good news for the blue-chips though as it makes their overseas earnings worth less when converted back, whilst it also makes their goods more expensive to foreign buyers.

As a result, the FTSE 100 has extended its losses so far in the afternoon session, with the UK’s top index now down 75.1 points, or 1%, to 7,343.2.

Today’s fall leaves the index poised for its biggest weekly drop in a month.

Chilean copper miner Antofagasta PLC (LON:ANTO) is one of the biggest drags, down 4% to 840.8p after its shares went ex-dividend. That means investors buying the stock today aren’t entitled to the next dividend pay-out.

Online supermarket Ocado Group PLC (LON:OCDO) is at the bottom of the leader board, though, down 4.2% to 806.8p.

Trying to prevent the Footsie from falling any further are property stocks, which have been boosted by interest in their FTSE 250 rival Intu Properties PLC (LON:INTU), which itself is up by 27% to 187.6p.

Its peers Land Securities Group PLC (LON:LAND) and British Land Company PLC (LON:BLND) are up 1.6% and 1.2% respectively.

One of the big news stories of the day has been the U-turn of Unilever plc’s (LON:ULVR) board, which has opted to keep its headquarters in London. Shares are down 0.9% to 4,044p.

2.20pm: US jobs data not as bad as first thought?

“Naturally whenever we see an NFP [non-farm payrolls] in the low hundred thousands, questions are asked about what went wrong in the labour that month and whether it’s a sign of things to come but this time that is not the case,” said OANDA senior market analyst Craig Erlam.

“It’s always difficult to assess the impact of something such as Hurricane Florence but it would certainly appear it weighed on employment during the month.

“That said, 134,000 job is far from a terrible employment number and with August’s being revised up by another 69,000, the labour market looks extremely healthy and provides further evidence of a booming economy.

 “Add to that unemployment falling to its lowest level in almost 50 years and wages growing by 2.8% and this is far from a bad jobs report.”

1.45pm: US jobs data disappoints

Stocks in New York are poised to open lower on Friday after the latest jobs data disappointed.

The US added 134,000 jobs in September, well below the consensus of 180,000 and the total of 201,000 in August.

Even before the results came out, spreadbetters expected a slow start on the markets as rising bond yields drive a sell-off in equities around the world.

The Dow Jones Industrial Average closed down over 200 points in Thursday at 26,627, while the tech heavy Nasdaq shed 145 at 7,897. The S&P 500 closed out down around 23 points at 2,901.

The downward spiral came as the 10-year Treasury note yield reached its highest level since 2011.

In futures trade, the Dow Jones on Friday is down 9 points, while the tech-heavy Nasdaq is seen losing 18.3 points. The S&P 500 index is called 1.5 points lower.

1pm: Trump's golf course lost £3.4mln last year

Donald Trump's Turnberry golf resort in Scotland lost £3.4mln last year, according to a companies house filing.

It is the fourth year in a row that the South Ayrshire resort has racked up multi-million-pound losses.

In total, since Trump took over Turnberry in 2014, the losses of its parent company, Golf Recreation Scotland, have totalled £33mln.

In the latest set of accounts, Trump’ son Eric, who took over his business interests when he became President, said: "Having seen a decline in turnover of 22% in 2016 due to the resort only being open for six months, 2017 saw an increase in revenue year over year of 70%.

"It is expected that revenue will continue to increase in subsequent years as the property is re-established as an industry-leading resort."

12.40pm: Royal Mail takes another beating from the City

Royal Mail PLC (LON:RMG) shares are taking another battering today after Citigroup downgraded the stock on the back of the postal operator’s profit warning earlier this week.

The FTSE 100 company had £800mln wiped off its stock market value on Monday after slashing its profit guidance for this year to £500mln-£550mln, compared with £694mln last year.

“The outlook for Royal Mail remains challenging even after the recent reset — While the recent profit warning saw the share price slide by c. 25%, we think this has only served to highlight ongoing risks which the company faces in the near-term,” said Citi analysts in a note to clients.

“Furthermore, despite the significant reset the shares remain more expensive than some European Postal peers.”

Citigroup cut its rating on the stock to ‘sell’ from ‘neutral’ with a target price of 300p.

Shares fell back towards that number this morning, dropping 3.5% to 342.1p.

12.10pm: Antofagasta and Royal Mail drag FTSE lower 

The FTSE 100 is down 35.8 points, or 0.5%, to 7,382.5 having recovered some of its losses from earlier in the session.

With speculation that today’s jobs report in the US could spark more interest rate hikes, investors have been taking their money out of equities – where companies are exposed to higher borrowing costs – and into government bonds – where yields are surging.

Compounding the index’s woes is a strong pound, which has headed back above US$1.30 after a report from Reuters suggested a Brexit deal was close.

Property stocks are in demand on the back of bid speculation surrounding Intu Properties PLC (LON:INTU).

Its peers, Land Securities Group PLC (LON:LAND) and British Land Company PLC (LON:BLND), are up 2.2% and 1.84% respectively, occupying the top two spots on the blue-chip leader board.

Weighing on the index is Chilean copper miner Antofagasta PLC (LON:ANTO) which is down almost 5% to 833p having gone ex-dividend today. That means anyone buying its stock today won’t be entitled to its latest dividend.

Royal Mail PLC’s (LON:RMG) week keeps getting worse; a shock profit warning on Monday has been compounded by a bearish ‘sell’ note and price target reduction (to 300p) from Citigroup analysts.

The shares are down another 3% today to 343.6p, meaning they have now lost more than a quarter of their value over the past five days.

11.50am: Fevertree 'a victim of the equities sell-off'

Shares in Fevertree Drinks PLC (LON:FEVR) have failed to fizz for the second day in a row, but that hasn’t stopped Berenberg pushing out a bullish ‘buy’ note on the posh tonic maker.

Analysts at the venerable German bank reckon Fevertree can “grow considerably” over the next few years, driven by demand for its drinks in the US, where it has recently taken over direct management of its operations.

Berenberg kept its ‘buy’ rating in place as it upped its price target to 4,250p from 3,350p.

But the stock, which lost 7% on Thursday, is down another 3.3% today to 3,252p this morning.

Market insiders reckon Fevertree is just a victim of the recent equities sell-off with it trading on pretty punchy multiples and having enjoyed a stellar 2018 so far.

11.20am: Sadiq Khan tweets about Unilever's decision

11am: House prices slip again in September

House prices have dipped month-on-month for the second time in a row, according to Halifax’s latest house price index.

The lender said property values fell 1.4% in September, following on from a 0.2% slide in August as buyers adopt a “wait and see” approach, the lender said. The average house price stood at £225,995 in September.

But Russell Galley, managing director, Halifax, said that despite the slowdown, annual house price growth is still near the top end of its forecasts for 2018.

He said: “The annual rate of growth is near the top of our forecast range of 0% to 3% for 2018, as a low supply of new homes and existing properties for sale, combined with historically low mortgage rates and a high employment rate, continue to support house prices.”

10.35am: Bond yields explained (sort of)

The FTSE 100 index is down 49.2 points to 7,368.8 this morning, compounding the heavy losses sustained in Thursday’s session.

Analysts say much of the fall is down to rising US bond yields and the latest US jobs data which is due this afternoon. Bear with me while I try to explain why…

Private payrolls data came in stronger than forecast yesterday, pushing the yield on the benchmark ten-year US Treasury note to its highest levels since May 2011.

Should the official non-farm data come back with a similar beat today, it would signal a continually improving US economy and inflation would be expected to rise (more people with more money going after the same amount of goods should lead to price increases).

To try to control inflation, central banks can raise interest rates. In order for bonds to remain a worthwhile investment, their prices would have to go down to boost yields, otherwise investors would look to make a return elsewhere.

With yields now starting to climb to multi-year highs, a lot of the big pension funds and other institutions are starting to take their money out of the stock market and into other investments such as government bonds, which are generally considered ‘risk-free’ and, at the moment, are offering a decent yield.

It's not just US Treasuries, UK government bond are also on the rise.

That’s why global stock markets have been struggling over the past couple of days (so they say). Phew, glad that’s over…

10.15am: Investment Association welcomes Unilever U-turn

The trade body that represents many of London's big investment firms has welcomed Unilever plc's (LON:ULVR) decision to abandon plans to move its headquarters to Rotterdam.

“The feedback from many of our members has been that there was no compelling reason for Plc shareholders to accept the proposed simplification in this form,” said a spokesman for the Investment Association.

“They did not believe it would be in the long-term interests of their clients, and would have resulted in many shareholders being forced to sell their shares.

“We welcome the fact that Unilever has listened to the feedback from their shareholders and not pushed ahead with their plans. We look forward to engaging with the company on their future plans.”

10am: £100mln wiped from Centamin's value

Centamin PLC (LON:CEY), one of London’s biggest gold miners, has cut its annual production target after reporting a 25% drop in quarterly output from its flagship Sukari mine in Egypt.

The FTSE 250 group blamed delays on planned operational improvements as it reported total gold production of 117,720 ounces (oz) in the three months ended September 30 versus 156,530oz in the year-ago period. It was, however, a pick up on the 92,800oz it mined in the second quarter.

Centamin now expects annual production of around 480,000, down from its earlier target of between 505,000-515,000oz. Shares lost their shine, dropping 8.6% to 99.4p.

9.45am: Good time to get out for Intu shareholders?

“A cash bid for Intu should warrant serious consideration by its shareholders,” said Liberum analyst David Brockton in a note to clients.

“Aside from any view on the long-term structural outlook for retail property, Intu’s prospects as a standalone entity are threatened by above average financial leverage which limits its ability to self-fund growth and maintenance capex, particularly during a period of cyclical pressure.

“A cash bid could offer shareholders a chance to salvage value ahead of a potential cash-call or dividend cut, under a new CEO.”

9.30am: Unilever abandons plans to scrap London listing

Unilever plc (LON:ULVR) has abandoned plans to scrap its dual listing and relocate to the Netherlands following opposition from several institutional investors.

The FTSE 100 consumer goods giant said in a statement that the proposal to relocate to the Netherlands and list solely on the Amsterdam stock exchange had “not received support from a significant group of shareholders” after it outlined the plans in September.

The move follows a period of vocal opposition from a number of institutional investors, including Columbia Threadneedle, Schroders PLC (LON:SDR), Aviva PLC (LON:AV.), and Legal & General Group PLC (LON:LGEN), Lindsell Train, Brewin Dolphin Holdings PLC (LON:BRW), and M&G Investments.

The seven institutions own around 10% of Unilever’s shares and had previously complained that the move would be a detriment to UK shareholders, with Aviva saying it saw “no justification” for the move. Shares are down 0.8% to 4,047p.

9.15am: Intu deputy chairman mulling takeover bid

Intu Properties PLC (LON:INTU), jilted at the altar this year by Hammerson PLC (LON:HMSO), has a new suitor.

The shopping centres property group is being put under the microscope by a consortium including The Peel Group, owned by Intu’s billionaire deputy chairman John Whittaker. Between them, the three consortium members own around 30% of Intu.

The consortium's consideration of the possible offer is at a preliminary and exploratory stage and no approach has been made to the board of Intu yet.

“At this level, despite the near £5bn of debt and the pressure on rental values, you’d think that buying Intu was a pretty cheap way into its two flagship assets, the Trafford Centre in Manchester (which is valued at £2.2bn gross) and Lakeside (which is valued at £1.3bn gross),” said retail analyst Nick Bubb.

Shares jumped 28% to 190p early on Friday.

8.50am: Footsie compounds Thursday's losses

The FTSE 100 got off on the back foot with some nerves ahead of the US jobs data later with index of blue-chip shares falling 30 points to 7,388.54.

The squeeze was further exacerbated by a sharp spike in the US Treasury yields, which has encouraged investors to dump the big dividend paying stocks and caused a slump on Wall Street.

The news of the morning emanated from the property sector with Intu, owner of the Metro Centre in Gateshead and a bunch of other malls, confirming a bid approach.

Peel Holdings is heading a consortium put together to buy Intu, whose shares shot up 25% in early trading.

The announcement also provided a boost to Hammerson (LON:HMSO), up 5%, Land Securities (LON:LAND), up 3.5%, and British Land (LON:BLND), up 2.9%.

Antofagasta (LON:ANTO) was the big faller, down 5%, after stock in the copper miner went ex-dividend.

6.45am: FTSE 100 set to rise 

The FTSE 100 is expected to open higher this morning, recovering from a sharp fall on Thursday, but investors look like their eyes will be firmly on the latest set of US jobs data and its potential to push treasury bond yields higher.

Spread-betting firm IG expects the blue-chip index to open around 20 points higher after plunging yesterday to finish 91 points lower at 7,418.

The fall in the FTSE has been partially blamed on the yields for US 10-year Treasury bonds, which have risen to levels not seen since 2011.

As US bonds are often seen as a risk-free investment, the higher yields sent investors towards the bond market and away from equities.

Michael Hewson, chief market analyst at CMC Markets UK, said that US bond yields were starting to look as if they “might be about to go on a bit of a run to the upside”, with the US jobs report to push yields upwards if it comes out positively.

“In contrast to Europe, the US economy appears to be on fire, blazing a trail in the sky, and sending US rate rise expectations sharply higher” he added.

The bond bonanza also sent equities downwards in US markets yesterday, with the Dow Jones Industrial Average closing down 200 points at 26,627, while the S&P 500 was down 23.9 points at 2,901 and the Nasdaq was down 145 points at 7,879.

In Asia today, the Japan's Nikkei was down 130 points at 23,845, while Hong Kong’s Hang Seng was down 69 points at 26,554 as tech stocks were dragged down by revelations by Bloomberg that China may have secretly planted spy chips in servers used by Apple Inc (NASDAQ:AAPL).

In the currency markets, the pound was trading 0.08% lower at US$1.30 against the dollar and flat at €1.13 against the euro.

All eyes on US non-farm payrolls

The US Labor Department’s September non-farm payrolls report will be the main event on the economic data front.

Analysts expect the data to show US employers added 185,000 jobs in September following a 201,000 rise a month earlier.

The unemployment rate is forecast to edge down 0.1 percentage points from the 3.9% reported in August.

The Federal Reserve takes into account the health of the labour market in deciding monetary policy, so a strong jobs report could raise expectations for the next interest rate hike.

A recent increase in the yield of US 10-year treasury bonds to nearly 3.2% may also be a sign that bond traders are expecting another rate rise from Fed chair Jerome Powell.

Meanwhile, the US will also be reporting international trade figures, which could indicate any changes that have arisen following the latest round of tit-for-tat tariffs in the ongoing trade spat with China.

Significant announcements expected:

Friday, October 5:

Economic data: US non-farm payrolls; US international trade; US consumer credit

Around the markets

Sterling: US$1.30, down 0.08%

Brent Crude: US$85 per barrel, up 0.5%

Gold: US$1,199 an ounce, no change

Bitcoin: US$6,542, down 0.2%

 

Proactive news headlines

Plastics Capital Plc (LON:PLA), the niche plastics product group, traded in line with expectations in the six months to the end of September. 

Ceres Power Holdings PLC (LON:CWR) has confirmed that one of its largest shareholders has paid up £1mln to keep its overall shareholding at 10%. 

Frontier IP Group Plc’s (LON:FIPP) success in Portugal has been recognised by the UK Department for International Trade, which  presented the group with the ‘New to Market Award’ at the 10th anniversary of the DIT Business Awards.

Block Energy Plc (LON:BLOCK) has inked a new agreement for gas sales at the West Rustavi project in Georgia.

88 Energy Ltd (LON:88E) has issued a statement confirming the next steps in its proposed £7.96mln rights issue. 

Ceres Power Holdings PLC (LON:CWR) has confirmed that one of its largest shareholders has paid up £1mln to keep its overall shareholding at 10%. 

Tekcapital PLC, (LON: TEK) said Juan A. Hurtado has joined its science advisory board as a technology and innovation advisor. He  previously served as the science and technology advisor and deputy director of Technology, Innovation and Solutions for the US Southern Command, Department of Defense, and with the US Air Force where he managed research and discoveries for a number of significant technology centres. 

City news headlines

Financial Times: Oil price has surged to four-year high, taking its toll on Asia’s biggest crude importers, with already weakening currencies deepening the damage.

The Daily Telegraph: The number of new car sales declined by 20% in September as new EU emission tests put greater pressure on manufacturers.

The Times: John Whittaker, the billionaire owner of Peel Group, is trying to take Intu Properties private in a multibillion-pound deal, which could spark an auction for the shopping centre group.

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