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FTSE 100 closes positively as PM Theresa May says gov't is working towards a good Brexit deal

Britain's blue-chip benchmark finished up around 31 points at 7,029
London skyline
Brexit proceedings will be crucial this week, say experts
  • FTSE 100 closes higher

  • US stocks fall

  • Brexit talks reach impasse

 

FTSE 100 closed in positive territory -  the first rise in four sessions as Brexit jitters appeared to be becalmed for now.

Britain's blue-chip benchmark finished up around 31 points at 7,029.

Earlier, Prime Minister Theresa May made a surprise address in the Commons after a weekend otf turbulent discussions in Brussels ahead of Wednesday's EU summit.

The talks have reached an impasse due to the Nothern Ireland border issue, she explained. Wall Street benchmarks are lower at the time of writing.

Looking at global markets, including in the US, analyst Chris Beauchamp at IG Index, added: "While US retail sales have not provided much joy, an estimate-beating report from Bank of America has helped keep bearish sentiment in check.

"Last week’s outbreak of fear is receding, although not as quickly as it arrived. Caution is still the watchword, but the more days that pass without another lurch lower, the better investors will feel.

"It has been a volatile day for sterling, but with the PM’s surprise statement out of the way it looks like the currency will avoid any further losses for the time being.  After the September statement, markets decided to approach the statement with caution, but thankfully this time around there was no repetition of ‘no deal is better than a bad deal’, and the generally upbeat gloss put on what was, by all accounts, a fairly stormy encounter in Brussels, helped the pound to recover. But there is still a lot of work to be done."

 

4.15pm

UK blue-chips headed for their first rise in four sessions Monday, while the pound pulled back as UK Prime Minister Theresa May said “two problems remain” in the Brexit negotiations.

The FTSE 100 rose 28 points, or 0.4%, to 7,024, with miners and so-called dollar-earners lead ing advancers. Randgold Resources PLC (LON:RRS) and Fresnillo PLC (LON:FRES) rose 5.1% and 4.3%, respectively, adding to recent gains as investors sought safety in gold assets during the recent global equity rout. 

Shares of defensive stocks and mutinationals that make most of their revenue overseas outperformed other stocks. Telecom company BT Group plc (LON:BT) rose 2.3% and consumer products maker Unilever plc (LON: ULVR) 1.8%.

The moves came as the pound reversed course and lost ground against the dollar as May spoke to lawmakers in the House of Commons about the Brexit negoations. The pound was off 0.1% to $1.3141.

“Real progress” has been made in the talks with EU officials, May claimed, but she said two issues remain on how to avoid a hard border in Northern Ireland after the UK exits the EU. 

Jeremy Corbyn, leader of the opposition Labour Party, hit back at May, saying her inability to resolve differences between “warring factions" in her Conservative Party are what has "led to this impasse."

 

3.00p Footsise clings to small rise 

The FTSE 100 held to modest gains in Monday afternoon trade, outperforming US stocks which were lower as trading got underway.

The FTSE 100 rose 10 points, or 0.2%, to 7,008, with support from defensive shares including tobacco maker Imperial Brands Group (LON: IMB) and mobile phone services provider Vodafonne PLC (LON:VOD) as they gained 1.8% and 1.3%, respectively. The top advancer was Paddy Power Betfair plc (LON:ppb) as the bookmaker leapt 5.1%.

UK blue-chips nudged higher ahead of an appearance by UK Prime Minister Theresa May in parliament, who is reportedly expected to talk about Brexit negotations, which appeared to hit another impasse over the weekend.

But on Wall Street, stocks declined after data showed U.S. retail sales rose by a less-than-expected rate of 0.1% in September. The  Dow Jones Industrial average shed 29 points at 25,311. The S&P 500 fell 0.1% 

“At first glance, it appears that Hurricane Florence has distorted the numbers to some extent with sales at restaurants and bars dropping 1.8%MoM – the biggest fall for two years,” said James Knightley, chief international economist at ING.

“Gasoline stations sales and building materials were down too, but most other components posted decent gains with auto sales up 0.8%, furniture up 1.1%, clothing up 0.5%, electronics up 0.9%  and sporting goods up 0.7%,” said Knightley.

The Nasdaq Composite gave up 0.6%, with Apple Inc. (NASDAQ: AAPL) down 0.9% after Goldman Sachs reportedly said slowing demand in China for Apple products could hurt the tech company’s earnings.

Back in London, the mid-cap FTSE 250 index slid 193 points, or 1%, to 18,781, led by a 35% slide in ConvaTec Group PLC (LON:CTEC) and 20% tumble in Superdry PLC (LON:SDRY) following profit warnings from the medical products maker and the clothing retailer.

1:15p Footsie turns higher 

UK blue-chips pushed into positive territory in early afternoon action Monday, while US stocks appeared set for modest losses when Wall Street opens for the new week.

The FTSE 100 was up 9.7 points, or 0.1%, at 7,005, clawing back from an intraday loss that pushed the benchmark deeper into six-month lows.

On Wall Street, stocks futures were coming off their lows. S&P 500 futures indicated a slip of 1 point at the open, while futures for the Dow Jones Industrial Average suggested a one-point gain. Nasdaq futures, however, were off 0.2%. Sears Holding Corp (NASDAQ:SHLD) will be in focus after the retailer filed for bankruptcy, while investors will look for financial results from Bank of America (NYSE:BAC).

Investors in UK assets will keep watch for an announcement this afternoon by UK Prime Minister Theresa May about the Brexit negotiations.

May will speak after UK and EU officials appeared at an impasse after talks in Brussels over the weekend. 

 

The pound also turned modestly higher on Monday against the US dollar, buying around $1.3162 compared with $1.3142 late Friday.

“The pound is holding up relatively well despite the stalled progress over the weekend,” said Craig Erlam, senior market analyst at Oanda, in a note.

“The currency is likely to remain rather volatile over the coming weeks as talks continue and we see increasing amounts of commentary being leaked,” said Erlam, “not to mention more pressure on the May following reports that more letters of no confidence being submitted, taking the total number to 44, four short of the number required to trigger a vote.“

In the UK markets, shares of Schroders PLC (LON:SDR) pulled back 3.3% to 2,747p after the wealth management firm issued a third-quarter financial report.

READ: Schroders posts increase in third quarter assets, led by institutional demand

Shoe Zone PLC (LON:SHOE) shares jumped 10% to 181.75p as the AIM-quoted footwear retailer said it will distribute an extra £4mln to shareholders through a special dividend.

READ: Shoe Zone steps higher as it unveils £4mln special dividend

12.00pm "No Deal" Brexit looking likely 

The possibility that UK and EU officials won’t reach a deal on Brexit terms seems to be growing, but such a scenario may not have such a dire impact on the UK’s economy, according to a new study.

A “No Deal” result would have a “material but small impact” on growth in UK gross domestic product by 2030, according to think tank Open Europe, which released its study early Monday.

The UK leaving the bloc without an agreement would be a drag, on average, of 0.17% a year, or 2.2% by 2030 on the British economy. Despite that drag, GDP would expand by about 30% over that period, said Henry Newsman, director at Open Europe, in an outline of the report.

Open Europe models No Deal as including tariffs on UK-EU trade along with costs for customs and non-trade barriers.

The impact of a No Deal scenario on the British economy could be mitigated by the government without negotiation by liberalizing its tariff regime and services and foreign direct investment, the group said. Such actions would cut down the average drag on GDP growth to 0.04% a year, or by 0.5% by 2030.

 

In early afternoon trade, the FTSE 100 was down 7 points at 6,988, paring its loss.

10.45a Footsie falls further 

The FTSE 100 lost more ground in mid-morning trade Monday, as political worries dampened risk appetite.

The FTSE 100 fell 24 points, or 0.4%, to 6,971, pushing the index to new six-month lows. The moves added to last week’s loss of 4.4% for the UK’s blue-chips gauge. 

In addition to fractured Brexit talks, investors were monitoring developments in the oil market following the disappearance and presumed death of journalist Jamal Khashoggi in Saudi Arabia.

“Another risk emerged … after Saudi Arabia officially threatened to use the country’s economic power to retaliate to any measures taken against the kingdom," following Khashoggi's disappearance, said Hussein Sayed, chief market strategist at FXTM.

“Brent crude surged 1.85% early Monday as some market participants began to price in the risk of supply disruptions if tensions escalated. However, given that the magnitude of the move was limited, this suggests that investors aren’t too worried yet.”

Oil shares, which weigh heavily on the benchmark, were mixed as oil prices advanced. BP PLC (LON:BP) fell 0.3% to 556.40p, and Royal Dutch Shell PLC (LON:RDSB) was up 0.2% at 2,484.00p.

Miners were once again among top advancers as investors sought relative safety in gold assets. Randgold Resources PLC (LON:RRS) jumped 4.2% to 6,024p, and Fresnillo PLC (LON:FRES) gained 3% to 902.60p.

Around the UK market, ConvaTec Group PLC (LON:CTEC) shares tumbled 30% to 157.05p on the FTSE 250 mid-cap index after the medical products company issued a profit warning after disappointing revenue in the third quarter and said Chief Executive Paul Moraviec is resigning. 

READ: ConvaTec announces resignation of chief executive as it issues profit warning

9.15a Footsie lower in early action 

The FTSE 100 struggled early Monday, with cyclical stocks under pressure as investors looked for what’s next for the embattled Brexit process.

The FTSE 100 was down 4.75 points at 6,991.16, pushing the index further into correction territory as the index has lost more than 10% from its record close of 7,877.45 notched on May 22.

Attention is back on Brexit negotiations after hopes that a deal could be hammered out this week fizzled out. UK and EU officials are still stuck on key issues, including how to resolve the question of a hard border in Northern Ireland. UK Brexit Secretary Dominic Raab travelled to Brussels over the weekend to discuss Brexit terms with the EU’s lead negotiator, Michel Barnier.

"Any hopes that a draft Brexit deal might be reached at this week’s EU summit were dashed yesterday after Brexit Secretary Dominic Raab flew into and out of Brussels empty-handed on Sunday," said Michael Hewson, chief market analyst at CMC Markets.

"It would appear that for all of last week’s optimism that we might see a framework of a deal in the coming days, the weekend breakdown suggests that this week’s EU meeting is unlikely to make any further progress. For all the willingness to arrive at a deal the UK government’s problems would appear to be much closer to home, in the form of selling any sort of compromise on the future customs relationship as well as a solution to the Irish border domestically," he said. 

Sterling on Monday was buying around $1.3114, down from the $1.3200 handle seen Friday. 

Cyclical shares were among Monday's biggest decliners, with investors holding questions about the future of trading in goods between the UK and the EU. Last week, cyclicals were hurt in part after the International Monetary Fund cut its global growth outlook. Shares of Melrose Industries PLC (LON:MRO), the turnaround specialist that bought engineering group GKN this year, fell 2%, and equipment rental company Ashtead Group PLC (LON:AHT) fell 1.9%. Aerospace and defense contractor BAE Systems PLC (LON:BA) declined 1.8%.

In UK trade, Superdry PLC (LON:SDRY) shares sank 20% to 811p after the clothing retailer issued a profit warning as unusually hot weather reduced demand for colder-weather items such as jackets.

READ: Superdry warns hot weather, FX costs will hurt full-year results

On the upside, shares of Purplebricks Group PLC (LON:PURP) rose 3.2% to 225p after the online estate agent said it is entering the European market for the first time through a joint venture with Axel Springer that is buying a stake in German online estate agent, Homeday.

READ: Purplebricks enters German real estate market through €25.4mln joint venture

6.38am Quiet start expected 

London is set for a quiet start to the week as investors await the latest developments in the Brexit negotiations.

After sliding 11 points on Friday to close at 6,996, the FTSE 100 was expected to just about regain the 7,000 level at the outset. Attention is likely to be focused more on the foreign exchange markets this morning rather than equities, with sterling under pressure.

Friday saw US markets bounce back from what had been a tough week, with the Dow rising 287 to 25,400 and the S&P 500 soaring 39 to 2,767.

In Asian markets, approaching the close of business, Japan’s Nikkei 225 was 362 points in the hole at 22,333 while Hong Kong’s Hang Seng index was trading at 25,524, down 278 points.

“Asian markets traded lower overnight despite a rebound in global equities at the end of last week. Concerns over higher US borrowing costs were the catalyst for last week’s heavy sell-off; however, there were plenty of other risk factors which were also dampening sentiment. Those risk factors, including US- Sino trade tensions, Brexit, Italy’s Budget proposal and now increased political tensions between the US and Saudi Arabia, are set to keep pressure on risk appetite this week,” predicted Jasper Lawler, at LCG.

From a corporate news flow perspective, London is set for a quiet day with the best the corporate calendar compilers can come up with being the annual general meeting of Pires Investments, a real estate investment trust valued at less than £1mln.

On the economic front, US retail sales will provide a bit of interest this afternoon.

Significant announcements expected:

AGMs: Pires Investments PLC (LON:PIRI)

Economic data: US retail sales; Empire State manufacturing survey

Around the markets

  • Sterling: US$1.3113, down 0.29 cents
  • 10-year gilt: yielding 1.496%, down 4.36 basis points
  • Gold: US$1,226.30 an ounce, up US$4.30
  • Brent crude: US$81.42 a barrel, up 99 cents
  • Bitcoin: US$6,325.45, up US$75.88.

Proactive investors

The mining license in Botswana held by Cradle Arc PLC (LON:CRA) over 28.5 square kilometres of ground including the Thakadu open pit and Makala underground deposit has now been extended by the Ministry of Mineral Resources until 2020.

Hurricane Energy PLC’s (LON:HUR) Lancaster field development has seen another key milestone as the Aoka Mizu FPSO vessel has now departed Dubai, where it was upgraded in dry-dock. 

HemoGenyx Pharmaceuticals PLC’s (LON:HEMO) Immugenyx subsidiary is teaming up with US pharma giant Johnson & Johnson to find a new treatment for lupus. 

Corero Network Security PLC (LON:CNS) is to receive a US$2mln investment from US internet hardware giant US Juniper Networks

Oil and gas producer Columbus Energy Resources PLC (LON:CERP) intends to raise around £2.5mln by placing shares at 3.5p a pop. 

Galileo Resources PLC (LON:GLR) has completed a second phase of drilling at the Star Zinc project in Zambia. Preliminary results from four of the drill holes show intersections of high-grade mineralisation running at between 14% and 26% zinc, and over good widths. 

A growing adoption of its medical imaging technology helped IXICO PLC’s (LON:IXI) top-line surge last year. 

Kavango Resources PLC (LON:KAV) has completed the first phase of its airborne electromagnetic geophysical survey at the KSZ project in southwest Botswana. The survey has identified 26 conductive anomalies across 2,000 line kilometres in the Hukuntsi area of the KSZ project. 

Providence Resources PLC (LON:PVR) has had encouraging reports concerning frontier exploration licence (FEL) 6/14 situated some 260 kilometres off the south-west coast of Ireland. 

Lucyd, a portfolio company of investment company Tekcapital PLC (LON:TEK), has formed a reseller partnership with a Brazilian optical retailer and bagged its first order.

Ariana Resources PLC (LON:AAU) produced a record 7,588 ounces of gold in the third quarter of 2018, up significantly from the 7,171 ounces produced in the second quarter. 

Berkeley Energia Ltd (LON:BKY) chief executive Paul Atherley has told investors that the company remains “firmly committed” to developing its Spanish uranium mine, though, he said that continuing investment would depend upon the company receiving approvals to start construction. 

Echo Energy PLC (LON:ECHO) told investors that it has confirmed that its third Argentinian well will be suitable for mechanical stimulation, and, it will now move on to the next stage in operations. 

Active Energy Group PLC (LON:AEG) has inked a joint venture agreement with an American renewable energy group, with power plants in the states of North Carolina and Georgia. 

Block Energy PLC (LON:BLOCK) has kicked off a programme of well work-overs at the Norio oil field, in the Republic of Georgia, where it intends to scale up production rapidly before the end of this year. 

Premier African Mineral PLC (LON:PREM) has been notified that a decision over the ownership structure of the RHA tungsten mine in Zimbabwe will not come until the end of the month. 

Ulster-based gold explorer Galantas Gold Corporation PLC (LON:GAL CVE:GAL) has appointed corporate finance specialist Róisín Magee to its board. 

Bacanora Lithium PLC (LON:BCN) remains confident it will receive funding to build the Sonora mine in Mexico. 

Greatland Gold PLC (LON:GGP) has appointed former Rio Tinto (LON:RIO) copper mining executive Clive Latcham as a non-executive director with immediate effect.

Business headlines

The Times

Britain needs to start implementing plans for a no-deal Brexit within weeks, ministers have been told, as last-ditch talks in Brussels between Britain and the EU broke up.

The biggest housebuilders are facing renewed pressure to cap executive bonuses after Sir Vince Cable, the former business secretary, urged companies to stop counting Help to Buy homes when calculating the pay rewards of their bosses.

The company that owns Patisserie Valerie is considering taking legal action against its auditors Grant Thornton for their alleged failure to spot a £40 million black hole.

The Daily Telegraph

Saudi Arabia has threatened to use its economic might in retaliation against any US action following the disappearance of journalist Jamal Khashoggi.

Brian Bickell, chief executive of Carnaby Street owner Shaftesbury, has backed calls for higher taxes on online retailers.

The Treasury has asked high street banks to assess their exposure to at-risk sectors and companies if a “no-deal” Brexit leads to a cash crunch for UK plc.

The Guardian

Leading economic forecaster EY Item Club has warned that the British economy is heading for its worst year in almost a decade amid the growing risks from no-deal Brexit.

Daily Mail

Carmignac, a French asset manager, has become the first investor to disclose a short position in Aston Martin, just a week after the sports car maker's IPO.

Digital music giant Spotify has been booking three-quarters of its revenue to an entity in Sweden, allowing it to pay just £891,425 a year in UK tax.


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