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FTSE 100 closes in red as Wall Street shares lag; Brexit exhaustion

The UK blue-chip benchmark finished down over 27 points at 7,026, while the FTSE 250 closed down over 52 points at 18,961.
london
“The risk of wandering into a ‘no deal’ scenario is still on the rise," says IG analyst
  • FTSE 100 closes lower

  • US stocks trading lower  

  • No sign of major Brexit progress  

FTSE 100 closed in the red Thursday as Wall Street shares suffered another sell-off and as markets tire of all the Brexit wranglings.

The UK blue-chip benchmark finished down over 27 points at 7,026, while the FTSE 250 closed down over 52 points at 18,961.

"Despite a stronger start the FTSE soon followed its global peers into the red, dragged lower by renewed selling on Wall Street," said Fiona Cincotta, analyst at City Index.

She added that the pound wasn’t offering much support to blue-chips as it "as good as ignored the weaker than forecast retail sales figures".

"After a mixed batch of data this week and clarity over Brexit still a long way off, the pound is looking tired rather than resilient," she concluded.

Sterling is down 0.35% against the US dollar at the time of writing.

Top riser on Footsie was publisher Pearson plc (LON:PSON), which added 3.78% to 867p, while on the losing front, CRH plc (LON:CRH), the building materials group, was down 4.10% at 2,222p.

3.55p Footsie poised for daily loss 

London-listed blue-chips slipped in late afternoon trade Thursday while US stocks fell, as Brexit- and Fed-related worries hurt risk appetite.

The FTSE 100 slipped 4 points to 7,050, but pared a bigger decline. US stocks dropped as well, but the Dow Jones Industrial Average’s fall of 44 points followed a triple-digit slump as trading started. The Nasdaq fell 49 points and the S&P 500 gave up 8 points.

Equities appeared unsettled by indications from the Federal Reserve’s September meeting minutes that policy makers are still looking to push up interest rates.

Trading in London was winding down with no sign that UK and EU officials made significant progress in reaching final terms of Brexit deal as they met in Brussels.

“Markets appear to be viewing the Brexit negotiations with the same exhaustion as everyone else, as both sides play for time,” said Chris Beauchamp, chief market analyst at IG.

“The risk of wandering into a ‘no deal’ scenario is still on the rise, with each missed deadline adding to the impression that neither side really knows what they want,” he said.

3pm Blue-chips remain lower 

UK blue chips stocks stepped lower in mid-afternoon trading Thursday as a prominent business group urged the UK government soon find common ground in Brexit talks with the European Union.

The FTSE 100 down 15 points to 7,038. 

Shares on Wall Street also struggled as trading got underway in New York, with the Dow Jones Industrial Average dropping 128 points. The Nasdaq gave up 42 points and the S&P 500 moved down 14 points, with Apple Inc. shares (NASDAQ:AAPL) in the red.

UK stocks drifted lower as the session progressed, for a time holding to gains even after UK retail sales fell by 0.8% in September, more than anticipated.

As UK and EU officials talked in Brussels about Brexit, the Confederation of British Industry urged them to quickly forge a deal.

"The risk of no deal is already biting hard. With each week that passes, firms are accelerating their contingency planning, diverting investment and costing jobs. And many firms, especially smaller businesses, simply have no time to prepare,” said Carolyn Fairbairn, CBI’s director-general, in a statement.

"Business' patience was already threadbare and is nearing an end,” she said, and “the need for compromise on both sides to agree the Withdrawal Agreement and secure the transition period is long overdue." 

The CBI represents 190,000 businesses across the UK.

Among individual shares, ITV plc (LON:ITV)  fell 1.6% to 155.00p, with UBS saying its quarterly tracker indicates audience trends have continued to weaken.  ITV’s trading update is due November 7.

READ: ITV set to disappoint as post-World Cup viewing figures tail off

Unilever plc (LON:ULVR) fell 0.9% to 3,989p. The Share Centre said investors are watching for the possibility of a management shakeup at the consumer-products company.

READ: Unilever boardroom shakeup expected after U-turn on HQ relocation

1.10pm Footsie turns red 

The FTSE 100 turned lower early Thursday afternoon, with focus on the deadlocked Brexit talks, while US stock futures indicated a decline for Wall Street when trading opens.

The FTSE 100 fell 12 points to 7,042, relinquishing an intraday rise of 24 points.

The index wilted as US stock futures suggested Wall Street will extend losses logged Wednesday. Futures for the Dow Jones Industrial Average were off 61 points, Nasdaq futures sagged 28 points and S&P 500 futures fell 8 points.

From the Brexit front, UK Prime Minister Theresa May was facing pressure from some of her Conservative Party members because she was considering a possible extension of the UK’s transition period out of the European Union by a few months. The current exit target is December 2020.

 

An extension agreement could break an impasse in the Brexit talks as it could assure the bloc that there’s no need to create a customs border down the Irish Sea. 

The mid-cap FTSE 250 index was up 15 points at 19,028.86.

On the FTSE 250, Domino’s Pizza Group PLC (LON:DOM) shares surged 8.9% to 284.10p, with the pizza delivery chain reporting a near-6% rise in sales over summer despite the hot weather.

Elsewhere in the market, UK Oil & Gas PLC (LON:UKOG) popped up 5.3% to 2.00p as the AIM-listed O&G explorer officially declared the Horse Hill Portland oil field “commercially viable”.

READ: UK Oil & Gas declares Horse Hill’s Portland reservoir “commercially viable”

11.05am Some hopeful signs for retail sector 

While there was disappointment in monthly UK retail sales, there are signs of strength for the sector, some analysts said Thursday.

A pullback in food sales led to a larger-than-expected 0.8% decline in retail sales volume month-on-month, the Office for National Statistics said. A “lack of special factors” after the heatwave in August and July and World Cup play in the summer also clipped September sales, said Howard Archer, chief economic advisor to the EY ITEM Club.

But he noted that retail sales volumes grew at a “very decent” 1.2% rate quarter-on-quarter in the third quarter.

“This fuels belief that consumer spending made an appreciable contribution as GDP growth likely improved to at least 0.6% quarter-on-quarter in the third quarter,” he said.

Year-on-year, retail sales “were still up a healthy-looking 3.0%,” said Archer.

Given the current uncertainty around Brexit negotiations, British consumers may be unlikely to ramp up spending even as data released this week showed wage growth climbed 3.1%, outstripping headline inflation of 2.4%, said Emma-Lou Montgomery, associate director for personal investing at Fidelity International.

“It is important, however, not to lose sight of the longer-term potential for the UK retail sector, and indeed other sectors,” said Montgomery. “Just like wage growth; the dawn for the retail sector may be around the corner as companies begin to innovate for new ways to attract consumers.”

READ: Department stores aren't dead: Why Mike Ashley can turn House of Fraser around

Shares of supermarket chains on the FTSE 100 were up, with Tesco PLC (LON:TSCO) higher by 0.6% at 210.00p. J Sainsbury PLC (LON:SBRY) edged up 0.1% to 300.20p, and WM Morrison Supermarkets PLC (LON: MRW) climbed 1.7% to 249.50.

The FTSE 100 was up 13 points at 7,067 in late morning trading. 

9.50am UK retail sales miss  

A decline in food purchases drove a larger-than-expected decline in UK retail sales in September, data released Thursday showed.

Retail sales declined 0.8% on a month-over-month basis, according to the Office for National Statistics, with a “large” 1.5% fall in food stores.

That step-down in food shopping was the largest since October 2015, the agency said. Analysts had widely expected a retail-sales decline of 0.4% month-over-month.

Retail sales rose 3.0% when compared with September 2017, marking growth across all sectors except department stores. The print fell short of expectations of 3.6% increase year-over-year.

But sterling started to creep higher ahead of the data, and recently traded at US$1.3107.

The FTSE 100 was up 15 points at 7,069, continuing to rise from the open. 

8.50am Early modest gains

The FTSE 100 index pushed higher in early trading on Thursday, benefitting from a weaker pound as the dollar jumped after hawkish minutes from the last Federal Reserve policy meeting,

Around 8.45am, the UK blue chip index was 10 points higher at 7,064, having closed 4.80 points lower on Wednesday after a late retreat in tandem with a sell-off on Wall Street.

US stocks were weaker after minutes from the September 25-26 Fed meeting showed all policymakers backed raising rates last month and also generally agreed that borrowing costs would increase further.

Neil Wilson, chief market analyst at Markets.com commented: “Minutes from the FOMC’s last meeting showed the Fed is set on more hikes and will not be dissuaded either by fears of a recession or sniping from Donald Trump.”

“Moreover,” he added, ”members even pointed at the Fed going even further and pushing rates into restrictive territory.”

Wilson continued: “This will not please Donald Trump and may produce more noise in the markets, however it is worth stressing that these minutes and everything else we know about the Fed and its chairman is that the central bank will do what it sees fit. The chances are that growth running +3% will start to ease back to 2-3% and that will make the Fed ease off the tightening pedal in due course anyway.”

On currency markets, sterling was lower against both the dollar and the euro, awaiting the latest UK retail sales numbers, as well as the Brexit talks.

Among equities, two FTSE 250-listed firms rose after well-received trading updates, with Domino’s Pizza Group PLC (LON:DOM) adding 5.2% at 274.3p and transport group National Express PLC (LON:NEX) up 2.4% at 405.60p.

But blue-chip consumer goods giant Unilever PLC (LON:ULVR) saw its third-quarter update slightly disappoint, with its shares losing 1.6% at 3,959.50p.

Proactive news headlines:

Wishbone Gold PLC (LON:WSBN) has raised £550,000 through a placing to pay off its equity stand-by facility with financier D-Beta. The agreement was set up in August 2017 and ending the arrangement will see Wishbone pay about £120,000 owed and a final settlement payment of £274,000.

ReNeuron Group PLC (LON:RENE) believes its CTX stem cell line could be used in the fight against cancer.

SDX Energy Inc (LON:SDX, CVE:SDX) has revealed it is out of the running for Egyptian assets being sold by BP. The AIM-quoted company, in a stock market statement, told investors that discussions with BP have been terminated by mutual agreement. No reasons were disclosed for the breakdown in negotiations.

Mosman Oil And Gas Limited (LON:MSMN) updated investors on its operations at the Stanley project, meanwhile, Texas operations have been impacted by significant rainfall.

George Frangeskides, Alba Minerals Resources PLC’s (LON:ALBA) executive chairman, is looking forward to the rapid progression of the Horse Hill oil field into the development phase, and, sUBSequently into production. Alba owns an 11.765% beneficial interest in the Horse Hill project, via a shareholding in the HHDL vehicle.

Live Company Group PLC’s (LON:LVCG) latest acquisition, Bright Bricks, is to take its life-size LEGO animals on a tour of zoos in Europe and the USA later this month.

Shanta Gold Limited (LON:SHG) produced 19,723 ounces of gold in the third quarter at its New Luika mine in South-Western Tanzania, which was a bit less than expected.

Base Resources Limited (LON:BSE, ASX:BSE) said mined ore tonnes increased by 35% in the third quarter.

Highlands Natural Resources PLC (LON:HNR) told investors that it has filed applications with the Colorado Oil and Gas Conservation Commission (COGCC) for a larger scale development plan for the West Denver shale oil and gas project.

Collagen Solutions PLC (LON:COS), the developer and manufacturer of biomaterials and regenerative medicines for the enhancement and extension of human life, has announced that its chief executive, Jamal Rushdy, will be presenting at Biotech and Money's Inv€$tival Showcase which is being held at the Hilton Waldorf, London, on Tuesday 13 November 2018.

S&U PLC (LON:SUS), the specialist motor finance and bridging lender, today hosted a site visit for investors and analysts at the offices of Advantage, its motor finance business based in Grimsby. The firm said no new material information will be disclosed and a copy of the presentation will be available for download on the S&U website www.suplc.co.uk

Primary Health Properties PLC (LON:PHP), one of the UK's leading investors in modern primary healthcare facilities, today hosted a capital markets visit for analysts to a selection of its assets in the city and surrounding towns of Dublin, Republic of Ireland.

United Oil & Gas PLC (LON:UOG), the oil and gas exploration and development company, has announced that it will be presenting at the Oil Capital Conference on 24 October 2018 at 10:00am., to be held at The Brewery, 52 Chiswell Street, London, EC1Y 4SD.

The Marketing Group PLC has announced the appointment of Sean Gogarty as a non-executive director of the company with immediate effect. The group said Gogarty has spent the majority of his working life developing brands and running branded businesses.

6.45am: Gains predicted

The FTSE 100 index is seen edging higher in early trading on Thursday, steadying after Wednesday’s late retreat although both US and Asian markets were weak overnight and the dollar jumped to a one-week high after hawkish minutes from the last Federal Reserve policy meeting.

Spread betting firm IG expects the bluechip index to open around 4 points higher at 7,058, having closed 4.80 points lower on Wednesday.

Overnight on Wall Street, the Dow Jones Industrials Average closed almost 92 points lower at 25,706, albeit off bigger early falls. The minutes from the September 25-26 Fed meeting showed all policymakers backed raising rates last month and also generally agreed that borrowing costs would increase further.

The falls continued in Asian markets, although Japan’s Nikkei 225 index was fairly flat with exporters benefitting from a weaker yen as the dollar rose after the Fed minutes indicated further US interest rate rises.

Elsewhere on currency markets, the pound remained lower against both the dollar and the euro, extending falls made following weaker than expected September UK inflation data on Wednesday, with the focus today on the latest UK retail sales numbers as well as the ongoing Brexit talks situation.

Growth acceleration from Unilever

On the corporate front, third-quarter trading news from a somewhat chastened Unilever PLC (LON:ULVR) will be the main focus on Thursday, with the Anglo-Dutch consumer products giant having recently aborted plans to abandon its dual-listing structure after shareholder pressure.

In the first half of 2018, the FTSE 100-listed firm reported underlying sales growth of 2.5% from the year before.

UBS is predicting a “notable acceleration” to 5.0% for the third quarter, of which 2.3 percentage points it predicts will be from increased volumes and the rest will be accounted for by price increases.

All eyes on Rentokil’s pest control business

Fellow blue chip component Rentokil Initial PLC (LON:RTO) has been pivoting towards its pest control business of late, snapping up 20 companies in the first half and recently buying Mitie Group PLC’s (LON:MTO) pest control arm for £40mln.

Given the increased focus on this part of the business, investors will want chief executive Andy Ransom to be pleased with its performance again, as he was at the half-way point.

Recent trading is likely to have been boosted by these acquisitions, despite severe weather conditions disrupting some of its operations.

Domino’s Pizza investors hope for better news

Away from the top flight, investors in the UK branch of pizza chain Domino’s Pizza Group PLC (LON:DOM) will be hoping for a more upbeat outlook when the firm releases a third-quarter trading update.

The group reported lower than expected sales for the second quarter in its half-year results in August, while also citing an “uncertain” trading environment going forward as consumer incomes continue to be squeezed while inflation piled pressure on the sector.

Despite the gloomier outlook, Domino’s chief executive David Wild said at the time that the group expected underlying pre-tax profits for the full year to be “in line with current market expectations” of between £95.9mln-£101.4mln.

Significant events expected on Thursday October 18:

Trading updates: Unilever PLC (LON:UVLR), Rentokil Initial PLC (LON:RTO), Domino’s Pizza PLC (LON:DOM), International Personal Finance PLC (LON:IPF), Renishaw PLC (LON:RSW), RWS Holdings PLC (LON:RWS)

Finals: Applied Graphene Materials PLC (LON:AGM), Tristel PLC (LON:TSTL)

Ex-dividends: To take 1.6 points off FTSE 100 index - BAE Systems PLC (LON:BA.), Smiths Group PLC (LON:SMIN)

Economic data: UK retail sales; US weekly jobless; Philly Fed business outlook survey

Around the markets:

  • Sterling: US$1.3087, down 0.2%
  • Gold: US$1,223.70, an ounce, unchanged
  • Brent crude: US$80.04 a barrel, down 0.01%

City Headlines:

  • Rupert Murdoch’s six children would be direct beneficiaries of a family trust valued at US$12bn after the break-up of his media empire and the sale of his entertainment businesses to Walt Disney – Financial Times
  • Uber considers spinning off self-driving car unit – Financial Times
  • Historic toy store Hamleys has ousted its finance director Alex Jablonowski after swinging to a loss last year – Daily Mail
  • In response to the threat of a new digital sales tax, ASOS boss has said that the government should focus on fixing business rates and corporation tax – The Guardian
  • Shares in leading international private hospital group Mediclinic hit new lows after it warned that its first-half results were likely to fall short of expectations and cut its full-year outlook – The Times
  • Client assets under management at Rathbone Brothers have risen to just over £47bn after the acquisition of Speirs & Jeffrey. – The Times
  • Scisys, a UK software business that provides space communication services and the BBC’s newscasting systems, is moving its headquarters to Dublin to avoid the “potential adverse consequences” of Brexit – The Times
  • US footwear and apparel company Nine West Holdings Inc filed an amended Chapter 11 bankruptcy plan that will reduce its pre-bankruptcy debt obligations by more than US$1bn - Reuters
  • Siemens’ hopes of winning a big contract to supply power to Iraq have been dashed after Donald Trump’s administration intervened on behalf of US rival General Electric – Financial Times
  • Robert Tchenguiz has been asked by a judge to apologise to Grant Thornton for bringing a multimillion-pound claim against the professional services group and to pay £9mln legal fees – The Times
  • The Commodity Futures Trading Commission has threatened to stop European banks from using US futures markets if the EU refuses to water down post-Brexit plans to oversee clearing houses – Financial Times

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