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FTSE 100 closes ahead as US earnings season gets off to strong start

Last updated: 17:45 19 Oct 2018 BST, First published: 06:55 19 Oct 2018 BST

wall street
  • FTSE 100 closes nearly 23 points up

  • Pendragon shares punished, Unilever shares gain 

  • US earnings season starts strongly 

  • US stocks rebound from yesterday's slump

 

FTSE 100 closed in positive territory, as Wall Street got off to a positive start, though geopolitical tensions still abound.

The UK blue-chip index closed up almost 23 points at 7,049 - up around 0.77% on the week as a whole.

Conversely, FTSE 250 shed around 165 points to close at 18,795.

Fiona Cincotta, analyst at City Index, summed it up thus:  "The FTSE lacked direction across the morning session but as Wall Street opened higher, rebounding after Thursday’s selloff, the FTSE followed suit."

She noted that big US names like Proctor & Gamble Co (NYSE:PG), PayPal (NASDAQ:PYPL) and Schlumberger Ltd (NYSE:SLB) posted better than expected earnings, which had soothed and lifted the market after a volatile week of trading.

"There is no denying that US earning season is off to a strong start. With over 15% of S&P firm having reported an impressive 83% have surprised to the upside according to FactSet," she said.

"Whilst the markets were expecting a solid earning season even before it started, the concerns surrounding forward guidance so far haven’t materialised."

 

3.45pm: Italy PM says no need to change budget 

Italian Prime Minister Giuseppe Conte has said he sees no need to change his government’s 2019 budget despite concerns about the country’s debt.

European Commission has warned Italy over its borrowing costs, which have hit four-and-a-half year highs.

Speaking after an EU summit, Conte told reporters that he would tell the Commission that its concerns were overdone. “The budget? There is no reason to change it”.

Berenberg said Italy’s new government is putting the country “firmly on the wrong track again”.

“Reversals of labour market and pension reforms coupled with unfunded spending increases are turning the once remote tail risk of an Italian debt crisis into an accident waiting to happen. Unless the government changes tack, the key question is not if but when disaster may strike,” the economist said.

However, Berenberg still believes a full-blown debt crisis is not imminent. Instead, it sees Italy managing to "muddle through" for the next few years.

Berenberg said while "reckless policies" in Rome could potentially plunge Italy into a deep crisis with significant financial and economic spillover to its neighbours, it is unlikely to spark a new “euro crisis”.

3.20pm: Persimmon boss walks out on BBC interview

Persimmon boss Jeff Fairburn has walked off half way through an interview with the BBC after being questioned about his £75mln bonus.

The £75mln bonus was reduced from £100mln after the company received widespread criticism from investors, politicians, charities and corporate governance experts. But the revised amount is still believed to be the largest by a London-listed firm.

Fairburn has previously said he would give a "substantial proportion" of the payout to charity.

Asked by the BBC if he had any regrets about last year's payout, Fairburn said: "I'd rather not talk about that".

Some Twitter users didn't understand what his problem with the question was: 

2.30pm: US stocks open in positive territory

US stocks have opened higher, rebounding from yesterday's sell-off.

The Dow Jones Industrial Average rose 135 points to 25,522, the S&P 500 added 15 points to 2,784 and the Nasdaq increased 65 points to 7,550. 

Wall Street recovered as Chinese stocks regained ground after a slump yesterday as authorities tried to soothe worries about the trade dispute between the US and China. 

1.30pm: Twitter reacts to Clegg joining Facebook

Twitter users have been reacting to the surprising news that former deputy prime minister Nick Clegg is joining Facebook as head of the social media company’s global affairs and communications team.

Clegg will move to Silicon Valley in January after months of discussions with Facebook founder and chief executive Mark Zuckerberg, according to the Financial Times.

Zuckerberg had apparently told Clegg that he would have a leading role in shaping the company.

Here's what a few Twitter users had to say about it:

 

 

 

 

1.00pm: US stocks set for higher open 

US stocks look set to rebound from yesterday’s sell-off with futures pointing to a higher open.

Dow Jones Industrial Average futures rose by 110 points to 25,490, S&P 500 futures increased 11 points to 2,783 and Nasdaq futures grew 48 points to 7,186.

On Thursday stocks were in the red amid concerns about rising interest rates and a slowdown in the global economy.

With little on the calendar for US economic data apart from existing home sales, the focus is on corporate earnings. Shares in Procter & Gamble and Honeywell International Inc (NYSE:HON) rose in pre-market trading after both posting better-than-expected earnings.

12.30pm: UK Budget predictions

The Share Centre has outlined what it expects to be included in the UK Budget, which will be released on October 29.

Richard Stone, chief executive of The Share Centre, said he sees the government will announce measures to improve financial education to ensure the public understands basis concepts such as interest rates, budgeting and the importance to savings and investments.

“This could take the form of promoting a Financial Awareness GCSE, using the maturing Child Trust Funds (impacting over 6 million young adults in the years ahead) to incentivise improved learning of financial skills and encouraging the next generation of teachers to take on financial education incorporating it in many different areas of the curriculum,” he said.

He also expects the government to say it is looking at ways to increase public participation in capital markets. This could include the implementation of a working party to investigate the issue of public participation and individual ownership and the setting up of an action plan to reinvigorate the capital markets, Stone said.

The government may also announce measures to encourage savings and investments by extending the limit on the Lifetime ISA and affirming a stable tax regime for ISAs and Pensions.

Stone added that the Chancellor would deliver his Budget “against a backdrop of generally positive economic news, albeit tempered by continuing uncertainty surrounding the outcome of the Brexit negotiations”. “Philip Hammond will undoubtedly be hoping those discussions reach some resolution before the budget,” he said.

11.50am: Government borrowing in September falls to lowest level since 2007

UK government borrowing fell in September to the lowest level since 2007, in good news for Chancellor Philip Hammond ahead of the unveiling of the country's budget later this month.

Borrowing declined to £4.1bn from £4.9bn a year earlier, compared to expectations of £4.5bn, the Office for National Statistics revealed. 

In the year to date, borrowing is 35% lower at £19.9bn.

EY Item club said: "Helpful news for the Chancellor as he prepares for his 29th October Budget as the public finances saw a lower year-on-year shortfall in September, thereby completing a markedly improved performance over the first half of fiscal year 2018/19."

10.50am: Blue-chips seesaw

UK blue-chips were wavering in midmorning trade Friday, searching for firm direction as the broader European stock market fell. 

The FTSE 100 was up 4 points at 7,030, but it’s been darting in and out of positive territory. The index had been up by as much as 28 points.

The FTSE 100 had opened higher following news that Chinese officials pledged to ramp up efforts to support the world's second-largest economy after growth slowed in the third quarter.

But the UK benchmark later dipped, joining other European indexes into the red. Germany’s DAX 30 fell 0.4%, while Italy’s FTSE MIB dropped 1.5%. Italy’s coalition government is expected by Monday to respond to the European Union's warning that its draft budget featuring beefed-up spending is breaking the bloc’s fiscal rules.

“The problem is that there seems to be no impending resolution between the two sides, with the coalition feeling that they only answer to the electorate, while the EU is unwilling to budge at the risk of setting a bad precedent for the other nations,” said Joshua Mahony, market analyst at IG.

While the EU tries to hold Italy in line, the bloc’s officials are still working to reach a Brexit deal with the UK.

Looking at individual stocks around the UK market, Pendragon PLC slid 9.9% to 23.75p after the motor dealer issued a profit warning, citing new EU emission tests and accelerated investment in its used-cars business as reasons for its outlook.

Shares in Unilever gained 3.6% to 4,130p after Bryan Garnier upgraded the stock to a 'buy' rating. 

London Stock Exchange PLC (LON:LSE) rose 0.8% to 4,319p, with the exchange operator logging a 5% rise in revenue for the third quarter, driven by strong performances in the LCH and FTSE Russell businesses.  

9.10am: Footsie steps up 

The FTSE 100 advanced in early morning trade Friday as global markets found some relief from efforts by China to cushion its financial markets, with Intu Properties PLC (LON:INTU) surging on the second line on bid moves.

After over an hour of trading, the UK blue chip index was up 23 points to 7,050, on course for a weekly rise of 0.8% after ending last Friday below the 7,000 mark.

The benchmark was aided by gains for some miners despite data showing that China’s economy expanded by a slower-than-expected 6.5% in the third quarter. China is a major buyer of industrial and precious metals.

“Despite this, the Chinese market rallied as the regulator stepped in with fresh measures to support liquidity and investment. Growth of 6.5% rather than 6.6% is a pretty nice problem to have but the trade war with the US, higher debt levels and a depreciating currency remain a concern,” said Neil Wilson, chief market analyst at Markets.com.

He added: “Any bounce in Chinese stocks needs to be seen in the context of the three-year collapse in equities.”

Among the blue chip miners, shares of BHP Billiton PLC (LON:BHP) rose 0.5% to 1,557p and Glencore PLC (LON:GLEN) gained 0.9% to 312.74p, but Rio Tinto PLC (LON:RIO) shed 0.1% at 3,730.50p.

With other UK movers, shares of Intu Properties PLC (LON:INTU) soared 13% to 200.30p, as a consortium led by British billionaire John Whittaker raised its bid to buy the shopping centre group, to 215p per share from 205p per share.

But Intercontinental Hotels Group PLC (LON:IHG) shares dropped 5% to 4,005p after the company said global comparable revenue per available room rose 1% during the third quarter, and that it plans to return US$500mln to shareholders in a special dividend.

Proactive news headlines:

Junior biopharma HemoGenyx Pharmaceuticals PLC (LON:HEMO) will receive an investment of at least US$1mln as part of a new collaboration deal with Nasdaq-listed cell therapy specialist Orgenesis Inc. (NASDAQ:ORGS)

Lighting group PhotonStar LED has signed a partnership with a major housing association in the south of England to trial its Halcyon range of  smart heating and lighting appliances. Over 80,000 homes are managed by the association and the trial is part of a ‘smart estates’ programme to remotely monitor heating, light and temperature.

Futura Medical PLC (LON:FUM), the pharmaceutical company focused on sexual health, has conditionally raised £5.6mln through a share issue.

Life sciences investor Arix Bioscience PLC (LON:ARIX) has poured another £5.4mln into LogicBio Therapeutics as part of the gene editing specialist’s IPO in New York today (Friday).

Molendotech, a company backed by Frontier IP Group PLC (LON:FIPP), has entered into a collaboration agreement to develop water tests for G's Group.

Rockfire Resources PLC (LON:ROCK) updated investors on its inaugural reverse circulation drilling programme at the Marengo project, Queensland. Highlight results from shallow holes included gold grades up to 7.8 grams per tonne in one section.

Kibo Energy PLC (LON:KIBO) told investors that is has now submitted documentation, a formal tender qualification document, to TANESCO (Tanzania Electricity Supply Company) for the Mbeya coal to power project (MCPP).

Regency Mines PLC (LON:RGM) updated investors on September production numbers for the AIM-quoted firm’s 47% owned Mining Equity Trust. MET sold 44,020 tons of coal for the month, achieving US$1.95mln of total revenues.

APQ Global Limited (LON:APQ), the emerging markets growth company announced that as at the close of business on 30 September 2018, its unaudited book value per ordinary share was 105.96 US cents, equivalent to 81.26p. The firm said it has also published its quarterly update to the end of September 2018 which is available on the company’s website.

6.55am: FTSE 100 eyes higher open 

The FTSE 100 is expected to start Friday slightly higher, despite another wave of selling on Wall Street and apparent concerns over the direction of American monetary policy.

Brexit talks also remain a lingering worry, as the Irish border issue continues to be a sticking point.

CFD and spread betting firm CMC Markets sees the FTSE 100 up 17 points, calling the London index at 7,053 to 7,057 with just over an hour to go until the open.

Overnight on Wall Street, the Dow Jones ended Thursday down 327 points or 1.27% at 25,379 while the S&P 500 lost 1.44% to 2,768 and the Nasdaq gave up 2.06% to 7,485.

“There appears to be a rising concern that the Federal Reserve may well be on the verge of making a serious policy error, in terms of its keenness to normalise monetary policy in order to be better prepared for the next crisis, when it comes,” said Michael Hewson, analyst at CMC Markets.

“The only problem with this is that their eagerness to do this is causing problems in other parts of the global economy, and in so doing is starting to cause a chain reaction, which looks set to rebound back at them.”

The analyst added: “The economic outlook in China is also causing concern, amidst a deteriorating relationship with the US over trade, the latest economic data out of the Middle Kingdom showed that the economy slowed more than expected in Q3, with annualised GDP coming in at 6.5%, its weakest quarter since 2009, and below expectations of 6.6%.”

In Asia, Japan’s Nikkei was down 159 points or 0.7% at 22,499, meanwhile, Hong Kong’s Hang Seng got a boost and was up 173 points of 0.7% and the Shanghai Composite rose 1.36% to 2,520.

Significant events expected on Friday October 19:

Trading updates: Intercontinental Hotels Group PLC (Q3) (LON:IHG), London Stock Exchange Group PLC (Q3) (LON:LSE), Provident Financial Group PLC (Q3) (LON:PFG), Dechra Pharmaceuticals (LON:DPH), Essentra (LON:ESNT), Record PLC (LON:REC)

Economic data: UK public sector finances; US existing home sales

Around the markets:

  • Sterling: US$1.3026, up 0.06%
  • Gold: US$1,228, an ounce, up 0.13%
  • Brent crude: US$79.59 a barrel, down 0.57%
  • Bitcoin: US$6,440, down 0.15%

City Headlines:

  • HSBC is poised to become the first overseas firm to list in China under plans to link the London and Shanghai stock exchanges – Daily Telegraph
  • Sky has warned broadcasters including Disney and Discovery to sort out their post-Brexit licensing plans by the end of 2018 or face being taken off its pay-TV service – The Guardian
  • Invesco has agreed to buy rival asset manager OppenheimerFunds from MassMutual for roughly $5.7bn, making the group one of the very largest money managers – Financial Times
  • Tesla has paid US$140mln to lease an 860,000 square metre plot of land near Shanghai’s port for its first major vehicle factory outside the US – Financial Times.
  • Amazon is investing in three regional hubs across the UK, creating more than 1,000 research roles as tech giants hone in on British talent – Daily Telegraph
  • Shares in PayPal rose 2% after reporting revenue growth of 14% to US$3.68bn, surpassing its own forecast of US$3.63bn and market analysts' US$3.66bn forecasts – Daily Telegraph
  • Uber is planning to launch a division that would enlist out temporary workers such as waiters and security guards for corporate functions and parties – The Times
  • BNP Paribas has become France’s first lender to cut jobs at its investment banking business as a result of the market turmoil – The Times
  • Nestlé has announced the departure of its head of Asia, Wan Ling Martello, who was credited with reviving Nestlé’s flagging Asian businesses. – Financial Times
  • Several of the world’s largest banks plan to join hands to create a digital platform that aims to capture an unaddressed US$1.5trillion gap in the coverage of global trade finance. – Financial Times
  • The Competition and Markets Authority has asked Britain’s largest companies and all its audit firms to hand thousands of internal documents within 14 days – The Times
  • The number of private equity deals that deliver more than three times the original investment has seen a sharp decline in the years since the financial crisis – Financial Times

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