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FTSE 100 closes higher as markets are relieved after US midterm election

The UK's premier benchmark index finished over 76 points higher, or 1.09%, at 7,117
Apple
London stocks closed higher on Wednesday
  • FTSE 100 index closes higher

  • Mining shares gain on weaker dollar after US midterm elections 

  • M&S and ITV shares lower after updates 

FTSE 100 closed  firmly higher as markets were positive after the US midterm election results.

The UK's premier benchmark index finished over 76 points higher, or 1.09%,  at 7,117, while FTSE 250  added nearly 104 points at 19,147.

In the US, the Dow Jones Industrial Average is up around 347 points while the broader S&P 500 is up nearly 50 points and the Nasdaq is 147 ahead.

"Midterm elections and the change in the USA’s political landscape hogged the limelight today but concerns that the stock market would fall out of bed if President Trump lost the support of both US legislative Houses proved unfounded," said Fiona Cincotta, at City Index.

"The new political landscape will herald some changes like a possible bout of investigations into President Trump including scrutiny of his tax bills and the ongoing suspicion of collusion with Russia during the last presidential election.

"But with a number of financial policies the two parties are actually not that far apart and bills boosting investment in infrastructure are set to keep stock markets happy."

3.55pm: Apple and Qualcomm 'gearing up for trial'

Apple Inc (NASDAQ:AAPL) and mobile chip maker Qualcomm Inc are preparing to take their long-running legal dispute to trial, a source has told Reuters.

Apple, which used Qualcomm’s modem chips in its iPhones, last year sued Qualcomm on claims its practice of taking a cut of the selling price of handsets as a patent license fee was illegal.

Qualcomm has denied the allegations and claims Apple owes it US$7bn in unpaid royalties.

The source said the two are not in settlement talks and are set to go to trial. 

"There is absolutely no meaningful discussion taking place between us and Qualcomm, and there is no settlement in sight,” the person said. “We are gearing up for trial.”

3.30pm: 'Impossible to say when Brexit deal' will be reached, says Barnier

The European Union’s Brexit negotiator Michel Barnier has said it was impossible to say when a deal with the UK would be finalised.

Speaking to reporters after a meeting with Finnish Prime Minister Juha Sipila, he added that there would be no Brexit deal agreed without a solid fix for the Irish border.

“To be frank, we are not there yet. The clock is ticking. The choices need to be made now on the UK side,” he said, according to Reuters. 

“The clock is ticking. I will not give you a date. I cannot give you a date. There are still important issues outstanding... so we have more work to do.”

3.00pm: Positive start to Wall Street trading after midterms

US stocks have opened higher after investors showed relief over the midterm elections.

The Dow Jones Industrial Average added 230 points to 25,863, the S&P 500 increased 28 points to 2,783 and the Nasdaq gained 85 points to 7,463.

The midterm elections showed no major surprises with the Democrats set to take control of the House of Representatives and Republicans on track to strengthen their grip on the Senate.

“Despite a whole lot of uncertainty in terms of what a split Congress actually means for the next 2 years of Trump rule, the markets continued to celebrate a broadly unsurprising set of results on Wednesday,” said Connor Campbell, financial analyst at Spreadex.

“Perhaps investors are just happy at the thought of a political deadlock in Washington, the kind which will prevent any Apple-cart upsetting legislation getting passed (though there is the worry that a domestically frustrated Trump could now chase a US-China trade war even harder).”

Meanwhile, Donald Trump has threatened to investigate the Democrats for leaking classified information. His warning comes as the new Democratic majority is expected to restart the congressional investigation into potential collusion between Trump's team and Russia.

In company news, Michael Kors Holdings Ltd (NYSE:KORS) shares plunged after the luxury fashion retailer reported a decline in second quarter sales that missed expectations.

Coty Inc. (NYSE:COTY) is also on the back foot after the New York beauty products firm posteda first quarter loss due to supply disruptions.
Office Depot Inc (NASDAQ:ODP) shares jumped after reporting better-than-expected third quarter revenue.

2.10pm: Persimmson boss said no to pay cut, says shareholder

Persimmon chief executive Jeff Fairburn turned down the company’s request to lower his share-based £75mln bonus before being asked to leave, according to Mike Fox of Royal London Asset Management (RLAM).

Fairburn agreed in February to cut his £100mln bonus to £75mln after a public backlash but shareholders still believed the sum was excessive. He also received criticism from charities, politicians and corporate governance experts.  

Persimmon said it had asked Fairburn to step down as it believed the “distraction” around his pay continues to have a “negative impact on the reputation of the business” and on his ability to continue in his role.

Fox – head of sustainable investments and fund manger at RLAM,  a shareholder of Persimmon – told the BBC’s World at One: "I think he was asked if he was prepared to reduce, again, the amount … even though he’s legally entitled to this amount he can say of his own choice that he will accept a lower amount, and I think the answer was no.

"He could have reduced it again ... there were options on the table that didn't have to end up in him leaving."

1.20pm: Fed expected to scale back QE despite criticism from Trump

The Federal Reserve is expected to announce on Thursday that it will leave interest rates unchanged while continuing to withdraw quantitative easing by up to US$50bn a month.

However, AJ Bell investment director, Russ Mould, said Fed chair Jay Powell is likely to “lay the ground work for a fourth rate rise of this year and ninth of this upcycle in December – despite President Trump’s claim that such a move would be ‘loco’”.

“Fed policy remains one of the key issues for investors to assess right now – it may not be a coincidence that the US central bank has so far shrunk its balance sheet by US$351bn, or 8%, while the S&P 500 is some 7% off its all-time high,” he said.

Last month, Donald Trump told Fox News that he was “not happy” with the Fed and could not understand why it was continuing to tighten monetary policy.

He said: "The problem I have is with the Fed. The Fed is going wild. I mean, I don't know what their problem is that they are raising interest rates and it's ridiculous.”

Trump added: "The problem [causing the market drop] in my opinion is Treasury and the Fed. The Fed is going loco and there's no reason for them to do it. I'm not happy about it."

Mould said: “The President’s colourful accusations that his country’s central bankers are ‘going crazy’ articulate a deep-rooted fear in the markets that higher rates and less stimulus could mean lower share prices.

"The Fed does not seem moved by such talk as yet, but this does beg the question of what might have to happen for the US central bank to stop tightening and even start loosening policy once more.”

12.30pm: Smaller UK manufacturers expect output to stall as Brexit looms

Small and medium-sized (SME) manufacturers expect their output to stall in the next three months, according to a survey by the Confederation of British Industry.

The manufacturers expect domestic orders to fall next quarter and export orders to be flat, CBI said.

CBI said expectations are the weakest since October 2011.

In the three months to October, the rise in output slowed while new orders growth eased as domestic orders flat-lined, CBI said.

“SME manufacturers are clearly feeling the pressure: both from softer global economic momentum, reflected in a tailing-off of exports orders, and Brexit uncertainty biting hard on investment plans,” CBI economist Alpesh Paleja said.

12.10pm: Executive exodus 

Royal Mail Group PLC (LON:RMG), Persimmon PLC (LON:PSN) and John Lewis Partnership have all announced the departure of an executive each today.

The head of the Royal Mail's post and parcels UK division, Sue Whalley, is stepping down a month after the company issued a profit warning.

Persimmon PLC (LON:PSN) has asked chief executive Jeff Fairburn to leave the housebuilder at the end of the year following a backlash over his £75mln bonus payout.

And John Lewis Partnership chairman Charlie Mayfield is heading for the exit in 2020.

11.20am: US midterm 'relief rally' on Wall Street ahead of open

US stock futures are pointing to a higher open as investors mull over the midterm elections.

Dow Jones Industrial Average futures gained 173 points to 25,814, S&P 500 futures added 23 points to 2,782 and Nasdaq futures increased 81 points to 7,096.

Oanda market analyst Craig Erlam said Wall Street is seeing a “relief rally” ahead of the open as investors view the US midterms result favourably despite the Democrats taking back control of the House of Representatives.

“The result leaves us with the prospect of political gridlock in Congress, something that is not as undesirable as you’d think,” he added.

“Much of Trump’s pro-growth and pro-market agenda was passed in the first two years of his term so losing control of one isn’t the end of the world. From a markets perspective, the most important thing is that the blue wave never fully materialised as this could have led to the scaling back of some of those market-friendly policies, including tax reform.

“While this was never the base case scenario, or in many people’s view, even particularly likely, it was possible and that’s enough to make investors nervous. Now we’re seeing a collective sigh of relief, which is lifting equity markets and risk appetite is gradually improving. This comes on the back of a rotten October so there’s plenty of room to the upside if investors sense opportunity.”

10.30am: Weaker dollar boosts mining sector

IG market analyst Joshua Mahony said a drop in the value of the dollar after the US midterms highlights "the feeling that this may not be good for near term growth prospects, with a greater degree of scrutiny and opposition expected for any policies put forward by the administration over the next two years". 

"Trump’s plan to enact a 10% tax cut for the middle class could be hit, with any another massive fiscal giveaway as being good for the near-term, yet hugely worrying for the long-term debt sustainability," he said. 

However, the weaker has given the mining sector a boost as it makes it cheaper for foreign companies to buy dollar-denominated commodities. 

Fresnillo PLC (LON:FRES), Anglo American PLC (LON:AAL), Antofagasta PLC (LON:ANTO), BHP Billiton PLC (LON:BHP) and Rio Tinto PLC (LON:RIO) are among the top risers on the FTSE 100. 

Going the other way, Marks and Spencer Group PLC (LON:MKS) is on the back foot after saying it expects little improvement in sales for the year after disappointing food sales in the first half. 

ITV PLC (LON:ITV) slumped after saying it expects total advertising to be down around 3% in the fourth quarter and broadly flat over the full year.

10.00am: House price growth slows in October 

House prices rose at the slowest pace in five years in October, according to data from Halifax.

The data showed prices increased by an annual rate of 1.5% last month compared to a 2.5% growth in September.

On a month-on-month basis, house prices rose 0.7% in October after two consecutive monthly declines. 

Russell Galley of Halifax said: "House prices continue to be supported by the fact that the supply of new homes and existing properties available for sale remains low. We see this continuing to be the case over the coming months and we remain supportive of our 0-3pc forecast range."

The report echoes figures released by Nationwide last week, revealing that growth had eased to 1.6% in October from 2% in September.

9.30am: Calls for US rate hike expected, says analyst

The US dollar is weaker against a basket of foreign currencies after the Democrats took control of the House of Representatives in the midterm elections.

“Dollar bulls were looking for a sweeping Republican win and they didn’t get it," said Mike Read, founder of social trading platform Pelican.

"With politics now even more polarised, calls for hikes in the fed rate will likely come thick and fast, which could actually benefit dollar bulls if they weather today’s storm. 

“Whatever the outcome from today’s results, one thing is for sure - the cloud of uncertainty from the last few weeks has lifted and we’re back to seeing trading as usual."

The US dollar is down 0.42% versus the pound, 0.30% versus the yen and 0.53% against the euro.

8.40am: Footsie swings higher

The FTSE 100 swung decisively higher in the wake of the US midterm elections that could have turned out worse for the sitting president, Donald Trump.

The index of blue-chip shares rose 71 points to 7,112.05 in the first half-hour of trade.

“No blue wave, no surprise GOP [Republican Party] clean sweep; what we got instead was largely what the market expected,” said Neil Wilson of Markets.com.

“The Democrats have taken the House, whilst the Republicans control the Senate.”

Turning to the UK share market, the big corporate news of the day was provided by Marks & Spencer (LON:MKS), which effectively told the market its sale had atrophied.

The update, which offered little more than hopeful words from the new boss, helped the share nudge 4% lower.

“The Marks & Spencer PR machine is in full swing and chief executive Steve Rowe is telling investors exactly what they want to hear,” said Lee Wild, head of equity strategy at Interactive Investor.

“The company has been in desperate need of a major overhaul for years and, under a new and more dynamic leadership team, is getting just that.

“M&S is admitting its shortcomings and promising to deliver what investors have been screaming at it to do for years.

“Modernising the clothing range, focusing on good quality but affordable ‘must-haves’, and selling more of what people want is reassuring to hear.”

ITV (LON:ITV) lost 3% of its value as it blamed the economic uncertainty around Brexit for flat advertising sales.

The big mover of the day was in the FTSE 250 as computer security firm Sophos (LON:SOPH) was negative on the outlook for the cyber market as it delivered its interim results. The stock tanked 32%.

Proactive news headlines:

88 Energy Ltd (LON:88E, ASX:88E) has updated investors on its conventional oil exploration assets in Alaska, where it has amassed a prospect inventory representing potential resources of 2.4bn barrels of oil. The prospects within the Project Icewine acreage count for the largest portion of the estimates, with some 2.1bn barrels ‘seen’ across 17 prospects in three play fairways.

Highlands Natural Resources PLC (LON:HNR) shares advanced in Wednesday’s early deals as the company told investors that hydraulic fracturing operations started this week at the East Denver project. It said that flow results from the new wells are expected in late December 2018 or early January 2019.

Initial human tests of SkinBioTherapeutics PLC’s (LON:SBTX) SkinBiotix cream have confirmed the product’s safety as well as delivering positive data regarding irritancy and moisturisation potential. These initial results are effectively a precursor to the main element of the study involving 120 volunteers with dry skin. This kicks off later in November and will assess the longer-term moisturisation potential of the technology.

Savannah Resources PLC (LON:SAV) has discovered three new lithium pegmatites in the Pinheiro deposit at its Mina do Barroso project in Portugal. The mining firm said the three new pegmatites covered a “considerable” strike of over 250 metres and depths of over 100m.

Tower Resources PLC (LON:TRP) has inked a new petroleum Agreement (PA) with the Government of the Republic of Namibia, giving the explorer an 80% interest in prospective offshore acreage. The three exploration areas (blocks 1910A, 1911 and 1912B) cover a total of 23,297 square kilometres in the Walvis Basin and Dolphin Graben.

InnovaDerma PLC (LON:IDP) is now at a “strategic inflection point”, its chairman Haris Chaudhry will tell investors who attend the Skinny Tan company’s annual meeting in London’s Square Mile later Wednesday. The end of exclusivity periods for its flagship products will usher in deals with major retailers, he will explain.

Mkango Resources Ltd (LON:MKA) has released the results of a 45 drill hole campaign from its Songwe Hill Rare Earths project in Malawi. The AIM-listed exploration firm said the drilling programme was a key component of the ongoing initial phases of its feasibility study for Songwe.

Cabot Energy PLC (LON:CAB), the AIM-quoted oil and gas company creating predictable production growth in Canada balanced with high impact exploration in Italy, has announced the appointment of Rachel Maguire as an independent non-executive director with immediate effect. The group noted that Maguire is an entrepreneur who is the founder and CEO of Arko Iris, a business consultancy advising organisations on best practice in stakeholder engagement, corporate governance and corporate responsibility.

SigmaRoc PLC (LON:SRC), the AIM-listed 'buy-and-build' construction materials group, announced that Gary Drinkwater has resigned from its board of directors with immediate effect due to personal health reasons.

European Metals Holdings Limited (LON:EMH) (ASX:EMH) has announced the appointment of WH Ireland Limited as joint broker to the company.

Collagen Solutions PLC (LON:COS), the developer and manufacturer of medical grade collagen-based biomaterials for use in research, diagnostics, medical devices, and regenerative medicine, has said it will hold an investor results presentation on Tuesday, 4 December 2018 at The Brand Exchange, 3 Birchin Lane, London EC3V 9BW at 4.30pm for a 4.45pm start. The group said its CEO, Jamal Rushdy and Hilary Spence, its CFO, will summarise the half-year results and present the key financial highlights, outlook and future vision and how they plan to deliver on the Company's growth strategy.

6.45am: FTSE 100 poised to go higher 

The FTSE 100 is poised to open higher but uncertainty may dent sentiment in the markets amid results from the US midterm elections.

Spread betting firm IG expects the FTSE 100 to open around 26 points higher after closing down 63 points yesterday at 7,040.

With the Republicans poised to lose control of the House of Representatives, uncertainty will return to the markets as Democrats will most likely be looking to throw a spanner in the works of Donald Trump’s policy agenda.

With the prospect of additional tax cuts from Congress now diminished, the US dollar dipped overnight, down 0.12% against the pound at £0.76.

US markets closed up yesterday ahead of the election results, with the Dow Jones Industrial Average closing up 173 points at 25,635, while the S&P 500 was up 17 points at 2,755 and the Nasdaq was up 47 points at 7,375.

In Asia today, the Japanese Nikkei 225 was down 61 points at 22,085 while Hong Kong’s Hang Seng was down 64 points at 26,054 as the US and China seemed no close to reaching a trade deal which has battered the indexes.

David Madden, market analyst at CMC Markets, said that now with midterms out of the way, “we may hear more regarding China” as Trump and Xi Jinping try and hash out a deal ahead of a G20 summit at the end of the month.

In the currency markets, the pound was up 0.18% at US$1.31 against the dollar following a period of volatility caused by several conflicting Brexit statements, including reports that the Prime Minister Theresa May was keen to obtain a deal, but not at “any cost”.

US FOMC meeting and interest rate decision

Aside from the election results, the Trans-Atlantic focus will be on the latest Federal Reserve policy meeting, with an interest rate decision due.

Following a series of US rate hikes already this year - and with some pointing the finger at these for causing the latest turbulence in global stocks markets - it is highly likely that the Fed policymakers will stay on hold for now, taking a wait and see approach.

Investors will, however, be seeking comment to assess whether the Fed’s policymakers believe that consumer price inflation and wage inflation is not set to run too ahead of itself and that their rate rises so far has not derailed the strong US economic growth.

That is the view that most investors would like to hear, if we get that, then a hike at the December meeting could definitely be on.

On this side of the Atlantic, interim results and trading updates from several FTSE 100 and FTSE 250 firms, including Marks & Spencer and ITV, will provide plenty for investors to get their teeth into.

Significant announcements expected on Wednesday:

Interims: Marks & Spencer Group PLC (LON:MKS), Dairy Crest PLC (LON:DCG), Sophos Group PLC (LON:SOPH), Wizz Air PLC (LON:WIZZ)

Trading updates: ITV PLC (LON:ITV), Persimmon PLC (LON:PSN), G4S PLC (LON:GFS), JD Wetherspoon PLC (LON:JDW)

Economic data: US consumer credit numbers

Around the markets:

  • Sterling: US$1.312, up 0.18%
  • Brent Crude: US$71.86 a barrel, down 0.38%
  • Gold: US$1,228.26 an ounce, up 0.15%
  • Bitcoin: US$6,522.88, up 0.88%

City Headlines:

Financial Times: One of the most divisive midterm elections in modern US political history has seen a record turn-out, with early exit polls showing that 16% were voting for the first time compared with 10 in 2016.

The Daily Telegraph: MPs could be restricted from scrutinising the economic fallout of the Brexit divorce ahead of a crucial vote on the issue.

The Times: Lloyds is abolishing another 6,000 jobs in another round of cuts by the bank that have shrunk its staff by more than half since the financial crisis.


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