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FTSE 100 finishes lower as rate rise fears and trade dampen sentiment

The UK's index of leading shares finished around 35 points lower at 7,105 on the day
North Sea oil rig
FTSE 100 closed lower Friday but was up a shade on the week
  • FTSE 100 closes in the red

  • Brent crude falls

  • Miners weigh

  • US markets lower

FTSE 100 closed the day in the red as traders fretted and US stocks plunged.

The UK's index of leading shares finished around 35 points  lower at 7,105.

On the week as a whole, the index gained around 0.15%.

FTSE 250 closed out over 150 points lower at 19,106.

On Wall Street, the Dow Jones Industrial Average  is currently down  around 267 points  at 25,923, while the S&P 500 is off around 35 at 2,771.

Fiona Cincotta, market analyst at City Index, summed up Friday's trading thus: "Taking the lead from US and Asia overnight, the FTSE fell through 7100 on the open and failed to retake the level across the day.

"Key factors such as trade war fears and higher interest rates, that weighed on sentiment and pulled the markets lower in October, have returned to haunt investors at the end of this week."

She suggested that a "more hawkish than expected" Fed had quickly extinguished the midterm election rally before it had time to take off.

The fear of interest rate rises, coupled with Chinese trade data fanning fears over the US – Sino trade war, all weighed on sentiment, said the analyst.

Heavy weighted miners dragged the FTSE lower, with the likes of Anglo American (LON:AAL) and Glencore (LON:GLEN)  losing up to 4%.

US markets open lower

As expected, US markets opened lower, offering no succour to weak UK equities.

The FTSE 100 was down 51 at 7,090. In the US, stocks opened lower on Friday as falling oil prices, interest rate fears and weak economic data from China ignited worries about a decline in economic growth.

The Dow Jones Industrial Average index shed 142 points to hit 26,049, pushed down by big international players such as Caterpillar, Apple, Exxon Mobil, Cisco Systems and Chevron.

The S&P 500 also shed 18.6 points to 2,788 while the tech-laden Nasdaq lost 83 points to reach 7,447.

READ Wall Street opens in red as concerns about rates and China weigh on sentiment

In the UK, the weak oil price was weighing down integrated oil giAnts BP PLC (LON:BP.), down 2.2%, and Royal Dutch Shell ‘B’ (LON:RDSB), down 1.2%.

In contrast, airline stocks reacted favourably to the oil price decline. Low-cost operator easyJet PLC (LON:EZJ) was up 2% and British Airways owner IAG (LON:IAG) was up 1.5%.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Brent crude is now officially in a bear market with oil down more than 20% since it recent peak price above $86 a barrel. <a href="https://t.co/KuMC1ViUq8">https://t.co/KuMC1ViUq8</a> <a href="https://t.co/dZpOuYKNgf">pic.twitter.com/dZpOuYKNgf</a></p>&mdash; Financial Times (@FinancialTimes) <a href="https://twitter.com/FinancialTimes/status/1060905102905696256?ref_src=twsrc%5Etfw">November 9, 2018</a></blockquote>

<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

“Oil has entered a grizzly bear market as the effect of Iran sanctions become better understood; critically it seems the impact on supply is far less than feared, in no small part to waivers. Oil is down for nine sessions with both WTI and Brent falling by around 20% from their October peaks,” said Neil Wilson at markets.com.

“Bullish bets are being cut rapidly while shorts are piling on. We're seeing a major flattening in net long positions that point to further declines for oil. This is a trade that assumes a momentum all of its own and it doesn't do to stand in front of it. Are you brave enough to be the bull who steps in front of this steamroller? Bullish bets being unwound at an incredible clip. CFTC figures show net longs down to their lowest in a year, down to 432k contracts by the beginning of November from 739k in February. We are likely to see $60 on Brent before we get back up to $80,” Wilson predicted.

2.00pm: Prospect of a soft opening on Wall Street leaves UK equities cast adrift

The Footsie has fallen below 7,100 as traders eye the prospect of a soft opening on Wall Street.

In futures trade on Friday, the Dow Jones was down 123 points, while the Nasdaq was off 57 and the S&P 500 was down around 14.

In London, the FTSE 100 was down 46 at 7,094, with Burberry Group PLC (LON:BRBY) leading the retreat, after UBS cut its price target for the luxury goods firm to 2,000p from 2,150p.

Sector peer – albeit one occupying a very different space to Burberry – Superdry PLC (LON:SDRY) – also had its target price cut, by RBC Capital Markets.

The new price target is 900p, down from 1,500p. The rating was kept at “sector perform”.

“The brief sunny moment retail stocks had yesterday has come to an end this morning as data showed that shop spending fell in October by 2% following a 2.7% decline in September,” observed Fiona Cincotta at City Index.

“Next, Marks & Spencer and Burberry all traded lower on expectations that a weaker start to the key Christmas shopping period would not be made up in November or December. UK consumers remain cautious despite the fact that domestic wage growth is accelerating, being put off by price inflation and concerns over Brexit,” she added.

“The struggles of the retail sector has now been a recurring theme in UK stocks since data started emerging after the January sales - there has been little to prop up the market in retail shares since then. As we enter the key pre-Christmas shopping frenzy, CEOs and sales directors will be struggling to find answers to what looks like a systemic problem more than simple economics,” Cincotta concluded.

Meanwhile, Connor Campbell at Spreadex suggests the UK GDP data ended up getting lost in the mix on Friday, with investors more focused on last night’s Federal Reserve statement and the miserable performance of the commodity sector.

“The FTSE … didn’t pay any attention to the growth figures. Instead it fretted over the likelihood of rising interest rates in the US, alongside Brent Crude’s slide into bear market territory, with the black stuff below $70 per barrel for the first time in 7 months. Combine this with copper’s 1% decline, and the FTSE’s commodities were in a sorry state,” Campbell noted.

11.30am: Boost from GDP proves short-lived

The Footsie’s losses have widened after the index initially perked up on the release of gross domestic product data for the third quarter.

The FTSE 100 was down 56 at 7,085.

The UK economy grew by 0.6% in the third quarter.

Alpesh Paleja, the principal economist at the bosses’ pressure group, the CBI said: “The sun shone on the UK economy over the summer, boosting economic growth relative to the second quarter but as the impact from the warm weather and World Cup fades, we expect subdued growth ahead. Indeed, our surveys for October already paint a picture of weaker momentum.”

“While the measures announced in the Budget delivered for business in many respects, there are still significAnt challenges. Weak real pay growth means consumers are still tightening their purse strings, and Brexit uncertainty has become a drain on investment,” Paleja added.

James Smith, the economist at ING that covers developed markets, was singing a similar song.

“The UK economy shifted up a gear over the summer, but with the sunny weather now behind us and Brexit uncertainty very much in front, we suspect the momentum will fade over the winter. Expect something closer to 0.3% QoQ [quarter-on-quarter] growth in the fourth quarter,” Smith advised.

Bringing some cheer to a slightly gloomy market was publisher and events organiser Informa PLC (LON:INF) after its trading update.

The shares were up 2.6% as the company revealed it was on course to hit full-year revenue targets while the integration of UBM, acquired earlier this year, was completed on schedule.

READ: Informa is confident of hitting full-year targets

9.30am: Chinese trade data knocks miners

Weak miners were driving the Footsie lower this morning after Chinese trade figures added to worries about US-Sino trade talks.

The FTSE 100 was down 40 at 7,101, with the likes of Anglo American, Antofagasta, BHP Billiton and Glencore from the mining sector down 3% or more.

Fellow traveller, steel producer Evraz, was down 2.6%.

“Strong export data in October shows that Chinese exporters are worried that US tariffs will increase in January 2019. We expect this front-loading behaviour to continue for the rest of 2018, as we don't think the Xi-Trump meeting at the G20 will yield positive results. At the same time, China's fiscal stimulus could boost import growth in 2019,” suggested Dutch finance house, ING.

Chinese exports rose 15.6% year-on-year, which was more than expected.

Closer to home, news that SSE PLC (LON:SSE) and German peer Innogy SE are talking about renegotiating the terms of the proposed combination of their retail units has sent SSE shares 2.7% lower.

8.45am: Fed's mood music a bit discordAnt

The FTSE 100 fell sharply at the open as the mood music from the US Federal Reserve appeared to point to a December hike to interest rates.

The index of blue-chip stocks fell 49 points to 7,091.33.

“The US central bank announced that ‘further gradual increases’ were to be expected,” said David Madden at CMC Markets.

“There was no mention of the recent volatility in the markets. Dealers took this as a sign that further hikes are in the pipeline.

“An interest rate hike in December is still likely, but looking ahead to 2019, traders are divided as to how many hikes the Fed will announce.”

The miners led the market lower as the outlook deteriorated for the Chinese economy, a massive consumer of their output.

Copper digger Antofagasta (LON:ANTO) was hardest hit as it fell 2.5%, while BHP Billiton (LON:BLT) was down 2.2% in the wake of Thursday’s annual meeting.

Informa (LON:INF), the owner of Lloyd’s List, the world’s oldest newspaper, was the Footsie’s top riser, nudging up 2.3% in the wake of a bullish update on trading.

6.45am: Footsie set to fall

After the US central bank’s statement yesterday, the Footsie was expected to give back all of Thursday’s gains at the opening.

Having advanced 23 points to close at 7,141 on Thursday, the FTSE 100 was expected to open at around 7,112.

As expected, the Federal Reserve left its interest rates unchanged.

“The Fed’s upbeat assessment of the labour market and broader economy, 2% inflation and stable inflation expectations essentially lock in a December Fed funds rate hike,” said Berenberg Capital Markets.

The US markets closed before the Fed had its say and experienced mixed fortunes. The Dow rose 11 points to close at 26,191 but the broader-based S&P 500 tumbled 7 points to 2,807.

In Asia, markets were soft this morning. In Tokyo, the Nikkei 225 was 237 points in the hole at 22,250 while heading towards the close of trading in Hong Kong, the Hang Seng was down 613 at 25,615.

Events and publishing group Informa PLC (LON:INF) headlines what looks like being a relatively quiet Friday in London after what has been a busy week so far.

In its last update, the FTSE 100 company posted a 5% rise in half-year revenues to £957.1mln, while adjusted operating profits climbed 3% to £294.4mln.

Even with a 6% rise in the interim dividend to boot, the results still fell flat.

Friday’s third-quarter update will give investors a chance to see how UBM is settling in – the rival it acquired for almost £4bn earlier in the year.

On the domestic macro front, a host of data releases on Friday should give a much clearer picture of where the UK economy stands with the country on the brink of hopefully inking a Brexit deal.

The most importAnt will be the first estimate of third-quarter gross domestic product (GDP), which is expected to show a modest improvement on the second quarter, with year-on-year growth of 1.3%.

The services sector drove the UK economy forward in the second quarter, while construction also made positive contributions; however, the industrial and manufacturing sectors weighed.

So, it will be interesting to see if these two sectors continue to act as a drag; the chances are that they did, according to economists, who expect September UK industrial and manufacturing productions numbers, released at the same time, to drop back significAntly compared to August.

Significant announcements expected

Trading update: Informa PLC (LON:INF). Morgan Advanced Materials PLC (LON:MGAM)

Interims: Volex PLC (LON:VLX)

Economic data: UK quarterly GDP first estimate; UK construction output; UK trade figures; US PPI; US Michigan consumer sentiment index; US wholesale inventories

Around the markets

  • Sterling: US$1.3042, down 0.19 cents
  • 10-year gilt: yielding 1.432%
  • Gold: US$1,220.50 an ounce, down US$4.60
  • Brent crude: US$70.85 a barrel, up 20 cents
  • Bitcoin: US$6,428.71, down US$10.93

Proactive news headlines

MaxCyte Inc’s (LON:MXCT) Flow Electroporation technology will be used by CRISPR Therapeutics as part of its quest to develop new gene therapies for the treatment of the cancer after the pair signed a commercial license agreement.

Haydale Graphene Industries PLC (LON:HAYD) said it remains on track with the development of a production line for its Silicon Carbide (SiC) cutting tools as it continued funding discussions.

There are significant concerns about the ongoing viability of MySQUAR PLC (LON:MYSQ), the Myanmar-focused social media group, though a bail-out deal is also being mooted. In an update, investors also learned that preliminary probe has discovered that £900,000 of the firm’s funds had found their way into the hands of unnamed former directors and third parties without sign-off from the remuneration committee. The company is considering its options to recover the money.

Bushveld Minerals PLC (LON:BMN) is to push ahead with the expansion of its Vametco vanadium plant to take advantage of soaring demand for the steel additive.

Futura Medical PLC (LON:FUM) said the results of a pharmacokinetic study of lead product MED2005 may help support a “simplified” US regulatory pathway for the erectile dysfunction treatment.

Canadian Overseas Petroleum Limited (LON:COPL) told investors that it has entered into talks with a second large oil service provider, with activities in West Coast Africa.

Mosman Oil And Gas Limited (LON:MSMN) told investors that it intends to continue the rapid development of its US projects, as it proposes drilling up to five new wells.

Premier African Minerals Limited (LON:PREM) has reached an agreement to amend the terms of the existing loan agreement entered with a company owned by a trust of which chief executive George Roach is a beneficiary for a gross value of US$300,000. 

Business headlines

The Times

Rivals and suppliers have warned that the proposed merger of J Sainsbury and Asda could reduce competition, increase fuel prices, damage the business of small retailers and suppliers, and result in higher prices for consumers.

Tesla has appointed Robyn Denholm, a technology and car industry veteran in her native Australia, as a chairwoman to head its board.

National Grid is undertaking a £1.7 billion project to build the world’s longest sub-sea power cable between Britain and Denmark called the Viking Link interconnector.

Walt Disney reports a 33% rise in fourth-quarter profit to $2.3 billion, beating financial forecasts, thanks to summer visitors to the company’s theme parks and big audiences for the Marvel film Ant-Man and the Wasp.

Sainsbury’s former chief executive Justin King has backed calls by business leaders for a second EU referendum, saying that the choice for ministers was between a bad Brexit and a disastrous Brexit.

The Daily Telegraph

European Union has demanded wide-ranging access to British coastal waters for their fishing fleet as the price of agreeing on an all-UK Brexit divorce deal.

Brussels has warned Denmark and Estonia to crack down on dirty money following Danske Bank's €200 billion money laundering scandal.

Financial Times

Martin Sorrell, the former boss of WPP, is close to his second acquisition with his new vehicle, S4 Capital.

The Guardian

Plans for a new nuclear power station in Cumbria have been scrapped after Toshiba closed the UK unit behind the project.

Daily Mail

Bombardier has refused to rule out job cuts in the UK as the aerospace firm announced plans to axe 5,000 roles.

UBS has pledged to vigorously defend itself in a pending lawsuit by the US justice department over the mis-selling of complex financial products that contributed to the 2008 financial crash.


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