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FTSE 100 closes firmly lower as investors realise US/China trade dispute continues

The UK index of leading shares finished down over 39 points lower at 7,022.
Dealing room
The trade war continues
  • FTSE 100 closes lower

  • Bremainers' hearts all a flutter as ECJ's advocate general says UK could unilaterally back out of Brexit

  • Dow Jones and US benchmarks tanking

  • Quartix and Versarien catch the eye among small-caps

FTSE 100 closed in the red, as did FTSE 250, as trade worries and political uncertainty continued to dominate.

The UK index of leading shares finished down over 39 points lower at 7,022.

The FTSE 250 shed over 234 points at 18,329.

"Stocks are lower today as continued political uncertainty is weighing on investor sentiment. The US and China have called a truce to the trade dispute, but that just means the problem has been put on hold until the New Year," said David Madden, analyst at CMC  Markets UK.

"A truce is better for market confidence than a further escalation, but the lack of a solution is still playing on investors’ minds.

"Italy is still in the news, as the government’s proposed budget deficit will be under review from the EU. The two sides are still at loggerheads, and neither one is showing signs of backing down. 

On Wall Street, the Dow Jones Industrial Average has tanked over 528 points at the time of writing, while the S&P 500 shed over 58 points at 2,731

The tech heavy Nasdaq index lost over 186 points at 7,255.

15.50pm; FTSE 100 down 31

The top shares index’s rally was running out of steam in the last hour of trading but at least it was keeping its chin above the 7,000 level.

The FTSE 100 was down 31 at 7,032.

Precious metals miners Fresnillo PLC (LON:FRES) and Randgold Resources Limited (LON:RRS) were the top performers, up 3.8% and 3.3% respectively, while builders’ merchant Ferguson Plc (LON:FERG) and betting shops owner GVC Holdings PLC (LON:GVC) – down 4.8% and 4.6% respectively – squabbled over the wooden spoon.

READ Eyes firmly on the UK on Wednesday as US markets shutter for funeral of George HW Bush​

 

2.40pm: The Footsie perked up after US losses were not as severe as feared

The UK’s blue-chip index has pared its losses after US indices fared less badly than expected at the outset.

The FTSE 100 was down 26 at 7,037, after the Dow Jones opened at around 23,745, down 81 points but better than the triple-digit fall the market had been expecting.

The broader-based S&P 500 index was trading at around 2,786, down 6 points.

Sterling continues to regain ground against the US dollar on foreign exchange markets, rising a third of a cent to US$1.2757.

“The battered pound was thrown a lifeline today after the European Court of Justice advocate general Campos Sánchez-Bordona stated that Britain can unilaterally revoke its decision to leave the European Union,” reported Lukman Otunuga, a research analyst at FXTM.

“Sterling’s aggressive appreciation to this news continues to highlight how explosively volatile and extremely sensitive the currency has become to Brexit headlines. Although the European Court of Justice may allow the United Kingdom to take a U-turn on Brexit, investors need to consider whether this is a realistic option for the UK government. With the government seen respecting the results of the Brexit referendum and vote to leave, this noise over the UK possibly withdrawing article 50 is poised to fade away.

“It will most likely be another rough, rocky and unpredictable trading week for the pound as anticipation mounts ahead of the parliamentary vote on Brexit. With pessimism in the air over Theresa May’s Brexit deal being squarely rejected by parliament, appetite towards the pound is seen diminishing further,” Otunuga opined.

Among FTSE 100 constituents, the fallers outnumber the risers by around two-to-one.

Away from the big caps, fading glamour stock restored some of its allure with news of the formal launch of the company's new graphene enhanced polymer range, Polygrene.

Between the beginning of June and late September, the shares doubled in price to 186p but have fallen back of late, closing last night at 114p; the shares rose 6.1% today to 121p on news of the product launch.

Meanwhile, Quartix Holdings plc (LON:QTX), one of Europe's leading suppliers of subscription-based vehicle tracking systems, headed north after raising profit expectations for 2018.

The shares motored 25p higher to 265p as the group said full-year profit (adjusted underlying EBITDA) is likely to exceed market expectations of around £7.5mln.

Revenue and free cash flow are expected to be slightly ahead of market expectations, the company revealed.

 

12.35pm: Losses lengthen as investors anticipate soft opening on Wall Street

The Footsie’s losses lengthened in the afternoon session as investors braced themselves for a soft opening on Wall Street.

The FTSE 100 was in danger of sliding back below 7,000, down 56 at 7,006.

In the US, the Dow Jones Average was expected to open at around 25,694 after rising 288 points yesterday to close at 25,826 while the broader-based S&P 500 was tipped to open its account at 2,777.7, after it rose 30 points yesterday to close at 2,790.4.

The Footsie’s large contingent of big dollar earners was counting against it today as sterling bucked up following a statement by the European Court of Justice’s advocate general that the UK could still unilaterally cancel Brexit by revoking Article 50 without having to consult the other EU member states.

“The recommendation is significant because it could be a way for the UK to avoid a no-deal Brexit, even though such a move would add further uncertainty for the pound,” opined Dean Popplewell at Oanda.

Coincidentally, the mid-cap FTSE 250 was down 0.94% - the same percentage fall suffered by its big brother – at 18,416.

The three biggest fallers were all repeat offenders: holidays operator Thomas Cook Group PLC (LON:TCG) has been in a tailspin since last week’s profit warning and has lost another 14.5% today; fashion firm Ted Baker PLC (LON:TED) continues to be hit by the fall-out from the alleged “forced hugging” culture at the company, and is down 12.3%, while infrastructure specialist Kier Group PLC (LON:KIE) shed 8.7% following last Friday’s cash call.

Balancing out the fallers was intellectual property outfit IP Group Plc (LON:IPO), which was up 6.9% at 123.8p after one of its portfolio companies, Ultrahaptics, completed a £35mln fund-raising round.

IP Group holds a direct undiluted beneficial stake of 21.1% in Ultrahaptics and is reviewing the carrying value of this asset as part of its year-end audit, the group said.

11.05am: Consumer spending data disappoints

The Footsie was mired in the red after disappointing consumer spending data.

“Daily signals that the British economy is slowing because of Brexit are not abating, the latest being consumer spending figures released Tuesday showing growth of only 0.5% in November, the slowest in a year. Even the Black Friday spend fest was not enough to offset the trend, making retailers nervous about the outlook for Christmas sales,” commented Fiona Cincotta at City Index.

The FTSE 100 was down 31 at 7,032, with supermarket giant Tesco PLC (LON:TSCO), down 2.6%, among the bigger losers.

As Craig Erlam at Oanda put it, in reference to yesterday’s market charge, “that didn’t last long”.

“Day two of the post US/China truce and markets are back in the red and the US yield curve has inverted slightly, potentially taking some of the shine off the weekend’s events,” Erlam observed.

“An inverted yield curve is often associated with the anticipation of a recession, which may be why investors are nervous about it but I’m not convinced this is what’s going on. The Fed has been tightening policy at a decent rate and if the economy starts to slow then it makes sense that it may cut rates a little to provide some support. This would imply lower levels of growth, which naturally is a drag on stocks and may therefore explain some of the selling today,” he postulated.

Elsewhere on the macroeconomic scene, Joshua Mahony at IG said the UK construction purchasing managers’ kindex provided the second outperformance of the week, following yesterday’s manufacturing rebound.

“Providing the second consecutive improvement to the construction PMI survey, we are seeing some form of stability for the sector despite worries over house prices and demand given Brexit uncertainty. Interestingly, the sector has seen the fastest rate of job creation since December 2015, with residential work particularly outperforming,” Mahony observed.

Talking of IG Group PLC (LON:IGG), it was one of the worst mid-cap performers, shedding 6.5% at 569p, after its pre-close trading update revealed group revenue in the first half of the current financial year is expected to be down roughly 6% year-on-year, compared to a 5% decline in the first quarter.

Shore Capital moved to ‘buy’ from ‘hold’ with a price target of 608/5p and said it reckons the de-rating is overdone.

“At last night’s closing price of 608.5p and before any change to our forecasts (provisionally unchanged), IG trades on 12.4x our May ’19 adjusted eps [earnings per share] of 49.2p (PBT [profit before tax]: £227m) and 12.3x May ’20 (PBT : £229m, eps 49.6p), with a prospective May ’19 dividend yield of 7.0% (43.2p – based on the assumption that the dividend will be held at May ‘18’s level for the next three years as cover is progressively rebuilt),” the broker said.

9.40am: The Footsie's bright start fizzles out

The unexpectedly firm start quickly fizzled out, although the release of the UK Construction Purchasing Managers’ Index (PMI) may have stopped the rot.

The FTSE 100 was down 20 at 7,043, just above its low for the day, round about the time the Construction PMI was released.

The seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered 53.4 in November, up from 53.2 in October. A value above 50 indicates an expansion in activity; the index has been above 50 for eight months in a row now.

“November data pointed to a solid expansion of UK construction output, which was supported by a broad-based upturn in the three sub-categories of activity monitored by the survey. Growth of new work picked up since October and rising client demand underpinned a robust and accelerated expansion of employment,” CIPS said in a commentary accompanying the statistical data.

“The rate of job creation was the fastest since December 2015; however, business confidence remained relatively subdued, with survey respondents noting that Brexit-related concerns had weighed on their growth projections for the next 12 months,” it added.

A fiscal first-quarter update from plumbers’ merchant Ferguson Plc (LON:FERG) was a bit of a wash-out, with the shares sliding 3.2% to 5,034p.

READ Ferguson sees first-quarter trading profit, revenue rise thanks to US growth, UK still weak

“A weak performance from the UK operations at Ferguson, the company formerly known as Wolseley, may be no great surprise to shareholders but a slowdown in the all-important US operations seems to be weighing on the share price,” said Russ Mould, AJ Bell’s investment director.

“This may seem a bit harsh when first-quarter sales grew by 9.6% year-on-year in the USA, but that still reflected a slight deterioration on the fourth quarter’s double-digit run rate and America does represent more than 80% of the company’s revenues and more than 90% of its profits.

“This may explain why investors are a bit windy, especially as there are some signs of a slowdown in the US housing market,” he added.

8.50am: Subdued start

The Footsie limped into positive territory as attention switches from Sino-US trade relations to Brexit.

The FTSE 100 was up 16 points at 7,078, with property listings site Rightmove PLC (LON:RMV) leading the advance after a broker upgrade.

Rightmove was sitting atop the Footsie leader-board with a 2.6% gain at 460.8p after Deutsche Bank upgraded the stock to ‘buy’ from ‘hold’ and cranked up the target price to 530p from 440p.

In other broker action, Goldman Sachs has got off the fence and upgraded telecoms giant BT Group PLC (LON:BT.) to ‘buy’, with a 320p price target (up from 240p), prompting market makers to mark up BT’s share price 2.3% to 262.5p.

BAE Systems PLC (LON:BA.) was the worst performing blue-chip, sliding 1.9% to 491.6p after Merrill Lynch moved to ‘neutral’ from ‘buy’.

Proactive news headlines:

Argo Blockchain PLC (LON:ARB) has seen sales of its crypto mining subscription packages beat its targets by “a significant margin ahead of schedule” as growth continued to exceed supply and its own expectations.

IXICO PLC (LON:IXI), the data analytics company delivering insights in neuroscience, has seen the value of an existing contract almost double.

BigDish Plc (LON: DISH), the company which operates a yield management platform for restaurants, has announced the appointment of SVS Securities as its joint broker with immediate effect.

discoverIE Group PLC (LON:DSCV) has hiked its interim dividend after reporting a rise in profits of almost 25% for the first half.

Demand for Collagen Solutions PLC’s (LON:COS) regenerative medicines and biomaterials surged in the first half of its current financial year.

Chinese engines giant Weichai Power has confirmed it will take a further 10% stake in Ceres Power Holdings PLC (LON:CWR) as part of a strategic collaboration agreed in May. The two have also agreed to create a fuel cell manufacturing joint venture in China, a licence agreement to transfer key technology to the venture and a new £9mln joint development agreement.

Digital marketing and advertising firm Taptica (LON:TAP) was reeling after chief executive Hagai Tal offered to resign last night. Tal was found liable yesterday for certain statements made in relation to the sale of Plimus in 2011, where he was chief executive and a shareholder.

Project management and consultancy group WYG PLC (LON:WYG) has repeated its full-year guidance after coming through a “tough” first half relatively unscathed.

Life sciences business OptiBiotix Health plc (LON:OPTI) has secured a distributor in Greece and Cyprus for its SlimBiome Medical weight loss device. The AIM-listed company said its partner has an established distribution network in Cyprus, Greece and the Middle East and a track record in taking new products to market direct to pharmacies. The unnamed distribution company is associated with a number of private clinics providing therapies to individuals across the world.

Every hole in the latest drill campaign at Greatland Gold PLC’s (LON:GGP) Havieron licence in Western Australia has yielded “significant visible mineralisation”.

Custodian REIT PLC (LON:CREI) has purchased Jubilee Close, a 44,844 square foot retail Park in Weymouth.

ECR Minerals PLC said it has submitted four new licence applications to augment its existing gold exploration interests in the Victoria region of Australia and is undertaking further work to identify other strategic exploration opportunities. It said three of the applications have been submitted in the Bailieston/Moormbool gold project area to augment existing licences.

The latest well update from Tlou Energy Ltd (LON:TLOU) has told investors that ‘top hole’ drilling operations are complete for the Lesedi-3, Lesedi-4 and the ‘optional’ Lesedi- 5 wells. It added that the coal bed methane project is on time and in line with budget.

Diversified Gas & Oil PLC (LON:DGOC) told investors it has reached an agreement with the West Virginia Department of Environmental Protection regarding the company’s well decommissioning obligations.

Strategic Minerals Plc (LON:SML) has started a EM survey to search for nickel targets to drill at its Hanns Camp project at Laverton, Western Australia. The ground-based survey follows air core drilling earlier in 2018, which confirmed three valid target areas, Hanns Camp South, Royal North and Royal Central.

Europa Oil & Gas Holdings PLC (LON:EOG) chairman Simon Oddie has told investors that the company is pursuing a new venture opportunity in Morocco, to add to the high-potential exploration offshore Ireland and its bogged down English projects.

Solo Oil (LON:SOLO), the natural resources investment company focused on acquiring and developing a diverse global non-operated portfolio of strategic oil and gas assets, has announced the appointment of Tom Reynolds as an independent non-executive director. Reynolds is a Chartered Engineer with over 25 years' experience in the energy sector, including a range of technical and commercial roles with BP, Total and British Nuclear Fuels.

Union Jack Oil PLC (LON:UJO), the UK focused onshore hydrocarbon production, development and exploration company has announced the appointment of Frazer Lang as a non-executive director with immediate effect. The group said Frazer is also an executive director of Union Jack's commercial partner, Humber Oil & Gas Limited, with whom Union Jack established a relationship in March 2018, whereby both parties seek to co-invest in UK onshore hydrocarbon opportunities.

6.50am: Stocks expected to start on the back foot

The FTSE 100 is expected to start Tuesday on the back-foot as stock market sentiments turn, and, as attentions focus back on Brexit.

CFD and spreadbetting firm IG Markets sees the FTSE 100 losing around 27 points, calling the London index at 7,047 to 7,051.

Cooling globe trade tensions provided the week’s early trading triggers, but, as has become customary, talk of Brexit is never far away.

“In the UK, the parliamentary debates on the Brexit withdrawal agreement are set to start today, culminating in next week’s vote on the 11th December,” said Michael Hewson, an analyst at CMC Markets.

“Attorney General Geoffrey Cox went to great lengths last night to outline the pros and cons of the deal, expressing how uncomfortable he was with the deal, while at the same time outlining that it wasn’t a particularly comfortable compromise for the EU either.”

Bank of England boss Mark Carney’s thoughts on Brexit will also be back under the spotlight as the Canadian economist will appear in front of the Treasury Select Committee to give his opinions on the proposed withdrawal agreement and the future relationship agreement with the EU.

A customary degree of volatility is likely in the foreign exchange market, and, accordingly also for those stocks that are sensitive to currency moves.

Elsewhere, Wall Street closed out a strong session on Monday. The Dow Jones finishing Monday’s trading up 287 points or 1.13% higher at 25,826.

The S&P 500 climbed 1.09% to end the day at 2,790 while the Nasdaq rose 1.51% to 7,441 by the close of trading.

In Asia, Japan’s Nikkei lost 538 points or 2.39% to trade at 22,036 while Hong Kong’s Hang Seng gave up only 0.17% and the Shanghai Composite moved into positive territory, up 0.31% at 2,663.

Around the markets:

  • Sterling: US$1.2738, up 0.1%
  • Gold: US$1,237 an ounce, up 1.44%
  • Brent crude: US$62.30 a barrel, up 4.5%

City Headlines:

  • Altria in talks to buy cannabis company Cronos Group – CNBC
  • Qatar’s exit from Opec deepens rift with Saudi Arabia – Financial Times
  • Royal Dutch Shell ties executive pay to carbon reduction – BBC News
  • UK factories see inventories up, exports down, as Brexit nears – Reuters
  • It's not my fault the high street is dying, Sports Direct boss Mike Ashley tells MPS – Sky News
  • FCA warns banks about moving business away from the UK because of Brexit – City A.M.
  • Glencore’s copper kingpin Telis Mistakidis to step down – Financial Times
  • Amazon 'testing cashierless technology for bigger stores' - Telegraph

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