logo-loader

FTSE 100 reverses into close to finish lower as ECB ends QE stimulus program

Last updated: 17:15 13 Dec 2018 GMT, First published: 06:41 13 Dec 2018 GMT

Trader staring at screen
  • FTSE 100 lower

  • EU confirms quantitative easing (QE) programme will come to an end next month

  • FTSE 250 also lower

FTSE 100 reversed into the close, ending the day in negative territory, as European benchmarks were rattled by Brexit worries and the ECB meet did little to cheer the mood.

The UK blue-chip benchmark index closed down around two points at 6,877.

The more UK company focused FTSE 250  was also lower, sliding over 170 points at 17,818 while FTSE AIM 100 shed 2.69 at 4,616.

Earlier, the European Central Bank, as expected,  confirmed it was ending this month the asset purchase program to stimulate the eurozone's economy. 

Mario Draghi, the central bank's chief added it was also keeping its main interest rate on hold at 0%.

"Dealers are still hopeful that Beijing and Washington DC are on the road to striking a deal," said David Madden, analyst at CMC Markets in London.

"Mario Draghi, the head of the European Central Bank (ECB) was a little downbeat in his outlook, but given the economic cooling the area has experienced, and the drop in oil, his update wasn’t a surprise."

Travel group TUI AG (LON:TUI) was among the top Footsie risers on the day, up 4.48% to 1,190p after it posted an impressive set of results in light of the troubled travel sector.

Revenue and underlying earnings for the year advanced by 6.3% and 10.9% respectively, while the dividend was increased to 72 cents from 65 cents.

3.50pm FTSE 100 moves higher

While UK investors remained fixated on Brexit developments – or lack of them – the rest of the world was focused on US-Sino trade relations.

Having spent much of the day in the red, the FTSE 100 finally got with the programme and moved 16 points higher to 6,896.

"Dealers are still hopeful that Beijing and Washington DC are on the road to striking a deal. Mario Draghi, the head of the European Central Bank (ECB) was a little downbeat in his outlook, but given the economic cooling the area has experienced, and the drop in oil, his update wasn’t a surprise," said David Madden at CMC Markets.

Moving counter to the market trend were retail giants Marks & Spencer Group PLC (LON:MKS) and Next PLC (LON:NXT), which were the worst blue-chip performers; the former was down 3.5% and the latter down 3.4% on what was generally a bad day for retailers.

Heavy falls were suffered by Bonmarche, Sports Direct and Koovs (see below) after trading updates while nothing more than an announcement that it plans to move from the main market to AIM was enough to knock 6.1% off the price of video games seller GAME Digital PLC (LON:GMD).

VR Education Holdings PLC (LON:VRE) was the day’s top riser in London, soaring 37% to 14p after announcing the launch of its ENGAGE platform.

READ VR Education shares jump as it launches ENGAGE online learning and training platform

The stock has already moved past the 13p price target set last week by Davy Research.

...

 

2.50pm: US stocks open firmer, Footsie largely unmoved

US markets opened higher, as expected, with the Dow Jones up 91 at 24,618 and the S&P 500 up 10.4 at 2,661.5.

Back in Blighty, the FTSE 100 remained in a holding pattern, down 6 at 6,874, out of step with other European indices, most of which are on the up after the European Central Bank (ECB) formally announced the end of its quantitative easing (QE) programme.

“The ECB just announced, or better confirmed, the end of its net asset purchasing programme (QE). What looks like pure boredom is, in fact, the result of masterly communication, setting itself on auto-pilot and preparing financial markets,” declared Carsten Brzeski, the chief economist at ING Germany.

“Some might argue that the end of net QE actually comes too late, few others currently contemplate that it might come too early. In any case, the ECB has managed to shelve the first unconventional crisis tool without distorting markets or the economy. Contradicting fears of market turbulence or surging bond yields, the ECB managed to end QE, and no one seems to care,” he added.

 

JR Zhou, a market analyst at the online trading platform, Infinox, seems to think foreign exchange traders care.

“Months of hints, nods and winks meant the ECB had no choice but to turn off the Eurozone money taps or risk serious damage to its credibility.

“While Mario Draghi was boxed in by previous announcements about QE, his press conference revealed two stark truths – he remains deeply concerned at the fragility of Eurozone growth and reserves the right to administer further monetary stimulus.

“Against a bleak backdrop of stalling German exports, wounded leaders in the Eurozone’s two largest economies and Italy’s simmering feud with the EU, Britain’s Brexit chaos almost looks a sideshow,” Zhou said.

“No wonder the doveish Mr Draghi wants to keep his options open. With the ECB’s inflation forecasts predicting that both economic growth and inflation in the Eurozone will dip in 2019, the likelihood of further monetary stimulus has increased, not fallen, with the news that the QE crutch is finally being withdrawn.

“As a result the euro is sliding against the dollar, and even against the recovering pound,” Zhou added.

2.20pm: EU leaders peddle uniform line in Brussels

Theresa May has arrived in Brussels for yet more Brexit negotiations but EU leaders are adamant there will be no renegotiation of the deal.

“The deal we already have is a good one. I think there is also an understanding from Theresa May that there will be no new negotiation of the withdrawal agreement,” said Sebastian Kurz, the Austrian chancellor.

“I think there will be some readiness from our side to maybe find some better explanation about the future relationship,” Kurz ventured.

“There is also some room to have a better interpretation of what we agreed on but there will be no new deal about the withdrawal agreement,” he added.

Earlier, Mark Rutte, had sung from the same hymn-sheet when speaking to reporters, saying the focus would be on trying to “demystify” the issue.

 

Just ahead of the US open, the FTSE 100 was down 11 at 6,870.

1.00pm: US stocks set to open firmer 

The Footsie was still drifting ahead of an open on Wall Street that is likely to be firm but not as strong as expected yesterday.

The FTSE 100 was down 15 at 6,864 while across the pond the Dow Jones was expected to open 73 points higher at 24,600 and the S&P 500 up 7 at 2,658.

“US index futures posted some solid gains overnight, but some of that upside has been eroded early in the European session. Gains are still there, but if downside pressures are sustained across major European bourses then the picture could look somewhat different come the opening bell, and the ECB is in a position to play a major role here,” said James Hughes, the chief market analyst at AXI Trader.

“Mario Draghi and his team are today widely expected to announce an end to the bond buying stimulus measures which have been propping up the Eurozone economy since the credit crisis a decade ago. More significant however will be any communication over the timing of the first rate hike. This had been tipped for Q3 2019, but lacklustre economic data has resulted in some suggestions that it could be pushed back. Such news would likely boost Euro stocks – and have the potential to lend some support on Wall Street, too,” he added.

On the corporate front, Christmas is the busiest time of the year for retailers but perversely also the time of the year when shops are most likely to go bust so shareholders in Bonmarche Holdings PLC (LON:BON) might have felt a cold blast when the fashion firm issued a profit warning.

Importing the idea of Black Friday from the US has been a prime example of the retail sector shooting itself in the foot and Bonmarche added weight to this view as it revealed sales in the Black Friday week ended November 24 were “extremely poor”, particularly at its stores, after a weak performance throughout the year.

“All this comes after weaker sales reported at John Lewis and Primark,” observed Neil Wilson at markets.com.

“It does not bode well for a strong seasonal uplift for the broader retail sector. In many hares are already fairly well discounted for but for some in the process of transformation plans it could not come at a worse time. Despite selling off heavily already, the likes of Marks & Spencer, Debenhams and others are yet vulnerable to a slushy Christmas trading period,” he suggested.

Shares in Bonmarche were down by more than 40%.

Elsewhere in the retail sector, leisurewear flogger Sports Direct International PLC (LON:SPD) tumbled 14% to 238.5p after its interim results.

“The much-awaited Sports Direct interims show decent underlying 15.5% growth in pre-exceptional EBITDA (helped by reduced losses in the US operations), but the overall performance is depressed by a huge loss in House of Fraser since acquisition and the company has warned that the full-year profit outcome will be held back by House of Fraser (aka the Harrods of the High Street),” said independent retail analyst, Nick Bubb.

 

Interims from India-focused fashion retailer Koovs PLC (LON:KOOV) were nothing to make a song and dance about, either.

The shares lost 13% as it reported a sharp decline in the trading margin to 14% in the six months to the end of September from 18% the year before.

The pre-tax loss narrowed to 580.9mln rupees (£6.4mln) from INR647.7mln (£7.8mln) the previous year.


 

11.15am: Hope in Brussels sprouts eternal

It will soon be the season for Brussels sprouts but for now, we’ll make do with Brussels doubts.

“After surviving a vote of no confidence, albeit in a manner that wasn’t as convincing as she would have hoped, UK PM Theresa May is now turning her attention back to Brussels as she bids for further legal assurances over the Irish backstop,” commented David Cheetham at XTB, as the FTSE 100 was proving remarkably sanguine about political events, sliding just 10 points to 6,870.

“The best performing blue-chip in London today is Tui, with the travel company’s share price rising by more than 5% to move back above the 1200p mark. The firm reported double-digit sales growth for the full year with a strong performance in hotels and cruises the chief contributors,” Cheetham continued.

“There have been well-publicised problems for travel operators of late with a heatwave seeing many holidaymakers choose to take domestic breaks while strikes amongst airline staff have contributed to an all-around challenging environment. Given this backdrop the results are no doubt pleasing and given that the stock has tumbled some 40% from its peak back in May investors will be hoping that this latest release can sew the seeds for a sustained recovery,” he added.

It would appear the Whitehall farce that is Britain’s tortuous exit from the European Union is having a malign effect on the confidence of private investors.

Unit trust supermarket Hargreaves Lansdown released its latest Investor Confidence index, revealing it has hit a fresh record low, falling from 69 in November to 52 in December. The rolling 12-month average level is 94.

“Any element of festive cheer is distinctly missing from investor sentiment, and little wonder given proceedings at Westminster. The political uncertainty surrounding Brexit continues to cast a long, dark shadow over investor confidence, which is significantly lower than even during the depths of the financial crisis. The ongoing trade spat between the US and China isn’t exactly relaxing background music either and is serving to further unsettle investors,” said Laith Khalaf, a senior analyst at Hargreaves Lansdown.

Bunzl PLC (LON:BNZL) was defying the slightly weaker trend, rising 1.2% to 2,435p following a trading statement. The distribution and services group said full-year revenue is expected to be up 8% and 9% year-on-year on a constant currency basis, with organic growth of more than 4%.


 

10.00am: Oil stocks drag the Footsie lower

After a brief sojourn in positive territory, the FTSE 100 was back in the doldrums, dragged lower by weak oil stocks.

The FTSE 100 was down 4 at 6,876, with the difference between advance and decline down to the weakness of BP PLC (LON:BP.), down 1.9%, and Royal Dutch Shell (LON:RDSB), down 0.8%, as the price of Brent crude for January delivery was trading 10 cents lower at US$51.05.

“A resurgent pound is doing little to help the FTSE 100, with optimism of a more stable Brexit outlook being reflected in sterling strength. Despite the US-China story failing to continue driving the entire market higher, many of the top FTSE gainers still reflect the focus on a possible rebound for commodity prices and demand, with Antofagasta and Anglo American both rising sharply,” noted Joshua Mahony, a market analyst at IG Group.

Most of sterling’s resurgence took place last night after the prime minister, Theresa May, saw off the rebels in her own party.

Big dollar earners such as fags makers British American Tobacco PLC (LON:BATS) and Imperial Brands PLC (LON:IMB) were among the big losers, shedding 2.3% and 1.2% respectively.

Groceries delivery technology outfit Ocado PLC (LON:OCDO) defied the trend, rising 3% to 817.4p following a trading update.

“The company’s start to life as a supermarket delivery company has long been eclipsed by what is under the bonnet,” said Richard Hunter at interactive investor.

“Ocado’s cutting-edge technology platform, which is being rolled out in the UK apace, has caught the eye of a number of global players keen to link into its order fulfilment capabilities. As such, in recent months tie-ups have been announced in Canada, Sweden and France with the potential jewel in the crown being the contract with Kroger of the United States.

“It is perfectly feasible that further deals are in the pipeline and, whilst it may take some time for even the existing ventures fully to bear fruit, income possibilities are so promising that the share price has had some difficulty in keeping up with such a transformation in such a relatively short period of time,” Hunter noted.

“Nonetheless, the 12% growth in retail revenue over the period, allied with a 13% hike in average orders per week, is further confirmation that plans are coming together. The trading update also provides a positive outlook from the company and, despite a pause over the last three months when the shares have fallen 14%, the picture over the last year is rather more indicative of the company’s progress. In that period, the shares have risen 126%, as compared to a decline of 8.2% for the wider FTSE100. This may, in turn, have resulted in the valuation being seen up with events for the moment, with the market consensus having recently softened to a hold, albeit a strong one,” Hunter concluded.

8.45am: The top-share index advanced, buoyed by financials

The Footsie was scraping through its own “vote of confidence” motion in early deals on Thursday.

The blue-chip index was up 15 points (0.22%) at 6,896, buoyed by the strength of financial stocks and airlines.

After initially receiving a boost from the survival of the prime minister, Theresa May, in a Tory party vote last night, sterling was little changed on the day on foreign exchange markets this morning.

“GBP [i.e. sterling] was the big winner overnight after UK PM May survived the long-awaited ‘no confidence’ vote by members of her party but at the cost of having to promise that she won’t be a candidate at the next election,” said Marshall Gittler, at ACLS Global.

“While this gets the UK over one hurdle, it still leaves the same problem as before, namely, what to do about the Brexit bill? There are only three alternatives: 1) pass the bill, 2) don’t pass the bill and have a “hard Brexit,” or 3) have another vote on whether to leave the EU and perhaps give up on Brexit entirely. It looks to me like the powers-that-be have ruled out number 3 as “undemocratic” (never mind that MPs got to take a second vote on whether they like PM May, as many people have pointed out). That leaves only the current legislation or nothing,” Gittler said.

“It’s still going to be difficult if not impossible for her to pass the current legislation as is – yesterday’s vote showed that only 200 Conservative Party members support her, and she needs 325 votes to pass the legislation. Assuming that the Labour Party (257 seats) and the Scottish National Party (35 seats) vote against it, it’s pretty hopeless. I think the odds are now shifting towards number 2, i.e. crashing out of the EU without an agreement. That’s the disaster scenario for GBP,” he opined.

Among blue-chips, banks such as Royal Bank of Scotland PLC (LON:RBS), Barclays PLC (LON:BARC), Standard Chartered PLC (LON:STAN) and Lloyds Banking Group PLC (LON:LLOY) were going well, with rises of 1.7% or more, while insurers Aviva PLC (LON:AV.) and Legal & General Group PLC (LON:LGEN) were up 1.5% and 1.3% respectively.

TUI AG (LON:TUI) was the top blue-chip risers, rising 6.6% to 1,214.5p after it maintained its guidance for the next three years after delivering earnings growth in 2018.

READ TUI AG prepares for potential hard Brexit as it posts 2018 earnings growth

Airlines easyJet PLC (LON:EZJ) and British Airways owner International Consolidated Airlines (LON:IAG) rose 2.4% and 1.3% respectively, in sympathy.

 

Proactive news headlines:

accesso Technology Group PLC (LON:ACSO) is to implement a combination of its ticketing, guest experience and queuing solutions at The Bear Grylls Adventure in Birmingham.

A number of potential purchasers are sniffing around the fund management business of Braveheart Investment Group PLC (LON:BRH).

US regulators have confirmed they will make a decision on whether or not to approve Shield Therapeutics PLC’s (LON:STX) Feraccru drug by 27 July 2019.

A number of potential purchasers are sniffing around the fund management business of Braveheart Investment Group PLC (LON:BRH). The board of Braveheart has recently been approached by a number of third parties, each of whom have expressed an interest in either purchasing outright the fund management business or entering into some form of a joint ownership arrangement.

Thor Mining PLC (LON:THR) (ASX:THR) has announced an upgraded and increased mineral resource estimate containing tungsten, copper and - for the first time - zinc, for the Desert Scheelite deposit at Pilot Mountain in Nevada USA.

Erris Resources PLC (LON:ERIS) sees the potential for a small to mid-sized gold producer to drill the Brännberg Project in Sweden after initial partner Centerra Gold elected not to continue drilling due to the mineralised system not demonstrating the size to host a gold deposit of over 1mln ounces.

Oil and gas services provider ADES International Holding Ltd (LON:ADES) has secured an extension on its contract for the Admarine 657 offshore rig in Saudi Arabia.

Highlands Natural Resources PLC (LON:HNR) is looking forward to a happy New Year with a number of new wells due online over the coming weeks. It follows a busy and successful work programme at the East Denver project in Colorado this year.

Landore Resources Limited (LON:LND) has said the planned mineral resource estimate and report on the BAM Gold Deposit, Junior Lake Property, Ontario, in Canada is progressing well and is due to be completed and published in early January 2019.

Savannah Resources PLC (LON::SAV) has announced that ongoing metallurgical test work has successfully produced saleable quartz and feldspar products for use in the ceramics industry from its Portuguese Mina do Barroso Project.

VR Education Holdings PLC (LON:VRE) has announced the commercial release of ENGAGE – its online virtual learning and corporate training platform. It is a significant milestone for the company, which raised £6mln when it listed on the junior market earlier this year, a large slice of which was earmarked for the launch of ENGAGE.

Diversified Gas & Oil PLC has confirmed that a major shareholder has divested a substantial portion of its 5.51% stake in the company via a share placing. The group said Trive Capital, and its associated entities have sold 22.5mln DGOC shares at a price of 114p for a gross placing consideration of £25.65mln.

Plexus Holdings PLC’s (LON:POS) chairman, Jeff Thrall believes the prospects for the group, both at the corporate and trading level have never been better. In a statement to be delivered at the AIM-listed oil and gas engineering services firm’s Annual General Meeting on Thursday, Thrall said: “I believe that Plexus and its proprietary technology has reached a key point in time in its strategic development, and why I see an exciting future for our POS-GRIP wellhead and connector applications in larger market sectors such as surface production, and subsea exploration and production.”

Renewable fuels provider Aggregated Micro Power Holdings PLC (LON:AMPH) has posted a sharp rise in first-half sales and gross profits. Still, AMP delivered over 80,000 tonnes of wood pellet and wood chip to nearly four million customers during the period. It also provided service and maintenance to around 900 biomass boilers.

Seeing Machines Limited (AIM: SEE) has announced that it has appointed Kate Hill as an independent non-executive director with immediate effect. The group noted that Hill had a distinguished 20+ year career with Deloitte Touche Tomatsu as an audit partner where she worked with Australian Securities Exchange-listed and privately owned clients. The firm also announced that Jim Walker, a non-executive director, is to leave the group.

Directa Plus PLC (LON:DCTA) announced that further to its £4mln fundraising announcement released on Wednesday, the open offer portion will allow qualifying shareholders apply for an aggregate of up to 2,009,673 shares at the 3p issue price to raise up to approximately £1.0mln before expenses. It added that qualifying shareholders will have a basic entitlement of 1 open offer Share for every 22 existing ordinary shares held.

Galantas Gold Corporation (LON:GAL) (TSXV:GAL) announced that the first part of its private placement closed on December 12, 2018, with 57,435,065 common shares placed raising proceeds of C$4,953,774 (£2,871,753). The group said United Kingdom places subscribed at a price of £0.05 per common share, while Canadian places subscribed at a price of C$0.08625 per common share. It added that the second part of the private placement requires acceptance of the TSX Venture Exchange and is anticipated to be for 22,564,935 common shares for receipt of C$1,946,226 (£2,871,753).

06.40am: FTSE 100 set for a mixed start after Mayhem is averted

The FTSE 100 is seen slightly lower ahead of Thursday’s open and, predictably, politics remains a primary focus in the UK as Prime Minister Theresa May clings on to her job but quite clearly remains stuck between a rock and a hard Brexit.

May survived her ‘no confidence’ vote on Wednesday though there were more votes against her than expected. Around a third of her party voted against, and, she is still tasked with getting a different deal from Brussels – something that looks somewhat unlikely, according to political commentators.

Many expect that it all may be repeated in the new year when the EU deal will need to be voted on in parliament.

The upshot for markets is that whilst nothing material changed yesterday, uncertainty remains high.

IG Markets reckons the FTSE 100 will start about 5 points lower, as the spread-betting and CFD firm called the London index at 6,878 to 6,881 with about an hour and a half to go before the open.

Naturally, attentions are focussed on the pound.

“Sterling soared yesterday against the US dollar and the euro as traders widely predicted that Theresa May would withstand the leadership contest," said David Madden, an analyst at CMC Markets.

“The pound retreated slightly after it was confirmed that Mrs May won the vote. Now that it has been confirmed she will remain the party leader, she can get on with her attempts to obtain some leeway from the EU.”

Elsewhere, international markets are otherwise looking at trade, trump and China.

Both China and America are seen to be making some concessions to ease the evident trade tensions, and, Trump has said he will involve himself in the Huawei case (after a Chinese executive was arrested in Canada, with extradition ordered, in relation to allegations connected to US sanctions against Iran).

Last night, Wall Street ended positively. The Dow Jones closed up 157 points or 0.67% at 24,527, the S&P 500 finished 0.54% higher at 2,651 and the Nasdaq gained 0.95% to end the session at 7,098.

In Asia, meanwhile, Japan’s Nikkei was up about 213 points or 1% at 21,816 while Hong Kong’s Hang Seng added 313 points or 1.2% to 26,488. The Shanghai Composite index similarly gained 1.28% at 2,635.

Significant events expected on Thursday:

ECB rate decision

Finals: TUI AG (LON:TUI). IntegraFin Holding PLC (LON:IHP)

Interims: Sports Direct PLC (LON:SPD), Purplebricks PLC (LON:PURP), RhythmOne PLC (LON:RTHM), Tungsten Corp. PLC (LON:TUNG)

Trading update: Ocado Group PLC (Q4) (LON:OCDO), Bunzl PLC (LON:BNZL), Serco PLC (LON:SRP), PZ Cussons PLC (Q1) (LON:PZC)

Ex-dividends to clip 1 point off FTSE 100 index: Associated British Foods plc (LON:ABF), 3i Group PLC (LON:III)

Economic data: US weekly jobless claims; US export, import prices

Around the markets:

  • Sterling: US$1.2625, down 0.03%
  • Gold: US$1,245, up 0.09%
  • Brent Oil: US$60.47, up 0.4%
  • Bitcoin: US$3,354, down 0.9%

City headlines:

  • Financial Times: UK Prime Minister Theresa May has survived an attempted coup by Eurosceptic Conservative MPs, but the confidence vote saw her authority shaken and her party bitterly divided.
  • The Guardian: Business leaders have urged MPs to move on from infighting after Theresa May survived a vote of no confidence in her leadership while urging the government to avoid a no-deal Brexit.
  • Financial Times: UK outsourcer Amey is likely to be sold to a private equity firm in the new year; Ferrovial is in talks with PAI Partners and Greybull Capital over a potential sale of the business.
  • Financial Times: Elliott Management has built a €1 billion stake in Pernod Ricard in an attempt to get higher margins and better governance at the French drinks group.
  • The Daily Telegraph: Free-to-use digital payment firm Revolut has received a licence to operate in Europe from next year, reducing its dependence on the UK after Brexit.
  • Financial Times: Investors were unimpressed by Credit Suisse’s plans to buy back as much as SFr3 billion of shares and modestly increase its dividend.
  • The Times: Inditex, the parent company of Zara, has registered slower than expected growth in the first nine months of this year owing to unseasonably warm weather this autumn.
  • Daily Mail: Losses at kitsch middle-class retailer Cath Kidston more than doubled to £42 million last year, which the company blamed on higher costs.
  • The Daily Telegraph: Eleven Sports, a streaming service that aimed to become the "Netflix of sport", is at risk of closure following its failure to secure distribution via established pay-TV operators.
  • The Times: President Trump has criticised Federal Reserve chairman Jerome Powell for being “far too aggressive” with rate increases and warned Fed policymakers that they would be “foolish” to raise interest rates next week.
  • The Times: The average number of listed properties per branch fell to a near-record low, according to the residential market monthly survey by the Royal Institution of Chartered Surveyors.

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

1 hour, 2 minutes ago