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FTSE 100 closes with modest gains on final pre-Christmas full-trading session as late Santa rally glimpsed

At the close, the UK blue-chip index was 9.24 points higher at 6,721.17 just below the late session peak of 6,733.00 and well above the early low of 6,653.65
Christmas in London
US stocks are trading higher in early deals
  • FTSE 100 index closes 9 points higher

  • US blue-chips attempt modest rally

  • UK GDP print left unchanged, US GDP revised lower


Close: Late Santa rally?

The FTSE 100 index started the Santa rally very late on the final full-day trading session before Christmas but did manage to close higher in tandem with an early modest rally on Wall Street, although that was starting to fade.

At the close, the UK blue-chip index was 9.24 points higher at 6,721.17 just below the late session peak of 6,733.00 and well above the early low of 6,653.65.

On Wall Street, around London’s close, the Dow Jones Industrial Average was about 38 points higher at 22,897 although both the broader S&P 500 index and the tech-laden were lower continuing the unseasonal caution over economic growth, trade wars and interest rates.

Joshua Mahony, market analyst at IG commented: “The Fed’s decision to raise rates earlier in the week was certainly unwelcome given the stock-market slide that has dominated over recent months. However, while markets are shifting their focus away from the Fed, we are now seeing the potential government shutdown provide a new focus for bears.

“With Donald Trump insisting that any spending bill should include funding for a wall on the US-Mexico border, the current bill which has passed the House look destined to fail at the newly Democratic Senate. The fact is that with Donald Trump having already provided a host of tax giveaway to corporations, a decision to provide US$5.7bn in funding to a wall would drive up the US deficit even further.”

On currency markets, sterling was mixed, falling against the US dollar, down 0.3% to US$1.1107, but rallied a touch versus the euro, up 0.5% to €1.1107 as investors continued fretting over Brexit deal uncertainties.

IG’s Mahoney commented: “The UK government is instructing UK firms to begin planning for a no-deal Brexit, with the expected rejection of Theresa May’s Brexit proposal ramping up the likeliness of a messy exit from the EU.

“Interestingly, we have seen UK consumer confidence hit a five-year low, putting the boot in for retailers at the time when they want people to be out spending. However, with wages far outstripping inflation and unemployment at multiyear lows, there is reason to believe that people have the money to spend, but are instead opting against splashing the cash given the prevailing Brexit uncertainty.”

3.40pm: Fed open to reconsidering view on rate hikes next year

Federal Reserve Bank of New York President John Williams said the central bank is open to reconsidering its view on interest rate hikes next year.

"We are listening, there are risks to that outlook that maybe the economy will slow further," Williams told Steve Liesman on CNBC's Squawk on the Street.

"What we're going to be doing going into next year is re-assessing our views on the economy, listening to not only markets but everybody that we talk to, looking at all the data and being ready to reassess and re-evaluate our views."

Earlier this week, the Fed hiked rates and forecast two more increases next year, down from the three previously estimated. 

3.10pm: US confidence index revised up, Fed's preferred measure of inflation inches closer to target

The University of Michigan's consumer confidence index was revised higher for December to 98.3 from a preliminary reading of 97.5. Economists had expected a final reading of 97.2. 

Naeem Aslam, chief market analyst at Think Markets UK Ltd, said: "No major downward move in the gold price despite the fact that we had a stellar number for the U.S. consumer confidence number.

"The reason for this is that investors are concerned about the government shutdown and its impact on the economy. We maintain our bullish view on gold but yes, some retracement could take place after the recent bullish move."

In other US data, the Commerce Department said consumer spending grew faster than incomes in November. 

Consumer spending rose 0.4% last month after a 0.8% increase in October, in line with market forecasts. 

Incomes rose 0.2% after a 0.5% gain in October, below expectations for a 0.3% increase. 

Inflation, as measured by Federal Reserve’s preferred core PCE gauge, picked up to an annual rate of 1.9% in November from 1.8% the prior month, as expected. The Fed is targeting 2% inflation. 

2.40pm: US stocks edge up at the open

US stocks edged higher at the start of trading even amid worries about the possibility of a government shutdown, rising interest rates and slowing global growth.

The Dow Jones Industrial Average rose 138 points to 22,995, the S&P 500 increased 11 points to 2,478 and the Nasdaq gained 10 points to 6,537.

Investors are trying to look past the fact that house Republicans late Thursday approved a funding package, which includes money to fund the expansion of the southern border wall, which the Senate is unlikely to approve and could lead to a government shutdown.

Traders also digested US GDP data for the third quarter, which was revised slightly lower but the pace of growth still put the country on track to meet Trump's 3% target for the year.

Separate data showed US durable goods orders rose 0.8% in November, following a 4.3% fall the previous month when orders for commercial and military aircraft slumped.

The Federal Reserve raised interest rates for the fourth time this year on Thursday by 25 basis points to a range of 2.25% to 2.5%, but indicated the next year's hikes would be more gradual. 

1.30pm: Third quarter US GDP revised lower

The US economy slowed in third quarter more than previously estimated, the Commerce Department said in its third reading of reading of gross domestic product for the period.

GDP increased at an annual rate of 3.4%, slightly lower than the 3.5% growth estimated in October. Economists had expected the reading to be unchanged from the last estimates.

However, the pace of growth was likely strong enough to keep growth on track to meet the Trump administration’s 3% target this year.

The economy grew 4.2% in the April-June quarter.

12.30pm: Spotify settles lawsuit

Spotify has settled a lawsuit over claims the music streaming service infringed the rights of songwriters and publishers.

Wixen Music Publishing accused Spotify of infringing more than 10,000s in a lawsuit seeking US$1.6bn in damages.

The lawsuit was settled for an undisclosed amount.

"Wixen Music Publishing and Spotify USA have agreed to a final dismissal of the lawsuit filed by Wixen Music Publishing late last year," the two companies said in a statement.

12.00pm: US stock futures point to lower open

US stocks are poised to fall at the opening bell amid the possibility of a government shutdown and ongoing worries about sluggish global growth.

Dow Jones Industrial futures fell 66 points to 22,931, S&P 500 futures dropped 9 points to 2,476 and Nasdaq futures declined 28 points to 6,528.

Today’s session will see the final reading of third quarter US economic growth, US personal consumption figures and durable goods orders data.

11.00am: Prospect of US government shut-down weighs on sentiment

Despite the strength of the heavily-weighted mining sector, the Footsie saw its losses lengthen as it entered the last hour of the morning trading session.

The FTSE 100 was down 36 at 6,676, despite the likes of Antofagasta, Anglo American, Glencore and Rio Tinto notching up gains of more than 1%.

“Stocks are back in the red, with the risk of a US government shutdown taking the blame after the recent Fed rate hike selloff. Meanwhile, UK consumers remain pessimistic despite healthy economic position,” said Joshua Mahony.

According to Mahony, Santa – when did he supplant Father Christmas in British culture, by the way? - is nowhere to be seen as we stumble into the festive break.

“The Fed’s decision to raise rates earlier in the week was certainly unwelcome given the stock-market slide that has dominated over recent months; however, while markets are shifting their focus away from the Fed, we are now seeing the potential government shutdown provide a new focus for bears. With Donald Trump insisting that any spending bill should include funding for a wall on the US-Mexico border, the current bill which has passed the House look destined to fail at the newly Democratic Senate. The fact is that with Donald Trump having already provided a host of tax giveaway to corporations, a decision to provide $5.7 billion in funding to a wall would drive up the US deficit even further,” Mahony said.

Talking of consumer confidence, the latest GfK survey indicator fell by a point to -14, signifying its lowest level since mid-2013.

“Consumers’ assessment of how the economy is going to evolve over the coming twelve months deteriorated sharply to the lowest level in seven years, while the equivalent indicator for personal finances was also weaker and matched the reading seen immediately after the Brexit referendum,” said Daiwa Capital Markets.

“There was some slightly more positive news with regards to the climate for major purchases, which improved slightly from the previous month and was in line with its average in 2018; however, overall, we would not expect that the festive period to see particularly strong consumer spending this year. Indeed, yesterday’s figures from the retail sector, which showed stronger than expected sales growth in November, likely only reflected the effect of consumers bringing their spending forward from December to take advantage of Black Friday deals.

“Looking at Q4 as a whole, consumer spending seems likely to have increased only slightly, almost certainly at a slower pace than the 0.5%Q/Q rate seen in Q3,” Daiwa added.


10.00am: GDP left unchanged; public sector borrowing at its lowest November level since 2004

The Footsie was in gentle decline following the release of the UK gross domestic product update.

The FTSE 100 was down 20 at 6,692, just six points above its intra-day low.

“The latest UK GDP print confirms yet another lacklustre quarter for economic growth,” declared Anthony Kurukgy, a senior sales trader at forex trading platform operator, Foenix Partners.

“Although the print remained unchanged from the month prior (0.6%), it reaffirms Governor Carney’s speech at the latest Central Bank meeting that growth forecasts for 2019 will be directly linked to the success or failure of the Brexit deal. With uncertainty having ‘intensified considerably’ over the last month, next year’s outlook remains bleak,” Kurukgy said.

Borrowing (public sector net borrowing excluding public sector banks) in November 2018 was £7.2 billion, £0.9 billion less than in November 2017, the Office for National Statistics (ONS) reported.

This was the lowest November borrowing for 14 years (since 2004), it added.

It has not been a great year for house-builders but the sector was enjoying a late flourish this morning, with the likes of Barratt Developments PLC (LON:BDEV) and Taylor Wimpey PLC (LON:TW.) - both up 1.9% - defying the weaker trend.

Fashion retailer Next PLC (LON:NXT) was also swimming against the tide, rising 34p to 4,148p despite Jefferies cutting its price target by a tenner to 4,600p.

Elsewhere in the retail sector, supermarket group J. Sainsbury PLC (LON:SBRY) also shrugged off news of a broker price target cut; the shares were up 2.7p at 268.7p, even as Bernstein lopped 20p off its target price at 310p.

Food ordering technology platform operator Just Eat PLC (LON:JE.) was the top performing blue-chip, rising 4.4%.

“Just Eat has been taking plenty of flak from investors in recent weeks: activist hedge fund Cat Rock has not been pleased with the more than 28% decline in Just Eat’s stock this year, but the shares were reinforced this week when broker Liberum stated it though they were worth double the 578p they were trading at earlier this week,” commented Fiona Cincotta at City Index.

“There is also now speculation that the company could be the target of a takeover bid. Both Cat Rock and Liberum have been critical of Just Eat’s overseas strategy but a bid may come from that direction too,” she added.

8.45am: It looks like we might get the quiet day we are all secretly hoping for

The FTSE 100 opened little changed on the last full trading day before Kris Kringle’s big night out.

The blue-chip index was down 4 points at 6,709, which considering US-Chinese relations took another turn for the worse overnight counts as a decent result – assuming anyone is at their trading desk to notice it.

Craig Erlam of Oanda is at his desk and he reckons a late surge before the end of the year to save what has been “an otherwise horrible quarter” is looking increasingly unlikely.

“We’ve gone from undeterred optimism to widespread pessimism in such a short period of time – as is often the case – and there clearly isn’t much appetite just yet to try and catch this particular falling knife. The Trump administration’s continued hard-line approach with China isn’t helping matters and the prospect of a government shutdown isn’t doing the situation much good either,” Erlam said.

With big corporate news about as rare as snow on Christmas Day (statistically, Britain is more likely to be snowbound at Easter), the Footsie could be set for a day of drift.

Once upon a time, Interserve PLC (LON:IRV) could be considered a big company but its debt mountain has reduced its market capitalisation to a size roughly equivalent to the annual salary of a middling Premiership footballer.

The shares rose 3.95% to 11.31p today – a far cry from 2018’s peak of 123.5p – as it said it was making progress on its deleveraging plan.

It is currently intended that a portion of the new equity Interserve intends to issue will be offered to existing Interserve shareholders and new investors through a public offering.

On the plus side, the idea offers existing Interserve shareholders the option to mitigate being diluted to a level even an advocate of homoeopathy would find derisory but on the negative side, the shares being offered are shares in Interserve …

Proactive news headlines:

Keywords Studios PLC (LON:KWS) said it is trading in line with market expectations as it announced another of its typical bolt-on acquisitions - computer game marketing assets producer, Sunny Side Up Creative, which it is buying for C$5.9mln.

Advanced Oncotherapy PLC (LON:AVO) is raising £10.0mln as it presses ahead with the building of its next-generation LIGHT proton therapy system on Harley Street.

Haydale Graphene Industries PLC (LON:HAYD) has raised £1mln in additional finance through a £750,000 loan and £250,000 share subscription. The loan is a 16-month facility from the Development Bank of Wales and carries a coupon of 11%. The share subscription was priced at 20p, a discount of 21.6% to the close yesterday.

Wishbone Gold PLC (LON:WSBN) has raised a total of £300,000.00, before expenses, through a share placing with the proceeds to be used to accelerate production from the newly licensed Honduras gold facility. The AIM-listed gold trading and exploration company said its company broker, Turner Pope Investments placed 300,000,000 new ordinary shares at a price of 0.1p each.

Red Rock Resources PLC (LON:RRR) said initial exploration at the Luanshimba project in the Democratic Republic of Congo has shown promising results that suggest the presence of copper and cobalt mineralisation at depth.

Range Resources Limited (LON:RRL) (ASX:RRS) said that LandOcean Energy Services Co. Ltd has confirmed that an outstanding payment of US$2.8mln remains refundable to Range, and they will use all reasonable endeavours to arrange the payment as soon as possible. The group said its current cash position is approximately US$3.3mln.

6.45am: London expected to open modestly lower

Global markets have adopted seasonal red as the colour of the moment and the Footsie is no exception.

After falling 54 points to close at 6,711 yesterday, the UK’s blue-chip index was expected to open about 23 points lower this morning.

“The negative sentiment follows a week when the Fed appeared more hawkish than the market had hoped for, holding on to further tightening of monetary policy despite the market volatility,” noted Danske Bank.

“The negative market sentiment was also prompted by renewed US-China tensions, which flared up after the US Justice Department filed charges overnight that alleged Chinese officials co-ordinated a decade-long espionage campaign to steal intellectual property and other data from dozens of companies. Treasury Secretary Steven Mnuchin said the indictments are a separate track from trade talks, which are scheduled to pick up again in January. However, China nevertheless demanded that the Justice Department withdrew the comments, highlighting the continuing tension between the world's top two economies.

“Meanwhile, the lower house of Congress passed funding for Donald Trump's border wall; however, we expect the proposal to be rejected by the Senate before Friday's midnight deadline, increasing the chance of a partial federal government shutdown,” the bank added.

US indices were sharply lower yesterday, with the Dow Jones down 464 points at 22,860 and the S&P 500 off 39.5 points at 2,467.4.

Attention today will be focused on the final reading of US gross domestic product (GDP), with the market expecting growth of 3.5%, and US durable goods orders, where the consensus estimate is for a 1.6% increase.

Asian markets were not as soft as US ones but were down nevertheless this morning.

In Tokyo, the Nikkei 225 was off 226 points at 20,166 and in Hong Kong the Hang Seng index was 58 points lighter at 25,565.

On the last full trading day before Christmas Day, there is precious little scheduled in the way of company results although as ever some companies may decide today is a good day to sneak out bad news.

On the economic front, we have already had GfK consumer confidence – spoiler alert: there is very little – and later on we will get GDP data.

Significant announcements expected on Friday:

AGMs: Haydale Graphene Industries PLC (LON:HAYD)

Economic data: UK GfK consumer confidence; UK quarterly GDP; UK public sector finances; US durable goods orders; US personal income and spending; US Schiller-Case home price index; University of Michigan final consumer sentiment index

Around the markets:

  • Sterling: US$1.2663, up 0.05 cents
  • 10-year gilt: yielding 1.138%
  • Gold: US$1,262.20 an ounce, down US$5.70
  • Brent crude: US$46.19 a barrel up 31 cents
  • Bitcoin: US$4,042.77, up US$6.69

City headlines:

  • Financial Times

  • Beijing has been accused by US and UK authorities of conducting a worldwide campaign of cyber-attacks against western powers and their allies with a view to stealing trade secrets
  • The Daily Telegraph

  • The Bank of England has warned that slowing world economy is hurting UK exports and adding gloom in financial markets as policymakers voted unanimously to keep interest rates at 0.75%.
  • A Tokyo court on Thursday unexpectedly decided not to extend the detention of Nissan's ousted chairman Carlos Ghosn.
  • The Guardian

  • UK’s car manufacturing output declined by almost 20% in November, as Brexit concerns and weakening demand in key markets affected the industry.
  • Consumer confidence measured the GfK index has plunged to a five-year low amid Brexit uncertainty.
  • Virgin Atlantic has won a high court injunction to halt a series of planned strikes by pilots over the festive season.
  • The Times

  • Oil prices declined below $55 a barrel for the first time in more than a year yesterday after fears that an interest rate rise in the US would dampen demand.
  • House prices will increase by between 2% and 4% next year, Halifax has forecast.
  • France has threatened to ban Ford from selling cars to the nation’s police to press the carmaker into reversing its decision to shut its Blanquefort gearbox factory, with the loss of 847 jobs.
  • Daily Mail

  • Walgreens Boots Alliance posted a 4.1% dip in profits to £1.3 billion in the three months to the end of November compared with a year earlier, blaming tough trading conditions.

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