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FTSE 100 closes higher as markets climb on trade talk optimism

Trade talks between China and the US are said to be going very well, which has lit a fire under US equities
City skyline
In New York, the Dow Jones Industrials Average ended 98 points higher helped by hints that the US Federal Reserve could halt its tightening of monetary policy
  • FTSE 100 closes higher on trader optimism

  • Wall Street shares climb

  • Broker comment lifts ITV

FTSE 100 closed higher, along with other European indices and as US stocks climb higher on optimism about trade talks.

The UK's blue-chip index added over 50 points at 6,861.

The FTSE 250 index added over 199 points at 18,175.

On Wall Street, the Dow Jones Industrial Index rose over 151 points at 23,682.

David Madden, analyst at CMC Markets, noted: "Dealers have high hopes for the US-China trade talks, and there were some optimistic words from President Trump, and that added to the bullish move.

"The negotiations will extend into this evening, and given the lack of negative macroeconomic news, traders are content to add to the bounce back that began in late December."

3.25pm: The Footsie moves into consolidation mode

Having received a leg-up from Wall Street’s strong opening, London’s top shares index looks to be in the mood to mark time until the close.

The FTSE 100 was up 76 at 6,887, with the lack of willingness to kick on perhaps partly explained by US indices failing to sustain early momentum. The Dow was up 140 points (0.6%) at 23,671 and the S&P was 10 points better (0.4%) at 2,560.

Back in the UK, terrestrial broadcaster ITV PLC (LON:ITV) was a ratings hit with Liberum Capital, which suggested that a five-year partnership signed on Monday by STV Group PLC (LON:STV) with Sky is a pointer to a deal between the satellite TV firm and the bigger commercial broadcaster on retransmission fees.

The City broker’s analysts said they believe such a deal would lead to a material – around 15% plus - uplift to ITV’s consensus earnings.

Shares in ITV were up 4.9% at 132.3p.

In other broker action, Merrill Lynch and Goldman Sachs both trimmed 10p off their price targets for Melrose Industries PLC (LON:MRS) – the former to 240p and the latter to 230p – but the stock still rose 10.25p to 1276.55p today.

Low-cost airline easyJet PLC (LON:EZJ) was also in a contrary mood, rising 59.5p to 1,159.5p, despite Berenberg cutting its target price to 1,110p from 1,160p and reiterating its ‘sell’ recommendation.

2.35pm: US indices open more than 1% higher

According to a tweet from President Trump, trade talks with China are “going very well”.

Investors do not always put a lot of stock in what politicians say but markets seem to be willing to take him at his word, with the result the Footsie, after a subdued start, is now sitting on a 76 point gain at 6,887.

US indices, meanwhile, have opened more than 1% higher.

The Dow Jones industrial average was up 287 points at 23,818 and the S&P 500 was up 26 at 2,576.

In the UK, packaging companies DS Smith PLC (LON:SMDS) and Smurfit Kappa Group PLC (LON:SKG) were in the box seat, steering the Footsie higher with gains of around 6.6%.

With the market apparently in risk-on mood again, there was little enthusiasm for defensive standbys such as drugs stalwarts AstraZeneca PLC (LON:AZN) and GlaxoSmithKline PLC (LON:GSK), water company Severn Trent PLC (LON:SVT) and consumer goods leviathan Unilever PLC (LON:ULVR).

The latter was down 0.9% at 4,067.5p after UBS downgraded the stock to ‘neutral’ from ‘buy’, with a target price of 4,400p.

12.30pm: Fed rate hikes thrown into doubt

The Footsie was close to its intra-day high, even though hopes of a firmer start on Wall Street were fading.

The FTSE 100 was up 60 points (0.9%) at 6,871, about six points below its high point for the day.

Across the pond, spread-betting quotes suggest the S&P 500 will open around 3 points lower at 2,569, while the Dow Jones industrial average was tipped to open at around 23,716, little changed.

“Mounting expectation that the Federal Reserve may not be in a position to hike interest rates at all during 2019 owing to the deteriorating global economic outlook has lent fresh support to US index futures overnight,” said James Hughes at Axi Trader.

“There’s also optimism over progress being seen in the US-China trade talks which are ongoing in Beijing right now, with the involvement of President Xi’s most senior aide helping lend a degree of support, too. That said, the US arguably remains on the back foot here with stock market volatility and domestic political issues having the potential to give China the upper hand. Any resolution would have the ability to bolster US equities, but the accompanying concessions need to be closely monitored,” he added.

Back in Blighty, tool hire firm Ashtead Group PLC (LON:AHT) was up 3.6% at 1,817p after UBS abandoned its ‘sell’ recommendation and moved to a neutral stance. The Swiss bank has a price target of 1,800p, up from 1,700p previously.

Cruises operator Carnival PLC (LON:CCL) – like Ashtead, a company heavily exposed to the US dollar – was buoyed by a broker note from Shore Capital.

The broker upgraded the stock to ‘buy’ from ‘hold’; the shares were up 98p at 4,020p.

11.30am: US stocks expected to open in the blue (or green, if you prefer)

US futures were pointing to a firm start, adding a bit of support to a UK top shares index that was starting to fade.

The FTSE 100 was up 44 at 6,855.

“The combination of healthy labour market data and doveish commentary from the Fed Chair has provided relief to stock markets that endured a rough fourth quarter, to put it mildly,” said Craig Erlam at Oanda.

“It’s too early to claim that the worst is behind us but the environment currently looks more favourable than it has for a few months. With the US and China in talks to de-escalate their trade conflict, the central bank showing a willingness to slow its tightening cycle and the economy still performing well, the markets may be looking a little more attractive,” he added.

There was a smidgen of joy for housebuilders and estate agents in this morning’s Halifax House Price Index.

House prices increased by 2.2% in December from a year earlier, recovering from a 1.2% decline in November.

The fourth quarter saw house prices up 1.3% on the corresponding period of 2017. According to the Halifax, house prices could rise anywhere between 2% and 4% this year.

“Despite December’s surprise jump in the monthly pace of price rises, the annual rate of price growth was less than half what it had been a year before,” noted Jonathan Hopper, the managing director of Garrington Property Finders.

“Some of those who had no choice but to sell in 2018 will be licking their wounds, especially in formerly overheated markets such as London and part of the South-east where average prices fell,” he added.

Sam Mitchell, the chief executive officer of online estate agents Housesimple.com, said buyers and sellers alike are “sitting on their hands” and this is likely to continue during the first three months of the year until there is more clarity on the outcome of Brexit.

“The downward drag on prices caused by London and the South East is being countered by regions primarily in the North, particular Yorkshire and the North West, where property is realistically priced and transaction levels fluid.

“Many of the regions seeing growth and activity levels are also not in Brexit line of fire to the extent that London and the South East are.

“The chances of an interest rate rise in 2019, a year of such radical uncertainty due to Brexit, are slim at best,” he opined.

Estate agent Foxtons Group PLC (LON:FOXT) was down 1.2% at 51.4p while sector peer Countrywide PLC (LON:CWD) was off 4.9%. Property listings web site operator Rightmove PLC (LON:RMV) was up 1.9%.

9.30am: Trade deal hopes buoy stocks

The prospect of a trade deal being thrashed out between the USA and China continues to sweeten sentiment in global markets.

The FTSE 100 was up 41 at 6,852, with around four out of every five Footsie constituents on the up.

“The main driver of this optimism appears to be the ongoing trade talks between the US and China in Beijing. Not that there is anything too sUBStantial to justify such positivity, but rather a lack of mood-dampening comments has green-lit an early European rebound,” said Connor Campbell at Spreadex.

“Also potentially playing a part in the gains are reports that the UK is sidling up to the EU to try to see whether it could get an Article 50 extension. If that is the case, it suggests that a) the government remains doubtful Theresa May’s agreement stands any chance of getting through parliament, and b) there really isn’t any appetite for a ‘no deal’ exit,” he added.

One blue-chip that was not on the rise in early deals was Wm Morrison Supermarkets PLC (LON:MRW) after its trading statement. The shares were occupying the Footsie’s cellar, down 3.4%.

Richard Hunter, head of markets at interactive investor, said the update was decent enough and “it hands the baton over to its larger rivals in good shape, although numbers from Tesco and Sainsbury are likely to eclipse this update”.

“However, pressure remains on all sides. A resurgent Tesco, the proposed ASDA/Sainsbury alliance and the continuing advance of Aldi and Lidl (the former of which just announced its best ever Christmas) all add to a challenging environment. Meanwhile, whilst improved, Morrisons still lags in comparison to its larger rivals in the increasingly important channels of online and convenience stores. In addition, the figures overall are shy both of analyst expectations as well as the same period last year.

“On the whole, however, Morrisons has a plan and is beginning to deliver it. The shares have fallen foul of the wider and weaker market environment, having dipped 14% over the last six months, although over the last year the 2.5% decline in the price compares favourably with the FTSE100, which has dropped 11.5% in the corresponding period. With the bar expected to be high in terms of forthcoming updates from the other supermarkets, the general market consensus of the shares as a hold tends to suggest that investors consider there to be better value elsewhere,” Hunter said.

The mid-cap FTSE 250 was up 127 points (0.7%) at 18,103, helped in part by a positive response to the trading statement from pUBS and brewing giant, Greene King PLC (LON:GNK) – known in real ale circles as Greedy King.

Like-for-like sales in the last two weeks, covering Christmas and the New Year, were up 10.9% year-on-year and the achieved record Christmas day sales of £7.7mln.

Greene King shares were up 3.7%.

Also on the up was self-storage outfit Safestore Holdings PLC (LON:SAFE) on the back of its full-year trading statement.

The shares were up 3.2% after the company posted its fifth consecutive year of double-digit earnings per share and dividend growth in percentage terms.

8.40am: Footsie finds gains

The FTSE 100 nudged 30 points higher to 6,840.64, with sentiment buoyed by the prospect of a trade deal between the US and China.

The outbreak of optimism followed comments by US Commerce Secretary Wilbur Ross, who predicted Beijing and Washington could reach a trade deal that "we can live with".

Morrisons (LON:MRW), the first of the grocers to report, was off 3% in the wake of what looked to be a reasonably robust post-Christmas trading update but with cautious comment on consumer behaviour.

“Morrisons continues good progress with like for like sales growth still at a healthy clip but it’s being punished for another relatively weak performance from the core retail arm, although Wholesale continues to do very well,” said Neil Wilson, an analyst at Markets.com.

Vodafone fell 1.1% after RBC Capital downgraded stock in the telco to ‘underperform’ from ‘outperform’.

Sticking with the broker changes, Electrocomponents (LON:ECM) benefited from an upgrade to ‘buy’ from US broker Jefferies', which pushed the stock 4% higher.

Capital & Counties (LON:CAPC) rose 2.5% after Peel Hunt moved its recommendation on the property group to ‘add’.

Proactive news headlines:

Landore Resources LTD (LON:LND) has boosted the gold resource at the BAM East deposit on its Junior Lake property in Ontario by 51% to 951,000 ounces. The average grade is 1.03 grams per tonne.

StatPro Group PLC (LON:SOG) has secured a deal with a large UK investment manager to provide its Revolution Data service. The software firm said the three-year contract, carrying a minimum value of £2.35mln, will involve the investment manager using the service to manage multi-asset risk and fixed income investments.

Energy storage and clean fuel company, ITM Power PLC (LON:ITM) has significantly strengthened its capability to deliver larger industrial scale projects. In its results statement for the six months to the end of October, the company said the period was one of major transition as it continued its evolution from a research-focused company to one capable of manufacturing the equipment its expanding list of industrial partners require.

Sativa Investments PLC (LON:SATI), the NEX-based medical cannabis investor, has unveiled plans to become a first-mover seed-to-consumer business in the UK. Its blueprint will require at least £12mln of funding – which would cover the cost of a glasshouse operation in Wiltshire – and probably more if it is to fully bankroll its ambitious blueprint.

Kingswood Holdings Limited (LON:KWG) has announced the appointment of Patrick Goulding as group finance director. The wealth management group, which trades as KW Wealth, said Goulding will lead the finance function as well as overseeing the group's operations.

APQ Global Limited (LON:APQ) said it has issued a total of 26,578 ordinary shares to employees as part of a management share-based compensation scheme, including to Bart Turtelboom, its chief executive officer, who has received 23,366 Ordinary Shares. The group added that, following this issue, Turtelboom is interested in 22,098,463 ordinary shares representing 28.27% of APQ’s issued share capital.

Thor Mining PLC (LON:THR) (ASX:THR) has advised that an updated presentation for shareholders has been uploaded to the company's website

6.45am: FTSE 100 set to push higher 

The FTSE 100 index is expected to push higher on Tuesday, rallying after Monday’s falls following advances overnight by US and Asian markets on continuing hopes for an end to the US/China trade war and amid dovish comments from US Federal Reserve officials.

Spread betting firm IG expects the blue-chip index to open around 15 points higher at 6,830, having shed 26.54 points on Monday.

Overnight on Wall Street, the Dow Jones Industrials Average ended 98 points, or 0.4% higher at 23,531 helped by hints that the US Federal Reserve could halt its tightening in monetary policy if economic growth slows further.

Gains in battered tech stocks led the way in New York, with Amazon.com Inc. (NASDAQ:AMZN) and Netflix Corp. (NASDAQ:N) in the vanguard boosted by interest from the key CES technology showcase in Las Vegas even though Korean rival Samsung said weak chip demand in the fourth quarter dragged its profits below market expectations.

Meanwhile today in Asia, Japan’s Nikkei 225 index added 1.4%, while Hong Kong’s Hang Seng index gained a more modest 0.2% propped up by hopes the US and China may be inching towards a trade deal to end the tariff wars.

On currency markets, the pound remained cautiously higher against both the US dollar and the euro amid ongoing Brexit uncertainty, with a parliamentary vote on Prime Minister Teresa May’s agreed deal due in a week.

Supermarkets eyed

On the corporate front, the first Christmas trading update from a listed UK supermarket group will be released on Tuesday, with Wm Morrison Supermarkets PLC (LON:MRW) set to beat bigger peers J Sainsbury PLC (LON:SBRY), Tesco PLC (LON:TSCO) to the punch.

The update comes after Bradford-based Morrisons on Monday said it would cut an average of 20% from the prices of 900 products as the ‘Big Four’ food retailers continue the battle against German discounters Aldi and Lidl.

Aldi revealed on Monday that it made almost £1bn of sales last month, marking its best-ever performance over the all-important Christmas trading period.

In a recent sector preview, UBS said it expects Morrisons - the UK’s fourth-largest grocer - to report sales growth of 0.5% in the final quarter of 2018, having chopped that back from its previous estimate of 1.8%.

It pointed out that Morrisons has the “toughest comparatives” of any of the ‘Big Four’, with the focus likely to be on the performance of its Makes It and The Best own brands.

Negative trend still an issue for SIG

On the second line, insulation specialist SIG PLC will also issue trading news on Tuesday, just six weeks after its last update and covering one of the quieter periods of the year for the FTSE 250-listed group.

In a preview, analysts at Peel Hunt said: “The negative trend seen in the UK during H2 is unlikely to have abated although mild weather in the last few weeks may have helped slightly. French market conditions are the main concern on the Continent given the weaker economic situation."

Significant events expected on Tuesday, January 8:

Trading updates: Wm Morrison Supermarkets PLC (LON:MRW), SIG PLC (LON:SHI), Greene King PLC (LON:GNK), Carr's Group PLC (AGM) (LON:CARR), Ferrexpo PLC (LON:FXPO), Abcam PLC (LON:ABC)

Interims: Gateley Holdings PLC (LON:GTLY)

Finals: Safestore PLC (LON:SAFE)

Economic data: Halifax UK house price data; US balance of trade; US JOLTS jobs openings; US consumer credit

Around the markets:

  • Sterling: US$1.2750, up 0.1%
  • Gold: US$1,193.71 an ounce, down 7.7%
  • Brent crude: US$57.33 a barrel, unchanged

City Headlines:

  • British and European officials are sending out feelers to explore the possibility of extending Article 50 amid fears a Brexit deal will not be completed by 29 March - The Daily Telegraph
  • Activist investor Edward Bramson, who is pushing to shake up Barclays, has ratcheted up pressure on the British lender by pledging to seek investor backing for a seat on its board - Financial Times
  • The UK’s Serious Fraud Office has whittled down the list of suspects in its year-long investigation into bribery and corruption at Rolls-Royce - Financial Times
  • Amazon became the world’s most valuable public company last night, with a market capitalisation of US$797bn, surpassing Microsoft - The Times
  • Elon Musk has started building a US$2bn factory in Shanghai that will be Tesla’s first carmaking plant outside the US - The Times
  • California’s largest utility company Pacific Gas & Electric is exploring bankruptcy protection amid concerns that its equipment could have caused one of the state’s deadly wildfires last year - The Times
  • Japan’s SoftBank has slashed the planned investment in WeWork, the lossmaking shared-office provider, following the recent tech stock rout - Financial Times
  • Laing O’Rourke, Britain’s largest privately owned construction company, has shored up its finances until 2022 after months of negotiations with banks - The Times
  • The low-cost airline Norwegian Air has blamed technical issues of Trent 1000 engines supplied by Rolls-Royce for a hit to its finances - Daily Mail
  • A New stock exchange, MEMX, has received backing from Wall Street’s largest brokers and banks in a bid to break the dominance of the New York Stock Exchange and Nasdaq - Financial Times
  • The London Stock Exchange's clearing arm handled more than one thousand trillion dollars of trades for the first time in 2018 - Daily Mail
  • Brexit will wipe nearly 20% off the value of Britain’s commercial farms, according to forecasters, bringing to an end the decades-long boom in agricultural land prices as EU subsidies are withdrawn - The Guardian

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