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FTSE 100 closes a tad lower ahead of BoE Super Thursday

The UK index of leading shares closed down around four points at 7,173
Mark Carney
Super Thursday may be a misnomer
  • FTSE 100 closes lower

  • Wall Street shares also off

  • Bank of England expected to leave interest rates unchanged tomorrow

FTSE 100 recouped some losses but closed a shade in the red, ahead of the Bank of England's monetary policy meet tomorrow.

The UK index of leading shares closed down around four points at 7,173.

Conversely, the FTSE 250 was higher, adding around 77 points to 19,073.

Market analyst David Madden,at CMC Markets, summed it up thus: "It has been a lacklustre session, partially because of an absence of major macroeconomic news.

"Some traders took the opportunity to take some cash off the table. European equity markets saw multi-month highs yesterday, and today investors are sitting on their hands. It is almost as if dealers are looking for upbeat news to justify the positive run."

The biggest laggard was online grocery firm Ocado (LON:OCDO), which shed over 6% to $968.40,as a volatile week continued for the group.  There has been a major fire in its  warehouse in Hampshire, which accounts for 10% of Ocado capacity.

In the US, the Dow Jones Industrial Average is down around 30 points, while the S&P 500 is off around eight at the time of writing.

3.45pm: Traders in wait-and-see mode

Ahead of the Bank of England’s interest rate decision and quarterly inflation report tomorrow, London’s leading shares largely marked time.

The FTSE 100 was down 11 points (0.2%) at 7,166.

“Deteriorating economic data and increasing political uncertainty means we're unlikely to get a Bank of England rate hike any time soon – although the recent strength in wage growth means a move later in 2019 shouldn't be completely ruled out,” predicted James Smith, an economist covering developed markets at ING.

“Economic data is deteriorating, and it is likely growth will continue to stall (or potentially stagnate completely) through the first quarter as business and consumer caution grows,” Smith noted.

“2019 looks to be a reasonably benign year for inflation. The impact of the pound's post-Brexit plunge has largely fizzled out of the year-on-year numbers. In the short-run, the headline rate may remain modestly sticky if oil prices continue to increase, as our commodities team forecasts; however, one way or another, we expect headline CPI [consumer prices inflation] to end the year below 2%. Beyond then, higher wage growth should see core price pressures build, although this relies on corporates having sufficient pricing power to pass these costs on. In the current challenging consumer environment, that may not always be the case,” Smith said.

2.40pm: US benchmarks open lower

The index of UK blue-chips retreated after US benchmarks opened modestly lower.

The FTSE 100 was down 25 points (0.4%) at 7,152.

In the US, the Dow Jones index was down 40 points to 25,372 while the S&P 500 was off 4 points (0.2%) at 2,733.

Away from the big caps, graphene-based products developer Directa Plus PLC (LON:DCTA) added around one-tenth to its market capitalisation after it announced it had been appointed as the newest member of the US National Graphene Association’s Industry Council.

Redx Pharma Plc (LON:RDX) received a shot in the arm in the form of a repayment of a loan it made which had previously been written off in its accounts, giving it a near £870,000 boost to working capital.

The shares were 8% higher at 6.75p, giving the company a market cap of almost £8mln.

1.30pm: UK blue-chips mark time

Wall Street stocks were expected to open lower after what was deemed a lacklustre “State of the Union” address yesterday by president Trump.

Spread betting quotes suggest the Dow Jones will open around 23 points lower at 25,389 while the broader-based S&P 500 was tipped to shed around six points at 2,732.

In the UK, it was a stand-off between the bears and the bulls, with the FTSE 100 down 2 points at 7,176.

The FTSE 250 was making a better fist of things, rising 79 points to 19,075, helped by a positive response to the trading update from electronic components supplier, Electrocomponents PLC (LON:ECM).

The shares were up 6.1% at 587.6p but Shore Capital’s Robin Speakman seemed underwhelmed.

“Trading has slowed, as expected by our forecast model, but to a greater degree than we expected,” the analyst said, as he reiterated his ‘sell’ recommendation.

12.15pm: Glaxo rises after top-line beats expectations

The Footsie made a brief foray into positive territory before returning to its station just below last night’s close.

The FTSE 100 was down 8 points at 7,170, having risen as high as  7,183 shortly after midday.

“It is shaping up to be a dull day for financial markets with equities across the world struggling for direction due to a lack of fresh catalysts,” said Lukman Otunuga, a research analyst at FXTM.

“Investors who were expecting fireworks and action from US President Donald Trump’s State of the Union address were left empty-handed after nothing new was brought to the table,” Otunuga observed.

“Brexit uncertainty and growing pessimism over Theresa May’s ability to secure further concessions from the EU continues to weigh on the Pound. With the European Union already stating that the Withdrawal Agreement is ‘not open for re-negotiations’ it will be interesting to see what the prime minister achieves from her trip to Brussels,” the analyst ventured.

US markets are expected to open modestly lower.

In the UK, and indeed across the pond, GlaxoSmithKline PLC (LON:GSK) released its results just after noon, prompting buying interest in the stock, which is now up 0.5% at 1,530.8p.

“Global pharmaceuticals group GlaxoSmithKline beat expectations with its Q4 figures today. Sales rose 7% to £8.2bn and operating profit trebled from £512mln to £1.6bn. The company saw sales of £784mln in its new shingles vaccine, Shingrix, and reported good progress on building up its pipeline of new drugs, especially in oncology where it has 16 in development,” reported Ian Forrest, an investment research analyst at The Share Centre.

“The final quarterly dividend of 23p makes 80p for the year and the company promised to repeat that total in 2019 despite the fact it expects earnings to drop by 5-9% at constant exchange rates. That is mainly due to the expected impact from the recent approval of a generic version of the asthma treatment Advair, and the $5.1bn purchase of US biopharma group Tesaro in December.

“The shares responded positively to the results having dropped backed slightly ahead of their release. While the Q4 figures show a better than expected performance and the key drug pipeline is building nicely, the forecast for 2019 was clearly cautious in terms of earnings. The commitment to match this year’s dividend is therefore very important and we continue with our ‘buy’ recommendation for investors seeking income and willing to accept a lower level of risk,” Forrest said.

10.45am: FTSE 100 recoups most of its losses

The FTSE 100 has almost recouped all of its losses despite a 7.3% fall for Ocado PLC (LON:OCDO) in the wake of its warehouse fire.

The FTSE 100 was down 7 points at 7,171 with groceries delivery technology specialist Ocado leading the retreat after it provided details on the scale of the fire at its Andover warehouse.

READ Ocado shares drop as it warns fire at Andover warehouse will hit sales

Ocado’s volatile week has continued, with yesterday’s sharp gains reversed amid a major fire in their warehouse. The warehouse accounts for 10% of Ocado capacity, and thus we are likely talking about a substantial disruption to profitability in both lost business and rebuild cost,” said Joshua Mahony of IG Group.

Following the news of the fire, Peel Hunt downgraded its recommendation to ‘hold’ from ‘buy’ and slashed its target price to 1,000p from 1,700p.

Ocado shares currently trade at 959p.

In other broker news, RBC has downgraded utilities provider Centrica PLC (LON:CNA) to ‘underperform’ from ‘outperform’ and slashed the target price to 130p from 185p. Centrica shares were down 4.4p at 136.1p and were the second-worst performers on the Footsie.

Joining Ocado and Centrica in the Footsie’s cellar was travel firm TUI AG (LON:TUI), after HSBC cut the target price. TUI was off 2.1% at 1,185.5p.

9.30am: Sterling's recovery cools investors' ardour for multinationals

The weakness of the pound was one of the reasons the Footsie soared yesterday, so today’s sterling rally has cooled equity investors’ ardour today.

The FTSE 100 was down 26 at 7,151, despite the strength of housebuilders following a decent trading update from Barratt Developments.

Barratt was up 2.8%, while sector peers Persimmon PLC (LON:PSN), Taylor Wimpey PLC (LON:TW.) and Berkeley Group PLC (LON:BKG) rose 1% in sympathy.

“For all the fears around Brexit hurting the housing market, housebuilders continue to churn out the profits and dish out generous cash rewards for shareholders,” observed Russ Mould at AJ Bell.

Barratt Developments, in particular, has produced a set of half-year results that most companies would die for,” he added.

Mid-cap outfit Redrow plc (LON:RDW) also received a warm reception for its first-half figures.

“Average house prices have cooled, and there is a lot of talk of uncertainty in relation to Brexit, but Barratt Developments and Redrow have shown that the sector is still going strong,” said David Madden at CMC Markets.

Redrow shares were up 1.4% and were far from the best performers on the FTSE 250; that accolade fell to Clydesdale and Yorkshire Bank owner CYBG PLC (LON:CYBG), which shot up 13.1% to 202.2p after the banking group raised 2019 guidance on its margins.

READ Virgin Money's new owner CYBG rallies it improves guidance for 2019 margins

The FTSE 250, with fewer companies dependent on overseas sales (and therefore less enamoured of a slide in sterling’s value), was up 18 points (0.1%) at 19,014.

8.20am: Weak start

After yesterday’s explosive gains the FTSE 100 has predictably succumbed to some profit taking this morning.

The FTSE 100 was down 21 points at 7,159.

Barratt Developments PLC (LON:BDEV) and Severn Trent PLC (LON:SVT) were both defying the weaker trend, however, after issuing trading statements this morning.

Barratt was up 1.7% and Severn Trent was 0.5% to the good.

Proactive news headlines:

Milan-based Directa Plus PLC (LON:DCTA) has been appointed as the newest member of the US National Graphene Association’s Industry Council.

ITM Power PLC (LON:ITM) has said that a consortium it is part of has received funding from the UK’s Office for Low Emission Vehicles (OLEV) to develop refuelling stations for electric vehicles.

Further drilling at Oriole Resources PLC (LON:ORR) Dalafin project in Eastern Senegal has indicated gold mineralisation at the Medina Bafe target continues at depth. Oriole has an 85% stake in Dalafin, but Canadian major IAMGOLD is carrying out the exploration and can earn a 70% stake in the project for a US$7mln spend.

Advantage Finance, the motor finance arm of lender S & U PLC (LON:SUS), is still producing record profits despite tougher market conditions.

Non-executive director Deborah Frost has been unveiled as the new chief executive officer of employee services provider Personal Group Holdings plc (LON:PGH). She will succeed Mark Scanlon, who signalled his intention to give up the gig back in September.

Shefa Yamim (ATM) Ltd (LON:SEFA) has received a technical economic evaluation (TEE) for Zone 1 of its Kishon Mid-Reach project that came in at the lower end of the cost curve.

Korea-focused gold explorer Bluebird Merchant Ventures Ltd. (LON:BMV) has applied for a grant to pay for 70% of a drilling programme at its Kochang project. Bluebird said it was invited to apply for the grant by KORES, a company owned by the South Korean government that has already funded two programmes in the area surrounding Kochang.

Mosman Oil And Gas Limited (LON:MSMN) said its net attributable production for the six months to 31 December increased by nearly 47% compared to the prior six months. The AIM-listed oil exploration, development and production company said net attributable production was 6,476 barrels of oil equivalent (boe), an increase of 46.6% on the 4,417 boe in the six months ended 30 June 2018.

Metals explorer Amur Minerals Corporation (LON:AMC) has received the final analytical results from its 2018 drill programme at its Kun Manie nickel-copper project in Russia.

Anglo Pacific Group PLC (LON:APF) (TSX:APY), the London and Toronto listed royalty company, is recommending a 25% increase in the final quarterly dividend for 2018 to 3.125p, which would result in a total dividend for the year of 8p per share, around a 14% increase on the 7p per share paid in 2017. It said a quarterly base dividend level of 1.625p is to be retained for 2019, with the final dividend to be decided when announcing the fourth quarter 2019 dividend.

MaxCyte Inc. (LON:MXCT), the global cell-based medicines and life sciences company, said late yesterday that Panmure Gordon completed a placing of a total of 5,908,319 shares in the company at a price of 170p per share to raise a total of £10.0mln, before expenses, fees and commissions.

6.30am: Softer start expected

The FTSE 100 is poised to open slightly lower on Wednesday morning as weakness in the UK economy amid the run-up to Brexit day next month weighed on sentiment.

Spread-betting firm IG predicts the FTSE 100 to open around 5 points lower after a bumper performance yesterday that saw the index close up 143 points at 7,177.

Michael Hewson, the chief market analyst at CMC Markets UK, said that there was “increased anxiety” from firms as Brexit day approached with little clarity on what an exit deal would look like as Theresa May continues to wrangle with Brussels.

“The UK…service sector activity posted its weakest reading since July 2016, the month after the Brexit referendum, as new orders slid sharply.”

“There appears to be little doubt that while the UK economy is slowing, it is not alone in its sclerosis with Italy and France out in front, with even weaker data, while the German economy is also struggling. Against this sort of economic backdrop, it ill behoves politicians on both sides of the Channel to play Russian roulette with the Brexit negotiations. The EU has consistently stated that it feels that the UK has more to lose from a disorderly Brexit, with both sides ramping up preparations for a no deal scenario.”

“The risk with this sort of calculation is, that at a time when the financial system in Europe is anything but robust, the fallout of a no deal Brexit could bring the roof crashing down on Europe’s head, with serious consequences for the global economy.”

In the US markets yesterday, investors were upbeat in the session ahead of Trump’s state of the union address and shook off some initial selling pressures on Google parent Alphabet Inc (NASDAQ:GOOG).

The Dow Jones Industrial Average closed up 172 points at 25,411, while the S&P 500 was up 13 points at 2,737 and the Nasdaq was up 54 points at 7,402.

In Asia today, there was muted trading and little reaction to the state of the union given Chinese New Year holidays which closed the Hong Kong exchange. The Japanese Nikkei 225 was up 29 points at 20,874.

On the currency markets, sterling was relatively flat at US$1.294 against the dollar amid Brexit uncertainty.

Big Pharma is big news for Wednesday

Investors may be taking some stress medication on Wednesday as drug giant GlaxoSmithKline reports its final results for 2018.

The launch of a generic rival to its Advair inhaler has many expecting a downgrade to its outlook.

Meanwhile, housebuilders Barratt and Redrow will be reporting their interims amid a very grey looking property market clouded by the shadow of Brexit.

Significant announcements expected on Wednesday:

Finals: GlaxoSmithKline PLC (Q4) (LON:GSK)

Interims: Barratt Developments PLC (LON:BDEV), Redrow plc (LON:RDW), Frontier Developments PLC (LON:FDEV)

Trading updates: Severn Trent PLC (LON:SVT), DP Poland Plc (LON:DPP), CYBG PLC (LON:CYBG), Electrocomponents PLC (LON:ECM), Victrex PLC (AGM) (LON:VCT)

Economic data: US JOLT job openings

Around the markets:

  • Sterling: US$1.294, up 0.05%
  • Brent crude: US$62 a barrel, up 0.03%
  • Gold: US$1,314.4 an ounce, down 0.1%
  • Bitcoin: US$3,375, down 1.2%

City headlines:

  • Financial Times: Interserve’s board is now focusing on a debt-for-equity swap in a last-ditch effort to save one of the UK’s biggest government contractors.
  • Daily Mail: Edward Bramson, corporate raider fighting for a seat on the board of Barclays, will ask shareholders to make him a director at the lender's annual meeting in May.
  • The Times: Activity in the UK services sector stalled and jobs were cut last month amid rising political uncertainty, bringing the economy to a virtual standstill.
  • The Guardian: Apple has agreed to pay 10 years of back taxes to France; as per reports the figure is close to €500 million.

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