FTSE 100 closes higher
US shares dip ahead of Fed minutes
Three Tory MPs defect to new Independent Group
FTSE 100 closed higher on Wednesday to join European benchmarks as markets appeared to be becalmed on trade fears.
It was a day of high political drama in the UK but investors focused more on easing tensions between Washington and Beijing.
BIg banking group Lloyds (LON:LLOY) was among the top gainers, adding 4.7% to 61.13p
For the year to 31 December 2018, Lloyds reported statutory profit after tax of £4.4bn, up 24% on 2017’s £3.5bn, but that was below the consensus estimate of £4.6bn.
The market appeared to focus on the group's cash return plans, with Lloyds hiking its final dividend and unveiling share buyback plans.
Footsie closed up over 49 at 7,228. Mid-cap cousin FTSE 250 added around 133 points to 19,202.
On Wall Street, US shares turned red ahead of the publication of Fed minutes.
David Madden, market analyst at CMC Markets, said: "European equities enjoyed a positive run today as traders are a little more optimistic about the state of US-Chinese trade relations. When President Trump said the March deadline wasn’t a ‘magical date’, it gave the impression he is flexible when it comes to negotiations."
3.35pm: FTSE 100 up solidly into late-afternoon
As the trading session nears its end into late-afternoon, the FTSE 100 had retained a solid set of gains and was up 53 points at 7,232.
One of the leaders in the blue-chips was Lloyds, which was up 5.7% at 61.7p after it shrugged off forecast-missing profits with a 5% dividend hike and a £1.75bn share buyback.
Meanwhile, languishing at the bottom of the pile in the index was Sainsbury’s, which had plunged 16% to 242p after UK regulators hinted they are swaying towards blocking the supermarket giant's proposed £10bn merger with Wal-Mart Inc (NYSE:WMT) owned Asda after an in-depth investigation found “extensive competition concerns”.
On the currency markets, the pound had slipped 0.24% to US$1.303 against the dollar as mixed UK manufacturing data and some overtures that the EU was losing its patience over Theresa May’s Brexit negotiation strategy started to weigh ahead of her trip back to Brussels.
Fiona Cincotta, senior market analyst at City Index, said that the pounds level at US$1.3 had recently taken the role of “hard Brexit level, weakening below it every time the markets read the political situation as moving towards a 'no solution' result ahead of the end of March”.
2.37pm: Wall Street kicks off in the slow lane
US markets relatively flat as expected on Wednesday morning as traders sat on their hands ahead of the Fed minutes.
Shortly after the open, the Dow Jones Industrial Average was up around 6 points at 25,897, while the S&P 500 was flat at 2,779 and the Nasdaq was up 10 points at 7,496.
Meanwhile in London, the FTSE 100 added to its gains and was up 28 points at 7,207.
1.10pm: US expected to open flat as market stagnates ahead of Fed minutes
Wall Street is expected to start in neutral on Wednesday morning as investors kept one eye on trade developments and another on the upcoming minutes of the Fed’s January policy meeting, which are to be released as scheduled despite the bank’s Washington HQ being closed due to a winter storm.
“After yesterday’s uninspiring session on Wall Street, sentiments aren’t exactly improving as the week unfolds. That’s despite the ongoing expectation of a dovish tone being set in the FOMC meeting minutes when they’re released later in the day, plus the idea that an end to the Federal Reserve’s QE tapering may be nearing – both of which are factors that should have the potential to support equity markets”, said James Hughes, chief market analyst at AxiTrader.
He added that the seeming lack of progress on US-China trade talks could drag on sentiment after China cautioned that any new tariffs could be disastrous for global equity markets, particularly so close to a 1 March deadline that could see US tariffs on Chinese imports rise to 25% from 10%.
“[The date] had previously been set as an immovable hard stop when fresh levies would come in but with Donald Trump perhaps willing to make concessions here, such a move may give markets the confidence they need.”
In London, the FTSE 100 had shed some of its gains and was up 14 points at 7,193.
12.20pm: FTSE 100 adds to gains; Three Tory MPs defect to new Independent Group
Three MPs from the Conservative Party, Anna Soubry, Sarah Wollaston and Heidi Allen, have become the latest group of Parliamentarians to defect from their party to join the newly formed Independent Group.
In their resignation letter, the three MPs criticised prime minister Theresa May’s handling of Brexit negotiations as “disastrous”, adding that the party had lurched to the right and failed to stand up to its hard-line elements.
“The country deserves better. We believe there is a failure of politics in general, not just in the Conservative party but in both main parties as they move to the fringes, leaving millions of people with no representation. Our politics needs urgent and radical reform and we are determined to play our part,” the letter said.
The Independent Group was formed by seven Labour MPs who defected on Tuesday, and can now count 11 amongst its ranks after an eighth Labour MP, Joan Ryan, quit the party late last night.
Three MPs - Sarah Wollaston, Heidi Allen and Anna Soubry - have left the Tory party to join the new Independent Group in Parliament. Live reaction and analysis: https://t.co/jhGIseRfwZ pic.twitter.com/mZvYzzEVe9— BBC News Graphics (@BBCNewsGraphics) February 20, 2019
Meanwhile, the FTSE 100 was up 25 points at 7,204.
11.55am: UK manufacturing activity slows but order books pick up
UK manufacturing output growth slowed in the three months to February, although order books did improve slightly, according to the latest data from the Confederation of British Industry (CBI).
The business organisation said output volume growth had dropped back to a pace roughly in line with its long-run average, with the motor vehicle equipment and mechanical engineering sectors proving the biggest drags on growth while chemicals, food & drink, and tobacco were among the biggest drivers of growth.
Total and export order books meanwhile “strengthened modestly” in the month, remaining within their respective long-run averages.
The CBI said UK manufacturers were still being supported by the lower level of sterling, however, the prospect of a no-deal Brexit represented “the biggest risk” to the sector’s outlook.
It is critical that politicians of all stripes and on both sides of the channel come to an agreement on the terms of a Brexit deal as soon as possible, to allow our manufacturers to continue to create, make and trade their goods with certainty #ITS https://t.co/NfBkMpfbEW pic.twitter.com/2PxFliBoVh— CBI (@CBItweets) February 20, 2019
Anna Leach, the CBI’s head of economic intelligence, said “the clock is ticking quickly towards crisis point” and that it was “crucial” for politicians to agree on the terms of a Brexit deal as soon as possible to provide “certainty” for manufacturers.
Tom Crotty, chair of the CBI Manufacturing Council, added that while manufacturers had proven “highly resilient in the difficult circumstances they find themselves in”, Brexit uncertainty had been “a millstone on growth and investment in the sector”.
Just before midday, the FTSE 100 was up 9 points at 7,188.
11.25am: UK banks ‘look in good shape’
“The banks are back as dividend powerhouses,” says Justin Cooper, chief executive of financial services provider Link Market Services.
“Their balance sheets are strong and they have become hugely cash generative. That cash is making its way back to shareholders.
“Lloyds is already distributing more in dividends to shareholders than it did before the financial crisis.
“The banks now make up 12% of UK dividends from a low point of 7% after the financial crisis. Their recovery means UK investors are becoming less dependent on oil and mining dividends to provide their income.
“Brexit looms big on the near-horizon but is unlikely to dent their dividends in the year ahead. And if it is resolved without disruption to the economy, the banks look in very good shape.”
11.am: Laura Ashley warns on full-year performance
Like-for-like sales at the firm, famous for its floral prints, fell 4.2% in the first half of its financial year, not helped by a Japanese partner scrapping a license agreement.
Laura Ashley broke even during the six-month period, compared to the profit of £4.3mln it reported this time last year.
Chairman Andrew Khoo said trading had been “challenging”, a trend he expects to continue throughout 2019.
“Given the continued market turbulence and having reviewed the revised management forecast for the second half, the board now holds the view that the performance for the entire year will fall short of market expectations.”
Shares dropped 6% at the opening bell, although they have since reversed those losses and are up 1.4% to 3.2p.
Laura Ashley #ALY— Dearg Doom (@MyDeargDoom) February 20, 2019
Share Price 3.16p (pre-open)
Profit warning for 2nd half. Mind you, 1st half sales of £122m and yet made zero. 2nd half will be net losses. Oh yes, exceptional loss of £1.5m.
No long term debt but unlikely private investors interest a top priority.
Move on! pic.twitter.com/GZnfNcPGE9
10.40am: Miners buoyed by US-China trade talk progress
After jumping at the opening bell this morning, the FTSE 100 has eased back slightly over the past hour or so.
The index of blue-chip shares is currently up 11.3 points, or 0.16%, to 7,190.5. It had been as high a 7,215 earlier in the session.
Lloyds, which is up 2.9% to 60.1p, pleased investors with its dividend increase and share buyback plans, while Glencore, up 1.2% to 306.2p, posted an 8% rise in underlying profit plus a US$2bn share buyback.
Most of London’s big miners were in the black though on hopes that progress with trade talks between the US and China might help to kickstart the Chinese economy which has shown signs of slowing down of late.
Trump: March 1 isn’t a "magical date" to strike a trade deal with China pic.twitter.com/pHgFy6CgvC— TicToc by Bloomberg (@tictoc) February 19, 2019
China is the world’s biggest consumer of raw materials, so its economic health is important to those who supply it with copper, iron etc.
Platinum producer Anglo American PLC (LON:AAL) (up 0.6% to 1,967p), Chilean copper miner Antofagasta (LON:ANTO) (up 1.6% to 904.3p) and Fresnillo PLC (LON:FRES) (up 1.1% to 993.4p), the world’s largest silver miner, are all in positive territory this morning.
It is unlikely to come as much of a surprise that J Sainsbury PLC (LON:SBRY) is the heaviest faller. The UK’s second largest grocer has plunged 15.6% to 242.9p after regulators hinted that they plan to block its proposed merger with Asda.
10.20am: GMB Union calls for Sainsbury’s-Asda merger to be blocked
Tim Roache, general secretary of trade union GMB, has described the CMA's findings in the Sainsbury's-Asda deal as "staggering".
"GMB Union will absolutely oppose any merger that would see hundreds of stores and scores of depots put at risk," he said.
"Our members - many of whom have worked at Asda for years, if not decades - will continue to support Asda in being the highly successful, standalone business it has been for generations, but it’s increasingly clear from the CMA announcement that isn't compatible with the Sainsbury’s merger plan, which must now be blocked," he added.
GMB, and other unions have said that should the merger go ahead, thousands of jobs would be at risk.
10am: Cash (return) is king for Lloyds
The UK bank is up 2.8% to 60p, despite reporting a profit of £4.4bn for 2018 – below consensus estimates of £4.6bn after a weak end to the year.
The reason for the share price rise is down to shareholder returns: Lloyds upped its divi by 5% to 3.21p a share, while it also unveiled a £1.75bn share buyback.
Lloyds Banking Group (@LBGNews) February 20, 2019
“Results this morning from Lloyds were a bit of a mixed bag with profits coming in lower than market expectations; however, the market focus is on a larger share buyback and an improvement in costs,” said Graham Spooner, investment research analyst at The Share Centre.
“The important outlook statement like its comment on the past year was fairly upbeat, whilst of course accepting that the UK economy remains unclear.
“The CEO is forecasting a rise in return on equity to 14 to 15%, progressive and sustainable dividends and for operating costs to be less than £8bn.”
9.40am: Intu plunges after posting huge loss
The FTSE 250 group, which owns the Trafford Centre in Manchester and Lakeside in Essex, saw the value of its portfolio of 20 malls in the UK and Spain fall by £1.41bn in 2018.
It said the sharp drop-off reflected “adverse conditions” in the UK retail market as well as “weakening sentiment” among property investors ahead of Brexit.
As a result of the hefty write-down, Intu swung to a loss before tax of £1.18bn in the 12 months ended 31 December 2018. That compared with a profit of £203.3mln in 2017. Net asset value fell to 271p a share, down from 349p a year in earlier.
Shares were down almost 9% to 108p in early deals on Wednesday.
Intu shares open down 9% at 107p after it says it will scrap its 2018 dividend, meaning the stock market now values the shopping centre owner at a more than 60 per cent discount to its net asset value pic.twitter.com/ROZ8y49exh— Louisa Clarence-Smith (@LouisaClarence) February 20, 2019
9.15am: Sainsbury’s-Asda merger pretty much dead
“The CMA has basically kicked the Sainsbury-Asda merger into touch,” says Hargreaves Lansdown senior analyst Laith Khalaf.
“While the regulator left the door open for the supermarkets to sell off assets to complete the deal, it’s clearly not keen on that solution.
“The supermarkets will now have to bend over backwards if they want to proceed with the merger, and even then, wouldn’t be guaranteed a favourable ruling from the CMA.
“The thorny issue of competition in the online delivery market also means they may have to get rid of one of the brands, reducing their ability to target different customer bases.”
We've provisionally found that the proposed Sainsbury’s / Asda merger could lead to:— Competition & Markets Authority (@CMAgovUK) February 20, 2019
???? Higher prices for groceries
⛽ Higher fuel prices
???? Less choice and worse quality for shoppers
Read more: https://t.co/lMdbRmQHnJ pic.twitter.com/MMVuCI2gU9
8.45am: Footsie finds gains
Traders were in reasonably cheery mood after President Donald Trump once again hinted a deadline to find a Sino-American trade deal may be pushed back to accommodate further negotiations.
Asia’s main markets ended the session in positive territory, providing a cue for London where the FTSE 100 advanced 31 points to 7,209.68.
There was no doubting the big news of the day – the Competition and Markets Authority’s preliminary finding that the £10bn Sainsbury-ASDA merger presents “extensive competition concerns”.
Sainsbury’s shares tanked 15% on the CMA’s provisional conclusion, dragging with it Morrison’s (LON:MRW), off 5%, and Tesco (LON:TSCO), down 2%. ASDA is owned by American giant Wal-Mart Stores, which is listed in the US.
On the plus-side, the miners were buoyed by the Chinese trade news.
Later in the US, economists and analysts will pick through the US Federal Reserve minutes to assess the trajectory for interest rates.
Proactive news headlines:
ReNeuron Group PLC (LON:RENE) said its cell-based therapy is showing signs that it can improve the vision of sufferers of a disease that causes blindness. Researchers in the US are currently carrying out a Phase I/II clinical on people with retinitis pigmentosa.
Landore Resources Ltd (LON:LND) has revealed the findings of a preliminary economic assessment of the BAM gold project, at Junior Lake in Ontario, Canada. The project is deemed to have 951,000 of contained ounces of gold, including 701,000 ounces in the indicated resources category.
Eden Research PLC (LON:EDEN) has said its nematicide biopesticide formulation, which is marketed as Cedroz by its commercial partner, Eastman Chemical Company has EU product authorisation from the Regulatory Affairs Directorate in Malta.
Eco Atlantic Oil and Gas Ltd (LON:ECO) (CVE:EOG) has contracted the Stena Forth harsh-environment drill ship for its upcoming exploration well, offshore Guyana. Stena Forth will drill the Jethro-Lobe prospect on the Orinduik Block offshore Guyana, in the neighborhood of Exxon’s multi-billion barrel discoveries.
Eland Oil & Gas PLC (LON:ELA) has announced it will start paying dividends to shareholders, following a successful period of production growth in Nigeria. The AIM-quoted company said it plans to pay dividend based on free cashflow generation, whilst at the same time, maintaining balance between new investment and debt repayment.
Collagen Solutions PLC (LON:COS) has raised around £215,000 from the sale of its stake in Jellagen Ltd. the private marine biotechnology company focused on developing collagen biomaterials from jellyfish in a private transaction.
Haydale Graphene Industries PLC (LON:HAYD) has confirmed it is talking to institutions about a funding round at well below last night’s closing price. The funding would also include an open offer to existing shareholders, said the composite materials specialist.
Frontier IP Group PLC (LON:FIPP) said its portfolio company, The Vaccine Group (TVG), will partner up with the Defense Advanced Research Projects Agency (DARPA), part of the US Department of Defense, for a project to protect US military forces from Ebola.
Golden Saint Technologies Limited (LON:GST) said its wholly-owned subsidiary, EMS Wiring Systems Pte Ltd has signed a signed a strategic co-operation agreement with IT Care Ltd, a Shanghai-listed public company that has developed cutting edge hologram technology.
OptiBiotix Health PLC (LON:OPTI) said it was pleased with the scientific and commercial interest around presentations made to an industry conference held in Copenhagen last week. The company, which is developing compounds to tackle obesity, high cholesterol and diabetes, provided three separate updates at ProBiota, an event for the prebiotic, probiotic and the microbiome-focused food and pharma industries.
Afarak Group PLC (LON:AFRK) is to take a €6.5mln write-down of its metal alloys plant at Mogale due to ongoing tough conditions in the steel additive market. Mogale, in South Africa, has been affected by technical problems including stoppages and low quality ore while the price of ferrochrome has continued to decline.
Benchmark Holdings PLC (LON:BMK), the aquaculture health, nutrition and genetics business, has announced the appointment of Kristian Eikre as a non-executive director of the company to take effect immediately after its AGM on 14 March 2019. The group noted that Eikre is currently co-head of Ferd Capital, a division of Ferd AS, a Norwegian investment company which owns a 26% stake in Benchmark.
6.45am: FTSE 100 set to open a 'touch higher'
The FTSE 100 is poised to open a touch higher this morning after a relatively directionless session led to a flat finish on Wall Street on Tuesday.
Most of the positive news had been priced in for the US markets yesterday as traders struggled for direction ahead of today’s Fed minutes and important economic indicators like US weekly jobless claims, manufacturing, and home sales data that are expected on Thursday.
“The minutes from the Federal Reserve January meeting will be scrutinised closely. Traders will be keen to gain a deeper understanding of the Fed’s abrupt change in direction of policy and motives for pressing pause on the hiking button” said Jasper Lawler, head of research at London Capital Group.
The Dow Jones Industrial Average closed up 8 points at 25,891, while the S&P 500 was up 4 points at 2,779 and the Nasdaq was up 14 points at 7,486.
Asian markets had more energy in today’s session on the back of renewed trade optimism as President Trump hinted at extending the US’s trade deadline with China.
Japan’s Nikkei 225 was up 128 points at 21,431, while Hong Kong’s Hang Seng was up 268 points at 28,496.
On the currency markets, the pound was relatively flat against the dollar ahead of the Fed minutes and anticipation as Theresa May heads back to Brussels for further negotiations.
“Whilst the pound surged through several moving averages on Tuesday, it could quickly slide back below $1.30 should Theresa May return from Brussels empty handed once again,” Lawler said.
Lloyds to report 2018 numbers on Wednesday as bank reporting cycle grinds on
On Wednesday, it will be Lloyds’ turn to report its full-year numbers as the cycle of blue-chip bank releases continues, with investors likely to keep an eye on any news around Brexit and the UK housing market, both sensitive spots.
The retail property market will also be in focus as heavyweight Intu also releases its full-year figures.
Shares in both have seen hefty declines over 2018, so investors will be hoping for some recovery or at least a silver lining.
Significant announcements expected on Wednesday:
Economic data: CBI industrial trends survey; US housing starts
Around the markets:
- Sterling: US$1.305, down 0.06%
- Brent crude: US$66.32 a barrel, down 0.2%
- Gold: US$1,341.58 an ounce, up 0.11%
- Bitcoin: US$3,882.68, up 0.4%
• Theresa May ditched a radical Brexiter plan to save her EU exit deal on Tuesday as she narrowed her sights on legal assurances about the temporary nature of the backstop to prevent a hard Irish border – Financial Times
• US airline Mesa Air has proposed a last-minute deal to take over struggling regional carrier Flybe, pulling the rug from Virgin Atlantic’s offer, according to reports – The Telegraph
• Germany built the world’s largest trade surplus last year by a margin of more than €100 billion, fuelling the risk that US President Donald Trump will launch a trade war with Europe – The Times
• Ericsson’s chief executive Börje Ekholm has warned that security worries about Huawei risk further hampering Europe’s lagging efforts to build 5G networks – FT
• Congressional Democrats have accused White House officials of pushing a plan to sell US nuclear power technology to Saudi Arabia in potential defiance of legal restrictions and regulatory procedures – FT
• The Government will be taking on a greater share of the risk on outsourced public sector contracts as part of a new set of rules drawn up to improve stability in the sector in the wake of Carillion’s collapse – The Telegraph
• Asda reported a mere 1% rise in sales during the three months to 31 December as it awaits a crucial decision on its £14 billion tie-up with Sainsbury's – Daily Mail