FTSE 100 closes marginally ahead
Tobacco shares rise as US vaping critic steps down
Just Eat sees profit-taking after results
FTSE 100 closed ahead by nearly 13 points Wednesday but US shares fell.
Footsie closed at 7,196 - up 12.57 points, while FTSE 250 finished in the red - down around 83 at 198,359.
The German DAX shed 33 points at 11,587 and the French CAC 40 lost nearly nine points.
On Wall Street, the Dow Jones is down 125 at the time of writing, while S&P 500 is off nearly 14 points.
The fall in Europe came despite talk of new targeted lending from the European central bank (ECB)which holds its latest council meeting on Thursday.
David Madden, analyst at CMC Markets said: "The central bank have a track record of talking about a scheme well in advance of it being actually launched, so this story might do the rounds. Despite the ECB report, stocks are largely offside this afternoon."
4pm: FTSE 100 struggling
The FTSE 100 struggled to remain in positive territory as the close of trading approached.
The leading index was barely changed, up just 5 points at 7188, as investors fretted about Brexit as well as the downgraded growth forecasts from the OECD thinktank.
The FTSE 250, which has been in the red for most of the day, was down 81 points at 19,361.
On Wall Street, the Dow Jones Industrial Average has lost its early gains, down 82 points at 25,724. As well as the OECD report, the US market has been unsettled by the US trade deficit, which has hit a ten year high despite President Trump’s efforts to improve the situation. The growing deficit with China in the midst of a dispute over tariffs is particularly striking.
Mickey Levy, economist at Berenberg Capital Markets, said: “While the focus on bilateral trade deficits is misguided and it is obvious that U.S. consumers and businesses benefit tremendously from imports, the widening of the U.S.’s bilateral trade goods deficit with China to -$419 billion in 2018 is striking. It reflects the trade tensions, China’s significant slowdown in domestic demand and production, and China’s retaliatory tariffs on imported goods from the U.S. On the other hand, the U.S.’s higher tariffs on Chinese imports did not significantly dent its appetite for China’s goods.”
He added: “A trade deal between both countries that is aimed in part at reversing this large imbalance…is expected to reduce the trade deficit over a long period of time, but no doubt the imbalance will remain very large.
2.50pm: Wall Street edges higher at the open
Wall Street opened marginally higher rather than lower as expected, but investors were reluctant to commit themselves ahead of any breakthrough in the US/China trade talks.
The growing US deficit reported earlier, the highest since 2008, shows the need to resolve the dispute between the world’s two largest economies. So the Dow Jones Industrial Average has climbed just 10 points to 25,817 in early trading.
Meanwhile the FTSE 100 is holding on to its gains, up 26 points at 7209 as a weaker pound continues to lift dollar earners.
UK investors remain cautious for their own reasons, notably the continuing uncertainty over Brexit.
In a speech on Wednesday to the London School of Economics, deputy Bank of England governor Sir Jon Cunliffe warned: “The most prominent short-term risk facing the UK today of some financial sector correction is the possibility of an extremely disorderly Brexit. Such an outcome may not be what we expect to happen or what is likely to happen but rather the worst possible case. The risk has not been generated by the financial sector. But, if it occurred, it would almost certainly lead to a correction in UK asset prices and losses for UK banks.”
He added: “We have acted to make sure the system is resilient to a worst case major economic shock from Brexit. That does not mean losses would be avoided. Or that it would be without volatility: financial stability does not mean market stability. But it does mean that the financial system would not contribute to and amplify the shock, and would be able to continue to provide critical economic services to the economy.”
1.50pm: US jobs growth slows, while trade deficit jumps 12.5%
A mixed picture from the latest US jobs figures saw a slowdown in employment growth last month, although the gains were still at a reasonably high level.
The ADP payrolls report for the US private sector showed an increase of 183,000 jobs in February, below the 190,000 forecast by analysts although the previous month’s figure was revised markedly higher from 213,000 to 300,000.
Mark Zandi, chief economist of Moody’s Analytics which helps compile the report, said, “The economy has throttled back and so too has job growth. The job slowdown is clearest in the retail and travel industries, and at smaller companies. Job gains are still strong, but they have likely seen their high watermark for this expansion.”
The figures come ahead of the widely watched official non-farm payroll numbers, which are due out on Friday.
Elsewhere, despite President Trump’s attempts to improve the US trade position, new figures show the deficit for 2018 widened to $621bn, a 12.5% increase and the highest level since 2008. Trump’s tax cuts boosted domestic US demand for imports while the strong dollar dampened exports.
The deficit in goods with China, where Trump is currently engaged in a tariff battle, rose 12% to $419bn.
The news has done little to inspire Wall Street, where the Dow Jones Industrial Average is expected to open down 0.22%
12.30pm: FTSE edges higher as weak pound helps dollar earners
The FTSE 100 has enjoyed a positive if subdued morning, despite the continuing concerns about Brexit and news that the OECD thinktank had cut its global growth forecasts.
It has added 11.3 points to 7194.7, helped by a 0.24% dip in the pound to $1.31 which benefitted the dollar earners in the index. Meanwhile the FTSE 250 has slipped 29.5 points to 19,413.
David Cheetham, chief market analyst at XTB, said: “After a strong run higher of late, the pound has taken a pause as traders focus on the latest Brexit developments and the many permutations that could ensue. It’s a similar story for stocks with the FTSE little changed and back around the 7200 handle with the benchmark edging back near its year-to-date high and working on a 4th consecutive day of gains.”
Wall Street is not expected to provide much impetus when it opens, with the Dow Jones Industrial Average forecast to open with a 0.2% dip which would take it back below 25,800. That could change with the forthcoming ADP jobs data – expected to show a rise in employment of 190,000 compared to 213,000 in January - and trade figures.
DS Smith has added nearly 5% to 366.5p following the sale of its plastics arm for US$585mln while British American Tobacco rose 3.5% 2,999.5p as a key US critic of vaping, Scott Gottleib, said he was leaving his post as food and drug commissioner.
11.00am: OECD cuts global growth forecasts
The OECD thinktank added to concerns about the global economy by cutting its growth forecasts in its latest outlook report.
It warned Brexit uncertainty and trade disputes were hitting growth prospects - no surprise there – and cut its forecasts accordingly. It now expects the world economy to grow by 3.3% this year, down from its previous estimate of 3.5% in November.
For the UK, the thinktank cut its growth forecast from 1.4% to 0.8% for 2019.
Its economist Laurence Boone said: “The global economy is facing increasingly serious headwinds. A sharper slowdown in any of the major regions could derail activity worldwide.”
The downbeat news did little to unsettle the markets, with the FTSE 100 edging higher, up 6.3 points to 7189.75. The index was lifted by its dollar earners as sterling slipped nearly 0.4% to $1.31 on continuing Brexit worries.
9.40am: Some relief for Big Tobacco
Tobacco stocks were lit up by news that a key US opponent of vaping was stepping down. Food and drug commissioner Scott Gottleib said in a letter to staff he would leave within the next month, apparently fed up with commuting from his home in Connecticut to Washington.
That was not enough to bring the FTSE 100 to life, with the leading index up just 1 point at 7184.77.
Connor Campbell, financial analyst at Spreadex said: “Following on from Tuesday’s scattershot trading, Wednesday saw the European markets get off to a hesitant, uncertain start after Australia became the latest country to flag up the sickly state of the global economy.
He added: “The red tinge of its banking sector, likely due to the lack of Brexit progress in last night’s meeting between Michel Barnier, Geoffrey Cox and Stephen Barclay – something that also dragged sterling 0.2% lower against the dollar and the euro – and losses from BP and Shell helped prevent the FTSE from carrying over Tuesday’s momentum”.
8.40am: Positive start for Footsie
With little market-moving news of note (save a GDP miss by Australia), the FTSE 100 made a subdued opening, nudging just 11 points higher to 7,194.58.
It’s possible, that speeches from Bank of England deputy governor Jon Cunliffe and external Monetary Policy Committee member Michael Saunders later could shake things up, but it’s unlikely.
Commentary by John Williams, president of the Federal Reserve’s New York region, will be keenly eyed for any slight hint on the trajectory of US interest rates and could have an impact on market sentiment on the other side of the Atlantic.
Share in the delivery firm Just Eat (LON:JE. succumbed to a round of profit-taking in the wake of full-year results – with investors requiring more than a 44% rise in revenues to keep the stock airborne.
“Deliveroo and Uber Eats are pushing their delivery services hard, and increasingly trying to muscle into Just Eat’s marketplace business of connecting hungry people to takeaways, who then handle the delivery themselves.
“For their part, Just Eat are trying to work with the same sort of branded restaurants their rivals are targeting, and offering their own delivery offering. None of this comes cheaply, and the costs are holding profits back.”
Proactive news headlines:
88 Energy Ltd (LON:88E) has told investors that on Monday 3 March the Winx-1 exploration well reached its total depth of 6,800 feet. It added that all the well’s pre-drill targets were intersected by the well and multiple potential pay zones were identified, including a zone within the Nanushuk primary target.
Allergy Therapeutics PLC (LON:AGY) enjoyed another six months of revenue and market share growth as it ended 2018 with plenty of money in the bank ahead of what will be a busy year for the drug developer.
Victoria Oil & Gas PLC (LON:VOG) has revealed that executive chairman Kevin Foo is signing off his tenure at the head of the company with a £12.6mln equity-based funding that promises a “new beginning” for the Cameroon gas firm. Foo will retire as a director and executive chairman upon completion of the fundraise.
BATM Advanced Communications Limited (LON:BVC) shares jumped in early deals Wednesday on the back of bullish 2019 forecasts that predicted earnings (EBITDA) and revenue growth would be “ahead of market expectations”.
Photonstar LED Group PLC (LON:PSL), which is seeking shareholder approval to become a cash shell, said it has already met with a number of promising potential acquisitions and has raised cash through a placing and a director’s subscription to enable due diligence on its targets.
Oriole Resources PLC (LON:ORR) said a trench programme at one of its Cameroon gold assets had returned what it described as “very encouraging” results. At the Bibemi project, geologists found orogenic-style gold mineralisation, which is formed when the earth’s crust folds.
African Battery Metals PLC (LON:ABM) has already received offers of new projects but will focus first on its existing portfolio, said executive director Paul Johnson. ABM, which was refinanced in January, owns copper, nickel and cobalt assets in the DRC, Cameroon and Ivory Coast.
Salt Lake Potash Ltd (LON:SO4) (ASX:SO4) has started constructing the first evaporation ponds at its Lake Way Sulphate of Potash (SOP) Project near Wiluna in Western Australia. The first phase will enable de-watering of the Lake Way Williamson Pit that contains the highest-grade brine resource in Australia.
6.45am: FTSE 100 seen lower
The FTSE 100 is expected to open lower on Wednesday morning as investors took their cue from Wall Street and sat on their hands to await more news on a potential US-China trade deal.
Spread-betting firm IG expects the FTSE 100 to open around 12 points lower after closing up around 49 points yesterday at 7,183.
“Investors aren’t prepared to run the current rally any further without more tangible evidence of progress towards a US – China trade deal or concrete evidence of improved global economic health”, said Jasper Lawler, head of research at London Capital Group.
In the US yesterday, the main indices closed slightly lower as investors waited for more information on the potential agreement.
The Dow Jones Industrial Average closed down 13 points at 25,806, while the S&P 500 was down 3 points at 2,789 and the Nasdaq was down 1 point at 7,576.
In Asia today, the markets were mixed following the listless Wall Street trading, although the 13th National People’s Congress, the Chinese legislation committee which got underway on Tuesday, lifted some benchmarks on promises to open up the economy and reduce trade tensions.
The Japanese Nikkei 225 was down 129 points at 21,596 while Hong Kong’s Hang Seng was up 35 points at 28,997.
Lawler said that while the prospect of more Chinese stimulus may have lifted Asian stocks, any gains would be capped “by an increase in regional tensions as North Korea starts rebuilding key missile testing facilities”.
On the currency markets, sterling was down 0.3% at US$1.313 against the dollar as fresh Brexit doubts over Theresa May’s Brexit deal, bolstered by comments from Labour that most of its MPs were unlikely to vote for it, encouraged some profit taking.
Legal & General to see new chief exec hog spotlight
Shares in UK insurer and investment firm Legal & General Group PLC (LON:LGEN) have recovered at the start of the year and investors will be keen to see full-year profits do the same after a challenging first half.
The company has said it is on course to deliver a 10% increase in earnings per share per year out to 2020 as it focuses on “attractive high-growth markets” within investment management, investing and annuities, and insurance.
“Investors will be keen to see if assets under management breach the £1trn mark and whether their three-tier strategy to offset the fall in individual annuity sales is coming through,” according to The Share Centre.
“However, the media focus is likely to turn to the recent announcement of Michelle Scrimgeor who has been selected L&G Investment Management's new chief executive.”
Scrimgeor, the European chief of Columbia Threadneedle Investments, will succeed Mark Zinkula, who will step down as head of the investment management division in August after eight years in the role.
Significant announcements expected for Wednesday March 6:
Finals: Paddy Power Betfair plc (LON:PPB), Legal & General Group PLC (LON:LGEN), Just Eat PLC (LON:JE.), Aggreko PLC (LON:AGK), PageGroup PLC (LON:PAGE), Costain Group PLC (LON:COST), BATM Advanced Communications Ltd. (LON:BVC), Headlam Group PLC (LON:HEAD), Anpario Plc (LON:ANP), Tritax Big Box REIT (LON:BBOX), FDM Group Holdings PLC (LON:FDM), Foresight Solar Fund Limited (LON:FSFL), Glenveagh Properties PLC (LON:GLV), VR Education Holdings Plc (LON:VRE), Vivo Energy PLC (LON:VVO), Secure Income REIT PLC (LON:SIR)
Economic data: US ADP employment change; US factory orders; US balance of trade; Fed Beige Book
Around the markets:
- Sterling: US$1.313, down 0.3%
- Brent crude: US$65.4 a barrel, down 0.7%
- Gold: US$1,289 an ounce, up 0.3%
- Bitcoin: US$3,840, up 3.7%
- Sainsbury’s, the second-biggest grocer in the UK, has been named the worst performing supermarket in Britain, data from shopper behaviour experts Kantar Worldpanel revealed – Daily Mail
- Carmakers employing thousands of people have issued stark warnings of an exodus from the UK in the event of a no-deal Brexit, in the clearest signal yet of the panic spreading through the industry – The Guardian
- China has announced tax cuts and infrastructure spending and lowered its annual growth target to stimulate an economy weakened by its trade dispute with the US – The Times
- Bennett Goodman, one of Blackstone’s most senior executives, have been slapped golden handcuffs in a bid to prevent the co-founder of the group’s credit business from following his tow original partners out of the door – Financial Times
- AstraZeneca boss Pascal Soriot took home £11.4 million last year - a 9% increase - despite an ongoing shareholder revolt over his pay – The Daily Telegraph
- Elementis, a specialist chemicals company that makes ingredients for make-up and skincare products, has begun to stockpile supplies in case of a no-deal Brexit – The Times
- Revelations from the Troika Laundromat investigation have raised new questions about the extent of their involvement in the movement of suspicious funds from Russia into Europe – The Guardian
- Northern Ireland has been warned of “grave” consequences from a no-deal Brexit, including a “sharp increase in unemployment” – FT
- More than 8 million UK adults would struggle to cope in a cashless society, according to a major report which claims that the country’s “cash infrastructure” is in danger of collapsing – The Guardian
- Fashion chain Jack Wills posted 1.1% decline in sales in the year to 28 January as younger shoppers shun preppy polo shirts in favour of casual streetwear brands – Daily Mail