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FTSE 100 closes firmly in red as traders flee risk ahead of Fed statement

The UK blue-chip index finished down nearly 33 points lower at 7,291
City of London
Meanwhile, the more UK-focused FTSE 250 had sunk around 108 points to 19,442
  • FTSE 100 index closes in red

  • Kingfisher is top FTSE laggard

  • Sterling weak as May requests Brexit extension to 30 June

FTSE 100 closed in the red mid-week as global markets sink lower as traders flee risk ahead of the Federal Reserve statement due soon.

The UK blue-chip index finished down nearly 33 points lower at 7,291 but other European benchmarks were lower still.

The German DAX shed around 184 at 11,603, while the French CAC 40 lost 43 at 5m382.
In London, mid-cap benchmark FTSE 250 shed around  162 at 19,388.

David Madden, at CMC Markets, said some dealers were taking money off the table ahead of the US Central bank's announcement.

"The language used by the US central bank in recent months has been neutral, and some traders are expecting that to be the case later. US-China trade talks are set to continue next week, and there has been some concerns about the state of trade relations, and that has been a factor in today’s decline."

On Wall Street, the Dow Jones Industrial Average is down 165 points at the time of writing, while the S&P500 is off around 14.

3.45pm: FTSE 100 set to end ‘hump day’ slightly down

Going into its final hour on Wednesday, the FTSE 100 looked set to close out the day slightly lower despite a brief dalliance with a 10 point gain earlier in the day.

The blue-chip index was down around 5 points at 7,318 in the last hour of trading, with stocks in retailer Kingfisher and some major miners continuing to weigh.

Meanwhile, the more UK-focused FTSE 250 had sunk around 108 points to 19,442, not helped by Brexit uncertainty and manufacturing data from the CBI that showed a sluggish domestic economy and pervading uncertainty had slowed down order growth in the sector.

On AIM, meanwhile, pharma firm Motif Bio PLC (LON:MRFB) was one of the standout performers during the session, posting an 74.6% rise to 10.3p in late-afternoon ontheh back of renewed talks with US regulators over its iclaprim antibiotic.

By contrast, Wildwood restaurant owner Tasty Plc (LON:TAST) had plunged 20.6% to 6.7p after it swung to a full year loss and warned investors its situation was unlikely to improve in the current year.

2.15pm: Sterling under pressure as May asks Brussels for Brexit extension

The pound has slumped once again into late-afternoon trading after Prime Minister Theresa May requested an extension of Brexit from the EU which would take the UK’s departure date to 30 June.

The extension, which was shorter than some had expected, sent the pound down 0.69% to US$1.317 against the dollar and down 0.74% to €1.159 against the euro.

The extension will now need approval from EU leaders, although they are not expected to simply rubber-stamp the request as it could potentially take the UK’s membership of the bloc past the next set of EU parliament elections which are due to take place on 23 May.

In the equity markets, the FTSE 100 had reversed its rally from earlier in the afternoon and was now down 3 points at 7,320.

1.40pm: Wall Street opens slightly lower as traders await Fed meeting

US markets opened down slightly on Wednesday morning ahead of the Fed’s interest rate decision later today, upending some analysts’ predictions of a higher open.

The US central bank is expected to release its economic forecasts at around 2pm Eastern Time (6pm UK time), with chairman Jerome Powell to hold a news conference at 2.30pm ET.

Shortly after the opening bell, the Dow Jones Industrial Average was down 71 points at 25,816, while the S&P 500 was down 6.9 points at 2,825 and the Nasdaq was down 9 points at 7,714.

Meanwhile, in London, the FTSE 100 had edged up 10 points to 7,334 in early afternoon.

12.20pm: Wall Street called a tad higher

The FTSE 100 index remained modestly higher in early afternoon trading supported by expectations for a small rally in opening deals on Wall Street with all eyes on the latest Federal Reserve policy announcement today.

Around 12.20pm, the UK blue chip index was up around 8 points at 7,331, just below the session peak of 7,334 and above the morning low of 7,297.

The Dow Jones Industrials Average is called around 13 points higher at 25,900 having shed 26 points on Tuesday after a late retreat.

James Hughes, chief market analyst at AxiTrader said: “Yet again, the US-China trade talks have found their way back onto the agenda, with some quarters seen as expressing concern that negotiators in Washington are now pushing back against some of the demands coming from Beijing.

“That’s propping up the greenback, but it doesn’t seem to be translating through to equities just yet, although attention now is well and truly focused on the FOMC’s monetary policy comments later in the session.”

He added; “It’s looking increasingly difficult for this to be ‘good news’ for stocks, as one school of thought suggests the Fed will claim there’s still scope for a rate hike this year, defying a market which currently has a 33% chance of a rate cut by next January priced in.

“Others suggest the economic outlook given by the Fed will be so downbeat as to pose a threat to domestic consumption, again a negative for equities.“

12.10pm: UK manufacturing struggles amid Brexit uncertainty

The latest industrial trends survey from the Confederation of British Industry (CBI) has pointed to a struggling manufacturing sector contending with Brexit-related uncertainty and a “lacklustre” domestic economy.

The report said that overall orders had slowed to 1% growth during March, down from 6% growth in February, which seemed entirely down to a softening in domestic demand.

Output expectations for the next three months also fell to a five-month low.

The conditions for the sector seemed to be being hampered by business caution over investment and spending amid uncertainty over Brexit and the economy, while lower consumer confidence was restricting demand for manufactured goods.

The CBI had also asked an additional question around how manufacturer’s activity was being affected by Brexit, with a quarter of respondents saying they had built up their stocks while others reported lower investment and demand alongside difficulties in getting export orders.

The FTSE 100 was down 1 point at 7,323.

11.00am: Footsie mostly flat

Heading into late-morning, the FTSE 100 was still relatively flat after recovering from an initial plunge at the start of the day, with traders still in ‘wait and see’ mode ahead of the Fed meeting.

The index was up around 1 point at 7,325.

The latest UK inflation figures seem to have made little impact on the market, although Howard Archer, chief economic advisor to the EY ITEM Club, said inflation is likely to “stay at or modestly below 2% for much, if not all of 2019”.

“We see inflation averaging 1.8% over 2019 and It could very well get as low as 1.6% during the year.”

However, Archer added that if there was a ‘no deal’ Brexit, the outlook would be “very different”, predicting an interest cut from the Bank of England and a “significant hit” to the UK economy.

“Our suspicion is that inflation will spike significantly higher if the UK leaves the EU without a “deal” primarily due to a likely marked fall in sterling even though the government has indicated that under a temporary scheme 87% of imports by value would be eligible for zero-tariff access compared to 80% of imports currently being tariff free.”

Meanwhile, UK house prices were 1.7% higher in January than a year ago, their slowest inflation rate since June 2013, with London seeing a 1.6% drop, the biggest annual decline since the midst of the recession in September 2009.

10.10am: UK inflation nudges up but still below BoE target

The latest UK inflation data has managed to stay under the Bank of England’s 2% target, with the consumer prices index (CPI) rising to 1.9% in the 12 months to February, up from 1.8% in January.

The 0.1% rise was caused by upward pressure from food, alcohol, and tobacco products although these were offset by lower price rises in clothing and footwear.

Combined with Tuesday’s job figures which saw the unemployment rate fall to a 45-year low of 3.9% and average weekly earnings on the rise, most analysts are expecting the Bank of England to sit on its hands and leave interest rates unchanged at its policy meeting on Thursday.

Ben Brettell, senior economist at Hargreaves Lansdown, said: “The Bank of England has been setting a neutral tone as Brexit approaches, with policymakers hamstrung by political uncertainty and a deteriorating global growth outlook. The Bank has said it thinks higher interest rates will be appropriate in the coming months, as it aims to keep inflation close to its long-term 2% target.”

He added that while the jobs figures would “normally lead to calls for higher rates” the current period was “far from normal” amid the ongoing Brexit uncertainty.

“If Theresa May can somehow find a way to break the political deadlock in Westminster and Brexit happens in a relatively orderly fashion, we could see rates gently nudge up later this year. If we leave with no deal, however, all bets are off. I’d expect inflation to spike as sterling weakens, but the Bank has shown willingness in the past to look through this type of inflation and keep interest rates low to support the economy. I’d expect them to do the same here.”

The figures did little to move the pound, which was down 0.4% at US$1.321 against the dollar, as currency traders are likely to have their eyes on Brexit-related developments.

The FTSE 100 index was also little moved by the news, down 2 points at 7,321.

9.45am: FTSE 100 moves into (almost) neutral territory

The FTSE 100 is stuck in neutral mode, seesawing between slightly up and slightly down again as the morning progressed.

One of the key weights on the blue-chip index has been DIY retailer Kingfisher,  with one analyst lamenting that the search for a new chief executive should have been started “long ago”.

“Investors will probably be pleased that the hunt is on for a new chief executive given the shares have fallen by 24% since Veronique Laury became CEO on 8 December 2014. But finding the right person is still crucial to putting Kingfisher back on track”, said Russ Mould, investment director at AJ Bell.

“Whoever gets the top job will walk into a lengthy turnaround programme that hasn’t really yielded the desired results. They may find it easier to rip up the plan and start again rather than make small changes.”

Laury isn't the only exec at the firm getting the chop either, with finance boss Karen Witts and chief digital guru Steve Willetts also scheduled for the boot.

Kingfisher shares were down 2.4% at 239.5p.

Another drag on the FTSE 100 this morning has been the miners, with shares in Antofagasta PLC (LON:ANTO), Rio Tinto PLC (LON:RIO), and Anglo American PLC (LON:AAL) all taking a hit from a drop in global iron ore prices.

Antofagasta shares were down 2.7% at 939.4p going into mid-morning, while Rio Tinto was down 3.5% at 4,156p and Anglo American was down 2.3% at 1,960p.

One level down on the FTSE 250, satellite firm Inmarsat Plc (LON:ISAT) was enjoying a boost from confirmation that it is in takeover talks with a private equity-led consortium that valued the firm at around £2.5bn, higher than its current market cap of £2.03bn. Its shares were up 16.7% at 510.80p.

The FTSE 100 was down 3.3 points at 7,320 while the FTSE 250 was up 2.5 points at 19,554.

8.30am: Fottsie weak as Fed, trade jitters bite

The FTSE 100 dropped back shortly after the open reflecting a cautious attitude ahead of the Federal Reserve meeting later today and with ongoing jitters over trade battles biting into the index.

In early deals, the UK blue chip index was down 24 points at 7,299.

“We should expect the Fed to reiterate its patient approach to raising rates. The problem for markets is that the dovishness is largely expected to the bar for a ‘dovish surprise’ from Powell is rather high”, said Neil Wilson, chief market analyst at Markets.com.

“All the focus will be on the fresh set of projection materials and it’s this that will matter for markets.”

“On trade, we have the usual toing and froing but there are some encouraging signs in at least the two sides are still talking and therefore we should expect progress of sorts. Nevertheless, I’ll believe it when I see it. The deadly duo of [US trade representative Robert Lighthizer] and [US treasury secretary Steven Mnuchin] are heading to China next week, with the aim of sealing a deal by the end of the month. But there are still a large chasm between the two sides”, Wilson added.

The pound was also on the slide in early deals, dropping 0.32% to US$1.322 as rumours regarding arguments in the UK government over the length of a possible Brexit extension and the possibility of Theresa May having to set out a resignation date put pressure on sterling.

In company news, blue-chip DIY retailer and B&Q owner Kingfisher PLC (LON:KGF) slumped 3.1% to 237.7p in early deals after it announced the resignation of chief executive Véronique Laury and a 52.8% plunge in full-year pre-tax profits.

Laury, who has been chief executive for the past four years, has entered the fourth year of her five-year One Kingfisher turnaround plan but the retailer continues to struggle.

A tough UK retail market has not helped but the biggest drag on its performance has been French DIY business Castorama.

Proactive News headlines:

Bluejay Mining PLC (LON:JAY) has quashed speculation it will soon undertake an equity capital raise. The company has sufficient funding in place that allows it to conduct its budgeted activities into Spring 2020, the Greenland -focused miner said in a statement.

Midatech Pharma PLC (LON:MTPH) (NASDAQ:MTP) has announced a ratio change on its American Depositary Receipts from one ADR representing two ordinary shares, to a new ratio of one ADR representing twenty ordinary shares. The AIM-listed R&D company, focused on delivering innovative oncology and rare disease products to patients, said the effective date of the ratio change is expected to be 8 April 2019.

88 Energy Ltd (LON:88E) has presented a picture of a portfolio that retains multiple significant opportunities in Alaska, in the wake of the recent Winx-1 exploration well disappointment. The company, in a statement, specifically highlighted that it is closer to a deal in a farm-out process to bring a partner into the exploration of conventional prospects in the Project Icewine area.

Scancell Holdings PLC (LON:SCLP) has strengthened its intellectual property  after it was granted two “important” patents in the US and Europe.

Highlands Natural Resources PLC (LON:HNR) is to set up a cannabidiol (CBD) operation in Colorado using hydrogen from its gas operation in Kansas as fertiliser.

Telit Communications PLC (LON:TCM) said it has reached a settlement with the administrators of Bartolini After Market Electronic Services (BAMES) in regard to the liquidation of the latter.

OptiBiotix Health PLC (LON:OPTI) has signed an exclusive agreement with DKSH International to distribute its SlimBiome weight management ingredient in Italy and Spain.

Asiamet Resources Ltd (LON:ARS) continues to make progress with its latest round of drilling at the Beruang Kanan Main copper project in Indonesia, where 37 resource evaluation holes have now been completed, alongside four geotechnical holes, as part of an ongoing bankable feasibility study.

Caledonia Mining Corporation PLC LON:CMCL) produced 54,511 ounces of gold from its Blanket mine in Zimbabwe during the 12 months to December 2018. That was down slightly on the 56,133 ounces produced in 2017, as grades were somewhat weaker.

Union Jack Oil PLC (LON:UJO) has conditionally raised £1.75mln through a share sale with the funds earmarked for anticipated follow-up activities to follow a successful outcome in an upcoming well at the West Newton project.

BB Healthcare Trust PLC (LON:BBH) says Dr Daniel Koller is stepping down from his role as part of the management advisory team team. Bellevue Asset Management, which manages the BB Healthcare trust, said Koller will focus his attention on BB Biotech, a German sister fund run by the investment group.

Physiomics Plc (LON:PYC), a provider of technology-based solutions to predict the effects of cancer treatment regimens for the biopharma industry, revealed that it is participating in the American Academy of Cancer Research (AACR) Annual Meeting 2019, taking place in Atlanta, Georgia, 29th March to 3rd April.  The company said it will for the first time be presenting on two new topics arising from client and grant funded projects.

INTOSOL Holdings PLC (LON:INTO), the award-winning international luxury travel company, has announced the appointment of Hybridan as its broker and advisor with immediate effect.

6.45am: Footsie seen lower as Fed awaited

The FTSE 100 is poised to open lower on Wednesday morning as traders await the latest interest rate decision from the US Federal Reserve amid what seems to be a slightly darker US-China trade picture.

Spread-betting firm IG expects the Footsie to open 38 points lower at 7,299 after closing up 25 points on Tuesday.

It was a mixed bag on Wall Street overnight, with the Dow Jones Industrial Average closing down 27 points at 25,887, the S&P 500 down 0.4 points at 2,833, and the Nasdaq up 9.5 points at 7,724 as news that China might be pushing back against US trade demands took some of the shine off market sentiment.

The varied picture continued in Asia today, with Tokyo's Nikkei 225 up 42 points at 21,609, while Hong Kong’s Hang Seng lost 95 points at 29,372, as traders digested the trade news and took a wait and see approach to the Fed.

On currency markets, sterling was off 0.1% at US$1.3250 against the dollar as the greenback was given a lift as a safe-haven ahead of the Fed and on the back of trade developments.

“Newsflow on any progress in the trade dispute has been slow over the past week. Until recently investors have kept their nerve over the trade war as they were more focused on the more dovish outlook from the FOMC”, said Jasper Lawler, head of research at London Capital Group. 

“However, reports that US – Sino trade talks are turning sour is hitting sentiment. Hopes that a trade deal would be signed by March had already been pushed back to April and now even June. Suddenly a trade deal, which had looked imminent is now months away if it can be agreed at all.”

UK inflation to battle Brexit

Although the domestic focus will continue to be on the ongoing Brexit shenanigans, Wednesday will also bring some more key UK economic data to contend with.

The latest consumer price index is due to be posted at 9.30am, with inflation having dropped below the Bank of England’s 2% target rate in January, helped along by lower oil prices.

Should inflation hold below 2% again in February or even drop lower, then it will make the Bank of England’s interest rate decision on Thursday even easier, not that any rise in interest rates from the current level of 0.75% is expected anyway.

Significant announcements expected on Wednesday:

US Fed interest rate decision

Finals: Kingfisher PLC (LON:KGF), Eland Oil & Gas PLC (LON:ELA), Centaur Media PLC (LON:CAU), Curtis Banks Group PLC (LON:CBP), Cloudbuy PLC (LON:CBUY), EMIS Group PLC (LON:EMIS), Empiric Student Property PLC (LON:ESP), Frontier Smart Technologies Group Limited (LON:FST), Genel Energy PLC (LON:GENL), SDL Plc (LON:SDL), Science in Sport PLC (LON:SIS), Ten Entertainment Group PLC (LON:TEG), TI Fluid Systems PLC (LON:TIFS)

Interims: Kier Group PLC (LON:KIE)

Economic data: UK CPI, RPI, PPI inflation data; UK house price index; UK CBI monthly industrial trends survey; US MBA mortgage applications

Around the markets:

  • Sterling: US$1.325, down 0.13%
  • Brent crude: US$67.48 a barrel, up 0.09%
  • Gold: US$1,306 an ounce, up 0.1%
  • Bitcoin: US$3,987.6, up 0.6%

City headlines:

  • Metro Bank is facing renewed questions about a £120 million grant it was awarded to improve services for small businesses – The Times
  • Office Outlet - the retail chain previously known as Staples - has slumped into administration, putting 1,200 more retail jobs at risk – Daily Mail
  • Inmarsat said on Tuesday it has received a cash takeover offer from a private equity-led consortium, a deal that would value the British satellite company at about $3.3 billion (2.5 billion pounds) and take it private - Reuters
  • The UK’s North Sea oil basin needs £200 billion of investment to survive for another generation – Daily Telegraph
  • Institutional Shareholder Services, the world’s biggest proxy voting agency, has recommended that shareholders reject Julian Dunkerton’s reappointment to the board of Superdry – The Times
  • UK unemployment has dropped to the lowest level in more than 44 years despite mounting fears over Brexit, as employers across the country ramped up hiring at the fastest rate in more than three years – Guardian
  • Mining group Ferrexpo has delayed publishing its annual accounts after an investigation into its charitable donations in Ukraine found further discrepancies – The Times
  • Financial services companies have committed to move about £1tn of assets out of the UK into Europe as the industry triggers its worst-case contingency plans with no Brexit deal in sight, according to consultancy EY – Financial Times
  • Leading economists have said that the Bank of England should wait to see how the economy responds in the event of a no-deal Brexit before launching any monetary stimulus – The Times
  • Barclays’ bosses have warned that corporate raider Edward Bramson would be a toxic presence on the board of the bank and should be kept at arm's length – Daily Mail
  • The world’s biggest energy trader Vitol said it expected oil demand to peak within 15 years – FT

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