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FTSE 100 reverses to end Friday lower as trade fears refuse to go away

Last updated: 17:10 10 May 2019 BST, First published: 06:19 10 May 2019 BST

Cityscape
  • FTSE 100 closes lower

  • US indices down

  • BBA Aviation wanted after a reassuring update

FTSE 100  turned negative into the close on Friday as traders got spooked by trade fears yet again.

The UK's premier share index ended the day down around four points at 7,203, while FTSE 250 added around 81 points at 19,366.

Over the truncated four day week as a whole, the index fell around 2.4%.

On Wall Street, stocks are seeing red at the time of writing. The Dow Jones Industrial Average is off around 193 points; the S&P 500 is around 24 points lower.

David Madden, market analyst at CMC Markets, noted: "...the feel-good factor in relation to the US-China trade situation is starting to wear-off".

"The bounce in Asian markets overnight influenced European dealers, and now that it is dawning on investors that the US-China stand-off is far from over, and things are likely to get worse before they get better."

Top loser on Footsie was Bunzl Plc (LON:BNZL), the distribution and services group, as it announced the retirement of long running finance director Brian May, who will leave the company in February.

May has been group finance director for 13 years and has been with the company for 25 years. Shares lost nearly 3% at 2,125p.

3.00pm: Gains slowly dissipating as trade war fears grow

With half an eye on the US’s new trade tariffs on China and the weak start on Wall Street, the Footsie is running out of steam.

The benchmark index was up 22 points (0.3%) at 7,229. In the US, the Dow Jones was down 116 points (0.5%) at 25,712 while the S&P 500 was down 10.5 points (0.4%) at 2,860.2.

“The @realDonaldTrump Twitter feed has been very active, taking some wind out of the sails of Friday’s stock market bounce,” observed Ken Odeluga at City Index.

“The U.S. President has been keen to push his view—not backed by any normal understanding of economics—that tariffs will ‘bring in FAR MORE wealth’ to the US ‘than even a phenomenal’ trade deal,” Odeluga continued.

 

“Market scepticism about the possibility of a breakthrough on day two of talks in Washington with China’s Vice Premier Liu Hu was already high

“The key takeaway for investors is that a President endorsing tariffs over a trade deal is negative for the chances of one being sealed anytime soon. All that’s left is to buckle up for the final downswing of the week,” Odeluga concluded.

 

Back on this side of the pond/international delusion line, mid-cap BBA Aviation PLC (LON:BBA) was 2.6% higher at 272p after itrs trading update this morning.

READ BBA Aviation says trading was in line with expectations

The flight support firm posted a 1.1% year-on-year increase in revenue in the first months of the year on a like-for-like basis.

“We see little change to consensus estimates, although the current rating implies a worse outturn. Our recommendation remains BUY with a 365p target price,” said Liberum Capital Markets.

1.45pm: US inflation rate rises to 2%

The US annual inflation rate rose to 2.0% in April, a slightly lower than expected increase.

“US headline CPI has nudged back up to the 2% target for the first time since November, helped along by the 30% rise in gasoline prices since the low at the start of the year but the fact that this data came in below expectations will do little to assuage ongoing market concerns about inflation,” said ING Economics.

US indices were expected to open around 0.4% lower following the inflation release.

In the UK, the FTSE 100 was up 29 points at 7,236.

12.15pm: The Footsie surrenders gains ahead of what is expected to be a soft opening on Wall Street

The Footsie enjoyed a profitable morning although gains were being surrendered towards the end of the session.

London’s index of heavyweight shares was up 30 points (0.4%) at 7,237.

“It’ll be interesting to see whether a negative US open has any impact on the European gains. The futures have the Dow Jones dropping 0.2% when the bell rings on Wall Street, pushing the index back under 25,800 (but leaving it well above Thursday’s 25,500-nearing intra-day lows),” observed Connor Campbell at Spreadex.

One blue-chip not participating in the Footsie’s advance is Bunzl Plc (LON:BNZL), the distribution and services group, which is bidding farewell to its finance director, Brian May (not that one).

Richard Howes, currently the bean-counter at cars seller Inchcape PLC (LON:INCH) will replace May in September.

Bunzl shares were down 2.2%.

The best performing stock this morning was Symphony Environmental Technologies PLC (LON:SYM), which soared 61%, after the European Commission dropped plans for restrictions on the type of biodegradable product it makes.

READ Symphony Environmental says EU drops investigation into oxo-plastics

Another minnow swimming rapidly upstream was Scancell Holdings PLC (LON:SCLP), after the company revealed it had added six “world-leading” cancer specialists to its clinical advisory board as the drug developer prepares for its Modi-1 cancer treatment to enter the clinic early next year.

The shares were up 18.4%.

 

10.50am: IAG leads the advance

London’s top shares index has clawed back most of yesterday’s losses, with confidence shored up by solid gross domestic product (GDP) data.

The FTSE 100 was up 48 points (0.7%) at 7,255, with British Airways owner International Consolidated Airlines Group (LON:IAG) leading the charge, up 4.5% after its first quarter update.

“It’s not every day you’ll see a company’s profits fall so sharply but the shares still rise but when your competitors have slipped into a loss, it’s perhaps not a surprise,” declared George Salmon, an equity analyst at Hargreaves Lansdown.

“And it’s not just the resilient profits that separate IAG from the pack. While others have bemoaned how Brexit uncertainty has prevented customers from making advance bookings, IAG is seeing no such headwinds.

“The main factor holding back profits is increased fuel prices, which have been compounded by a rise in the US dollar. While there’s little IAG can do about either of those factors, the group is confident it can offset these macro headwinds with cost efficiencies elsewhere, such that profits come in level with last year. That would be an impressive achievement in the current climate,” Salmon said.

While equity analysts run the rule over IAG’s figures, economists are doing likewise to the first quarter UK GDP numbers.

“Stockpiling was a key factor for first quarter UK growth, but some better news on consumer activity suggests underlying economic momentum could stay a little stronger as we head into the summer. As ever, the odds of a Bank of England rate hike this year hinge on Brexit,” asserted ING Economics.

9.45am: UK GDP rises by 0.5%

UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.5% in the first quarter, bang in line with forecasts.

The news had little impact on the FTSE 100, which was up 42 points at 7,429.

“Political uncertainty still looms over the UK economy, with the chances of a cross-party Brexit deal appearing less likely by the day. For the time being at least, growth is holding up. Jobs are still being created and wage growth remains strong but there are concerns that this positivity is being driven by a continuing inventory build-up, and this is expected to unwind as we head toward H2 [the second half],” said Phil Smeaton, the chief investment officer of Sanlam UK.

“Despite all the concerns around UK growth, it is ironic that economic weakness in the EU driven by declining industrial activity in Italy and Germany might be dragging down UK growth. As global trade disputes rumble on it would seem that any hopes of stronger EU growth lie with domestic activity, which would provide a welcome boost for the UK,” he added.

9.10am: FTSE 100 claws back some losses; IAG and Sirius Minerals shares fly higher

Traders looked to end the week on a high note after the recent sell-off as the FTSE 100 opened 49 points at 7,256.26.

However fragile sentiment looks likely to be directed by the status of trade talks between the US and China, which appear to have hit an impasse.

That said, Washington has offered a grace period on shipments already en route to the States though it still plans to hike tariffs on around US$200bn of goods imported from the People’s Republic.

“Given the deadline has now passed there is the possibility that tariffs could still be avoided given that US officials allowed for goods currently in transit to be exempt from the new tariff increases, which means there is a potential window, albeit a limited one, for an agreement to be hammered out, after President Trump said that a deal still remained possible,” said Michael Hewson of CMC Markets.

The day’s big corporate news came from International Consolidated Airlines (LON:IAG), owner of British Airways and Iberia, which delivered quarterlies that were greeted with a collective sigh of relief in London with the shares 3.6% flying higher.

That said, the picture wasn’t a particularly pretty one with fuel and currency costs providing a drag on IAG’s financial performance in the first three months of the year.

“In the context of its financial year, the first quarter will probably be one which IAG will want to forget,” said Richard Hunter, analyst at Interactive Investor.

“As can be seen from the demise of several smaller airlines over recent times, fortunes can turn on a sixpence in this highly cyclical industry. Whilst IAG’s problems are not existential, the first quarter has highlighted some of the challenges.

“Virtually across the board, costs have increased with fuel and employee costs having moved significantly higher.”

After the waves caused by the company’s recent fundraiser, Sirius Minerals (LON:SXX) shares clawed some ground back Friday as they rose 3.85% early on.

6.19am: FTSE 100 set to open higher 

Although the threat of an escalation in the trade war between US and China remains uppermost in investors minds, bargains are apparently out there.

As such, spread betting quotes suggest that the FTSE 100 will open around 19 points higher at 7,226, after falling 64 points to 7,207 yesterday.

US indices recovered some of their poise in the afternoon session yesterday but the Dow Jones industrial average still closed 139 points lower at 25,828 and the S&P 500 9 points lighter at 2,871.

“Given the deadline has now passed there is the possibility that tariffs could still be avoided given that US officials allowed for goods currently in transit to be exempt from the new tariff increases, which means there is a potential window, albeit a limited one, for an agreement to be hammered out, after President Trump said that a deal still remained possible,” observed Michael Hewson at CMC Markets.

“It is this hope that investors may well cling to as the tariff deadline passed earlier today, while China said it would take measures to retaliate in due course.

“There is no doubt that the stakes have increased in the past few days, with not only these now new China tariffs, but also escalating tensions in the Persian Gulf, after the USS Abraham Lincoln carrier group sailed through the Suez Canal into the region,” he added.

The performance of Asian markets this morning has been mixed. In Tokyo, the Nikkei 225 was down 161 points at 21,241 but in Hong Kong, the Hang Seng was 8 points heavier at 28,322.

In the UK, investors will have the first quarter gross domestic product (GDP) numbers to pore over to take their minds off Brexit, trade wars and The Game of Thrones spoiler alerts.

Economists have pencilled in a 0.5% quarter-on-quarter increase, up from a 0.2% gain in the preceding quarter.

“This is quite high, but growth was likely supported by companies making Brexit preparations. We expect GDP growth will slow again to around 0.2% q/q in the coming quarters,” observed Danske Bank.

Matters of a Brexit nature will also be germane in providing context for the first quarter performance of British Airways owner International Consolidated Airlines Group PLC (LON:IAG).

Consumer confidence is low at the minute, not just in the UK but in other countries as well, so it will be interesting to see if people are still prepared to fork out for holidays.

The sharp rise in oil prices over the past six months has raised concerns about fuel costs for airlines, which could put extra pressure on margins.

An update on guidance for the year will also be eyed. While the outlook given in February was better-than-feared, it was hardly scintillating, with bosses forecasting flat profits.

Elsewhere in the travel sector, hotelier Millennium & Copthorne Hotels PLC (LON:MLC) is due to update investors.

Revenue and profit slumped last year as global geopolitical uncertainties weighed on business confidence, while soaring costs hit the bottom line. The rise of Airbnb, a shortage of staff and a glut of new hotels has also dented hotels’ profits.

Those issues are obviously still front and centre, so the market will be keen to see what effect they continue to have and how bosses are dealing with them.

Proactive news headlines:

Biodegradable plastics group Symphony Environmental International PLC (LON:SYM) says the European Commission has dropped plans for restrictions on the type of product it makes. 

Oncimmune Holdings PLC (LON:ONC) said it has begun a large-scale study in China to assess the potential of its screening device in patients with early-stage lung cancer. 

Advanced Oncotherapy PLC (LON:AVO) has secured more than £12mln additional funding to support ongoing work on a next-generation proton beam system. 

Resources company Tharisa PLC (LON:THS) said production volumes and recoveries of both chrome concentrates and platinum group metals (PGMs) are on an upward trend. 

StatPro Group PLC (LON:SOG) has signed a three-year deal with an EU investment manager carrying a minimum price tag of €1.2mln (£1.04mln). The firm, which provides cloud-based portfolio and analytics services to asset managers, said the customer already used its flagship Revolution Delta service but the deal added a new module to cover new EU money market regulations and provide risk reporting to regulators.  

Scancell Holdings PLC (LON:SCLP) has added six “world-leading” cancer specialists to its clinical advisory board as the drug developer prepares for its Modi-1 cancer treatment to enter the clinic early next year. 

Bluejay Mining PLC (LON:JAY) has submitted the social and environmental impact report for its Dundas project in Greenland. 

Significant events expected today

Trading updates: International Consolidated Airlines Group PLC (LON:IAG), BBA Aviation PLC (LON:BBA), Millennium & Copthorne PLC (LON:MLC)

Economic data: UK quarterly GDP estimate; UK trade data; UK construction output; US CPI


 

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