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FTSE 100 closes in the red as trade tensions and Brexit confusion rumble on

The UK index of leading shares closed down nearly 38 points at 7,310
Oil rig workers
A number of energy stocks defied the weaker trend today
  • FTSE 100 index closes lower

  • Housebuilders hit

  • Energy minnows Jersey Oil & Gas, Tlou and Echo Energy have a bumper day

FTSE 100 closed in the red on Monday as trade tensions rumble on  as well as the continued confusion over Brexit.

The UK index of leading shares closed down nearly 38 points at 7,310, while FTSE 250 shed around 163.

Housebuilders were big casualties on Footsie, amid Brexit fears and weakness in the London property market identified by a recent survey.  Barratt Developments (LON:BDEV) dropped 4.37% to stand at 586.80p. Taylor Wimpey (LON:TW.) shed 3.43% to stand at 171.50p.

Prime Minister Theresa May, who has pledged to  resign, is set to have one more roll of the dice as her Brexit plans go before the House of Commons for a fourth time. It has now been rejected three times.

Market analyst at IG Index Joshua Mahony said: "For all the talk of a ‘bold’ new Brexit offer from the Prime Minister, the reports that such a deal would include the Northern Ireland

backstop are already leading us to believe she will see yet another failed vote next month."

On Wall Street, the Dow Jones Industrial Average is down around 64 at the time of writing, while the S&P 500 is off  nearly 15.

15:50pm Footsie trims losses

Less than one in five Footsie constituents were in the black as the day entered the final hour of trading.

The top-shares index was down 32 points (0.4%) at 7,317, having dropped below 7,300 at one point.

Thanks to the strength of heavily-weighted oil companies BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB) – up 0.3% and 0.1% respectively on the back of firmer oil prices – the index’s tumble was not as painful as might otherwise have been the case.

Elsewhere in the energy sector, three minnows were making a splash.

Jersey Oil and Gas PLC (LON:JOG) advanced 24% to 71.5p after its full-year results surprised the market in a food way. The company said in its results statement it continues to see the positives for the Verbier oil discovery, as it looks forward to the receipt of new seismic data and a detailed re-evaluation of the project.

READ Jersey Oil and Gas looks forward to Verbier re-evaluation and new licensing round

Tlou Energy PLC (LON:TLOU) was also up 24% (to 8.6p) after it issued a statement telling investors it has been approved as the ‘preferred bidder’ for a coal bed methane fired power project in Botswana.

Echo Energy PLC (LON:ECHO) was 22% firmer after it rejigged its priorities and made new arrangements that will allow the acceleration of exploration at the Tapi Aike project.

2.45pm: Trade war escalation has the markets spooked

US stocks opened lower, following the lead of their European counterparts.

The Dow Jones industrial average was down 121 points (0.5%) at 25,643 and the S&P 500 was off 18 points (0.7%) at 2,841.

In the UK, the FTSE was off its worst levels of the day but still deep in the red on 7,286 – down 63 points.

Markets have been spooked by the prospect of an escalation in the trade argy-bargy between the US and China.

“The US-China trade war shows no signs of cooling off after Washington's latest broadside against Chinese technology giant Huawei,” reported Peter Garnry, the head of equity strategy at Saxo Bank.

“What we are witnessing is a potential reconfiguration of global trade as it has stood since World War II. The World Trade Organization [WTO] has been put under pressure by Trump's threatening a US withdrawal unless WTO terms are changed; Washington also blocked judicial appointments at the WTO’s appellate body.

“The upcoming G20 meeting in Osaka had a specific agenda regarding WTO and global trade but with the US-China trade war escalating, the focus is now entirely on the rumoured meeting between Trump and Chinese president Xi Jinping. CPB’s estimate on world trade volume is down 3.5% since October 2018, with this marking the largest decline since 2008 as global trade slows down on worsening economic activity as well as friction from tariffs,” Garnry noted.

(CPB is the Netherlands Bureau for Economic Policy Analysis).

Switching continents, bottling company Coca-Cola HBC AG (LON:CCH) lost its fizz this afternoon, shedding 5.7% at 2,701p after US fizzy drinks giant Coca-Cola abandoned its attempt to sell its majority stake in Coca-Cola Beverages Africa.

The London-listed Footsie stalwart was seen as a potential buyer of the pop maker's African bottling business.

Elsewhere in the packaging sector, investors were also pulling the plug on DS Smith PLC (LON:SMDS) and Mondi Plc (LON:MNDI); the former was down 3.2% and the latter 3.1%.

1.00pm: US stocks set to open later

With US stocks set to open lower on fears of a further deterioration in relations between the US and China, UK stocks have retreated further.

The FTSE 100 was down 59 points (0.8%) at 7,290, barely above its low point for the day.

In the US, if spread betting quotes are to be believed, the Dow Jones is expected to open about 100 points lower at 25,664 and the S&P 500 is pegged to drop 15 points to 2,845.

“Equity markets remain hostage to developments in the ongoing US-China trade battle and fell 2% last week as tensions increased further. China retaliated against the US move the previous week with its own move to impose additional tariffs. Meanwhile, Trump banned US companies from using Huawei, the Chinese telecoms equipment manufacturer,” said Rupert Thompson, the head of research at asset management firm, Kingswood.

“On balance, we still believe some kind of deal will eventually be reached – most likely at a Xi/Trump meeting at the G20 Summit in late June. It is after all ultimately in both their best interests to do so. That said, there is now a clear risk that an unwillingness by both sides to be seen to cave in to the other could stymie a deal and lead to further escalation in early July.

“The correction in equities has been quite limited so far, with markets only down 3% or so from their recent highs. In sterling terms, the decline has been less still as it has has been cushioned by the fall in the pound back down to US$1.27,” he added.

“With Theresa May looking likely to leave No 10 in the next month or two with no Brexit deal in her bag, fears have grown that her replacement will be a euro-sceptic such as Boris Johnson – raising the risk of No-Deal and/or an early General election and ever more prolonged uncertainty,” Thompson said, adding that Kingswood has taken advantage of share price weakness to top up its equity holdings.

News flow from the blue-chips has been on a par with the number of goals scored by Watford in Saturday's FA Cup Final.

The mid-caps provided a bit of excitement in the form of a fiscal third quarter trading update from information technology outfit Softcat PLC (LON:SCT).

The shares were up 2.3% at 962p after the company said full-year results would probably be slightly ahead of previous expectations.


 

11.20am: Housebuilders join airline stocks in the doghouse

After briefly resisting the global trend this morning, the Footsie has moved firmly into the red.

The index of heavyweight shares was down 33 points (0.4%) at 7,316, with housebuilders featuring prominently among the big fallers after the latest house price index for Rightmove showed continued weakness in house prices in London, the south-east and the east of England.

In the capital, the average asking price in May was down 2.5% from a year earlier while in the south-east it was down 1.1%. In the east of England, the average house price was down 0.9% year-on-year.

It was not all good news for prospective house buyers, however; for the whole of Britain, the average asking price rose by 0.1% from a year earlier to £308,290.

“What will seem inconsistent to some, given the ongoing uncertainty of the Brexit outcome, is that four out of eleven regions have hit record highs for new seller asking prices,” said Rightmove's Miles Shipside.

“Agents in these areas say that Brexit concerns are not really on the agenda of home-movers; they are more concerned with satisfying their housing needs,” Shipside said.

Wales, the West and East Midlands, and the North West are the regions where asking prices have hit a new high.

"While we tend to view London as a separate market to much of the UK already, the current landscape in the capital is clearly fragmented and there are three or four more granular levels at play,” said Marc von Grundherr, of Benham and Reeves.

“What we are currently seeing across the London property market is a 'three-speed' dynamic with outer, more affordable areas doing one thing, the prime market another and the ‘regular’ market doing something different again.

“The top end of the market may take solace from a recent bump in the value of their homes, adding on average £74,700 to their notional bank balance, however, it is important to note that there is still a decent sized gap between asking prices and selling prices.

“That said, the signs are, here at the coal-face, that at last we are seeing increased activity from potential buyers with applicant registrations up quite significantly year on year and as a result, we are now seeing the bottom of the London market," he suggested.

Barratt Developments PLC (LON:BDEV), down 2.6%, was the biggest blue-chip faller in the sector but it was closely followed by Persimmon PLC (LON:PSN), Taylor Wimpey PLC (LON:TW.) and Berkeley Group PLC (LON:TW.), which was down by more than 2%.

10.00am: Oil price rise proves a mixed blessing

Thanks largely to airline stocks, London’s index of leading shares is barely changed this morning.

The FTSE 100 was up 2 points (0.0%) at 7,350, with easyJet PLC (LON:EZJ), TUI AG (LON:TUI) and British Airways owner International Consolidated Airlines (LON:IAG) the biggest three fallers among Footsie constituents.

The former was down 3.4% at 990.6p and the latter down 1.7% at 500.4p while the one in the middle was off 2.7% at 805.6p in reaction to rising oil prices.

No-frills airline Ryanair PLC (LON:RYA) chose an interesting day on which to release its full-year results.

READ Ryanair nosedives as it predicts flat profits for 2020, profits tumble

The shares slumped 4.5% to €10.32 after the company warned shareholders not to expect any profits growth in the current fiscal year.

“With full-year profit at the lower end of reduced guidance from January and a gloomy outlook it is little wonder budget airline Ryanair is in a tailspin,” declared AJ Bell’s Russ Mould.

“Times are tough for the travel industry. Brexit is affecting consumer sentiment, appetite for travel and the operating environment for the airlines themselves. If that weren’t enough, oil prices are on the rise and excess capacity is adding to the pressure on profitability,” he added.

Cruise ships operator Carnival PLC (LON:CCL), which is also a heavy fuel user, seems to have escaped the carnage and has risen 0.1% to 4,044p.

It’s an ill wind that blows nobody any good and while the rising oil price might be bad for the airlines, it has provided a boost for integrated oil giants BP PLC (LON:BP.) - up 0.8% at 560.6p – and Royal Dutch Shell (LON:RDSB), which was up 0.5% at 2,555p.

 

8.30am: Fairly subdued start for Footsie

As predicted, the FTSE 100 opened in positive territory, but only just as it nudged 7 points higher to 7,356.04.

Traders continued to fret about the Sino-American trade impasse, while Brexit and its latest twists and turns was another pre-occupation. Indeed worries the UK may be headed for a no-deal departure from the EU kept the pound below US$1.28

Meanwhile, crude prices continued to firm amid growing tensions between America and Iran, and the reluctance of OPEC to turn on the spigots. So far this year the cost of a barrel of oil has increased by around 40%, with the oil cartel’s limit on supply behind the price squeeze higher.

“Investors had been growing nervous that OPEC could look to remove the production limits at its next meeting in June, in light of tightening global supply and elevated prices,” said Jasper Lawler of London Capital Group.

“Whilst the OPEC production cuts have offered significant support to oil prices, US sanctions on Iran and Venezuela have also played a role. Add into the equation rising Middle Eastern tensions, as Iran retaliates to US measures and oil looks well supported at these levels", Lawler added.

Airlines lose altitude

Oil price-sensitive discount airline easyJet (LON:EZJ) was among the earlier fallers as it lost 2.4% after a recent trading update, with the weekend chaos at Manchester airport possibly adding to the pain. British Airways owner IAG (LON:IAG) dropped 1.1%.

Ryanair (LON:RYA) held a steady course even after warning its profits would be flat.

And after the kicking it received last week, with Citi suggesting the stock was worth zero pence, Thomas Cook (LON:TCG) enjoyed what in City parlance is known as a 'dead cat bounce' as it rose 4.6%.

The term derives from the theory that even a dead cat is likely to bounce when dropped from the top of, say, the Shard. In other words, don’t be fooled by the rally, it is illusory.

There were also some nerves ahead of results later this week from Royal Mail (LON:RMG), which was off 5%. Analysts believe there is plenty of scope for the deliveries group to disappoint.

Proactive news headlines:

Project management and consultancy group WYG PLC (LON:WYG) has agreed to be taken over by US rival Tetra Tech Inc for £43.4mln. WYG shareholders will receive 55p per share, representing a 244% premium to Friday’s closing price.

Echo Energy Plc (LON:ECHO) has revealed a reimagined plan for its portfolio of assets in Argentina, with attention now focused solely on the Tapi Aike exploration project, which is seen as a potential ‘multi-trillion cubic feet' gas project.

Collagen Solutions PLC (LON:COS) is to raise £6mln at a premium to its current share price, with a multi-billion-dollar US agriculture company agreeing to pump in the majority of the cash. Rosen’s Diversified, the fifth largest beef processor in the US and valued by Forbes at over £2.4bn (US$3bn), is to invest £4.2mln into Collagen through the purchase of 83.6mln shares at 5p apiece – almost 25% above Friday’s closing price.

Bacanora Lithium PLC (LON:BCN) has received a cash injection of £14.4mln from Ganfeng, the world’s largest lithium metal producer. Ganfeng will invest at 25p per share for a 29.9% stake in Bacanora, but can also take a 22.5% direct stake in the Sonora lithium project in Mexico.

Jersey Oil and Gas PLC (LON:JOG) continues to see the positives for the Verbier oil discovery, as it looks forward to the receipt of new seismic data and a detailed re-evaluation of the project. Everyone was disappointed with the result of the Verbier-2 appraisal well, which last month failed to encounter its targeted reservoir, though untested potential remains for the project.

Bezant Resources PLC (LON:BZT) has been granted environmental impact assessment approvals allowing additional exploration work and drilling activity to take place on the Eureka project in Argentina.

Scancell Holdings PLC (LON:SCLP) and the cancer charity Cancer Research UK have announced further progress with Scancell's SCIB2 cancer immunotherapy vaccine.

AFC Energy PLC (LON:AFC) has established proof of concept for an ammonia-based off-grid fuel cell system following an 18-month trial. Next steps will be to conclude work on the business case and engineering of an integrated, scalable ammonia fuelled clean power generator, said the AIM-listed group.

Allergy Therapeutics PLC (LON:AGY) has reported positive results from the early-stage study of Acarovac – its dust mite allergy jab.

Golden Saint Technologies Limited (LON:GST) has signed a Letter of Intent with Siam Motors to build a tier three data centre facility in Pattaya and/or Chonburi Province in Thailand. Siam, established in 1952, is Thailand's longest established automotive industry group but also has wide-ranging interests in other sectors.

Ariana Resources PLC (LON:AAU) produced 7,296 ounces of gold from its Kiziltepe project in Turkey during the quarter to 31 March 2019. That in turn generated gross income of US$10.86mln.

Life sciences business OptiBiotix Health PLC (LON:OPTI) has signed a licence agreement with Nutrilinea, an Italian manufacturer of food supplements formulations, covering the use of LPLDL to reduce high blood pressure.

CentralNic Group PLC (LON:CNIC) has agreed to acquire the Australasian domain name and hosting reseller TPP Wholesale in a deal worth A$24mln (£13.1mln).

StatPro Group PLC (LON:SOG) shares were looking up on Monday after it secured a three-year extension with a top 20 fund administrator worth at least £2.44mln.

Iodine producer Iofina PLC (LON:IOF) is to pull the trigger on the fundraising it had been considering, with the company seeking to raise up to £7.5mln through the issue of shares at 16p each.

AfriTin Mining Ltd (LON:ATM) has complete its resource validation drilling programme at the Uis tin project in Namibia. AfriTin completed 20 holes for 2,343 metres and has already received assay results for five holes.

Rockfire Resources PLC (LON: ROCK) has identified a promising soil anomaly at the Cardigan Dam prospect on the Lighthouse tenement in Queensland, Australia. Two broad gold-in-soil anomalous trends were detected in recent work. Each trend is approximately 400 metres long by 100 metres wide in dimension.

Rose Petroleum PLC (LON:ROSE) has confirmed the issue of some 25mln new shares and revealed that Origin Creek Energy LLC (OCE) is now a significant shareholder in the company. It follows on from and replaces a funding deal and management changes in April. The £275,000 investment from Robert Bensh has now been cancelled, and, he will no longer be appointed as chairman.

Falcon Oil & Gas Ltd (LON:FOG) confirmed the results of its share placing, in an announcement after Friday’s market close. The company, in a statement, said it had conditionally raised £7mln (US$9mln) with 50.5mln new shares being sold at a price of 14p each.

Rosslyn Data Technologies PLC (LON:RDT), a leading global big data technology company, announced that Ginny Warr will be joining its board as a non-executive director with effect from today. It said Warr is currently head of procurement at British Land Company PLC (LOB:BLND) and is a seasoned chief procurement officer bringing over 30 years' experience in both public and private sector roles.

Itaconix Plc (LON:ITX) announced that Mike Townend will step down as a non-executive director of the company with effect from 24 May 2019.

Tower Resources PLC (LON:TRP), the AIM-listed oil and gas company with its focus on Africa, announced that Jeremy Asher, its chairman and chief executive officer, will be presenting at the Africa E&P Summit which takes place at IET London: Savoy Place, 2 Savoy Place, London WC2R 0BL on 22 - 23 May 2019.

5.50am: FTSE 100 set for subdued start

The FTSE 100 looks set to make a subdued start to the trading week with spread betting companies predicting the index of blue-chips will nudge just six points higher to 7,354.62.

Trade worries and continued concerns over Brexit look set to haunt the London market. "The surge in the polls of the newly formed Brexit Party has also spooked markets as it gains support from both the Conservative and the Labour Party, with the Conservatives seeing the most damage to their polling numbers," said Michael Hewson of CMC Markets.

"As it becomes clearer that Prime Minister Theresa May’s premiership is in its final death throes attention is shifting to a number of different outcomes, including but not confined to, who her successor is likely to be, the collapse of the government, a new election and the prospect of a possible minority Labour Government."

Overnight, Asia’s main markets were mixed. The Chinese benchmarks were down amid continued worries over the Sino-American trade impasse, while Japan crept higher after official figures showed its economy grew at a faster than predicted pace in the first quarter.

Investors welcome the surprise victory of Scott Morrison’s conservative coalition in the Australian elections. Exit polls had predicted a Labor Party win for the first time in six years.

"I've always believed in miracles," Morrison said in his victory speech on Saturday night.

The ASX 200 was up 1.7% in afternoon trade.

M&S and Royal Mail 

Back in the UK, it is expected to be a fairly busy week for corporate news. Marks & Spencer (LON:MKS) will update on its struggle to avoid the carnage on the high street, while analysts reckon Royal Mail (LON:RMG) still has the capacity to disappoint.

On Wednesday, inflation data may help guide the Bank of England’s policy on interest rates. On the same day, we’ll get an idea of the thinking of America’s rate-setting body when the Federal Open Markets Committee publishes its minutes.

Significant events expected on Monday, May 20:

Finals: Ryanair PLC (LON:RYA), BTG PLC (LON:BTG), LXI REIT PLC (LON:LXI), McKay Securities PLC (LON:MCKS)

Interims: Cerillion PLC (LON:CER)

Trading update: Softcat PLC (LON:SCT)

AGMs: Keywords Studios PLC (LON:KWS)

Economic data: US Chicago Fed national activity index

Around the markets: 

  • Pound: US$1.2734
  • Gold: US$1,276.10, up 40 cents an ounce
  • Brent crude: US$63.60 a barrel, up 84 cents

City Headlines: 

  • Financial Times
  • US spy chiefs warn tech companies on China dangers
  • May makes final Brexit push despite Tory sense of doom
  • Trump warns of the ‘end of Iran’ if it threatens US
  • Shipbuilders pull out of MoD support-vessel shortlist
  • UK telecoms win case against regulator over spectrum fees - mobile phone groups could claw back more than £220mln after high court ruling
  • Times
  • Labour’s proposed employee ownership scheme would have raised about £7bn for the state last year
  • Banks and other credit providers are facing an increase of up to £100mln in the levy they pay to fund advice services for people who get into debt difficulties
  • Essensys, a developer of software for shared office providers, is finalising plans for a £75mln stock market float
  • Daily Telegraph
  • Fever-Tree is launching a range of pre-mixed gin and tonics as it looks to continue its stellar growth
  • Young to spend less on fashion in fresh blow to high street
  • Daily Mail group loses fight for biggest Irish newspaper
  • Sports Direct considers launching legal challenge to Debenhams' restructuring plans
  • Guardian
  • Google 'blocks Huawei access to Android updates' after blacklisting
  • Netflix close to long-term UK studio space deal at Pinewood
  • 5G rollout is being stalled by rows over lampposts
  • BP pushed for Arctic drilling rights after Trump's election

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