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FTSE 100 closes higher Monday, just, as traders sit on hands

Footsie closed around 11 points higher at 7,357 at the start of the week, while mid-cap cousin FTSE 250 gained over 39 points
Pound coin on a chart
The pound enjoyed a brief sojourn above US$1.26
  • FTSE 100 closes up- just

  • US shares higher

  • Hikma enjoying swan song before Footsie relegation

FTSE 100 closed in the green on Monday, while US stocks were also higher, as traders await a key Federal Reserve meet mid-week.

Footsie closed around 11 points higher at 7,357 at the start of the week, while mid-cap cousin FTSE 250 gained over 39 points at 19,157.

Hikma Pharmaceuticals PLC (LON:HIK) was top Footsie gainer, up 3.34% to 1,700.50p before it is demoted from the blue-chip benchmark at the end of the month.

Elsewhere in Europe, the German DAX shed around ten points at 12,085, while the French CAC 40 gained around 23 points at 5,390.

"Stock markets in Europe haven’t moved much today as some investors are sitting on their hands in advance of the much-awaited Federal Reserve meeting on Wednesday," noted David Madden, at CMC Markets.

"There has been a lot of chatter about the Fed cutting rates later this year, but some traders feel the markets are getting ahead of themselves."

3.45pm: Sterling's rally fades, providing a bit of solace for Footsie bulls

Sterling's rally on foreign exchange markets has fizzled, breathing a bit of life into a comatose FTSE 100 index.

London's index of heavyweight shares was back in positive territory, up 5 points (0.1%) at 7,350 after sterling lost ground against the greenback.

Sterling was buying around US$1.2579, virtually unchanged on the day after it had earlier recovered above US$1.26.

Nevertheless, there was a definite sense of traders keeping their powder dry ahead of the US Federal Reserve's meeting later this week.

“Monday was a day to forget trading-wise, investors firmly focused on the central bank-dominated second half of the week,” declared Spreadex's Connor Campbell.

“It is understandable that traders might be a bit reticent to show their hand this early on, given the uncertainty surrounding the Fed’s meeting on Wednesday evening. With Jerome Powell and his FOMC peers creating a dovish din in the last couple of months, there is the expectation that the central bank will slash rates sooner rather than later. The big question is whether it will tee up a July rate cut or something a bit further down the line,” he added.

The Footsie's advance, limited though it was, was headed by Hikma Pharmaceuticals PLC (LON:HIK), enjoying a swan song before it is demoted from the FTSE 100 at the end of the month.

The shares were up 3.4% at 1,701p, in contrast to easyJet PLC (LON:EZJ), which is also on the way out of the Footsie; the no-frills airline was the biggest faller, sliding 5.1% to 881.6p after German flag-carrier Lufthansa issued a profit warning this morning.

2.35pm: US economic data scares off the US bulls

US benchmarks opened mixed after what was described as an “awful” June reading of the Empire State index.

The index fell to -8.6 from 17.8, wrong-footing economists who had pencilled in a number of 11.0 for June.

June’s level was the lowest since October 2016.

The Dow Jones industrial average, which prior to the release of the Empire State index data had been expected to open higher, was down 8 points (0.0%) 26,081 while the S&P 500 was up 2.5 points (0.1%) at 2,889.4.

“This looks terrible, but it won’t last,” assured Ian Shepherdson, the chief economist at Pantheon Macroeconomics; he was talking about the Empire State Index reading, not the decline of the Dow.

“The survey is conducted during the first 10 days of the month so it likely reflects the peak of Mexico tariff fear. President Trump tweeted the tariff threat on May 30 and abandoned it June 7. During that period, businesses appear to have panicked,” Shepherdson speculated.

“Most of the time, the Empire State index lags the trend in China’s Caixin manufacturing PMI index by about three months, but the Mexican tariff threat wrecked that relationship in June. Now that the Mexican tariff threat is over, and if we’re right in our views that tariffs will not be applied to imported Chinese consumer goods, and that real progress will be made at the Osaka G20 summit, it would be reasonable to expect the up-tick in China’s PMIs to support better US survey readings over the next few months. In the meantime, the next national ISM manufacturing report will be nothing like as weak as the Empire State survey appears to suggest,” he predicted.

Back in Blighty, the FTSE 100 index was down 8 points (0.1%) at 880.2p, with the two airline stocks – easyJet PLC (LON:EZJ) and British Airways owner International Consolidated Airlines (LON:IAG) – still at the bottom of the greasy pole following Lufthansa’s profit warning this morning.

The former was down 5.3% at 880.2p and the latter was 2.8% weaker at 447.9p.

“Airline companies remain at the mercy of a number of external factors which they have little control over: terrorism, air traffic control strikes, volcanic eruptions, currency movements, oil prices, along with new events such as Brexit and people flying drones over airports. Many of these can lead to a squeezing of margins or wipe out profits in what is a cut-throat business,” explained Graham Spooner, an investment research analyst at The Share Centre.

“Demand for travel is not going to go away, so long-term investors in the sector should hopefully be aware that it will be a bumpy ride and is likely to remain so in the foreseeable future.

“Don’t then be afraid to sell into strength or buy into weakness, as long-term visibility is distinctly lacking,” he advised.

1.45pm: US indices tipped to open higher

US indices are expected to open modestly higher but that has failed to prompt the Footsie to reverse its slide.

The FTSE 100 was down 11 points (0.2%) at 7,334 an hour ahead of the US open.

“US index futures may be sitting below the Asian session highs, but expectations are still that Wall Street will start the week in positive territory. There’s a lot of expectation over the messages that will be baked into the Federal Reserve’s policy statement which is due on Wednesday. Although the chances of a rate cut this week remain limited, the recent rebound in stocks has been supported by the idea that dovish action will be seen by the Fed in the July meeting. Failure to telegraph this has the potential to initiate another bout of selling, whilst also being likely to escalate criticism of the Fed’s monetary policy from the White House,” suggested James Hughes at Axi Trader.

Axi is tipping that the Dow Jones will open 51 points higher at 26,141 and the S&P 500 up 6 points at 2,893.

12.10pm: The FTSE 250 is outperforming its big brother

While the Footsie has just dipped below the horizon the mid-cap FTSE 250 remains in positive territory.

The index of blue-chip shares was down 4 points (0.1%) at 7,342, with packaging giant DS Smith PLC (LON:SMDS) joining the airlines in the doghouse after Exane BNP downgraded the stock to 'underperform' from 'neutral'.

Smith's shares were 4.3% lower at 335.25p after the French broker cut its price target to 300p from 340p.

Airlines remained under pressure after German flag-carrier issued a profit warning.

Wizz Air PLC (LON:WIZZ), down 4.2% at 3,473p was one of those airline stocks under the cosh but that did not stop the mid-cap FTSE 250 – which includes Wizz Air among its constituents – from rising 49 points (0.3%) to 19,167.

Neither did the 12% fall to 115.4p from Kier Group PLC (LON:KIE) after the contract engineer kicked off a restructuring plan that involves axing 1,200 jobs, suspending dividend payments and selling non-core businesses.

The increasingly toxic nature of the Neil Woodford brand was behind a 4.1% slide in the share price of Woodford Patient Capital Trust PLC (LON:WPCT) but, again, the FTSE 250 was able to overcome this, in part because of a 4.2% rise to 484p by Babcock International PLC (LON:BAB), after it said it had batted away two bid approaches by controversial outsourcing outfit, Serco PLC (LON:SRP).

Property giant Hammerson PLC (LON:HMSO) was also wanted after Peel Hunt upgraded the stock to ‘add’ from ‘hold’. Hammerson shares rose 3.4% to 292.1p even though Peel Hunt lopped 50p off the target price at 350p.

Sector peer Shaftesbury PLC (LON:SHB) was up 0.7% at 824p as the same broker upgraded the stock to ‘hold’ from ‘reduce’, with a 900p price target.

11.00am: RBS leads the market higher

Royal Bank of Scotland Group PLC (LON:RBS) was marching the FTSE 100 higher on Monday, although it was not exactly a quick march.

The Footsie was 12 points (0.2%) to the good at 7,358, with RBS the top riser, up 2.2% at 217p after the bank said its risk-weighted assets will be reduced by £4.7bn and it will be easier to sell its stake in Alawwal bank after the Saudi Arabian lender merged with rival Saudi British Bank.

Drugs giant AstraZeneca PLC (LON:AZN) found the market hard to please, shedding 0.3% at 6,198p, despite unveiling further encouraging effects from its leukaemia treatment, Calquence.

It has been a morning of mixed news for oil & gas explorers.

Union Jack Oil PLC (LON:UJO) and Reabold Resources PLC (LON:RBD) were up 32% (at 0.225p) and 27% (at 1.05p) respectively, after a “potentially transformational” result as the West Newton appraisal well confirmed a substantial hydrocarbon accumulation.

Reabold holds a 24% economic interest in this licence while Union Jack has a 16.7% stake.

In contrast, Lansdowne Oil & Gas PLC (LON:LOGP) and Providence Resources PLC (LON:PVR) came under selling pressure after the two companies agreed on an extension request for the completion of a loan from their Chinese partners.

Lansdowne fell 6.5% to 1.075p and Providence 6.2% to 7.97p.

9.40am: Weak airlines hamper the Footsie's progress

The Footsie was just about keeping its head above water despite the dead weight of airline stocks following a profit warning from Germany’s Lufthansa.

The index of leading shares was up 4 points (0.1%) at 7,350, some 14 points below its intra-day high, thanks largely to a 3.7% decline to 894.6p by easyJet PLC (LON:EZJ) and a 3% tumble to 446.9p by British Airways owner International Consolidated Airlines (LON:IAG).

“Shares in the airlines sector have been spooked by a profit warning from Frankfurt-listed Lufthansa. It has blamed deteriorating prices in Europe on market-wide overcapacity and rival carriers willing to accept significant losses to expand their market share,” said AJ Bell’s quote machine, Russ Mould.

“These factors are certainly not ‘new’ news and so the fact Lufthansa is still moaning would suggest life is getting even tougher for the airlines.

“While price cuts are fantastic news for travellers, the airline can’t sustain loss-making operations forever,” Mould noted.

With the oil price looking less frothy – Brent crude was down 30 cents at US$61.73 – the Footsie was also having to cope with the heavily weighted oil majors, BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB), languishing in the red.

The former was down 0.5% at 536.2p and the latter was off 0.3% at 2,508.5p.

8.50am: Modest gains at open

The FTSE 100 made a subdued start to the new trading week, rising 12 points to 7,358.22.

Traders were keeping their powder dry ahead of the Federal Reserve decision on US interest rates on Wednesday, which could be pivotal for sentiment.

“All eyes are of course on the Fed meeting this week. It’s hard to recall a time we headed into an FOMC meeting with so much at stake and with so much uncertainty about what might be agreed,” said Neil Wilson of Markets.com.

“This means the potential volatility around the event is likely to be substantially higher than at most recent FOMC meetings. Traders may start to show some nervousness ahead of the Fed meeting if they think it won’t be accommodative as hoped.”

The Footsie’s top riser, up 1.8%, was Royal Bank of Scotland (LON:RBS), which said it will make around £400mln from a Saudi bank merger.

In the second-tier, Saga (LON:SAGA) was chased 5% higher on the belief it may be a takeover target.

The short sellers, meanwhile, continue to undermine the confidence of investors in accident prone construction group Kier (LON:KIE), which has received a chilly reception for plans to offload its building arm.

Proactive news headlines:

Union Jack Oil PLC (LON:UJO) has revealed what is described as a “potentially transformational” result as the West Newton appraisal well confirmed a substantial hydrocarbon accumulation. The West Newton A-2 conventional appraisal well, located in east Yorkshire, encountered a 65 metre (net) interval in the Kirkham Abbey formation which was its main target.

A clinical study using facilities and a trial protocol developed by hVIVO PLC (LON:HVO) has delivered positive results. Enanta Pharmaceuticals’ N-protein inhibitor, EDP-938, achieved a “highly statistically significant” reduction in viral load and cleared up the symptoms of respiratory syncytial virus (RSV).

Intosol Holdings PLC (LON:INTO) has seen a 15% increase in bookings to its boutique hotels in the first quarter and said its new business model will deliver higher margins for the year ahead.

Computer networking specialist BATM Advanced Communications Limited (LON:BVC) has developed a new technology under its long-standing partnership with NXP Semiconductors that will speed up the flow of network traffic.

FairFX Group PLC (LON:FFX) has reiterated its full-year guidance following a strong start to its current year. In an update ahead of its AGM on Monday John Pearson, chairman of the e-banking and payments group, said the Company’s year to date in 2019 had been strong in terms of both turnover and improved margins.

European Metals Holdings Ltd (LON:EMH)(ASX:EMH) has updated the process flowsheet previously developed to enable the production of lithium hydroxide (LiOH.H2O) from the Cinovec project in the Czech Republic. This work has been completed in conjunction with test-work confirming the production of battery grade lithium hydroxide from Cinovec ore.

Haydale Graphene Industries PLC (LON:HAYD) is to work with the National Physics Laboratory (NPL) on ways to improve the functionality of the so-called wonder material. Government agency Innovate UK is the sponsor of the 12-month project under the Analysis for Innovators (A4i) scheme.

Providence Resources PLC (LON:PVR) and Lansdowne Oil & Gas PLC (LON:LOGP) have agreed to an extension request for the completion of a loan from their Chinese partners. APEC Energy Enterprises requested a further extension, to 5 July, for the US$9mln loan which is part of the agreed farm-out deal for the Barryroe project.

Live Company Group PLC (LON:LVCG) is to bring its BRICKLIVE Animal Paradise tour to Japan, following a deal with events promotor Make Merry Company.

Angling Direct PLC’s (LON:ANG) new store in Sutton, Nottinghamshire opened over the weekend. The new ‘destination store’ means the fishing tackle and rods seller now trades from 28 stores up and down the UK.

Video games specialist Keyword Studios PLC (LON:KWS) has snagged Jon Hauck as its new chief financial officer. Hauck is currently the group financial controller at FTSE 100 pest control and hygiene giant Rentokil Initial PLC (LON:RTO) but will move to Keywords in November.

Eurasia Mining plc (LON:EUA) has lodged an application for a new exploration license area, Tipil, with the relevant authorities in Russia. Tipil is adjacent to West Kytlim, where Eurasia has been mining for platinum and palladium for some time.

WideCells Group Plc (LON:WDC) told investors that a financing agreement with the European High Growth Opportunities Securitization Fund expired. The Company said it understands that substantially all bonds held by the fund will or have been converted into shares, and it expects confirmation of this in the coming days.

Following meetings between Vast Resources PLC (LON:VAST), local community leaders in Zimbabwe and the Zimbabwean parastatal Zimbabwe Consolidated Diamond Company, a road map to allow the Company to mine on the Heritage Concession has now been established.

Passenger aircraft leasing group Avation PLC (LON:AVAP) is to use GE’s AirVault Asset Transfer System to store and manage the records of its fleet of planes.

Sativa Group PLC (LON:SATI), the NEX-listed UK's leading quoted medicinal cannabis and wellness cannabidiol (CBD) group, has appointed Cenkos Securities as its corporate adviser and broker with immediate effect.  Geremy Thomas, Sativa’s founder and chief executive officer of Sativa commented: "Cenkos' appointment is in line with Sativa's progression from, in only 15 months, being the UK's first listed medicinal cannabis investment vehicle to its transition to a fully operational seed-to-consumer trading business.”

Mkango Resources Ltd. (LON:MKA) (TSX-V:MKA), the rare earths development Company, has announced the exercise of warrants over 17,226,210 common shares without par value in the share capital of the Company at an exercise price of 6.6p each, for an aggregate consideration of £1,136,930. The group said this includes 3,333,333 warrants exercised by its chairman, Derek Linfield, following which he will hold a beneficial interest in 5,139,561 shares, representing approximately 3.9% of the Company's issued share capital.

6.15am: FTSE 100 called higher 

The FTSE 100 is expected to take its cue from Asia’s main stock markets and open in positive territory ahead of the US Federal Reserve’s call on interest rates on Wednesday.

Following a more dovish tone from America’s central bankers of late, the market is pricing in rate cuts (three of them to be exact before the year-end) rather than hikes to loan costs.

“Judging by the rally in the US dollar in the last few days, foreign exchange markets have a different view,” said Michael Hewson, analyst at CMC Markets.

“This dovish bond market view seems hard to square with what is happening on the data front, after some strong US retail sales data from April and May showed that the US consumer had started to spend again.”

Back here in the UK, corporate news flow is expected limited today but late in the week will bring updates from budget hotelier Whitbread (LON:WTB), builder Berkeley Group (LON:BKG) and retailer Dixons Carphone (LON:DC.).

Significant events expected on Monday: 

Full-year results: BTG PLC (LON:BTG)

AGMs: FairFX Group PLC (LON:FFX)

Economic data: None scheduled

Around the markets:

  • Pound worth US$1.2592
  • Gold US$1,344.80 an ounce, up 30 cents
  • Brent crude US$62.16, up 15 cents a barrel

City Headlines:

Financial Times

  • Deutsche Bank prepares ‘bad bank’ in overhaul - Germany’s biggest bank will shrink or shut its US equity and trading businesses
  • Questions mount over weak Link in Woodford affair - Link Fund Solutions oversees Neil Woodford’s funds and had similar role in two earlier fund closure
  • Banks accused of gouging small customers on forex services - ECB paper finds hedging rates can be 25-times higher than those of bigger clients

Times

  • Serco is on the prowl to consolidate the government contracting and privatised public services market after it emerged that it has twice been rebuffed in attempts to merge with Babcock
  • The UK aerospace sector has attacked “extreme” politicians endorsing a no-deal departure from the European Union
  • An investment firm championed by Hargreaves Lansdown is one of the biggest shareholders in the fund supermarket
  • Causeway Capital, the new owner of Patisserie Valerie, has unveiled plans to turn around the café chain, which was sold at a knockdown price after a £94mln fraud tipped it into insolvency

Daily Telegraph

  • Saga's biggest investors fear the troubled over-50s insurer and tour operator is at risk of being sold “on the cheap” as its shares continue a long slide
  • No deal Brexit threats are harming Britain and won't work, warns CBI chief
  • A change in the corporate structure of Woodford Investment Management in 2016 could have earned the Company’s directors significant tax benefits, according to industry experts
  • FirstGroup faces fresh assault from top shareholder over split

Guardian

  • Economic growth in Britain is expected to slow to the lowest levels since the financial crisis as firms run down Brexit stockpiles, according to the British Chambers of Commerce
  • Boeing Max 737 jet crisis: we should've been more open, says CEO

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