Sterling and gold got it in the neck on Tuesday but the Footsie made a serious run at breaking its previous all-time high.
The FTSE 100 closed at 7,074, up 91 points (1.3%), having reached the heady heights of 7,122 at one point today – above the record closing level of 7,104.
With gold back below US$1,300 an ounce for the first time in 15 weeks to around US$1,275, it was no surprise that precious metals miners Randgold Resources Ltd (LON:RRS) and Fresnillo PLC (LON:FRES) failed to do their bit to push the blue-chip index to a new high.
The former shed 5.9% and the latter 5.6%.
For most first liners, however, Tuesday was a day for celebrating sterling’s spell in the doghouse – the Footsie being chock full of multi-national companies that earn more in dollars than they do in pounds.
Intertek Group PLC (LON:ITRK), the quality testing group, received an extra boost from Jefferies, which switched its stance from ‘under-perform’ to ‘buy’, with the target price going up to 4,300p from 3,000p.
Intertek’s shares advanced 185p to 3,727p.
The mid-cap FTSE 250 is generally regarded as being more representative of UK PLC, but even it managed to put on 159 points (0.9%) at 18,342, despite miners Acacia Mining (LON:ACA), Hochschild Mining (LON:HOC) and Centamin (LON:CEY) weighing it down with losses in excess of 4.5%.
OneSavings Bank PLC (LON:OSB) was the 250’s star player, climbing 6% to 284.8p as Barclays Capital got off the fence and upgraded the stock to ‘overweight’, and whacked the target price up to 340p from 235p.
Among the tiddlers, Summit Therapeutics PLC (LON:SUMM) hit the ball out of the ground as it inked a deal with US peer Sarepta Therapeutics (NASDAQ:SRPT) that could be worth up to US$522mln.
The pair will collaborate on Summit’s potentially breakthrough treatment for Duchenne muscular dystrophy, a muscle wasting disease that affects boys.
The UK drug developer gets an immediate US$40mln and US$22mln when the last patient in the company’s phase II trial is dosed.
The shares doubled at one point to 262p but saw a bit of profit-taking near the close to finish at 245p, up 88% on the day.
Kosovan quarries operator Fox Marbles Holdings PLC (LON:FOX) received a shot in the arm today from a new US-backed initiative to establish a major quarry industry in Kosovo.
Stone Alliance, a company 59% owned by the AIM-listed group, is proposing to raise €100mln to establish a network of 40 quarries in Kosovo.
Chris Gilbert, chief executive, said: “Fox Marble will provide all the practical expertise required to achieve the stated objectives of Stone Alliance and manage the business, which has rights to very attractive stone in 40 sites across the country.
The shares rose 8.5% to 11.125p on the news.
Half-year results from Quantum Pharma PLC (LON:QP.) were definitely not what the doctor ordered, with the shares practically halving.
First half profits slumped to £0.8mln from £2.8mln the year before and the board warned that the full-year performance will be materially below market expectations.
Afternoon report
The price of gold, having dropped below US$1,300 for an ounce, has now reached its lowest level since June’s Brexit vote.
Gold has lost some of its shine as a ‘safe haven’ asset as the US Federal Reserve apparently looks to raise American interest rates in November and as investors flock to the relative safety of London’s multinational blue-chips now that the Brexit roadmap is becoming clearer.
The precious metal was changing hands at around US$1,283.
Laurie Williams, gold market commentator for bullion dealer Sharps Pixley, highlighted that the gold price fall is exacerbated by what he notes is an ironically named public holiday in China.
The Chinese are ‘good at buying gold in the dips’ but are absent due to the ‘golden week’ holiday.
14.00:FTSE 100 closes in on all-time high, challenger banks given a Barclays boost
The FTSE 100 was still trading tantalisingly close to its all-time (up 125 points at 7,109), but there was quite enough momentum to push through 7,135.
We’ll see where it ends. In the meantime the challenger banks have benefited from a decently bullish note from Barclays, upgrading OneSavings Bank (LON:OSB) and Aldermore (LON:ALD) to ‘overweight’ from ‘equal weight’.
“UK challenger banks remain geared plays on the macro, in our view. However, high profitability, comfortable capital ratios and low valuation multiples should provide significant insulation,” it said.
OneSavings was up 6%, while Aldermore a 1% bump.
12.30: Close, but no cigar
London’s FTSE 100 is closing in on a new all-time high, as Sterling keep taking a pounding.
Up 125 points, 1.8%, the FTSE 100 stands around 7,110 and is now just 25 points from the 7,135 high set last June.
There’s a certain irony to the fact that it is Britain’s outward facing, foreign revenue earning blue-chip stocks that are rising now that the roadmap to Brexit is becoming clearer.
As the British pound languishes at lows last seen in the mid-eighties investors are flocking to the multinational blue-chips, especially those that make their money in dollars but do their accounts in pounds.
“Sterling is once again getting battered by Brexit worries,” said Chris Saint, senior analyst for Hargreaves Lansdown’s currency services.
He added: “With formal Brexit talks yet to start, the pound looks set for a bumpy ride in the weeks ahead and is struggling to find new friends even when UK economic data surprises positively.”
10:00: FTSE 100 approaches all time highs as pound slumps to 1985 lows - 10:00am
The British pound is languishing in 30 year lows, following Theresa May’s weekend reminder that ‘Brexit means Brexit’.
On Tuesday Morning the pound reached down to 1.2671 against the US dollar, a level last seen in 1985.
London’s FTSE 100, meanwhile, continues to push beyond 7,000 and the all-time high of 7,135 isn’t too far away.
Up 100 points, 1.44%, on Tuesday Morning the FTSE 100 was changing hands at 7,084.
Significantly, the drive in the FTSE 100 comes from the many blue-chip multinationals that are listed in London but don’t rely on operations in the UK. In fact their international operations mean they’ll see a boost from the currency moves - particularly those that generate dollar earnings but report in sterling.
“A weak GBP is helping propel ever higher the army of international-exposed FTSE names that benefit from helpful currency conversion gains while house builders are enjoying the prospect of the UK Chancellor’s £5bn UK house building stimulus,” explained Mike van Dulken, analyst at Accendo Markets.
Van Dulken also highlighted comments from US Federal Reserve Loretta Mester, president of the Cleveland Fed, who suggested an American interest rate raise could come ahead of next month’s presidential election.
8:15: FTSE 100 passes 7,000 mark with some ease
With the market experts pointing to a rather lacklustre opening, the defied the early predictions FTSE 100 propelled past the 7,000-mark with some ease.
With fears easing over Deutsche Bank’s woes, some clarity on Brexit and even some hints towards an accord within OPEC, the index of blue-chip shares vaulted 1%, or 69.56 points higher, to 7,053.08. It is the first time in more than 18 months we have seen these levels.
London's open was slightly at odds with the close on Wall Street, which strayed into negative territory, and the mixed messages sent out by Asia.
The top risers on the Footsie were a mixed bag with the crash test dummies firm Intertek Group PLC (LON:ITRK) top of the pile, followed by education specialist Pearson PLC (LON:PSON) and Provident Financial (LON:PFG).
Preview: Will it or won't it?
Will the FTSE 100 break the 7,000 level? Well, it’s unlikely to achieve that landmark, last seen 18 months ago, at the opening bell.
For the spread-betters are calling the market three points lower, leaving the index of blue-chip shares stranded at 6,980.52.
It follows a quiet session in Asia - the Nikkei was up 0.8% while both the Hang Seng and ASX fell 0.2%; China was shut.
Wall Street closed down with both the Dow Jones index and the broader-based S&P 500 posting losses of 0.3%, with sellers offloading real estate stocks and utilities.
With fears over Deutsche Bank receding, all eyes are on the US economy scanning for clues as to when interest rates will move higher.
So there is an expectation that equity markets will mark time, with trading volumes remaining light, until the America’s employment figures are released on Friday.
Further out and ahead of the US elections, things may become a little choppier, asserts Chris Beauchamp, analyst at the spread better IG.
Cutting up rough?
“As October gets underway in earnest, strategists are lining up to suggest that more volatility is on its way,” he said.
“To be fair, they do appear to have history on their side. Years containing presidential elections in the US do appear to see more volatility, with much of this concentrated in the month immediately preceding the event itself.2
*Brent crude oil trading 11 cents lower at US$50.78 a barrel.
*Gold up US$4 an ounce at US$1,313.
*The pound is worth US$1.2824.
City Headlines
*Cath Kidston, the British fashion label whose trademark floral prints have found a following across the world, has been bought by Baring Asia, the private equity group, for an undisclosed sum – FT.
*BP has shut one of its platforms near the Shetland Islands following an oil spill that will attract more unwelcome attention to the UK group’s environmental record – FT.
*Philip Hammond’s pledge to cushion the economic fallout from Brexit with extra spending on infrastructure was given a cautious welcome by businesses, although some warned that the chancellor risked losing the government’s grip on public finances – Times.
*Doughnut-maker Krispy Kreme is understood to have abandoned its planned £200 million London flotation in favour of a sale to its US parent – Telegraph.
*The house building industry has denied claims from communities secretary Sajid Javid that it is building up so-called land banks, as shares in some of the biggest companies rise on the back of a promise of increased government investment in housing – Telegraph.