FTSE 100 closes up 0.5%
Spread-betting stocks tumble after regulator's proposals
Pound falls to $1.2714
FTSE 100 shares closed near their highest point of the session on Tuesday, but no thanks to spread-betting stocks after the UK’s top regulator proposed stricter rules for the sector.
The Financial Conduct Authority said it was concerned that many retail investors buying "contract for difference" products did not understand them adequately – leading spread-betters stocks to plunge by a third.
The regulator also noted that 82% of clients lost money on the products.
In the FTSE 100, which closed up 0.5% at 6779, Paddy Power Betfair plc (LON:PPB) shares were the third-biggest decliner of 2.6% to 8135p.
Meanwhile Israel-based Plus 500 (LON:PLUS) fell 28% to 369.82p after it said the FCA proposals would "have a material operational and financial impact" on its UK regulated subsidiary, which accounts for about a fifth of revenues. The stock was fairly much flat-lined throughout the session – all of it sharply lower on the day.
But for a second successive session, miners dominated the decliners. Anglo American (LON:AAL) was down 3.9% to 1194.5p.
Banks helped give the FTSE 100 a leg up, with RBS (LON:RBS) the top riser of 5.7% to 209.1p, Barclays (LON:BARC) second, up 4.6% to 226.75p and followed by HSBC (LON:HSBA) up 4.4% to 654p
But it was HSBC which gave the spur for gains after broker Morgan Stanley upgraded its rating on the company to "equal-weight" from "underweight".
The spread-betting contagion was felt wider, among mid-caps too.
In the mid-cap FTSE 250, which ended down 0.1% at 17,452, the top decliner was IG Group (LON:IGG), down 38.4% to 485.1p and CMC Markets (LON:CMCX) down 37.6% to 115p, although it was lighter on Playtech plc (LON:PTEC) down 3.5% to 798p.
On the upside, shares in Drax Group (LON:DRX) ended 17.1% higher at 325.13p after the power producer said it planned to buy energy supplier Opus Energy for £340mln. Drax also announced it would buy four gas turbine projects.
The FTSE AIM 100 Index ended down 0.8% at 3869 and FTSE AIM All-Share Index down 0.6% at 810.
London’s losers and winners on the day were evenly matched. Some 31% of stocks gained and 33% lost.
1611 GMT - FTSE 100 extends gains, with banks leading the way
FTSE 100 extends gains, up 24 points to 6,770
Lenders boosted by hopes of Italian banking bail-out
CloudTag romps higher on wearable devices hopes
4.00pm ...
Banks led the FTSE 100 higher in late afternoon trading, shrugging aside opening falls on Wall Street.
At around four o'clock, the leading share index was up 23 points at 6,770 back near session highs as strength in the lenders continued to offset a drop by heavyweight commodity issues.
Chris Beauchamp, Chief Market Analyst at IG, said: "Banks have led the way this afternoon on the FTSE 100, helping the index to make modest gains. Indeed, optimism about banks is driving markets in Europe firmly higher, on expectations that some sort of bail-in for Italian institutions is on the cards.
"This would provide a real boost to risk appetite, similar to that seen when the ECB first announced its QE programme, and would certainly do more than just a measly extension to the easing timeframe, which is quite possibly all that Mario Draghi can offer at the ECB meeting on Thursday."
He added: "Softer metals prices and a sharp drop in price of oil have hit commodity firms, but a solid performance from European indices has helped to preserve the generally positive tone of the week so far."
HSBC Holdings PLC (LON:HSBA) was a strong Footsie gainer, up 4.1% helped by an upgrade from Morgan Stanley.
Among smaller stocks, CloudTag Inc (LON:CTAG) continued to soar higher, leaping nearly 43% higher on speculative interest after good gains yesterday.
Cloudtag management excited investors on Monday afternoon after it confirmed that it expects to take delivery of the first batch of its wearable devices later this month.
FTSE 100 back in the black,up 14 points to 6,760
Financial spread betting firms hammered
Hopes of Italian banking bail-out lift lenders
Tullow dragged lower by giant vampire squid
1.15pm ...
The FTSE 100 found forward gear towards the end of the morning session, and although slightly off the top, is now in positive territory.
The top-share index was up 14 at 6,760 at around one o’clock, despite the heavily-weighted mining companies being down in the dumps. Their losses are offset by gains for banks, where spirits have been raised by hopes that the Italian government – this week’s Italian government, one might say – will launch a lifeboat to rescue the world’s oldest still extant bank, Monte dei Paschi di Siena.
HSBC Holdings PLC (LON:HSBA) led the Footsie’s advance, with the 3.5% rise helped by a Morgan Stanley upgrade. The US broker reckons 2017 will be a pivotal year for the banking sector with an inflection in earnings growth as net interest income troughs and cost saves are executed.
State-owned Royal Bank of Scotland Group PLC (LON:RBS) was also on the up adding 2.9%.
Energy stock Tullow Oil plc (LON:TLW) was on offer, down 4% at 319p, after Goldman Sachs downgraded the stock to ‘sell’ and slashed the target price to 221.8p from 247.2p.
Goldman thinks the stock is now trending above the fundamentals implied by the bank’s long-term oil price assumption of sixty bucks a barrel.
With the back-end of the oil price futures curve flat at around US$56-57/bl, Goldman believes the focus will switch back to fundamentals, and notes that Tullow has the highest sensitivity to oil price changes of the energy stocks it covers. By its calculations, a ten dollar change in the oil price moves Tullow’s value by around two-fifths.
11.30am...
The FTSE moved back in to positive territory as it headed towards the afternoon after a rather dreary opening session.
After being in the red for most of today, the blue chip index climbed back into the black and was up 14 points or so to 6,761 shortly before midday.
This morning’s list of fallers on the London markets was dominated by spread betting firms after the Financial Conduct Authority announced it would be clamping down on the contracts for difference market.
IG Group Holdings PLC (LON:IGG) CMC Markets Plc (LON:CMC) were the two hardest hit and down by almost a third shortly before lunch.
Plus 500 Ltd (LON:PLUS) wasn’t too far behind, slipping almost 25% for the day. The company warned that its UK business would be ‘materially’ affected by tighter regulations.
The financial watchdog said it had identified a number of ‘serious concerns’ following a year-long consultation, while it also found that 83% of clients lost money when using CFDs.
It has unveiled a number of proposals which it hopes will “enhance consumer protection” by limiting the risks of CFD products and ensuring that customers are better informed.
Shore Capital said that today’s news will likely “moderate the growth” of new clients in the coming months, while Numis added that the new proposals were “long overdue”.
There were some positive movers though.
Power station giant Drax Group (LON:DRX) was one of the morning’s main risers after it announced plans to acquire business energy supplier Opus Energy for £340mln.
The purchase is part of Drax’s diversification drive and will be funded through a new debt facility.
In the smaller stocks, CloudTag Inc (LON:CTAG) continued its remarkable rise over the past few days as it posted a 14% gain for the day.
The management was forced to address social media speculation on Monday afternoon and confirmed that it expects to take delivery of the first batch of its wearable devices later this month.
8.45am...Sluggish start as expected
The FTSE 100 started the day in negative territory despite Wall Street hitting new highs overnight.
Bank of England governor Mark Carney struck a rather cautious note in a speech given Monday evening in which he talked once more about above-trend inflation and slower economic growth post-Brexit.
The index of blue-chip shares shed 19 points to 6,728.20, dragged lower by the miners and builders.
HSBC Holdings (LON:HSBA) led the top-flight risers, followed by the plant rental group Ashtead Group (LON:AHT), which said its full year results would beat market expectations.
It cited a strong trading performance on both sides of the Atlantic for this outperformance, alongside the weak pound.
6.45am...slow start predicted
London's blue-chips are set to open slightly lower on balance, despite US stocks hitting new highs last night.
Spread betting quotes indicate the FTSE 100 index will open at around 6,741, down six points from last night's close,as investors continue to mull the fall-out from the Italian referendum result, which brought down the Italian government.
Across the pond, the Dow Jones average last night closed at a new high of 19,216 - up 46 points - while the broader-based S&P 500 advanced 13 points to 2,205.
In Asia, markets were mostly higher entering the final trading stanza, except for the Shanghai Composite, which was down a point at 3,204.
In Hong Kong, the Hang Seng was 165 points to the good at 22,671, while in Tokyo, the Nikkei 225 was 70 points higher at 18,345.
On the oil markets, the US benchmark, West Texas Intermediate (WTI) briefly rose above US$52 a barrel yesterday, before ebbing a little to close at US$51.79 a barrel, its highest closing level since July of last year.
The oil price has been on the rise ever since oil producers agreed to cut back on production, although it appears that traders have been taking some profits this morning, with WTI and the European benchmark, Brent crude, both falling back.
On the home front, plant hire specialist Ashtead Group PLC (LON:AHT) releases interims today and given that most of its sales come from the US, it will be interesting to heat the company's perspective on the avowed intention of president-elect Donald Trump to invest heavily in infrastructure.
Meanwhile, the weakness of sterling against the greenback won't have done the company any harm either.
"On a reported basis, September’s first-quarter numbers showed increases of 12%, 15% and 15% in sales, pre-tax profit and earnings per share respectively, with the benefits of a weaker pound partly offset by lower fleet disposals," notes Russ Mould, the investment director at AJ Bell.
"That seems a pretty fair benchmark for the first-half numbers especially as the analysts’ consensus calls for increases of 15%, 23% and 17% in sales, pre-tax profit and earnings per share for the full year," Mould notes.
He also suggests investors keep an eye on the dividend, given the company's record of increasing the pay-out.
Around the markets
- Brent crude for February delivery: US$54.51, down 41 cents
- Gold is US$1,172.70 an ounce, down US$3.70
- The yield on a 10-year gilt is 1.273%
- Sterling is trading at US$1.2738, up 0.07 cents
Headlines
- Tata ready to keep Port Talbot open – The Times
- Drop in the ocean is enough to secure Gulf of Mexico contract for BHP Billiton – The Times
- Smoke signals suggest BAT will up offer for rival Reynolds American – The Times
- Thousands of UK restaurants could go out of business because of Brexit – The Independent
- GW Pharma pledges commitment to UK growth as it cancels London listing – The Daily Telegraph
- The City Pub Company undaunted by industry cost hikes ahead of Aim float – The Daily Telegraph
- Mark Carney: we must tackle isolation and detachment caused by globalisation – The Guardian
- Chris Grayling to unveil plans for new fully privatised railway line – The Guardian
- US bank quit Sports Direct role over share deal concerns, court filing claims – The Guardian
- Ferrari shares race to record high as investors bet on Italian companies that export goods beyond the Eurozone – The Daily Mail
- Financial sector’s tax contribution hits a record £71.4 billion – City AM