FTSE drifts off 2-month peaks
UK public borrowing headache
Oil snaps lower from initial gains
Pound down against dollar at $1.2351
FTSE 100 shares drifted lower on Wednesday, retreating from the previous session’s two-month highs after official UK public borrowing figures came in worse than expected.
London's FTSE 100 closed down 2.54 points, or 0.04%, at 7,041.
Excluding banks, public sector net borrowing was £12.6bn in November, worse than the £12.2bn market forecast and up from a revised-higher £4.7bn in October, but down from a £13.2bn a year ago, raising fears of rising post-Brexit debt-funding to buffer the economy by 2019.
The top fallers were brokerage Hargreaves Lansdown plc (LON:HL.) down 3% to 1206p. A week ago analysts at Barclays said concerns for Hargreaves was overdone. Read more.
Another decliner was Hikma Pharmaceuticals (LON:HIK), taking second place, down 1.4% to 1794p.
Meanwhile, the mid-cap FTSE 250 fell 0.1% to 17,745 and led by Paysafe Group plc (LON:PAYS) down 3.8% at 346.8p.
On the flipside, mid-cap defence technology firm QinetiQ (LON:QQ.) up 4.4% at 259.5p after it announced a deal to buy a targeting systems business from Meggitt (LON:MGGT) for £57.5mln. Meggitt fell 0.9% to 467.82p.
Crude oil prices pushed higher in early trading but this unwound later in the day – even before EIA supply data for the US oil industry was released after the London close. North Sea Brent crude was 1.1% lower at $54.75 per barrel.
The FTSE AIM 100 Index closed down 0.4% at 3957 and the FTSE AIM All-Share Index down 0.2% at 824.
Gainers outshone losers across the London bourse as 33% of stocks rose and only 30% fell.
1345 GMT - FTSE 100 remains weak as terror alert keeps lid on festive euphoria
FTSE 100 index down 8 points at 7,035
Travel stocks worried by terror attacks
Banks edge higher as Italian lenders get rescue package
BP up on broker upgrade
1.45pm … Italian banks propped up …
The Footsie stayed weak in early afternoon trading as the Christmas spirit continued to be lacking in London as recent terror attacks in Germany and Turkey remained a worry.
At 1.45pm, the FTSE 100 index was down 8 points at 7,035, stuck in a tight trading range for the day of between a high of 7,056 and a low of 7,025.
Banks saw some modest gains, however, with Barclays PLC (LON:BARC) edging 0.4p higher to 228.0p and HSBC PLC (LON:HSBA) ahead 1.4p at 656.4p as the Italian parliament agreed to a government rescue package for the country's ailing lenders.
Italy's two houses of parliament approved a government request to increase the public debt by up to €20bln to fund a rescue package for ailing financials, starting with troubled Banca dei Monte Paschi di Sienna – the world’s oldest bank.
Craig Erlam, senior market analyst at Oanda, said: “Struggling Italian banks have been offered a lifeline after the lower house of parliament approved a request that will enable the government to borrow up to €20 billion to aid the recapitalisation of banks as a last resort.
“Still, Monte dei Paschi is down heavily on the day after it confirmed that it has only four months of liquidity left, which is much less than previously thought. This latest revelation makes the need for a solution all the more urgent.”
11:15 am ... Broker boosts ...
Broker comment gave a boost to BP PLC (LON:BP.) on the FTSE 100, with the stock up 0.7% at 3.2p after UBS upgraded its rating for the oil major to ‘buy’ from ‘neutral’.
The Swiss bank’s analysts said that, following recent big deals in Abu Dhabi and west Africa, BP seems to have found a "new sense of purpose" in its upstream business.
Mid cap Shawbrook Group PLC (LON:SHAW) also found support from a broker upgrade, adding 3.6% to 8.9p as the challenger bank was upgraded to ‘sector perform’ from ‘underperform’ by RBC Capital.
But among the smaller companies, medical devices group AorTech International plc (LON:AOR) lost almost a third of its value, down 29% at 16.5p after it reported a drop in first-half revenues and cautioned over on-going litigation against a former chief executive.
The AIM-listed firm said it continues to incur exceptional administrative costs due to litigation against its former chief executive officer, Frank Maguire, and other parties, which began in March 2014.
Overall the London market remained cautious and unexciting, with the FTSE 100 index down around 4 points at 7,039.
09:15am … Strong defence ...
Defence outsourcer QinetiQ Group PLC (LON:QQ.) was the biggest mid-cap gainer, up 5.6% to 262.7p after acquiring the Target Systems division of fellow FTSE 250 constituent Meggitt PLC (LON:MGGT) for £57.5mln in cash.
QinetiQ said the acquisition will accelerate the growth of its international business, adding new customer relationships in Europe, Asia and North America, and will boost the company's testing and evaluation services offering.
Shares in Meggitt edged up 0.1% to 472.5p.
But on AIM, Eden Research PLC (AIM:EDEN) was a big faller, with its shares dropping 16% to 11.75p after it revealed that its 2016 revenues are set to halve year-on-year which offset news of a commercialisation deal for one of its products.
And shares in Aurum Mining PLC (LON:AUR) fell 12% to 5.1p as the firm launched a discounted placing at 4p a share to raise up to £6.0mln as it prepares to shift from the mining sector to investing in UK cyber security companies.
8.30am ... Pancake day ....
The FTSE 100 was the very definition of flat in the first half hour of trade as drifted less than a point to 7,043.10.
It has been tough going on thin volumes on the run up to the Christmas break with the terror alerts in Germany and Turkey keeping a lid on any festive euphoria.
A break-out may occur if Italy can finally conclude a bail-out for its oldest bank, Monte dei Paschi.
Belatedly, the travel-related stocks have reacted to the attacks in Berlin, Zurich and Ankara with Merlin (LON:MERL) and Carnival (LON:CCL) leading the losers’ list.
Among the small-caps BATM (LON:BVC) was up 9% after it concluded a deal to sell a 5% stake in its biotech arm on very good terms to a Chinese firm.
Miner Ariana Resources (LON:AAU), meanwhile, was up 8% after it took control of gold property in a very hot area of Turkey for precious metals.
Looking ahead and at the macro news due later, the focus will be on the public finance figures for November.
Consistent with the usual monthly pattern, public sector net borrowing is expected to rise to about £11.5bn, which would be the lowest level for a November since 2007.
“However, this would be only about £1bn less than a year ago, suggesting little progress with fiscal consolidation,” said Emily Nicol of Daiwa Europe.
“Of course, as Chancellor Phillip Hammond’s Autumn Statement last month made clear, public sector net borrowing this year is now expected to be £13bn higher than expected in March, at £68bn.
“And, with Brexit set to play havoc with the health of the public finance, deficits thereafter are expected to remain significantly higher than previously forecast.”
6.45am...slow start predicted
Spread bet firms see a slow start to trading in London today, with early indications that FTSE 100 will shed around ten points.
But stock markets are resisting any temptation to slip into wind-down mode with both London and Wall Street close to ending the year at record levels.
The UK index is within touching distance of its record closing level of 7,104 and a fair wind between now and Friday week may see that level breached .
US markets overnight meanwhile got ever closer to the 20,000 mark with the Dow Jones Industrial Average ending the day 92 points higher at 19,974.
Nasdaq and the S&P 500 also notched up similar percentage gains as investors continue to believe in a Santa rally.
Asian markets were mixed with handy gains in Hong Kong and Shanghai offset by a disappointing day in Tokyo.
City headlines
Lloyds rebuts analyst caution over MBNA deal – Financial Times
Twitter’s chief technology officer steps down – Financial Times
Volvo steps up drive to flotation with £483 million fundraising from institutional investors – Daily Telegraph
Facebook misled officials, EU claims – The Times
No let-up for homebuyers next year, says RICS – The Independent
Investors in animal fat £5 notes company triple their money after sale – The Independent
Sir Philip Green could face £1 billion BHS fine under MPs’ plan – The Guardian
Disney breaks US$7bn global box office record for 2016 – The Guardian
MPs poised to investigate VAT fraud on Amazon and eBay – The Guardian
EU’s single currency hits lowest level since 2003 against dollar – The Daily Express
Government set to wave through international takeover of National Grid gas network – City AM