FTSE 100 closes 180 points lower
Pound surges
IMF upgrades UK growth forecast
May calls snap UK election
FTSE 100 plunged to a lower finish on Tuesday - down 2.46% - its worst close since immediately after the Brexit vote last summer.
Causing stocks to flounder on the UK benchmark was the strengthening pound, which rose 1.53% against the US dollar after the Prime Minister Theresa May called a snap general election for June 8.
Miners were the big losers and the biggest laggard on Footsie was Glencore (LON:GLEN), down 5.58% to 291.8p.
Overall, FTSE 100 closed around 180 points down at 7,147.
House builders did well with Barratt Developments plc (LON:BDEV), up 1.4% to 580p and the biggest gainer was Marks & Spencer Group (LON:MKS), up 1.93% to stand at 353.5p.
Laith Khalaf, senior analyst at broker Hargreaves Lansdown, said: "The fall in the stock market is not a negative response to the UK election per se, rather it is a knock on effect of a surging pound, combined with price falls in some key commodity markets, all of which has taken its toll on the heavyweights of the FTSE 100 index."
4pm... FTSE 100 down 164pts
London’s investment community woke fretting over the escalating North Korea crisis and ended it mulling events closer to home – specifically the prospect of a June general election.
The snap decision to go to the polls simultaneously did two things: it put some lead in the pencil of sterling (it hit a ten-week high of US$1.2752), while sending the FTSE 100 plummeting 164 points to 7,163.35.
The two were connected. The currency headwinds caused by the strengthening pound hit dollar stocks hardest – so the miners and oilers felt the pain most acutely.
“The negative reaction in the FTSE 100 to the snap election is, in our view, mostly currency-related,” said Jasper Lawler, senior analyst at London Capital Group.
He added: “That iron ore prices are descending further into bear market territory is a particular worry for the FTSE 100.
SIGN UP FOR the Proactive Investors newsletter
“Commodity and multinational companies have contributed some of the biggest gains in the last 12 months.”
There was a boost for the UK from the International Monetary Fund, which revised its 2017 forecasts up half a percentage point to 2%.
The Fund said negative effects from the UK vote to leave the European Union are taking longer to materialise.
2.45pm...tumble continues
FTSE 100's losses lengthen; the index was down 151
Pound rallies after snap election announcement
Miners the biggest fallers on the FTSE
ASA Resource plummets after directors find evidence of corruption at Zimbabwean gold mine
The markets dislike uncertainty, and although the Tories look like a shoo-in at the 8 June election, investors remain nervous.
At 14.15 the FTSE 100 was down 151 points at 7,177, with around 60 points of that fall coming after confirmation of the election date.
SIGN UP FOR the Proactive Investors newsletter
Miners remain the main reason the index is in a deep hole, and that has nothing to do with the UK general election.
Iron ore prices have tumbled again, sending the likes of BHP Billiton (-4.9%), Anglo American (-4%) and Glencore (-3.9%) to the bottom of the Footsie class.
Oil prices are also on the slide, with Brent crude off more than 1%, which has encouraged selling of the shares of BP PLC (LON:BP.) and Royal Dutch Shell PLC (LON:RDSB).
The former is down 3.6% and Shell is down 2.8%.
Just five FTSE 100 constituents are currently in positive territory, and four of those – Marks & Spencer Group PLC, Kingfisher PLC, Next Plc and Primark owner Associated British Foods plc – are retailers.
Among the minnows, ASA Resource Group PLC (LON:ASA) saw its share price almost halve as management confirmed it had found evidence of corruption at its Freda Rebecca gold mine in Zimbabwe.
Investors were also cool on RedT Energy PLC (LON:RED), which shed five-eighths of a penny at 7.75p, despite some ostensibly good news.
The energy storage technology company has signed an agreement with The Olde House, a working farm and holiday retreat situated in North Cornwall, to place six of its redT energy storage machines.
The energy storage machines that will be installed were originally manufactured for an installation on the Isle of Gigha, as part of a joint project undertaken by DECC (now BEIS), redT and The Gigha Community to remove constraints placed on the island's community wind farm.
Since the project was initially conceived, the constraint placed on the Isle of Gigha wind farm has now been removed.
Keras Resources PLC (LON:KRS) climbed 12.5% to 0.45p after it said it had raised A$620,000 through a share placing down under.
The funds raised will support the planned listing on the Australian Securities Exchange of Keras’s Australian gold assets.
Elsewhere in the resources sector Pembridge Resources PLC (LON:PERE) added three-eighths of a penny at 3.5p as it unveiled a new vice president of strategy.
Adam Melnik will join the team as a consultAnt. He is currently working with Vedanta Resources and before that he was a metals and mining research analyst with Canaccord Genuity in Toronto.
2.11pm...FTSE descends further
The FTSE is down 147 points to 7,180 as the pound has jumped 1.24% against the dollar to US$1.2721 following news of a snap general election.
"The GBP positives of today’s announcement largely reflect PM’s May prospect of securing a stronger mandate for representing Britain in Brexit negotiations," according to ING's Viraj Patel.
"The assumption is that with the Conservatives enjoying a huge 21-23% lead over Labour in the latest opinion polls, May’s move will substantially lift the Conservatives 17 seat working majority."
Here is the @FT's UK general election 2017 poll tracker, showing the scale of predicament Labour is in https://t.co/oWWrJnurR1 pic.twitter.com/6CW7AfL7ot
— Tony Tassell (@TonyTassell) 18 April 2017
However, the analyst warned investors should be wary of the negatives, including that the election prolongs UK political uncertainty, which has "undoubtedly been GBP’s Achilles heel for over a year now".
"We reiterate that a domestic election will take us no closer to understanding the UK’s future trade and investment relationship with the EU – which in our view will be the primary driver for GBP’s long-run outlook. The risk remains that prolonged uncertainty over the UK investment climate leads to a more permanent loss of investment and a further decline in the UK's basic balance. Such a scenario would require further downward GBP adjustment."
1.45pm... Analyst says ignore swaying polls in investment decisions
Laith Khalaf, senior analyst at Hargreaves Lansdown said investors should look beyond any short-term political uncertainty and keep focused on their own long-term savings goals.
"Markets can get a case of the jitters in the run up to elections, but this one may be different seeing as it comes in the wake of the Brexit vote, and the polls suggest the incumbent government is likely to remain in power and gain more seats, Khalaf said.
SIGN UP FOR the Proactive Investors newsletter
"Nonetheless a snap election does potentially open the door to some market volatility in the coming months, though investors shouldn’t let their investment decisions be dictated by swaying polls. The household saving ratio is currently at its lowest level since the 1960s, and the big risk investors face from an election is that they let it disrupt their financial plans."
1.19pm...Pound may weaken, says analyst
FXTM research analyst Lukman Otunuga said while sterling has reacted positively to the news of a snap election so far, it could fall later due to the uncertainty it brings as Brexit gets underway. The pound has risen 0.80% versus the dollar to $1.2665.
"While short-term bulls may reign as a result of this fresh development, longer-term bears could exploit the potential political uncertainty to drag Sterling lower. A very strong likelihood remains that Sterling sensitivity will intensify moving forward, with a vote in parliament on Wednesday to decide whether or not the election will take place acting as the first test."
One of those days where 'tumble' is in the URL and 'wild ride' is in the headline. Sterling up 1.2% from lows. pic.twitter.com/FSVn97UeTi
— Mike Bird (@Birdyword) 18 April 2017
12.50pm... Volatility ahead for markets
Neil Wilson, senior market analyst at ETX Capital, reckons volatility in the market is likely to "remain elevated" in coming weeks.
"And as elections are so unpredictable, there is always the outside risk it could spark a reversal in the entire Brexit process. Can the Lib Dems cobble together a pro-Remain ticket that upsets the Tory Apple cart?," he said.
The pound is up 0.82% against the dollar to US$1.2655, pushing the FTSE 100 down 130 points to7,197.73.
11.11pm... Theresa May blames Brexit opposition for snap election
Theresa May said her change of heart on an early election came after she concluded that it was the “only way to guarantee certainty and security for years ahead”.
"The country is coming together, but Westminster is not,” she explained.
10.05am...FTSE lower, led by miners
This morning demonstrated why a lot of traders like to close positions ahead of a long break, as stocks opened lower after North Korea’s shenanigans.
At around 10am, the FTSE 100 was more than 1% lower, down 78 at 7,249.
Mining stocks were the big losers, with the likes of Anglo American PLC (LON:AAL), Antofagasta PLC (LON:ANTO), Glencore PLC (LON:GLEN) and BHP Billiton plc (LON:BLT) shedding close to 3% each.
The dollar rallied against the euro following comments from US Treasury Secretary Steven Mnuchin that suggested he was sanguine about the prospect of a strong US currency.
A higher dollar makes minerals more expensive, as the commodities are quoted in the US currency, and it is not uncommon for mineral stocks to move in the opposite direction to the greenback.
Prime minister Theresa May caught the market on the hop with news she is going to make a statement this morning.
"There has been some sudden selling in the British Pound over the past few minutes following the news that UK Prime Minister Theresa May will be making a statement within the next hour," said Jameel Ahmad, vice president of Market Research at FXTM.
"There are unconfirmed rumours at this stage circulating that Theresa May might be stepping down, while there are other reports going around that this could be linked to the announcement of a UK general election," Ahmad reported.
"Truth be told, nobody is really that aware of what is going on but this uncertainty has caused a reaction in the sterling."
Car insurer Direct Line Insurance Group PLC (LON:DLG), up a penny at 345p, was among the few blue-chips to make headway this morning after a research note from Barclays Capital.
The bank reiterated its ‘equal weight’ stance and 337p price target, but downgraded sector peers esure Group PLC (LON:ESUR) and Hastings Group Hldg PLC (LON:HSTG) to ‘equal weight’ from ‘overweight’.
Esure retreated 2.9p to 238.4p, a shade above the Barclays price target of 234p, while Hastings slipped 4.7p to 278.2p, even as Barclays cranked up its price target to 276p from 247p.
In other broker commentary, bookie Ladbrokes Coral Group PLC (LON:LCL) is worth a punt in the view of Irish broker Davy Research.
The shares hardened 2.1p to 130.6p as Davy abandoned its neutral position and switched to an ‘outperform’ recommendation, with a price target of 156p.
8.51 ... FTSE down more than 40 point on North Korea jitters
The growing tension between Washington and Pyongyang led to a bout of investor jitters that saw the FTSE 100 marked down more than 42 points to 7,285.21 early on.
The miners were hit hardest as Anglo American (LON:AAL) topped the list of casualties with a 3% fall. Royal Mail (LON:RMG) was off 1.9% after union threats of industrial action amid planned changes to the company’s pension scheme.
Shares in Reckitt Benckiser (LON:RB.) were up 1.3% ahead of first quarter numbers later this week.
Among the tiddlers, Motif Bio (LON:MTFB) was up 21% after it said it had successfully negotiated the first of two phase III trials of its next-generation Antibiotic.
That gave a knock-on 27% boost to Amphion Innovations (LON:AMP), up 27%, which is a leading investor in Motif.
Finally, shares in south-eastern Europe focused property and investment company, Secure Property Development and Investment PLC (LON:SPDI), were up almost a quarter after it said it had signed a leasing deal in Romania which increases the company's current net rental income by almost 10%.
Proactive News Summary
The exploration and development firm Sound Energy PLC (LON:SOU) said a drill rig will soon be on its way from its Tendrara licence in Morocco to start work on two wells at Sidi Moktar, its second gas asset in the country.
The company has also confirmed it will go it alone with the exploration of Sidi Moktar, rather than bringing in a partner, thanks to its strong financial position.
China-focused coal bed methane gas group Green Dragon Gas Ltd (LON:GDG) has announced that its development plan for the Qinshui Basin Chengzhuang Cooperative CBM Block has been approved by the Consultation Center of China National Petroleum Corporation.
Clinical stage biopharma group Faron Pharmaceuticals Ltd (LON:FARN) has partnered with the University of Birmingham as it looks to advance its potential cancer immunotherapy, Clevegen.
Faron will work with the “world-renowned” UoB Medical School to develop and initiate a liver cancer programme testing Clevegen in clinical trials.
The south-eastern Europe focused property and investment company, Secure Property Development and Investment PLC (LON:SPDI), has signed a leasing deal in Romania which increases the company's current net rental income by almost 10%.
Echo Energy - the Independent Resources plc (LON:IRG) reboot led by Sound Energy execs - is raising £23mln of new capital and is working on an acquisition in South America.
LGO Energy PLC (LON:LGO) has confirmed that its second new well at the Goudron field has come online, adding 80 barrels to daily oil production.
6.45am...North Korea the story
The FTSE 100 looks set to open its account for the week in the red amid growing tensions between the US and North Korea following the latter’s failed missile test.
The index of blue-chip shares will drop 17 points to 7,310.59, according to the spread betting firms.
Asia’s main markets were on the back foot, with exception of Japan which benefited from strength of the yen against the dollar.
The Anti-American invective emanating from Pyongyang and the show of supposed military might over the weekend has both political strategists and investors nervous as how the White House will respond.
Vice-President Mike Pence spelled out the options in a New York Times article.
He said Donald Trump has three choices: a military strike that could ignite a full-blown war; pressure on China to impose tougher sanctions (an approach that has so far failed); or a deal that could require significant concessions, with no guarantee North Korea would meet its promises.
“For now, though the hope is on an increased prospects for talks, potentially incorporating China more into any negotiations,” said Chris Weston, analyst at the financial spread betting firm IG.
Returning to the UK and more mundane matters, it appears to be a big week for scheduled corporate news with Primark owner Associated British Foods (LON:ABF), Unilever (LON:ULVR), Reckitt Benckiser (LON:RB.) Burberry (LON:BRBY) and Sky (LON:SKY) all slated to report.
- The price of gold fell by US$7.40 an ounce to US$1,284.50
- Brent crude was changing hands for US$55.40 a barrel for a rise of 4 cents
- The pound is worth US$1.2568
Business Headlines
- Ant Financial, a subsidiary of Alibaba has agreed a US$1.2bn takeover deal with an American electronic payments company Moneygram International – Times.
- The proposed merger between Tata Steel and the steel operations of Thyssenkrupp, which would secure the future of the Port Talbot steel works and a total of 8,000 UK jobs, is at risk because of complex negotiations around pensions and opposition from German trade unions – Guardian.
- Taiwan’s Foxconn has approached Apple about a potential joint bid for Toshiba’s flash memory business, which is worth US$28bn – Financial Times.
- Sky and Virgin Media are close to a landmark deal to join forces in the advertising market, in a move meAnt to challenge local media and tempt spending away from Google and Facebook – Daily Telegraph.
- Weetabix is expected to be gobbled up by the American cereal giant Post Holdings in a £1.4bn deal – Daily Telegraph.
- The new boss of Debenhams will unveil plans this week to overhaul the retail chain’s 165 shops and cull some in-house brands in a bid to lure shoppers back to its stores – Daily Telegraph.