FTSE 100 closed in the red on Tuesday as the oil price tumbled on glut worries and sterling took a hit.
The bluechip benchmark closed down 51 at 7,472, while the FTSE 250 fared even worse, slumping 101 points at 19,771.
The mid-cap index is more UK focused and was hit by the currency's devaluation and more worries about the uncertainty of the Brexit process.
Brent crude tanked 1.02% to $46.81 a barrel.
The UK pound fell 0.67% against the Euro and 0.87% against the US dollar.
David Madden, analyst at CMC Markets, said it would appear that the BoE chief Mark Carney wants to keep monetary policy loose as there is so much uncertainty surrounding the Brexit negotiations.
"Some traders feel that Mr Carney was too aggressive in his easing of monetary policy in the awake of Brexit, and now it seems that he doesn’t want to increase interest rates in case he has to cut them again."
On Footsie, the resource stocks took a hit with Antofagasta (LON:ANTO) the biggest laggard, down 4.67% to 755.50p.
The biggest gainer was Paddy Power Betfair (LON:PPB), up 1.58% to 8,660p.
3.56pm: FTSE in the red as energy stock continue to weigh
The FTSE 100 is still sitting lower, down 30 points to 7,492.92, weighed down by energy stocks, miners and banks.
Energy shares, including Royal Dutch Shell, BP and BHP Billiton, plunged after the oil prices fell on global supply glut worries.
Mining stocks were also under the cosh as copper prices fell with Antofagasta and Anglo American in the red.
Rio Tinto and Glencore slumped after the Rio rejected a bid from Glencore to buy its Australia coal assets.
Barclays, RBS and Lloyds, fell after Bank of England Governor Mark Carney said interest rates should remain a record lows, which would hurt banks' profits.
Tesco also dipped as several of its online deliveries were cancelled due to a computer glitch.
Meanwhile, the pound tumbled 0.94% against the dollar to US$1.2617 and 0.74% versus the euro to €1.1342.
3.34pm: Pound reaches lowest point since mid-April
The pound has fallen to its weakest point since 18 April when Theresa May announced a snap general election.
Sterling fell 0.8% versus the dollar to US$1.2625 after dovish remarks from Bank of England Governor Mark Carney and after the S&P ratings agency said it could downgrade the UK before Brexit negotiations are done.
The currency also dropped to a one-week low against the euro, down 0.80% to €1.1336.
“The drop has seen sterling unravel gains made last week after three members of the Bank of England voted to lift interest rates,” said Jasper Lawler, senior market analyst at London Capital Group.
“One of the dissenters Kristin Forbes will be replaced by London School of Economics professor Silvana Tenreyro. The question for the direction of UK interest rates is whether other MPC members are emboldened by the three dissenters or fall in line behind the dovish governor. We think GBPUSD at sub 1.30 levels assumes a rate cut or more QE, and slowing consumption notwithstanding, that doesn’t look very likely.”
2.44pm: S&P puts more pressure on pound after warning
Sterling fell further against the dollar, down 0.65% to US$1.2655, after ratings agency Standard & Poor’s warned it could downgrade the UK before the terms of the Brexit deal are established.
S&P sovereign ratings chief Moritz Kraemer told Reuters the agency doesn’t have to wait until the Brexit negotiations wrap up in 2019.
“No, we don’t have to wait,” he said, adding that the S&P will review the UK every six months, or more, if necessary.
“We will be watching the economic implications, the implications for the public finances, the constitutional implications like the whole Scotland situation...and things like the currency and if it will maintain its reserve status.”
The S&P cut the UK's credit rating to AA from AAA after the UK voted to leave the EU last June, and currently has a 'negative outlook' on debt.
2.12pm: Rio Tinto shares tumble after rebuffing Glencore bid
Rio Tinto plc (LON:RIO) shares tanked after rejecting a counter bid from Glencore for its Australian coal mines.
The miner is sticking with its initial buyer, Chinese-backed Yancoal, saying that it had already achieved clearance from regulators so the deal would be completed sooner than if it were to wait for Glencore to get the green light.
Glencore offered US$2.55bn for the assets, $100mlnmore than the initial bid by Yancoal, which was announced in January.
Rio soothed concerns that Yancoal, which is majority owned by China’s Yanzhou, had yet to raise financing for the deal. The company said it received additional information and confirmations” about how Yancoal would fund the acquisition.
Shares fell 1.52% 5o 3,041.0p in afternoon trading.
1.45pm: FTSE pares gains as oil stocks slide
The FTSE 100 has reveresed earlier gains, falling 12 points to to 7,510.98 as drop in oil prices weighed on energy shares.
Royal Dutch Shell (LON:RDSA) fell 1.67% to 2,096.0p and BP plc (LON:BP. declined 1.62% to 465.0p.
Brent crude slid 2.42% to US$45.80 per barrel and West Texas Intermediate dropped 2.4% to US$43.35 per barrel.
1.10pm: Outrage as Tesco home deliveries cancelled
Tesco plc (LON:TSCO) has come under fire after customers had their online orders cancelled after a computer glitch.
Up to 10% of orders have been affected, the supermarket said.
“We’re experiencing an IT issue which is affecting some grocery home shopping orders," a spokesperson said.
"We’re working hard to fix this problem and apologise to customers for any inconvenience this may cause.”
Shares in Tesco fell 0.79% to 169.70p.
12.45pm: Whole Foods boss signals name change under Amazon
Whole Foods Market Inc (NASDAQ:WFM) chief executive John Mackey has hinted that the high-end grocer could launch under a different brand after being taken over by Amazon.com Inc. (NASDAQ:AMZN).
Mackey said: "Over time, there could be other formats that evolve that - that might - wouldn't be branded Whole Foods Market, potentially, wouldn't be our standards."
However, he said in a securities filing yesterday that Amazon would not be "stupid enough" to change the grocer's high standards.
12.10pm: Analysts weigh in on Carney's Mansion House speech
Howard Archer, chief economic advisor to the EY Item Club, expects interest rates will remain at their current record low throughout 2017 and possibly 2019 after Mark Carney’s remarks.
“Mark Carney’s cautious stance fuels our belief that interest rates will not be rising any time soon, given a stuttering UK economy and uncertainties over its outlook,” he said.
“We maintain the view that the Bank of England will hold off from raising interest rates in 2017. A tightening in 2018 also looks highly questionable given the cloudy outlook.”
Our view on #Carney #Mansion House speech. Reinforces our belief #BOE #interest rate hike unlikely any time soon despite 5-3 June #MPC vote https://t.co/lvdUMO0rwL
— Howard Archer (@HowardArcherUK) 20 June 2017
Other analysts weighed in on Carney’s comments, including Spreadex’s Connor Campbell, who said rising inflation will continue to plague consumers as Carney has done nothing to protect the pound.
“Consumers won’t be too happy about Carney’s stance; with nothing to curb its rise inflation could easily cross 3% next month, further tightening the noose around the nation’s bank balances,” he said.
Afternoon Market Comment: Sterling suffers as Carney dismisses calls for rate hike... https://t.co/tx8URSSctD
— Connor Campbell (@ConnorSpreadex) 20 June 2017
Craig Erlam, senior market analyst at Oanda, said rising inflation is clearly a concern among certain policy makers, having risen to 2.9% last month which is well above the central banks 2% target. Three policy makers voted to raise rates at the meeting last week.
“Prior to last week’s meeting, markets had not anticipated a rate hike until at least 2019, prompting the pound to rally after the announcement,” he said.
“While the move was quite sharp, it hasn’t developed into anything more which would suggest investors are very much on the same page as Carney who argued that against the backdrop of anaemic wage growth and mixed consumer activity and business investment, it would not be appropriate to raise rates.
“This may mean tolerating higher inflation in the short term but under the circumstances, I think this remains the most suitable and likely response.”
#GBP Off as #Carney Plays Down Rate Hike Chances https://t.co/9Weg1BDWCA #UK #BoE #Hammond pic.twitter.com/lO5Em5fmJO
— Craig Erlam (@craig_forex) 20 June 2017
11.49am: FTSE 100 edges higher as pound tanks
The FTSE 100 is up 10 points to 7,534.19 as the pound plunged 0.57% against the dollar to US$1.2665 after Bank of England Governor Mark Carney said interest rates should be kept on hold amid uncertainty over Brexit.
Carney said he wanted to see how businesses, financial markets and consumers reacted to Brexit before raising rates. He also said weak wage growth meant it was too soon to be hiking rates.
“It is becoming clear that the rising fears of Brexit negotiations negatively impacting economic growth continues to weigh heavily on sentiment while prolonged periods of uncertainty has ensured Pound weakness remains a recurrent them,” said FXTM research analyst Lukman Otunga.
“With both consumer spending and business investments dishing out mixed signals, and tepid wage growth still a cause for concern, “now is not yet the time to raise interest rates” according to Mark Carney.”
On the company front, Lloyds Banking Group (LON:LLOY) shares declined 1.05% to 67.98p on Carney’s remarks about keeping interest rates low.
Fellow lender Barclays (LON:BARC) edged 0.12% lower to 206.50p after it was charged by the Serious Fraud Office with conspiracy to commit fraud over the bank's emergency fundraising deal with Qatar at the height of the financial crisis.
A weaker pound has boosted shares of multinational companies listed in London, as it makes overseas earnings more valuable. Shares in WPP plc (LON:WPP) rose 1.37% to 1,699p, and Burberry Group plc (LON:BRBY) increased 1.72% to 1,772.0p and and Unilever plc (LON:ULVR) rose 4,370p.
Global advertising giant WPP is leading the way, up 2.2%. Other gainers include luxury fashion chain Burberry (+1.5%) and consumer good titan Unilever (+1.2%).
N Brown Group (LON:BWNG) shares gained 6.06% to 302.0p after the fashion retailer reported a 5.6% increase in first quarter revenue, driven by online sales.
Serco Group plc (LON:SRP) was sitting 2.29% higher at 120.70p after the outsourcing group secured a £1.5bn deal to run what will be Australia’s biggest prison, the UK firm's largest-ever contract by value.
10.56am: Carney's dovish comments hardly surprising, says IG
Chris Beauchamp, chief market analyst at IG, said Mark Carney has "shattered the calm of the Tuesday session" after saying interest rates should remain unchanged for the time being due to worries about Brexit.
"It was hardly surprising to hear the governor himself air his well-known dovish views, but coming less than a week after a surprise flapping of wings among the MPC’s policy hawks, it was enough to send the pound lower versus the dollar and the euro," Beauchamp said.
"His cautious view on Brexit, one reiterated by the chancellor as well, has also ruffled feathers among sterling traders, with reports of the first day of Brexit negotiations not helping matters. Leaks from the talks should be expected from now on, which will mean the summer is not likely to be a quiet time for those monitoring the pound and its various crosses."
The pound fell 0.325 to US$1.2696 and the FTSE 100 eased off earlier gains, rising seven points to 7,530.88.
10.08am: Twitter users react to Carney's speech
CBI's principle economist, Alpesh Paleja, has responded to Mark Carney's speech on Twitter. He noted that the shake-up of Monetary Policy Committee members, including the recent addition of Professor Silvan Tenreyro, could see a change in views.
He also welcomed Carney's remarks that “Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption".
Carney not close to voting for a rate rise, and churn on the #MPC could see a shift in balance of views. Also, loving the cake metaphor! pic.twitter.com/r0CEUG1nda
— Alpesh Paleja (@AlpeshPaleja) 20 June 2017
Others also reacted to the speech on Twitter:
Phillip Hammond and Mark Carney have just said Brexit has made us poorer, and will make us poorer. Pound on the slide. War coming in Govt.
— Peter Arnott (@PeterArnottGlas) 20 June 2017
Mark Carney on those sunlit uplands of Brexit https://t.co/9RjwrTiZAw pic.twitter.com/DfYa8ZUWvh
— Katie Martin (@katie_martin_fx) 20 June 2017
This is the key passage from Mark Carney. He says Brexit means lower incomes, job losses, higher prices incomes. (Quotes via @AndrewSparrow) pic.twitter.com/bFEJkDE8kK
— Jack Blanchard (@Jack_Blanchard_) 20 June 2017
Mark Carney mocks Boris: "Before long we'll find out the extent to which Brexit is a gentle stroll to a land of cake and consumption"
— Michael Deacon (@MichaelPDeacon) 20 June 2017
09.53am: Carney paints bleak picture of economy, says analyst
Bank of England Governor Mark Carney has painted a "very bleak" picture of the UK economy at a time when the UK is in political turmoil, acccording to James Hughes, chief market analyst at GKFX.
Carney cited weak wage growth in declaring that now is not a good time to be hiking interest rates, while inflation is well above the BoE's 2% target.
"Lets not forget what a rate hike does to borrowers, it puts debt payments up, and with household debt in the UK including mortgages up at approx £53,000 per household and at £13,000 excl mortgages, this could spell disaster for some families," Hughe said.
"Mark Carney himself predicted that inflation would be at 2.8% by the end of 2017, however we are already at 2.9% in June! Wage growth is key now in any jobs report, we know people are getting jobs and we know the unemployment rate is coming down, but that does not paint a full picture. If earnings do not go up at at least the same pace as inflation, then raising debt payments for millions of people should not be on the table. Remember consumer spending is already being hit by higher prices."
09.27am: Mark Carney says interest rates will remain on hold
The pound has plunged 0.42% to US$1.2683 after Bank of England Governor Mark Carney said interest rates will remain unchanged while the central bank waits to see how Brexit negotiations play out.
In a speech at Mansion House, he also said that wage growth was too weak to justify a rate rise. Carney acknowledged that three members of the Monetary Policy Committee voted for a rate hike at the last policy meeting but she he was ready ready to join these hawks.
"Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase," he said.
"But all expect that any changes would be limited in scope and gradual in pace."
He added: "From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment.
"In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations."
The slump in the pound gave the FTSE 100 a boost with the top-tier index rising 23 points to 7,547.68.
09.05am: Philip Hammond says UK is tired of austerity
Chancellor Philip Hammond has signalled that the Tory party would loosen its purse strings after saying Britain is tired of austerity in his Mansion Speech today.
Hammond also said the Conservatives are committed to keeping taxes as low as possible, to foster growth.
He opposed increased borrowing to fund current consumption and promised to provide assurances to the European Investment Bank (EIB) to ensure that UK businesses continue to have access to funding after Brexit.
On migration the Chancellor said the UK needs to keep recruiting the “best and brightest”, echoing Theresa May’s statement.
On Brexit, he said that Britain needs to be able to trade effectively with the EU and repeated his call for a transition period for businesses after the UK’s withdrawal from the bloc.
Hammond's speech was scheduled for Thursday but delayed following the Grenfell Tower fire.
08.46am: FTSE opens lower
The FTSE 100 made a rather listless start to proceedings as it ignored the nose-bleed-inducing new highs seen on Wall Street to drift three points lower 7,520.94.
The indifference may be accounted for by the fact that America’s main stock markets were lifted by a tech rally, led by Apple Inc (LON:APPL), which are notable by their absence here in the UK.
The early news comes from the Mansion House, at the heart of the Square Mile, where Chancellor Philip Hammond is making his delayed speech to the great and the good of the City.
According to the Guardian, reporting live from the event, the key message from Hammond is that Brexit must have four strands:
- A comprehensive agreement on trade and services.
- A mutually beneficial transitional arrangement, avoiding disruption and dangerous cliff edges.
- Frictionless customs arrangements.
- An implementation period, when the UK will be outside the customs union, but customs rules will remain in place pending the new rules coming into force.
Eyes and ears will also be on Mark Carney, also at Mansion House, with the Bank of England governor expected to gives some detail on the clear split with the Monetary Policy Committee on keeping interest rates on hold.
8.00am: Proactive news headlines...
Aminex plc (LON:AEX) has told investors it has now repaid its corporate loan facility in full. The company now describes itself as a ‘debt-free’ gas producer. It also highlighted that its operating subsidiary in Tanzania, Ndovu Resources, continues to be paid in dollars for gas sales from the Kiliwani North project although there have been some delays.
Shanta Gold Ltd (LON:SHG) has unveiled a series of transactions that should utterly transform the Tanzania-focused miner. It is acquiring Vancouver-based Helio Resource Corp for US$5.6mln; it is raising US$14mln from investors, and it has agreed a debt restructuring deal that significantly reduces the coupon on those borrowings.
88 Energy Ltd (LON:88E) has confirmed that the second stage of fracking in the Icewine-2 appraisal well has been completed successfully. Two zones of the HRZ shale have now been fracture stimulated, the company highlighted, with more than 98% of the intended proppant volume injected into the reservoir.
Tlou Energy Limited (LON:TLOU) has achieved ‘first power’ from its coal bed methane (CBM) project in Botswana, where the Lesedi gas field is hooked into generators. The company describes it as a ‘significant milestone’ which is evidence of the group’s ability to deliver power from, and therefore further monetise, the CBM gas resource.
Sula Iron & Gold PLC (LON:SULA) has completed the first hole of a new 5,000m drill programme at the Sanama Hill target at Ferensola in Sierra Leone. The first hole FDD025, is being logged with two further holes on Sanama Hill close to completion (FDD026 & FDD027). In due course one of the two drill rigs will be transferred to TZ4, the Southern Target, to commence a targeted programme there.
Solo Oil PLC (LON:SOLO) boss Neil Ritson has highlighted that efforts continue to at least sell part of its stake in the Ntorya gas project, onshore Tanzania, where partner Aminex plc is presently advance development plans. Aminex, in a separate statement on Tuesday, noted that it is working with the Tanzanian Petroleum Development Corporation (TPDC) on a two-stage development plan for Ntorya.
A pick-up in production from its new San Gregorio West underground mine in the last three months enabled Orosur Mining Inc (LON:OMI TSX:OMI) to meet production guidance for a fourth year in a row. Total gold produced for the year to March was 35,371 oz (compared to guidance of guidance of 35-40,000) with a third of that (10,748oz) in the final quarter as SGW ramped up.
Shares in Kin Group Plc (LON:KIN) edged higher on Tuesday Morning after the digital wellness provider revealed it had won a new contract with an NHS Trust hospital. The one year deal will see Kin, which trades as Kin Wellness, provide a services programme for the hospital’s doctors, nurses and staff.
Ariana Resources plc (LON:AAU) is raising £2 mln in new money via a placing and subscription of shares at 1.3p a share. The initial raise of £1.87 mln has already been completed with the help of ubiquitous mining broker Beaufort and by Panmure Gordon.
Amur Minerals Corporation (LON:AMC) has provided an update on the current drill programme in Russia’s Far East, where it is working to expand the metal deposits of the Kun-Manie project. Drilling is targeting Kun Manie’s Ikenskoe / Sobolevsky (IKEN) and Kubuk (KUB) deposits, and since beginning the programme in early May the company has so far completed some 5,903 metres of drilling, about 30% of the planned programme.
Ormonde Mining plc (LON:ORM)’s revised construction schedule for the Barruecopardo tungsten project in Spain now calls for plant commissioning to begin in the third quarter of 2018. This follows the rescheduling of certain construction contracts such that they now run consecutively instead of concurrently, and also follows on from the completion of the necessary land acquisitions.
Horizonte Minerals Plc (LON:HZM TSX:HZM) has awarded another batch of contracts for the feasibiity study at its Araguaia nickel poreject in Brazil with some of the workstreams now more than 50% finished. Contracts have now been awarded for the transports and logistics to Steinweg Handelsveem, for power lines and transmission to SM&A Electrics and to VCE Mine Consultancy for the legal permit report.
6.45am...Footsie set follow Wall Street higher
FTSE 100 is set to push on in early dealings after a surge on Wall Street overnight.
Financial spread bet firms expect Footsie to add up to ten points when trading gets underway, to add to the 60 point gain to 7,523 seen Monday.
Brexit discussions with the EU started on a low key note, but talk of a softer departure for the UK and repeated hints from the new and very confident French President Emmanuel Macron that the EU door is still open for the UK have eased some concerns over the outcome.
Employers' organisation the CBI said this morning that the UK economy will see more subdued growth over the next couple of years due partly to the exit from Europe.
After a strong performance in the second half of 2016, the CBI said political uncertainty, including the ongoing Brexit negotiations, would start to weigh on the economy.
In the US, a rebound by tech shares drove the gains, with Apple, Amazon and Facebook all among the best performers.
The Dow Jones Industrial Average jumped to a new record at 21,528, a gain of 144. The S&P 500 and Nasdaq did even better, with the tech – dominated Nasdaq jumping 1.4%.
Oil was the one weak spot, with the price languishing at close to a seven month low on worries over a continuing supply glut.
Asian markets were mixed with a strong rise in Tokyo not matched in Hong Kong, which fell, while Shanghai was flat.
Business headlines
Dow Jones hits record high as tech shares bounce back: Apple drove the Dow Jones industrial average past 21,500 for the first-time last night as American technology shares rebounded. (Times)
UK SMEs increasingly pessimistic about state of economy post-election: The Federation of Small Businesses (FSB) recorded a drop-in confidence among members for the first time since the aftermath of the EU referendum in June last year. (Independent)
Indian government to seize US$350mln due to Cairn Energy: The Indian government is to seize roughly US$350 million of payments due to Cairn Energy as it steps up its fight with the oil and gas explorer over what it says are US$1.6 billion in unpaid taxes. (Financial Times)
Barclays braced for SFO verdict in probe over Qatar-backed rescue: Barclays and some of its former directors are braced for the Serious Fraud Office to decide whether to bring criminal charges over the bank’s dealings with Qatar during its £11.8 billion fundraising in the financial crisis. (Telegraph)
Energy price cap likely to go ahead despite warnings of ‘timebomb’: Theresa May is expected to forge ahead with an energy price cap this week despite misgivings among Tory ranks and warnings it could prove a “political and consumer timebomb”. (Guardian)
Orange plans to dump 33% of its stake in BT worth £384mln: A glut of BT shares will come on the market this morning after Orange revealed plans to cut its stake in the telecoms giant. (Daily Mail)
Commodities/currencies
Gold: US$1,248 +1
Oil (WTI):US$44.45 up 2c
£/$: 1.2744, pound higher