FTSE 100 closed in the red as the oil price sagged and Prime Minister May arrived at the EU leaders’ summit in Brussels.
The topic she will be raising is Brexit
The UK benchmark closed down over eight points at 7,439, while the FTSE 250 shed 24 at 19,658.
Brent crude was slipping at the time of writing to under $45 a barrel, and down 2.31%.
It came as Australian broker Macquarie reportedly said that OPEC’s production cut deal was unlikely to last beyond the current deadline of March next year.
In companies, drug companies were among the risers with Shire (LON:SHP), up 3.72% to 4,624p as the major finally won approval in the US for its long-acting attention deficit hyperactivity disorder drug (ADHD) Mydayis.
The biggest laggard was United Utilities Group (LON:UU.) down 4.21% to 898.5p.
3.55pm: FTSE retains losses as EU summit begins
The FTSE 100 held onto losses in late afternoon trading despite a recovery in oil prices as traders turned their attention to an EU summit where Theresa May will outline her Brexit plans.
The London index fell 19 points to 7,428.82 while the pound edged down 0.10% to US$1.2658.
Oil prices recovered but remained at seven-month lows on worries that an OPEC deal to cut production was being offset by increased output from Libya, Nigeria and the US. Brent crude rose 1.4% to US$45.43 per barrel, reversing a 2.6% drop on Wednesday to below US45 for the first time since November.
West Texas Intermediate increased 0.09% to US$42.90 per barrel after reaching a 10-month low of US$42 yesterday.
On the political front, the Prime Minister arrived at the EU leaders’ summit in Brussels where she would be raising the issue of Brexit.
She said: “What I’m going to be setting out today is clearly how the UK proposes to protect the rights of EU citizens in the UK, and see the rights of UK citizens living in Europe protected.
European Council president Donald Tusk suggested in a statement ahead of the summit that the UK could change its mind about Brexit and remain the EU.
Meanwhile, UK factory orders reached a 29-year high in June, according to the Confederation of British Industry. The CBI said its factor order balance rose to +16 in June from +9 in May, the highest point since 1988, supported by the strongest exports growth in 22 years.
In corporate news, Imagination Technologies shares jumped 16.4% to 143.75p after saying it has put itself up for sale after Apple decided to stop using its chips.
Shire gained 3.70% to 4,625p after saying the European Medicines Agency has validated the marketing authorisation application for Veyvondi for the treatment on von Willebrand disease.
Go-Ahead declined 1.75% to 1,800p as the transport operator said it expects passenger numbers and revenue to have fallen 4% over the past year at its Govia Thameslink Railway, which includes the strike-hit Southern Rail.
United Utilities fell 1.05% to 902.50p and Experian slipped 1.16% as their stock went ex-dividend.
2.57pm: UK could remain in EU, Donald Tusk suggests
European Council president Donald Tusk has suggested there is a chance the UK could change its mind and remain in the European Union.
Speaking in Brussels ahead of the first summit of EU leaders since the start of Brexit negotiations, Tusk quoted the lyrics of John Lennon's Imagine to express his hope that Britain would decided to stay.
"We can hear different predictions, coming from different people, about the possible outcome of these negotiations: hard Brexit, soft Brexit or no deal,” Tusk said.
“Some of my British friends have even asked me whether Brexit could be reversed, and whether I could imagine an outcome where the UK stays part of the EU.
“I told them that in fact the European Union was built on dreams that seemed impossible to achieve. So, who knows? You may say I’m a dreamer, but I am not the only one.”
2.11pm: US initial jobless claims rise more than expected
US initial jobless claims rose 3,000 to 241,000 in the week to 17 June, the Labor Department revealed, slightly more than the 240,000 expected. It marked the 120th week in a row that claims were below 300,000, signalling strength in the US labour market.
The more accurate four-week average of new claims increased by 1,500 to 244,750.
1.20pm: Outlook for manufacturers looks mixed, says EY Item Club
Howard Archer, chief economic advisor to the EY Item Club, said the June CBI industrial trends survey was "highly encouraging" but official data has been less optimistic.
“Taken at face value, the survey suggests that the manufacturing sector has had a strong second quarter and has considerable momentum going into the third quarter," he said.
“However, there is the concern that survey evidence for the manufacturing sector has tended to be markedly more upbeat than the official data from the Office for National Statistics (ONS) so far in 2017."
The latest ONS figures show manufacturing output rose 0.2% month-on-month in April after falling in each of the first three months of 2017. Manufacturing output fell 0.7% in the three months to April compared to the three months to January.
12.15pm: London stocks drop amid worries on oil prices and political uncertainty
The FTSE 100 was in negative territory, falling 326 points to 7,421.02, as oil prices remained weak and as political uncertainty weighed.
Oil prices steadied after the Energy Information Administration reported a 2.5 million fall in crude inventories last week. Brent crude rose 0.79% to US$45.18 per barrel and West Texas Intermediate increased 0.60% to US$42.79 per barrel
But traders were seemingly pessimistic after Iranian oil minister Bijan Zanganeh said OPEC members are considering further oil output cuts.
Craig Erlam, chief market analyst at Oanda, said “there’s little reason at the moment to believe that oil isn’t headed for further losses”.
“Traders appear to be testing the resolve of those countries that signed up to the production cut, having been clearly disappointed with the decision not to deepen the cuts on top of extending them by nine months,” he said.
“Oil is currently trading at seven month lows despite a commitment from a number of producers to bring the market back into balance.”
Mild Risk Aversion Seen in Early Trade - MarketPulse https://t.co/k1ifGLhGD3 #UK #BoE #GBPUSD #US #Oil #EIA #Gold pic.twitter.com/9LjfsOwBbq
— Craig Erlam (@craig_forex) 21 June 2017
Investors were also exercising caution as political uncertainty persisted with Theresa May yet to confirm a pact between the Conservatives and the DUP. Chancellor Philip Hammond also told Sky News that business investments were being delayed as Brexit remained unclear.
In economic data, investors appeared to shrug off an update survey on the manufacturing industry from the Confederation of British Industry. The CBI said its factory order balance rose to +16 in June from +9 in May, the highest point since 1988, supported by the strongest exports growth in 22 years.
The pound was flat against the dollar at US$1.2668 due to a lack of catalysts today.
Among corporate stocks, United Utilities, Experian and Land Securites, were in the red after their stocks went ex-dividend.
Provident Financial rebounded from yesterday’s slump when it warned that full year profits would be hit by the reorganisation of its doorstep lending division.
Shire’s shares gained after the European Medicines Agency validated a marketing authorisation application for its Veyvondi treatment on adult patients with the bleeding disorder von Willebrand Disease.
11.46am: UK factory orders reach 29-year high, CBI reveals
UK factory orders reached a 29-year high in June, according to the Confederation of British Industry.
The CBI said its factor order balance rose to +16 in June from +9 in May, the highest point since 1988, supported by the strongest exports growth in 22 years.
Exports were supported by a weaker pound following last June’s Brexit vote.
Rain Newton-Smith, CBI chief economist, said: “Total and export order books are at highs not seen for decades, and output growth remains robust.
Total order books climbed to the highest since August 1988, while export orders improved to a 22-year high. #CBI_ITS https://t.co/4HUMVYaHSA pic.twitter.com/s6WDKSSPBA
— CBI Economics (@CBI_Economics) 22 June 2017
Further reassurance that UK #manufacturing is continuing to thrive in the wake of the #Brexit vote. #CBI survey bodes well for Q2 GDP too. https://t.co/PBx9id8wRD
— Julian Jessop (@julianHjessop) 22 June 2017
“Nevertheless, with cost pressures remaining elevated it’s no surprise to see that manufacturers continue to have high expectations for the prices they plan to charge.”
11.31am: Oil and gas stocks worst performers in year to date, says AJ Bell
A surprisingly disciplined approach to production cuts from OPEC members and non-OPEC nations is not enough to support the price of oil, according to AJ Bell.
“It may take a financial market correction, coupled with further oil price weakness, to return the market to balance and provide support to oil stocks that are wilting under the glut of oil – oil and gas producers and oil equipment and services are two of the three worst performing sectors in the FTSE All-Share in the year to date, said Russ Mould, investment director at AJ Bell.
Mould said three things need to happen to halt the slide in prices – a drop in oil inventories, a decline in oil exploration and a financial (bond and stock) market shake-out that reduces the amount of capital (debt or equity) available to shale drillers.
10.39am: First time home buyers in pole position, says mortgage broker
Mortgage experts have weighed in on the CML mortgage report.
John Goodall, chief and co-founder of buy-to-let specialist Landbay said while overall lending grew, it “can’t be ignored that home mover activity is more subdued than in recent times”.
“Rising house prices and hefty stamp duty bills have stumbled the market and sales remain low. It is time that the government addressed these wider issues of the housing market,” he said.
“This includes a re-evaluation of stamp duty charges and some firm promises to tackle the UK’s supply shortage.”
Jeff Knight, marketing director at Foundation Home Loans, said: “The political picture may have had a short-term impact, but ultimately, those already in the buying or re-mortgaging process aren’t going to hold their breath for too long and the mortgage market is clearly able to withstand more than a few knocks. Record low mortgage rates have matched on-going incentives for first-time buyers, boosting confidence for those looking to get a foot in the door. “
Alastair McKee, managing director of UK independent mortgage broker, One 77 Mortgages, said: "With mortgages so cheap, competition from landlords significantly reduced and the considerable leg-up of Help-to-Buy, first time buyers are in pole position.
"Landlords, especially amateur landlords with just one or a small number of properties, have had their confidence hit extremely hard by the punitive new tax and prudential lending regime.”
McKee added that Bank of England Governor, Mark Carney, has said interest rates are likely to remain low for some time yet but if inflation continues to rise sharply “that could change and homeowners aren't taking any risks”.
10.06am: Oil weighing on investor confidence, says CMC Markets
David Madden, market analyst at CMC Markets, said investor confidence is being weighed down by a weak oil price.
"Oil has fallen back to levels not seen since mid-November 2016, and traders are worried it could bring about low inflation and diminished growth," he said.
"In London, the FTSE 100 is down 0.5% and commodity related companies are the biggest fallers. BP and Royal Dutch Shell are in the red on the back of falling oil prices. While, mining companies like Glencore, Anglo American and BHP Billiton are lower again as dealers are concerned about declining demand for commodities from Asia."
09.30am: Mortgage lending falls in May, CML estimates
Gross mortgage lending rose 12% in May to £20.1bn compared to a year ago, the Council of Mortgage Lenders has estimated.
The CML revised its forecast for buy-to-let mortgages in 2017 and 2018, reflecting the pressure of an increase in taxes. It now expects buy-to-let lending of £35bn in 2017 and £33bn in 2018, a decrease from its December forecast of £38bn in each year.
“While falling mortgage interest rates have helped support borrowing, tax and prudential measures are exerting pressure on the buy-to-let market,” said CML director general Paul Smee.
“Following the distortion of the stamp duty change on second properties last year, we expected a slight recovery in lending levels. However, this has not materialised, and we therefore have lowered our forecast for buy-to-let lending this year and next.”
08.34am: FTSE slides as investors mull remarks from BoE's Andy Haldane
The FTSE 100 opened in the red as investors continued to mull over hawkish remarks from Bank of England chief economist Andy Haldane.
London’s top tier index fell 25 points to 7,422 while the pound rose 0.08% to US$1.2681.
Sterling recovered yesterday after Haldane said he may vote for an interest rates hike later this year, citing risks of leaving policy tightening too late as inflation and the economy have shown greater resilience than expected.
His remarks come in stark contrast to Governor Mark Carney who said on Tuesday that weak wage growth and Brexit uncertainty meant interest rates should remain unchanged.
Meanwhile, oil prices continued to drift lower due to worries about the global supply glut, with Brent crude down 0.35% to US$44.66 per barrel and West Texas Intermediate down 0.28% to US$42.41 per barrel.
“It’s evident that oil prices are becoming the primary driver of the financial markets. After both benchmarks entered a bear market with Brent plunging below $45 for the first time since November, investors are becoming more concerned as to when the plunge will stop,” said FXTM chief market strategist, Hussein Sayed.
“Back in November 2016, when OPEC and non-OPEC producers, including Russia, decided to cut production, most market participants believed that this would lead to a re-balancing of the market and the supply glut would come to an end. Eight months later, U.S. shale producers increased the rate of drilling, Libya is pumping oil at the highest levels in four years, and the amount of oil that’s being stored in tankers jumped to a new high in 2017. “
Royal Dutch Shell (LON:RDSA), BP (LON:BP) and BHP Billiton (LON:BHP) dropped on the slump in oil.
Elsewhere, Standard Life plc (LON:SL. shares dipped 0.89% to 338.70p after Britain's competition watchdog cleared its £11bn takeover of Aberdeen Asset Management.
Imagination Technologies Group (LON:IMG) surged 19.64% to 147.75p after the chipmaker put itself up for sale following Apple’s decision to stop using its products.
Shares in Experian plc (LON:EXPN), Land Securities plc (LON:LAND), Mediclinic plc (LON:MDC), and United Utilities plc (LON:UU. declined as the stocks went ex-dividend.
08.33am: London stock futures fall
As the June heatwave grinds towards the weekend, the stock market is one place absent of heat.
London’s FTSE 100 is expected to start on the back foot. Wednesday saw financial stocks under pressure with investor attentions on inflation forecasts, and the tempering of crude oil prices is also becoming a draining factor for the benchmark.
Oil prices reached their lowest level for nearly a year at one point on Wednesday, and having steadied somewhat the Brent contract is this morning set just below the US$45 per barrel level.
“The declines seen in the past few weeks really shouldn’t have been too much of a surprise to OPEC given the capacity of US shale producers to vacate the space left open for them,” said Michael Hewson, analyst at CMC Markets.
“That, and a significant increase in output from Libya and Nigeria, both of whom are exempt from the quota system, and it is clear that OPEC underestimated their own importance, when it came to global oil output.”
US markets had opposing fortunes on Wednesday. The Dow Jones closed out the trading day down 57 points, 0.27%, at 21,410 while the S&P 500 also finished in the red, down 0.06%, at 2,435. But, the tech-heavy Nasdaq was positive, rising 0.74%, ending the session at 6,233.
In Asia, the key benchmarks are all pointing higher this morning. Japan’s Nikkei was albeit only up a few points, at 20,144.
Hong Kong’s Hang Seng, meanwhile, gained 134 points or 0.52% to trade at 25,828. The Shanghai Composite was higher, rising 0.77% to 3,180.
Australia’s ASX 200, however, climbed almost 1% changing hands at 5,717.
Here in London, equities seen to be more subdued. CFD and spreadbetting firm IG Markets sees the FTSE 100 down about 5 points, calling the benchmark at 7,454 to 7,457 about an hour before Thursday’s open.
There are no major blue-chip announcements in the books, the columns for financial results and quarterly trading updates have seemingly emptied. There will be a small impact of a handful of stocks going ex-dividend which will trim just 1.88 points off the FTSE 100.
Thursday’s ex-div stocks are: Experian PLC (LON:EXPN), Land Securities PLC (LON:LAND), Mediclinic PLC (LON:MDC), and United Utilities PLC (LON:UU. all trading without entitlement to their latest payout.
Headlines
Calls to reverse 1100 Tesco Cardiff call centre job cuts - BBC News
Takata shares halve in the wake of bankruptcy rumours - Financial Times
Brits face ban from all-inclusive holidays over fake poisoning claims - Sky News
Brexit could be "cataclysmic" for Britain's strawberry industry - City A.M.
One-month tenancy deposit cap proposed in Queen's Speech - Financial Times
Tesco Bank customers hit by computer problems - BBC News
Oracle is first enterprise tech group to hit $200bn valuation - Financial Times
Commodities/currencies
Gold: US$1,252, up 0.55%
Oil (WTI): US$42.82, up 0.68%
£/$: US$1.2658, donw 0.10%
Proactive news headlines…
Mariana Resources Limited (LON:MARL) expects to de-list from AIM on or around 4 July, with its TSXV shares being cancelled shortly after, following its acquisition by Canada-listed Sandstorm Gold.
The deal has received the backing of Mariana shareholders and the gold and copper explorer is now waiting on approval by a Guernsey court, which is expected to sanction the takeover at a meeting on Monday.
The non-executive chairman of Jubilee Platinum PLC (LON:JLP), Colin Bird, has snapped up 1.25mln shares in the chrome and platinum producer for £48,000. After today’s purchase, Bird holds 10.37mln Jubilee shares, representing a 0.93% stake in the company.
Christopher Goss, non-executive chairman at Tethyan Resources PLC (LON:TETH), has decided to step down from the board with immediate effect. With the secondary listing of the company on the TSX Venture Exchange advancing, Tethyan said Goss felt it was an appropriate time to step down.
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Motif Bio Plc (LON:MTFB) said its chief medical officer has been invited to address a prestigious conference to discuss the results of the first of two clinical trials of iclaprim, its next-generation antibiotic. Dr David Huang has been invited to present at IDWeek 2017 on October 7 where he will give an overview of the REVIVE-1 phase-III clinical study.
Ortac Resources Ltd (LON:OTC) has received confirmation from the Slovakia Main Mining Bureau that its permit for the Sturec gold project will be re-issued. Vassilios Carellas, Ortac's chief executive, said: “Following on from previous announcements, the company was required to allow a period of time for the decision to re-issue the underground mining permit to be considered by all stakeholders.
Tlou Energy Limited (LON:TLOU) has announced the appointment of Hugh Swire as its new non-executive director with immediate effect. Tony Gilby, the Botswana focussed CBM firm’s chief executive, said: “Hugh is a great addition to our team and brings a wealth of knowledge and experience to the board. Hugh is based in London and is very well known in the investment community.
Graphene specialist Directa Plus Plc (LON:DCTA), is to work with Italian workwear group Alfredo Grassi to manufacture a new range of garments using the highly flexible element. Grassi manufactures customised protective clothing, workwear and uniforms for private and public organisations globally and has been testing graphene its products to see the benefits.