FTSE 100 off 108 points at 7,390
Ex-dividend factors hit index
UK trade data weak, but industrial production growth surprises
NIESR expects slowdown in UK economy
Close: Triple digit fall for the Footsie
Not having any bomb shelter makers among its constituents, it is not surprising that the FTSE 100 took a big tumble, as tensions between North Korea and the USA became tauter.
"The VIX volatility index spiked above 15 to reach its highest since May before easing back a touch," noted Neil Wilson, at ETX Capital.
"The question is whether this is the start of an August swoon that results in a correction or investors use the sell-off as an ideal time to buy the dip. After a fairly sanguine reaction from markets when the North Korea trouble broke we are seeing pressure build and less risk on the table," Wilson said.
Soft drink bottler Coca-Cola HBC tdefied the trend, rising 9.2% after reporting first half earnings growth with sales supported by warmer weather and a later Easter.
That rise paled into significance compared to the 247% rise by workplace equipment supplier HC Slingsby PLC (LON:SLNG) after it reported a return to profitability in the first half of the year.
For the six months to June 30, HC Slingsby posted a pre-tax profit of £123,000, against a loss of £424,000 at the same stage last year, as revenue rose to £9.936mln, up from £9.276mln.
3.40pm: FTSE takes another dive
Approaching the closing bell, the FTSE 100 has descended further on worries about North Korea persisted, weak UK trade data and ex-dividend stocks.
London’s top tier index is now down 113 points to 7,384p.
“The FTSE is now down a whopping 1.6% – and while roughly third of that decline stems from a chunk of the index going ex-dividend, the rest certainly doesn’t,” said Spreadex’s Connor Campbell.
“Not only is the war of words (let’s hope their spat remains verbal) between Trump and Kim Jong Un weighing on the FTSE, but also the disappointment of June’s 9 month high UK trade deficit.”
Ex-dividend stocks providing a drag on the FTSE included BT Group, Anglo American and Lloyds Banking Group.
Elsewhere, DFS Furniture slumped after saying full year earnings will be at the lower end of its guidance range following a weaker-than expected second half, hit by uncertainty around the snap UK general election, an unclear economic outlook and warm weather.
Prudential shares have wavered throughout the session after saying it will merge its UK operations and reporting 5% increase in first half operating profit, driven by Asia.
Going the other way, soft drink bottler Coca-Cola HBC topped the FTSE 100 after reporting first half earnings growth with sales supported by warmer weather and a later Easter.
Cineworld also gained after the cinema chain reported a surge in half-year sales and profits.
2.48pm: US intial jobless claims and PPI data miss forecasts
US data this afternoon has come in weaker than economists had expected.
Initial jobless claims rose to 244,000 last week from 241,000 the previous week, compared to forecasts of 240,000, the Labor Department revealed.
US producer price inflation also missed expectations. PPI fell 0.1% month-on-month against forecasts for a 0.1% rise, bringing the year-on-year rate down to a 1.9% gain from 2.0% growth. Economists had expected a 2.2% annualised rise.
“US PPI comes in well below expectations, suggesting that there is little need for imminent additional policy tightening,” said James Knightley, chief international economist at ING. “Nonetheless, we still see some potential for higher inflation to year end.”
2.07pm: UK economic growth slows in third quarter, NIESR estimates
UK economic growth is expected to slow to 0.2% in the three months to July, from 0.3% in the second quarter, according to the National Institute of Economic and Social Research (NIESR).
Amit Kara, head of UK macroeconomic forecasting at NIESR, said the slowdown was driven by the service sector.
“We see a modest recovery in the second half of this year in response to strengthening global growth and a weaker currency, but on the flip side, consumer spending is likely to be weighed down by weak wage growth and investment spending held back by Brexit-related uncertainty.”
"Further out, we see quarterly economic growth strengthen somewhat to 0.4-0.5% as the economy rebalances away from domestic demand and towards net trade.”
Our monthly estimates of GDP suggest that output grew by 0.2% in the 3 months ending in July - Read here: https://t.co/3xIy0DmAYV#NIESRGDP pic.twitter.com/Q0FbNJI20h
— NIESR (@NIESRorg) 10 August 2017
1.32pm: Oil prices rise as OPEC upgrades demand forecast
Oil prices rose slightly even after OPEC said production by its members rose for a third consecutive month in July.
Total OPEC production stood at 32.9mln barrels per day in July, up 173,000 barrels per day the previous month, led by output increases in Saudi Arabia, Libya and Nigeria.
However, OPEC upgraded its global demand forecast for the year by 100 thousand barrels a day, saying it now expects growth of 1.37 million barrels a day in 2017.
Brent crude rose 1.2% to US$53.38 per barrel and West Texas Intermediate climbed 0.8% to US$49.97 per barrel.
“Whilst output has risen and is exceeding demand forecasts for the year, higher predicted demand in 2018 and a persistent drawdown on stocks has oil on the up still,” said Neil Wilson, senior market analyst at ETX Capital.
“Nevertheless this report raises fresh doubts about whether OPEC’s production curbs are working. Production increased thanks mainly to higher output from Saudi Arabia, as well as the turning tide in Nigeria and Libya. They’re currently exempt from curbs but this situation may need to be reassessed quickly”
12.37pm: London stocks still under the cosh
At the midday mark, the FTSE 100 is still in the red, down 84 points to 7,413.51, driven by ex-dividend stocks and weak UK trade data.
"While a chunk of the FTSE’s losses – around 40 or so points – stemmed from a wave of its components going ex-dividend, the index’s decline still intensified as the day went on, more than doubling to send it 1.2% lower," said Connor Campbell, financial analyst at Spreadex.
"Part of the reason was the generally uninspired data coming out of the UK. Though the industrial production reading beat expectations to jump to a 6 month high of 0.5%, any goodwill generated by this move was undone by the UK’s worst trade deficit figure for 9 months, with exports plunging 4.9% in June."
11.15am: Footsie getting cheaper
JP Morgan fund manager James Illsey thinks UK equiities are cheaper than you think:
JP Morgan’s Illsley: Why UK equities are cheaper than you think https://t.co/Jjzox7avOg @FETrustnet @JPMorgan_UK @Miss_Ruya @Anoushaa
— Jonny Jones (@JonnyJones92) 10 August 2017
They certainly are today, down over 82 points at 7,415 currently, having dropped 44 points yesterday!
On currency markets, the pound recovered earlier falls versus the dollar, turning flat at US$1.2990, and pushed 0.3% higher against the euro at €1.1099.
10.15am: Mixed data adds to concerns
The FTSE 100 index doubled its drop as the morning session progressed after some mixed UK economic data, while ex-dividend factors and North Korea tensions also continued to weigh.
Around 10.15am, the UK blue chip index was 81 points lower at 7,416, just holding above the session low of 7,407.40, although stocks trading without entitlement to their latest dividend payment accounted for over 41 points of the fall.
The Footsie extended its falls after data from the Office of National Statistics showed the UK's trade deficit widened by £0.1bn to £8.9bn in the second quarter of the year due to increases in imports of goods and services.
A still elusive 'rebalancing': Britain's trade deficit swells to an eight-month high https://t.co/ileJ29OLM6 pic.twitter.com/4QeATqKpBL
— fastFT (@fastFT) 10 August 2017
Other ONS data showed total UK industrial production rose by 0.5% month-on-month in June, ahead of expectations for a 0.1% increase, however, manufacturing production came in flat.
James Smith Economist, Developed Markets for ING said: “ It’s been a disappointing morning in terms of UK data. Headline industrial production data was flattered by a 5% MoM rise in oil and gas output, but manufacturing remained flat on the month. In fact, manufacturing output hasn’t increased in any month so far this year.”
He added: “This is particularly concerning when you consider the backdrop of a 13% post-Brexit fall in the pound and the significant improvement in global growth prospects (particularly in Europe, a key trading partner for the UK).
“Whilst these developments appear to have boosted sentiment amongst manufacturing firms according to recent PMIs, we aren’t seeing this being translated into the official data.”
On currency markets, sterling was down 0.2% versus the dollar at US$1.2981, and was flat against the euro at €1.1079.
8.45am: Caution prevails
The FTSE 100 index posted another big drop in early trade this morning, albeit with nearly 20% off the blue chips trading ex-dividend today, although without that technical weight, the blue chips would still be modestly lower as North Korea tensions continue.
Around 8.30am, the UK benchmark index was down 51 points at 7,446, having dropped about 44 points yesterday.
Naeem Aslam chief market analyst at Think Markets UK Ltd said: “The intense situation ducked investors from jumping into a fully risk on mode and this helped the yellow metal to score more gains.
“The momentum would remain strong as long as the rhetorical brinkmanship between President Trump and North Korea does not come to end.”
He added:“The VIX index failed to show any signs of explosions yesterday and with easing tension, we would expect the index to go further into the sleep mode today.
“Perhaps, more unconventional presidential comments are something which has become the new norm for the markets.”
However stocks trading without entitlement to their latest dividend payment in London accounted for over 41 points of the FTSE 100’s opening fall.
Those included top fallers Anglo American PLC (LON:AAL), BT Group PLC (LON:BT.A), Lloyds Banking Group PLC (LON:LLOY), Royal Dutch Shell A PLC (LON:RDSA), and Rio Tinto PLC (LON:RIO).
A batch of corporate results provided some alternate interest, with blue chip soft drink bottler Coca-Cola HBC PLC (LON:CCH) jumping 9% higher to 2,593p after reporting higher quarterly sales on Thursday, helped by warm weather in June and a late Easter holiday.
And tour operator TUI PLC (LON:TI) gained 0.8%, or 10% at 1,257p said holiday demand was resilient and growing strongly as it increased its sales target for the year and made a nine-month core profit for the first time.
Proactive news headlines:
Fox Marble Holdings PLC (LON:FOX) has signed a deal to establish a new distribution outlet for its marble products in the United States. The AIM-listed company - focused on marble quarrying and finishing in Kosovo and the Balkans region- has signed a Memorandum of Understanding with Pristine Stone NYC LLC in New York, a natural stone importer and distributor in the USA.
Myanmar-language social media, entertainment and payments group MySQUAR Limited (LON:MYSQ) has added to its gaming offering once again. The AIM-quoted company has launched its new ‘hardcore’ Land of Magic game and has also added Nanbat Wingabar to its Lucky Wingabar casual online gaming platform..
Portfolio analytics software provider StatPro Group PLC (LON:SOG) has signed a two-and-a-half year contract extension and consulting agreement with a “major” asset manager based in Singapore. The deal, which will net StatPro US$1mln over the length of the contract, is for the AIM-listed group to migrate the asset manager from StatPro Seven to its cloud-based StatPro Revolution platform.
Savannah Resources Plc (LON:SAVP) has told investors that every one of sixteen new drill holes at the Mino do Barroso lithium project in Portugal has encountered massive pegmatite mineralisation.
Tavistock Investments PLC: (LON:TAVI) is selling its Tavistock Financial business to Sanlam Limited’s UK operations for a total cash consideration of £1mln. The transaction will see Sanlam UK acquire Cheltenham-based Tavistock Financial's network of 158 financial advisers along with 25 support staff.
Rare earths group Rainbow Rare Earth Limited (LON:RBW) has reported even better grades than expected at the Gasgawe target on its Gakare licence in Burundi. Lab testing of ore from the main vein at Gasagwe returned an average Total Rare Earth Oxide (TREO) grade of 62.17%, which compared with an average 57% in veins across the rest of the 39 sq km licence published in the competent person’s report.
KEFI Minerals plc’s (LON:KEFI) recent deal with Oryx Management will have a massive positive impact on the funding requirements for the Tulu Kapi mine, the company has revealed. In a stock market statement the company highlighted that the residual funding requirement has dropped from US$289mln (a figure foreseen in January 2014) to US$32mln as a result of the Oryx arrangement and it is now seeing a further reduction to US$24mln.
Strategic Minerals Plc (LON:SML) has set itself a target to quadruple in value over the next five years. The iron ore, tungsten and tin and cobalt group said that based on the potential in these businesses (plus some more acquisitions) it can see scope for its market value to rise to £100mln from £30mln currently.
Thor Mining PLC (LON:THR) has kicked off a new drill campaign at the wholly-owned Pilot Mountain tungsten project, in Nevada, where it is aiming to confirm and expand resources.
7.00am: Ex-divs to weigh
London’s FTSE 100 is set to return to summer R&R after Wednesday’s nuclear war anxiety which saw global equities falling.
The City’s blue-chip benchmark is seen rising, albeit slightly, ahead of Thursday’s open even after a big ex-dividend hit.
A steady improvement in sentiment through yesterday’s Wall Street trading has helped somewhat – plainly not too many investors are factoring the possibility of nuclear holocaust into their portfolios just yet!
“Tensions on the Korean peninsula aren’t anything particular new to investors, there’s generally been a flare up every so often over the last few years that roils markets for a day or so, before everything settles down again,” said Michael Hewson, analyst at CMC Markets.
“Yesterday’s flare up felt a little different initially probably more so because of the inexperience of President Trump in the area of foreign policy, particularly given his tendency to conduct policy by way of tweet and press conference.”
The analyst added: “While markets in Asia and Europe finished sharply lower yesterday, US markets managed to reverse most of their losses, as Secretary of State Rex Tillerson went on a damage limitation exercise, stopping off in Guam on the way, as Japanese and South Korean officials tried to play down the spat.”
Wall Street’s Dow Jones ended just 36 points, 0.17%, lower for Wednesday at 22,048. The S&P 500 was, meanwhile, all but flat for the day at a close of 2,474, albeit the Nasdaq moved 0.28% lower to finish at 6,352.
In Asia, Japan’s Nikkei was this morning trading just a couple of points in positive territory, at 19,743.
Hong Kong’s Hang Seng, meanwhile, shed more than 1% to 27,475 and the Shanghai Composite was 0.7% lower at 3,251.
Here in London, CFD and Spreadbetting group IG Markets sees the FTSE 100 rising by about 2 points, calling the benchmark at 7,460 to 7,463 about an hour before Thursday’s open.
In terms of City news, the day is expected to bring a number of notable updates – with interim results due from names such as Prudential and Glencore, while DFS Furniture, which recently gave a profit warning, reports full year results.
Ex-dividend factors will chop a whopping 41.3 points off the FTSE 100 index on Thursday, with Anglo American PLC (LON:AAL), AstraZeneca PLC (LON:AZN), Barclays PLC (LON:BARC), BP PLC (LON:BP.), BT Group PLC (LON:BT.A), Diageo PLC (LON:DGE), Direct Line Insurance Group PLC (LON:DLG, Fresnillo PLC (LON:FRES), GKN PLC (LON:GKN), GlaxoSmithKline plc (LON:GSK), Informa PLC (LON:INF),Lloyds Banking Group PLC (LON:LLOY), Royal Dutch Shell A PLC (LON:RDSA), Royal Dutch Shell B PLC (LON:RDSB), Rio Tinto PLC (LON:RIO), Rentokil Initial PLC (LON:RTO) all set to trade without entitlement to their latest payouts.
Thursday’s agenda
Trading update: TUI Group PLC (LON:TUI)
Interims: Aldermore Group PLC (LON:ALD), Amec Foster Wheeler PLC (LON:AMFW),Tritax Big Box Reit PLC (LON:BBOX), Capital & Regional PLC (LON:CAL), Coca-Cola HBC PLC (LON:CCH), Cineworld Group PLC (LON:CINE), Derwent London PLC (LON:DLN), Evraz plc (LON:EVR), Glencore PLC (LON:GLEN), Hill & Smith Holdings PLC (LON:HILS), Ibstock Plc (LON:IBST), North Midland Construction PLC (LON:NMD), Prudential PLC (LON:PRU), Vitec Group PLC (LON:VTC), Wentworth Resources PLC (LON:WRL)
Finals: DFS Furniture PLC (LON:DFS)
Economic data: UK industrial, manufacturing production
Headlines
Housing market lull 'spreads from London' - BBC News
Morrisons promises not to adopt brands using fake farm names - The Guardian
Alastair Darling reveals the 'most scary moment' of the financial crisis - The Independent
BoE to tighten hiring policy after Charlotte Hogg scandal - Financial Times
Explosion in digital purchases fires up sleepy payments industry - Financial Times
US jobs most at risk as Worldpay agrees £9.3bn tie-up with Vantiv - Telegraph.co.uk
Greco says Zurich on track for $1.5bn in cost cuts by 2019 - Financial Times