FTSE 100 gains nearly 44 to 7,353
FTSE 250 closes 147 pts ahead
Sterling weaker against dollar ahead of big data this week
Banks and miners lead rally
FTSE 100 finished Monday almost 44 points higher as geopolitical fears eased and Wall Street shares continues north.
The Dow Jones is up 156 points at the time of writing, continuing the rally from Friday.
In London, FTSE 100 finished the day up 0.60% at 7,353, while FTSE 250 also romped home , adding over 147 at 19,692.
"European equities enjoyed a massive bounce back today, as the political situation between the US and North Korea appears to be improving.
"The standoff is far from over, but traders are taking their cues from Washington DC which is hoping to pursue a political end to the tense situation," said David Madden, at CMC Markets.
Top gainer on Footsie was holiday group TUI PLC (LON:TUI), which flew 4.79% higher at 1,290p as Credit Suissse upgraded the shares.
Experian plc (LON:EXPN) went the other direction, as shares in the credit checking group plunged 1.45% to stand at 1,495p.
3.43pm: FTSE's rally may be shortlived as key data looms, says analyst
The FTSE’s gains have strengthened in late afternoon trading, rising 53 points to 7,363.
The pound fell against a broadly stronger dollar, down 0.38% to US$1.2964, supporting the London index.
TUI has continued to lead the gains along with miners and banks, including Glencore, Standard Chartered, Anglo American and Royal Bank of Scotland. The recovery in these assets came following a sell-off last week in risky assets amid tensions between the US and North Korea.
“After last week’s macro-panic this Monday has been a palate cleanser, allowing the markets to readjust following a fairly hefty plunge,” said Connor Campbell, financial analyst at Spreadex.
“The rest of the week may not be so carefree. That’s because there is a string of key data to deal with, especially in the UK where a one-two-three punch of inflation, jobs and retail sales readings are released between Tuesday and Thursday.”
3.11pm: Paddy Power Betfair is Credit Suisse's preferred gaming stock
Credit Suisse said its preferred stock in the gaming sector is Paddy Power Betfair as the company benefits from the shift to online betting from retail.
The bank upgraded its rating on firm to ‘outperform’ from ‘neutral’ and raised its target price to 9,200p from 8,900p, saying it has the best technology strategies along with William Hill.
Credit Suisse also initiated its coverage of Playtech with an ‘outperform’ rating and target price of 1,200p as its second most preferred stock in the gaming sector. It expects double digit earnings growth to 2020, supported by a market share increase in live casino and in sports betting as well as a competitive advantage in the Netherlands and the potential for further mergers and acquisitions.
Taking a wider look at the sector, Credit Suisse believes there is a higher risk the government will cut the maximum stake for gaming machines to £2 from £100 since the UK general election.
Shares in Playtech rose 2.31% to 968p and Paddy Power Betfair gained 0.90% to 7,320p.
2.31pm: Ireland's state energy provider ESB to join UK market
Competition in the UK's energy market is set to heat up with Ireland's state energy provider ESB poisted to join within monhts.
ESB will compete against 50 rival suppliers vying for customer accounts.
Energy suppliers have already expressed concerns about fierce competition with Centrica's Britsh Gas blaming it for the loss of customer accounts in the first half.
1.21pm: Ryanair urges UK airports to limit alcohol sales
Ryanair Holdings PLC (LON:RYA) has called on UK airports to stop selling alcohol in bars and restaurants before 10am to prevent disruptive behaviour by passengers on its flights.
The budget airline cited a Civil Aviation Authority report in saying there was a 600% surge in disruptive passenger incidents between 2012 and 2016 with most involving alcohol.
Along with its proposed morning drinking ban, Ryanair recommended introducing the mandatory use of boarding cards when buying alcoholic drinks in bars and restaurants and putting a limit on the number of drinks per person to a maximum of two.
Ryanair wants the two-drink limit to also apply during flight delays. Customers flying from Glasgow Prestwick and Manchester to Alicante and Ibiza are no longer permitted to bring duty free alcohol on board the aircraft, the group added.
Those who have purchased duty free alcohol will be asked to put it into the hold or leave their purchases behind.
"It's completely unfair that airports can profit from the unlimited sale of alcohol to passengers and leave the airlines to deal with the safety consequences,” said Ryanair’s chief marketing officer Kenny Jacbos.
“This is a particular problem during flight delays when airports apply no limit to the sale of alcohol in airside bars and restaurants.
“This is an issue which the airports must now address and we are calling for significant changes to prohibit the sale of alcohol at airports, particularly with early morning flights and when flights are delayed.”
12.47pm: Standard Life and Aberdeen Asset Management complete merger
Standard Life and Aberdeen Asset Management have completed their £11bn merger today following court approval last week.
The deal creates Europe’s second largest fund manager, which will trade as Standard Life Aberdeen and will hold £670bn assets under management.
Angus Grierson, managing director of LGB Corporate Finance, said: “Standard Life Aberdeen will benefit from increased scale across asset classes, as well as broadened investment capabilities across a larger global footprint.
“The growing trend of consolidation among the top-tier asset managers continues with the announcement last week of the proposed merger of M&G and Prudential and we expect the mid-tier to follow suit as they seek strategic solutions in the face of technological disruption, slow organic growth and growing regulatory pressures.”
12.00pm: FTSE continues to rally, led by TUI
The FTSE 100 rose 45 points to 7,355 at the midday mark as risk appetite returned to the markets after worries over tensions between US and North Korea tensions abated.
“I don’t think this signifies a belief that relations between the two countries will suddenly improve, it’s more a case of no news being good news and that will likely continue for as long as it lasts,” said Oanda’s Craig Erlam.
“The problem is that both sides can be rather unpredictable so things could escalate at any point and trigger another dash for safety. Gold, the yen and the Swiss franc may be coming off their highs at the moment but I’m not convinced it will last.”
Tour operator TUI topped the FTSE 100 after Credit Suisse upgraded the stock to ‘neutral’ from ‘underperform’, citing lower near-term risks and the benefits from its cruise and hotel businesses.
Glencore gained on reports that it has been linked to the purchase of Rio Tinto's Pacific Aluminium business.
Prudential was also sitting higher on reports that Legal & General is eyeing a bid for a £10bn of the insurer’s UK annuity portfolio.
In contrast, Experian and G4S slumped after Morgan Stanley cut its rating on both stocks to ‘equal-weight’.
11.17am: Real wages to fall next year, CIPD survey shows
Real wages are likely to fall next year as UK firms expect to increase salaries by less than inflation, a survey by the Chartered Institute for Personnel and Development found.
Employers expect to increase wages by just 1%, well below June’s 2.6% annual rate of inflation. The Bank of England has said it sees inflation reaching a peak of 3% in October.
The CIPD report found that firms see little incentive to offer hefty pay rises as they receive an average of 24 applications for each low-skilled job.
The latest @CIPD labour market outlook predicts pay to remain subdued as competition for low-skilled jobs increases https://t.co/oldDllA5p5
— Katie Flynn (@katierflynn) 14 August 2017
The survey comes ahead of official jobs data on Wednesday, which is expected to show average weekly earnings rose 1.8% in the three months to June.
11.00am: China's involvement in US-North Korea spat soothes worries, says IG
European equity markets seem to have dusted off last week's concerns over tensions between the US and North Korea with investors coming out of their defensive positions to move back into riskier assets, according to IG's Joshua Mahony.
"Chinese involvement in the recent spat between North Korea and the US has been one of the biggest calming influences, highlighting that for the US to go to war with North Korea it must first go through China," Mahony said.
"However, with China moving to implement a ban on whole host of North Korean products (such as coal, lead, and fish), it is clear that it is aware that something needs to be done to reign in the rebellious neighbours."
The FTSE 100 is up 40 points to 7,350
10.23am: Eurozone industrial production falls more than expected
Eurozone industrial production fell by 0.6% month-on-month in June, compared to analysts’ expectations for a 0.5% decline and after a 1.3% increase in May, Eurostat revealed.
On an annualised basis, output rose 2.6%, missing forecasts for a 2.85 gain and following growth of 3.9% in May.
Euro area industrial production -0.6% in June over May, +2.6% over June 2016 #Eurostat https://t.co/4P0bOTYI0w pic.twitter.com/avt2XuwHxm
— EU_Eurostat (@EU_Eurostat) 14 August 2017
09.59am: Donald Trump could struggle to meet economic growth targets, says S&P
US President Donald Trump could struggle to meet economic growth targets amid tension with North Korea and the failure of his plan to “repeal and replace” Obamacare, according to S&P Global Ratings.
“We no longer believe the federal government will be able to push through even a small infrastructure-spending package--much less the US$1trn the White House has suggested,” S&P's US chief economist Beth Ann Bovino said in an article titled, 'The Departed: Can U.S. Lawmakers Spur GDP Growth When They Return?'.
Bovino added: “With US economic growth stuck at around 2% and as the baby boomers retire, the administration’s plans to cut immigration would likely put the US on the path to even slower rates of economic growth."
9.14am: Bitcoin reaches US$4,000 milestone
Bitcoin shot past US$4,000 in value for the first time last night, according to data from Coindesk. The cryptocurrency rose to a peak of US$4,125.17 today, up 15% since Friday.
It gains came after a plan to make trade execution faster by moving some data off the main network was activated last week.
Bitcoin has been on the rise in refcent weeks despite worries over a so-called hard fork where the currency is split in two, creating a second cryptocurrency called Bitcoin Cash.
8.45am: Footsie bounces
The FTSE 100 index rallied higher in early trading, recovering after the sharp slide at the end of last week as tensions between the US and North Korea saw no escalation and after robust Japanese data pleased Asian markets today.
Around 8.40am, the UK blue chip index was up about 23 points at 7,333, stabilising following a near 200 point drop in the final three sessions of last week amid US/North Korea sabre-rattling.
Naeem Aslam, chief market analyst at Think Markets UK Ltd, commented: “Investors in Europe are tracking the gains over in Asia and they are more optimistic due to the strong Q2 GDP data out of the Japanese economy.
“The Japanese economy grew at an annualised rate of 4 percent rate during the second quarter. The number is really encouraging if we compare this to the country's performance for the last year. However, not all economic data out of Asia was stellar. The Chinese factory output number fell short of consensus with a reading of 6.4%.”
And, he added: “On the global stage, it is the strong rhetoric of the US which is going to keep investors jittery. North Korea is known for making foolish statements and this isn't new for investors.
On the contrary, it is President Trump's statements like "fire and fury" which traders are incapable of digesting.
With currencies, the pound was almost flat first thing against both the dollar and the euro, at US1.3009 and €1.1000 respectively, as investors await a busy week to come for UK data, with inflation numbers due tomorrow and unemployment/average earnings on Wednesday.
Broker comment a focus
There was little corporate news around on a quiet August Monday, so broker comment provided the main interest early on.
Utility group SSE PLC (LON:SSE) was a good FTSE 100 gainer, adding 0.9% at 1,401p thanks to an upgrade in rating by Credit Suisse, while holidays firm TUI PLC (LON:TUI) took on 2% at 1,256p as the same broker upgraded its rating as well.
But on the downside, credit checking firm Experian PLC (LON:EXPN) and outsourcing firm G4S PLC (LON:GFS) were blue chip fallers, down 1.2% at 1,499p and 0.8% at 296.90p, as Morgan Stanley downgraded its ratings for both.
Among the small caps, Telit Communications PLC (LON:TCM) bounced higher, up nearly 10% to 135.5p on news that its chief executive, Oozi Cats has resigned from his position with immediate effect following a recent internal investigation into alleged historical indictments.
Telit shares plunged last week on reports which alleged that Cats had been on the run from US law enforcement since the early ‘90s after skipping a plea hearing.
Last Wednesday, Telit confirmed it had hired a law firm to assess whether or not Oozi and his wife were connected to the Uzi and Ruth Katz named in the court papers.
The Internet of Things (IoT) enabler said today that Cats had “knowingly withheld” the indictments from the company.
Proactive news headlines:
Greatland Gold plc (LON:GGP) is initiating a new round of geochemical survey and gravity surveys at the Ernest Giles project in Australia. Results are due in September and should go towards identifying drill targets.
Oozi Cats, the chief executive of Telit Communications Plc (LON:TCM), has resigned from his position with immediate effect following a recent internal investigation into alleged historical indictments. Yosi Fait will continue as interim chief executive officer while three independent non-executive directors are expected to be appointed “as soon as possible” to reinforce the board.
Calendonia Mining Corporation PLC (LON:CMCL) produced just over 25,000 ounces of gold in the first half of 2017. The company expects to maintain its full year dividend at 27.5 US cents.
Cable TV software supplier Mirada PPC (LON:MIRA) has seen a pick up in business from key customer Televisa in Mexico. Mirada, which supplies ‘over –the –top’ or red button software, said subscriber numbers increased after December due to an improvement in the Mexican currency and less economic uncertainty following a slump when US President Donald Trump was elected.
Jersey Oil & Gas PLC (LON:JOG) has told investors that partner Statoil has now started drilling the Verbier exploration well in the North Sea. The AIM-quoted explorer has owns an 18% stake in the Statoil project (it is operator, with 70% of the asset) which is targeting significant potential resources.
Savannah Resources Plc (LON:SAV) told investors that construction work has started for the pilot plant at the Mutamba project in Mozambique. The plant is part of the bulk metallurgical test project at Mutamba. It will be a 20-tonne per hour facility, capable of producing bulk samples of concentrates from mineral sands.
Paul Campbell-White, chief financial officer of Warner Bros Television Production UK, is to jump ship to hold the same role at Brave Bison Group PLC (LON:BBSN).
Shares in Anglo Asian Mining PLC (LON:AAZ) jumped by just over 5% in early trade to 24.5p following an update to the resource estimate for the Ugur gold deposit on the Gedabek licence area in Western Azerbaijan. Ugur is now known to contain 199,000 ounces of gold and 1,049,000 ounces of silver, while the proven and probable reserves stand at 147,000 ounces of gold and 808,000 ounces of silver.
6.50am: Early recovery
The FTSE 100 is expected to stabilise in opening deals on Monday following the sharp falls seen at the end of last week in reaction to the heightened military tensions between the US and North Korea, supported by recoveries from stocks on Wall Street on Friday and in Asia today.
Spread betting firm CMC Markets expects the FTSE 100 index to open around 15 points higher at 7,324, having shed 80 points on Friday and plunging by around 200 points in the final three sessions of last week.
On Wall Street on Friday, the Dow Jones Industrials closed 14 points higher at 21,858, and today in Asia shares bounced higher helped by news Japanese GDP beat expectations, although robust Chinese economic growth showed signs of fading.
Craig Erlam, senior market analyst at Oanada said: “The war of words between the two countries weighed heavily on risk appetite for much of last week and despite today’s bounce, it will continue to pose a threat in the days ahead.
“What we’re seeing today is relief at the situation not deteriorating over the weekend, something traders were clearly wary of towards the end of last week.
“Still, given the unpredictability of those involved, traders are likely to remain on edge and I don’t think it will take much for the safe haven rush to resume.
UK data ahoy
Although the North Korea/US tension is likely to remain the biggest uncertainty in the coming week, concerns over the health of the UK economy will also be a focus, with official data due on inflation, jobs and average earnings.
The Office for National Statistics (ONS) last month revealed the consumer price index fell to an annual rate of 2.6% in June, down from 2.9% in May, but it remained well above the Bank of England’s 2% target and is expected to reach a peak of 3% by October.
Inflation data for July will be released on Tuesday, and Dutch bank ING is expecting a tick up to 2.7%.
Meanwhile, wage increases have continued to fall behind inflation, with data from the ONS for the three months to May showing average earnings, excluding bonuses, rose by 2.0% year-on-year, while real wages, including the impact of inflation, fell by 0.5% in that three month period.
ING predicts the latest UK average earnings growth to remain at 2.0% for the three months to June, when the data is released on Wednesday.
A report released overnight by the Chartered Institute of Personnel and Development said UK employers predicted their pay increases would average 1% despite more of them expecting to increase staff levels than in its previous survey three months ago.
No other UK economic data is due today though, and the UK corporate diary is much lighter this week, with nothing significant scheduled for release today, although numbers from Real Food Group PLC (LON:RGD) will be of interest given its recent profit warning and change of management.
Significant events expected on Monday August 14:
Finals: Real Good Food Group PLC (LON:RGD)
Interims: Akers Biosciences Inc (LON:AKR), Clarkson PLC (LON:CKN), Caledonia Mining Corp (LON:CMCL)
Around the markets:
- Sterling: US$1.2964, down 0.38%
- Gold: US$1,289.20 an ounce, down 0.37%
- Brent crude: US$52.17 a barrel, up 0.13%
City Headlines:
- Top BT shareholder calls for Boss Gavin Patterson to quit over £530mln accounting scandal – Daily Mail
- Lloyds Banking Group to push deeper into wealth management sector – Financial Times
- Barclays to close dozens of branches across the country this autumn – City AM
- Sky broadband numbers fall in final months of financial year – Financial Times
- Legal & General circles Prudential annuity business – Daily Telegraph
- Telit set to oust ‘fugitive’ boss Oozi Cats – The Times
- How Purplebricks Executive sold £288,775 of stock days before BBC probe sent online estate agent’s shares plunging – Daily Mail
- Centrica’s British Gas price hikes pushes energy switching to record high – Daily Telegraph
- BHS scandal returns to haunt Sir Philip Green after liquidator lodges Arcadia lawsuit – The Times
- Chevron prepares to confirm commitments to North Sea fields – Financial Times
- Netflix loses its crown as online rivals muscle in with Amazon Prime boasting almost 2 million more viewers – Daily Mail
- Baillie Gifford plans to use AI to improve fund performance – Financial Times
- Seven arrested in Serious Fraud Office’s investigation of trader Balli, linked to Lord Lamont - The Times
- Holidays bought on internet to get same legal protection as travel agent bookings: thanks to EU – The Independent
- Rise of electric car solves little if driven by fossil fuels, warns windfarm boss – The Guardian