FTSE 100 rises 63 points to 7,382
Pound weakens after reports of delay to Brexit trade talks
Tesco, BHP Billiton and Antofagasta shares jump
Provident Financial slumps on profit warning
Close: Miners drive Footsie higher
Unless you were a shareholder of Provident Financial PLC (LON:PFG), it was a good day for holders of blue-chip equities.
The FTSE 100 index finished at 7,382, up 63 points, despite Provident losing two-thirds of its value after a profit warning and the resignation of its chief executive, Peter Crook.
“Gains in London have been underpinned by the mining sector, which has been energised by news of BHP Billiton's largesse. There is some hope that, where BHP and Rio lead, others will follow,” said Chris Beauchamp, the chief market analyst at spread-betting firm IG.
“Investors have been rightly patient with the sector while it pruned its ambitions and cut back on unnecessary operations, but now it is up to the firms to deliver in the shape of higher payouts. BHP and Rio’s moves in this direction merely boost the attractiveness of these large, well-diversified operations,” Beauchamp said.
Away from the blue-chips, Juridica Investments Limited (LON:JIL) was the top performer, rising 88% to 16p on the back of its interim results.
The provider of strategic capital for corporate legal claims declared an interim dividend of 8p – just 2p shy of last night's closing price.
3.55pm: FTSE edges higher, pound weakens
The FTSE 100 is up 62 points to 7,381, with Tesco and BHP Billiton continuing to lead the way.
The pound fell 0.61% versus the dollar to US$1.2821 and dropped 0.16% against the euro to €1.0900 amid uncertainty on the timeframe on the UK forging a trade agreement with the European Union.
Sterling was also hit by underwhelming economic data. While the ONS said the UK posted its first July budget surplus since 2002, debt costs in the fiscal year to date rose by the most for the period since 2010.
Company-wise, BHP Billiton rallied after reporting an rise in full year attributable profits, supported by rising commodity prices.
Antofagasta gained after it posted a jump in first half earnings as an increase in copper prices helped to lift revenues.
Tesco surged as separate reports from researchers Kantar Worldpanel and Nielsen showed sales growth in the last month outpaced its main UK rivals.
In contrast, Sainsbury's shares fell after Kantar data showed it lost market share.
Provident Financial tanked after it issued its second profit warning in two months, announced the resignation of its chief executive and withdrew its interim dividend.
3.30pm: Dollar strengthens ahead of Jackson Hole
Ahead of the Jackson Hole meeting of central bankers, the dollar has strengthened against the pound, the euro and the yen.
“Ears will be pinned back for speeches coming from Jackson Hole later this week, with specific interest in the words coming from Mario Draghi and Janet Yellen,” said Dennis de Jong, managing director at UFX.com
“The dollar has firmed up ahead of Jackson Hole, with investors considering the Fed Chair’s next moves. (Janet) Yellen looks to have just four months left in her role, possibly leaving her in a more favourable spot to raise interest rates before the end of the year.”
Oanda’s Craig Erlam said the dollar’s recovery could be a mix of a quieter start to the week following last week’s political dramas and a reflection of expectations for Yellen’s appearance at Jackson Hole.
“The event is seen as the ideal platform for the Fed Chair to prepare the markets for a balance sheet reduction announcement in September while also providing an update on the central bank’s position on interest rates," he said.
“A number of policymakers have voiced concern about inflation in recent months, casting doubt on whether another rate hike this year will happen. Should the dollar continue to make gains in the coming days, it may suggest that traders are anticipating a more hawkish Yellen on Friday.”
3.00pm: British Airways workers put strike on 'pause for peace'
British Airways workers plan to end their strike to create a “pause for peace” to allow for talks to end a dispute over pay.
The unite Union said it has not issued any further notice for strike action, which will end on 30 August.
“This is in order to create a ‘pause for peace’ so that our respective teams can get around the table with a view to securing a mutually accepted resolution to the current dispute,” Unite said.
The union members have been on strike for nearly two months in a dispute over pay and the sanctioning of striking workers.
Unite earlier this month warned of continued legal action and rising costs for the carrier from wet leasing aircraft should British Airway refuse to engage in fresh negotiations.
2.25pm: US house price growth slows in June
US house price growth slowed in June to 0.1% month-on-month on a seasonally adjusted basis from 0.3% in May, according to the Federal Housing Finance Agency. Economists had been expecting a 0.5% increase.
In the second quarter, house prices rose 1.6% compared to the previous three months. Compared to the same quarter a year ago, prices increased 6.6%.
@FHFA House Price Index: US houses prices up 1.6% in Q2. https://t.co/5w9pj9laZL Watch video highlights: https://t.co/7C9zD12l3e #breaking
— FHFA (@FHFA) 22 August 2017
1.30pm: Provident Financial unlikely to go bust...for now, says analyst
Provident Financial’s outlook looks pretty grim at the moment but the chances of the subprime lender going bust looks unlikely, at least in the near term, according to Henry Croft, research analyst at Accendo Markets.
The company has today issued a profit warning, cancelled its interim dividend and saw its chief executive step down following a deterioration in the trading performance of its home credit business.
“While the restructuring of debt collection operations is eating into finances, the core divisions of the business (including Buybarn, Satsuma and Vanquis) continue to trade in-line with management expectations,” Croft said.
“Provident Financial could go it alone in the meantime – potentially even reverting to its previous method of self-employed agents undertaking debt collection in a bid to raise collection rates back to 2016’s 90% versus the current 57% performance reported today. Should that fail, in the long-run an outside source may look to swoop in on its assets.”
He said following the significant share price decline today, a European or North American sector peer could come in to absorb the group’s outstanding loans into their own books.
Shares in Provident are down 67.71% to 563.50p.
However, the FCA’s investigation into the Vanquis Repayment Option Plan, which contributes roughly £70mln in revenues, presents a major risk, Croft said.
“A substantial fine, removal of the provision and/or a PPI-esque string of claims by consumers who undertook ROP over its 2-year lifespan could be the final nail in the coffin for the business.”
1.15pm: Central bankers to be tight-lipped on policy at Jackson Hole
Federal Reserve chair Janet Yellow and European Central Bank President Mario Draghi are expected to keep their cards close to their chest at the Jackson Hole gathering of central bankers on Friday, according to ING Research.
"Both speeches are likely to be fairly 'high level' and lack any major hints about future policy," said ING's developed markets economist James Smith.
He added that the Fed and markets are still at odds over the number of rate hikes expected this year and next. There are also increasing signs of disagreement within the Federal Open Market Committee following a recent dip in inflation.
"We're still confident that inflation will head back towards 2% later this year, partly as the effect of a 10% depreciation in the dollar starts to nudge up import costs." said Smith.
"The strength in the jobs market should also see wage growth gradually approach 3% again. That all means that the hawks are likely to prevail when it comes to a rate hike in December."
12.30pm: UK manufacturing demand strong in August, CBI survey shows
Demand for UK manufacturing was strong in August, according to the Confederation of British Industry.
The CBI’s Industrial Trends Survey showed the headline total orders balance improved to +13 after falling to +10 in July from a near 29-year high of +16% in June.
The improvement in orders was supported by foreign demand as the export balance improved to +11% in August from +2% in July, boosted by a weaker pound.
“The survey points to a resurgence of price pressures in August, which will not be pleasing for the Bank of England,” said Howard Archer, chief economic advisor to the EY ITEM Club.
“Even so, the prices balance remains well below the peak levels seen around February, and the suspicion remains that UK inflation is near to peaking.”
The balance of manufacturers expecting to increase their domestic prices over the next three months rose to +19% in August from +9% in July.
Archer added that the outlook for manufacturing appears mixed with a promising export environment countered by challenging domestic conditions.
#CBI reports robust #UK #manufacturing activity in August: Demand remains robust for UK manufacturers https://t.co/HHkSobAgIB via @CBItweets
— Howard Archer (@HowardArcherUK) 22 August 2017
12.00pm: Tesco leads FTSE 100 higher
The FTSE 100 rose 47 points to 7,366, led by Tesco, as the pound weakened over renewed Brexit fears.
Sterling fell 0.57% against the dollar to US$1.2826 and dropped 0.05% versus the euro to €1.0912 following reports that trade talks between the UK and the European Union due to begin in October are likely to be delayed due to lack of progress over the Brexit withdrawal agreement.
The euro was hurt by data from the ZEW Institute showing a decline in German and Eurozone economic sentiment and by the expectation that European Central Bank President Mario Draghi will refrain from addressing policy at Jackson Hole on Friday.
In company news, Tesco was at the top of the FTSE after reports from researchers Kantar Worldpanel and Nielsen showed the supermarket outpaced its main rivals.
BHP Billiton shares also jumped after the miner unveiled a commitment to quit its underperforming US shale oil and gas business as it posted a jump in annual profit and tripled its final dividend.
Antofagasta was on the front foot after the miner saw its first half profit surge by nearly 90%, lifted by higher copper prices, leading it to boost its interim dividend, and the firm said it is on track to meet annual targets.
Heading in the opposite direction, Provident Financial was the biggest faller following a triple whammy of announcements including the departure of its chief executive, another profit warning and the decision to cancel its interim dividend.
11.40am: China's Dalian Wanda ditches plans to buy Nine Elms Square
Dalian Wanda, China's largest commercial property company, has pulled out of plans to buy the Nine Elms Square development in south-west London after Beijing regulators placed restrictions on overseas investment.
Dalian Wanda’s Hong Kong division had exchanged contracts with a joint venture between St Modwen Properties and Vinci to buy the 10-acre site in June. The site, previously home to the New Convent Garden flower market, has now been sold to an unidentified buyer for £470mln.
11.10am: Pensions regulator to prosecute ex-BHS ower Dominic Chappell
Former BHS owner Dominic Chappell is to be prosecuted by The Pensions Regulator (TPR) for failing to provide information and documents it requested during its investigation into the sale of the company.
Chappel was director and majority shareholder of Retail Acquisitions Ltd at the time that the company bought BHS.
TPR is prosecuting Chappell for failing to comply with three notices requesting information issued on 26 April 2016, 13 May 2016 and 20 February 2017 under Section 72 of the Pensions Act 2004.
"He has been summonsed to appear at Brighton Magistrates’ Court on 20 September 2017 to face three charges of neglecting or refusing to provide information and documents, without a reasonable excuse, when required to do so under section 72 of the Pensions Act 2004, contrary to section 77(1) of that Act," the TPR said in a statement.
10.45am: Sports Direct takes direct stake in Debenhams
Sports Direct has become the second largest shareholder in Debenhams after taking a 10% direct stake in the department store chain.
The sportswear retailer already held an interest in Debenhams through contracts for difference and put options.
Debenhams said today it has converted some of those contracts into a direct shareholding worth 10.54% of the company.
10.30am: German economic confidence declines in August
German economic confidence fell in August amid worries about the outlook for growth falling weaker than expected exports and the recent vehicle emissions testing scandal.
The ZEW Institute’s economic sentiment index dropped to 10 from 17.5 in July, missing expectations of 15.
ZEW president professor Achim Wambach said: “The significant decrease of the ZEW economic sentiment indicator reflects the high degree of nervousness over the future path of growth in Germany.
“Both weaker than expected German exports as well as the widening scandal in the German automobile sector in particular have helped contribute to this situation. Overall, the economic outlook still remains relatively stable at a fairly high level.”
10.00am: UK public sector surplus not a sign of healthy economy, says economist
The UK’s first public sector July surplus since 2002 is not a signal that the economy is in rude health, Pantheon Macroeconomics has warned.
“The improvement compared to a year ago primarily reflects a £0.8B jump in self-assessment tax receipts, relating to income earned in 2016/17,” said Pantheon’s chief UK economist Samuel Tomb.
“Self-assessment tax payments were unusually low last year because the deadline for payments on account fell on a weekend, meaning that many payments were not received until August.”
Borrowing has totalled £22.8bn in the first four months of this fiscal year, 9% higher than the same period a year ago, Tombs highlighted.
He added that while borrowing is likely to total £49bn, well below the Office for Budget Responsibility’s forecast of £58bn, growth in receipts will slow sharply at the end of the year. This is because the jump in the amount of self-assessment receipts collected in January and February, due to prior tax changes, will not be repeated.
“The OBR also likely will revise down its very optimistic forecasts for wage growth in the Autumn Budget, boosting the borrowing forecast in future years,” Tombs said.
“As such, we continue to doubt that the Chancellor will pare back the fiscal consolidation planned for the coming years.”
9.30am: UK achieves first surplus since 2002, ONS reveals
UK public sector borrowing recorded a surplus of £0.2bn in July,excluding public sector banks. It marked Britain's first surplus since 2002 and compared to a deficit of £0.3bn a year ago. Economists had expected a deficit of £1bn.
Receipts from self-assessed income tax, which increased by £0.8bn to £8.0bn compared with July 2016, marked the highest level of July self-assessed receipts since records began in 1999.
In the year to date, public sector net borrowing rose by £1.9bn to £22.8bn.
£1,758.3 bn public sector net debt at the end of July 2017, equivalent to 87.5% of GDP https://t.co/4kgp0vAy1C
— ONS (@ONS) 22 August 2017
The pound fell 0.40% against the dollar to US$1.2849 and dipped 0.2% versus the euro to €1.0915.
8.50am: FTSE opens higher, boosted by Persimmon
The short sellers betting against lender Provident Financial PLC (LON:PFG) got it spot on (and are presumably heavily in the money) after the mother of all profit warnings sent the shares plummeting 48%.
We saw the early warning signs on Monday as the price was marked down after it emerged hedge funds AQR, Systematica and Lansdowne Partners borrowed stock to cover their positions.
Today it emerged Provident boss Peter Crook has been booted and the company is withdrawing its interim dividend to protect its capital base during an investigation into its Vanquis Bank subsidiary.
For Neil Wilson, senior market analyst at ETX Capital, the car crash announcement has a slightly eerie similarities to the goings on a decade ago.
“A catastrophic share price drop in a subprime lender – it’s like the last ten years never happened,” he said.
“Is this a Northern Rock moment? Probably not – this is more about management failings than a market-wide issue: rivals are taking market share.”
The FTSE 100 refused to be dragged down by Provident’s woes as it reversed its two-day losing streak to post a 45 point gain to 7,363.65.
Top of the risers was house builder Persimmon PLC (LON:PSON) after a stellar set of interims. The broker Peel Hunt called it an A-star result.
Proactive news headlines:
Sphere Medical Holding PLC (LON:SPHR) was the biggest faller in London on Tuesday after it unveiled plans to cancel its AIM listing as it looks to facilitate a much-needed £8mln investment led by Neil Woodford. The company, which makes the Proxima blood gases monitors, said the investment was conditional on it de-listing and becoming a privately-held entity.
Specialist recruiter Empresaria Group plc (LON:EMR) has confirmed to investors that it enjoyed a record first half performance, boosted by strong performances from its recent acquisitions. As flagged in last month’s trading update, net fee income – gross profit – for the six months ended 30 June jumped 26% to £34.4mln (H1 2016: £27.2mln) on significantly higher revenues of £173.4mln (H1 2016: £106.1mln).
Drug developer Sareum Holdings Plc (LON:SAR) expects profit and cash at bank to be ahead of market expectations when it reports its results for the 12 months ended 30 June 2017 later this year.
Haydale Graphene Industries PLC (LON:HAYD), the global advanced materials group that has developed functional uses for the new wonder material graphene, has signed an outline commercial collaboration deal with Rogers Advanced Composites (RAC). Haydale chief executive Ray Gibbs said the pair had spent over two years in mixing, dispersing and processing of a range of nanomaterials into high-end epoxy resins.
OptiBiotix Health plc (LON:OPTI) has announced an expansion of a key manufacturing and supply agreement. It is broadening its European tie-up with Italian food company Sacco, signed in March, to cover the US and rest of the world.
BOS GLOBAL Holdings Limited (LON:BOS) managing director Michael Travia restated his view that the developer of workplace productivity software is at a “tipping point” in its development. The comment was made as the company announced two significant deals for its BOS Time enterprise product.
Rose Petroleum PLC (LON:ROSE) has now secured all necessary permits and permissions for its planned 3D seismic exploration programme in Utah’s Paradox basin, onshore United States. The permitting process for the proposed survey is now complete, the company said in a statement.
Sound Energy PLC (LON:SOU) has told investors that has nearly wrapped up its operations at the Badile exploration project in Italy. The company said that the drilling rig has now been fully disassembled and that operations to plug and abandon the well – including the restoration of the site – is expected to be complete by the end of September.
Kibo Mining Limited (LON:KIBO) has submitted an updated version of its MOU for the development of the Mbeya coal and power project to the relevant Tanzanian ministry. Meanwhile, funding talks continue to progress.
Premier African Minerals Limited (LON:PREM) has provided details of a new drilling programme being undertaken by Casa Mining in the Democratic Republic of Congo. Ortac has a 22.2% stake and Premier African Minerals has a 4.5% stake in Casa Mining.
Bushveld Minerals Limited (LON:BMN) has retired a US$3mln prepayment facility related to its acquisition in joint venture of Vametco, a South African vanadium company. Simultaneously, a US$3mln extension for a working capital facility for Vametco has been put in place.
Sam Catalano, Capital Network's mining analyst talks investors through European Metals Holdings (LON:EMH , ASX:EMH) key assets as well as strategy and outlook in a video today.
6.45am: Better day predicted
The FTSE 100 is expected to rally higher in early trading after overnight gains on Wall Street and in Asia, supported by firmer commodity prices although investors will remain wary ahead of the annual central banking conference in Jackson Hole later this week.
Spread betting firm CMC Markets expects the FTSE 100 index to open around 21 points higher at 7,339, having lost about 5 points yesterday.
Overnight in New York, the Dow Jones Industrials closed 29 points higher at 21,703, while the broader S&P 500 index also edged up, although the tech-laden Nasdaq Composite slipped back again.
Michael Hewson, chief market analyst at CMC Markets UK said: “While markets in Europe struggled, US markets were more mixed with the Nasdaq slipping back while the Dow and S&P500 posted some modest gains, and this looks as if it will translate into a more positive start for European stocks today after yesterday’s disappointing start.
“The weakness of the US dollar may well be helping limit the downside for now, but the political environment in Washington DC is still keeping markets on their toes.”
He added: “Attention for this week will remain on Jackson Hole as well as the lead up with investors likely to be hanging on every word of ECB President Mario Draghi, when he steps up to the podium. Any indication that the ECB is heading towards an imminent discussion of a tapering program could well introduce more pain for European stocks."
A batch of blue chip results will attract attention today, including updates from two mining giants.
Overnight in Australia, the world’s biggest miner BHP Billiton PLC (LON:BLT) announced a commitment to quit its underperforming US shale oil and gas business as it posted a jump in annual underlying profit to US$6.7bn, although that was below forecasts for US$7.4bn.
The FTSE 100-listed firm also pleased shareholders by cutting its net debt by nearly US$10bn to US $16.3bn and tripling its final dividend to US$0.43 a share.
Copper focus for Antofagasta
Meanwhile, fellow blue chip miner Antofagasta PLC (LON:ANTO) will unveil its first half results today, although the numbers from the Chilean-focused copper group are unlikely to surprise given it only issued an update a few weeks ago.
On July 26, Antofagasta said its first-half production rose by 7.1% and kept its full-year cost and output guidance unchanged after talks to avert strike action at its mines.
The company said full-year production was still expected to be between 685,000 and 720,000 tonnes, unchanged from a forecast from the beginning of the year, although output would be higher during the second half.
Persimmon proving resilient
And blue chip housebuilder Persimmon PLC (LON:PSN) is expected to deliver a strong set of first half figures today, having already said trading was “excellent” during the period even in the face of political uncertainty.
In a trading update last month, the FTSE 100-listed company said customer demand in the first half held up despite an unclear economic outlook, the snap UK general election and Brexit worries.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said with the trading update already giving an outline of what’s to come in the first half results, the focus will be on the outlook.
Significant events expected on Tuesday August 22:
Finals: BHP Billiton PLC (LON:BLT)
Interims: AFI Development PLC (LON:AFRB), Antofagasta PLC (LON:ANTO), Cape PLC (LON:CIU), Cairn Energy PLC (LON:CNE), Empresaria Group plc (LON:EMR), Hostelworld Group PLC (LON:HSW), Inspired Energy OLC (LON:INSE), Kenmare Resources PLC (LON:KMR), Persimmon PLC (LON:PSN), Quantum Pharma PLC (LON:QP.), John Wood Group PLC (LON:WG.)
Economic data: CBI industrial trends report
Around the markets:
- Sterling: US$1.2821, down 0.61%
- Gold: US$1,286.22 an ounce, down 0.4%
- Brent crude: US$52.09 a barrel, up 0.8%
City Headlines:
- Bank crash boss sues for Lloyds bonus – The Times
- BHP bows to activist pressure to exit US shale – Financial Times
- BP under fire over plan to drill near Amazon coral reefs – The Times
- Murdoch family faces High Court challenge over ‘fit and proper’ finding in Sky takeover – Daily Telegraph
- AstraZeneca spends £23mln on gene research tie-up with German biotech – Daily Telegraph
- Rosneft and partners finalise US$13bn takeover of India’s Essar – Financial Times
- Tesco recalling Galaxy bars, Maltesers and other products – The Independent
- Britain’s largest home-credit lender Provident Financial is swamped by short sellers knocking over £158mln off its value – Daily Mail
- Investment fund Silchester takes stake in William Hill – Daily Telegraph
- Co-op Group shareholders approve slashing stake in Co-op Bank to 1% - Daily Telegraph
- Ford launches scrappage scheme offering at least £2,000 for any brand – The Guardian
- Former boss of General Electric is favourite to take over at Uber – The Times
- Johnson & Johnson unit speaks out at planned death row drug use – Financial Times
- Macy’s taps senior eBay exec as President in e-commerce push – Financial Times
- Traders betting against Alibaba witness £7.6bn in losses as the Chinese tech giant’s shares surge more than 90% - Daily Mail
- Samsung jumps into risky but lucrative original drugs market – Financial Times
- Bupa deal set to create UK’s biggest care homes provider – The Times
- Fujitsu considering options for mobile phone unit amid sale speculation – Financial Times
- Qantas Chief Executive to campaign for same-sex marriage in Australia – The Independent
- Kosmos Energy lists on the London Stock Exchange in a bid to attract new investors – City AM