FTSE 100 flat at 7,383
Pound falters against euro and dollar
Eurozone manufacturing PMI rises, US PMI falls
WPP shares on the back foot after weak first half sales but Provident Financial rallies
Close; FTSE 100 unchanged as miners ride to the rescue
Despite being weighed down by WPP PLC (LON:WPP), the Footsie managed to finish the day virtually unchanged, largely thanks to the strength of miners.
WPP PLC (LON:WPP) slumped almost 11% to 1,420p after it said like-for-like net sales would not grow this year, or at best would rise just 1%, compared to the 2% growth previously expected.
“Advertising world dominus Martin Sorrell, CEO, steered attention to slashed spending by giant multinational consumer groups that are traditional WPP clients. Revenues fell in all regions,” noted Ken Odeluga, a market analyst at spread betting firm City Index.
“What Sorrell’s frequently frank comments tend to skim over is the inexorable threat from fast-growing digital operators, chiefly Google and Facebook. True, as a traditional agency, WPP still earns a hefty margin for providing a finely tuned conduit between large companies and all sorts of platforms, including gl0bal internet companies,” Odeluga continued.
“But the ‘old boys’ are increasingly shut out of one of the fastest-growing advertising markets – so-called ‘programmatic’. That’s the catch-all term used to describe high-speed, increasingly algorithm-driven auctions of online slots,” Odeluga opined, referring to technology provided by the likes of mporium Group PLC (LON:MPM).
While WPP took a shoeing today, yesterday's whipping boy, Provident Financial PLC (LON:PFG) clawed back some of yesterday's eye-watering losses, rising 12.1% to 660.94p; the stock plunged yesterday from 1,745p to 589.5p on a profit warning and the defenestration of the chief executive.
The FTSE 100 ended the day up just under a point at 7,383. The mid-cap FTSE 250 eased 8 points to 19,743 wile the FTSE AIM 100 retreated 23 points to 5,107.
3.55pm: FTSE 100 flat after mixed PMI data
The FTSE 100 is more or less flat in afternoon trading, falling one point to 7,380, following mixed manufacturing and services data in the eurozone and the US.
In the eurozone, the manufacturing PMI rose in August while the services PMI fell. In contract, the US manufacturing PMI fell in August but the services PMI rose.
The pound weakened amid worries about the lack of progress in Brexit negotiations. The pound is down 0.21% versus the dollar at US$1.2797 and down 0.62% against the euro at €1.0835.
Brexit worries also hit housebuilders, with shares in Barratt Developments, Taylor Wimpey and Persimmon on the back foot.
Elsewhere, WPP shares plummeted after reporting a drop in first half sales and cutting its 2017 growth forecast.
Tesco continued to rise after saying it will open a compensation scheme for shareholders and bondholders who were misled by a trading statement in August 2014 that overstated the supermarket’s profits.
Provident Financial reversed yesterday's slump when it issued a profit warning, cancelled its interim dividend and announced the departure of its chief executive.
NMC Health gained after saying it expects full year earnings to be towards the top end of the current guidance range and announcing that it has signed a new operations and maintenance contract for the management of Emirates Healthcare assets.
3.30pm: Weekly US crude inventories fall
US crude oil inventories fell by 3.3 million barrels last week to 463.2 million, according to weekly data from the Energy Information Administration. Analysts had expected a decline of 3.5 million.
U.S. commercial crude #oil inventories for week ending 8/18/17 DOWN 3.3 MMbbl, refinery utilization= 95.4% https://t.co/7IDx2lOwRw #energy
— EIA (@EIAgov) 23 August 2017
Perhaps soothing worries about the global supply glut, oil prices rebounded slightly with Brent crude up 0.19% to US$51.97 per barrel and West Texas Intermediate up 0.08% to US$47.87 per barrel.
3.00pm: US manufacturing PMI falls to two-month low
US manufacturing activity hit a two-month low in August as production and new orders slowed.
The Markit’s flash reading of the purchasing managers’ index fell to 52.5 from 53.3 in July, missing analysts’ estimates of 54.5. However, remained above the 50 level that signals expansion.
The services PMI, on the other hand, jumped to 56.9 from 54.7, ahead of forecasts of 55.0.
The composite PMI, which combines manufacturing and services, edged up to 56.0 from 54.6.
“The US economic growth story remained a tale of two sectors in August,” said Rob Dobson, director at IHS Markit.
“Nonetheless, the acceleration signalled for the economy as a whole suggests that GDP growth is still gaining momentum during the third quarter.
“With new order inflows also strengthening and job creation equalling its best pace in the year-to-date, economic growth should remain on course to outperform relative to the second quarter.”
2.10pm: Don't rule out policy hints at Jackson Hole, says FXTM analyst
European Central Bank President Mario Draghi is expected to refrain from addressing the course of monetary policy for the eurozone at Jackson Hole, reports have suggested, but that’s not to say we should rule it out.
“Although there have been reports that Draghi will not deliver a new policy message at the conference, this does not rule out the possibility of verbal intervention to weaken the euro, “ said FXTM research analyst Lukman Otunuga.
“While Federal Reserve Chair Janet Yellen will be speaking on financial stability, investors will most likely comb through the speech for further clues on when the Fed plans to unwind its balance sheet and raise rates.
“If Draghi or Yellen surprise investors by announcing new policy messages, financial markets may experience explosive levels of volatility, which should jolt them from their summer lull.”
1.30pm: Oil prices slip on mixed reports about Libya
Oil prices fell amid confusion over the status of Libya's largest oil field, Sharara.
Since Sharara was shut down at the weekend after a local tribe closed a pipeline in a dispute over jobs, the market has seen conflicting reports about whether the oil field is set to reopen.
Brent crude fell 0.56% to US$51.58 per barrel and West Texas Intermediate dropped 0.39% to US$47.64.
12.30pm: UK economy weaker than it looks, says UBS
UBS has said that the UK economy may be in even worse shape than it seems.
The bank's analysts said their new model strips out volatility in data to show growth has “softened sUBStantially since the beginning of the year” and is headed “close to zero in the near future". PMI data has recovered since an initial slump following last year's Brexit vote but UBS said their hard-data indicator has fallen more recently.
UK economy may be even weaker than it looks, UBS model shows https://t.co/Jz9gabCKAi via @lucy_meakin pic.twitter.com/iy9MpFgySk
— Forward Guidance (@ecoeurope) 23 August 2017
The ONS is expected to report 0.3% growth in second quarter UK gross domestic product on Thursday.
11.50am: UK companies set to be hit hard by Brexit next year, survey shows
Profit growth at the UK’s largest companies is expected to fall next year as some put plans on hold or shift operations to other parts of the EU due to Brexit, a study has found.
The survey of projections compiled by UBS for the Financial Times said profit at Britain’s biggest companies is expected to rise by 7.2% in 2018, compared to the estimated 19% this year.
“The currency is a kneejerk reaction that mathematically comes through,” Nick Nelson, head of European equity strategy at UBS, told the FT. “Years two, three and beyond there’s more uncertainty.”
Meanwhile, Prime Minister Theresa May said the Supreme Court would be the ultimate arbiter of law in the UK after Brexit.
Her remarks came after a government paper said "direct jurisdiction" of the European Court of Justice will stop after Brexit but did not rule out that the EU court would maintain its authority during a transitional period after the formal withdrawal.
11.25am: It's all about Jackson Hole
There are few catalysts to drive markets today with traders looking ahead to the Jackson Hole Symposium, which kicks off on Thursday for three days, according to Oanda’s Craig Erlam.
“The event will see both Federal Reserve Chair Janet Yellen and ECB President Mario Draghi speak on Friday, which will be of keen interest to traders,” he said.
“Both central banks are expected to be very active between now and year-end and Jackson Hole is the perfect platform to lay the foundation for upcoming policy moves. Whether they will or not remains to be seen.”
But Erlam said since Draghi steered clear of commenting on upcoming policy decision in his speech today, he may decide to do the same at Jackson Hole.
“The ECB is clearly very concerned about the recent appreciation in the euro – despite an insistence that it does not concern itself with such matters – and recent “misinterpretations” by traders to Draghi’s comments will likely mean he steers clear once again.”
Draghi and Yellen will both speak at the event on Friday.
10.30am: ECB's Mario Draghi gives nothing away in speech
European Central Bank President Mario Draghi has remained tight-lipped on monetary policy in the eurzone during a speech ahead of the Jackson Hole gathering of central bankers, which begins on Thursday.
Speaking at a conference in Lindau, Germany, Draghi said adjustments to monetary policy are "never easy" but made no reference to how the bank might change policy to respond to improving economic data across the eurozone.
Speech Mario Draghi: The interdependence of research and policymaking https://t.co/JlGFR3W8GX
— ECB (@ecb) 23 August 2017
Markets are now looking ahead to his appearance at Jackson Hole but reports have suggested he is unlikely to say much about policy then either.
9.50am: Eurozone PMI sends pound to new eight-year low against the euro
The euro has rebounded after data showed the manufacturing sector in the eurozone expanded further in August. Markit's purchasing managers' index rose to 57.4 from 56.6 in July, beating market forecasts of 56.3 and ahead of the 50 level that separates an expansion in sector activity from a contraction.
The services PMI fell to 54.9 from 55.4, compared to expectations of 55.4. The compositie index, which combines services and manufacturing, rose to to 55.8 from 55.7, exceeding the 55.5 estimated by analysts.
ING Research economist, Bert Colijn, said: "Manufacturing PMIs in the Eurozone have been buoyant for quite some time now, but industrial production has failed to improve from its modest growth trend of recent years. As most indicators point to further recovery of manufacturing activity, we do expect to see some improvements in growth for the months ahead.
The pound is down 0.43% against the euro at €1.0853, a new eight-year low.
Sterling is also weaker against the dollar, falling 0.19% to US$1.2798.
The dip in pound saw the FTSE 100 recover slightly, rising 9 points to 7,390.87.
8.55am: FTSE opens in the red
The FTSE 100 reverted to ‘summer mode’ Wednesday as it drifted eight points lower at the open to 7,373.82 with market participants counting down to the Bank Holiday break.
“The UK index has been unable to sUBStantially break through, and hold above, 7,400 in almost a fortnight, investors struggling to justify such a climb when macro-nightmares like the tensions between the US and North Korea are still unresolved,” said Connor Campbell, markets analyst at Spreadex.
The leading faller of the day was Sir Martin Sorrell’s WPP after the advertising behemoth was forced to slash growth forecasts for a second time as first-half sales went into reverse gear.
Analysts said the group, whose shares fell 11%, is facing its worst year in a decade as customers cut their spending with the company.
Not so much a dead cat bounce as a dead cat – that’s the best description of Provident Financial PLC (LON:PFG), which saw two-thirds of its value wiped out Tuesday following a catastrophic profit warning Tuesday.
After that sort of drop, the savvy (or brave) investors would normally weigh in, deeming the stock oversold leading to a bounce in the stock.
That didn’t happen today with the brokers taking out the red pens leading to a raft of brutal downgrades, leaving Provvy shares 4% lower.
Proactive news headlines:
Futura Medical PLC (LON:FUM) has announced that Church & Dwight Co Inc, has given formal notice that it intends to terminate its licensing agreement for the UK firm’s CSD500 erectogenic condom and is to return all commercialisation rights.
Digital wellness provider Kin Group Plc (LON:KIN) has brought in administrators to help it find a buyer after it failed to secure additional funding. The AIM-quoted company had requested the suspension of its shares last month after its key lender, Belastock Capital, said it will not proceed with the release of three further tranches.
Concepta PLC (LON:CPT) told investors that it has now made its first shipment of its myLotus fertility products into China The company, in a stock market statement, said that the first part of a £225,000 order (announced in mid-June) has now been shipped and it expects to make further shipments to fulfil the order over the coming weeks.
Highlands Natural Resources Plc (LON:HNR) has struck a new third party funding deal to support its new drilling at the East Denver project in the Niobara shale, Colorado. A number of the precise details were not disclosed, nonetheless HNR told investors that the new arrangement was with a “leading oilfield services company, with global operations and listed on the New York Stock Exchange”.
Anglo Pacific Group plc (LON:APF) said it made a “very strong” start to the year after free cash flow and royalty income surged in the first half. The mining royalty business reported a 300% jump in free cash flow to £18.9mln in the six months ended 30 June, compared to the same period a year earlier, including an impact of the Denison financing arrangement of £3.3bn.
Savannah Resources Plc (LON:SAV) said phase one of the pre-feasibility study (PFS) of the Mutamba Mineral Sands Project in Mozambique is now underway. The company has appointed mineral sands expert TZMI to carry out the work, which will include a gap analysis, options review, project planning and budget finalisation for stage-two.
Premier African Minerals Limited (LON:PREM) has increased its holding in a company developing an Ethiopian potash project worth US$2.8bn. Premier’s deal may on the face of it look modest – it is has acquired a 1% stake in Circum Minerals for US$1.36mln. But it says it now has a “meaningful” 5.2% interest in the company.
Horizon Discovery Group PLC (LON:HZD) said that its recent placing raised gross proceeds of £80mln for the company and, following this, it expects completion of the acquisition of GE Healthcare Dharmacon, Inc. to occur on 31 August 2017.
Greatland Gold plc (LON:GGP) has said its chief executive Gervaise Heddle has again increased his holding in the company, acquiring a further 500,000 ordinary shares today at a price of 0.55p each. Following the acquisition, Heddle is now beneficially interested in 4,250,000 ordinary shares in Greatland Gold, representing 0.21% of the issued share capital. Yesterday Greatland said Heddle had acquired a further 750,000ordinary shares at a price of 0.545p each.
Ed Stacey, support services analyst at Capital Network, talks investors through the latest developments at Empresaria Group (LON:EMR) in a video today.
6.55am: FTSE 100 seen lower
The FTSE 100 is expected to retreat in early trading today following mixed showings overnight on Wall Street and in Asia, with the Dow Jones leaping nearly 200 points but other global markets fairly flat seeking fresh direction.
Spread betting firm CMC Markets expects the FTSE 100 index to open around 11 points lower at 7,370, having rallied nearly 63 points higher yesterday.
Michael Hewson chief market analyst at CMC Markets UK said: “Another day of strong gains in metals prices along with a recovering US dollar and diminishing concerns over geopolitical risks served to combine to return a day of strong gains for both European and US equity markets yesterday, with the Dow posting its best one day gain since April on chatter that the Trump administration might be able to make some progress on the thorny issue of tax reform."
But he added: “Sadly we’ve seen this movie quite a few times this year with the hope that US politicians may well be poised to move forward with a program of tax reform, and for those hopes to sUBSequently turn to dust.”
Hewson said the focus today ahead of this week’s Jackson Hole symposium will be the latest flash PMI reports for August from Germany and France, as well as a speech by ECB President Mario Draghi in Germany, with investors looking for clues as to his thinking about what the European Central Bank might do with respect to the current bond buying program, as we head into year end.
WPP numbers eyed
There will be little on the corporate front to excite today, but results from advertising giant WPP PLC (LON:WPP) will be eyed, with the firm often seen as a proxy for the global economy.
“These results will provide a valuable insight into trading and operational developments at a time when confidence in the outlook for advertising spend appears to be faltering,” said Shore Capital.
“Our more cautious mind-set also reflects comments from senior advertising industry players suggesting that the trend for brands to review agency relationships on a more frequent basis is here to stay and that marketing executives are currently exhibiting a more reticent and short-term approach to committing their budgets,” the broker said.
WPP’s half-year revenue is expected to be in the region of £7.5bn while analysts have pencilled in 45.7p for earnings per share, and 22p for the dividend.
Significant events expected on Wednesday August 23:
Finals: Laura Ashley Holdings PLC (LON:ALY)
Interims: Anglo Pacific Group PLC (LON:APF), Candover Investments PLC (LON:CDI), Costain Group PLC (LON:COST), Hansteen Holdings PLC (LON:HSTN), Vedanta Resources PLC (Q1) (LON:VED), WPP PLC (LON:WPP)
Around the markets:
- Sterling: US$1.2797, down 0.21%
- Gold: US$1,288.53 an ounce, up 0.27%
- Brent crude: US$52.17 a barrel, up 0.58%
City Headlines:
- Openreach in talks with BT’s rivals – The Times
- Premier Oil sells stake in Western Europe’s biggest onshore oilfield – Financial Times
- Glencore may lay off 4,700 Zambian workers in power dispute – Financial Times
- Tui Boss warns Brexit could take 10 years – City AM
- Balfour Beatty made preferred bidder by EDF Energy for Hinkley point power station – Daily Express
- Ryanair CEO Michael O’Leary expresses interest in snapping up bust German rival Air Berlin – Daily Mail
- Energy supplier Ovo hires No 10 aide who backed price cap – The Times
- Chevron Chief expected to step down after cost overruns – Financial Times
- Ford plugs in to China’s electric car market with joint venture – Daily Telegraph
- Chinese car firm Great Wall cools talk over its interest in Fiat Chrysler deal - City AM
- US probes Bayer’s US$66bn bid to buy Monsanto – Daily Telegraph
- Goldman Sachs CEO slams state of the US in solar eclipse tweet – The Independent
- Village Voice print edition falls silent – Financial Times
- Septwolves snaps up Chinese rights to Karl Lagerfeld brand for US$48mln – Financial Times
- Solar panel capacity to overtake nuclear energy next year in historic landmark – The Independent
- Bank of England should close cheap funding scheme for retail banks, says economist Simon Ward – The Times
- FC Barcelona sues Neymar for €8.5mln over PSG transfer – Financial Times