FTSE 100 drops 16 points to 7,422
Gold prices rise on North Korea tensions, weaker dollar
UK construction PMI falls to one-year low
3.55pm: FTSE still in the red
Ahead of the closing bell, the FTSE is down 16 points to 7,422 with worries over North Korea tensions continuing to weigh after the nation tested a nuclear bomb over the weekend.
However, the London index stayed above the 7,400 mark, said Connor Campbell, financial analyst at Spreadex.
“Much like the repeated terror attacks of the past 12 months, the frequency with which North Korea has stolen headlines in the last few weeks has reduced its market-shaking power,” he said.
“That’s not to say there aren’t actions the country – and, indeed, its international enemies – could take that would inspire value-eroding fear in the markets, but rather that investors are perhaps beginning to get used to North Korea’s missile mischief.”
Evening Market Comment: Little changes on US-less afternoon with North Korea nudging Europe into the red... https://t.co/nf46sIRowp
— Connor Campbell (@ConnorSpreadex) 4 September 2017
On the UK data front, the Markit/CIPS purchasing managers’ index on construction activity fell to a one-year low in August. The report initially hit the pound but currency recovered slightly versus the dollar in afternoon trade as investors continued to digest Friday’s weak US jobs report/
Among companies, Provident Financial and Royal Mail slumped in the wake of their demotion from the FTSE 100 in the index’s latest quarterly reshuffle.
Housebuilders, including Barratt Developments, Persimmon and Taylor Wimpey, were under the cosh ahead of a slew of earnings from the sector this week that may offer an insight into the health of the housing market.
On the upside, Fresnillo and Randgold Resources gained as gold prices rose on a stronger dollar and on investors seeking safe havens amid North Korea fears.
Tesco was sitting higher as three former senior executives of the supermarket, who are accused of fraud and false accounting following a scandal in 2014, today saw their trial adjourned until September 25, according to news reports.
3.00pm: Britain to decide on Fox-Sky deal as soon as possible
The British government said it will decide “as soon as reasonably practicable” whether to refer 21st Century Fox’s proposed US$15bn takeover of Sky for an in-depth investigation.
A full investigation of the deal, announced in December, could add many months to the approval process.
The government asked Ofcom to conduct further analysis of Rupert Murdoch's acquisition in August amid allegations that Fox News had colluded with the White House on a stock that contained fabricated quotes. It said it will consider Ofcom’s advice carefully before taking a final decision.
2.30pm: Cable recovers on weaker greenback
The pound has recovered against the dollar as the greenback has come under pressure following Friday’s disappointing US employment data.
The Labor Department said US employers added 156,000 jobs in August, compared to a downwardly revised 189,000 in July and analysts’ expectations of 180,000.
“With recent US employment data compounding with concerns over subdued inflation and political drama in Washington, further downside is on the cards,” said Lukman Otunuga, research analyst at FXTM.
Sterling rose 0.05% versus the dollar at US$1.2957. The dollar fell 0.59% against the yen and 0.37% versus the euro.
The weaker dollar has boosted spot gold prices, which are up 0.72% to US$1,334.72 per ounce.
The slight reversal in the pound has weighed on the FTSE 100 with the London index down 24 points to 7,413
1.40pm: McDonald's workers strike in UK over pay and zero hour contracts
McDonald’s workers at two chains in the UK staged a protest today to demand an increase in pay to £10 per hour and an end to zero-hour contracts.
Fourteen workers at restaurants in Cambridge and Crayford, in London, held the protest - the first by McDonald’s employees in Britain.
McDonald’s said its franchisees had offered staff the option of a guaranteed hour contract but so far 86% of its employees wanted to remain on flexible contracts.
McDonald's workers strike for the first time in history in the UK for £10/hour, union rights and an end to zero hours contracts #McStrike pic.twitter.com/ggQHrrIH6M
— Youth Fight for Jobs (@youthfight4jobs) 4 September 2017
1.15pm: Lloyds to appoint MBNA boss to lead overall credit cards business
The managing director of Lloyds Banking Group’s recently acquired credit cards business, MBNA, is reportedly set to be put in charge of the overall cards operation.
Elyn Corfield, who has been head of MBNA since Lloyd completed its £1.9bn acquisition in June, will lead the bank’s push for market share growth in UK credit cards, Sky News reported.
Her appointment will be announced internally later today, sources told the broadcaster.
The MBNA deal increased Lloyds’ market share of the UK credit card market to 26% from 15%, putting it in second place to Barclaycard.
1.00pm: Reckitt Benckiser shares fall as executives depart
Reckitt Benckiser Group PLC (LON:RB. shares fell 1.49% to 7,294p following news that four senior executives are leaving following a weak performance at the consumer goods company.
Darrell Stein, senior vice president of information services, will leave on 1 October and will be replaced by Seth Cohen, who will join the company from PepsiCo.
Frederic Larmuseau, head of developing markets, Deborah Yates, senior vice president of human resources, and Roberto Funari, executive vice president of category development, will step down at end of the year to pursue other opportunities.
Reckitt has been handling the fallout from a failed product launch and a safety scandal in South Korea. It was also hit by a cyber attack in June that disrupted its global operations and cost it about £100mln of sales this year.
12.05pm: BoE to hold off on rate hike until 2019, poll of economists shows
The Bank of England is unlikely to raise interest rates until 2019, according to a BBC poll of economists.
Half of the economists surveyed by the BBC believe the Bank will be reluctant to raise rate during Brexit negotiations despite inflation overshooting the 2% target. Inflation in July stood at 2.6%.
Policymakers within the BoE’s Monetary Policy Committee have been increasingly divided over whether to lift interest rates with three voting for a hike in June.
Stuart Green, of Santander Global Corporate Banking, told the BBC he did not expect a rate increase before 2019.
"We believe that policymakers will be reluctant to tighten monetary policy until greater clarity emerges around the UK's post-EU trading framework, and our expectation of declining inflation through 2018 should also reduce the pressure for an interest rate rise," he said.
11.50am: North Korea worries drag on markets
The FTSE 100 fell 10 points to 7,427,93 as worries over North Korea tensions weighed on investor sentiment.
North Korea appears to be preparing to launch more missiles after testing a hydrogen bomb at the weekend, South Korea said, adding that the US planned to strengthen its military presence in the region.
Investors bought safe havens, including gold, sending the price of the yellow metal higher and giving mining shares a boost. Fresnillo and Randgold Resources were among the top risers on the FTSE 100.
Going the other way, Micro Focus International slumped after completing its US$8.8bn takeover of Hewlett Packard Enterprise's software business.
Royal Mail shares continued to fall in the wake of its demotion from the FTSE 100.
Meanwhile, the pound was weaker versus the dollar and the euro after a survey showed UK construction activity growth slowed in August. The Markit/CIPS PMI fell to 51.1 in August, a 1-year low, from 51.9 in July. Economists had expected a reading of 52.
Across the pond, the US markets are closed for Labor Day.
11.00am: Eurozone PPI slows in July
Eurozone producer price growth slowed more than expected in July, according to Eurostat.
The producer price index, which measures prices paid for materials and fuels by manufacturers, rose 2.0% year-on-year, down from 2.4% in June, below analysts’ estimates for a 2.1% gain.
High rates of growth in the cost of consumer and intermediate goods mitigated slower growth in energy prices.
Eurozone PPI is seen as an early guage of inflationary pressures that may be passed onto consumers later.
10.05am: Pound weakens after UK construction PMI falls to 1-year low
The pound has weakened against the dollar and the euro following an unexpected drop in UK construction PMI.
Sterling declined 0.14% against the dollar at US$1.2933 and fell 0.65% versus the euro at €1.0850.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said August’s PMI suggests that the construction sector is flirting with another recession after a 1.3% quarter-on-quarter fall in second quarter output.
“Although the PMI still is above the 50 mark that in theory separates expansion from contraction, it is below the 52 reading that has been the tipping point in practice,” Tombs said.
“The further fall in the PMI echoes the deterioration of the European Commission’s measure of construction firms’ confidence to its lowest level since the aftermath of the Brexit vote. “
Tombs said the construction sector’s slowdown was led by a drop in commercial work, which will likely worsen. If Brexit negotiations continue to progress slowly, more firms will activate contingency plans, freeing up office space and sapping demand for new commercial projects, he said.
9.40am: UK construction activity slows in August
UK construction activity slowed in August to the weakest level in 12 months, according to Markit/CIPS data.
The purchasing managers' index fel lto 51.1 in August from 51.9 in July, the worst reading since the same month a year ago and below expectations of 52.0. A level above 50 signals an expansion in sector activity while a figure below that indicates a contraction.
“Survey respondents noted that subdued business investment and concerns about the UK economic outlook had led to a lack of new work to replace completed projects, especially in the commercial building sector," said Tim Moore, associate director at IHS Markit and author of the survey.
“There were signs that UK construction firms are bracing for the soft patch to continue into this autumn, with fragile business confidence contributing to weaker trends for job creation and input buying during August.”
8.45am: FTSE 100 opens in negative terrority
The FTSE 100 got off to a slow start with North Korea once again casting a pall over the day’s activities. The index of blue chip shares fell 10 points to 7,428.52.
The Kim regime’s testing of a thermo-nuclear device prompted widespread condemnation and a modest sell-off in Asia overnight.
Traders said the markets were switching into “risk-off” mode, which essentially means sitting on ones hands and waiting to see how the latest piece of political brinksmanship plays out.
“There’s little surprise as to what is driving trading this morning,” said Connor Campbell of Spreadex.
“North Korea’s latest nuclear naughtiness has sent another ripple of fear through the markets this Monday – as has the US threat of a ‘massive military response’ and South Korea’s own show of (simulated) force.
“However, with the increasing regularity of such tests, and the USA’s Labor Day holiday, the edge has been taken off the European losses.”
The haven investment qualities of gold sent the price of the precious metal higher overnight. This in turn boosted the diggers with Randgold Resources (LON:RRS) leading the Footsie early on.
Delving down among the small-caps, punters’ favourite 88 Energy Ltd (LON:88E) took a bit of a biffing early on. The shares fell 21% after the company provided a rather uninspiring update on the flow testing of its second oil well on Alaska’s North Slope.
Slightly better news was delivered by InnovaDerma (LON:IDP), maker of the hugely popular Skinny Tan bronzer. The product appears to be flying off the shelves in Ireland, where it is stocked by Boots.
The shares, which have doubled in value in the year to date, were up 2% at 377p.
Proactive news headlines:
88 Energy Ltd (LON:88E) has provided some initial results following the start of flow testing in the Icewine-2 well, but, as the programme continues decisive answers are still awaited. The company told investors that the well is presently flowing back frack fluid at a rate of 70 barrels of oil per day. Only minor hydrocarbon indications have been observed, via formation of gas hydrates within the choke manifold, 88 Energy added.
Sound Energy PLC (LON:SOU) told investors that it has received an offer for funding for its eastern Morocco gas project. The indicative non-binding proposal comes from Advisory & Finance Group (AFG), a Moroccan financial institution that funds OGIF (which was Sound’s partner and is becoming a major shareholder).
Sunrise Resources PLC (LON:SRES) has started to prepare samples of cement substitute pozzolan for potential customers as drill assays confirmed commercial quantities at its CS deposit in Nevada. Preliminary results showed thick intervals of pozzolan and perlite-pozzolan, while tests on material from the Tuff Zone, which has been given priority by Sunrise, showed it comfortably met the international standard.
Amryt Pharma PLC (LON:AMYT) said a product that it licensed the rights to is performing better than expected. Lojuxta treats a rare and life-threatening condition called Homozygous Familial Hypercholesterolemia, which causes abnormally high levels of bad cholesterol.
Solo Oil PLC (LON:SOLO) has got a significant boost for its flagship Tanzania gas project, where partner Aminex PLC (LON:AEX) has almost tripled its estimate of gas resources. Aminex, in a stock market statement, told investors that its new estimate sees some 1.3 trillion cubic feet of gas initially in place at the Ntorya project, up from prior estimates of 466 billion cubic feet.
InnovaDerma PLC (LON:IDP) said it expects to expand the retail distribution of its hugely popular Skinny Tan range in Ireland after its success in Boots stores there. The product, which is said to contour and reduce the visible appearance of cellulite as well as being a bronzer, was only stocked in Boots’ stores in the Republic last month.
Michelmersh Brick Holdings PLC (LON:MBH) reported a 6% increase in first half turnover and said it expects a strong second half following its acquisition of Carlton Main Brickworks. The brick maker said turnover in the six months ended 30 June 2017 rose to £16.2mln from £15.3mln the same period a year earlier, supported by an increase in average selling prices and a seven-day contribution from Yorkshire-based Carlton.
BB Healthcare Trust (LON:BBH) has kicked off a funding to take advantage of what it says are a pipeline of opportunities in the biotech space. The issue will comprise a Placing, Offer for Subscription and Intermediaries Offer, it said today, with the aim to complete the funding by the end of the month.
Advanced Oncotherapy PLC (LON:AVO) shares soared at the opening bell on Monday after the company confirmed it is on track with the development of its first LIGHT proton therapy system. The AIM-quoted group said it still expects the first system to be capable of treating superficial tumours by the end of the third quarter of next year.
Radiation detection specialist Kromek Group PLC (LON:KMK) has secured a five-year contract worth US$2mln, adding another new customer to its books in the process. The deal comes just a few weeks after the AIM-quoted firm announced a multi-year contract award with a medical diagnostics client.
One of BATM Advanced Communications Ltd's (LON:BVC) subsidiaries has inked a five-year framework agreement with a national defence agency worth up to US$35.8mln. High-end software developer NGSoft – which is wholly-owned by BATM – will provide various ICT services and solutions to the unnamed agency over the course of the next five years.
Union Jack Oil PLC (LON:UJO) boss David Bramhill told investors to expect a ‘particularly active’ next six months. The UJO chairman’s comments come in the UK-focussed junior oiler released first half results, in which it highlighted that it remained debt free and had around £1.9mln of cash.
Premier African Minerals Limited (LON:PREM) has drilled a further 16 holes at the Zulu lithium project, and has now sent samples off for assay. Visual indications are that the new drilling will confirm continuity of mienralisation to the south of the Main Zone at Zulu.
Eurasia Mining PLC (LON:EUA) is making progress towards submitting the production license application for its Monchetundra platinum group metals project in Russia. So far, all necessary contracts covering mine design, blasting, mine surveying, ecological monitoring and land rehabilitation have been assigned to third parties, a necessary step towards a successful mining license application.
Midatech Pharma PLC (LON:MTPH )(NASDAQ:MTP) has submitted a clinical trial application (CTA) for a first human study of its MTD201 programme to treat rare carcinoid cancer and acromegaly. In a statement, the AIM-listed company said it expects to enter the clinic in the fourth quarter of 2017, pending regulatory approval to conduct the clinical trial, which is expected shortly.
NetScientific PLC (LON:NSCI) has announced that its portfolio company, ProAxsis is now able to initiate sales of its NEATstik® product throughout Europe, having successfully registered the product with a CE Mark.
ANGLE PLC (LON:AGL) has highlighted the publication of independent research which further demonstrates the key advantages of its Parsortix system in the treatment of cancers. The AIM-listed firm, said the research published by the Heinrich Heine University of Duesseldorf demonstrated the measurement of key proteins in breast cancer using Parsortix, which may advise therapy decisions in breast cancer treatment.
Great land Gold PLC (LON:GGP) is all set to begin exploration at its Panorama project in Western Australia in early October. The exploration focus will be on working up potential cobalt and gold mineralisation. The key objective is to outline and refine the primary target areas for further detailed ground work and potential drilling campaigns.
6.45am ... FTSE 100 called lower
The FTSE 100 look set to open its weekly account in negative territory after North Korea tested a hydrogen bomb over the weekend.
President Trump called it a “hostile and dangerous” act, while Asia’s main stock markets reacted negatively to the ramping up of tensions in the region.
“The Swiss franc and gold gained ground as haven trades come into play along with yet another counterintuitive move into the Japanese yen, a rather strange trade given Japan’s proximity on the front line of any potential flashpoint,” said Michael Hewson, analyst at CMC Markets.
Here in the UK. the index of blue chip shares looks set to fall 18 points to 7,420.50, according to the spread betting firms.
After a quiet end to August it is back to work with a vengeance for the inhabitants of the Square Mile, so we should see a marked increase in volumes as the senior traders return to their desks.
On the corporate news front the week’s schedule is dominated by the builders with earnings reports and updates from Barratt Developments (LON:BDEV), Berkeley Group (LON:BKG), Bovis (LON:BVS) and Redrow (LON:RDW).
The main economic news comes Thursday from the European Central Bank. The market’s main focus will be on the potential wind down of quantitative easing measures rather than interest rates.
- Pound worth US$1.2956, up 0.04%
- Gold at US$1,334.69, up 0.71%
- Brent crude at US$52.70, down 0.09%
Business Headlines
- The number of European banks in grave danger rose sharply last year and is now close to its 2013 level, despite extensive efforts by lenders to bolster balance sheets and profits, analysis by consultancy Bain shows – FT.
- New British banks are struggling to enter the current accounts market, with many saying strict regulation and high costs are stifling their ability to “challenge” the UK’s large high street lenders – FT.
- Four of Reckitt Benckiser’s top 10 Executives are quitting the British household consumer group, which is battling the lowest sales growth in its history – FT.
- Global oil demand could peak in only five years, according to forecasts suggesting that oil companies are underestimating the rise of electric vehicles – Times.
- Petrofac’s chief executive faces being stripped of his role as a business ambassador for the Prime Minister unless he can overturn a fine for insider trading – Times.
- JPMorgan Cazenove has lost its crown as the City’s most popular stockbroker for the first time in 13 years – Times.
- The boss of Bovis Homes is set to scale back the housebuilder’s ambitious programme and geographic reach when he announces his turnaround plan for the company this week – Times.
- Three former Tesco directors will stand trial on Monday to face charges over the company’s £263mln accounting scandal – Telegraph.
- The board of London housebuilder Berkeley is facing a shareholder-led pay revolt after they collectively took home £92mln this year – Telegraph.
- Concerns are mounting that Devon-based Tungsten miner Wolf Minerals may need to tap its owners for more funds after extending its loan facility with its biggest investor – Telegraph.
- Britain’s aerospace sector could be priced out after Brexit – Guardian.
- The TUC has urged the government to use productivity gains from the greater use of robots and artificial intelligence to reverse planned changes to the state pension age – Guardian.
- Veteran City fund manager Richard Buxton is leading talks with private equity firms about a takeover of Old Mutual’s £25bn asset management arm – Daily Mail.
- The European Commission is poised to hit Google with another record-breaking fine over competition concerns about its Android mobile phone software, it has been claimed – Daily Mail.
- Internet giant Amazon will this week launch an advertising blitz for its new women’s clothing range – Daily Mail.