FTSE 100 closes 3.30 lower
Gulf Keystone Petroleum slides despite receiving payment from the KRG
All eyes now on the Fed
FTSE 100 closed lower but only marginally as markets await the Fed's decision on US interest rates.
The UKE blue chip index finished down just 3.30 points, or 0.05% at 7,271, while the FTSE 250 nudged into positive territory - up around five at 19,540.
David Madden, at CMC Markets, said: "It is likely we will hear about the Fed’s plans to start reducing the size of the balance sheet.
"Traders are almost evenly divided over whether the US central bank will hike interest rates in December or not."
The biggest Footsie gainer was Babcock International Group PLC (LON:BAB), whose shares advanced 5.81% to 846.50p.
The engineering firm said current trading was in line with its expectations, and it maintained its full year outlook.
In a trading update, the FTSE 100-listed firm said revenue visibility has also "continued to improve" with 89% of revenue in place for the financial year ending March 2018, and 57% of revenue is in place for the following year.
On the losing front, Diageo plc (LON:DGE) shed 2.78% to 2,426.5p after a downbeat annual general meeting statement.
3.30pm - Into the final hour
The top-shares index entered the final hour having finally decided to get a move on, albeit in a backwards direction.
The FTSE 100 was down 14 at 7,261, possibly as a result of a bit of cautious closing of positions ahead of the Fed's interest rate decision.
Sterling's strength also weighed on the index, given a substantial number of the companies in the index are big dollar earners.
Away from the blue-chips, Gulf Keystone Petroleum Limited (LON:GKP) fell 3.1% to 116.67p, despite revealing it had received a payment of US$15mln gross, of which US$12.0mln net is for GKP, from the Kurdistan Regional Government for Shaikan crude oil export sales in May of this year.
Oh well … better late than never.
3.00pm: US stocks open mixed
US stocks opened mixed, mirroring the situation in London.
The Dow Jones average was down 3 at 22,367 while the S&P 500 was nominally higher at 2,507.
With no lead provided by US stocks, UK blue-chips continued to mark time ahead of this evening's interest rate decision from the US Federal Reserve.
The FTSE 100 was down 2 at 7.273 while the FTSE 250 was up 8 at 19,543. The FTSE Aim 100 was off 5 points at 5,030.
2.15pm: FTSE 100 in remake of Waiting for Yellen
The FTSE 100 showed no sign of rousing itself as the lunchtime session ended.
The blue-chips index was down 3 at 7,290, despite a strong performance from B&Q owner Kingfisher PLC (LON:KGF).
The shares were up 5%, ostensibly on better-than-expected interims, but Ken Odeluga of City Index is unconvinced.
“Kingfisher's heavily de-rated and increasingly shorted shares have spiked higher on a thin beat relative to expectations and its announcement of a share buyback programme,” Odeluga noted.
“We also suspect that the merest hint of corporate action has helped buoy the stock on Wednesday. With management comments dismissing the notion of a break-up out of hand, we would rather interpret the stock price reaction as reflecting increasing anxiety over ongoing self-help measures than indicative of medium-term probability,” he continued.
“As for Kingfisher’s slightly buffed outlook, whilst welcome, the improvement by a notch is less surprising to us than many, as we had already pencilled in a likely further increment of previously unguided savings from the group’s shorter-term goods not for re-sale (GNFR) drive, following promising outcomes reported in August. The disparity between Poland and weaker regions and outperformance of Screwfix are also not news. Still, it appears that the lack of further marked deterioration across the board—the group remains comfortable with full-year expectations—has encouraged the market to largely shrug-off signals that economic growth in the UK and France could yet weaken further,” the City Index analyst concluded.
The retailer's shares may also have been buoyed by today's surprisingly strong retail sales figures for August and news that £60mln has been earmarked by the company to buy back shares.
Pest control technology developer TyraTech Inc (LON:TYR) rose strongly to 1.75p from 1.5p overnight.
There has been one article on the web that shares of the maker of the Vamousse lice-killing shampoo are oversold, but otherwise the rise is a bit of a head-scratcher.
The reason for the 14% climb by PowerHouse Energy Group PLC (LON:PHE) was easier to discern; the company revealed a deal with Qatar based consulting firm, Energy & Environment Holding (EEH), which could ultimately lead to the AIM-quoted group providing its technology for fuelling in time for the 2022 FIFA World Cup.
READ PowerHouse Energy to deliver low-carbon fuelling to Qatar for FIFA World Cup
1.30pm: Footsie flags as US markets look set to open flat
Ennui was the watchword in London from the start of day and the story looks set to be repeated on Wall Street.
US indices were tipped to open a point or two higher, with investors across the pond suffering just as much analysis paralysis ahead of the Federal Reserve's interest rate decision, expected 7pm UK time.
The FTSE 100 fell into the red in the lunchtime session but like a toddler afraid to stray too far from its mother's ankles, the decline was modest, just 2 points at 7,273.
Drinks pedlar Diageo plc (LON:DGE) remained the worst performing blue-chip after a downbeat annual general meeting statement.
Airline stocks were also getting the elbow as sterling gained almost a third of a cent against the greenback.
British Airways owner International Consolidated Airlines (LON:IAG) was down 1.7% at 596p and easyJet PLC (LON:EZJ) was down 0.9% at 1,217p.
A weak dollar does few favours either to fashion firm Burberry Group PLC (LON:BRBY), which reports in pounds but which sells a shed-load of stuff overseas. The shares were off 16p at 1,762p.
12.30pm: FTSE 100 stuck in narrow trading channel
It's the sort of day to make equity traders envious of foreign exchange traders, with the market as flat as the proverbial pancake.
Throughout the morning the top-shares index traded within a narrow range spanning from 7,250 to 7,290.
Shortly afternoon, the Footsie was up 5 at 7,280, with 44 constituents in the red and 57 in the blue; despite being called the FTSE 100, the index actually has 101 stocks in it because Royal Dutch Shell has two classes of share.
All of the broker comment on FTSE 350 companies today seems to be focused on the mid-caps.
Software firm and bid target AVEVA Group PLC (LON:AVV) was1.8% higher at 2,452p after Goldman Sachs abandoned its bearish position and moved to 'neutral' as it increased its price target to 2,400p from 1,850p. Given that AVEVA shares moved to just under £24 when the engineering software company agreed to walk down the aisle with Schneider Electric, this is hardly a case of Goldman going out on a limb to earn the big bucks it charges for its views.
Galliford Try plc (LON:GFRD) edged up 8p to 1,379p after Liberalism repeated its 'buy' recommendation and nudged up its price target to 1,473p from 1,460p.
Bus and trains group Stagecoach Group PLC (LON:SGC) got a lift from HSBC, which moved to 'hold' from 'reduce'. Stagecoach shares rose a penny to 164p.
In contrast, sector peer National Express Group PLC (LON:NEX) backtracked 1% to 349.7p after Liberum trimmed its price target to 390p from 400p.
Insurance and travel firm Saga PLC (LONSAGA) also shed 1%, at 196p, as Peel Hunt lopped 10p off its 250p price target.
11.45am: FTSE 100 becalmed despite strong showing by Kingfisher and Babcock
The FTSE 100 remains tethered to last night's closing value, despite positive responses to trading updates from two index constituents.
Kingfisher PLC (LON:KGF), up 6.0%, continues to top the Footsie leader-board after its results surpassed expectations, but engineering group Babcock International Group PLC (LON:BAB), up 5.6%, is giving it a food run for its money.
“Trading statement guides to in line. No change to our FY forecasts at this time, with revenues at Marine a little weaker but strength in Aviation and Nuclear,2 said Liberum Capital Markets, which has a 'buy' recommendation at a target price of 1,100p.
The shares currently trade at 845p.
The group said 89% of 2017 revenues are already booked.
Panmure's Michael Donnelly reaffirms a 'BUY' recommendation for Babcock International
— David Buik (@truemagic68) September 20, 2017
The FTSE 100 was up 4 at 7,289, weighed down by soft miners, as the dollar gives ground, thus hitting dollar-denominated minerals prices, and weak banks, despite the increased prospect of a rate hike in the UK following this morning's strong retail sales data.
FTSE 250 constituent Metro Bank PLC (LON:MTRO) was the hardest hit, sliding 4.4% after Aussie broker macquarie initiated with an 'underperform' rating.
READ Australian broker Macquarie no fan of Metro Bank, starts coverage with an ‘underperform’ rating
11.00am: Kingfisher sky-bound, Diageo hung-over but otherwise blue-chips mark time
Having turned negative following the August retail sales figures, the FTSE 100 struggled back into positive territory.
DIY retailer Kingfisher PLC (LON:KGF) led the march, higher – well, it was not so much a march as a foot-dragging advance – after first half profits exceeded expectations.
The shares were up 5.6%, which probably accounts for all of the FTSE 100's two point rise to 7,276.
In truth, market pundits are expecting a lacklustre day in the market today ahead of the big decision on US interest rates this evening.
“Today’s session will be dominated by the countdown to the Federal Reserve’s meeting at 7pm, and the press conference at 7.30pm. Interest rates are expected to remain on hold, and it is likely that we will hear about the beginning of the reduction of the balance sheet. Some traders feel the balance sheet will start to be trimmed next month,” suggested David Madden, a market analyst at CMC Markets.
“Dealers are still much divided over whether the Fed will raise interest rates in December or not. Deciphering the language of Janet Yellen, the Chair of the Fed, will be the focus of the trading session.
“A rate hike in December seems unlikely given we don’t know what the future membership of the Federal Reserve will be in a few months, the debt ceiling debate will be conducted in that month, and we don’t know the impact of Hurricane Harvey and Irma,” he added.
A rate hike before the end of the year stateside may be unlikely, but the betting back in Blighty is the Old Lady of Threadneedle Street will increase interest rates some time this year.
“A UK rate rise got a little closer today, as retail sales for August beat expectations for both the monthly and yearly figures. Not only this, but the ONS report notes that strong price increases were being seen,” reports Chris Beauchamp, chief market analyst at IG.
Talking of the ONS, the agency's senior statistician, Kate Davies, said: “Within this month’s retail sales we are seeing strong price increases across all store types compared with a year ago, reflecting wider inflationary pressures; however, we are still seeing underlying growth in sales volumes, and with strong growth in non-essential purchases as consumers continued to buy more from non-food stores.”
The likes of Marks & Spencer Group PLC (LON:MKS), up 2.4%, responded positively to the retail sales data, as did fellow clothing flogger Next Plc (LON:NXT), up 1.1%, and advertising giant WPP PLC (LON:WPP), up 1.7%.
10.00am: FTSE 100 turns lower, as miners weigh
FTSE 100 has turned south, albeit not by much, with miners acting as a drag.
The FTSE 100 was down 9 points at 7,266.
Drinks brands owner Diageo plc (LON:DGE) was the biggest faller, after issuing a trading commentary ahead of its annual general meeting.
The shares shed 2.2% as the chief executive, Ivan Menezes, said it expected organic net sales growth in the first half of the financial year to be affected by the later timing of the Chinese New Year and the expected impact of the highway ban in India.
Expectations on overall performance for the year remain unchanged.
9.30: August retail sales figures prove stronger than expect
The prospect of an interest rate hike before the end of the year was heightened by unexpectedly strong retail sales in August.
Retail sales volumes rose 1% from July's level, representing the biggest month-on-month increase since April.
Economists had expected sales to rise by around 0.6%.
“The UK consumer continues to show remarkable resilience, with retail sales in August blowing economists’ forecasts out of the water,” commented Ben Brettell, senior economist at Hargreaves Lansdown.
“Increased spending in non-food shops like department stores and DIY outlets were behind the dramatic improvement,” Bretell noted.
“Spending has defied expectations of a slowdown since the Brexit referendum, and currently seems to be holding up despite weak wage growth and above-target inflation. This could bode well for economic growth – the UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales. If this fails to materialise the economy could see a stronger second half to the year – though there are also growing concerns over the level of household debt, which is fuelling continued consumption in the absence of rising real wages,” Bretell said.
UK retail sales growth blasts through expectations https://t.co/DqoYfGLk3l
— Financial Times (@FinancialTimes) September 20, 2017
8.45am: Mixed start, as expected
The FTSE 100 opened the session in cautious mood ahead of the US Federal Reserve interest rate decision with the index of blue-chip shares up just six points at 7,281.54.
The mood was rather subdued given the MSCI’s All Country World Index hit an all-time high.
Here in the UK we are still some 250 points off the highs seen over the summer months.
The stock of the morning was Kingfisher (LON:KGF), ahead 7% and defying its detractors to give a reasonably upbeat assessment of prospects.
The content of results themselves was largely known. Investors wanted to see how the B&Q owner’s turnaround strategy was progressing.
As has been the theme for several years the Screwfix mail order business goes from strength to strength.
“France remains the sore spot as Castorama and Brico Depot continue to underperform the market,” said Neil Wilson, market commentator at ETX Capital.
Ocado (LON:OCDO) fell 2.3% as a bunch of earnings downgrades followed the home delivery grocery firm’s lacklustre market update on Tuesday.
Proactive news headlines:
blur Group PLC (LON:BLUR) will be fully funded for the next two years after brining in a further £1.2mln – cash that will allow it to enact its turnaround strategy. Brokers have launched an accelerated share placing at 4p, which comes with a warrant attached to subscribe for a further two shares at 6p each in the next year.
PowerHouse Energy Group PLC (LON:PHE) told investors it has entered into a deal with Qatar based consulting firm Energy & Environment Holding (EEH) which could ultimately lead to the AIM-quoted group providing its technology for fuelling in time for the 2022 FIFA World Cup.
Ticketing and queue management leader accesso Technology Group PLC (LON:ACSO) is on course to achieve its aims in 2017 after an in-line first half.
Online merchandising specialist ATTRAQT Group plc (LON:ATQT) said the planned cost savings from the integration of Fredhopper have been delivered.
Alusid, one of the portfolio companies of intellectual property commercialisation specialist Frontier IP Group Plc (LON:FIPP), has extended its Silicastone product range.
John Morton, former chief executive officer of European Wealth Group Limited (LON:EWG) is to leave the group. Marianne Ismail has been confirmed as the chief executive officer of the company, having last week been given the role on an interim basis while Morton look a leave of absence.
Back office optimisation specialist eg solutions PLC (LON:EGS), which is set to be taken over, looks to be signing off on a high. For its interim results show a business in rude health.
Healthcare marketing specialist Cello Group plc (CLL) said it was confident of meeting full-year market expectations after a solid first half. The Cello Health unit led the way as it grew organically and via the acquisition of Defined Health for £15mln in February, which cements its focus on the US.
W Resources PLC (LON:WRES) has received a two-year extension to its Tarouca tungsten project in Portugal. The licence will now expire on 23 March 2019. During this period, W Resources expects to complete a 15 hole/1,500m reverse circulation drilling campaign.
Premier African Minerals Limited (LON:PREM) has agreed the disposal of its Mozambique forestry interests but will retain a stake in a limestone deposit in the country.
South African gold miner Pan African Resources plc (LON:PAF) expects a better twelve months ahead after a number of operational challenges cut profits in the year just ended. “Remedial actions successfully implemented by management are delivering the expected results,” said chief executive Cobus Loots.
Tidal power generator Atlantis Resources PLC (LON:ARL) expects to complete the first phase of its MeyGen project in the Pentland Firth in October, when all four of its seabed turbines will be in operation. Tim Cornelius, chief executive, said after refurbishment the final turbine will be reinstalled at MeyGen in the coming weeks, which will mark the transition into full operations.
Savannah Petroleum PLC (LON:SAVP) is looking forward to the start of drilling operations, as soon as its shares are readmitted to trading in London. The AIM-quoted share is on pause as it works through the regulatory admin related to its proposed reverse acquisition of Nigerian oil and gas assets.
Stratex International plc (LON:STI) shares started Wednesday on the back-foot after the gold group responded to a move to block its proposed merger by former directors. In May, the company agreed a US$31.1mln reverse takeover deal to acquire Crusader Resources - a junior miner with two projects in Brazil – with the new shareholders set to own around 81% of the enlarged company.
Green Dragon Gas Ltd (LON:GDG) told investors that state-backed China National Offshore Oil Corporation (CNOOC) is accelerating its plans for the group’s joint assets.
6.45am...little change expected
UK stocks were set to open little changed, with investors mindful of the big decision due today from the US central bank.
The Federal Reserve is expected to leave interest rates unchanged at today's meeting, but there could be an announcement regarding balance sheet normalisation.
“To us, it is unlikely that the Fed would start shrinking the balance sheet immediately after the announcement. November or December could be plausible candidates for a start date. December rate hike will likely be kept on the table. The probability of a December rate hike has improved to 53.2% before the decision,” according to Ipek Ozkardeskaya at spread betting firm LCG.
After rising 22 points to close at 7,275 yesterday, the FTSE 100 was expected to open or slightly above that level this morning.
US stocks banked modest gains yesterday, with the Dow Jones up 39 at 22,370 and the S&P 500 up 3 at 2,507.
Approaching the close of trading, Asian markets were mixed.
In Japan, the Nikkei 225 was down 5 at 20,295 while in Hong Kong the Hang Seng was up 68 at 28,119.
On the UK corporate front, half-year results from Kingfisher PLC (LON:KGF), could be on the bleak side if last month’s trading update is anything to go by,
The DIY stores owner then reported a 1.9% drop in like-for-like sales for the second quarter as the group continued to be hit by weak trading in France.
One of the key things in the interim results statement will be the full-year guidance. Last month Kingfisher said it was happy with consensus forecasts and although it has only been a month, trading can change as fast as the weather for a home improvements retailer.
Around the markets
- Sterling: US$1.3513, up 0.02 cents
- 10-year gilt: yielding 1.332%
- Gold: US$1,316.40 an ounce, up US$5.70
- Brent crude: US$55.30 a barrel, up 16 cents
Business headlines
The Times
Johnson backs off after clash over Brexit: Foreign secretary retreats from resignation threat
AI can identify Alzheimer’s a decade before symptoms appear: Artificial intelligence can identify the signs of Alzheimer’s in scans a decade before symptoms show, scientists say.
Watchdog is warned over decision to halt inquiry: The head of the Treasury select committee has demanded a “full explanation” from the accounting watchdog for its decision to drop an investigation into KPMG’s role as auditor of HBOS.
Panel backs crackdown on foreign bids: The Takeover Panel yesterday appeared to endorse the government’s plans to bring in tougher rules for companies buying British businesses
Purplebricks ‘bullied review website’ over negative responses: Purplebricks has been accused of “corporate bullying” by the operators of a consumer review website that the online estate agent has threatened to sue.
The Daily Telegraph
Diesel cars defy 'demonisation' with steady price rises
China mulls Moorside nuclear rescue deal to deepen roots in UK plants
Heathrow urges Chancellor to scrap air tax on domestic flights in Budget
French oil major Total in talks with Google as energy sector turns to AI
The Guardian
Public inquiry needed into UK's £200bn debt crisis, say senior MPs: Select committee chairs join leading figures voicing concern over impact of debt on households already facing squeeze
Lloyd’s of London firm moves European base to Dublin over Brexit: Insurance syndicate XL Group one of several companies choosing Irish capital to guarantee access to EU single market
Fall in migration after Brexit could push up inflation, says Carney: Bank of England governor says labour shortages could also raise wages in short term, but Brexit would have only modest impact on prices
The Independent
Employers’ confidence in the UK economy hits lowest level since Brexit vote
Zero-hour contract numbers fell sharply in 2017 hinting at slowing of workforce casualisation
Financial Times
Andrew Mackenzie, BHP Billiton's CEO, sees pay jump 20% to US$7.1 million
Former Glaxo boss Andrew Witty jumps into biotech venture capital sector
Patrick Pichette, former head bean counter at Google, to join Twitter’s board
Daily Express
Deutsche Bank: Central banks are out of ammunition if recession hits: Financial experts have warned central banks across the world are “out of ammunition” to combat a second global recession.
Pound slips as chaos continues following Boris Johnson’s Brexit comments: The pound has registered mild losses versus the euro this afternoon, although sterling has risen from the day’s worst levels after technical factors saw GBP tumble
City AM
The weaker pound means London’s hotel boom will continue into 2018, a new report says: London’s hotels are set to remain resilient next year despite challenges to the U.K.’s hospitality market, according to a report released.
London Stock Exchange Group signs pledge to support armed services and veteran employment: The London Stock Exchange (LSE) will sign a covenant pledging its commitment to supporting the armed forces and veteran employment.
Domino’s Pizza franchisee DP Eurasia grows market in Russia and Turkey: Shares in one of the biggest franchisees of Domino’s Pizza rose after it said it had tripled its sales in Russia during the first half of the year.