FTSE 100 closes 30pts up at 7,538
US stocks mixed
Pound firm after UK manufacturing data
Banks lifted by broker upgrades
FTSE 100 closed higher on Tuesday as eyes are on Catalonia as the president Carles Puigdmeont is preparing a key speech, after the independence referendum.
"There is a possibility the President of Catalonia will declare independence from Spain. It could be a symbolic declaration of Independence or perhaps a unilateral declaration, and the latter could prompt Madrid to strip the region of the autonomous powers and impose direct rule," said David Madden, at CMC Markets.
The UK bluechip index added over 30 points on the day to stand at 7,538, while the more UK focused FTSE 250 gained over 43 points at 20,146.
The pound like yesterday stayed strong, up a tad - 0.04%- against the Euro and up 0.53% against the US dollar.
On Wall Street, stocks are rather more muted, with the Dow Jones up 0.11% and the S&P 500 off 0.13%.
Top gainer on Footsie was Persimmon (LON:PSN), down 2.34% to 2,761p, while the biggest loser was publisher Pearson (LON:PSON), which shed 1.90% to stand at 619.50p.
3.20pm: Policymakers can't afford to be complacent, warns IMF's Obstfeld
Maurice Obstfeld, the IMF’s economic counsellor, said the picture for the global economy is "very different" from 18 months ago with accelerating growth in Europe, Japan, China and the US.
"These positive developments give good cause for greater confidence, but neither policymakers nor markets should be lulled into complacency,” Obstfeld warned.
“A closer look suggests that the global recovery may not be sustainable. Not all countries are participating, inflation often remains below target, with weak wage growth, and the medium-term outlook still disappoints in many parts of the world."
He added that the recovery is also vulnerable to "serious risks".
"Financial markets that ignore these risks are susceptible to disruptive repricing and are sending a misleading message to policymakers," he said.
"Policymakers, in turn, need to maintain a longer-term vision and seize the current opportunity to implement the structural and fiscal reforms needed for greater resilience, productivity and investment.”
2.50pm: US stocks rise with Dow and Nasdaq reaching record highs
US stocks have opened higher after the bank holiday yesterday.
The Dow Jones Industrial Average reached a record high, rising 64 points, driven by a rally in Wal-Mart.
Wal-Mart announced a US$20bn buyback before the bell and repeated its earning guidance for the current fiscal year.
The Nasdaq composite also reached an all-time high, up 0.4%, while the S&P 500 gained 0.3%.
Meanwhile, the IMF forecasts 2.2% economic growth in the US in 2017 and 2.3% in 2018, a decline from April when it projected 2.3% growth this year and 2.5% in 2018. The downgrade came as the IMF no longer expects President Donald Trump's proposed tax cuts to happen.
2.40pm: Oil prices rise as OPEC says market is rebalancing
Oil prices jumped after OPEC said there were "clear signs" the oil market was rebalancing after years of oversupply. Brent crude rose 1.3% to US$56.56 per barrel and West Texas Intermediate increased 1.8% to US$50.53 per barrel.
“The process of global destocking continues, both onshore and offshore, with positive developments in recent months showing not only a quickening of the process but a massive drainage of oil tanks across all regions,” OPEC secretary general Mohammad Barkindo said at a conference in New Delhi.
Barkindo also called on US shale producers to help cut the global supply glut.
Lukman Otunuga, research analyst at FXTM, said: "It has certainly been a tricky year for OPEC, especially when considering how US shale production soared nearly 10%, despite the cartel's valiant efforts in cutting supplies to prop up prices. Although Saudi Aramco plans to make “the deepest customer allocation cuts in its history” by cutting 560,000 bpd next month, its impact could be diluted if the US shale producers see this as a Christmas gift."
2.10pm: IMF raises global economy growth estimate
The International Monetary Fund has said the increasing momentum behind anti-globalisation movements is one of the main threats to the economy because it puts productivity and living standards at risk.
In the latest IMF estimates, the global economy is expected to grow 3.6% in 2017 and 3.7% in 2018, up 0.1 percentage points from the April forecast.
Emerging markets are expected to see a 4.6% acceleration in growth this year and a 4.9% increase in 2018, driven by China.
Estimates for the UK growth, however, have been downgraded by 0.3% to 1.7% for this year and 1.5% in 2018, due to lower levels of private consumption, caused by a weaker pound squeezing household incomes.
Global economy gaining strength, with growth marked up at 3.6% this year and 3.7% for 2018 #WEO https://t.co/i8QzV8jOkB pic.twitter.com/1BZvEp12R7
— IMF (@IMFNews) 10 October 2017
1.40pm: Business minister says goverment stands ready to help BAE
Business minister, Claire Perry, has told MPs that the government would work with BAE Systems to support those affected by the defence giant's 2,000 job cuts.
Perry hit back at claims by opposition MPs that UK defence spending changes were responsible for the job cuts, saying the government "stands ready" to help the company. She said the Ministry of Defence had spent nearly £4bn with BAE this year so far.
"The government stands ready to support fully those affected, indeed colleagues across the MoD, my department, and others, are reviewing what support we can offer to the company as it goes through this process," the minister said.
Business minister Claire Perry says government "stands ready to support fully" those affected by #BAE job losses
— Tim Iredale (@iredalepolitics) 10 October 2017
BAE said the decision to reduce its headcount was a bid to improve efficiency as it lowers Typhoon and Hawk aircraft production rates.
1.10pm: NIESR cuts UK GDP estimate
The UK economy grew 0.4% in the three months to September, the NIESR said in its revised estimates.
The NIESR had previously estimated gross domestic product growth of 0.5%, compared to 0.4% the previous period.
Amit Kara, head of UK macroeconomic forecasting at NIESR, said: "Although economic growth is likely to be a touch stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year and this at a time when real GDP growth in other major economies such as the euro-area and the USA has strengthened.
Kara added: "Looking ahead, we expect the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth and weaker sterling and away from domestic demand."
UK NIESR GDP Estimate (3M/3M) Sep: 0.40% (prev R 0.50%)
— LiveSquawk (@LiveSquawk) 10 October 2017
12.50pm: Banks continue rally
Banks are continuing to gain in afternoon trading, with Royal Bank of Lloyds Banking Group boosted by ratings upgrades from Credit Suisse.
Whitbread is also on the front foot after saying its Costa coffee division has bought a 49% stake of its South China joint venture from partner Yueda for RMB 310mln.
Capita is another top riser after appointing former Amec Foster Wheeler boss John Lewis as its chief executive to lead the struggling outsourcer's turnaround.
Heading in the opposite direction, BAE Systems shares dipped after sayign it will cut 2,000 jobs in the UK, more than the 1,000 expected.
Vedanta Resources is in the red as reported grown in second quarter production of metals but a decline in oil and gas.
12.00pm: Footsie resumes gains
The FTSE 100 index pushed back up towards session highs around midday on expectations for opening gains on Wall Street, although a firmer pound kept the London gains modest.
Around 11.55am, the UK benchmark was about 13.5 points higher at 7,521, back near the day’s peak of 7,524.57 and above a low of 7,504.56.
On currency markets, sterling was gained 0.3% versus the dollar at US$1.3186, but remained flat against the euro at €1.1191, after UK manufacturing data added to expectations that the Bank of England could raise UK interest rates sooner rather than later.
Aug rise in #UK #manufacturing & #construction output will likely fuel expectations of Nov #BOE #rate hike despite disappointing trade data
— Howard Archer (@HowardArcherUK) 10 October 2017
Chris Beauchamp, chief market analyst at IG said: “UK investors are indulging in a spot of bargain-hunting this morning after yesterday’s brief weakness, with the 60 point drop from Friday’s high to Monday’s low providing the first real bit of downward movement in what has been, so far, a very bullish month for the index.”
He added: “US markets should be a touch more active today, as normal service resumes after Columbus Day, with Blackrock’s earnings being the highlight of an otherwise quiet session. Energy stocks should see some support as OPEC continues to air the idea of production cuts, but their appeal to US shale producers to limit their output is an interesting titbit, revealing the increasing worry OPEC has about their inability to meaningfully rebalance the oil market.”
IG expects the Dow Jones Industrials to start at 22,782, up 21 points from Monday’s close.
10.40am: BAE slashes jobs
BAE Systems (LON:BA.) is making bigger job cuts than speculated on yesterday, with up to 1,950 roles being axed, the majority from its military air unit where orders for its Typhoon jet have slowed.
In a trading update, released at 10am, Britain’s biggest defence company said up to 1,400 roles would be cut in its military air and information business, 375 would be lost in its maritime unit and 150 would go from its applied intelligence operations.
We have today announced organisational changes to boost competitiveness and accelerate technology innovation: https://t.co/E1bGfytitI
— BAE Systems (@BAESystemsplc) 10 October 2017
The group also said trading “has been in line with management expectations and the Group's outlook for 2017 remains unchanged.”
BAE share came off earlier lows but were still 0.8% lower at 613.5p, while the FTSE 100 index was off about 6 points at 7.514.
10.00am: UK factory data strong, trade deficit at peak
The FTSE 100 index eased back from early highs in mid morning trading as sterling got a boost from UK economic data which added to expectations that the Bank of England could raise UK interest rates sooner rather than later.
Around 9.50am, the UK blue chip index was up about 9 points at 7,516, drifting back from an opening peak of 7,524.57 but above a low of 7,504.56 hit after the data.
On currency markets, the pound extended its gains to 0.3% versus the dollar at US$1.3179, but remained flat against the euro at €1.1190.
The Office for National Statistics said UK manufacturing output rose by 0.4% month-on-month in August, matching July’s increase compared with forecasts for a 0.2% rise.
Overall industrial output - which includes the factory sector - rose by 0.2% in August, as forecast, compared with the 0.3% increase in July.
Dennis de Jong, managing director at UFX.com, commented: “With ongoing Brexit negotiations leaving Britain between a rock and a hard place, Prime Minister Theresa May will be content with better than expected UK manufacturing results after September’s figures remained on par with August.”
But he added: “While manufacturing has been hailed as one of the UK economy’s few bright lights in recent months, it remains to be seen whether the recent and somewhat surprising rally in the pound will boost the sector as we approach the back end of 2017.”
Meanwhile other ONS data showed Britain’s goods trade deficit with the rest of the world hit an all-time high of £14.245bn in August, pushed up by increased imports of chemicals, machinery and textiles. Economists had expected the deficit to narrow to £11.20bn.
8.45am: Banks drive early gains
The Footsie managed to buck expectations for an opening fall and pushed higher in early deals helped by gains in the banking sector following upgrades for both Lloyds Banking Group PLC (LON:LLOY) and Royal Bank of Scotland PLC (LON:RBS).
Around 8.40am, the FTSE 100 index was up 11 points at 7,519, recovering most of yesterday’s declines even though the pound held firm against the dollar, up another 0.2% at US$1.3165.
Naeem Aslam, chief market analyst at Think Markets UK Ltd said: “The bettering for Sterling comes to an end after traders realised that Prime Minister Theresa May has support of her party and from the public.”
He noted that May has presented a different story to her party leaders on Brexit, saying EU leaders are keen to discuss and negotiate a deal with Britain.
But, Aslam added: “Her contrasting views reappeared when she told business leaders that the transition period could last for two years and they should curve up a strategy accordingly. These mixed messages would surely keep any upward move capped for the currency.”
On the corporate front, RBS was a top FTSE 100 gainer after Citigroup upgraded its rating for the majority state-owned lender to ‘neutral’ in a sector review, saying the bank is “the most geared to rising rates and has the most defensive asset mix.“
Credit Suisse also upgraded RBS in a sector review today, hiking its stance to ‘neutral’ as well, while it upgraded Lloyds to ‘outperform’.
In early trading, RBS shares gained 1.2% at 275.5p, while Lloyds was up 6% at 66.97p.
Proactive news headlines:
Strategic Minerals PLC (LON:SML) has generated record cash flow from its Cobre magnetite tailings operation in New Mexico and now expects profits to be above US$1mln for the first time. The money will be used to continue with exploration activities at Redmoor and elsewhere.
Social media app group MySQUAR Limited (LON:MYSQ) is teaming up with fellow AIM member Sealand Capital Galaxy PLC (LON:SGCL) to distribute mobile games on each other’s platforms in Myanmar. MySQUAR games will be available under Sealand's licence agreement on the Huawei inTouch platform. Huawei is the third largest smartphone provider in the Myanmar market.
Haydale Graphene Industries PLC (LON:HAYD) is proposing to raise up to £9mln through the issue of shares at not less than 120p each. Up to £6mln will be raised through a share placing, with the remainder via a sUBScription offer open to all shareholders.
Shares in Seeing Machines Limited (LON:SEE) motored higher as it announced the "automotive production debut" of its FOVIO-based driver monitoring system in the 2018 Cadillac CT6.
Scancell Holdings PLC (LON:SCLP) has nabbed Dr Cliff Holloway from Benitec Biopharma to be its new chief executive officer, succeeding Dr Robin Goodfellow. Goodfellow will remain on the board of directors.
Iodine extractor Iofina PLC (LON:IOF) might beat its production guidance of between 225-240 metric tonnes in the second half of 2017. The bullish update followed production of 125Mt of iodine in the three months to September, making year to date production of 360.5Mt.
Internet of Things (IoT) enabler Telit Communications PLC (LON:TCM) has designed a wireless sensor to be used in robotic lawnmowers made by Swedish outdoor power products giant and Flymo owner Husqvarna. The device will allow cities which use the lawnmowers to maintain their green spaces as well as collect data about the environment such as air quality, water and noise pollution and sound levels.
Mytrah Energy Limited (LON:MYT) has announced there will be a review into a recent transaction connected to chairman Ravi Kailas.
88 Energy Limited (LON:88E, ASX:88E) has updated investors on the Icewine project in Alaska, as it released its most recent quarterly activity report. The company said that there has been significant pressure build up in the Icewine-2 well since the flow testing programme was suspended on September 18.
Tharisa PLC (LON:THS) produced 360,500 tonnes of chrome concentrates during the fourth quarter of the financial year, up 8% quarter-on-quarter. Full year production totalled 1.3mln tonnes of chrome concentrates, an increase of 7% on the corresponding period a year ago. This production also included 323,000 tonnes of higher margin specialty chrome and 143,600 tonnes of platinum group metals.
Tower Resources PLC (LON:TRP) is to advance the exploration of the Thali block in Cameroon, following a technical committee meeting alongside the authorities.
Avacta Group PLC (LON:AVCT), the developer of Affimer® biotherapeutics and reagents, has announced that its chief technology officer, Dr Matt Johnson, will be presenting at the Annual Biomarkers & Precision Medicine Congress in San Diego, 9th-11th October.
6.45am: Weaker start predicted
The Footsie is seen starting weaker again after yesterday’s modest falls despite overnight gains on Asian markets as political uncertainties hold sway globally, with a Catalan independence declaration expected today.
Spread betting firm CMC Markets expects the FTSE 100 index to open 5 points lower at around 7,502, having shed 14.98 points yesterday, impacted by a rally in the pound amid talk embattled UK Prime Minister Theresa May could reshuffle her divided cabinet.
Sterling held its gains at around US$1.31 overnight, with the week's only important UK economic data due out today, including the latest industrial and manufacturing production numbers.
A survey released overnight by the British Retail Consortium showed UK like-for-like retail spending rose by 1.9% last month, up from a 1.6% increase in August, the fastest pace so far in 2017, excluding Easter, albeit driven by hikes in prices for food and clothing since the Brexit vote last year.
Overnight in New York, the Dow Jones ended 12.60 points lower at 22,761 failing to extend its recent record breaking run for a second successive session, albeit with volumes thin on the Columbus Day holiday in the US.
But Asia stocks managed gains today, with the Nikkei in Tokyo up around 0.4%, having been closed for a public holiday yesterday, helped by better than expected Japanese trade data.
On the corporate front in London, BAE Systems PLC (LON:BA) will deliver a trading update today, with investors keen to hear any more news about an extension to the Eurofighter order from Qatar as the defence group awaits more news on UK and US defence budgets.
Analysts at UBS believe that BAE's organic growth will remain around low single digits at group level over 2017-19 although the group’s US defence sales should grow at 7-8% organically as the Army' modernisation share of the US budget grows faster than other areas.
However the Swiss bank’s analysts think sentiment could weigh on BAE shares until the UK discloses potential budget cuts in January 2018 and further job cuts are expected as BAE's restructuring continues.
First half numbers from fashion firm Ted Baker PLC (LON:TED) are expected to continue its track record of double-digit growth, reflecting the resilience of its balanced model, according to analysts at Liberum Capital.
And, while other pub groups have seen sales decline, Marston’s PLC (LON:MARS) has so far fared better with its last update showing like-for-like sales growth in the destination and premium divisions.
The market will, therefore, be seeking some reassurance in terms of current trading outlook in an update on Tuesday, with future expansion plans and especially any comments on future dividend payments also eyed.
Significant events expected on Tuesday October 10:
Trading updates: BAE Systems PLC (LON:BA), Domino’s Pizza PLC (Q3) (LON:DOM), easyHotel PLC (LON:EZH), Marston’s PLC (LON:MARS)
Interims: Ted Baker PLC (LON:TED), LiDCO Group PLC (LON:LID), Redstoneconnect PLC (LON:REDS), 1Spatial PLC (LON:SPA), Vedanta Resources PLC (LON:VED)
Finals: Volution Group PLC (LON:FAN)
Economic data: UK industrial, manufacturing production; UK balance of trade
Around the markets:
- Sterling: US$1.3185, up 0.3%
- Gold: US$1,290.44 an ounce, up 0.5%
- Brent crude: US$56.56 a barrel, up 1.3%
City Headlines:
- UK to delay selling down RBS stake until US case settled – Financial Times
- Government faces EU scrutiny over ‘illegal state aid’ of BT in push for ultrafast broadband – Daily Telegraph
- Singapore regulator takes ‘serious view’ of Standard Chartered probe – Financial Times
- GlaxoSmithKline worst among business groups' list of well-run companies – The Independent
- Centrica’s CEO tries to plug share price slide by buying £173,100 worth of stock – City AM
- Morrisons employees sue supermarket in data leak class action – City AM
- Microsoft to buy all the power from new Irish wind farm - Financial Times
- SoftBank deal with Uber encounters delay – Financial Times
- AIG warns of $3bn hit from hurricanes and Mexico earthquake – Financial Times
- Ikea turns to ecommerce sites in online sales push – Financial Times
- New Aldi UK distribution hub in Bedford will be the size of 20 football pitches and create 400 jobs – Daily Mail
- Airbus shares tumble after CEO warns of ‘turbulent times’ amid fraud and corruption probe – Daily Express
- Small generators take on Ofgem over sUBSidy cuts: - The Times
- EU banking watchdog to publish guidance on new hUBS for banks seeking EU base post-Brexit – The Independent
- David Cameron takes job with US electronic payments firm – The Guardian
- Ministers plan reforms to prevent repeat of Monarch collapse – The Guardian