FTSE 100 closes 10.8 lower
US stocks higher at open, helped by Goldman earnings
Sterling weak on Carney Brexit comments
UK inflation hits 3%, as forecast
FTSE 100 closed Tuesday in the red as the pound weakened and as UK inflation reached a five year high in September.
The index of leading UK shares closed at 7,516 - down 10.8, while the more UK company focused FTSE 250 lost over 86 points at 20,130.
It comes as the market has been spooked by Brexit comments from Bank of England governor Mark Carney, who said the central bank was preparing for the possibility of a hard Brexit without a transition period.
Elsewhere, the OECD ( Organisation for Economic Co-operation and Development) has published a report suggesting a further referendum to reverse Brexit to avoid the crippling effect on the British economy.
Against the Euro, the pound shed 0.15%, while against the US dollar, it lost 0.56%.
The key Consumer Prices Index (CPI) climbed to 3% in September this year, a level it last reached in April 2012, and up from 2.9% in August, driven by higher transport and food prices.
It suggests there is a more likely chance that UK interest rates will be raised next month.
Top dog on Footsie was publisher Pearson (LON:PSON), which rose 7.32% to 667p as it nudged up its profit guidance and said while structural problems in US higher education were likely to “persist” in the medium-term, there had been some temporary respite.
Merlin Entertainments PLC (LON:MERL) – formerly a part of Pearson - was the biggest blue chip faller, plunging nearly 16% to 377.9p after it unveiled a fall in trading in the key summer period blaming a series of terror attacks in Britain and unfavourable weather.
In small caps, Greatland Gold (LON:GGP) rocketed nearly 57% in London to 1.84p after it said it has applied for a new exploration licence to expand its landholding at the Ernest Giles gold project to more than 2,000 kilometres.
3.15pm: Gains remain for Footsie
UK blue chips held firm in late afternoon trading as New York shares found early gains, also supported by a weaker pound which was spooked by Brexit comments from Bank of England governor Mark Carney.
Around 3.15pm, the FTSE 100 index was up 18 points at 7,545, hovering just below the day’s peak of 7,550.44, and above the low of 7,506.31.
On currency markets, the pound fell 0.6% versus the dollar to US$1.3175, and lost 0.2% against the euro at €1.1218 after Carney told MPs today that the BoE is preparing for the possibility of a hard Brexit without a transition period.
Carney also told lawmakers that the central bank still has to balance the need to support job creation and growth with an inflation rate which climbed above its 2% target to 3% in September, according to official data released today, although he still believes a rise in interest rates may be needed over the coming months.
In early deals on Wall Street, the Dow Jones was up 23 points at 22,980, helped by gains from banking giant Goldman Sachs Group Inc. (NYSE:GS) after it reported third-quarter results that beat market expectations.
Pearson up; Merlin down
In London, Pearson plc (LON:PSON) remained the top FTSE 100 gainer, up 7.8 % at 670p as the under-pressure educational publisher nudged up its profit guidance and said while structural problems in US higher education were likely to “persist” in the medium-term, there had been some temporary respite.
The FTSE 100-listed group said benefits from the company’s cost-savings programme mean operating profits are now expected to be £576mln-£606mln, up from the £546mln-£606mln previously forecast
But Merlin Entertainments PLC (LON:MERL) – formerly a part of Pearson - was the biggest blue chip faller, plunging 16% to 377.9p after the operator of Alton Towers and Madame Tussauds unveiled a fall in trading in the key summer period blaming a series of terror attacks in Britain and unfavourable weather.
Analysts at Liberum Capital placed their rating for Merlin ‘under review’ from ‘hold’ saying: “The poor summer trading adds to our on-going concerns about the Midway division, the reallocation of capex away from the existing estate towards accommodation dilutes returns and the additional £262mln required to build LEGOLAND New York delays returns visibility yet further. The risk/reward profile has shifted more to the downside."
1.25pm: Dow gains expected
The FTSE 100 index hit session highs in afternoon trading on expectations for early gains on Wall Street after a boost from US banking results, with today’s as forecast increase in UK inflation passed by.
Around 1.25pm, the UK blue chip index had gained 20 points at 7,547, trading just below the session peak of 7,549.82, and well above the day’s low of 7,506.31.
On currency markets, sterling dropped 0.5% versus the dollar to US$1.3185, and shed 0.2% against the euro at €1.1212 as, although UK inflation climbed to 3% in September, Bank of England Governor Mark Carney told lawmakers today that the central bank still has to balance the need to support job creation and growth with an inflation rate above its 2% target.
On Wall Street, the Dow Jones Industrial Average is seen opening slightly higher today, inching closer to 23,000, fuelled by strength in banking giant Goldman Sachs Group Inc. (NYSE:GS) after it reported third-quarter results that beat market expectations.
Goldman is one of the biggest components of the price-weighted Dow, and with its shares up over 1% in pre-market trading, that would equate to a roughly 20 point gain for the Dow.
12.00pm: Bank needs to balance
In a testimony to parliament today, Bank of England Governor Mark Carney has said the central bank still has to balance the need to support job creation and growth with an inflation rate that is running above its target.
Carney told UK lawmakers: "Inflation rising potentially above the 3% level in coming months is something that we have anticipated.
"As a consequence we faced a trade-off, and we still face a trade-off, between having inflation above target and the need to support, or the desirability of supporting, jobs and activity."
The BoE has said most of its rate-setters think they will need to raise interest rates "in the coming months" to head off a build-up of inflation pressure. Carney has previously said he is part of that majority.
At midday, the FTSE index was ahead nearly 15 points at 7,541, just below the session high of 7,543.34, and well above the day’s low of 7,506.31.
11.10am: Consumer price rise predicted
With today’s increase in inflation exactly as forecast, and a Bank of England rate hike before the end of the year largely priced-in to markets, the FTSE 100 index managed to recoup initial falls while the pound turned lower against the dollar.
Around 11.05am, the UK blue chip index was up 2 points at 7,528, below the session high of 7,533.95, but above the day’s low of 7,506.31.
On currency markets, the pound reversed earlier gains to shed 0.1% versus the dollar at US$1.3246, though sterling added 0.3% against the euro at €1.1268 as UK inflation climbed to 3% in September, up from 2.9% in the preceding month.
Here's a chart showing how UK inflation has diverged from EU inflation in recent months pic.twitter.com/mj08NPIzHL— Ed Conway (@EdConwaySky) 17 October 2017
Maike Currie, investment director for personal investing at Fidelity International, said: “With price rises now one percentage point above the Bank of England’s 2% inflation target, governor Mark Carney will be penning a letter to the Chancellor explaining why inflation is so far above target.
“But this will be cold comfort to cash-strapped consumers, as today’s inflation figure marks the biggest squeeze on UK households in five years - inflation has not been at this level since April 2012.
She added: “Life is getting much more expensive with an increase in the cost of food, fuel and a last-minute price spike in flights all contributing to the rise in inflation. Meanwhile, our pay packets have stagnated with wage growth falling behind inflation, despite UK unemployment being at a record low.”
Currie noted: “It’s also worth noting that September’s inflation figure matters hugely to both retirees and savers. Under the government’s ‘triple lock’ guarantee, the state pension will rise in April each year by whichever number is the highest out of the September CPI inflation number, average earnings or 2.5%.
“With inflation running higher than either wages or 2.5%, this will determine the rise in the State Pension next year, arguably making retirees the biggest winners from today’s inflation figure.”
9.50am: Rate rise predicted
The Footsie fell back to session highs as the morning session progressed ass the pound gained after the latest UK inflation data hit a 5-1/2 year high fuelling rate rise fears.
Around 9.50am, the FTSE 100 index was down about 14 points at 7,513, just above the session low of 7,506.31, having reversed from an opening peak of 7,530.34.
On currency markets, sterling took on 0.2% versus the dollar at US$1.3274 but remained flat against the euro at €1.1279 after the latest UK data added to the pressure on the Bank of England to consider a hike in UK interest rates.
The UK consumer price index rose to an annualised rate of 3% in September, according to the Office for National Statistics, matching economists’ average expectations and marking the biggest rise since April 2012.
David Cheetham, chief market analyst at XTB.com commented: “With the core reading remaining in line with the prior at 2.7% it is clear that price pressures are currently running well above the 2% mandate for the BoE and today’s release has all but rubber stamped a rate hike from the central bank at their next meeting.“
He added: “Given the likely historic consequences of the release the market reaction has been remarkably subdued with the pound dropping in the immediate aftermath before recovering to trade back near its highest levels of the day.
“This can probably be explained by the fact that a Nov hike has already been widely discounted by the markets and today’s rise was consistent with expectations and therefore it doesn’t come as too much of an upside shock.”
Other data from the ONS today saw the annual growth in factory gate prices cool to 3.3%, as expected, compared with the 3.4% increase in August.
And official house prices in August saw a 5.0% annual increase across the UK, compared with a 4.5% increase in July, with prices in London alone up 2.6%.
9.00am: No magic for Merlin
Merlin inked an agreement with Peppa’s owner Entertainment One PLC (LON:ETO) that will allow it to roll out “location based entertainment” based on the brand around the world (apart from the UK and China).
But investors weren’t too fussed about the lovable pig, instead focusing on weak like-for-like revenues growth of just 0.3% in the 40 weeks to 7 October.
The FTSE 100 group blamed “the series of terror attacks and unfavourable weather” in the UK and Europe for the poor performance. To add insult to injury, Merlin said full-year underlying earnings (EBITDA) would come in between £470mln and £480mln, below previous estimates of £490mln.
Merlin – which also owns Alton Towers and the LEGOLAND brand – was the top blue chip faller, losing more than a fifth of its value to sit at 360p.
That was the big drag on the FTSE 100 which is broadly flat at 7,526.6.
Pearson top blue chip riser
Pearson has struggled to get off the profit warning train in recent years – issuing five warnings in just four years – but said today that adjusted operating profits should come in at between £576mln and £606mln.
The embattled firm still expects “tough conditions” in its core business but investors were looking past that, with the stock jumping 5.5% to 655.9p.
17 consecutive months of growth for supermarkets
All of the ‘big four’ – Sainsbury’s, Tesco PLC (LON:TSCO), WM Morrisons PLC (LON:MRW) and Asda – recorded sales growth in the 12 weeks to 8 October, although they all saw a small decline in their market shares as Aldi and Lidl continue to make inroads.
Losses also narrowed, thanks to a rise in development income and moderately better services income, in the firm’s first set of finals since it was rebooted and renamed last July.
Proactive news headlines:
Ferrum Crescent Limited (LON:FCR) has appointed experienced capital markets man Myles Campion to the board, following the departure of chairman Justin Tooth. The company is currently reassessing and standardising data held on all the old core at the Toral zinc project, and expects to release a maiden JORC resource before the end of the year.
Progress at bulk email specialist dotDigital Group PLC (LON:DOTD) quickened in the second half of the financial year to the end of June.
Genedrive PLC (LON:GDR) has revealed a 13.7% rise in turnover, for the twelve months ended June 30, thanks to a rise in development income and moderately better services income. It is the first full financial reporting period since the company, formerly Epistem Holdings, was rebooted last July.
Myanmar-focused social media group MySQUAR PLC (LON:MYSQ) has restated last week's trading statement after getting the maths wrong. Average monthly revenues of $135,000 per month in the last quarter were a 350% gain compared to the US$29,744 achieved during July-September 2016 rather than the 450% stated.
ANGLE PLC’s (LON:AGL) Parsortix system has outperformed comparable liquid biopsies in a new study undertaken on kidney cancer sufferers in Germany. University Hospital Muenster, an ANGLE customer, compared in detail the ability of four different types of systems to harvest circulating tumour cells (CTCs) for clear cell renal cell carcinoma (kidney cancer) patients.
The cyber security arm of BATM Advanced Communications Limited (LON:BVC) has landed a US$350,000 deal from the defence agency of an undisclosed European country. Its Celare operation will supply monitoring and detection systems as part of a proof of concept contract.
Stratex International PLC (LON:STI) has sold its 13.7% stake in Goldstone Resources for £550,000. Stratex argued that it had been diluted down by a recent fundraise and was no longer able to materially influence strategy. In conjunction with the news, Emma Priestley, chief executive of Goldstone, has resigned as non-executive of Stratex.
PCG Entertainment PLC (LON:PGCE) confirmed that it has received £8,249.33 as the first monthly payment under the equity sharing facility arranged by RiverFort Global Capital announced on August 18. The group said that, going forward, the company intends to announce the results of their monthly payments in the second week of the month following the month in which the trading calculations are made.
Metal Tiger PLC (LON:MTR) revealed it has purchased an additional 356,239 ordinary shares in Kingsgate Consolidated Limited (ASX:KCN) at an average price of circa A$$0.36 (£0.21) per ordinary share for a total consideration of circa A$128,246 (circa £75,933), to bring its total holding in KCN up to 11,939,648 ordinary shares, representing 5.34% of the company.
The cyber security arm of BATM Advanced Communications Limited (LON:BVC) has landed a US$350,000 deal from the defence agency of an undisclosed European country.
Its Celare operation will supply monitoring and detection systems as part of a proof of concept contract.
7.00am: FTSE 100 set to open modestly higher as Brexit talks plod on
The FTSE 100 was set to claw back all of yesterday's minor losses at the outset, after US markets again broke new ground yesterday.
Spread betting quotes suggested the blue-chip index, which shed 8 points yesterday to close at 7,527, would open at around the 7,536 level.
Brexit discussions between UK prime minister Theresa May and the president of the EU Commission, Jean-Claude Juncker, were said to be “constructive and friendly”, but not much of any consequence came of the meeting.
A statement was released after the meeting which said: "The prime minister and the president of the European Commission reviewed the progress made in the Article 50 negotiations so far and agreed that these efforts should accelerate over the months to come," the statement read.
In the US, the Dow Jones rose 85 points to 22,957 while the broader-based S&P 500 climbed 4.5 to 2,557.6.
Towards the end of trading in Asia, the Nikkei 225 in Tokyo was up 56 at 21,312 while the Hang Seng in Hong Kong was up 58 at 28,751.
In the UK, inflation figures for September due out today could give a big clue as to the timing of the long-awaited interest rate hike by the Bank of England.
Some pundits are expecting the inflation rate to hit 3% for the first time since April 2012.
The consensus forecast is for the annual increase in the core Consumer Price Index to be unchanged at 2.7%, while the producer price index is expected to be up 8.2% year-on-year, after rising 7.6% in August.
On the corporate front, a number of big hitters are reporting, including Evraz PLC (LON:EVR), Merlin Entertainments PLC (LON:MDC), Moneysupermarket.com Group PLC (LON:MONY), Pearson PLC (LON:PSON), ASOS PLC (LON:ASC) and Bellway PLC (LON:BWY).
Around the markets
- Sterling: US$1,3254, up 0.04 cents
- 10-year gilt: Yielding 1.339%
- Gold: US$1,294.40 an ounce, down US$8.60
- Brent crude: US$57.80 a barrel, down 2 cents
Significant announcements expected
Trading updates: Evraz PLC (LON:EVR), Mediclinic International PLC (LON:MDC), Merlin Entertainments PLC (LON:MDC), Moneysupermarket.com Group PLC (LON:MONY), Pearson PLC (LON:PSON), Segro PLC (LON:SGRO)
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The Daily Telegraph
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The Scottish Herald
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