FTSE 100 unchanged 7,523
Sterling jumps 0.8% vs euro on Brexit deal boost
UK public sector deficit falls by more than expected
Barclays shines after Berenberg abandons bearish stance
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The Footsie was all of a dither in late trading, before deciding to close practically unchanged.
The FTSE 100 closed at 7,523, up less than a fifth of a point.
It was a bad day for Anglo-Dutch consumer goods producers, with Unilever plc (LON:ULVR) and Reckitt Benckiser PLC (LON:RB.) two of the biggest blue-chip casualties after disappointing updates earlier this week.
Barclays PLC (LON:BARC) was wanted, rising 3.7p to 195.7p after Berenberg upgraded the stock to 'hold' from 'sell'.
4.25pm: Sterling jump dents Footsie
A strong week for equities is finishing on a subdued note, with the Footsie drifting into negative territory late on as sterling got a boost from vague Brexit deal hopes.
About 4.25pm, the FTSE 100 index was around 1 point lower at 7,521, just above the low of 7,517.75 and well below the session peak of 7,560.04.
On currency markets, the pound jumped 0.8% versus the euro to €1.1192, and was up 0.3% against the dollar to US$1.3193.
Chris Beauchamp, Chief Market Analyst at IG commented: “ A surge throughout the day for the pound has been prompted by a wave of signs that suggest a softening of the EU’s stance on trade talks.
“Crucially, it is the lady herself, Angela Merkel, that has been keen to stress the progress being made. This has been enough to tempt some sterling bulls out of their hiding places, after a week in which UK data has taken the shine off expectations for a BoE rate hike in November.
He added: “European markets rallied off their lows yesterday but are making something of a return trip to those lows this afternoon as investors cut back on risk ahead of a potentially volatile weekend.
“Spain is set to begin the process of imposing direct rule on recalcitrant Catalonia, an event that is unlikely to go down well in Barcelona. While US markets have gone parabolic over the last few days”.
3.30pm: Quiet drift to weekend
The Footsie retained modest gains in late afternoon trading, as US stocks started at new record highs after the Senate passed a budget blueprint for the next fiscal year, although a slightly firmer pound limited London’s advance.
About 3.25pm, the FTSE 100 index was around 9 points higher at 7,532, well below the session peak of 7,560.04 but above the low of 7,523.04.
On currency markets, the pound was up 0.2% against the dollar to US$1.3177, helped by further positive UK data, but was flat versus the euro to €1.1180 as Brexit uncertainties weighed.
Looks downright deplorable. https://t.co/RGpVtDMbh2
— George Takei (@GeorgeTakei) 20 October 2017
In New York, after around an hour of trading, the Dow Jones Industrials was up 72 points at 23,235, with the other US benchmarks also higher with the Senate budget blueprint approval seen as paving the way for President’s Trump’s much lauded tax reforms.
Craig Erlam, senior market analyst at Oanda said: “The passing of the budget resolution through the Senate late on Thursday is likely helping lift sentiment further today, with final approval in the House being a big step towards Donald Trump’s long awaited tax reform being enacted.
“As Steve Mnuchin made clear this week, a portion of the rally in equity markets since Trump’s election victory in November was driven by the expectation that tax reform will happen and provide a significant boost to the economy and companies.
“A failure to deliver on this would be a huge blow to Trump and could be damaging for markets as well, although this now looks increasingly less likely.”
12.25pm: US boost expected
The FTSE 100 index held firm in early afternoon trading, lifted by hopes for further strong gains today on Wall Street after President Trump’s tax plans got a boost yesterday, while the pound also pushed ahead amid vague Brexit progress chatter.
Around 12.25pm, the UK blue chip index was about 19 points higher at 7,542, below the session peak of 7,560.04 but above the low of 7,523.04.
On currency markets, sterling extended its gains, up 0.2% against the dollar to US$1.3175 and ahead 0.5% versus the euro to €1.1159.
Connor Campbell , financial analyst at Spreadex said: “ It’s hard to see exactly what has prompted sterling, previously down 0.3% against the dollar and flat against the euro, to reverse its early decline.
“The likeliest reason is faint whiff of Brexit progress between the UK and EU at the Brussels summit, with Donald Tusk confirming that the latter would begin internal discussions about the ‘second phase’ of the Brexit negotiations, i.e. the all-important trade talks.
“While that isn’t exactly what Theresa May and David Davis would have wanted, it does leave December as the possible starting date for formal talks – a bit can-kicky, but better than nothing.”
Brexit, summarized. pic.twitter.com/E7AhQxxwV2
— ian bremmer (@ianbremmer) 20 October 2017
Campbell added: “Looking to the afternoon and the Dow Jones is set to rocket another 80 points higher when the bell rings on Wall Street, taking the US index to a fresh, 22350 record peak.
“The reason for the Dow’s latest growth seems to be last night’s Trump budget approval from the US Senate, a symbolic step on the road to the President’s much-touted, and market-pleasing, ‘massive tax cuts’.”
Banks, miners in demand
In London, banking stocks were in demand after the US Senate passed a budget blueprint seen as a key step towards tax cuts which the market anticipates will help financials.
Among the sector gainers, blue chips Lloyds Banking Group PLC (LON:LLOY) and Royal Bank of Scotland PLC (LON:RBS) – both of whom will issue third quarter numbers next week – were up 0.7% at 67.44p and 1.7% at 284.9p respectively.
Miners were also among the strongest FTSE 100 gainers as copper prices rose again, on track for a fourth weekly gain and near to three-year highs, with Antofagasta PLC (LON:ANTO) ahead 2.8% at 1,015p and Anglo American PLC (LON:AAL) up 1.7% at 1,455p.
But consumer product giants Reckitt Benckiser PLC (LON:RB.) and Unilever plc (LON:ULVR) were the two biggest blue chip fallers after disappointing updates earlier this week, losing 1.6% at 6,681p and 1.5% at 4,234.5p respectively.
11.10am: No Budget giveaways seen
Despite the UK public sector finances improving, Laith Khalaf, senior analyst at Hargreaves Lansdown says taxpayers should not expect any Budget giveaways next month.
Khalaf commented: “The deficit is heading in the right direction, helped by increasing revenues from income tax, national insurance and VAT, which underlines how reliant government finances are on UK consumers both earning money, and spending it.
“Given record low unemployment and surprisingly robust retail sales, it’s not hard to see why the Treasury is making inroads on bringing its borrowing back in line.”
But, he added: “Despite the improving fiscal outlook, we can’t expect too many giveaways in the forthcoming Budget.
“While the deficit is falling, the government still owes an eye-watering amount of money, even though low interest rates have helped to reduce the cost of servicing that debt. Given the hawkish rhetoric coming out of the Bank of England, that may be about to change.
“What’s more, the imaginary pie of future tax revenues that the Chancellor has to play with is expected to be trimmed back significantly, thanks to an adjustment to economic projections made by the Office for Budget Responsibility.”
The analyst concluded: “Finally there’s also Brexit in the mix, and the unknown effect this will have on the UK economy, and government finances. All of this means the Chancellor’s spreadsheets will tell him he doesn’t have a great deal of room for manoeuvre on Budget day.”
Among equities, the FTSE 100 index pushed higher again in late morning trading, adding nearly 18 points at 7,540.
On currency markets, the pound ticked up 0.1% against the dollar to US$1.3162 and rose 0.3% versus the euro to €1.1147.
Choppy morning for the pound GBPUSD so far - breaks the one week support and then soars back above. One week trend still down: pic.twitter.com/8fGQTpJYlO
— David Jones (@JonesTheMarkets) 20 October 2017
10.00am: Public secor finances improving
Chancellor of the Exchequer Philip Hammond today got a boost ahead of next month’s annual budget as the UK public finance’s saw the smallest deficit for any September in the last 10 years.
The Office for National Statistics said the UK public sector deficit was £5.902bn, down almost 11% compared with the same month last year - with the figures excluding state-controlled banks. That was less than the consensus forecast of £6.5bn.
UK public finances going through a sunny spell. Lowest financial YTD borrowing since 2007 (£32.5bn). On track for lower than OBR forecast. pic.twitter.com/iUVkg7H9f5
— Rupert Seggins (@Rupert_Seggins) 20 October 2017
The deficit for August was also revised down by around a billion pounds to £4.716bn.
September’s figures marked the third straight month in which the public finances performed much better than analysts had expected, even as the prospect of Britain’s departure from the European Union has weighed on the overall economy.
The latest data – coming at the end of a week which saw UK inflation top 3%, average wages lag, and retail sales drop – does little to alter expectations that the Bank of England will sanction the first UK rate hike for almost a decade before the end of the year.
On currency markets, there was little reaction, with sterling flat against the dollar at US$1.3139 and up 0.2% versus the euro at €1.1127.
Among equities, the FTSE 100 index drifted off early highs, but was still up nearly 9 points at 7,531.
8.40am: Strong start on quiet day
FTSE 100 shot up almost 30 points to 7.552 in early deals despite a quiet day in London on the corporate front.
Big cap miners lead the charge with copper titan Antofagasta (LON:ANTO) top riser, up 2.89% to 1,016p
BHP Billiton PLC (LON:BLT) gained 1.04% to 1,411p as its new chairman defended the global miner’s chief executive officer, Andrew Mackenzie after attacks from activist investor Elliott Advisors prompted speculation a change in boss was imminent.
Chairman Ken MacKenzie told reporters after his first AGM yesterday: "Any suggestion there is a set timeline around Andrew's tenure is simply false and without merit."
Shares in Dechra Pharmaceuticals PLC (LON:DPH) nudged up 0.29% to 2,081p as the veterinary products group said it had seen growth "across all of its markets" in the first quarter.
Intercontinental Hotels Group (LON:IHG) shed 0.76% to 4,068p, despite it posting what it said was a good third quarter performance.
“We have delivered a good third quarter performance; RevPAR increased by 2.3% and net rooms growth of 4.1% was our strongest since 2010,” said chief executive Keith Barr.
Thee recent hurricanes in the US had a “mixed effect”, with some hotels benefitting from the displacement of locals while others suffered from cancellations.
Gold producer Acacia Mining (LON:ACA) dropped 5.49% to 200.36p as it revealed third quarter revenue fell 40% to US$171mln from the same period a year earlier. Acacia lost US$90mln of gross revenue during the quarter, due to the impact of the earlier export ban in Tanzania.
The miner also confirmed that majority owner Barrick Gold Corporation has struck a tentative deal to resolve a dispute with the Tanzania government.
In smallcap world, Ncondezi Energy Limited (LON:NCCL) shot up 55% to 9.13p as it struck a non-binding offer with China Machinery Engineering Corporation (CMEC) and General Electric South Africa Limited (GE) for exclusive negotiations to develop and operate its integrated 300MW coal fired power project and open pit coal mine in Tete, Mozambique.
Proactive news headlines:
Jersey Oil & Gas PLC (LON:JOG) is raising up to £24mln to fund an appraisal programme at the new Verbier project as well as new exploration drilling at the follow-on Cortina prospect.The company has an 18% stake in the UK Seaward Licence P2170, in the North Sea, where Statoil is the operator
Bacanora Minerals Ltd reached another milestone in its bid to start mining lithium from its flagship Sonora project in Mexico with the receipt of environmental approval from the government
PowerHouse Energy Group PLC (LON:PHE) has hosted a two day demonstration of its waste to gas technology. The Distributed Modular Gasification (DMG) trial ran uninterrupted for 36 hours using tyre crumb as its feedstock. Syngas produced was flared as part of the demonstration.
6.30am: FTSE 100 called higher
FTSE 100 is seen reversing yesterday's losses to start higher, after mixed trading in Asia and after the US Senate approved a budget plan for 2018.
The UK's premier blue-chip index closed down almost 20 points yesterday at 7,523, after disappointing retail sales figures for September but today is called by IG Index to start 29 points higher.
Wall Street shares were mixed with the tech sector pulling the Nasdaq down 19 points at the close ahead of a vote, which sees President Trump's drive to overhaul the tax system across the pond move closer.
The Senate agreed (51-49) a budget blueprint for fiscal 2018, which allows Republicans to pursue a tax-cut package, significantly, without Democratic support.
Trump says plans to cut the tax rate to 20% from 35% would create jobs and boost wages.
The Dow Jones closed up 5.44 at 23,163, while the S&P 500 gained 0.84 at 2,562.
In Asia, the Chinese market saw slight gains but the Nikkei 225 in Japan dropped over 14 at 21,433 ahead of national polls at the weekend. Prime Minister Shinzo Abe is expected to come back into power through the Sunday vote, but the country has proportional voting, which could throw a curved ball.
Back to the UK and it's set to be a fairly quiet day in London although Brexit rumblings are likely to continue following yesterday's EU summit. In European markets, the Spanish, Catalanonia question will also feature. On the corporate front in the City, the highlight is likely to be a trading update from Intercontinental Hotels Group PLC (LON:IHG).
Analysts at Barclays reckon the Holiday Inn and Crowne Plaza owner could raise its full-year underlying earnings guidance when it reports third quarter results on Friday.
A decent performance is expected from IHG across its key regions, but particularly in Europe and China where revenue per available room is forecast to grow by 3.9% and 4.2% respectively.
Significant events expected on Friday October 20:
Trading updates: Dechra Pharmaceuticals PLC (LON:DPH); Intercontinental Hotels Group PLC (LON:IHG); Record PLC (LON:REC)
Finals: Oncimmune Holdings PLC (LON:ONC)
Around the markets (at around 6.30am):
- Sterling: US$1.3096, down 0.46%
- Gold: US$1,286.90 an ounce, unchanged
- Brent crude: US$51.48 a barrel, up 0.37
City Headlines:
- Barclays set for £200 million windfall from Shop Direct - The Times
- Rosneft boosts presence in Iraqi Kurdistan despite rising instability- FT
- Genel insulated so far from Iraqi Kurdistan dispute - FT
- GM to pay $120 million to resolve state claims over faulty ignition switches - FT
- BHP CEO says will not rush to sell U.S. shale assets - FT
- Weinstein Company board told of bid interest - FT
- Kasperksy denies its software can be used for Russian espionage - FT
- Snapchat advertising jumps 73% as companies use app to track where people are shopping - The Independent
- Xavier Rolet to step down as Boss of London Stock Exchange next year - The Telegraph
- Car Chiefs meet Chancellor as industry calls for support on new technology - The Telegraph