FTSE 100 index up 19 points at 7,505
Sterling continues to retreat ahead of BoE meeting
RBS shares rise after Q3 results but IAG is punished
US GDP rises more than expected
The Footsie's rally ran out of steam towards the end but the blue-chip index still finished comfortably in positive territory.
The FTSE 100 index closed at 7,505, up 19 points.
House-builders were a drag on the index, with Berkeley Group PLC (LON:BKG) casting a shadow over the sector as founder Tony Pidgley and chief executive Rob Perrins sold more than 1mln shares between them.
Third quarter results from British Airways owner IAG (LON:IAG) got the thumbs-down as market makers pushed the share price down 6.9%.
Contract caterer Compass Group PLC (LON:CPG), up 2.4% at 1,638p, was one of the better performers after RBC Capital Markets upgraded the stock to 'outperform' from 'sector perform' and bumped up the target price to 1,750p from 1,591p.
4.00pm: FTSE holds onto gains
The FTSE 100 is up 12 points to 7,499 as investors digest better-than-expected US GDP data, assess political uncertainty in Spain and look ahead to next week’s Bank of England interest rate decision.
US GDP rose more than expected in the third quarter, raising bets the Federal Reserve will raise interest rates in December.
Closer to home, the BoE is widely expected to raise rates at next Thursday’s policy announcement but weak CBI retail sales placed doubts on the central bank taking action.
Uncertainty on UK interest rates has seen the pound trade in negative territory throughout Friday’s session. Sterling is down 0.31% versus the dollar at US$1.3120.
Spain was also facing uncertainty over its political future after Catalan’s regional parliament voted to declare independence from the nation.
Company-wise, Shire’s shares jumped after its third quarter results beat expectations.
RBS held onto gains after reporting a third consecutive quarter of profits.
Compass was still higher after an upgrade by RBC Capital.
International Consolidated Airlines remained a top faller after reporting a slowdown in passenger unit revenue growth in third quarter.
Berkeley Group slumped after founder Tony Pidgley and chief executive Rob Perrins sold more than 1mln shares in the housebuilder between them to net almost £50mln.
3.40pm: Spain approves application of Article 155
The Spanish Senate has approved the first-ever application of Article 155 of the Spanish constitution, meaning the government of Catalan President Carles Puigdemont could be removed from power on Saturday.
The move came moments after Catalan voted to declare independence from Spain and could see the government call new regional elections.
Article 155 gives the central government the power to impose direct rule over the Catalan.
3.30pm: No pain yet but tensions could rise after Catalan vote
There seems to be no panic yet in Spanish markets after Catalan's regional parliament voted to declare independence from Spain but tensions look likely to escalate, said ETX Capital's Neil Wilson.
The IBEX is down more than 1.5% on the day but remains around 250 points clear of the early October trough, he noted.
"Indeed today’s losses only take it back to where was before the ECB’s dovish taper announcement spurred a risk rally across European equities. At pixel time the IBEX was trading at 10175, around 65 points above where it traded at 10:30 yesterday morning," he said.
"Catalan-based banks are leading the sell-off predictably enough, with Banco de Sabadell and CaixaBank down 4-5%, although they too are off the day’s lows."
IBEX heading south, but not yet past month lows pic.twitter.com/CRSCzFqQbz
— Neil Wilson (@neilwilson_etx) 27 October 2017
Wilson added that while the vote is technically illegal and Madrid has already imposed direct rule on Catalonia, the declaration is more than merely symbolic. It could lead to social unrest and could have implications for the Catalan economy, he said.
"This could hit demand and we have already seen Spain dial down its expectations for growth this year as a result of the crisis. With both sides leaning towards extremes, things could get rockier for investors.”
2.40pm: Catalan regional parliament declares independence from Spain
The Catalan regional parliament has voted to declare independence from Spain.
The move was backed 70-10 in a secret ballot and came as Spain’s Prime Minister Mariano Rajoy asked the senate to approve the government’s request for “exceptional measures” to impose direct rule on Catalonia following its referendum on independence.
The Catalan coalition Junts pel Si and their allies of the far-left CUP party have submitted a proposal to "establish the Catalan Republic as an independent and sovereign state of democratic and social rule of law."
The Spanish Senate in Madrid was to vote on Friday on whether to implement Article 155 of the constitution. Implementing Article 155 could see the central government remove the regional government, install a technocratic government and call new regional elections.
The Catalan Parliament has voted to declare independence from Spain pic.twitter.com/RolsTH47Mp
— Sky News (@SkyNews) 27 October 2017
2.10pm: US GDP beats forecasts
The US economy rose more than expected in the third quarter despite two hurricanes that affected household spending, according to the Commerce Department.
Gross domestic product rose at an annual rate of 3.0% in July through September after a 3.1% rise in the second quarter, exceeding forecasts of 2.6%. An increase in inventory investment and a smaller trade deficit offset the impact of hurricanes Harvey and Irmam which hit Texas and Florida in last August and early September.
The data pushed the dollar higher, rising 0.57% versus the pound, 0.22% versus the yen and 0.43% versus the euro.
Jacob Deppe, head of trading at online trading platform, Infinox, said had construction and consumer spending not been disrupted by hurricanes Irma and Harvey, the GDP figure could have been even higher and "almost certainly" would have surpassed the second quarter’s annual growth figure of 3.1%. The storms caused losses of US$121bn in privately owned fixed assets and $10.4bn in government-owned fixed assets, the Commerce Department said.
“The question now is whether the Federal Reserve is moving too slowly? Has it been caught off guard by the Trump effect?," Deppe said.
“Markets will probably look past the GDP figure quickly as it moves into a political slogan, the focus will soon move back onto Trump and Tax reform."
He added: "There looks to be no reason for the US Federal Reserve to back off from an interest rate hike in December as planned, especially with core Consumer Price Inflation rising to 1.7% in September."
US stocks are mixed in early trading with the Dow Jones Industrial Average up 71 points, the S&P 500 up 3 points and the Nasdaq down 7 points.
US GDP Grew 3% In Q3 & 3.1% In Q2. Best Back-To-Back Showing Since 2014 https://t.co/gVG53y8aSY pic.twitter.com/FjUYHPyQsE
— LiveSquawk (@LiveSquawk) 27 October 2017
1.18pm: US futures point to higher open
US futures are pointing to a higher open on Wall Street, buoyed by better than expected earnings reports after the close last night.
The S&P 500 is up 5.90 points, while Dow Futures are up 33, and Nasdaq is up over 37 ahead of the regular session.
"We’ve seen a bit of a wobble in US equity markets this week following what was a very steady climb in previous weeks," noted Craig Erlam, market analyst at Oanda.
"It’s been a big week for earnings but focus today will temporarily shift back to the economic data, with fewer companies reporting and GDP figures for the third quarter being released."
1.05pm: BoE rate hike not a done deal, says Hargreaves
The Bank of England is widely expected to hike interest rates next week but it is not a done deal, said Hargreaves Lansdown’s Laith Khalaf.
“The market looks to have got ahead of itself by treating a rate hike on Thursday as a done deal - little has changed in the economic data since the last decision, when seven out of nine members of the committee voted to keep rates on hold,” Khalaf said.
“That’s not to say there definitely won’t be a rate rise, but the decision is probably more finely balanced than markets are currently acknowledging. There is therefore scope for disappointment come Thursday, so a fall in sterling and a gilt rally are on the cards if a rate rise fails to materialise.”
Khalaf said it wouldn’t be too much of a shock to see rates held at 0.25% but the Bank is under immense pressure to raise rates as inflation outpaces wage growth due to a weaker pound.
12.30pm: Brexit exodus of jobs looking more unlikely, says UBS boss
UBS boss Sergio Ermotti said its Brexit contingency plan to move 1,000 of London look “more and more unlikely” as the company reported a 14% increase in third quarter profit.
Ermotti said "regulatory and political clarifications" had reduced the likelihood of a mass exodus of jobs from the City after the UK leaves the EU.
“Our target is to keep as many people as we can in London,” he said, according to the FT.
His remarks came as the bank reported net attributable profit of 946mln Swiss francs despite a weaker performance from its wealth management business in the Americas and personal and corporate banking.
Other banks looking to move jobs out of London amid worries that Brexit will mean the loss of passporting rights that allow financial businesses to sell services freely in Europe, include HSBC and Goldman Sachs.
12.00pm: Weak sterling boosts FTSE 100
The FTSE 100 rose 18 points to 7,505 as the pound weakened amid uncertainty over whether the Bank of England will raise interest rates next Thursday.
Sterling fell 0.52% against the dollar to US$1.3092 and 0.24% versus the euro to €1.1268.
“It seems that yesterday’s truly dismal retail figures from the CBI – which, in October, showed the sharpest decline since the recession – have helped spark some late in the week jitters about whether or not the Bank of England will raise rates next Thursday,” said Connor Campbell, financial analyst at Spreadex.
Afternoon Market Comment: Miserable morning for pound and euro as dollar awaits US Q3 GDP... https://t.co/tx8URSSctD
— Connor Campbell (@ConnorSpreadex) 27 October 2017
Contract catering, services and property giant Compass Group was a top riser after RBC Capital raised its stance on the shares to 'outperform' from 'sector perform' and lifted the target price to 1,750p from 1,530p (current price: 1,628p).
Royal Bank of Scotland was also on the front foot after delivering its third consecutive quarter of profits.
On the downside, International Consolidated Airlines shares flew lower after reporting a slowdown in passenger unit revenue growth in third quarter.
Berkeley Group was under the cosh after founder Tony Pidgley and chief executive Rob Perrins sold more than 1mln shares in the housebuilder between them to net almost £50mln.
11.10am: IAG the biggest FTSE 100 faller
British Airways owner International Consolidated Airlines has moved to the bottom of the FTSE 100 despite reporting better-than-expected third quarter profit and raising its full year guidance slightly. Investors seemed concerned about the easing of passenger unit revenues and risks stemming from economic uncertainties.
George Salmon, equity analyst at Hargreaves Lansdown, said IAG's more premium brands are at greater risk if the economy takes a turn for the worse.
"In a downturn, business class sales tend to dry up faster than demand for cheap holidays, while the group’s significant fixed costs have to be paid whether the planes are full or not," he said.
Shares are down 4.6% to 639.50p
10.40am: CMA launches investigation into hotel booking websites
Hotel booking websites are to be investigated by the UK Competition and Markets Authority amid worries about misleading consumers.
The UK watchdog said it was concerned about the way hotel booking websites presented information to consumers, including the way discounts are applied and how hotels are ranked in search results.
The CMA said it would investigate so-called "pressure selling" where consumers feel rushed into making a booking decision based on information displaying how many people are looking at the same room, how many rooms are left or how long a price will be available.
The regulator did not name any sites in its investigation but some of the leading operators include Trivago, Expedia and Booking.com.
9.30am: RBS expected to report 2017 loss
Royal Bank of Scotland's shares are higher after reporting a third consecutive quarter of growth but analysts expect misconduct costs will eat away at 2017 profits.
"RBS faces the indignity of suffering a tenth year without a profit, though this really all depends on the timing and size of the fine that’s coming from the US Department of Justice," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"The fact the bank has said it expects to be profitable next year suggests RBS is bracing for a pretty imminent rap on the knuckles."
The pending DoJ fine relates to the mis-selling of US mortgage-backed securities in the lead up to the 2008 financial crisis.
8.50am: Positive start
The FTSE 100 index pushed higher at the end of a positive week, extending yesterday’s rally from Wednesday’s rogue falls, led by gains from Royal Bank of Scotland PLC (LON:RBS) as its third quarter updates soothed some of the sector nerves.
Around 8.45am, the UK blue chip index was nearly 23 points higher at 7,509 having gained 39 points yesterday after a 79 point drop on Wednesday, on course for about a 3% advance over the week.
Equities were helped by a further retreat by the pound on some caution ahead of next week’s Bank of England monetary policy decision, losing 0.4% against the dollar to US$1.3095 and 0.2% versus the euro at €1.1267.
Attention this morning was on corporate news, with a splurge of tech faints releasing results after-hours in the US including Amazon, Google-owner Alphabet and Microsoft, although in London it was the banks which again were the focus.
After slightly disappointing numbers so far this week from Lloyds Banking Group PLC (LON:LLOY) and Barclays PLC (LON:BARC, majority state-owned lender RBS pulled an iron out of the fire today as cost-cutting helped it reported a third consecutive quarter of profits.
The bank said it attributable profit in the third quarter to 30 September was £392mln, down from £680mln in the second quarter but up from a £469mln loss in the year-ago period.
Neil Wilson, senior market analyst at ETX Capital, commented: “Really this looks a positive continuation of what was evidenced in H1. Heavy cost cutting is working on the bottom line while fewer conduct charges helps too. “
However, he added: “More progress, but no update on the DoJ investigation and the spectre of GRG still leaves a question mark over whether the bank really can return to profitability next year.”
Still, RBS shares topped the early FTSE 100 gainers, adding nearly 3% at 289.3p.
Going the other way, however, was British Airways and Iberia owner International Consolidated Airlines Group PLC (LON:IAG), which was the biggest blue chip casualty down 4% at 643p after its third quarter update failed to please despite the firm expecting full year profits to rise by nearly 20% this year .
Analysts at Liberum Capital said that the consensus predictions for full-year profit were already pricing in strong double digit growth, and that the passenger unit revenue trend was weaker than at German rival Lufthansa AG.
Proactive News Headlines:
Kibo Mining PLC (LON:KIBO) has landed an environmental and social impact assessment (ESIA) certificate for the Mbeya coal project and the Mbeya power generation project in Tanzania. The ESIAs represent integral elements of the approval process for the company’s proposed Mbeya coal to power project (MCPP), the company said, and the award is seen as a ‘further milestone’ in the critical energy project.
A continued increase in orders for Symphony Environmental Technologies PLC's (LON:SYM) plastic additives in Saudi Arabia means the firm expects pre-tax profit for 2017 to be " significantly higher than current market expectations".
ReNeuron Group PLC (LON:RENE) has been awarded a further grant by the Welsh Government to advance its emerging exosome therapy platform.
Online merchandising specialist ATTRAQT Group PLC (LON:ATQT) told investors it now expects revenues to be below previous expectations but still showing organic growth, while its sales pipeline remains strong. The revised forecasts come after a review, at management's request, following Eric Dodd's appointment as finance chief at the beginning of September.
SDX Energy Inc (LON:SDX, CVE:SDX) told investors that drilling is now underway on the KSR-15 well at the Sebou project area in Morocco. KSR-15 is a development well that will take 21 to 30 days to drill and complete, prior to a flow test and connection to existing production facilities (with those operations expected to take up to 30 additional days).
Bushveld Minerals Limited (LON:BMN) has issued a revised competent person's report (CPR) for the Mokopane tin project in South Africa, ahead of the spin-off the group's tin assets into the new AIM listing AfrTin. It includes mineral resource estimates for the Groenfontein deposit and the Zaaiplaats deposit.
NetScientific PLC (LON:NSCI) portfolio company ProAxsis has signed a clinical trial partnership with National Jewish Health, the US's leading respiratory hospital. ProAxsis will work with the hospital on validation of its ProteaseTag point-of-care technology.
Kin Group PLC (LON:KIN) has explained the decision to consolidate its shares ahead of a fund raise and return from suspension on AIM. “The directors recognise that having over 125 billion shares in issue might create market stability issues.” Approval is now being sought for the shares to be consolidated on the basis of 5,000 into one.
6.40am: Strong US tech earnings to help
FTSE 100 is called to open a shade higher after Asian stocks rose overnight in the wake of strong US tech earnings.
The UK benchmark, alongside other European indices, closed higher on Thursday, adding over 39 points at 7,486.
Today, spreadbetters at IG Index are forecasting it will open its account almost four points higher.
New York stocks closed higher, apart from the Nasdaq, and after the bell, tech titans Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL) and Microsoft Corp (NASDAQ:MSFT) reported blistering quarterly numbers.
E-commerce giant Amazon saw shares rise almost 8% and the share gains for the three combined added an eye-watering US$80bn in market value in the first hour or so of extended trading.
In Asia, the Nikkei 225 later added 227 points at 21,967, while the Shanghai Composite Index gained 9.55 at 3,417.
For a Friday, the diary looks fairly busy on the corporate and data front. In the afternoon, traders will mull the US advance GDP (gross domestic product) reading, after what was a dull day for data yesterday across the pond.
Consensus for GDP (the total value of all goods and services) is for a read of 2.5%, compared with the previous report of 2.6%.
Banking results week will be wrapped up in London today with the release of tax-payer majority owned Royal Bank of Scotland Group PLC (LON:RBS) with a third quarter trading update, sure to be closely watched.
The lender posted its first half-year profit in three years this summer as it cut costs as part of its ongoing restructuring.
Also reporting is IAG (LON:IAG), owner of British Airways, which unveils its third quarter amid a tough time for the sector generally. The stock is up 47% year-to-date, helped by its focus on long-haul routes and the corporate market.
Meanwhile, the tumultuous events in Spain are also likely to attract headlines and the attention of the EU as the Spanish Senate are likely to vote to impose direct rule on the region of Catalonia.
The region's president Carles Puigdemont yesterday decided not to run a snap election in Catalonia.
Significant events expected on Friday 27 October:
Trading updates: Berendsen PLC (LON:BRSN), Elementis PLC (LON:ELM), Hastings Group Holdings PLC (LON:HSTG), Inchcape PLC (LON:INCH), Royal Bank of Scotland Group PLC (LON:RBS), Shire PLC (LON:SHP), International Consolidated Airlines Group PLC (Q3) (LON:IAG)
Interims: System1 Group PLC (LON:SYS1), Berendsen (LON:BRSN)
Economic data: Nationwide UK house prices; University of Michigan US consumer sentiment report
Around the markets:
- Sterling: US$1.3120, down 0.31%
- Gold: US$1,2689.28 an ounce, up 0.0818%
- Brent crude: US$59.89 a barrel, up 0.99%
City Headlines:
- Alphabet writes new chapter as its shares pass $1,000 - The Times
- Passenger growth helps Heathrow profits take off - The Times
- Connect delivers mixed news as 340 jobs are cut - The Times
- Twitter closes in on first ever profitable quarter as it adds 4 million new users - The Independent
- Merlin Entertainments set to build £265 million Legoland in New York - The Independent
- Uber teams up with Barclays to launch visa credit card offering digital reward schemes - The Independent
- Network companies under scrutiny for rising U.K. electricity prices - FT
- Iran expects to sign more than $20 billion of energy contracts in 2018 - FT
- Saudi Aramco buys stake in Rotterdam oil terminal from Gunvor - FT
- Bayer sales decline as consumer healthcare drags - FT
- Bloodhound supercar passes first test towards 1,000mph - FT
- Weinstein company scrambles for alternate funding - FT
- Alarm sounds over state of U.K. high street as sales crash - The Guardian
- Paddington Bear to front M&S Christmas advertising campaign- The Guardian
- Carillion locked in £200 million row over contract to prepare Qatar for 2022 FIFA World Cup - CITY AM