FTSE 100 closes down 17 at 7,487
Sterling higher versus dollar, euro
Interest rate hike expected from BoE but Fed to stand pat
FTSE 100 closed lower on Monday as the pound gained against the Euro and the US dollar, while silver miner Fresnillo (LON:FRES) was the top gainer.
The UK blue-chip benchmark closed over 17 down at 7,487, while FTSE 250 went the other way - up over 20 points at 20,166.
The pound is up 0.40% against the Euro and up 0.63% against the US dollar at the time of writing.
There was mixed data for the market to digest on Monday, which showed UK mortgage approvals last month (September) fractionally dropped while consumer credit edged higher.
A big lean on sentiment is the upcoming BoE monetary policy meeting on Thursday (November 2), where, it is widely expected that the interest rate will rise for the first time in a decade.
Expected is that this would push the base rate back up to 0.5%, where it had sat for seven years to March 2009, before it was cut to 0.25% last year in the wake of the Brexit vote.
While the Bank is under pressure to raise rates, the vote is unlikely to be unanimous among the nine voting members of the Monetary Policy Committee, reckons Oanda's Craig Erlam.
"Interestingly, despite markets strongly pricing in a rate hike – 85% as of this morning – policymakers have given the impression that they are not so convinced in recent public appearances," he suggested.
Mining giant Fresnillo added 2.69% to 1,337p on the day as the gold price firmed, to be Footsie's top gainer, while British American Tobacco plc (LON:BATS) shares lost 1.78% to stand at 4,932.6p each.
4.00pm: FTSE stays in the red
As the closing bell approaches, the FTSE is down 14 points to 7,490 on the back of a stronger pound.
Sterling is up 0.46% versus the dollar at US$1.3188 and 0.29% versus the euro at €1.1343 on the expectation that the Bank of England will announce an interest rate increase on Thursday.
Among the top risers on the FTSE, easyJet jumped after saying it would buy part of insolvent Air Berlin’s assets at Berlin’s Tegel airport for €40mln.
Kingfisher shares were lifted by a Goldman Sachs upgrade.
BP and Royal Dutch Shell gushed higher as Brent crude prices reached the US$60 per barrel mark.
HSBC, on the other hand, continued to decline in afternoon trading after it reported decline in third quarter profits on an adjusted basis due to rising expenses.
Housebuilders were still in the red, including Berkeley, Persimmon, Bellway and Taylor Wimpey amid worries an interest rate increase in the UK will hurt demand. The stocks were also hit by a Barclays downgrade ahead of the UK Budget.
3.30pm: Pound to be lifted by hawkish Bank of England remarks
Ahead of this Thursday’s Bank of England interest rate decision, ETX Capital’s Neil Wilson said: “After September’s hawkish hold, a dovish hike in November is expected with the Bank set to raise rates but sound cautious on the outlook for future hikes.”
He added: “November is the ideal window of opportunity to raise rates so that the MPC has ammunition in the event of an economic downturn to ease again.”
Wilson said sterling should rise if the Bank raises rates but the currency is also sensitive to any split vote between MPC members and any forward guidance on future hikes.
The pound would be boosted by more hawkish outlook from the Bank and a signal that this is the first of many but there is no consensus to suggest the start of a gradual tightening cycle, he said.
"In terms of the voting split, a tighter vote may be sterling negative," Wilson added. "An 8-1 split would signal confidence in the economy and therefore the possibility of further hikes in 2018, even if the official communication on this front is more cautious."
3.00pm: Goldman Sachs boss makes another dig about Brexit
Goldman Sachs boss Lloyd Blankfein has issued another veiled threat about the bank’s plans in London after Brexit.
Blankfein posted a tweet of an aerial shot of the new £350mln European headquarters in London the bank is building, saying that that filling it up remains “outside of our control” because of Brexit.
In London. GS still investing in our big new Euro headquarters here. Expecting/hoping to fill it up, but so much outside our control.#Brexit pic.twitter.com/XwrIcqwM1t
— Lloyd Blankfein (@lloydblankfein) 30 October 2017
Earlier this month he tweeted that he was in Frankfurt and expected to spend more time there in the Germany, suggesting that Goldman would move jobs out of London once the UK leaves the EU.
Goldman, like many UK-based banks, are worried about losing their passporting rights that allow them to trade freely across the EU. Businesses have called on the UK government to negotiate a two-year transition deal that would ensure they get the same benefits of the EU for short period to ease them into lift after Brexit.
2.20pm: US PCE growth supports case for December rate hike, says Berenberg
The core PCE deflator, a measure of inflation that excludes food and energy prices, has risen between 0.10% and 0.13% over the past four months following a decline in March. While the gains are modest, Berenberg expects this will support the case for an interest rate hike by the Federal Reserve in December.
“The slight firming in prices, combined with the improved economic momentum, is enough for the Fed to increase its policy rate in December,” Berenberg said.
On consumer spending data, Berenberg said the gains mark a good start for the fourth quarter and suggest continued momentum in quarterly growth consumption and the economy.
2.00pm: US consumer spending rises most since 2009
US consumer spending rose by 1.0% in September - the largest increase since August 2009 - as households in Texas and Florida replaced motor vehicles damaged by the floods caused by Hurricanes Harvey and Irma.
It compares to an unrevised 0.1% rise in August and analysts’ expectations for a 0.9% gain.
Personal Spending in the US has risen the most since 8 years, jumping 1% for the month @tEconomics pic.twitter.com/godYF0N1nC
— ADS Prime London (@adsslondon) 30 October 2017
Personal income climbed 0.4% last month, in line with forecasts, after rising 0.2% in August.
The core personal consumption expenditure deflator, the Federal Reserve’s preferred measure of inflation, rose 0.1% month-on-month and a 1.3% year-on-year. Both the monthly and yearly figures were unchanged from the August’s rate of growth and as expected by analysts.
The data comes ahead of the Fed’s interest rate decision on Wednesday when the central bank is expected to stand pat on policy. The Fed is widely anticipated to raise interest rates in December.
Meanwhile, US President Donald Trump is expected to announce a replacement for Fed Chair Janet Yellen this week with Jerome Powell among the potential candidates.
1.00pm: IFS raises forecast on UK deficit ahead of Budget
The UK deficit will reach £36bn by 2021-22, according to the IFS, more than than twice the initial official forecast of £17bn.
The raised forecast on the deficit is likley to add pressure on Chancellor Philip Hammond ahead of next month's Budget. Hammond is trying to balance between calls to raise spending and to meet fiscal targets as uncertainty over Brexit continues.
“It is hard to see how the Chancellor can both maintain the credibility of his fiscal targets and respond effectively to the growing demands for spending”, the IFS said.
12.30pm: Asda boss steps down
Asda's chief executive and president Sean Clarke will step down at the end of the year after just 18 months in the role.
Clarke will be replaced by deputy chief executive Roger Burnley, who joined supermarket a year ago from Sainsbury's.
His departure comes as the UK's largest supermarkets face rising competition from fast-growing discounters Aldi and Lidl.
12.00pm: FTSE led lower by housebuilders
The FTSE 100 fell 25 points to 7,479 in lunchtime trading as the pound strengthened ahead of an expected interest rate hike by the Bank of England on Thursday.
Sterling increased 0.47% against the dollar at US$1.3190 and rose 0.19% versus the euro at €1.1331.
Investors also weighed better-than-expected mortgage approval data from the BoE along with an increase in the European Commission’s UK economic sentiment index in October.
Company-wise, shares in easyJet flew higher after agreeing to buy part of the insolvent Air Berlin’s operations in Berlin’s Tegel airport for €40mln.
Kingfisher shares jumped after Goldman Sachs raised its rating on the stock to ‘buy’.
Going the other way, housebuilders Berkeley, Persimmon, Bellway and Redrow slumped following downgrades from Barclays along with expectations for a rate increase.
HSBC was in the red after reporting a drop in adjusted profits in the third quarter, reflecting higher operational costs.
11.30am: BoE interest rate vote unlikely to be unanimous, says analyst
The Bank of England is expected to raise interest rates on Thursday to stem rising inflation that has put pressure on household incomes. While the Bank is under pressure to raise rates, the vote is unlikely to be unanimous among the nine voting members of the Monetary Policy Committee, according to Oanda's Craig Erlam.
"Interestingly, despite markets strongly pricing in a rate hike – 85% as of this morning – policymakers have given the impression that they are not so convinced in recent public appearances," he said.
"Should they vote in favour of a hike on Thursday, I will be very surprised if the decision is unanimous."
11.00am: UK economic sentiment improves in October
UK economic sentiment improved in October on the back of a recovery in confidence in the services and construction sectors.
The European Commission’s economic sentiment indicator (ESI) for the UK rose to 110.7 from 109.2 in September.
However, retailers were the least optimistic since July 2016 with the consumer confidence indicator down to -5.5 in October from -5.2 in September amid worries about the risk of unemployment and a decline in saving intentions.
In the euro-area, the ESI rose by 0.9 points to 114.0 in October, buoyed by an increase in confidence in retail trade and construction sectors.
10.20am: Bank of England to raise rates this week, says economist
In response to the Bank of England's data on mortgages and consumer credit, Pantheon Macroeconomics said it expects the central bank will raise interest rates this week.
"At least future rate rises will have a smaller direct impact on the economy than in the past, given that the ratio of mortgage debt to incomes has fallen and most of this debt now is fixed-rate," said Pantheon's chief UK economist, Samuel Tombs.
"Even so, higher rates will be an unhelpful influence at a time when the economy still is struggling."
Households' broad money holdings failed to keep up with inflation in September for the first time since March 2012. The squeeze intensifies: pic.twitter.com/zMH7T2qES0
— Samuel Tombs (@samueltombs) 30 October 2017
9.30am: UK mortgage approvals fall to three-month low in September
UK mortgage approvals fell to a three-month low in September of 66,232 from an upwardly revised 67,232 in August, according to the Bank of England. The decline, however, was better than the 66,050 expected by analysts.
The growth rate in unsecured consumer lending dropped to an annual rate of 9.9% in September from 10.0% in August. Net consumer lending rose by £1.606bn last month.
The data comes after the BoE said UK lenders need to hold an extra £10bn of capital amid worries of rapid consumer lending and that banks had overestimated the creditworthiness of their borrowers.
8.35am: Weak start
The FTSE 100 index fell back in early trading as the pound firmed ahead of interest rate decisions from both the Federal Reserve and Bank of England later this week.
Around 8.30am, the UK blue chip index to open was 20 points lower at 7,485, retracing all of Friday’s 18.53 points advance.
On currency markets, sterling was up 0.3% versus the dollar at US$1.3160 and took on 0.1% against the euro at €1.1316 as investors positioned for what could be the first UK rate hike in over a decade and a possible further US move.
Markus Huber, trader at City of London Markets Limited commented: “Besides the FOMC meeting on Wednesday, President Trump is also expected to announce his choice for the position of the head of the FED and finally possible first arrests will be made regarding the probe if Russia interfered into the US presidential elections by collaborating with the Trump team.”
He added: “Overall sentiment remains positive and after Friday’s big gains it wouldn’t come as too much of a surprise if stocks would be consolidating a bit and at times might see some moderate profit-taking ahead of this week’s important event.”
Among the fallers in London, housebuilders took a tumble as Barclays Capital downgraded ratings across the board, cutting blue chips Persimmon PLC (LON:PSN), off 1.9% at 2,778p, and mid cap Berkeley Group PLC (LON:BKG), off 3.5% at 3,675p, both down to ‘underweight’ from ‘equal-weight.’
But the top blue chip gainer came courtesy of a broker upgrade, with DIY retailer Kingfisher PLC (LON:KGF) taking on 3.2% at 320.1p as Goldman Sachs upped its rating to ‘buy’ from ‘neutral’.
Proactive news headlines:
Europa Oil & Gas Holdings PLC (LON:EOG) is expecting to see more progress with its Irish portfolio and is looking forward to drilling at the Holmwood project onshore UK.
Cabot Energy PLC (LON:CAB) has told investors that the side-track of the 16-05 well at the Rainbow project, in Canada, has seen significantly better than expected flow rates during well testing. The side-track well is now in production, connected to the existing pipeline. It was tested for a 24 hour period, in which it yielded some 573 barrels of oil. The exit rate of the test was around 680 bopd.
Seeing Machines Limited (LON:SEE) shares drove higher early on Monday after the eye-tracking and facial recognition specialist won a new contract with a German car giant. The AIM-listed company will supply its FOVIO driver monitoring system (DMS) technology to the “premium German automotive partner” for use in its new car models, which are scheduled for mass production in 2020.
Corero Network Security PLC (LON:CNS) has secured its first SmartWall Threat Defense contract win in the Australian market; the contract is worth more than US$200,000.
Ortac Resources Ltd (LON:OTC) has raised £1.7mln before expenses from a placing of 85mln new ordinary shares at 2p per share to fund further investments in Ortac's core African assets, and has reshuffled its management, with its CEO stepping down and an executive chairman appointed. Vasillios Carellas, the company's CEO, will step down from the Ortac’s board with immediate effect and will take up the role of chief operating officer focusing on the group's promising African exploration assets. Nick von Schirnding will assume the role of executive chairman.
NetScientific PLC (LON:NSCI) said one of its portfolio companies will update the scientific community on an advance in the field of respiratory health. ProAxsis will give two poster presentations providing further data on its ProteaseTag technology.
Haydale Graphene Industries PLC (LON:HAYD) said its patent application governing the way it ‘functionalises’ wonder material graphene and other materials for commercial use has been granted in the US.This means the company’s plasma process is now protected in all its key markets, including UK, Europe, Japan, China and Australia.
Tekcapital PLC (LON:TEK) has licensed a patent developed by the Florida Agricultural and Mechanical University that could be the backbone of software for autonomously controlling cars, trucks and drones using artificial intelligence. The company, which is wrapping the intellectual property into its Guident business, says the technology may one day be used to develop an app that will dispatch vehicles to find parking spots and then retrieve them again.
Highlands Natural Resources PLC (LON:HNR) has commenced flow back operations at the Wildhorse and Powell wells at its East Denver Niobrara oil and gas shale project in Colorado. As previously announced, the Wells were hydraulically fractured 55 times each for a total of 110 intervals.
Echo Energy PLC (LON:ECHO) has confirmed it is holding talks over a potential new acquisition in South America. The company, in a statement, told investors that it is in discussions for a potential farm-in to oil and gas assets, though due to the size of the acquisition the transaction would constitute a reverse takeover and as such the company’s shares are being suspended on AIM.
Diversified Gas & Oil PLC (LON:DGOC) told investors that its acquisition of assets from Titan Energy is now wholly complete and that overall trading remains in-line with current market forecasts. The acquisition means the company now operates around 17,000 wells and it is optimising asset performance whilst reducing costs.
Thor Mining PLC (LON:THR) says it will be able to improve the economics at the Molyhil tungsten and molybdenum project in Australia, following ore sorting tests. The project was previously the subject of an economic study which ascribed to it a net present value of A$67mln.
Wolf Minerals PLC (LON:WLFE) has received permission from the Australian Securities Exchange to grant security over the Hemerdon tungsten project in return for a £10 mln extension to bridging finance offered by long-time supporter Resource Capital Funds. The total bridge finance now in place amounts to £55 mln.
Katoro Gold PLC (LON: KAT) has completed the second phase of its environmental and social impact assessment study, known as an ESIA, for the Imweru gold project in Tanzania. The National Environmental Management Council has acknowledged receipt of the Scoping Report and Terms of Reference for the execution of the final phase of the ESIA, being the detailed Environmental Impact Assessment.
Strategic Minerals PLC (LON:SML) has raised just over £1 mln via an oversUBScribed placing of shares. The money will be used to secure and then to develop the Leigh Creek copper project in Australia, which the company currently has under option.
Keywords Studios PLC (LON:KWS), the international technical services provider to the global video games industry, has completed the acquisition of VMC Consulting Corporation and Volt Canada Inc on the terms previously announced.
Green Dragon Gas Ltd. (LON:GDG), one of the largest independent companies involved in the production and sale of coal bed methane (CBM) gas in China, announced that it has progressed discussions with the majority of its debt holders to extend existing maturities to 20th November 2018.
Capital Networks has issued a research report on e-Therapeutics PLC (LON:ETX), concluding that it is an “undervalued stock with a unique approach to drug discovery”, according to analyst Riccardo Lowi.
Capital Networks has also issued a research report on Chariot Oil & Gas Ltd. (LON:CHAR), with analyst Lionel Therond concluding that he believe this is an opportune time for potential investors to revisit the equity story.
6.50am: Cautious start to a big week
The Footsie is seen opening lower despite strong showings from US and Asian markets reflecting worries over the situation in Catalonia and caution ahead of interest rate decisions from the Federal Reserve and Bank of England this week.
Spread betting firm CMC Markets expects the FTSE 100 index to open around 25 points lower at 7,480, having gained 18.53 points on Friday.
On currency markets, sterling held fairly steady versus both the dollar and the euro ahead of the latest BoE MPC meeting which is widely forecast to see the first UK rate increase in over a decade.
However economists are still not completely certain whether the Fed will sanction another 0.25% hike at the end of its two-day meeting, or whether it will wait until the last of the year on December 12-13.
With interest rates rising, lenders are the beneficiaries and one of the biggest, HSBC Holdings PLC (LON:HSBA) wraps up the ‘Big Four’ UK banks’ third quarter results season on Monday.
The global lender saw strength in its Asian operations help it post a five-fold jump in profits to US$4.6bn in the September quarter, up from US$843mln a year earlier, although was a touch light of the consensus forecast for US$4.7bn.
The 2016 numbers had been impacted by a US$1.7bn on-off loss from the sale of its Brazilian unit and adverse currency movements. Reported pretax profit from its Asian business rose by 10% to US$4bn for the third quarter of 2017.
The numbers come as time begins to run out on Stuart Gulliver’s stint as HSBC's chief executive, with John Flint - chief executive of the group's Retail Banking and Wealth Management unit - to take over early next year.
Significant events expected on Monday October 30:
Interims: HSBC Holdings PLC (Q3) (LON:HSBA)
Finals: Artilium PLC (LON:ARTA), Lok’n Store Group PLC (LON:LOK)
Production update: Glencore PLC (Q3) (LON:GLEN)
Economic data: GfK UK consumer confidence; Nationwide UK house price index; UK consumer credit/mortgage approvals; US personal income, spending
Around the markets:
- Sterling: US$1.3188, up 0.46%
- Gold: US$1,274.50 an ounce, up 0.09%
- Brent crude: US$60.33 a barrel, down 0.18%
City Headlines:
- HSBC posts huge jump in profit as Asia business grows – BBC News
- Grocers brace for verdict on Tesco’s £3.7bn cash and carry takeover – Daily Telegraph
- BT Chief Gavin Patterson expected to come under renewed scrutiny week as firm battles to recover from series of setbacks – Daily Express
- Astrazeneca and GlaxoSmithKline breach prescription medicines code – The Times
- Ofcom raps Virgin Media over three-year iPhone contracts – Daily Telegraph
- Centrica to invest in smart homes manufacturer Carbon Dynamic – Daily Express
- Bookshop chain Waterstones could be put up for sale by its Russian oligarch owner – Daily Mail
- HMV overtakes Amazon in fight for dwindling DVD and Blu-ray sales - City AM
- UBS to move 250 London staff because of Brexit – Financial Times
- China’s Fosun Pharmaceutical to buy French drug distributor Tridem – Financial Times
- Monarch owner accepts ‘moral obligation’ over repatriation costs – The Guardian
- Scotland’s ports gear up for the day North Sea oil runs dry- Financial Times
- Trump set to name Jerome Powell as favourite to replace Janet Yellen at US Federal Reserve – The Times
- Beaufort Securities and WH Ireland move into top five most popular stockbrokers for AIM-listed firms – City AM