FTSE 100 closes down six at 7,380
Carillion issues another profit warning
Comcast reportedly interested in 21st Century Fox
FTSE 100 closed around six points lower on Friday - a quiet day - as more emerged over the Brexit negotiations.
The UK blue-chip benchmark finished 6.26 lower at 7,380, while FTSE 250 ended over 52 points lower at 19,797.
Reports emerged in the late afternoon that Prime Minister Theresa May had given two weeks to offer more money for the divorce bill if there was to be hope of trade talks beginning before the end of 2017.
EU president Donald Tusk said he was ready to start the next phase of negotiations, which would cover trade, but said Britain must demonstrate more progress towards reaching an agreement on the bill and the Irish border.
In the currency markets, the pound was in a tight range, losing just 0.11% against the Euro and up 0.08% against the US dollar.
Top winner on FTSE 100 was Sky PLC (LON:SKY), which retained its position as the number one blue chip gainer throughout the day, after City broker Liberum hinted that there might be other takers for the broadcast giant aside from 21st Century Fox.
Its shares rose 4.10% to 940p.
The biggest laggard was United Utilities Group PLC (LON:UU.) after HSBC downgraded the rating to 'hold' and cut the target price to 900p (from 1000p).
They expect high inflation to hit earnings given that more than half of UU’s debt is linked to the retail price index.
FTSE 100 broadly flat..
It’s been fairly quiet on the FTSE 100 on Friday, with the index having traded in a tight range slightly above and slightly below yesterday’s close of 7,386.9.
Shortly before market close, the Footsie is broadly flat 7,387.7.
Sky PLC (LON:SKY) has retained its position as the number one blue chip gainer throughout the day, after City broker Liberum hinted that there might be other takers for the broadcast giant aside from 21st Century Fox.
Fox’s £11bn offer is currently being investigated by competition watchdogs, but recent press reports have suggested that Fox could look to actually sell the 39% stake it currently owns to wither Comcast or Verizon.
Brokers move the markets
Liberum reckons the rumours are “credible”, adding that if a deal goes through it would expect the victor look to launch a bid for the remainder of the broadcaster.
Iinvestors had become a little twitchy that a deal might not happen at all given the speculation, but analyst Whittaker disagrees.
“We still think Sky gets sold, one way or another,” Whittaker said. Shares are up 3.9% to 938.5p.
Kingfisher upgraded; United Utilties flushed out
B&Q owner Kingfisher PLC (LON:KGF) was also in demand on Friday on the back of an upgrade from mid-level Canadian bank RBC.
Analysts reckon there are now “reasons to be more cheerful”, not least an improving French housing market which has been holding back Kingfisher’s Castorama and Brico Dépôt stores across the Channel.
RBC moved its recommendation up to ‘sector perform’ and hiked its price target to 325p, above the 308.8p where the shares currently find themselves (a 2.9% gain for the day).
Water companies were being flushed out of portfolios this afternoon following a bearish note from HSBC earlier this morning.
Analysts at the bank downgraded United Utilities Group PLC (LON:UU.) to ‘hold’ and cut their target price to 900p (from 1000p) as they expect high inflation to hit earnings given that more than half of UU’s debt is linked to the retail price index. Shares are down 4.3% to 799p.
On a more general note, the bank cited industry-wide political and regulatory concerns which weighed on UU’s peer Severn Trent PLC (LON:SVT) (down 2.7% to £20.86).
Carillion pummelled (once again)
Away from the big guns, the day’s big story has focused on troubled construction services group Carillion PLC (LONCLLN).
The company – which has lost almost 90% of its value in 2017 – issued another profit warning this morning and said it would breach its banking covenants.
Those who had taken a punt on the stock after it was hammered earlier in the year have had their fingers burned, with shares down another 38.5% to 25.53p today.
2.55pm...US stocks open in the red
Like Tottenham in the 2015/16 Premier League title race, the Dow Jones has bottled it with an all-time high in sight.
It’s not looking as bad as Arsenal’s championship hopes this season though, and a decent run this afternoon could see it claim a fresh high.
As it is, the index is currently down 0.3%, or 63.4 points, to 23,395, with The Coca-Cola Company the heaviest faller – down 1.5% to US$45.86.
The Nasdaq also opened in the red, albeit ever so slightly, at 6,786.2 – a 7 point loss on Thursday’s closing price.
It was a similarly slow start on the S&P 500, which has shed 5 points, or 0.2%, to 2,580.7.
2.40pm…Nationwide warns of tough times ahead
Nationwide has said household finances are coming under greater pressure, as the lender reported a fall in profits and warned of tougher trading conditions ahead.
Total mortgage lending slipped from £17.5bn to £16.7bn, largely due to a steep drop-off in the number of buy-to-let investors following the tax changes earlier this year.
Various government initiatives including Help to Buy and historically low interest rates have seen the number of mortgages granted to first time buyers jump.
Chief executive, Joe Garner, said that a “sluggish” economy, partly a result of Brexit, weak wage growth and rising prices are straining its customers’ finances.
“Looking ahead, the UK economy should continue to grow, albeit at a slower rate due to the uncertainties around Brexit,” he added.
“Despite the recent base rate rise, borrowing costs overall remain low. However, we know that low wage growth and inflation are putting pressure on household budgets and we remain alert to signs of financial strains on consumers,” said Garner.
2.15pm...The Proactive guide to next week's Autumn Budget
With the Autumn Statement Budget now less then a week away, have a read of our in-depth guide on what Philip Hammond might mention...
READ: Budget 2017 - What to expect as the Chancellor outlines Brexit plans
2.10pm...Bankers moving out of London post-Brexit to earn less money
Get the violins out – we’ve got some bad news for bankers having to relocate outside of the Square Mile after Brexit.
Those moving from London to other European financial hubs following Britain’s exit from the EU can expect significantly lower pay packages, according to compensation consultant, Emolument.
On average, managing directors in London banks – one of the more senior roles in investment banking – can expect to take home just shy of £500,000.
That compares with ‘just’ £330,000 in Milan, £312,000 in Paris and less than £300,000 in Frankfurt. Not sure I’d get out of bed for that…
1.45pm...Jaguar testing driverless cars in Coventry
The UK’s largest car maker Jaguar Land Rover has been testing driverless cars on public roads.
The trials have been going on for a couple of weeks on a half-mile route in Coventry city centre, not too far from its UK headquarters.
Driverless cars rely on various cameras and sensors to detect traffic, pedestrians and signals, although humans can override it in emergencies.
Jaguar is up against the likes of Tesla and other big-name car manufacturers in trying to roll-out the new technology.
The UK government has backed a £20mln UK Autodrive project with the aim of promoting more widespread use of driverless cars by 2020.
@Jaguar Discovery Autonomy initiative- testing in @covcampus car park earlier. #AI #driverless #cars pic.twitter.com/tCXITqKPAz
— Turing2014 (@Turing2014) October 20, 2017
1.10pm…Just Eat shares sour on Deutsche Bank downgrade
The influential London arm of Deutsche Bank has downgraded its recommendation on the takeaway food group Just Eat plc (LON:JE.) in the wake of its £240mln takeover of HungryHouse.
In a note entitled 'Just Full', Deutsche went to ‘hold’ from ‘buy’ on the stock while keeping its target price fixed at 830p a share.
In early afternoon trade the stock was down 3.6% at 794p.
The German investment bank also trimmed its underlying earnings forecasts, which are now 6-7% below consensus, to reflect the investment Just Eat new boss Peter Plumb may make in order to expand.
“We think extension into take-away delivery, more alliances with branded restaurants and geographic expansion are all possibilities,” Deutsche said in a note to clients.
“Although these moves would be positive growth drivers in the medium to long term, they could come at the expense of near term margins.”
There’s a way to get your dinner, without moving from your seat. If you believe in magic, tonight you can Just Eat. #MagicIsReal ✨ pic.twitter.com/SXN4jhEE5a
— Just Eat UK (@JustEatUK) October 28, 2017
12.30...US markets set for mixed open
Strong gains yesterday helped the Dow to recover most of the losses it endured earlier on in the week and leaves it within touching distance of all-time highs today.
“While that rise will have given some investors’ confidence that the recent stumble has passed, an inability to hold onto these today still leaves markets vulnerable to a broader pull-back,” said OANDA’s senior market analyst Craig Erlam.
“A failure to make a new high is typically another warning that the trend is weakening, especially coming after a month in which it has fallen into a sideways trend, rather than continuing its gradual ascent.”
The Dow isn’t forecast to hit new highs at the bell though, with spread bet firms expecting the index to drop 22 points to 23,436.
As for the broader S&P 500 that is seen 1.5 points down at 2584.1, although the Nasdaq looks like it could open in the black, with spread bet firms expecting it to rise 2.3 points to 6,340.1 early on.
12pm...What the show was supposed to be about...
Tesla Semi pic.twitter.com/7VLz7F46Ji
— Elon Musk (@elonmusk) November 17, 2017
11.55am … Tesla’s new US$200,000 electric supercar
It was billed as a launch for a new electric truck. But Tesla Inc’s (NASDAQ:TSLA) Elon Musk, always the showman, sprang a major surprise on the audience of converted petrol-heads, journalists and geeks gathered at the SpaceX Center, Hawthorne, California last night.
For out the back of a trailer, pulled by its new giant battery-powered Tesla Semi, emerged the revamped Roadster 2.0, which Musk said was the fastest production car ever, “period”.
Musk thinks his new baby will radically shake-up the premium end of the market.
“The point of this is just to give a hardcore smackdown to gasoline cars,” he said.
“Driving a gasoline sports car is going to feel like a steam engine with a side of quiche.”
0 to 100 km/h in 1.9 sec pic.twitter.com/xTOTDGuwQj
— Elon Musk (@elonmusk) November 17, 2017
11.50am ... Beware the Carillion horror show
“The Carillion horror show continues," says Hargreaves Lansdown equity analyst Nicholas Hyett.
"Some sort of recapitalisation was inevitable, but a possible debt for equity swap, with debt even higher than the group had anticipated, is probably as bad as anyone would have guessed.
"The group has made some progress on asset sales, and it sounds like some cost savings are being made. It’s not what the group expected though, and it’s clearly not enough. It’s also probably irrelevant given the state of the balance sheet, with net debt already many multiples of the group’s market capitalisation.”
Er, Carillion. Bottom picking is a dangerous thing.https://t.co/7KPoNbndcA
— Miserly Investor (@miserlyinvestor) November 17, 2017
11.45am … Lloyds and HSBC to come out on top in upcoming BoE stress tests
Lloyds Banking Group PLC (LON:LLOY) and HSBC Holdings (LON:HSBC) are likely to perform better than other UK banking peers in the upcoming stress test results of 2017, according to analysts at JP Morgan.
Royal Bank of Scotland Group PLC (LON:RBS) will probably remain weaker in the Bank of England’s stress tests due to litigation risks, the broker added.
The stress tests, which examine how well banks are placed to handle difficult economic situations, will be published on November 28.
RBS is facing rising misconduct costs and provisions in relation to the mis-selling of mortgage-backed securities in the US in the lead up to the 2008 financial crisis. It is awaiting a fine by the US Department of Justice (DoJ), which is expected to come in at about £6bn.
The bank is also still yet to put its LIBOR and foreign exchange mis-selling scandals to bed with lawsuits ongoing.
Lloyds has also been tackling misconduct issues, including a payment protection insurance mis-selling scandal and a lawsuit brought against it by shareholders over its ill-fated takeover of HBOS in 2018.
However, JP Morgan thinks Lloyds is best positioned to manage higher capital requirements.
11.35am ... Carillion to breach banking covenants
Carillion PLC (LON:CLLN) was the biggest faller in London after the troubled construction services firm issued yet another profit warning.
The company – which has lost 90% of its value so far in 2017 – said it will breach its banking covenants as it downgraded profit forecast again and warned of a mounting debt pile.
Profits will be “materially lower” for the year to 31 December due to the failure to improve margins across UK support service contracts, delays to the disposal of certain public private partnerships and to the start of a significant project in the Middle East.
Full year average net debt is expected to rise to between £875mln and £925mln.
Shares plunged 33.6% to 27.5p on Friday.
11.15am ... Sky boosted by Comcast chatter
Sky PLC (LON:SKY) was the big riser among the blue chips after a City broker hinted that there might be other takers for the broadcast giant aside from 21st Century Fox.
Fox’s £11bn offer is currently being investigated by competition watchdogs, but recent press reports have suggested that Fox itself could be the subject of a takeover bid.
'Comcast will want all of Sky'
Liberum reckons the Comcast rumours are “credible”, adding that it would expect NBCUniversal to want to own more than the 39% stake Fox currently has in Sky.
“We still think Sky gets sold, one way or another,” analyst Ian Whittaker said. Shares are up 3.1% to 931p.
B&Q owner Kingfisher PLC (LON:KGF) was also in demand on Friday on the back of an upgrade from mid-level Canadian bank RBC.
Analysts reckon there are now “reasons to be more cheerful”, not least an improving French housing market which has been holding back Kingfisher’s Castorama and Brico Dépôt stores across the Channel.
RBC moved its recommendation up to ‘sector perform’ and hiked its price target to 325p, above the 304.5p where the shares currently find themselves (a 1.5% gain for the day).
Those two gainers weren’t enough to push the FTSE 100 into the black though, with the blue chip index currently down 7.4 points to 7,379.5.
The pound’s strength against the dollar for the second day in a row isn’t helping the Footsie as it makes companies’ dollar-denominated earnings worth less when translated back into sterling.
One pound will get you US$1.321 at the moment – a 0.14% rise.
HSBC bearish on United Utilities and water companies in general
Private hospital group Mediclinic International PLC (LON:MDC) was weighing once again, dipping 2.9% to 561.5p.
Yesterday’s interim results revealed a fall in first-half profits with the group hit by weakness in its Middle East and Swiss divisions, while news that it was considering reviving its interest in Spire Healthcare Group PLC (LON:SPI) was met with a shrug of the shoulders.The top faller spot went to United Utilities Group PLC (LON:UU.) though after the UK’s largest listed water company was downgraded by HSBC ahead of its first half results next week.
Analysts at the bank moved their rating to ‘hold’ and cut their target price to 900p (from 1000p), as they expect high inflation to hit earnings given that more than half of UU’s debt is linked to the retail price index. Shares are down 4.3% to 799p.
HSBC weren’t exactly bullish on the water industry full stop, noting political and regulatory concerns. That weighed on UU’s peer Severn Trent PLC (LON:SVT), which is down 2.3% to £20.96.
9am ... Carillion hammered (again)
The FTSE 100 fell 23 points in early trade to 7,364.09 as the pound clawed back some of the ground lost to the dollar in recent weeks and months. Weaker sterling has put a pep in the stride of the index’s big dollar earners. So the greenback’s slide, amid growing worries over the Trump administration’s tenure, acted as a bromide Friday. Top of the fallers was United Utilities (LON:UU.), which was off almost 3% in the wake of the downgrade by HSBC. Severn Trent (LON:SVT), with a decline of 1.9%, was dragged with it. Those sadly deluded investors who bought into Carillion (LON:CLLN) hoping for a massive rebound got their fingers well and truly burned. For shares in the accident-prone civil engineer fell a further 30% after the company once again sound the earnings alarm. In the year to date, the stock has seen 87% wiped from its value.
Proactive news headlines
Greatland Gold PLC (LON:GGP) says global mining giant Newmont is currently evaluating exploration data gathered from its Ernest Giles project in Australia in the past six months. An announcement of the results is expected within a few weeks.
A subsidiary of Bushveld Minerals Limited (LON:BMN), Lemur Resources, has appointed key contractors to manage and oversee a bankable feasibility study for the Imaloto coal and power project in Madagascar.
Galantas Gold Corp (LON:GAL) has announced third quarter financial results. The company booked a loss of just over C$1.4 mln during the nine months to end September, and finished the quarter with just over C$700,000 in the bank. However, a fundraising announced earlier this week could add as much as C$1.4 mln to the company's coffers, enabling it to press ahead with development of the Omagh gold mine in Northern Ireland.
Seeing Machines Limited (LON:SEE), the technology firm whose eye-tracking software is used in semi-autonomous vehicles, expects demand for its Driver Safety System (DSS) to pick up as the mining sector continues to recover. DSS boxes, found in giant trucks that transport ore around large open-cast sites, are used to measure the alertness of the driver.
African Potash Ltd (LON:AFPO) aims to raise £400,000 to set up an blockchain-based payment system for its fertiliser distribution business.A review of its strategy and corporate branding in Africa is also underway to assess how the use of blockchain will change its supply chain and eVoucher scheme.
Pizza franchise owner DP Poland (LON:DPP) has opened its fiftieth store in the country, an event hailed as a major milestone by chief executive Peter Shaw.The first store opened in Warsaw in 2011 but DPP now has outlets in 21 cities.