FTSE 100 ends positively; FTSE 250 down
UK unemployment rises unexpectedly
Glencore top Footsie riser
AA and First Group shares breakdown
FTSE 100 ended the day in positive territory bolstered my miners, a weaker pound, and earnings from Lloyds (LON:LLOY).
The premier UK index closed up around 24 points at 7,281.
The FTSE 250, however, fared less well, shedding around 14 points at 19,788.
In the currency markets, sterling was down 0.19% against the Euro and off 0.36% against the US dollar.
Top gainer on Footsie was commodities titan Glencore plc (LON:GLEN), which added 5.24% to 404.55p.
Meanwhile, on the losing front, Shire Plc (LON:SHP) lost 2.62% to 2,992p
David Madden, at CMC Markets, said: "The London market did a U-turn from yesterday which was held back by BHP Billiton and HSBC. Whereas today impressive results from a bank and miner drove the index higher."
3:45 pm: FTSE 100 set to finish Wednesday positively as Lloyds rises over 3%
The FTSE 100 looks set to finish Wednesday positively, up 32 points or 0.44% trading at 7,279, with Lloyds Banking Group Plc (LON:LLOY) and its financial result providing the day’s stand-out highlight.
Lloyds shares advanced 2.35p or 3.46% changing hands at 70.20p thanks to its promise of increased pay-outs to shareholders whilst the bank released its financial results.
In its final results, Lloyds reported its highest pre-tax profit since 2006 but it fell short of market forecasts. The bank posted a statutory profit of £5.3bn for the year to the end of December 2017, up 24% on 2016, a final dividend of 2.05p per share was recommended by the board, bringing the total for the year to 3.05p, compared to 2.55p in 2016.
Ken Odeluga, analyst at City Index, described Lloyds’ results as “the clearest signs seen for years that it’s firing on all cylinders”.
And whilst the analyst noted that ‘conduct-related costs’ (those related to PPI for example) was a material drag, nonetheless, he said shareholders are welcoming the lack of flashy moves in Lloyds’ new three-year plan.
“One tacit message it conveys is that as CEO António Horta Osório enters his seventh year at the helm, he is still not tempted to kick-start faster growth by taking on more risk,” he said in a note.
Investors are now looking to Barclays, which reports its results tomorrow, and like Lloyds, the bank is facing some large exceptional items which are going to drag down its reported profits for 2017, one of which is a £1bn charge to profits thanks to President Trump’s US tax reforms.
Like Lloyds, Barclays may also face further PPI charges, with PPI costs for 2017 to come to at least £700mln, taking Barclays’ total PPI bill to £9.1bn.
Given the narrative through Lloyds’ results day, the question may perhaps be what Barclays will do about its dividend.
2:45 pm: Bank of England economist said rates could rise faster
The Bank of England’s chief economist Andy Haldane has said there’s a chance that the British central bank would need to raise rates faster to bring inflation under control.
"I think there is the potential for greater than expected momentum in both global and UK growth and inflation," Haldane wrote in a report to the UK parliament.
"In my view, this would put the balance of risks to the path of interest rates necessary to return inflation sustainably to target to the upside."
It comes on the day that Bank of England governor Mark Carney testimony to the Parliament Treasury Committee.
2:15 am: FTSE 100 turns positive as investors on both sides of AtlAntic speculate on rates
The FTSE 100 turned positive into the afternoon as Wall Street futures pointed to improved trading on the other side of the AtlAntic.
In New York, the S&P 500 and Nasdaq were both indicated to start positively, while the Dow Jones is seen to be only slightly lower.
London’s blue-chip benchmark was up 17 points, or 0.24%, to trade at 7,264.
British investors are now looking to Bank of England governor Mark Carney, who testifies to the the Parliament Treasury Committee.
That testimony will follow this morning’s unexpected increase in UK unemployment, and onlookers will wAnt to know what this may mean for the central bank’s plans for interest rates.
“The testimony could offer a rare opportunity for investors to assess how committed the Bank of England is to raising U.K interest rates this year,” Lukman Otunuga, analyst at FXTM.
“With the Pound quite sensitive to monetary policy speculation, comments from Carney and co. during this afternoon’s testimony have the ability to create fireworks.”
Interest rates are the focus in New York too, ahead of Federal Reserve meeting notes which are expected to provide cues in regards to the likelihood and timing of rate rises.
Even before the release of the minutes, speculation was building.
JUST IN: Fed's Harker says that two rate hikes this year are 'likely appropriate' pic.twitter.com/JFqg5pvRLR
— Reuters Business (@ReutersBiz) February 21, 2018
12:30 pm: Bitcoin and Ethereum trading with relative stability
There was some relative stability in the cryptocurrency markets on Wednesday, in as much as the price of Bitcoin moved be less than 2%.
Bitcoin was down US$198.25 or 1.77% to trade at US$11,010, meanwhile, the Ethereum digital currency gained US$4.49 or 0.5% to US$897.45.
Elsewhere, however, the Ripple XRP dropped 6.25% to US$1.07 per token.
11:45 am: FTSE 100 stuck on back foot, Lloyds Banking Group rises on pay-out promises
London’s FTSE 100 struggled to get off the back foot, even as Lloyds Banking Group PLC (LON:LLOY) rallied after apparently boosting its investor appeal.
At 7,233, the blue-chip index was down 13 points or 0.18%.
Shares in the black-horse bank were up 1.3p or 1.9%, changing hands at 69.16p. It was plainly the main event for equity traders after the bank’s promise of greater shareholder pay-outs distracted from profits that missed forecasts.
Barclays PLC (LON:BARC), was down 0.65p or 0.32% at 200.4p, meanwhile, Royal Bank of Scotland Group PLC (LON:RBS) shares were practically unchanged.
HSBC Holdings PLC (LON:HSBA) bounced back after yesterday’s disappointment, gaining 6.4p or 0.88%, and London’s other Asia-focussed bank Standard Chartered PLC (LON:STAN) added 4p or 0.49% to 824.5p.
In the mining sector, BHP Billiton PLC (LON:BLT) shares extended the declines, down 1.95% to 1,461p, as a double broker downgrade followed Tuesday’s results.
Deutsche Bank has cut its stance on BHP to ‘hold’ from ‘buy’, reducing the target price to 1,700p from 1,900p, citing valuation grounds. Meanwhile, Citigroup cut the rating to ‘neutral’ from ‘buy’ while leaving the target unchanged at 1,550p.
Rio Tinto PLC (LON:RIO) followed BHP (its closest peer) with its share price declining 47p or 1.18% to 3,943p.
In the sector, Glencore PLC (LON:GLEN) shares advanced 15p or 4% trading at 400.11p after the FTSE 100-listed firm reported its strongest-ever full-year performance, with underlying earnings just beating market forecasts.
The miner and commodities trader said its full-year adjusted underlying earnings (EBITDA) of US$14.76bn, above expectations for US$14.67bn, and said its full-year marketing adjusted EBIT was US$3bn.
Glencore’s chief executive Ivan Glasenberg said the performance was the company's "strongest on record, driven by our leading marketing and industrial asset businesses". He concluded: "We look to the future with confidence.”
Anglo American PLC (LON:AAL) gained 0.68% to 1,751, while Lonmin PLC (LON:LMI) was down 3.86% to 73.45p.
Both BP PLC (LON:BP) and Royal Dutch Shell PLC (LON:RDSB) were on the slide as the crude oil price dipped 0.5%, changing hands at US$64.95 per barrel. BP was down 0.6% at 472p and Shell dipped 0.11% to 2,278p.
Elsewhere, it was a bad day to be in transport-related shares.
Roadside recovery group AA PLC (LON:AA.) collapsed about 20% after it slashed its dividend and effectively issued a profit warning as part of a ‘strategy update’.
Train and bus operator FirstGroup PLC (LON:FGP), down 14% at 82.75p, lowered its full-year earnings guidance after its US coach and bus services were hit by severe snowstorms in January and tough competition.
The group said its outlook for adjusted earnings per share (EPS) is “slightly reduced” but there is no change to expectations for “substantial” cash generation for the year.
10:35am: Jobs stats show mixed up UK economy continues to be pinched
ING said that unemployment figures raise the question whether the ‘sluggish’ economic growth in 2017 is now catching up with the labour market, but, at the same time noted that as headline wages are still going up, the threat of higher interest rates remains.
“For the Bank of England, which has said rising wages are a key argument for tighter monetary policy, today's data makes a May rate hike all the more likely - although as always, this still relies on renewed Brexit progress over coming weeks,” said James Smith, ING markets economist.
“Having said this, the employment picture is starting to look slightly more concerning.”
Following the report, the British pound weakened, down 0.33% to 1.395 against the dollar.
Elsewhere, Hargreaves Lansdown analyst Laith Khalaf added: “Wages are heading in the right direction, though the rate of growth is hardly jaw-dropping, and significantly still lags behind the rate of inflation.
“That means the consumer squeeze is still alive and well, and the pick-up in wage growth anticipated by the Bank of England is yet to materialise. For UK consumers, pennies remain a precious commodity, so we can expect continued pressure on the retail sector and a focus on discount shopping as a result of tight household budgets.”
“Economically speaking, not much has changed in the labour market, which is still characterised by low unemployment and stubbornly stagnant wages. An interest rate rise is now expected in May, though continuing weak wage growth may prove to be a fly in the ointment.”
10:00 am: FTSE 100 stays lower as UK unemployment rises unexpectedly
The FTSE 100 continued lower on Wednesday and whilst much of the City focus was on Lloyds Banking Group PLC (LON:LLOY), the new UK data showed an unexpected jump in unemployment.
Standing at 7,228, the FTSE 100 was down 21 points or 0.3%, meanwhile, the FTSE 250 shed 124 points or 0.6% to 19,678.
The unemployment rate increased by 4.4%, from 4.3%, It marked the first time in nearly two years that the unemployment rate has increased for a quarterly period.
Comments from Matt Hughes, a statistician for the Office for National Statistic, came with something of a Brexit filter.
“Rising employment this past year was largely driven by UK nationals. In particular, fewer citizens of the eastern European countries that joined the EU in 2004 and of non-EU countries were in work than in the year before,” he said.
Naeem Aslam, analyst at Think Markets, meanwhile, said: “The wage growth number accelerated to 2.5% but investors have not shown any positive reaction to this number.
“This is mainly because there is nothing exciting about this, especially when the unemployment number has ticked higher and this is the main reason that we are seeing more pressure for Sterling.
“Traders do not like the idea that the unemployment is ticking higher and wage growth has no real strength.”
8:10am: FTSE 100 starts Wednesday lower, Lloyds hikes shareholder pay-outs
The FTSE 100 continued its recent losing streak, opening lower on Wednesday. Changing hands at 7,236, the index of London’s top 100 shares was down 10 points or 0.14%. At the same time, the FTSE 250 dipped 36 points or 0.18% to trade at 19,767.
Naturally, much of the news focus was on Lloyds Banking Group PLC (LON:LLOY) which pleased investors with a dividend hike and a £1bn share buy-back.
Lloyds shares rose 1.64% to trade at 68.94p, though the shareholder pay-outs somewhat distract from some negatives.
The bank posted a statutory profit of £5.3bn for the year to the end of December 2017, up 24% on 2016 and the highest level since 2006 - but below analysts’ expectations of £5.7bn.
A final dividend of 2.05p per share was recommended by the board, bringing the total for the year to 3.05p, compared to 2.55p in 2016. The lender said it plans to implement a share buyback of up to £1bn, equivalent to 1.4p per share, supported by strong capital generation.
Proactive news headlines:
Collagen Solutions PLC (LON:COS) is to make an initial submission for a CE mark after positive results from a clinical study of ChondroMimetic implants. Collagen's shares opened 29% higher at 3.49p as the company revealed quantitative three-dimensional magnetic resonance imaging analysis in the long-term study concluded that cartilage regeneration in the treated defects had reached a level and structural quality nearly identical to native cartilage.
SDX Energy Inc (LON:SDX) (CVE:SDX) has finished drilling the KSS-2 well at the Sebou project onshore Morocco, though analysis determined that the gas saturation was too low and the well is not deemed to be commercial. KSS-2 encountered 8 net metres of high quality reservoir, on prognosis, but, the company believes that the well location has been isolated from the reservoir source rock as it is on the ‘upthrown’ side of a fault.
Range Resources Ltd (LON:RRL) has announced the appointment of Lubing Liu as its new chief operating officer, effective March 1, and at the same time the company updated investors on its operations in Trinidad. Average net oil production amounted to 777 barrels of oil per day in January, representing 23% growth compared to the rate measured for the quarter ending December 31.
FairFx Group PLC (LON:FFX) has acquired international payments and travel currency services provider City Forex Limited, for a consideration of £6mln payable in cash. The electronic banking and international payments group said the acquisition of City Forex is expected to be immediately earnings enhancing.
Coinsilium Group Limited (AQSE:COIN) announced that it has been engaged by online education platform operator Tutellus Technologies SL to advise them on the development of a blockchain-based platform in advance of its upcoming Token Generation Event.
Eco (Atlantic) Oil & Gas Ltd. (LON:ECO) (CVE:EOG) has forwarded on the first batch of seismic data shot by Tullow Oil (LON:TLW) over the Orinduik field. French giant Total has an option to take a 25% working interest in Orinduik from Eco for a payment of US$12.5mln.
Rainbow Rare Earths Limited (LON:RBW) expects to commission the new processing plant at the Gakara mine in Burundi later this month, after which the scale of mining should pick up sharply. The plant is now running as designed said Rainbow and final adjustments have been completed.
Faron Pharmaceuticals Ltd (LON:FARN), the clinical stage biopharmaceutical company, will today host an R&D Day to discuss its strategy and pipeline developments, including a focus on Clevegen, Faron's second wholly-owned pipeline product. The event will take place today from 13:00 to 15:00 GMT at the offices of Panmure Gordon, One New Change, London, EC4M 9AF.
Motif Bio PLC (LON:MFTB) (NASDAQ:MTFB), the clinical-stage biopharmaceutical company specialising in developing novel antibiotics, has announced that three iclaprim abstracts have been accepted for presentation at the upcoming 28th European Congress of Clinical Microbiology and Infectious Diseases (ECCMID 2018) to be held in Madrid, Spain, April 21-24, 2018.
Taptica International Ltd (LON:TAP) has announced that it will be attending this year's Mobile World Congress, the world's largest exhibition and conference for the mobile industry, in Barcelona from 26 February to 1 March, where Tremor Video DSP, a Taptica company, will host a session as part of the MWC Partner Programme on 'The fusion of TV & Digital: 1 to 1 creative storytelling'.
6:50am: FTSE 100 set for soft opening as market waits for clues from US rate setters
After setbacks on Wall Street yesterday, UK stocks are set for a soft opening.
Spread betting quotes point to the FTSE 100 opening at around 7,235 after it closed more or less unchanged on Tuesday at 7,247.
London will be keeping half an eye out today for the release of the minutes of the most recent meeting of the US central bank's rate setters.
“The main event of the day will be the minutes of the 31 January FOMC meeting. They may give us a hint of what the new Fed Chair, Jerome Powell, is likely to say in his inaugural biannual testimony to Congress on 28 Feb/1 March,” suggested Marshall Gittler, at ACLS Global.
“While the January employment and CPI data weren’t available yet at this meeting, the stronger language concerning inflation in the meeting statement indicates that the Committee members were already more confident about inflation. Furthermore, the statement following the meeting referred twice to making 'further gradual adjustments' in interest rates, vs their previous pledge to make just 'gradual adjustments.'
“The market is waiting to find out what this subtle change means; it could indicate that they are contemplating making more than the three rate hikes that they’ve pencilled in for this year and next. The minutes may, therefore, have a more hawkish slant, which could support the dollar,” he added.
US markets took a battering on Tuesday, although volatile movements are becoming the norm this month.
The Dow Jones industrial average shed 255 points at 24,965 and the broader-based S&P 500 tumbled 16 points to 2,716.
The indices took a step back for the first time in seven sessions, with the higher dollar taking its toll.
In Asia, heading towards the close, the situation was a lot brighter, with Japan's Nikkei 225 up 46 points at 21,971 and Hong Kong's Hang Seng up 414 at 31,288.
Lloyds numbers eyed
In London today, retail investors' favourite Lloyds Banking Group PLC (LON:LLOY) will take centre stage, with press reports suggesting it will announce a £1bn share buy-back.
The bank, which finally returned to full public ownership last year, is expected to report steady rather than spectacular underlying income growth while loans to customers are tipped to be broadly flat for the year.
However, cost savings and an improved net interest margin should mean profit growth is a little more impressive, although further charges for payment protection insurance (PPI) mis-selling are also likely.
The consensus forecast for underlying profit before tax is £7.1bn, while the dividend – Lloyds has been a favourite stock of income investors throughout most of its stock market existence – is expected to rise to 4p from 2.25p in 2016.
The real focus for investors is the strategy review accompanying results, with cost savings likely to remain a key focus, as will efforts to move more services online and increasingly offer a digital banking service.
Also scheduled to report are commodities giant Glencore, house builder Barratt Developments and bus & trains operator FirstGroup PLC.
On the macroeconomic side, UK wage growth data is due for release at 09:30 this morning.
“Expectations are for earnings growth to remain constant in the three months to December at 2.5%. Given that inflation is elevated at 3%, wage growth data takes on an even more important role in the eyes of the market. As inflation moved higher following the weakening of the pound, post Brexit referendum, wage growth hasn’t kept pace. This means that wages have actually been falling in real terms, squeezing the UK consumer, which in turn is leading to a slowdown in spending,” noted Jasper Lawler at LCG.
“Negative real earnings growth is a key factor as to why the BoE has shown caution over raising interest rates. Hiking too quickly can actually dampen wage growth further, the opposite effect of what the central bank is looking for; therefore, investors will be watching the figures carefully to see whether the squeeze on the consumer is increasing or receding”, Lawler suggested.
Significant announcements expected
Finals: Lloyds Banking Group PLC (LON:LLOY), Glencore PLC (LON:GLEN), Capital & Counties PLC (LON:CAPCC)
Interims: Barratt Developments PLC (LON:BDEV), Hotel Chocolat Group PLC (LON:HOTC), SkinBioTherapeutics PLC (LON:SBTX)
Trading update: FirstGroup PLC (LON:FGP)
Economic data: UK unemployment, average earnings; UK public sector finances; US existing home sales; US FOMC meeting minutes
Around the markets:
- Sterling: US$1.3982, down 0.15 cents
- 10-year gilt: yielding 1.589%
- Gold: US$1,329.80 an ounce, down US$1.40
- Brent crude: US$64.78 a barrel, down 47 cents
- Bitcoin: £7,869.66, down £500.88
City headlines:
- Lloyds to unveil £1 billion share buyback in annual results: Lloyds is planning to unveil a £1 billion share buyback in its results tomorrow, in what could be the first in a series of cash returns from Britain’s biggest bank.
- Melrose rejects Corbyn’s claims it is ‘making a quick buck’ from GKN: Melrose, the FTSE 250 industrial conglomerate attempting a £7.4 billion hostile takeover of GKN, has rejected claims by Labour leader Jeremy Corbyn that it is an asset stripper out to “make a quick buck”.
- Southern rail operator Go-Ahead changes track with first foray outside bus and rail: The operator of the Southern rail franchise has moved to add a new line to its business, with its first investment beyond trains and buses into a German car sharing company.
- Hostility grows towards Tesco takeover of Booker: Investors in Booker Group have been told by a second shareholder advisory group to vote against a planned £3.7 billion takeover by Tesco as doubts about the deal continue to mount.
- Bursting of bubbles hit productivity, says McKinsey: The collapse in productivity in advanced countries over the past decade was caused by pre-crisis bubbles in financial services and housing and a sharp drop in wages after the recession, according to McKinsey Global Institute.
- Chief executive of gene editing firm Horizon Discovery quits: Horizon Discovery, a Cambridge-based biotechnology company, said that Darrin Disley had decided to leave “in order to pursue other business interests”.
- Walmart fails latest profit health check: Disappointing profits at Walmart and a slowdown in the group’s online growth have fuelled fears about the health of traditional retailers and their ability to take on Amazon.
- UK manufacturing order books slip back in three months to February: UK manufacturers’ order books deteriorated slightly in the three months to February, according to the latest CBI Industrial Trends survey. Around 30% of firms reported above normal books, while 10% said they were below normal, giving a balance of 10%.
- RBS report detailing ‘disgraceful’ mistreatment of small businesses published by Treasury Committee: MPs have published a damning report into “disgraceful” mistreatment of thousands of struggling small firms by Royal Bank of Scotland in the years following the financial crisis.
- Aldi’s Kevin the Carrot festive spirits advert banned for appealing to children: An advert for discount retailer Aldi’s selection of alcoholic drinks has been banned by the regulator after one viewer complained that it might appeal to children, because it features a walking, talking carrot named Kevin.
- Murdoch promises to run Sky News for 10 years for Fox takeover deal: Rupert Murdoch has doubled the length of time he is willing to keep running Sky News to “at least” 10 years, as 21st Century Fox sweetens its offer to protect the news channel to gain clearance for the £11.7 billion takeover of Sky.
- Ikea joins Big Clean Switch to offer 100% renewable energy tariff: Ikea is calling for households to join its latest joint venture – a collective energy switch that promises an exclusive 100% renewable electricity tariff.
- William Hill fined £6.2 million by Gambling Commission: Betting group William Hill has been fined £6.2 million by the gambling industry regulator for failing to protect consumers and prevent money laundering.
- £100 million share boost for Sports Direct after controversial boss Mike Ashley announces buy-back scheme: Controversial Sports Direct chief Mike Ashley gave investors something to shout about yesterday after unveiling plans to buy back £100 million of shares in the firm. As part of the deal, the retailer will buy up to 30 million shares from investors between now and 05 September.
- Holiday Inn owner Intercontinental plans a classier budget chain with gyms and free snacks and drinks: Intercontinental Hotels Group (IHG) has unveiled a chain of budget hotels which will have gyms and free snacks and drinks.
- Asda’s strong Christmas sales not enough to stop growth slowing down to just 0.5% as the supermarket war rages on: Asda saw sales growth slowed down sharply in the Christmas quarter despite higher inflation and weak comparatives for last year.
- Homeware shop Dunelm sees shares slump as discounts put profit margins under pressure despite rising sales: The retailer saw strong sales growth both in stores and online but heavy discounting and the acquisition of Worldstores that helped it gain market share hit its profitability.
- EU rejects calls for economic safety net as Greek bailout nears end: The European Union has rejected calls to grant Greece an economic safety net as an economist declares Athens should request a precautionary credit line as it moves slowly towards the exit door of its stringent bailout programme.
- ‘It’s our turn’ Germany ready to run European Central Bank and control eurozone: Germany is hoping to run the European Central Bank (ECB) and secure the financial giant’s presidency as the EU’s economic powerhouse eyes up controlling the eurozone.
- HSBC misses expectations despite 141% jump in annual profits: HSBC earnings have missed expectations despite the company more than doubling annual profits amid a renewed push in Asia.
- Wood Group secures funding for nuclear decommissioning project: The Aberdeen-headquartered energy and industrial services heavyweight said it was leading research to make nuclear decommissioning “safer, faster and more cost-effective” by applying new technologies developed in space exploration, car production and medicine.
- BrewDog to open world’s first craft beer hotel in Scotland: Craft beer giants BrewDog have announced plans to build the world’s first craft beer hotel in their Aberdeenshire homeland.
- Ford to set up German bank in second half of the year as it gears up for Brexit: Ford confirmed today that it plans to set up a bank in Germany in the second half of this year as it looks to firm up its post-Brexit planning.
- Tickets for Eurostar’s new direct London to Amsterdam service to go on sale later than planned after “a few issues”: Eurostar said today tickets for its highly anticipated London-Amsterdam service will now go on sale later than planned whilst it irons out “a few issues”.