Market ReportFTSE 100

FTSE 100 closes higher as traders await US interest rate decision

The Footsie has been in consolidation mode for most of the day

Trading room
The Fed is in focus tomorrow and the interest rate decision
  • FTSE 100 closes up 18 pts

  • RBS top riser 

  • Energy minnows EnQuest, Union Jack Oil and Hurricane Energy all make splashes with trading updates

FTSE 100 closed around 18 points higher as traders sit on their hands a bit and wait for the interest rate decision from the US central bank tomorrow.

The UK blue-chip benchmark closed around 18 points, or 0.26% higher, at 7,061, with financial stocks doing well.

The FTSE 250 was also higher - up  over 28 points - or 0.15%, at 19,723.

David Madden, at CMC Markets, noted: "It has been a relatively quiet day in terms of macroeconomic data, and a lack of negative news has given traders an incentive to go long.

"The political climate hasn’t really improved, but more importantly for dealers, it hasn’t worsened."

On Wall Street, the Dow Jones is up over 95 points at the time of writing, at 24,706.

Facebook(NASDAQ:FB) is the big story and other social media stocks like Twitter (NYSE:TWTR) and Snap Inc (NYSE:SNAP) are in the red today, as the Cambridge Analytica story is still doing the rounds.

Top riser on Footsie was Royal Bank of Scotland (LON:RBS),  which added 2.29% to stand at 263.50p, while  among the top laggards was Just Eat (NYSE:JE),  which shed 2.8% to stand at 715p.

Just Eat the takeaway app, notes Madden, has lost ground in the past two sessions as brokers have lowered their price target for the company.

"Yesterday Peel Hunt trimmed their price target from 1199p to 950p, and today Morgan Stanley lowered its price target to 780p from 790p. Last week we saw JP Morgan and UBS reduce their price target for the company."

Marking time..

The FTSE 100 continued to mark time in the late afternoon session as traders wait on tomorrow’s interest rate decision from the Fed.

The FTSE 100 was up 34 at 7,077, just three points below its high point for the day.

Steel firm Evraz plc (LON:EVR) made a late move to the top of the Footsie leader-board with an 11.3p gain at 422.6p.


3.00pm: The Footsie continues to spin its wheel

The blue-chips index continued to trade sideways in the afternoon session, a few points off its intra-day high.

The FTSE 100 was up 32 at 7,075, with holiday firm Tui AG (LON:TUI) leading the advance, up 2.8%.

Insurer Prudential PLC (LON:PUR) was up 1.4% at 1,904.5p following a broker upgrade; Mediobanca Securities has moved to ‘outperform’ from ‘neutral’ and raised its Prudential price target to 2,227p from 2,154p.

In other broker action, Genel Energy PLC (LON:GENL) has been upgraded to ‘outperform’ from ‘underperform’ by RBC Capital Markets.

Shares in the Kurdistan-focused producer rose 2.5% to 153.69p as RBC whacked up the price target to 200p from 115p.

READ Genel Energy shares boosted as RBC delivers upgrade ahead of Iraq elections

2.00pm: Traders have half an eye on tomorrow's meeting of the Fed's policy-makers

The Footsie continues to mark time ahead of tomorrow’s interest rate decision by the US Federal Reserve.

The UK’s top-shares index has largely traded sideways in the lunchtime session, and with US markets just about to officially open, was up 26 at 7,069.

“I expect the Fed to implement ‘steady and gradual’ hikes on a quarterly basis throughout 2018. March, June and September hikes appear close to guaranteed, with a fourth rate hike in December looking increasingly unlikely,” predicted Damian Testi, an investment manager at Walker Crips.

“These dates are the most probable trigger points given the meetings are accompanied by a ‘Summary of Economic Projections’ and press conference from Jerome Powell. The Fed’s mandate to transparently articulate its economic stance to the market is more important now than ever as the current bull market moves through its tenth year,” Testi added.

Among the small caps, a number of energy firms were making splashes.

EnQuest PLC (LON:ENQ) was up 5.4% after it revealed in its full-year results it expects a material increase in production in 2018.

“This growth, combined with a focus on cost control and a sUBStantially reduced cash capital expenditure programme, should see the group generate increased cash flow, enabling it to manage its liquidity and reduce debt,” the company said.

Union Jack Oil PLC (LON:UJO) climbed 5.7% after it confirmed the acquisition of a 10% stake in the Biscathorpe project in the South Humber basin, onshore UK.

READ Union Jack Oil confirms Biscathorpe stake acquisition

Hurricane Energy PLC (LON:HUR), the fractured basement reservoir specialist, hardened 0.28p to 32.86p as it revealed that it has received key long lead items for the Lancaster field’s early production system.

READ Hurricane Energy’s Lancaster sees ‘significant milestone’ as Lancaster field development advances

12.45pm: Stocks cement morning's gains ahead of an expected firm start on Wall Street

The FTSE 100 was close to intra-day highs ahead of an expected firm start in the US.

The blue-chip index was up 33 at 7,076, while the mid-cap FTSE 250 had roused itself after a slow start to advance 60 points to 19,755.

Failing to participate in the FTSE 250’s climb were oilfield support services firm Wood Group PLC (LON:WG.) and online gaming giant 888 Holdings PLC (LON:888), both of which issued disappointing updates this morning.

Wood Group was down 4.9% after it predicted modest earnings growth for the current year.

Investors decided not to stick – or twist, for that matter – with 888 after it cut the dividend “in light of regulatory developments and mindful of the importance of retaining adequate cash to fund potential investment activities”.

11.45am: Firmer start expected on Wall Street

After yesterday’s shake-out, US markets were expected to bounce back today, boosting UK sentiment in the process.

After falling 336 points yesterday, the Dow Jones was expected to open its account at 24,674 or thereabouts, up 63 points on last night’s close.

The broader-based S&P 500, which fell 39 points to 2,713 yesterday, was expected to open at around 2,722.

Back in the UK, the FTSE 100 was up 27 at 7,070, six points below its intra-day high.

The blue-chip index perked up after the inflation data, which prompted a sell-off on the foreign exchange markets of sterling as fears over an interest rate rise sUBSided.

The inflation rate eased to 2.7% in February from 3.0% in January, which was a little better than the 2.8% expected by economists.

Although still nowhere near the 2% target, the Bank of England has set, the bigger-than-expected fall eased concerns that the Bank might push up interest rate rises sooner than previously expected; a rise in interest rates typically reduces disposable income, which in turn cools down prices.

“We expect inflation to tread water for the next few months before a renewed shift downwards in the summer,” said Howard Archer, the chief economic advisor to the EY ITEM Club.

“Today’s producer prices data suggests that the impact of the 2016 sterling depreciation is continuing to fade further along the supply chain, while strong base effects will increasingly come into play as we move through the year. As a result, we expect the CPI [Consumer Prices Index] measure to drop back to the 2% target by early-2019,” he added.

House-builders were wanted after a strong update from Bellway, shrugging off a wishy-washy house price index reading.

“The official seasonally adjusted house price index rose by 0.3% month-to-month in January. Year-over-year growth in house prices slowed to 4.9%, from 5.0% in December, one tenth below the consensus,” noted Pantheon Macro.

“At the regional level, house price growth in London lagged behind the national average for the 14th consecutive month, although the year-over-year growth rate edged up to 2.1% in January, from 2.0% in December,” Pantheon said.

“Price growth also has continued to slow in the South East and East, but has held steady at about 6.0% in most other areas. Impending increases in mortgage rates, however, likely will slow house price growth across all regions,” it added.

Sam Mitchell, the chief executive officer of online estate agents HouseSimple.com observed that “buyers continue to hold the stronger hand and are negotiating hard with sellers”.

Groceries delivery firm Ocado Group PLC (LON:OCDO) was off the pace, down 1.4%, after a mildly disappointing fiscal first quarter update in which it reported trading had been affected by “the beast from the east”.

“Forget the snow impacting Ocado’s earnings; the more interesting fact is the reduction in the number of items per basket,” proffered Russ Mould, the investment director at AJ Bell.

“A reduced average order size is bad news for companies like Ocado. It isn’t really cost effective to be delivering small orders to lots of different houses,” Mould said.

“While it doesn’t give any figures for the average number of items per basket, it does say there has been a reduction. It also says this trend has effectively been offset by inflation pushing up the price of items, resulting in a 0.4% decline in the average order value to £110.45 for the 13 weeks to 4 March.

“On the other hand, the average number of orders per week is growing, up 11.1% to 280,000 in the trading period.

“There remains a lot of hype around Ocado and its potential for future growth. As such, its figures will be scrutinised in more depth than a business which has bigger scale and is more mature,” Mould said.

Numis Securities, meanwhile, cut its recommendation from ‘buy’ to ‘add’ but this was more to do with the recent good run of the shares.

Numis’s price target is 650p; the stock currently trades at around 564p.

10.45am: Mid-caps provide most of the sizzle

The FTSE 100 and the FTSE 250 went their own ways this morning, with the former scraping back a few of yesterday’s heavy losses.

The FTSE 100 was up 15 at 7,058 while the FTSE 250 was down a point at 19,694.

The latter was little changed despite conveyor belt maker Fenner PLC (LON:FENR) shooting up 24% to 610.5p following the agreed offer by French tyre giant Michelin.

The FTSE 250 constituent is being taken out at 610p a share in a cash bid that values it at around £1.2bn.

Fellow mid-cap Bellway PLC (LON:BWY) was wanted after its interims.

The house-builder’s stock rose 91p to 3,141p after it told investors it was on track to build 10,000 houses this year – a new record.

Bellway's interims show the benefit of past investment which is producing strong top-line growth. With the group still seeing strong demand we think that the risk to full-year numbers is on the upside and we therefore reiterate our Buy rating and argue that the shares are materially too cheap,” said Numis Securities.

Other house-builders were dragged higher in Bellway’s slipstream.

Banknote printer De La Rue PLC (LON:DLAR) sneaked out a mild profit warning in a stock market announcement entitled “directorate change”.

Chief financial officer, Jitesh Sodha, has informed the company of his intention to step down after an orderly transition period.

The shares tumbled 80p to 522p as the company mentioned, almost as an afterthought, that full-year results would be around the lower end of the current range of forecasts from analysts who cover the company. 

9.45am: Inflation data provides a small fillip

The consumer prices index in February was up 2.7% in February, down from 3% in January.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.5% in February 2018, down from 2.7% in January 2018.

The Office for National Statistics said the largest downward contributions to the change in the annual rate came from transport and food prices, while falling prices for accommodation services also had a downward effect.

The FTSE 100 index, which has more or less fallen back to last night’s closing level, perked up a bit following the release and was up 8 at 7,051.

“February’s slight fall in inflation will be welcome news for UK households, indicating that the gap between wages and inflation is narrowing, albeit marginally," said Dennis de Jong, the managing director of UFX.com.  

“Domestic inflation price pressures were expected to retreat, and this could be a developing theme in the coming months as the UK begins to show slow signs of recovery from the pound slump since the Brexit vote.  

“The Bank of England now has a key decision to make with interest rates, as inflation begins to drop closer to its 2% target. With the BoE’s monetary policy meeting taking place on Thursday, investors will be looking for any indication of another rate rise.

“Easing inflationary pressures, combined with the market reaction from yesterday’s Brexit agreement and ongoing trade negotiations, could see the pound yoyo in the coming days,” he added.

Nick Dixon, the investment director at Aegon, said the inflation rate should now move slowly towards the Bank of England’s 2% target.

“The big question remains interest rates. With only a slow trend down, inflation risks on the upside, and US rate pressure building, we are likely to see a few interest hikes here in the UK during 2018,” Dixon said. 

“Aegon continues to see the big risk as interest rates rising above the current yield curve, which will put downward pressure on fixed income prices, especially those such as government bonds with low yield support. With fixed income vulnerable and equity volatility rising, we see additions to cash weightings as a prudent step for the majority of investors,” he added.

9.00am: Investors are in a cautious "risk-on" mood

After yesterday’s shake-out, bargain hunters have emerged to do their thing.

The FTSE 100 was up 17 at 7,060 after an hour or so of trading, with yesterday’s damaged goods – legacy software firm Micro Focus International PLC (LON:MCRO) – today’s “must have” purchase.

Micro Focus, which saw its share price roughly halved yesterday after it warned on revenues, was up 6.1% at 1,072.5p in early deals.

Credit Suisse reacted to yesterday’s disturbing statement from Micro Focus by moving to a neutral position on the stock, abandoning its ‘underperform’ rating; the price target was slashed to 1,200p from 1,975p.

With the markets back in “risk-on” mood, albeit half-heartedly, there was little support for defensives such as utility companies United Utilities PLC (LON:UU.), National Grid PLC (LON:NG.) and Severn Trent (LON:SVT), which were down by between 0.7% and 1%.

Open: Reasonably buoyant start for Footsie

The FTSE 100 got off to the reasonably buoyant start as traders ignored the dour performances of Wall Street and in Asia overnight.

The index of blue-chip shares rose 28 points to 7,070.52.

In the next hour, we are expecting inflation data, which is likely to show prices rises are starting to ease.

The consumer inflation is forecast to be 2.8% for February, down from 3% the month earlier.

On the markets, the movements were fairly muted.

However, Micro Focus topped the risers after Credit Suisse upgraded the stock in the wake of Monday’s earnings alert and the ejection of the CEO.

One suspects the call has been made on valuation grounds, given the severe mark-down of the stock in the wake of the profit warning, which at one stage wiped more than 40% from the business’ market worth.

Micro Focus was a little perkier Tuesday as its shares advanced 2.3%.

Dropping down a division, the putative takeover of conveyor belt maker Fenner (LON:FENR) by tyre giant Michelin saw shares in the former soar 25%.

Housebuilder Bellway (LON:BWY) was up 2% after a solid set of interim results.

Proactive news headlines:

Amur Minerals Corporation (LON:AMC) has boosted the nickel resource at its Kun-Manie project in Russia by 50% to 1.58mln tonnes of contained nickel. The average grade across all deposits is 1.03% nickel equivalent. Kun-Manie now ranks as the third-largest undeveloped nickel sulphide project in the world, using March 2018 metals prices.

Strategic Minerals PLC (LON:SML) has doubled the inferred resource at its Redmoor project in the UK to 4.5mln tonnes of ore grading 1% tin equivalent. The strike length is now around a kilometre, and the mineralisation remains open at depth.

Bloomsbury Publishing PLC (LON:BMY) saw its shares jump nearly 10% higher on Tuesday after the book firm said that it expects its revenues to be ‘slightly ahead’ of expectations and profits to be ‘well ahead’ of expectations for the year ended 28 February 2018.

Hurricane Energy PLC (LON:HUR) revealed that it has received key long lead items for the Lancaster field’s early production system. TechnipFMC delivered two horizontal Xmas tree systems as well as the control system for the floating production storage and offloading (FPSO) vessel.

Union Jack Oil PLC (LON:UJO) has confirmed the acquisition of a 10% stake in the Biscathorpe project, in the South Humber basin, onshore UK. The deal, which remains subject to regulatory approval, sees Union Jack increase its stake in the project to 22%.

Medical diagnostics group Genedrive PLC (LON:GDR) saw diagnostics revenue rise 8.3% year-on-year in the second half of calendar 2017. The company’s hepatitis C virus (HCV) ID kit, which was launched in October 2017, is rapidly becoming available in target countries, the group said in its interim results statement.

Aggregated Micro Power Holdings PLC (LON:AMPH) revenue this year will be £40mln, a third higher than previously forecast. Recent positive trading during this winter season was cited as the reason for the uplift in sales, with fuel demand likely to have risen steeply with the recent UK cold snaps.

Ceres Power Holdings PLC (LON:CWR) saw revenue and other operating income practically double in the first half and expects this trend to continue for the remainder of the current financial year. In the six months to the end of December, the top line shot up to £3.08mln from £1.55mln in the corresponding period of 2016.

Motif Bio PLC (LON:MTFB, NASDAQ:MTFB) said it wanted to make the strongest possible submission to the US regulator as it confirmed it would take some additional time over the new drug application (NDA) for iclaprim. The next-generation antibiotic has been developed initially to treat acute bacterial skin and skin structure infections and has successfully negotiated two Phase III clinical trials.

Drug developer ValiRx PLC (LON:VAL) has been granted a US patent over technology at the heart of its lead cancer compound VAL 201 The protection covers the molecule and a “wide variety of derivatives, modifications and analogues of the compounds and their mode of action”.

Shefa Yamim (ATM) Limited (LON:SEFA) has announced the results from three bulk samples, part of a 14 bulk sample exploration campaign to determine a resource estimate for heavy minerals in Zone 1 at its Kishon Mid-Reach project.

Katoro Gold PLC (LON:KAT) is reassessing the economic viability of its Imweru gold project in Tanzania in the light of new mining legislation. Katoro will engage with the relevant Tanzanian government departments and also revisit the numbers in the already completed pre-feasibility study. For the time being all feasibility work is suspended. Katoro will also seek to diversify its portfolio.

BlueRock Diamonds PLC (LON:BRD) announced after the close on Monday that it has raised approximately £500,000 via a placing and subscription for 33,333,333 ordinary shares at a price of 1.5p each. The group added that each new placing share will also be accompanied by a warrant to subscribe for a further new share at a price of 3p each. In early morning trading, BlueRock shares were trading at 1.75p, down 5% on Monday's closing price.

Scotgold Resources PLC (LON:SGZ) has amended the terms of a £1mln loan provided by its chairman and major shareholder Nat le Roux. Under the new terms the repayment date is extended to September 2018, and the coupon has been revised down to 0%.

Bacanora Minerals Ltd (LON:BCN) (TSX-V:BCN) announced that, at the annual and special meeting of the lithium company held in Canada on 19 March 2018, all resolutions were duly passed, including the resolution to approve the proposed re-domicile of the company to the UK. As a result, the group said the last day of trading for its shares on Canada’s TSX Venture Exchange is expected to be 23 March 2018, with the new Bacanora Lithium PLC shares expected to be admitted to trading on AIM on 26 March 2018.

6.45am: Rally predicted 

The Footsie is seen rallying in early trade on Tuesday in spite of poor performances overnight from US and Asian markets and uncertainty ahead of the latest UK inflation data, with London shares supported by takeover interest.

Spread betting firm IG expects the FTSE 100 index to open around 40 points higher at 7,081, having dropped 121 points on Monday.

On Wall Street on Monday, the Dow Jones plunged 335 points to close at 24,610 with technology stocks hit by a slide from Facebook Inc (NASDAQ:FB) amid reports it allowed improper access to user data.

Asia markets were also under pressure, with the technology sector retreating and on nervousness ahead of new Federal Reserve boss Jerome Powell's first two-day monetary policy meeting, which kicks off today with a US rate hike expected tomorrow.

Sterling steady as inflation awaited

On currency markets, the pound held steady versus the dollar and the euro following gains on Monday after a Brexit breakthrough boost after the EU and the UK agreed terms for a transition period.

However, much will depend on the February UK inflation numbers which could provide clues for the next Bank of England interest rate hike ahead of its latest Monetary Policy decision on Thursday.

The UK consumer price index has stayed stubbornly high over the past few months, having been widely predicted to fall towards the end of last year.

Instead, inflation rose to 3.1% in November and stood at 3.0% in both December and January, even though the effect of post Brexit falls in sterling should have worked its way out of the figures by now, so traders will be keen to see if it can ease back in February.

Another strong performance expected from Bellway

If UK interest rates are close to being hiked again, builders will be in the crosshairs as the fragile housing market could bear the brunt as mortgage rates increase.

However, Bellway PLC (LON:BWY) had a bumper 2017 and is expected to promise more of the same in 2018 when it announces interims on Tuesday.

The FTSE 250-listed firm’s housing revenue in the six months to the end of January is expected to have risen by more than 14% year-on-year to £1.3bn on the back of a 6.3% rise in housing completions and a near 7.8% rise in the average selling price.

Technology deals eyed at Ocado

Food price inflation, meanwhile, could be a factor in numbers from online grocer Ocado PLC (LON:OCDO), although the firm - set up in 2010 as a grocery delivery service – is now more focused on being a technology platform provider.

“Deals to license out its technology to Canadian and French retailers have raised hopes the blue touch paper on Ocado’s transformation from UK online supermarket to international technology provider is well and truly lit,” observed Danny Cox, an analyst at Hargreaves Lansdown.

“We’re unlikely to get news of any more deals at this stage, or indeed what the longer-term profitability of those it has already signed is like. Still any indication there are more interested parties at the negotiating table will be important,” Cox added.

Fenner bid move from France

Takeover moves could provide the underlying strength in London today following late news on Monday that French firm Michelin has launched a £1.2bn takeover bid for FTSE-listed engineering firm Fenner PLC (LON:FENR).

On Monday, another French group Klepierre revealed it had had a £4.9bn takeover approach rejected by real estate firm Hammerson PLC (LON:HMSO), and the bid battle for FTSE 100-listed automotive and aerospace parts firm GKN PLC (LON:GKN) also intensified.

Significant events expected on Tuesday March 20:

Trading update: Ocado Group PLC (LON:OCDO)

Finals: John Wood Group PLC (LON:WG), Mears Group PLC (LON:MER), 888 Holdings PLC (LON:888), Cloudcall Group (LON:CALL), Caledonia Mining Corp (LON:CMCL), DP Eurasia NV (LON:DPEU), EnQuest PLC (LON:ENQ), Faroe Petroleum (LON:FPM), Getbusy PLC (LON:GETB), The Gym Group PLC (LON:GYM), Hansteen Holdings PLC (LON:HSTN), IQE PLC (LON:IQE), Judges Scientific PLC (LON:JDG), NAHL Group PLC (LON:NAH), Polypipe Group PLC (LON:PLP), TF Fluid Systems PLC (LON:TIFS)

Interims: Bellway PLC (LON:BWY), Blancco Technology Group PLC (LON:BLTG), Ceres Power Holdings PLC (LON:CWR), Genedrive PLC (LON:GDR)

Economic data: UK inflation (CPI, RPI, PPI, HPI)

Around the markets:

  • Sterling: US$1.4925up 0.01%
  • Gold: US$1,316.80 an ounce, unchanged
  • Brent crude: US$62.29 a barrel, up 0.4%

City Headlines:

  • French tyre-maker Michelin swoops on British manufacturer Fenner with £1.2bn takeover bid – Daily Mail
  • GKN gets support of third-biggest shareholder to hold off Melrose – Financial Times
  • Millions of pounds wiped off share prices of Carpetright and Mothercare amid fresh fears for both companies’ future – Daily Mail
  • Next to post profits fall as high street remains in doldrums – The Scottish Herald
  • Royal Bank of Scotland could launch online bank as it targets valuable youth market and tries to escape its toxic past – Daily Mail
  • Housebuilder Persimmon executives agree to bonus cut – Financial Times
  • Oracle’s mixed earnings brightened by the cloud – Financial Times
  • Amazon said to be weighing up Toys R Us store buys – Daily Telegraph
  • BlackBerry climbs on Microsoft partnership – Financial Times
  • Facebook stock value plunges amid Cambridge Analytica controversy – The Independent
  • Snapchat’s UK ad revenue set to overtake Twitter’s next year – The Guardian
  • Bank of America whistleblowers land US$83mln in awards – Financial Times
  • Chairman of US newspaper publisher Tronc steps down – Financial Times
  • Claire’s Accessories files for bankruptcy in the US – City AM
  • SandRidge Energy rebuffs Midstates’ offer, launches strategic review – Financial Times
  • ANZ mulls IPO for asset finance unit after failed HNA deal – Financial Times
  • SocGen expects resolution over Libor probe in ‘coming weeks’ – Financial Times
  • VW finance arm posts record 2017 despite diesel scandal – Financial Times
  • Oyster Yachts bailed out of administration by tech entrepreneur Richard Hadida – Daily Telegraph
  • Goldman chief Jörg Kukies named as German deputy finance Minister – Financial Times
  • Asian companies Softbank and Hutchison bid for British 5G spectrum – The Times

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