FTSE 100 closes up 18 at 7,877
UK borrowed £40.5bn last year
M&S to close 100 stores
US stocks mixed
3.45pm: Tesco to close non-food website
Tesco PLC (LON:TSCO) has just announced it will close its loss-making non-food website, Tesco Direct, following a detailed review.
The supermarket said in a statement that there is "no route to profitability for this small, loss-making part of the business".
Tesco Direct will stop trading on July 9, putting about 500 jobs at risk.
"The priority is to support colleagues, and external partners, that will be affected by this change," Tesco said.
The move underlines the struggles retailers are facing from a squeeze on consumers, which have been hit higher inflation and sluggish wage growth.
3.10pm: Britain factory output falls to weakest level in over two years
Factory output in Britain fell to its weakest level since April 2016 in the three months to May, according to a survey by the Confederation of British Industry (CBI).
The CBI’s output gauge dropped to +3 from April’s +13, below its long-run average for the first time since the UK voted to leave the European Union in June 2016.
“Consequently, the Bank of England looks highly unlikely to raise interest rates at the next MPC meeting in late-June. Expectations of an August interest rate hike will also likely be diluted given that the MPC wAnts to see sustained evidence that the economy is improving before tightening monetary policy.”
However, Bank of England Governor Mark Carney said earlier today that he expected the UK’s economy to pick up after a weak start to the year during heavy snowstorms.
#CBI survey shows #manufacturing orders at lowest level since Nov 2016 in May; largely due to softer domestic demand. Fuels concerns over softer #UK #economic activity Manufacturing pauses for breath in May - CBI https://t.co/E8sXcr5z4R via @CBItweets— Howard Archer (@HowardArcherUK) 22 May 2018
2.40pm: US stocks open higher, FTSE holds gains
US stocks have opened higher as trade tensions between the US and China receded.
The Dow Jones Industrial Average rose 42 points to 25,052, the S&P 500 increased 6 points to 2,739 and the Nasdaq grew 29 points to 7,423.
Closer to home, the FTSE 100 is up 21 points to 7,888.
“The FTSE 100 continues to overcome investors’ concerns over the Brexit negotiations, a wobbly government, indecisive central bank and modest UK economic growth as it reaches further new highs,” said Russ Mould, investment director at AJ Bell.
Mould said there were “three good reasons” why the index could "keep on running".
The first is a 4% dividend yield for 2018 with shareholder payouts expected to rise 7% to a record £88.3bn.
The second is a weaker pound providing support to UK stocks since two-thirds of the FTSE 100 index’s earnings come from overseas.
However, Mould said “investors also need to be aware of the potential downside and what could still go wrong”.
He said the time to buy securities is when no-one is interested, adding that investors need to be comfortable with the fact that the FTSE 100 is heavily skewed in terms of its market cap, income and dividends to just a dozen or so stocks and three or four sectors.
And while FTSE 100’s dividend yield is attractive, it may not be entirely safe.
“The yield premium relative to bonds may look attractive but if dividends are cut (say in the event of a sudden economic downturn), or bond yields go up (because the Bank of England screws up its courage and raises interest rates) then that relationship could change,” Mould said said.
1.50pm: Easing US-China trade tensions boosts stocks
China’s government said on Tuesday it will cut import duties on passenger cars to 15% from the current 25%, sending US stock futures higher.
Dow Jones Industrial Average futures gained 50 points to 25,052, S&P 500 futures increased 24 points to 6,939 and Nasdaq futures edged up 24 points to 6,939.
“The postponement of new tariffs by both the US and China and the revelation that the latter will cut import tariffs on cars from as much as 25% to 15% and on car parts to 6% is seen as an importAnt step away from a trade war that could have negative implications globally,” said Oanda’s Craig Erlam.
“Trade protectionism was one of the fears of a Trump Presidency and his announcement of tariffs and his approach to trade agreements went some way to justifying such views but this could be an importAnt breakthrough.”
On the company front, Kohl’s Corp. (NYSE:KSS) shares rose 5% in pre-market trading after reporting first quarter earnings that beat expectations and raising its full year forecasts.
Tesla Inc (NYSE:TSLA) shares gained 2.7% after chief executive Elon Musk said the company would soon fix a problem with its Model 3 vehicles raised by Consumer Reports.
Shares in building company Toll Brothers Inc (NYSE:TOL) dropped 3.9% after posting a 10% decline in second quarter profit due to a higher impairment change and a drop in the gross margin.
1pm: Mediclinic leads Footsie higher
The FTSE 100 opened higher on Tuesday and has continued to hover just the right side of the breakeven line ever since.
Even the stronger pound, which has crept up past US$1.345 today, couldn’t stop the blue-chips from squeezing a bit more out of the calming US-China situation.
A possible trade war between the two superpowers had been hanging over the global markets for a few weeks, but those concerns have eased with both saying they wAnt to find a way to improve trade.
The FTSE 100 is currently up 13.6 points, or 0.2%, to 7,872.8 in early afternoon trading.
The retailer confirmed plans to close 100 stores over the next four years this morning as it looks to take more of its business online. M&S also has full-year results due out tomorrow.
Analysts cut their rating to ‘neutral’ form ‘buy’ citing a “lack of positive catalysts”, although they did increase their price target to 561p from 530p.
12.40pm: US stocks called slightly higher at opening bell
US stocks are set to climb once again when the bell rings in New York later today, albeit at a slower pace than yesterday.
“The futures have the Dow jumping 50 or so points when the bell rings on Wall Street, around a sixth of the 300-point surge seen on Monday,” writes Spreadex analyst Connor Campbell.
“Still, that keeps the index above 25,000, if admittedly more than 1,500 points from its all-time highs.”
The Dow Jones Industrial Average is called 52 points higher to 25,060.2 at the open; the broader S&P 500 is set to make a 4.8-point gain to 2,737.4; while the tech-heavy Nasdaq is expected to rise 26.0 points to 6,930.8.
12.15pm: Sugar tax adds some pop...
The Government received £13 million from the Soft Drinks Industry Levy in April 2018, the first month the tax was in force https://t.co/jODkOGpFGa— ONS (@ONS) May 22, 2018
11.55am: FTSE 100 to hit 8,000 ‘by end of summer’
That’s the claim from one trader in the City.
“The largest capitalisation equities within the FTSE, even though they may have their operation base in the UK, make a large amount of their revenue from operations outside the UK, meaning with Sterling on a relative, weaker basis, certainly against the US dollar, this in turn aids profit for the respective companies. This for me is the key driver of the latest move higher in the FTSE,” says ayondo markets’ chief trader, Jordan Hiscott.
“Going forward, the upward momentum and weaker currency is likely to continue and I wouldn’t be surprised to reach 8000 before the end of the summer.”
11.45am: Tweet of the day...
Michael Saunders gives the obvious answer when asked why he is often in a minority on the MPC on interest rate rises. "In mathematical terms, it's because the others didn't agree with me." @bankofengland— Kamal Ahmed (@bbckamal) May 22, 2018
11.30am: M&S confirms plans to shut 100 stores by 2022
Of those 100 stores, M&S has already pulled the shutters down on 21 and revealed today the locations of 14 others earmarked for closure.
Stores in Bayswater, Fleetwood and Newton Abbot are to close by the end of July, while the Clacton and Holloway Road sites are expected to close early next year.
The other locations proposed for closure are Darlington, East Kilbride, Falkirk, Kettering, Newmarket, New Mersey Speke, Northampton, Stockton and Walsall.
With shoppers doing more and more of their shopping online, M&S wAnts to reduce its store estate and shift some of its focus and investment into its web offering.
"Closing stores isn't easy but it is vital for the future of M&S," said Sacha Berendji, director of retail operations at the firm.
11.15am: UK economy grows 0.1% in first quarter
The UK economy grew at its slowest rate since 2012 in the first quarter of the year.
The ONS said GDP growth fell to 0.1% from 0.4% in the previous quarter, driven by a fall in construction output and a sluggish manufacturing sector.
BoE governor told the Treasury Committee that the figures don’t tell the whole story.
“We are…conscious that [in] the first quarter of the year there is a historic pattern that that is often the quarter that is most revised over time so there's some upside there,” Carney explained.
“All that said, there's a bit of residual softness arguably in that first quarter which is one of the reasons why it made sense, at least for me, to wait to see if the momentum is re-established as I do expect it to be [before raising rates].”
11am: NYSE appoints first female boss
For the first time since it was established more tha n200 years ago, the New York Stock Exchange has appointed a female as its leader.
Stacey Cunningham has been promoted from her current position of chief operating officer to the new leadership position.
It means that both the NYSE and Nasdaq will now have female bosses.
10.45am: FTSE nudges higher
The FTSE 100 has added to its Monday gains, when it broke through 7,800 for the first time.
In mid-morning trading, the index is up 7.7 points, or 0.1%, to 7,866.9.
That’s despite a strengthening pound which has managed to rediscover its verve in light of comments made by Bank of England governor Mark Carney and his fellow Monetary Policy Committee that interest rate hikes are still very much on the cards.
Sterling is currently up 0.4% against the dollar to US$1.347, having fallen below US$1.330 briefly on Monday.
The global markets have been buoyed by an apparent easing of relations between the US and China – two of the world’s foremost economic superpowers. China even went as far as to cut the import duty on cars from the States today to 15% from 25% previously.
Severn Trent PLC (LON:SVT) was one of the top risers, up 1% to £20.66, ahead of its full-year results tomorrow, although its hospitals group Mediclinic International Plc (LON:MDC) sitting atop of the leader board – up 3.4% to 686.6p.
Travel operator TUI AG (LON:TUI) is the biggest blue-chip faller, losing 2.2% to £17.70, while Marks and Spencer Group Plc (LON:MKS) investors seem to be getting twitchy with results due tomorrow. The stock is down 1.8% to 296p.
10.15am: Pound nears US$1.35
The pound has recovered some of yesterday’s losses as traders digested comments from Bank of England governor Mark Carney and Monetary Policy Committee member – one of those who votes on rate rises – Gertjan Vlieghe.
Carney said that the BoE held off from raising interest rates in May to allow the economy to “re-establish itself”, adding that he expects to hike rates when it has done so.
Meanwhile Gertjan reportedly said that rates will “go up very gradually” over the next few years.
Sterling, which slumped in the wake of May’s no hike decision, is up 0.4% to US$1.347.
9.50am: Government borrowed less than expected last year
Public sector net borrowing in the UK dropped by £5.7bn in the last financial year to its lowest level since 2007.
The Office for National Statistics said borrowing between April 2017 and March 2018 was £40.5bn - £4.7bn less than official expectations from the Office for Budgetary Responsibility.
The OBR expects the public sector to borrow £37.1bn in the current fiscal year, around a quarter of what it borrowed at the peak of the financial crisis in 2010.
At the end of April, the total deficit stood at £1.77trn, equivalent to 85.1% of gross domestic product and a £56.8bn increase year-on-year.
Public sector finances, UK: April 2018 published today https://t.co/ugypgnMCcF— ONS (@ONS) May 22, 2018
8.45am: Footsie flat
After surging to a record high Monday the FTSE 100 appeared to be afflicted by stage fright as it opened 1.37 points lower at 7,857.80.
There was some respite for the pound as the dollar eased back a little, although the direction of the British currency may well hinge on the comments of Bank of England governor Mark Carney, who is in front of the Treasury Select Committee later.
"Expectations of a rate hike went from almost fully baked in to nearly completely priced out in the two weeks leading up to the last Bank of England [interest rate] decision," said London Capital Group commentator Jasper Lawler.
The canary in the coal mine ahead of what's expected to be a busy week for the retail sector looks to be Halfords (LON:HFDS), the car parts and bikes group which sounded the earnings alarm. The stock skidded 14% lower.
Finally, the market appeared slow to react to a downgrade by heavyweight broker JP Morgan Cazenove, which downgraded Royal Mail Group (LON:RMG) to 'neutral' from 'overweight'.
Proactive news headlines:
Scottish billionaire Mrs Ann Gloag has bought a 3% stake in Arc Minerals Ltd (LON:ARCM). The investment came as part of the recent placing that allowed Arc to boost its stake in the Zamsort copper-cobalt project in Zambia. Mrs Gloag is a co-founder of Stagecoach.
Avacta Group Plc's (LON:AVCT) Affimer technology may hold the key to delivering DNA-based treatments that more effectively and efficiently tackle diseases such as cancer. Early encouraging signs have emerged from the company's collaboration with Finland's FIT Biotech.
OptiBiotix Health plc (LON:OPTI) confirmed it has inked a deal with Seed Health, which will produce, promote, market, and commercialise products containing the former's cholesterol lowering additive, LP-LDL.
Accesso Technology Group PLC (LON:ACSO) has seen a strong start to 2018 with several new agreements and a move into US markets, according to a statement to be made at its annual general meeting later today.
Background screening specialist ClearStar Inc (LON:CLSU) has continued to enjoy double-digit revenue growth in the second quarter of its fiscal year as its offering starts to attract the attention of some big-name companies.
Bluejay Mining PLC (LON:JAY) will shortly be commencing fieldwork at the Dundas mineral sands project in Greenland. The aim is to boost the existing resource significAntly, and also to continue with environmental and social assessment work. A pre-feasibility study is due shortly.
ECR Minerals PLC (LON:ECR) has completed drilling at its Monte Christo gold project in Australia. It will now move on to drill at Blue Moon, where a geochemical survey has already identified potential targets.
Canadian copper miner Rambler Metals and Mining PLC (LON:RMM CVE:RAB) has raised £2.2mln through a private placing with fund manager Lombard Odier. Shares were priced at 5p and will be issued in two tranches to ensure Lombard’s stake does not rise above 9.9% until approval is grAnted by the Toronto Venture Exchange.
Ferrum Crescent Limited (LON:FCR) said that, following shareholder approval at yesterday’s AGM, it has now completed the placing and subscription to raise, in aggregate, approximately £1mln (before expenses), through the issue of, in aggregate, 1,739,130,435 new ordinary shares at a price of 0.0575p each.
6.30am: FTSE 100 set to pause for breath
The FTSE 100 is seen pausing on Tuesday having reached record intra-day and closing highs yesterday with the slight retreat reflecting overnight falls from Asian markets despite a jump by Wall Street as US/China trade war fears subsided.
Spread betting firm IG expects the UK blue-chip index to open around 4 points lower at 7,855, having closed 80 points higher on Monday at the new closing peak of 7,859.17 and just below the intra-day peak.
In New York, the Dow Jones industrials average leapt 298 points higher to close at 25,013 encouraged by signs of a reconciliation between the US and China over import tariffs.
But Asian stocks were more cautious today as stronger oil prices and a firmer dollar weighed on the region, with Japan's Nikkei 225 mostly flat while Chinese and Australian shares were lower.
On currency markets, the pound was fairly flat versus the dollar but lower against the euro ahead of the first of this week’s UK economic data, with the public sector finances due for release at 9.30am.
Bank of England governor Mark carney is also due to give testimony of the May inflation report to the House of Commons’ Treasury Select Committee today.
On the corporate front, the week’s batch of retail results kick off with updates from two mid-cap companies on Tuesday - car parts to bicycles stores chain Halfords Group plc(LON:HFD) and specialty tiles firm Topps Tiles Plc (LON:TPT)
Cars and bikes focus
Halfords’ full-year results will be the first set of numbers to be presented since new chief executive Graham Stapleton joined in January.
The recent unseasonal weather is unlikely to have done much for the retailer’s bikes business, although recent weakness there could be offset by higher sales in the car parts and repairs division.
Halfords is guiding for a full-year pre-tax profit of £71.4mln, but analysts at Deutsche Bank reckon there is a chance for a small beat, forecasting £72.4mln. They also reckon a special dividend “is possible”.
Guidance eyed from Topps Tiles
In a trading update in April, Topps Tiles said total revenues rose to £109.4mln in the 26 weeks to 22 May, up from £106.6mln for the same period a year earlier.
Like-for-like revenues rose 0.6% in the period, compared to a 1.9% decline in 2017, with a strong first quarter offsetting a weaker second quarter.
The retailer said second-quarter sales were hit by the so-called ‘Beast from the East’, which brought snowfall and icy temperatures across to the UK from Siberia, so any full-year guidance will be eyed closely.
In a bid to boost sales, Topps has been making improvements to its stores, website and product range, so investors will be looking to see if these efforts to turnaround the business have started to yield results.
Page turner for Bloomsbury Publishing
It alerted the market then that it sees revenues ‘slightly ahead’ of expectations and profits to be ‘well ahead’ of expectations for the year ended 28 February 2018.
The focus in the full-year results, therefore, is likely to be on current trading and its plans for IB Tauris, the acquisition of which was announced at the beginning of the month.
SignificAnt events expected on Tuesday May 22:
Interims: Topps Tiles Plc (LON:TPT), Greencore Group PLC (LON:GNC), Nostrum Oil & Gas PLC (Q1) (LON:NOGN), Oxford Biodynamics PLC (LON:OBD), Renew Group PLC (LON:RNWH), Shaftesbury PLC (LON:SHB), UDG Healthcare PLC (LON:UDG), Watkin Jones PLC (LON:WJG)
Finals: Halfords PLC (LON:HFD), Bloomsbury Publishing PLC (LON:BMY), Big Yellow Group PLC (LON:BYG), Entertainment One Limited (LON:ETO) First Derivatives PLC (LON:FDP), Homeserve PLC (LON:HSV), Intermediate Capital Group PLC (LON:ICP), Scapa Group plc (LON:SCPA), 1Spatial PLC (SPA), Schroder Real Estate Investment Trusts Limited (LON:SREI)
Economic data: UK public sector finances; Richmond Fed manufacturing index
Around the markets:
- Sterling: US$1.3415, down 0.1%
- Gold: US$1,290.20 an ounce, unchanged
- Brent crude: US$72.44 a barrel, down 0.3%
- Theresa May urged to take action over Sainsbury’s’ contract changes that cut wages for some - The Independent
- Ocado soars again to give its Founder another £18mln with the delivery firm set to break into the FTSE 100 for first time next month – Daily Mail
- BP latest to ink LNG supply deal with Venture Global - Financial Times
- Rio Tinto warns Mongolia on tampering with rights to copper mine – Financial Times
- Takeda says Shire deal will bolster price positioning: - Financial Times
- Microsoft, Google find fresh flaw in chips, but risk is low - Reuters
- Retail giAnt Walmart on top again in Fortune 500 – The Times
- Obamas strike multiyear production deal with Netflix – Financial Times
- Adobe to buy Magento Commerce for US$1.7bn - Financial Times
- Foreign funds force Hyundai to ‘re-evaluate’ $8.8bn restructuring - Financial Times
- Blackstone sells Ipreo deal data service to IHS Markit in US$1.86bn deal - Financial Times
- Ant Financial US$10bn fundraising over-subscribed: - Financial Times
- Nokia smartphone maker HMD raises US$100mln – Daily Telegraph
- Colony and Cerberus vie to buy Abraaj buyout arm: - Financial Times
- Australia’s Healthscope falls after rejecting takeover bids: - Financial Times
- World’s largest battery and car-charging network planned for UK – Daily Telegraph:
- Why Aston Martins just got even more expensive: Price of the luxury sports cars jumps by an average £16,000 – Daily Mail
- Crabbie’s to open new distillery near historic Leith home – The Scotsman
- UK chief executives become more downbeat about growth: KPMG - Reuters