FTSE 100 closes up 13pts
Q1 GDP unchanged at 0.1%
Pound lower
Royal Mail Group top Footsie loser
FTSE 100 closed higher on Friday but off the day’s highs as US stocks dropped and Brexit worries continued to pressure the pound.
The UK's blue-chip index finished up over 13 points at 7,730 having been 20 points higher just after the open
Mid-cap brother fared better though, up over 121 points at 21,110.
Footsie was down on the week though, shedding around 0.6%.
Stocks in Italy and Spain dropped amid political uncertainty, but the German Dax added 0.65% on the day to 12,938.
In the currency markets, the pound lost 0.01% against the Euro and is off 0.53% against the US dollar, at 1.3314.
It came as EU officials warned that the current UK position in Brexit negotiations mean no chance of progress. Three days of talks in Brussels have reportedly broken down.
Top riser on Footsie was packaging outfit Smurfit Kappa Group (LON:SKG), which added 3.6% to 3,108p following yesterday’s €460mln acquisition of the Dutch paper and recycling business Reparenco.
The top loser was Royal Mail Group plc (LON:RMG), which slid 2.75% to 530.40p after German ban Berenberg downgraded the rating for the stock to 'sell' from ‘hold’, citing increased risks for the mail delivery firm’s profit growth.
3.45pm: Footsie loses gains
The FTSE 100 got off to a hot start on Friday morning, but the index hasn’t able to maintain that form as traders start to turn their attentions to the upcoming bank holiday weekend.
With around 45 minutes left in trading, the FTSE 100 was up 1.2 points to 7,717.9. It had touched 7,750 shortly after the opening bell.
Smurfit Kappa Group PLC (LON:SKG) is still on the rise following yesterday’s €460mln acquisition of Dutch paper and recycling business Reparenco, which it believes can deliver “significant synergies” in the near-term.
The Irish packaging group is the index’s top riser, up 3.4% to £31.02.
B&Q owner Kingfisher wasn’t far behind, climbing 2.6% to £92 after yesterday’s mini sell-off and the news that rival Homebase has been sold to a turnaround specialist.
Heading the other way is Royal Mail PLC (LON:RMG), down 3.1% to 528.8p, after it was downgraded by analysts at Berenberg.
Oil prices have been surging in recent months but both Brent crude and West Texas Intermediate recorded sharp falls this afternoon which weighed on the big UK-listed oilers.
BP PLC (LON:BP.) has lost 2.1% to 554.9p, while fellow supermajor Royal Dutch Shell PLC (LON:RDSB) is down 1.8% to £26.30.
3pm: Slow start in US
Despite the futures markets pointing to a steady rise at the opening bell in New York, things have been a bit slower than expected.
The Dow Jones Industrial Average is down 65.7 points, or 0.3%, in early deals to 24,746.0, while the broader S&P 500 has shed 6.7 points, or 0.2%, to 2,721.0
The tech-heavy Nasdaq openedhigher, albeit by not very much, climbing 12.2 points, or 0.2%, to 7,436.8.
2.40pm: Is Opec set to increase supply?
OPEC’s production cuts have done their job and propped up the oil price over the past two years, but the talk now is shifting back to balancing supply so as to stabilise the price.
In Friday trading, Brent crude was priced above US$77 with WTI (West Texas Intermediate) holding above US$69 a barrel.
At the last OPEC meeting, ministers were adamant that the agreement would stay in place until the end of 2018 as agreed, but that was before Venezuela’s production decreased so rapidly and the US sanction action on Iran is already taking barrels off the market.
With such tightness in the market, Commerzbank said oil at US$80 a barrel would “raise the probability of a production increase,” to ease the price.
Read more of oil expert Eithne Treanor’s column here.
2.05pm: Saudi Aramco not floating in 2018
There had been wide speculation that Saudi Aramco - possibly the first trillion-dollar listed company - would float at some point this year.
The New York and London stock exchanges had been among the favourites to land the oil giant.
The #SaudiArabia energy minister now says that shares in #Aramco the state-owned oil giant are most likely to go on sale at some point NEXT year. Huge speculation the public listing was going to be this year. London & NY amongst the stock exchanges vying for the listing.
— Aaron Heslehurst (@bbcaaron) May 25, 2018
1.30pm: Dunelm issues profit warning
Dunelm Group PLC (LON:DNLM) is one of the day’s late fallers after the furniture retailer said it expects annual profit to be “moderately” below last year’s following sluggish sales.
The company said it has endured an “unexpectedly challenging” start to its fourth quarter, with like-for-like store sales down 4.7% so far in the period.
Overall sales are up just 0.1% in the period as a 43.7% rise in online sales offset the decline at stores.
“Taking into account the trading conditions in the quarter to date and a more cautious outlook for the remainder of the financial year, we currently believe that underlying profits for the year are likely to be moderately below those delivered last year (2017: £109.3mln).”
Shares fell 13% to 533p in afternoon trading.
1.00pm: US stock futures point to higher open
US stock futures rose on Friday after a senior North Korean official said leader Kim Jong Un is still willing to meet with the US after President Donald Trump called off a June 12 summit.
Dow Jones Industrial Average futures rose 25 points to 24,826, S&P 500 futures increased 1.9 points to 2,729 and Nasdaq futures added 14.5 points to 6,972.
Trump’s decision to pull out of a meeting with North Korea had dragged on indices on Thursday but the Asian nation’s restrained response to the move eased concerns about geopolitical tensions.
On the company front, a federal jury has ordered Samsung Electronics Co. to pay Apple Inc (NASDAQ:AAPL) US$539mln for infringing patents related to phone designs.
Foot Locker (NYSE:FL) was on the front foot in pre-market trading after reporting first quarter results that beat analysts’ expectations.
12.00pm: FTSE 100 gains in midday trade
The FTSE 100 rose 13 points to 7,730 in lunchtime trading as the pound fell after weak UK GDP data dampened expectations for an interest rate increase by the Bank of England.
The UK economy grew by just 0.1% in the first quarter, the worst rate since 2012, according to the Office for National Statistics.
The pound dropped 0.3% against the dollar to US$1.3339.
Energy stocks, including BP PLC (LON:BP), Royal Dutch Shell PLC (LON:RDSB) and BHP Billiton PLC (LON:BHP), were under pressure as oil prices fell after Saudi Arabia and Russia said they were ready to ease supply curbs.
Going the other way, Kingfisher PLC (LON:KGF) gained after Australian firm Wesfarmers sold rival DIY retailer Homebase to restructuring specialist Hilco for £1.
BT Group PLC (LON:BT.A) shares jumped on reports it has received informal interest from infrastructure funds keen to own a stake in its core fixed-line network.
11.15pm: Analysts weigh risks to UK economy
The UK economy had a weak start to 2018 and the outlook for the rest of the year is looking pretty grim, according to some analysts.
“While growth in the first quarter was clearly savaged by the Beast from the East, the extent of the slowdown suggests there was an underlying loss of momentum in economic activity,” said Howard Archer, chief economic adviser to the EY Item Club.
EY Item Club recently cut its 2018 UK GDP growth forecast to 1.4%, which would be the weakest performance since 2009 and down from an expansion of 1.8% in 2017.
Archer said the rest of 2018 should be helped by the squeeze on consumers easing further with inflation falling back from a peak of 3.1% in November to 2.4% in April.
“However, the recent rise in oil prices to a three-and-a-half year high could lead inflation to be higher-than-expected and hold back the improvement in consumer purchasing power,” he said.
“It also looks questionable as to whether employment can sustain its recent growth, given the tightness of the labour market.
#UK #GDP #growth confirmed at just 0.1% q/q in Q1 2018, which maintains concern over loss of underlying momentum as well as weather impact. Muted q/q growth in #consumer spending (0.2%) while disappointing falls in #business #investment (0.x%) & exports (0.5%) Net #trade flat
— Howard Archer (@HowardArcherUK) 25 May 2018
Jonathan Samuels, the chief executive of finance company Octane Capital, said with inflation still above target, households seemingly spent out and Brexit looming ever closer, it's "hard to see any material bounce-back in the UK economy during 2018”.
"Companies are becoming increasingly vigilant as we approach Brexit, as reflected by the contraction in business investment,” he said.
"In Brexit, we're entering the absolute unknown and caution is rapidly becoming the default setting for UK Plc.”
He added that since Bank of England Governor Mark Carney appears to have put an interest rate cut back on the cards “underlines the genuine concern about a potential chaotic exit from the EU”.
The pound is down 0.15% to US$1.3360 as the GDP data cast doubt on rate hike expectations.
10.45pm: Mortgage approvals recover in April
UK mortgage approvals reached a three-month high in April but was still 9.4% lower than a year ago, according to data from trade body UK Finance.
Mortgage approvals recovered on a month-on-month basis to 38,049 in April from 37,606 in March, driven by remortgaging levels ahead of expected interest rate hikes by the Bank of England.
Refinancing of existing mortgages jumped 13.7% on the year to 28,212.
"April saw steady growth in mortgage lending and approvals, following a slowdown in activity the previous month. This was driven by strong remortgaging levels, as borrowers locked into attractive deals amid expectations of a base rate rise," said Eric Leenders, personal finance managing director UK Finance.
10.15am: Kingfisher leads blue chips higher
The FTSE 100 continues to claw back some of the losses sustained over the past couple of days.
The index of blue-chip shares is up 22.5 points to 7,739.3 in mid-morning trade in London.
B&Q owner Kingfisher PLC (LON:KGF) is the top riser, up 4% to 309p, as it recovers from yesterday’s mini sell-off in the wake of a disappointing first-quarter update. The shares have been lifted on news that rival DIY chain Homebase has been sold by its Australian owner Wesfarmers to turnaround specialist Hilco for £1.
Utilities in demand
Blue-chip utilities – which have all had results this week – were also in demand, buoyed by Pennon Group PLC’s (LON:PNN) positive outlook in its full-year results.
Severn Trent PLC (LON:SVT) is up 2.5% to £20.87, while its larger peer United Utilities Group PLC (LON:UU.) has gained 2.2% to 812.8p.
BT Group PLC (LON:BT.A) finds itself towards the top for a change, with the telecoms group boosted by reports it has received informal interest from infrastructure funds keen to own a stake in its Openreach division. Shares are up 2.4% to 207.5p.
Postal giant Royal Mail PLC (LON:RMG) is still the index’s heaviest faller, down 3% to 529.4p, after it was downgraded by analysts at Berenberg.
Apart from that, there aren’t too many big losers. Platinum refiner Johnson Matthey PLC (LON:JMAT), down 1% to £34.37, is the only other loser of any note.
10am: Construction better than first thought
Growth in the UK construction sector fell less than initially thought in the first quarter of the year.
A second reading found that construction growth between January and March – when the UK was blighted by the ‘Beast from the East’ – fell 2.7%, compared with the first estimate of 3.3%.
The ONS said: “While the bad weather had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited, with partially offsetting impacts in energy supply and online sales.”
9.50am: Cryptocurrency craziness
Well the crypto press releases get better:”First Cryptocurrency Based Social Network Focusing on the Paranormal Will Exhibit at DisclosureFest’s Mass Meditation”
— Rory Cellan-Jones (@ruskin147) May 25, 2018
9.35am: Q1 GDP reading unchanged at 0.1%
The second estimate for first-quarter gross domestic product (GDP) has remained unchanged at 0.1%. If the final reading confirms this figure, it will be the slowest rate of growth since 2012.
“The Bank of England have been keen to stress that the weakness in the first quarter was temporary while also pointing out that it has historically been prone to upwards revisions,” said XTB chief market analyst David Cheetham.
“Unfortunately for Carney and his fellow MPC members, there has been no such upwards revision today and while there's still the final reading to come it is unlikely we see much improvement there.”
0.1% increase in #GDP in Q1 2018, unrevised from our previous estimate https://t.co/xWYiXCmyYJ pic.twitter.com/hY1DrMc4BJ
— ONS (@ONS) May 25, 2018
9.15am: BT nudges higher
BT Group PLC (LON:BT.A) shares are up 2% to 207.3p, amid reports it has received informal interest from infrastructure funds keen to own a stake in its core fixed-line network.
The interest was first reported by Bloomberg, which said infrastructure investors and private equity groups had expressed interest in taking a minority or majority stake in Openreach.
Reuters reported that a person familiar with the situation, who declined to be named because the process is not public, said funds had lodged informal expressions of interest which had not been courted and which would now be considered by the telecoms giant.
BT owns the UK's national telecom and broadband network through Openreach, a legally separate division that is used by the firm and its rivals, such as TalkTalk PLC (LON:TALK), Vodafone PLC (LON:VOD), and Sky PLC (LON:SKY), to provide services to consumers.
8.45am: Footsie claws back losses
The FTSE 100 got off to a decent start, clawing back some of Thursday's losses as traders ignored the negativity emanating from Wall Street and Asia's main markets.
The index of blue-chip stocks was up 30 points at 7,746.95, ahead of a second estimate of first-quarter economic growth.
The initial reading showed the UK GDP had been subdued by the Beast from the East as the value of goods and services grew just 0.1%.
There are some economists predicting an upward revision, though it's fair to say nobody's holding their breath.
The big Footsie rise was Kingfisher (LON:KGF), which bounced back 3.2% in the wake of a mini sell-off Thursday, prompted by rather a lacklustre first-quarter trading update.
On the flipside was Royal Mail Group (LON:RMG), which fell 3.7% after the London arm of German bank Berenberg downgraded the stock in the delivery group to 'sell'.
Stepping down a division, Centamin (LON:CEY) shares dropped 15% after the latest production update from the Egypt-focused gold digger failed to wow the market.
Proactive news headlines:
Midatech Pharma PLC (LON:MTPH) (NASDAQ:MTP) is about to kick off first-in-man trials of a potentially pioneering new treatment for a fatal childhood brain cancer. Dosing has begun using Midatech’s MTX110 in patients with diffuse intrinsic pontine glioma (DIPG), a highly aggressive strain of the disease.
Westminster Group PLC (LON:WSG) is still hopeful it can move forward with its airport security contracts in Iran. The group put a €24mln contract with one airport on hold following the US withdrawal from the Iran nuclear pact in May.
Echo Energy PLC (LON:ECHO) is raising £8.5mln of new capital though a share placing and subscription as it plans to accelerate its operations in Argentina. It is issuing 71.18mln new shares, priced at 12p each.
Ergomed PLC (LON:ERGO) has added specialist pharmacoepidemiology services to its PrimeVigilance drug safety and information offering with a new hire. The AIM-listed company, which provides specialist services to the pharmaceutical industry, said it had appointed Dr Michael Forstner as head of risk management and pharmacoepidemiology.
Haydale Graphene Industries PLC (LON:HAYD) is to invest US$1.5mln in its manufacturing capabilities in South Carolina to bring manufacturing of a new cutting tool in-house. At the moment, manufacturing is outsourced but demand from aerospace engine makers for the tools has prompted Haydale to expand.
Strategic Minerals PLC (LON:SML) is to kick off a new drill programme at its Redmoor tin-tungsten-copper project in Cornwall next month.
Cadence Minerals PLC (LON:CAD) told investors that its future prospects are growing and are very exciting. “We will continue to support our investee companies and identify new areas for expansion that offer the potential for superior returns on capital,” the company said in its full year statement.
Orosur Mining Inc (LON:OMI) has decided to terminate its option agreement on the Anillo gold exploration project with the Chilean national mining company, Nacional del Cobere de Chile (Codelco).
i3 Energy PLC (LON:I3E) told investors that James Caird Asset Management has exercised its option to convert US$500,000 of a loan into equity. Some 925,926 new i3 Energy shares have been issued to the investment group. The company noted that the value outstanding on the loan is now US$1mln.
6.45am: Rally predicted
The FTSE 100 is seen rallying in early trading seeking to close out the week near the all-time highs it hit earlier as US markets recovered from sharper falls, somewhat following a more conciliatory response from North Korea after the cancellation of a planned summit by US President Donald Trump.
Spread betting firm IG expects the FTSE 100 index to open around 50 points higher at 7,766, having closed around 71 points lower on Thursday, retreating further from a record peak of 7,903.50 set on Tuesday.
Globally, markets were a mixed bag, with the Dow Jones ending down 75 points at 24,811, albeit off morning lows, while Asian stocks mixed with tensions eased by the North Korean response to Trump's summitt cancellation, with Japan’s Nikkei 225 up 0.1%, while Hong Kong’s Hang Seng Index fell 0.3%.
On currency markets, the pound was fairly flat versus both the dollar and the euro ahead of the last of this week’s big batch of UK economic data, with the second reading for GDP growth due at 9.30am.
“Today’s second estimate of Q1 GDP is expected to come in at 0.1% unchanged from the previous estimate and given the poor weather in March it would be a surprise if any of the other indicators were revised higher, though we could see exports revised up to 0.5%” said Michael Hewson, chief market analyst at CMC Markets.
On the corporate front, utilities will be firmly in the front view as SSE PLC (LON:SSE) and Pennon Group PLC (LON:PNN) report their full-year results.
With core revenues being tightly regulated, there’s not much scope for the results from SSE and Pennon to stray too far from expectations, so upcoming changes to regulation are likely to be the focus.
Ofwat’s price review, due to come in for 2019, will likely pose more of a challenge for the three firms above and their unlisted peers, so look out for commentary around any impact of the new rules.
Utilities are all about their dividend pay-outs, so investors will be hoping to see a strong grip on costs to keep the bottom line looking healthy.
Analysts are expecting Pennon to generate sales of £1.4bn and operating profits of around £320mln.
Significant events expected on Friday May 25:
Finals: SSE PLC (:LON:SSE), Pennon Group PLC (LON:PNN), Volvere PLC (LON:VLE)
Trading update: Spectris PLC (LON:SXS)
Economic data: UK second reading Q1 GDP; US durable goods orders; US University of Michigan final consumer sentiment
Around the markets:
- Sterling: US$1.3354, up 0.1%
- Gold: US$1,291,70, an ounce, unchanged
- Brent crude: US$70.60 a barrel, down 0.2%
City Headlines:
- UK households less confident as economy worries grow: YouGOV/CEBR survey – Reuters
- Potential bidders emerge for Homebase – Financial Times
- Netflix eclipses Disney in market milestone – BBC News
- Uber shuts Arizona self-driving program two months after fatal crash - Reuters
- Richemont clinches takeover of Yoox Net-A-Porter – Reuters
- Ryanair considers carry-on bag U-turn after new rules cause 'issues' at the gate – Daily Telegraph
- New TSB gaffe: bank claims some former customers have died – The Guardian