FTSE 100 closes 25 points higher
Oil dips amid signs of possible production increases
US stocks higher
Resource stocks top gainers
After a promising start, FTSE 100 dipped towards the bell to close around 25 points higher as the stronger pound and oil market put a cap on gains.
The UK's premier index added over 25 points at 7,712, with resource stocks taking up four of the top five positions.
Oil fell towards the end of the European session after reports emerged that OPEC could lift its oil output by 1mln barrels a day and as US stockpiles showed an unexpected gain.
In the currency markets, sterling was up 0.14% against the US dollar at 1.3421, but lower (0.36% down) against the Euro.
On Wall Street, markets were climbing, with the Dow Jones Industrial Average up nearly 200 points and the S&P 500 also ahead.
Top riser on Footsie was housbuilder Barratt Developments plc (LON:BDEV), up 3.26% to 569.40p, while copper giant Antofagasta (LON:ANTO) added 3.14% to 1,149p.
On the losing front, United Utilities Group PLC (LON:UU) was the biggest loser, off 1.93% at 771.20p.
3.30pm: Brent crude lower
Brent crude prices turned downward toward the end of the trading day amid increasing signs that Saudi Arabia and other major oil producers will raise supply to balance a surge in demand for the peak US driving season.
In late-afternoon Brent crude was down US$0.20 at US$75.18 a barrel as India’s oil minister said his Saudi counterpart told him the country was revisiting its policy on cutting production, one of the key drivers behind the price rise in recent months.
It comes ahead of the meeting of OPEC countries on 22-23 June, with Reuters sources saying the members are considering a supply increase of up to 1mln barrels per day.
2.45pm: Wall Street opens higher
Markets in the US opened higher amid news of a smaller trade deficit in April in addition to a slight thaw in trade war tensions with China.
The Dow Jones was up 124 points at 24,925 shortly after the open, while the S&P 500 was up 6.5 points at 2,755 and the Nasdaq was up 11 points at 7,648.
In other news, shares in electric car make Tesla Inc (NASDAQ:TSLA) jumped 5.5% to US$301 at the open after owner Elon Musk said the company was “quite likely” to meet its goal of manufacturing 5,000 of its Model 3 cars a week by the end of June.
2.15pm: US market set to open higher amid slight thaw in trade tensions
Wall Street is expected to open higher this morning as investors eye a possible thawing of trade tensions between the US and some of its major partners.
The expected reduction in trade tensions follows reports that US Treasury Secretary Steven Mnuchin urged President Donald Trump to exempt Canada from metals tariffs at a meeting on Tuesday.
The report adds to news today that China had offered to buy some US$70bn of US goods to get the Trump administration to cool its tariff threats.
In a note to clients, Konstantinos Anthis, head of research at ADS Securities, said: “This news points toward an easing of geopolitical risks which paints a positive outlook for global growth and investors are jumping into the fray to benefit from this positive tilt in risk sentiment”.
The Chinese olive branch isn’t the only reason US trade will be at the forefront as data released this morning showed the US trade deficit shrank 2.1% to US$46.2bn in April, its lowest in seven months.
1.00pm: EU to slap tariffs on US imports from July
The European Union is expecting to hit US imports with tariffs from July in response to last weeks trade action by Washington.
Member states have given broad support to a plan by the European Commission to impose 25% duties on up to €2.8bn of US exports in response to that it says are illegal trade actions by the United States.
Products in the EU’s crosshairs include orange juice, bourbon whiskey, jeans, motorcycles and a variety of steel products.
The Commission’s plan also includes duties of between 10% and 50% on a further €3.6bln of US imports in March 2021 or sooner if the World Trade Organization rules the US measures illegal.
At a news conference, EU Commissioner Maros Sefcovic said: “The Commission expects to conclude the relevant procedure in coordination with member states before the end of June so that the new duties start applying in July”.
The response follows similar action by Canada, the US’s second-largest trading partner, who said it will impose retaliatory tariffs on C$16.6bn worth of US goods from 1 July.
12.00pm: FTSE 100 closes out morning with stable gains after Tuesday’s fall
The FTSE 100 has picked itself up after a finish in the red yesterday as the morning ends with a somewhat positive gain for the index.
An outperformance in the US, led by the tech-heavy Nasdaq which finished at a record high, has pushed trading up across Europe.
Joshua Mahony, market analyst at IG, said: “After a start to the week which has seen outperformance across both construction and services PMI readings in the UK, the emphasis now shifts towards the geo-political affairs as we move into a quieter period on the economic calendar. With the US trade data released this afternoon, there is a certain weariness of the potential impact Donald Trump will have upon risk sentiment given his propensity to tweet around such events. With China attempting to stifle US tariffs, we are clearly at a crucial juncture for global trade, despite the relative optimism seen throughout global financial markets.”
There has also been positive news on the trading front, with the Chinese government saying it has offered to buy US$70bn worth of US goods in exchange for having no further tariffs imposed on Chinese imports to the US.
On the continent, markets have been stirred by comments that the European Central Bank will discuss a possible end to its stimulus programme before 2019 after ECB chief economist Peter Praet said it would debate next week whether to gradually unwind bond purchases when it holds its policy meeting.
The comment pushed the euro to a ten-day high, however many are cautious that the Italian political situation could cause more worries for the eurozone.
So @Mov5Stelle has claimed @ECB was punishing #Italy last month to ensure no populist govt took power. Seemed nuts. But then ECB released QE data today. Interesting graph, no? https://t.co/APk9VrqTOD pic.twitter.com/EIj5QGAnH8
— Peter Spiegel (@SpiegelPeter) 4 June 2018
Analysts at Dutch bank ING said: “Judging from Peter Praet’s comments, it also seems that the majority of the ECB considers the series of weaker hard macro data as a soft patch rather than the start of a downswing of the eurozone recovery.
They added: “As observed earlier, Praet’s speech today provides further evidence that there is a growing majority within the governing council favouring an end of QE by the end of the year. Maybe an ironic outcome of the Italian market tensions is that the weaker euro is making it even easier to engage in QE tapering. However, we do not think that there is already agreement on the timing and detail of the communication.”
While there wasn’t much corporate news on the calendar, the big story of the day was FTSE 250 retailer WH Smith Plc (LON:SMWH), whose travel business helped the retailer to more than offset the continued fall in sales at its high street stores.
Like-for-like sales in its high street stores were down 1% in the three months ended June 2 compared with the same period a year earlier.
But group like-for-like sales climbed 1%, as WHS positioned itself to take advantage of the growing number of road, rail and plane passengers.
WH Smith has been shifting its focus away from the UK high street, where a host of retailers have struggled to grow sales as shoppers shift to online.
In late-morning trading, WH Smith shares were up 6.4% at 2,104p.
11.15am: Sterling hits two week high against dollar
Yesterday’s above-forecast services PMI has helped push sterling up to a two-week high against the greenback.
In late-morning, the pound was up 0.22% at US$1.3423 against the dollar, however it was down 0.16% at €1.1411 against the euro as ECB comments on the potential end of the eurozone stimulus pushed a rally.
In other news from the continent, the initial bounce from the news of the Italian coalition is starting to fade with Italian bond yields rising and stocks in Milan dropping to their lowest weekly levels.
David Cheetham, chief market analyst at XTB, commented: “The case for European equities has not been helped by some reported ECB leaks, that suggest the central bank will debate an exit to their asset purchase programme (APP) at next week’s meeting. The withdrawal of stimulus at a time when the strong economic performance seen last year has pulled-back markedly would weigh further on European markets, which have lagged their US counterparts in recent weeks due to the latest batch of political uncertainty.”
Meanwhile, the UK Labour party has submitted an amendment to the Brexit Withdrawal Bill that pushes for a ‘soft’ Brexit, calling for full access to the single market.
The move comes before a crucial vote next week as Labour hopes to attract rebel Conservative MPs to its softer Brexit agenda.
10.40am: European leaders seek US sanction exemptions for firms in Iran
European signatories to the Iran nuclear deal have written to US officials stressing a commitment to upholding the agreement while urging the United States to exempt active EU firms who are operating in Iran from secondary sanctions.
In a letter, ministers from Germany, France and Britain singled out key areas they wanted exempted, including pharmaceuticals, healthcare, energy, automotive, civil aviation, infrastructure and banking.
Reuters reported that the letter said: "An Iranian withdrawal from the (nuclear agreement) would further unsettle a region where additional conflicts would be disastrous".
10.30am: Euro rallies as ECB officials to discuss end of stimulus
The Euro jumped to a ten-day high after officials from the European Central Bank (ECB) said that an end to the bank’s bond-buying programme by the end of the year was plausible.
ECB chief economist Peter Praet said the central bank would debate next week whether to gradually unwind bond purchases when it holds its policy meeting.
Meanwhile, the head of Germany’s central bank, Jens Weidmann, said expectations for an end to bond-buying by the end of 2018 were plausible.
At mid-morning the Euro was up 0.18% at 0.8761 against the pound and up 0.38% at 1.1762 against the dollar.
9.30am: Oil price rises as Venezuela mulls export halt
Brent crude was on the rise this morning after Reuters sources said the Venezuelan state oil firm Petróleos de Venezuela (PDVSA) was considering a declaration of force majeure on some exports amid a fall in output and tanker bottlenecks at ports.
Venezuela has some of the world’s largest oil reserves and is a key supplier to the US fuel markets, but output has been restrained by inadequate investment, mismanagement and a confrontation with the United States that had led to sanctions.
The US has already requested unofficially that Saudi Arabia and some other OPEC producers increase output ahead of the organisation’s meeting on June 22-23 when it will decide whether to lift production as global demand outstrips supply.
In morning trading, Brent crude was up US$0.52 at US$75.9 a barrel.
Naeem Aslam from ThinkMarkets commented: “OPEC could increase the supply as the US has requested the cartel to loosen up the tap a little. However, the US inventory stockpiles continue to support the oil price to some extent and it shows that there is no glut. The US trade inventory data released yesterday showed that the US inventories have fallen by 2%.”
8.45am: FTSE 100 pushes ahead
The Footsie moved higher in early trading, rebounding thanks to strength in heavyweight mining issues after gains overnight in Asia, with broker comment the main focus in the absence of much corporate news.
Around 8.45am, the FTSE 100 index was ahead about 16 points at 7.702, rallying after shedding 54 points on Tuesday.
However, Naeem Aslam, market analyst at ThinkMarkets.com, said “we may continue to move higher but caution is the main word amid investors.”
He added: “The focus remains towards the upcoming G7 meeting where trade-war would be the most debated topic. This is a war created by Donald Trump, the president of the United States. Mr Trump is of the mind frame that by putting this kind of pressure on other countries can get him the desired outcome.
“This may be true to a certain extent because there appears to be some sign that China has agreed to buy US agriculture and energy products worth more than US$70bnunder a condition that no extra tariffs would be implemented.”
On currency markets, in the absence of any UK economic data, sterling held steady against the US dollar at US$1.3410, but was 0.2% lower versus the euro at €1.1415 reflecting Brexit uncertainty.
On the corporate front, British Gas-owner Centrica PLC (LON:CNA) was a FTSE 100 gainer early on, up 2.2% at 146.1p, boosted by an upgrade in rating from JPMorgan Cazenove to ‘overweight' from ‘neutral’.
The US bank’s analysts said, in their view, "the risk (for Centrica) has swung to the upside with management’s mitigation strategy taking shape.”
But broker comment was a drag on two blue chip real estate groups, with British Land PLC (LON:BLND) the top FTSE 100 faller, down 0.7% at 686.4p, while Hammerson PLC (LON:HMSO) lost 0.3% at 545.2p.
Traders said Swiss bank Credit Suisse had downgraded its ratings for both the property stocks to ‘underperform’.
Proactive news headlines:
Harvey Nash Group plc (LON:HVN), the global technology recruitment and outsourcing group, said it is tracking ahead of budget in its new financial year.
Instem Plc (LON:INS) said a Fortune 500 medical products and pharma company has adopted its Samarind Regulatory Management System. The deal is worth an initial US$750,000, with 80% of that sum being recognised this year, and brings with it recurring annual revenues of US$169,000.
Sound Energy PLC’s (LON:SOU) new drilling plans for the Tendrara-Lakbir permit have been given the environmental greenlight from the Moroccan authorities. The company, in a statement, told investors that it has secured approval for its Environmental Impact Assessment for the TE-9 and TE-10 wells.
Echo Energy Plc (LON:ECHO) told investors it has now completed the ELA-1 well, at the Laguna Los Capones project area, in the Fracción C licence area onshore Argentina. The well, drilled to a depth of 1,829 metres, encountered gas shows across a 40 metre section in the deeper Tobifera volcaniclastic target and some oil staining was also observed. Big Pic in April.
Chariot Oil and Gas Limited (LON:CHAR) has told investors it is well-funded for what it expects to be an “exciting” year for the junior explorer. AIM-quoted Chariot revealed earlier this week that the drilling of the Prospect S well at its Central Blocks licence offshore Namibia is slated to begin in the fourth quarter of the year and for which it is fully-funded having raised US$16.5mln earlier in the year.
Rose Petroleum PLC (LON:ROSE) described its past financial year as a period of “substantial progress’ as it works towards drilling its first well in Utah’s Paradox basin. The explorer’s maiden well programme is due to take place before the end of 2018.
Metal Tiger PLC (LON:MTR) has signed a binding investment agreement to acquire up to 50% of Botswanan focused explorer Kalahari Metals Limited (KML) for a total consideration of US$1.6mln.
European Metals Holdings Limited (LON:EMH) said it has begun the beneficiation process and magnetic separation of a 15 tonne bulk sample of ore from its Cinovec Lithium/Tin project in the Czech Republic.
StatPro Group PLC (LON:SOG), the portfolio analytics provider, has announced a strategic partnership with Broadridge Financial Solutions Inc (NYSE:BR).
Cadence Minerals Plc (LON:KDNC (OTC:KDNCY) reported that its investee company Macarthur Minerals Limited (TSX-V:MMS) has completed a heliborne SkyTEM electromagnetic survey programme targeting gold and copper at its Hillside Gold Project in the Pilbara region of Western Australia, to define high priority targets from conductors such as clusters of massive sulphide-hosted base metal deposits at depth. Cadence has a 15.2% equity interest in Macarthur.
NetScientific PLC (LON:NSCI) has announced that its portfolio company Vortex Biosciences has appointed Bob Englert as new chief executive officer. The healthcare IP commercialisation group said Bob Englert, who is currently chief technology officer, takes up the position with immediate effect, replacing Gene Walther, who has resigned to pursue other interests.
Berkeley Energia Limited (LON:BKY) shares have made their debut on the main board of the London Stock Exchange today. The uranium miner has also received confirmation from Spanish authorities that its shares will be admitted to the Madrid, Valencia, Bilbao and Barcelona stock exchanges in the near future.
Bluejay Mining PLC (LON:JAY) has announced the appointment of Garth Palmer as non-executive director with immediate effect. The group noted that Palmer, who has served as the company secretary to Bluejay for the last six years, is a Chartered Accountant with more than 15 years' experience and is also a director of AIM listed SigmaRoc PLC (LON:SRC). Bluejay also announced that Greg Kuenzel has stepped down as a non-executive director from today to focus on his other business interests.
Papua Mining PLC (LON:PML) has announced the appointment of Gordon Hart as a non-executive cirector of the company, effective immediately. The group said Hart has over 35 years of experience in the equity capital and financial advisory markets, spending the last 12 years as managing director of Venture Group Equities Pty. Ltd.
Eckoh PLC (LON:ECK), the global provider of secure payment products and customer contact solutions, has appointed Canaccord Genuity Limited as its joint corporate broker with immediate effect, to act alongside N+1 Singer, who remain the company's nominated adviser and joint corporate broker, and Berenberg who remain its joint corporate broker.
6.40am: Early gains predicted
The FTSE 100 was expected to open tentatively higher after a mixed session yesterday on Wall Street.
Having fallen 54 points yesterday to close at 7,687, the FTSE 100 was expected to open around five points higher with investors still a little concerned over the Italian political situation.
“Whilst Italy is over the worst politically speaking, economically the picture is far from rosy,” suggested Jasper Lawler at London Capital Group.
“Italy’s new Prime Minister Giuseppe Conte [is] vowing to put in place economic policies which could add to the nations heavy debt load sent investors into panic mode, searching for safe haven government debt, such as US treasuries, pulling yields lower,” Lawler said.
“Whilst the Nasdaq bounded higher for the second straight session, the broader US market was noticeably less buoyant as trade war concerns weighed on sentiment. The Dow closed 0.05% lower and the S&P 1 point higher. A rather disappointing end given strong ISM non-manufacturing figures and news that the US -North Korean Summit is reportedly back on for 12th June,” he added.
Heading towards the close of trading, the big two Asian markets – Japan and Hong Kong – were both higher.
The Nikkei 225 was up 95 at 22,634 and the Hang Seng was up 159 at 31,252.
Back in the UK, the first quarter reporting season is drawing to a close, which means corporate news flow is on the thin side.
WH Smith finds it is better to travel to survive
Of the announcements scheduled for today, WH Smith is probably the biggest name, if not the most popular one, as it was recently voted the UK’s worst High Street retailer by Which? Readers.
In the survey carried out in January, Which? readers complained about the books and stationery retailer’s customer service and labelled it a “horrid shop”.
For a long time now the strategy has been extracting as much profit from existing customers rather than chasing top-line growth and that strategy works better in the newsagent's shops that are based in travel hubs (e.g. mainline trains stations and airports), where, to a certain extent, customers have few alternative outlets to shop at if they do not like WH Smith's prices or allegedly tatty shops.
In its fiscal third quarter update, the travel business, which accounts for around 54% of the group's sales, is expected once again to do most of the heavy lifting in terms of performance.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “The focus on high footfall transport hubs saw travel revenue rise 7% during the first half, and the company is aiming to win more retail space at airports and stations in the UK and abroad.”
Hyett added:” The entry into the US market, through a joint venture with Duty Free Americas, should provide long-term growth potential.”
Plastic fantastic?
As one of Europe’s largest manufacturers of plastic packaging, the crackdown on plastics in both the UK and Europe has weighed heavily on RPC Group PLC (LON:RPC), which reports full-year results on Wednesday.
The EU’s most recent proposals target single-use plastics, like cutlery and straws, and calls for all plastic bottles to be recycled by 2025.
Graham Spooner, an investment research analyst at The Share Centre, is expecting few surprises as the company reported in March it was on track to achieve growth in full-year sales and profits.
“RPC has returned to its strategy of buying companies so any comments on potential deals will be of interest, as will any update on how the integration of previous acquisitions in Europe is progressing,” Spooner said.
“With plastic waste very much a high profile subject at present, the market will also be interested in whether the company has held any discussions with the government on the proposed deposit-return scheme for single use glass and plastic bottles. With a long track record of dividend growth the market will also be focusing on what figure the company has settled on this time,” he added.
Significant announcements expected
Trading update: WH Smith Plc (Q3) (LON:SMWH)
Finals: RPC Group PLC (LON:RPC), Alpha Financial Markets Consulting PLC (LON:AFM), Findel PLC (LON:FDL), Tricorn Group PLC (LON:TCN) , Workspace Group plc (LON:WRK)
Economic data: Halifax UK house prices; US international trade; US productivity and costs
Around the markets
- Sterling: US$1.3406, up 0.11 cents
- 10-year gilt: yielding 1.285%
- Gold: US$1,301.50 an ounce, down 70 cents
- Brent crude: US$75.87 a barrel, up 49 cents
- Bitcoin: US$7,601.47, down US$25.56
Business headlines
The Times
Labour bids for ‘softest’ Brexit deal in new shift: Corbyn moves towards full single market access
Rivals cleared to reach for Sky: Decision fires starting gun on takeover battle with US rival
Peppa Pig theme Park to open in Shanghai: Merlin Entertainments yesterday revealed that the city’s LC Mall would house the world’s first Peppa Pig World of Play.
TSB boss ‘gave MPs inaccurate picture’ of computer chaos: Paul Pester’s future as chief executive of TSB was in doubt yesterday after he was accused by Andrew Bailey, head of the Financial Conduct Authority, of giving an inaccurate picture to parliament about the bank’s IT problems.
The Guardian
Fashion designer Kate Spade found dead in New York: Law enforcement officials say body of Spade, 55, was found in apartment on Park Avenue and a note was discovered at the scene
Sales of hybrid cars soar as diesels plunge by nearly a quarter: Drivers continue to shun diesel in the face of environmental and tax concerns
Fifa files criminal complaint against ticket site Viagogo: Football governing body acts as part of crackdown on unauthorised World Cup sales
Hammond defends RBS shares sale after £2bn loss to taxpayers: Sale of 925m shares at 271p significantly lower than 502p at which Treasury bought
Daily Telegraph
UK M&A activity sees leap thanks to mega deals: Billion pound deals including Vantiv Inc’s purchase of Worldpay Group and GVC Holding’s acquisition of Ladbrokes Coral helped drive a £18.2bn quarter-on-quarter leap in the value of UK firms being bought.
Heathrow expansion: Third runway approved as Government sets aside £2.6bn compensation for residents
Tesco Bank latest to be hit by IT problems with customers unable to log in for hours