FTSE 100 closes lower - down 23 at 7,681
German finance minister says businesses should prepare for 'worst-case' Brexit
BT the big corporate story
Tensions mount amid G7 meet
FTSE 100 ended lower on Friday with resource stocks taking a hit, while BT (LON:BT.A) was the big corporate story of the day.
The UK communications giant confirmed this morning that its chief executive Gavin Patterson was to step down later this year.
Investors had been agitating for his removal for a while, given the share price performance over the past year or so, and some of the company’s big-name backers reportedly met with chairman Jan du Plessis this week to express their dissatisfaction.
Shares added nearly 1% on the day, to stand at 204.95p.
Footsie closed out down around 23 points at 7,681 and was also down on the week as a whole, off around 0.26%. This is the third week of a loss in a row.
Mid-cap cousin FTSE 250 though added 5.83 on the day to close at 21,160.
In the currency markets, the pound was up 0.18% against the Euro, and down 0.14% against the US dollar.
Top riser on Footsie was house builder Barratt Developments (LON:BDEV), which added 2.23% to 586p, despite new data from Halifax showing that house prices had eased in May versus last year. But compared with the preceding three months, they were 0.2% higher.
Top laggard on the blue-chip benchmark was silver giant Fresnillo (LON:FRES), which lost 6.39% to stand at 1,216p.
3.35pm More Brexit woes
The German finance minister, Olaf Scholz, has said that despite continuing negotiations with UK officials, businesses should prepare for a possible worst-case-scenario.
Scholz warned that a tentative deal to manage Britain's transition out of the common market had been reached in March, but this still hinged on a final overall deal being reached with the European Union.
Speaking to a Goldman Sachs conference in Frankfurt, Sholz said: "There is no guarantee that an overall agreement will be reached, including over the question of the customs border between Ireland and Northern Ireland.
He added: "Companies are advised to prepare for the worst case scenario as well".
3.00pm: US stocks open lower as G7 spat rattles markets
Wall Street opened lower as expected this morning as the recent trade spats between Trump and the heads of several other G7 nations reverberated across the market.
The Dow Jones was down 35 points at 25,207 shortly after the open, while the S&P 500 was down 2.4 points at 2,767 and the Nasdaq was 14 points lower at 7,622.
Lindsey Bell, investment strategist at CFRA Research, said: “There is still a cloud over the markets because of trade issues and we see little upside in the near term…But the market is also accepting that there will be no major revelations from the G-7 or the North Korea Summit”.
2.00pm: Wall Street braces for losses as trade tensions flare ahead of G7
Markets in the US are setting up for losses to close out the week as friction between the US and its allies heats up ahead of the G7 meeting in Quebec later today.
Fears of a pending trade war, first between the US and China but now including several of the United States’ key allies, have spooked markets since March when President Donald Trump first announced tariffs were to be slapped on aluminium and steel imports to the US.
Tensions between Trump and two key US allies, Canada and France, have intensified ahead of the G7 meeting after a Twitter spat erupted between Trump and French President Emmanuel Macron.
Macron tweeted yesterday:
The American President may not mind being isolated, but neither do we mind signing a 6 country agreement if need be. Because these 6 countries represent values, they represent an economic market which has the weight of history behind it and which is now a true international force https://t.co/UA86fcjozs
— Emmanuel Macron (@EmmanuelMacron) 7 June 2018
Trump responded with pointed words:
Why isn’t the European Union and Canada informing the public that for years they have used massive Trade Tariffs and non-monetary Trade Barriers against the U.S. Totally unfair to our farmers, workers & companies. Take down your tariffs & barriers or we will more than match you!
— Donald J. Trump (@realDonaldTrump) 8 June 2018
Jasper Lawler, head of research at London Capital Group, said: “There is little doubt that trade will top the agenda at the Friday and Saturday Summit in Canada. Given Trump’s trade levies on U.S. allies and his general unpredictability, uncertainty could continue to form a central pillar to trading as we move through the summit and into the weekend.
He added: “Trump has already had a Twitter spat with France’s President Macron prior to the event, which doesn’t bode well. However, the big question for traders is unlikely to focus on Trump’s actions, but rather the level of hostility and aggression that the other leaders will show,”
1.15pm: Ex-HSBC banker to launch investment firm with Greek shipping magnate
Former senior HSBC and Goldman Sachs banker Matthew Westerman is launching a private investment firm alongside a former colleague as well as a Greek shipping tycoon.
Westerman will partner his former Goldman Sachs colleague Julian Metherell and Peter Livanos, who owns Greek shipping company Ceres Hellenic, in a new firm called MW&L Capital Partners.
The trio will invest in small-to-medium sized targets based on knowledge built up in their respective careers covering financial services, oil and gas, and shipping, Westerman said.
In company news, FTSE 250 serviced office provider IWG PLC (LON:IWG) has said US property investment firm Starwood Capital and British private equity fund TDR Capital will now have until June 29 to make firm offers for the company or walk away.
The firm said the UK’s takeover panel had granted an extension to the two organisations from an earlier deadline of 8 June.
IWG had been separately approached by Starwood, TDR, US real estate investment firm Prime Opportunities Investment Group and American buyout house Lone Star for a deal.
In early afternoon trading, IWG shares were up 0.1% at 314.3p.
12.15pm: UK inflation expectations unchanged despite fall in consumer price inflation
There was disappointing news for the Bank of England today as public inflation expectations for both the one-year and two-year horizon stayed that same despite a fall in consumer price inflation in April to a 13-month low of 2.4%.
According to the BoE/TNS quarterly survey, consumer price inflation was seen at 2.9% over the next year, with the two-year horizon also at 2.9%, modestly above the long-term average of 2.7%.
For the five-year horizon, inflation expectations stood at 3.6%, up from 3.4% in a February survey and the highest reading since November 2013.
Howard Archer, chief economic advisor to the EY ITEM Club, said: “The survey shows that consumers currently believe the inflation rate is 3.1%, which is unchanged from the February survey. It is above the latest actual rate which stood at a 13-month low of 2.5% in April. The survey also reveals that 51% of the public expect interest rates to rise over the next 12 months. This is down from 58% in the February survey.”
He added that while inflation expectations are not unduly high compared to long-term norms, their ‘stick-ability’ in May could fuel the Monetary Policy Committee’s inclination to hike interest rates in the near term. However, much will still depend on how well the UK economy bounces back from its weakened first quarter performance.
11.35am: FTSE 100 stuck in the doldrums as morning ends; G7 gets off to uneasy start
As lunchtime approaches, the FTSE 100 shows little signs of returning to positive territory as trade war fears and concerns on a hawkish week ahead from the European Central Bank led stocks lower.
Joshua Mahony, market analysts at IG, said: “With a host of central banks due up next week, it comes as no surprise that we are seeing market rhetoric shift into what to expect from a monetary standpoint. The biggest progression of the week has come from Europe, where the ECB is now widely expected to at least discuss how they should lay out a timeline for the end of QE. With German and French industrial production both declining in May, we are seeing some of the euro strength come off in early trade, as markets lower expectations of a hawkish shift from the ECB.”
He added: “With the G7 meeting kicking off in somewhat acrimonious fashion, it is looking increasingly unlikely that we will see any form of positive outcome from a trade standpoint. Trump has already criticised Trudeau and Macron on Twitter, and the breakdown in trade that could come with a bitter war of words is certainly raising risks in financial markets.”
One of the big fallers in the FTSE 100 was miner Antofagasta PLC (LON:ANTO), whose shares dropped 3.4% in late-morning trading amid a dip in copper prices.
It wasn’t all bad news in the blue-chips though, with mobile operator BT Group PLC (LON:BT.A) ticking up 0.05% to 203p as shareholders rejoiced at news chief executive Gavin Patterson will step down later this year.
Russ Mould, investment director at AJ Bell, said: “The BT share price showed some mercy as it failed to bounce sharply upon the announcement that chief executive Gavin Patterson will step down later this year”
He added: “Mr. Patterson will point to the acquisition of EE, the purchase of football rights and the creation of BT Sport, a settlement with its pension holders and extensive investment in fibre broadband networks as major strategic steps for the company. But shareholders will counter by pointing to profit warnings, an Italian accounting scandal, money wasted on share buybacks and the abandonment of a plan to consistently increase dividends. BT has, ultimately, massively undershot the financial goals laid down by Mr Patterson in March 2016.”
10.30am: EU regulators to rule on Ryanair’s Laudamotion bid by July 12
Antitrust regulators in the EU will decide by 12 July whether to clear the way for budget airline operator Ryanair Holdings PLC’s (LON:RYA) bid to take a 75% stake in the rebranded former Niki airline Laudamotion.
Ryanair sought approval for the deal on Thursday as it seeks to consolidate its foothold in the Austrian market, a growing hub for eastern European destinations.
10.00am: Brent crude falls as US supply surge offsets Venezuela concerns
Oil prices dropped this morning in a reverse of early gains as a surge in output from the United States and signs of lower demand from China offset supply concerns from Venezuela earlier this week.
In mid-morning, Brent crude was down US$0.39 at US$76.93 a barrel after customs data from China revealed a decline in oil imports after hitting a record high the previous month.
This was complemented by a surge in US production, which climbed to a record 10.8mln barrels per day last week, putting the US on track to be the world’s biggest crude oil producer.
The production increase helped relieve pressure following news from Venezuela earlier this week that the state-owned oil firm PDVSA was struggling to clear a 24mln barrel backlog of oil shipments.
Despite the fall, the oil market remains tight, with Brent crude prices sitting around 15% higher than at the start of 2018.
9.30am: FCA presses ahead with new premium listing plan
The Financial Conduct Authority (FCA) is continuing with its plan to introduce a new premium listing next month that is aimed at attracting companies like the state-controlled oil company Saudi Aramco to the LSE.
The kingdom is expected to float up to 5% of Aramco in the capital Riyadh and an international market such as London or New York in what is predicted to be the biggest initial public offering ever, as well as a prime reputational boost for the exchange that is chosen for the listing.
The FCA’s plan attracted criticism from investors when it was circulated in July last year, with suggestions that the UK government has influenced the watchdog to try and secure the Aramco listing.
As a result, the FCA said it had made changes to the plan, including the requirement that the election of independent directors be subject to approval from independent shareholders.
There would also be a requirement for "timely disclosures" on transactions between the sovereign and the issuer.
8.50am: FTSE 100 dogged by trade war worries; Lloyds/Standard Life Aberdeen spat takes on new dimension
The FTSE 100 fell into the red and below 7,700 amid continued fears the G7 meeting of the heads of the world's seven largest economies could see the escalation of trade hostilities between the US and the rest of the world.
The index of blue-chip shares dropped 46 points to 7,658.65.
"After ignoring the trade tensions for as long as they could, a rocky Asian session has left the European indices feeling rather tender," said Connor Campbell, analyst at Spreadex.
"A likely feisty G7 meeting in Quebec appears to be the main thing driving the markets lower. investors are either worried that nothing will get resolved, or Trump will become more entrenched in his aggressive approach to trade."
Back here in the UK, there was no doubting the big story of the morning: the exit later this year of Gavin Patterson, BT's (LON:BT.A) hapless chief executive.
The news was greeted by a collective hooray in the City as Patterson has recently stumbled from one disaster to the next, prompting calls to quit from some of the company's backers in the Square Mile.
The morning's big faller, down 3.5%, was Standard Life Aberdeen (LON:SLA) after Lloyds Banking Group (LON:LLOY) offloaded a £344mln stake in the asset manager.
Earlier this year, Lloyd's pulled a mandate to manage £109bn of its funds from SLA.
Proactive news headlines:
Papua Mining PLC (LON:PML) has said that geophysics survey at the Marengo gold/copper project has defined quasi linear IP and resistivity anomalies at One Mile Mountain, which may be related to high gold zones sitting on the edge of deeper porphyry system.
Midatech Pharma PLC (LON:MTPH, NASDAQ:MTP) said patient enrolment has begun for a clinical trial that could expand the market for its cancer treatment. Gelclair is already prescribed for an after effect of radiation and chemo therapies called oral mucositis, a painful and debilitating inflammation and ulceration of the surface of the mouth.
Sound Energy PLC (LON:SOU) told investors it has applied for a development concession for the Tendrara gas discovery. It marks another step towards taking Tendrara into production, following on from the week’s earlier news that it reached an agreement with a key contractor for front end engineering design to develop gas infrastructure.
Strategic Minerals PLC (LON:SML) (USOTC:SMCDY) has agreed amended the contract with the major client of its Southern Minerals Group (SMG) subsidiary at the Cobre magnetite stockpile in New Mexico, USA. It added that the client is to pay SMG, quarterly in advance, a non-refundable prepayment of US$375,000 against future deliveries, with payments due in June, September and December 2018.
Airport and energy group Stobart Group Limited (LON:STOB) has rescheduled its Annual Meeting for 6 July. Former chief executive Andrew Tinkler has already indicated he will vote against the re-election of chairman Ian Ferguson and has put forward well-known retail entrepreneur Philip Day as his replacement.
HemoGenyx Pharmaceuticals PLC (LON:HEMO), the biotechnology company developing novel therapies to transform bone marrow, or blood stem cell, transplantation for the treatment of blood diseases, is to hold a presentation for investors on Tuesday 26th June 2018. The group said the briefing by Dr. Vladislav Sandler, CEO of Hemogenyx, will take place at Copper Bar, Balls Brothers, 6 Adams Court, Old Broad Street, EC2N 1DX from 4.30pm for a 4.45pm start and will be followed by drinks and networking.
Tlou Energy Limited (LON:TLOU), the AIM and ASX listed company focused on delivering power in Botswana and Southern Africa through the development of coal bed methane projects, has today issued letters to eligible and ineligible shareholders regarding the non-renounceable entitlement offer announced on 6 June 2018.
Thor Mining PLC (LONLTHR) today announced on the Australian Securities Exchange the closure, on Friday 1 June 2018, of the CHESS Depositary Interest (CDI) Sale Facility for holders of less than a marketable parcel of CDIs in the company. The ASX Listing Rules defines a "Marketable Parcel" as those holdings of CDIs with a market value of A$500 or more.
6.45am: Trade worries to dominate
The Footsie is predicted to open lower this morning as the start of the G7 meeting in Quebec will likely cause investors to pause for thought when trading kicks off.
Spread betting firm IG expects the FTSE 100 index to open around 34 points lower between 7,675 to 7,679, pushing it below the psychologically important 7,700 level that it seemed to have trouble escaping this week.
The big news of today will be the start of the G7 meeting in Canada, which will be closely watched for any indicators regarding additional fallout from trade tariffs announced by the US last week, following reciprocal tariff announcements from Canada and the European Union.
David Madden, market analyst at CMC Markets UK, said: “Traders will be paying attention to see if any progress is made regarding trade talks. President Tump is in the eye of the trade storm, and he is letting the world know he means business, and he is determined to get the best deal for the US. At the moment, investors aren’t overly concerned about the state of play, but that doesn’t mean they don’t have a pain threshold.”
The Dow Jones finished up 95 points at 25,241 yesterday, while the S&P 500 closed down 1.9 points at 2,770. The Nasdaq, which has seen a good run this week bolstered by US tech stocks, closed 54 points lower at 7,635, with a fall in the Facebook share price following a data glitch scandal likely contributing to the lower finish.
In Asia, the Japanese Nikkei 225 was down 78 points at 22,745 while Hong Kong’s Hang Seng was down 380 points at 31,128.
On currency markets, the pound was down 0.03% at €1.1369 against the euro and up 0.01% at US$1.3422 against the dollar.
Fuller’s to bring some fizz to a quiet Friday
On the corporate front, a trading update from brewery and pubs group Fuller, Smith & Turner PLC (LON:FTSA) on Friday is likely to show steady like-for-like sales but a strain on margins continuing.
Back in January, the FTSE Small Cap firm posted a solid set of figures for the 42 weeks to January 20, despite what the firm described as a "challenging" trading environment.
Fuller’s said like-for-like sales in its Managed Pubs & Hotels division rose 3.0% for the period, while like-for-like profit in Tenanted Inns rose 2.0%, with beer and cider volumes flat.
Liberum Capital reckons Fuller’s solid trading is testament to the well-invested estate and its premium offering, but it noted the firm is stepping up investment in systems and IT capex which will weigh on margins.
The City broker is forecasting Fuller’s posting managed like-for-like sales growth of 3.4% this year with EBIT margin of 12.3%, down 35 basis points.
They concluded: “Assets are recorded at cost and hence NAV of 593p per share doesn’t reflect the true value of bricks and mortar nor the value of the Chiswick site, however we prefer the growth potential of City Pubs and Young's”.
Significant events expected on Friday, June 8:
Trading update: Fuller Smith & Turner PLC (LON:FSTA)
Finals: First Property Group PLC (LON:FPO), Volex PLC (LON:VLX)
Economic data: US wholesale trade
Around the markets:
- Sterling: US$1.3422, up 0.01%
- Gold: US$1,298 an ounce, no change
- Brent crude: US$77.09 a barrel, down 0.3%
City headlines:
- Marks & Spencer boss Steve Rowe has lost 30% of his pay after shutting 100 shops and seeing profits plunge – Financial Times
- Geordie Greig has been appointed editor of the Daily Mail, succeeding Paul Dacre. – Financial Times
- Poundworld is teetering on the brink of administration, putting at least 11,000 jobs under risk – The Guardian
- TSB chief executive Paul Pester is under mounting pressure to quit after MPs said he had “not been straight” about bank’s IT crisis – The Guardian
- Google has vowed to never work on artificial intelligence weapons projects after its collaboration with the US military fomented an employee backlash. – The Independent
- Amazon has a struck ground-breaking deal to livestream exclusive coverage of 20 matches a season online, breaking Sky and BT’s stranglehold on Premier League football – Daily Mail
- Virgin boss Sir Richard Branson has suggested that the UK government should bring forward the deadline to ban the sale of new petrol and diesel cars from 2040 to 2025 – Daily Mail
- Fabb Sofas, the upholstery retailer founded by Lord Kirkham, has been placed in administration after failing to find a buyer. – The Times
- Ultra Furniture Limited, an upholstery manufacturer with 160 employees, has been placed under administration, becoming the latest casualty of the decision by Britain’s largest supermarket to shut Tesco Direc – The Times
- Chinese smartphone giant ZTE will pay a US$1bn fine to the US government as part of a deal to lift an export ban against the company – Daily Telegraph.
- Swedish furniture chain Ikea has vowed to phase out all single-use plastic products from its stores and restaurants by 2020 – The Guardian
- CMC Markets boss Peter Cruddas has vowed to steer clear of "churn and burn" cryptocurrency products as the company continues to fish for big-spending investors – Daily Telegraph
- Co-operative Bank chief Liam Coleman is planning to step down from the lossmaking British lender – Financial Times
- A hedge fund run by Crispin Odey has gained 19.9% in the year to date helped by outsized bearish bets on equities and government deb – Financial Times