FTSE 100 closes 131 points lower
Rolls-Royce top FTSE 100 riser on improved outlook
Trump announces US$50bn worth of tariffs on Chinese imports
Oil price slides below US$75
FTSE 100 closed 1.7% down on Friday as Wall Street shares also plummeted as traders took flight due to the spectre of trade wars.
Investors are fearful surrounding President Trump's tariffs tactics, worried it will hit economic growth.
The UK's top share index shed over 131 points at 7,633, while mid-cap brother FTSE 250 was also lower, down a whopping 318.5 points at 21,005.
Market analyst Chris Beauchamp at IG Index said earlier this afternoon: "As markets head towards the weekend the spectre of trade wars looms large in everyone’s minds, causing a widespread rout on equity indices."
He added: "It has been clear for some time that trade wars are the only narrative really capable of torpedoing a rally, and so it has proved this time around, but this weakness still looks like a buying opportunity in the longer-term, especially ahead of an earnings season that should reiterate the strength of the US corporate landscape."
Among the biggest hit stocks on Footsie were resource stocks, as commodity prices lagged, with BHP Billiton plc (LON:BLT) among top laggards, dropping 4.51% to 1,670p.
Glencore (LON:GLEN) was also lower, off 4.32% to 381.30p.
Top riser on FTSE 100 was engineer Rolls Royce plc (LON:RR.), which surged 7.61% to 950p on the back of a bullish trading update ahead of a capital markets event.
On the week, FTSE 100 also was down - around 0.62%.
3.35pm: Global markets smacked
With half an hour or so left in the trading week, the FTSE 100, like most global markets, is nursing big losses as a result of the heightened tensions between the US and China.
In case you missed it, Donald Trump slapped China with US$50bn worth of tariffs on various products imported from China. China has said it will retaliate in order to safeguard its own interests.
The trade war has sunk the FTSE 100, which is down 1.3%, or 103.4 points, to 7,661.6.
Miners and banks have been hit particularly hard by the tensions, with BHP Billiton plc (LON:BLT) (down 3.8% to 1,682p) and Royal Bank of Scotland Group PLC (LON:RBS) (down 3.3% to 255p) among the biggest losers.
London’s oilers have been bruised by the weaker oil price as Russia and Saudi Arabia discussed increasing production.
Supermajors Royal Dutch Shell PLC (LON:RDSB) and BP PLC (LON:BP.) have both shed 2.5% to 2,643p and 571.2p, respectively.
Rolls Royce Holding PLC (LON:RR.) is by far and away the day’s top riser on the back of a bullish trading update ahead of a capital markets event. Shares are up 8% to 952.2p.
Tesco PLC (LON:TSCO) released a decent first-quarter trading update, helped by its recent acquisition of Booker, sending its stock up 3.2% to 257.9p.
3.10pm: Wall Street hit by Trump's tariffs
Wall Street has followed European markets lower after President Trump hit China with US$50bn worth of import tariffs on Chinese goods.
The Dow Jones Industrial Average is down 0.9% to 24,958.7, the S&P 500 is 0.4% lower at 2,771.5 and the Nasdaq has shed 0.6% to 7,718.1.
2.45pm: What’s on next week?
Obviously the most important thing happening next week is England’s first World Cup match against Tunisia on Monday night.
On the markets side of things, Dixons Carphone Plc (LON:DC.) reports its full-year results next Thursday and the electronics retailer will be hoping people have been upgrading their TV sets in time for the footy.
READ: The week ahead
Housebuilder Berkeley Group PLC (LON:BKG), smoke alarm maker Ferguson Plc (LON:FERG), and FTSE 100 equipment hire firm Ashtead Group PLC (LON:AHT) are also due to update the market in one way or another.
Of course the Bank of England will also convene next week, although most economists expect interest rates to remain unchanged at 0.5%.
2.20pm: Will EU target US car and tech firms?
Following Trump’s new tariffs on hundreds of Chinese product lines, German Chancellor Angela Merkel has hinted that Europe could respond by targeting US car manufacturers and tech firms.
At an event in Germany, Merkel said: “We should think about the strategic significance of the auto industry for the European Union so we can prepare an exchange with the US.”
She also said US internet platforms also posed a challenge and questioned whether European regulators need to get involved.
1.50pm: Trump’s tariffs put markets on edge
President Trump has confirmed he will impose tariffs on US$50bn worth of goods from China.
The tariff list includes over a 1,000 product lines, stretching from jet engines to water pumps to dishwashers, and paves the way for a trade war between the world’s two biggest economies.
In a statement, Trump said: “In light of China’s theft of intellectual property and technology and its other unfair trade practices, the US will implement a 25% tariff on $50bn of goods from China that contain industrially significant technologies.”
China had hoped for a diplomatic resolution but has warned that it will “respond immediately by taking the necessary decisions to safeguard our legitimate rights and interests”.
The looming trade war has put the markets on edge, with the FTSE 100 now more than 1% down at 7,681.8, while US stocks are set to open in the red once trading begins in New York shortly.
1.30pm: Tesco shares rise on Q1 update
Tesco PLC (LON:TSCO) has delivered a tenth consecutive quarter of positive like-for-like sales growth, boosted by its acquisition of wholesale Booker which closed earlier this year.
In a first-quarter trading update for the 13 weekend to 26 May 2018, the UK’s largest supermarket chain reported group like-for-like sales growth of 1.8%, with an increase in the UK & the Republic of Ireland of 3.5%.
Analysts' forecasts were for a range of 1.7% to 2.5% growth, and the headline number is a slowing from growth of 2.3% in the previous quarter.
The FTSE 100-listed group added that Booker - consolidated from 5 March 2018 - saw like-for-like sales growth of 14.3% in the period including tobacco - 12.4% growth excluding tobacco - driven by a strong underlying performance and new business wins.
Tesco shares are up 2.6% to 256.2p.
Hmmm.
Flattered by Booker (+14.3%)
Tesco UK & RIO actually slowed
— Mike van Dulken (@Accendo_Mike) June 15, 2018
1pm: New FOBT changes ‘won’t be brought in until 2020’
A report in the Times suggests the new caps on fixed-odds betting terminals, dubbed the ‘crack cocaine’ of the gambling industry, might be delayed.
The government recently changed the laws around the machines, cutting the maximum betting stake from £100 to £2.
But The Times reckons they might not be introduced until April 2020. Downing Street has responded, claiming no official date has been set yet.
12.40pm: Trade war fears to weigh on US stock
US stocks are set to open lower when Wall Street opens later this afternoon, bogged down by renewed trade war fears between the US and China.
The blue-chips on the Dow Jones are called 110.5 points lower at 25,062.1; the broader S&P 500 is expected to dip 7.8 points to 2,775.1 at the bell; while the tech-heavy Nasdaq is seen 14.0 points lower at 7,265.2.
“Having fallen following the Fed’s hawkish rate hike, the Dow Jones is set to drop a further 150 points [or so] when the bell rings on Wall Street,” wrote Spreadex analyst Connor Campbell.
“That decline, one that would send the Dow back to 25000, is assumedly related to Trump’s trade war tactics, something that undermines the fairly solid gains the index had been posting in June (before this week began, at least).”
12.15pm: Oil price slides
London’s oil supermajors are both reeling from the fall in oil prices.
A barrel of Brent crude is now down to US$75, having briefly touched US$80 a couple of weeks ago.
The reason for the fall is reportedly because Russian president Vladimir Putin and Crown Prince of Saudi Arabia Mohammad Bin Salman Al Saud discussed increasing production during yesterday’s opening World Cup match between their two countries.
Royal Dutch Shell PLC (LON:RDSB) is down 2.8% to 2,660p, while BP PLC (LON:BP.) has dropped 1.3% to 578.1p.
When you don't care who wins, so long as the oil price stays high.pic.twitter.com/Qa5Gto564m
— Michael Cruickshank (@MJ_Cruickshank) June 14, 2018
11.45am: Best day in two years for Rolls-Royce
Rolls-Royce Holding PLC (LON:RR.) is enjoying its best day for two years, climbing 8.5% to 957.6p – although it had tipped over 1,000p at one point this morning.
Despite saying problems with its Trent 1000 engine – which have grounded some planes – could cost an extra £100mln this year, the FTSE 100 group is sticking to guidance for this year's free cash flow to come in at about £450mln, give or take £100mln despite the extra cost.
The engine maker also announced ambitious new mid-term financial targets, saying it is aiming for free cash flow per share to exceed 100p in the mid-term, compared to the 15p of free cash flow per share it made in 2017.
11.30am: Footsie falls continues
The FTSE 100 has fallen deeper into the red as gains from a relatively promising start were quickly reversed following trade woes and the fallout from the activity of various central banks.
Tensions around trade tariffs have flared up again today as US president Donald Trump is expected to unveil tariffs on US$50bn worth of Chinese imports, with Beijing promising to “quickly react” with its own retaliatory measures should the charges be imposed.
Craig Erlam, senior market analysts at OANDA, said: “Markets will always be vulnerable to trade spats between countries and while the response to the G7 meeting may have been quite muted, that more likely a sign of such an outcome being in line with expectations than markets becoming less sensitive to it.
He added: “The biggest concern here is naturally that this will continue to escalate and more and more counter-tariffs will be imposed, something that will harm all economies and weigh on investor sentiment. Perhaps Trump feels that the strength of the US economy and recent success in Singapore gives him the breathing room to make a sacrifice on the economy and jobs in an attempt put additional pressure on other countries.”
Elsewhere, the euro was under pressure following yesterday’s meeting of the European Central Bank where it was announced the ECB would end its quantitative easing program by the end of the year, however it pushed the prospect of an interest rate hike back toward the latter part of 2019.
Erlam said: “As ever, a hawkish shift in policy was accompanied by some very dovish language from President Draghi which sent the single currency tumbling. Combine this with a more hawkish result from the Federal Reserve meeting on Wednesday and it’s no surprise the EURUSD pair is under pressure again despite a brief recovery over the last couple of weeks.”
11.00am: Bank of Japan cuts inflation outlook
Japan’s central bank has downgraded its assessment on inflation as governor Haruhiko Kuroda said structural changes in the economy, such as rising service-sector productivity, may be holding back inflation, signalling the central bank will look more closely into factors curbing prices.
The governor also stressed his resolve to “patiently maintain our powerful monetary easing”, indicating that Japan will lag well behind Europe and the US in pulling back its crisis-mode policies.
The BOJ also maintained its ultra loose policy, keeping its short-term interest rate target at -0.1% and pledging to guide 10-year government bond yields around 0%.
Meanwhile, Japan’s farm ministry suspended its tender and sale of wheat from Canada after grain containing a genetically modified trait was discovered last summer in Canada’s Alberta province.
“We are suspending the tender and sale of Canadian wheat until we confirm that the Canadian wheat that Japan buys contains no GMO,” an official at the Japanese farm ministry said.
Canada is one of the world’s largest wheat exporters. While other crops such as corn and soybeans have been widely genetically modified to improve yield or withstand threats, GMO wheat has not been approved anywhere for commercial production because of concerns by consumers.
10.30am: Eurozone inflation confirmed at 1.9% for May as labour costs surge
Consumer prices in the eurozone rose by 1.9% in May, driven by higher costs in energy, food, and services while labour costs in the currency bloc rose at their sharpest rate in five years in the first quarter of 2018.
Figures from the EU statistics office Eurostat showed that inflation had confirmed its flash estimate, and was up from 1.3% in April, while labour costs for the quarter increased 2%, up from a 1.4% hike in the fourth quarter of 2017.
Analysts at Dutch bank ING commented: “This modest improvement in wage growth seems to have given the ECB a lot of confidence in a sustained improvement of inflation to target even though that puts a lot of weight on a 0.2% improvement.”
They added: “Businesses indicating that labour is hindering their business has risen to levels not seen since the start of the indicator in 1985. This shows that the improvements may be there, but are not yet widespread. Wage growth is therefore likely to continue to improve at a modest pace, confirming our view of a slow recovery in core inflation for the second half of 2018.”
In company news, FTSE 100 utilities group Centrica PLC (LON:CNA) has signed a non-binding agreement to buy liquefied natural gas (LNG) from US company Anadarko Petroleum’s Mozambique acerage, a deal that will see Centrica and Japanese firm Tokyo Gas buy 2.6mln tonnes of LNG per year (mmta) from the start of operations until the early 2040s.
10.00am: China promises to “quickly react” to new US trade tariffs
The Chinese government has vowed to strike back quickly if the US moves against its interests as president Donald Trump prepared to unveil new tariffs targeting US$50bn worth of Chinese goods.
Geng Shuang, spokesman for the Chinese Foreign Ministry, said the country would “quickly react and take necessary steps to resolutely protect our fair, legitimate rights” if the US were to take “unilateralist, protectionist measures”.
A Reuters source has said that Trump was due to give details later on Friday of a revised list of 800 product categories, down from 1,300.
9.30am: Glencore settles over Congo royalties, Iceland suffers trading slowdown
FTSE 100-miner Glencore PLC (LON:GLEN) has settled a dispute in the Democratic Republic of Congo (DRC) with two companies associated with Israeli billionaire Dan Gertler by agreeing to pay royalties in a currency other than US dollars.
US sanctions on Gertler, Glencore’s former partner in copper and cobalt operations in Congo had sparked a litigation and legal tangle that investors are worried may have affected supplies of cobalt from the DRC, the world’s biggest cobalt supplier.
It follows a separate settlement earlier in the week regarding Glencore’s Kamoto copper and cobalt mine, although it remains at odds with the Congolese government over a mining code signed off at the start of the year.
Meanwhile, privately-owned supermarket chain Iceland said earnings for the first half would be lower than the prior year as legislation mandating staff wages increases came into effect.
Iceland said the increase in staffing costs and the impact of higher oil prices on consumers and its own distribution costs would combine with a less impressive sales performance to reduce core earnings in the first two quarters of the year.
8.45am: FTSE opens higher
The prospect of a trade war between the world's two largest economies didn’t appear to dampen London traders' spirits, with the FTSE 100 opening the session with an 11-point gain to 7,776.53.
US President Donald Trump looks likely to press ahead with US$50bn-worth of tariffs on Chinese goods, which will no doubt elicit a tit-for-tat response.
Turning to the stock market, there was no doubting the big mover. It has been a roller coaster week for Rolls Royce (LON:RR.) after news leaked over the weekend of a swathe of job losses as part of a restructuring at the jet engine maker.
On Friday, ahead of meeting analysts and investors, it spelted out its medium-term goals, which included generating over £1bn of free cash flow, or £1 a share. The stock jumped 13%.
Following in Rolls vapour trail was Tesco (LON:TSCO), which advanced 2.5% after delivering a reasonably upbeat update on trading.
"Overall sales improved on the previous year, with the core UK and Ireland performance coming in even stronger," said Richard Hunter, analyst at Interactive Investor.
"Meanwhile, the wisdom of the Booker acquisition, whose own growth was particularly strong in the quarter, is already becoming apparent, whilst the decision to focus more sharply on its more profitable lines with the removal of Tesco Direct is sound."
The day's big faller was KEFI Minerals, which lost more than 20% after it unveiled long-awaited plans to issue shares to part fund its plans to develop a gold mine in Ethiopia. The country recently lifted its state of emergency declared following the resignation of its Prime Minister.
Proactive news headlines:
KEFI Minerals PLC (LON:KEFI) is looking to raise a total of £5.5mln through a share placing and subscription which should entirely now fund its Tulu Kapi Gold Project in Ethiopia. The AIM-listed gold exploration and development company said it has conditionally raised £3mln through a placing of 120mln new ordinary shares at a price of 2.5p each to existing and new shareholders.
Sound Energy PLC (LON:SOU) told investors that it has identified and finalized the location for its proposed TE-9 exploration well. TE-9 will test the A1 exploration prospect in the Tendrara-Lakbir permit, Eastern Morocco.
Silence Therapeutics PLC (LON:SLN) is presenting data to an industry conference on its lead drug that suggests it is a "promising candidate" for the treatment of iron overload and anaemia. Researchers have been assessing its potential use in Beta-Thalassemia - a blood disorder that reduces the production of haemoglobin - and related ailments.
Orosur Mining Inc (LON:OMI) is carrying out a review of its operations at the San Gregorio gold mine in Uruguay.
Echo Energy PLC (LON:ECHO) has told investors that it is changing its drill plans in Argentina to accelerate the Fracción D asset. The company recently completed a successful well test on the CSo-85 well, which had been the subject of a work-over, and, it has now decided to substitute the fourth and final slot in the present Fracción C and Laguna de Los Capones drill programme with a new well at Fracción D.
Southend Airport owner Stobart Group Ltd (LON:STOB) has written to shareholders explaining why former chief Andrew Tinkler was sacked from his executive duties and the board yesterday. Tinkler has called for chairman Iain Ferguson to be replaced by Philip Day at the AGM on 6 July.
Live Company Group PLC (LON:LVCG) said its subsidiary, Brick Live International Limited (BLI), has entered into a new licence and content lease with two South Korean companies.
Falcon Media House Limited (LON:FAL) said it has raised £500,000 through the issue of convertible loan notes, with the funding conditional on the company proposing to noteholders that the conversion price be adjusted to 1.5p. The group said the resolution, if passed, will amend the maximum dilution possible should all notes be converted.
Sareum Holdings PLC (LON:SAR) announced that henceforth, WH Ireland Limited will act as its nominated adviser and Hybridan LLP will act as sole broker to the company.
6.45am: FTSE 100 set to open in positive territory
The Footsie is poised to open higher this morning as the impact from a more dovish approach from the European Central Bank (ECB) and an interest rate hike from the Federal Reserve continues to reverberate.
Spread betting firm IG expects the FTSE 100 index to open around ten points higher at 7,775 as the ECB announcement prompted a revaluation on monetary policy in the eurozone.
The ECB at its policy meeting yesterday announced that it would look to end its asset purchasing programme by the end of the year sent the euro higher, however an additional statement that an interest rate rise would not occur until the back-end of 2019 as well as a downgrade in GDP forecasts and a raised inflation outlook of 1.7% from 1.4% sent it back down again.
Michael Hewson, chief market analyst at CMC Markets UK, said: “The slide in the euro wasn’t helped by a better than expected US retail sales number which showed a jump in consumer spending in May from 0.3% in April to 0.8% in May, which in turn served to highlight a continued divergence between US and EU monetary policy that is likely to widen further between now and the end of next year.
He added: “Today’s final EU CPI numbers for May should give us an indication as to whether the ECB was right to nudge up its forecasts yesterday. In the recent flash numbers, the headline number jumped up from 1.2% in April to 1.9% which should be confirmed later this morning. More importantly the core numbers are expected to come in at 1.1%, still well below what is comfortable for the ECB, though a lower euro could go some way to pushing that number higher in the coming months, with a rising oil price still yet to really filter its way fully into the headline numbers.”
The Dow Jones closed down 25 points at 25,175 yesterday, while the S&P 500 closed up 6.8 points at 2,782 and the Nasdaq was up 65 points at 7,761 as the markets digested the Fed’s interest rate hike to 0.25%.
In Asia, the Japanese Nikkei was up 79 points at 22,817, while Hong Kong’s Hang Seng was down 40 points at 30,399 as the continent looks to end on a cautious note amid an expectation of more US tariffs on Chinese goods.
On currency markets, the pound was down 0.08% at US$1.3251 against the dollar and down 0.08% at €1.1452 against the euro.
Tesco in focus amid Booker acquisition and Sainsbury's, Asda merger
On the corporate front, equity traders will have eyes on food retail giant Tesco as it is set to deliver a trading update.
Investors will be focused on how its latest addition – wholesaler Booker – has settled in.
The UK’s largest supermarket group – soon to be second largest if the merger of J Sainsbury PLC (LON:SBRY) and Asda goes ahead – completed the Booker acquisition in March and analysts are expecting it to boost Tesco’s top and bottom lines this year.
Focus will also undoubtedly be on sales in its core UK grocery business which generates the lion’s share of profits, with Deutsche Bank expecting 1.6% growth in like-for-like UK sales – a slight slowdown from the 2.3% achieved in the final quarter of last year.
Keep your eyes peeled too for any commentary on the recent decision to shut down the non-food Tesco Direct website.
Significant announcements expected for Friday June 15:
Trading update: Tesco PLC (AGM Q1) (LON:TSCO), SThree PLC (LON:STHR)
Finals: Record PLC (LON:REC), Wynnstay Properties PLC (LON:WSP)
Economic data: UK trade in goods; US industrial production; US Empire State manufacturing survey; US University of Michigan consumer sentiment reading
Around the markets:
Sterling: US$1.3251, down 0.08%
Gold: US$1,304 an ounce, no change
Brent crude: US$75.91 a barrel, down 0.04%
City Headlines:
The Independent: The European Central Bank is set to halve the pace of its asset purchase programme after September to just €15 billion per month and then finally end two months later.
The Times: DWF, one of Britain’s largest law firms, is set for a London listing later this year with a valuation of up to £1 bn.
The Daily Telegraph: Stobart Group has fired former chief executive Andrew Tinkler, who last month launched a boardroom coup to replace Stobart chairman Iain Ferguson with billionaire retail tycoon Philip Day.
Financial Times: A review panel has suggested denying DeepMind, Alphabet’s artificial intelligence business, further access to Britain’s National Health Service until it can clarify how it intends to make profits.
The Times: Unilever is likely to lose its position in the FTSE 100 index after it abandons its 88-year dual governance of being based in the Netherlands and the UK.