FTSE 100 closes down at 7,631
Markets weak after China responds to Trump trade tariffs
Ocado top loser
Wall Street shares lower
FTSE 100 recovered some earlier losses but still ended up in the red on Monday as trade troubles spooked markets.
"Trade tensions are running high as the US and China are engaging in tit-for-tat tariff attacks," said David Madden, analyst at CMC Markets.
"We are edging closer to a trade war between the two largest economies in the world and dealers are cutting their long positions in equities.
"Beijing are targeting the US’s agricultural and car making sectors for political reasons, as they know it would hurt President Trump’s voting base.
Madden noted that both countries' administrations were showing no signs of letting up.
The UK premier share index closed 2.58 points, or 0.03% to stand at 7,631.
Meanwhile, FTSE 250 closed nearly six points lower at 20,990.
Ocado Group (LON: OCDO), the online food delivery group was top loser on Footsie, down 7.79% to 959p after it was downgraded to ‘underperform’ from ‘buy’ by Bank of America Merrill Lynch (BAML) as it moved into the long execution phase of its deal with US grocery giant Kroger.
Top riser on FTSE 100 was RSA Insurance Group (LON: RSA), which added 2.42% to 667.80p.
3:50pm: FTSE 100 set to finish only lightly Monday lower, despite sharp slump on Wall Street
London was let off lightly through Monday afternoon, with the FTSE 100 down 15 points or 0.20% at 7,618 while other equity markets slumped significantly lower.
“The Dow plunged 240 points as the session got underway, a sharp decline that took it back below 24850 and to its worst price in 12 days,” said Connor Campbell, analyst at Spreadex.
“The index is struggling under the weight of the escalating US-China trade war, with Trump’s decision to push forward with tariffs on Beijing last Friday causing another nasty flare-up of international posturing.”
The analyst added: “Though still at its worst intraday price since the end of May, shedding half a percent to return to 7600, the FTSE managed to avoid the pain seen elsewhere.
2:45pm: FTSE 100 stays lower meanwhile Wall Street starts lower
The FTSE 100 remained on the back foot, down 23 points or 0.31% at 7,616, as Wall Street began the week softly, with the Dow Jones starting 250 points lower.
Whilst the Dow gave up 1%, the S&P 500 and Nasdaq were both also lower opening 0.1% and 0.82%.
1:00pm: FTSE 100 remains on back foot as US futures point lower
There was no changing the subject as Monday’s trading moved into the afternoon.
At around 1:00pm, the FTSE 100 was down 28 points or 0.38% changing hands at 7,605.
It comes as the US equity market us set to extend their losses. Dow Jones futures pointed to a 215 point decline, indicated at 24,897, while the S&P 500 and Nasdaq also moved lower in premarket trade.
12:15pm: FTSE 100 continues lower amid Trump tariffs and Germany uncertainty
The FTSE 100 remained lower, down 27 points or 0.36%, changing hands at 7,606 amid caution over a US and China trade war, plus political uncertainty in Germany.
Connor Campbell, analyst at Spreadex, highlighted the volatility.
“The DAX plunged 190 points as Monday went on, sending it back under 12850 to effectively complete the erasure of the unlikely gains it saw after the ECB announced the end of its QE programme, but crucially was dovish on interest rates, last Thursday,” Campbell said in a note.
“This sharp drop came as Angela Merkel clashed with chairman of the CSU, Horst Seehofer, over the Chancellor’s stance on migration, namely the issue of refugees arriving in Germany who have already been registered as asylum seekers in other European countries.
“Some analysts have called this Merkel’s ‘worst crisis’ in more than a decade, a claim that is contributing the red-soaked Eurozone boards.”
11:29am: FTSE 100 continues weighed by risk aversion over Trump tariffs
London’s FTSE 100 was down 26 points or 0.34% changing hands at 7,608 as risk aversion, triggered by trade tensions between China and the United States, continued through the European trading sessions.
“Both countries have laid out plans to impose tariffs on one another on 6 July which is making investors a little uncomfortable, more so due to the potential for the situation to escalate further than the tariffs themselves,” said Craig Erlam, analyst at OANDA.
“The question now is how much pain both sides will be willing to inflict on the other – and themselves in the process – before coming to an agreement that removes tariffs and eases investor concerns.”
Erlam added: “While we’re only seeing moderate risk aversion in the markets at the moment, it is enough to drag European stocks markets down with French and German indices off between 0.5% and 1%.
“The FTSE is holding up ok although this is being aided by the weaker pound which supports the large number of external looking companies in the index.
“Traditional safe havens are naturally doing well this morning with gold up a couple of dollars and the yen in the green against the dollar euro and pound.”
11:00am: Audi CEO Stadler arrested as VW diesel-gate scandal continues
Volkswagen’s diesel-gate scandal looks far from concluded as Rupert Stadler, chief executive of VW’s Audi brand, was arrested in Germany this morning.
Stadler was said to be the most senior company official so far to be taken into custody in relation to emission test cheating.
BREAKING: @Audi chairman Rupert Stadler has been detained on charges of fraud and misrepresentation in matters relating to the @dieselgate scandal. He has officially been under investigation by German authorities since 30 May (2018).
— Greg Kable (@GregKable) June 18, 2018
According to international media reports, prosecutors in Germany detained Stadler because of fears he may hinder an ongoing investigation.
10:45am: FTSE 100 narrows Monday’s earlier losses, Trump tariffs remains a ‘spectre’
The FTSE 100 has been edging off its earlier levels through the morning’s later deals, with the index down 8 points or 0.11% changing hands at 7,625.
Trump’s tariffs remain the focal point - for market commentators at the very least.
“The spectre of trade wars looms large across global markets this morning,” IG Markets analyst Chris Beauchamp said in a note.
He added: “A general lack of news on the economic front has not helped matters, providing little distraction from the ongoing crisis.
“After recent strength, especially in European markets, we have seen stocks become more vulnerable to bad news, although any selloff for the time being should still represent a buying opportunity in the longer-term.
“In addition, the shift in central banking rhetoric has reminded investors that they should no longer consider accommodative (or, ultra-accommodative) policy as a given, which will make markets more sensitive to these trade war developments.”
10:25: More banking sector consolidation eyed as Virgin Money and CYBG seal deal
As CYBG and Virgin Money confirmed that they are to merge, attentions are expected to look at new banking sector consolidation, mostly among the smaller ‘challenger’ banks.
Monday saw the confirmation of the £1.7bn transaction which is designed to create a rival to the so-called ‘big four’ UK banks (HSBC, Barclays, Lloyds and Royal Bank of Scotland).
“Investors will be casting an eye over the sector potentially looking for further consolidation in the sector; the news also highlights the changing landscape within the banking sector as traditional banks disappear from the high street,” said Graham Spooner, analyst at The Share Centre.
“Based on the unstable response in the shares and an indefinite outlook as the transition will take place over the next two to three years, it’s difficult to say that this stock is any better than a hold.”
Elsewhere, CMC analyst Michael Hewson said: “While some have suggested that the terms of the deal aren’t exactly generous I think the deal is less about the terms than whether it's a good fit for the two banks.
“On their own both banks are likely to struggle for market share while together they are a decent fit, and will probably be more durable in terms of competing on the same playing field.
He added: “While it will certainly help competition in the UK banking market which has suffered to some extent from a lack of competition, it’s unlikely they will make much of a dent in terms of eroding the market share of the big four.”
9:35am: FTSE 100 negative but markets yet to panic over Trump trade war with China
As the FTSE 100 emerges from the morning’s initial dealing the index remained decidedly on the back foot, albeit a panic stricken rout has yet to present itself.
Changing hands at 7,622 the index of London’s top 100 shares was down close to 13 points or 0.17%.
Investor sentiment has bristled somewhat at the prospect of new global trade turbulence, after this weekend China responded to Donald Trump’s plan to impose tariffs on some US$50bn of Chinese imports.
READ: Monday's stock market movers
Rebecca O’Keeffe, interactive investor’s head of investment, reckons the current trade tariff position is unlikely to cause a “full-blown rout” for markets, though she sees risk rising.
The prospect of further escalation and reprisals between the United States and China would have potential to cause considerable damage to the global economy.
“Markets are finally beginning to wake up to the risks of a global trade war, with equities falling across the globe,” O’Keefe said in a note.
“The negotiating style of President Trump had allowed investors to assume that his threats were hyperbole and part of his unique diplomatic style, and that he would step away from the brink rather than risk undermining the positive impact his previous policies have had on the stock market.
“However, the US decision to press forward and take on China makes the risks far more pronounced and the real danger is that the Chinese retaliation may start a chain reaction that is difficult to stop – especially as Trump likes to have the last word.”
8:40am: FTSE 100 ignores the maelstrom to post a modest gain; broker upgrade boosts ABF
As expected the FTSE 100 got off to a subdued start. However it resisted the downward pull of an impending trade war and the political uncertainty in Germany, where Chancellor Angela Merkel's 13-year tenure looks under threat.
Against this backdrop the index of blue-chip shares actually managed an upward move, rising 1.96 points to 7,635.87.
Associated British Foods (LON:ABF) was an early riser, up 2.4% following an upgrade to 'outperform' by RBC Capital Markets.
Shares in RSA Insurance Group (LON:RSA) and Aviva (LON:AV.) were well bid after a report over the weekend quoted Oliver Bäte, boss of German financial giant Allianz, as saying the group is on the look-out for acquisitions here in the UK.
In the second-tier Morgan Stanley's move to 'overweight' boosted stock in aerospace specialist Cobham (LON:COB) 6.5%.
Proactive news headlines:
Capital Drilling Ltd (LON:CAPD) has upgraded its revenue guidance after a buoyant first half. It expects turnover to be in the US$105-US$115mln range, up from a previous forecast of US$100-US$110mln. The company will update on its performance in the first six months of the financial year on July 10.
Arc Minerals Ltd (LON:ARCM) has increased its ownership of Zamsort Limited to 61%, following the acquisition of an additional 6% interest from two separate shareholders of Zamsort and appointed a new drilling contractor.
Iodine extraction specialist Iofina plc (LON:IOF) had good news and bad news for its shareholders as it reiterated its full-year production guidance and revealed it, along with other producers, had been hit with "dumping duties" by China.
OptiBiotix Health plc (LON:OPTI) has signed an exclusive deal with John Morley Foods to manufacture and supply SlimBiome in muesli packs within the UK.
Braveheart Investment Group PLC (LON:BRH) has reported nearly double profits in its full-year results following a jump in the value of its investments.
SDX Energy Inc (LON:SDX, CVE:SDX) has announced a new gas discovery, in the SD-4X well at the South Disouq Concession, in Egypt. The well was drilled down to a depth of 7,806 feet and it encountered 89 feet of net conventional natural gas pay in the Abu Madi horizon.
88 Energy Ltd (LON:88E) has confirmed that nitrogen lift operations have begun, to support the ongoing programme at the Icewine-2 well in Alaska. The company continues to recover fluids injected previously through fracking and a hydrocarbon flow has yet to be measured (other than gases associated with the process).
App monitoring service AppScatter Group PLC (LON:APPS) still hopes to get itself its £13.5mln acquisition of German firm Priori Data across the line. appScatter had initially hoped to complete the takeover by the end of May but it pushed this back to June 15 as it waited on confirmation that investors who took part in a £15mln placing to fund the acquisition were entitled to certain tax benefits.
Directa Plus Plc’s (LON:DCTA) chairman Sir Peter Middleton says momentum has been maintained after the progress in 2017 for the graphene enhancement specialist. “We have a strong pipeline of opportunities for near-term commercial progress and continue to broaden our portfolio of patents with two granted in 2018 covering our non-toxic flame retardancy composition for the textiles market and our new graphene-based solution for enhancing the performance of tyres, which were awarded by the US and Italian patent offices respectively.
Avation PLC (LON:AVAP) has announced it has acquired and leased one factory new C Series CS300 aircraft to airBaltic, the Latvian hybrid carrier. The commercial passenger aircraft leasing company said the lease commenced on 15 June 2018 and is for 12 years and is at market lease rates.
Shares in Greatland Gold plc (LON:GGP) headed higher in early deals as it commenced its first exploration campaign at its Black Hills licence in the Paterson region of Western Australia.
Erris Resources plc (LON:ERIS) has identified a series of anomalies indicative of gold mineralisation in a ground magnetic survey at its Brännberg gold project in Sweden. The company is in joint venture with Centerra Gold (TSE:CG) at Brännberg, with Centerra providing US$1.85mln in funding during 2018 for exploration.
Wishbone Gold PLC (LON:WSBN) booked sales of US$8.2mln in the year to December 2017, almost double the US$4.2mln booked in the previous year. Admin costs were down, and the company held just over US$250,000 at the period end. Chief executive Richard Poulden said the company had built "a solid trading base for the future."
Irish explorer Providence Resources PLC (LON:PVR) has announced the earlier than expected start to an offshore survey. The Gardline M/V Kommandor survey vessel has started mobilisation ahead of data acquisition across Frontier Exploration Licence 6/14 which includes the Newgrange Prospect.
Canada-focused oil group Cabot Energy PLC (LON:CAB) has seen a boardroom reshuffle with Keith Bush, chief executive, and Nicholas Morgan, finance director, stepping down. Scott Aitken, currently the chief executive of Cabot’s 58% majority shareholder High Power Petroleum, is to become CEO, while non-exec Petro Mychalkiw will become chief financial officer.
Touchstone Exploration Inc. (LON:TXP) (TSX:TXP) has announced a one-year extension of its US$15mln term credit facility maturity date until November 23, 2022, with no mandatory principal payments to be made until January 1, 2020. Touchstone is then required to repay US$810,000 per quarter commencing on January 1, 2020 through October 1, 2022, and the then outstanding principal balance is repayable on the maturity date. In addition, the amended term credit facility removes the minimum US$5mln quarterly cash reserves financial covenant. As consideration, the company paid the lender a financing fee of US$150,000.
Scotgold Resources Limited (LON:SGZ) has announced the appointment of Peter Hetherington, chief executive officer of IG Group Holdings PLC (LON:IGG), and Bill Styslinger III, a director of Nasdaq listed Casa Systems Inc., as non-executive directors of the company with immediate effect. The firm also said it is to appoint the Perth-based affiliate of BDO International as its auditors.
European Wealth Group Limited (LON:EWG), the integrated wealth management group, has announce the appointment of Jonathan Freeman, currently the non-executive chairman of PhotonStar LED Group PLC (LON:PSL), as a non-executive director.
Chaarat Gold Holdings Limited (LON:CGH), the AIM quoted exploration and development company with assets in the Kyrgyz Republic, announced it will co-host the second annual Investment Forum on 28 June 2018 with the Embassy of the Kyrgyz Republic and the European Bank for Reconstruction and Development (EBRD) entitled "The Kyrgyz Republic - Central Asia's next emerging market".
APQ Global Limited (LON:APQ), the AIM-listed emerging markets growth company announced that, as at the close of business on 31 May 2018, its unaudited book value was US$111.74 per ordinary share, equivalent to £83.98.
6.40am: Muted start predicted
The FTSE 100 looks set to make a muted start to the week with the US-China trade war and the unfolding German political crisis foremost in traders' minds.
Against this backdrop, Asia's main markets were in firmly in negative territory. However, the UK blue-chip index will be largely resistant to their pull, with the spread betting firms predicting just a three-point drop 7,636.91.
Angela Merkel faces an uncertain future as the rebels plot to oust her over Germany's open-door immigration policy, which is bound to have a bearing on sentiment here in Europe as the day goes on.
And after spending Sunday outlining the financial benefits of Brexit for the NHS, it's back to fending off rebels ahead of another Europe vote later this week.
Looking ahead, the Bank of England is expected to stand pat on interest rates when the two-day meeting of its Monetary Policy Committee breaks up on Thursday.
And on the corporate front we have updates from retailer Dixons Carphone (LON:DC), building supplies group Ferguson (LON:FERG) and house builder Berkeley (LON:BKY).
Around the Markets:
- Pound worth US$1.3273
- Gold US$1,282.10 an ounce, up US$3.60
- Brent crude US$72.77 a barrel, down 72 cents
City Headlines
- Financial Times
- US business community warns on impact of Trump tariffs - Previously upbeat mood in boardrooms chills as president raises the stakes with China
- FCA to launch asset management Mifid probe - UK regulator’s investigation to focus on research costs and corporate
- US banks poised for US$170bn in shareholder payouts - Large banks set to distribute more than annual profits for first time since the crisis
- Times
- Big Four audit firms under scrutiny for being too cosy with audit clients in regions
- Daily Telegraph
- Bitcoin is useless, unsafe, and dirty, finds withering Bank for International Settlements report
- Consumer goods giant Unilever has severed ties with social media stars who buy an online following to promote products
- UK’s economic growth weakest since financial crisis, says British Chambers of Commerce
- Guardian
- UK debit cards transactions overtake cash for the first time