FTSE 100 closes 46 pts higher
Sterling lags after dovish remarks from new MPC member
Carnival and Royal Mail rally
FTSE 100 closed the day higher, bolstered by the weaker pound and cruise operator Carnival Corp (LON:CCL) was top gainer, as shares gained after losing heavily after results yesterday.
The UK blue-chip index finished over 46 points higher, at 7,555.
But mid-cap cousin finished lower on the day, off around 17 at 20,757.
In the currency markets, sterling shed 0.06% against the Euro, and 0.34% against the US dollar, which boosted the Footsie's dollar earning constituents.
"The FTSE attempted a rebound on Tuesday, clawing back lost ground after global trade war fears pulled the index 2% lower in the previous session," said Fiona Cincotta, amrket analyst at City Index.
"Whilst trade war concerns will remain a central focus to trading today, risk sentiment has eased slightly with negativity not quite so dominant as yesterday.
"A stronger dollar and more dovish inclinations on the BoE MPC sent the pound lower on Tuesday.
"With known hawk Ian McCafferty set to leave the BoE/MPC after August, pound traders as good as ignored his comments pushing for another rate rise, instead panicking after a dovish testimony from new BoE policy maker Jonathan Haskel."
Top loser on Footsie was British Airways owner International Consolidated Airlines Group plc (LON:IAG), which flew 3.53% lower at 673.20p.
3.45pm: US consumer confidence weakens
US consumer confidence fell more than expected in June, according to a leading indicator.
US Consumer Confidence Jun: 126.4 (est 128.0; prev R 128.8)
- Jobs Hard-To-Get Jun: 14.9 (prev R 15.6)
— LiveSquawk (@LiveSquawk) June 26, 2018
The Conference Board’s consumer confidence index dropped to 126.4 this month from 128.8 in May. Economists had forecast a level of 128.0.
The weaker consumer confidence comes amid worries about tensions between the US and its trading partners the US and the European Union.
Meanwhile, US stocks have reversed initial gains with the Dow, S&P and Nasdaq moving into the red.
3.20pm: Inflation expectations rise to joint-highest level since 2013
The UK public’s inflation expectations for the next five to 10 years have risen to the joint-highest level since December 2013, a Citigroup/YouGov survey showed.
Expectations rose to 3.3% this month from 3.2% in May.
For the year ahead, inflation expectations rose to 2.6% from 2.5%.
“The rise in the oil price has now led to a rebound in households’ inflation expectations. So far, this is not out of the ordinary, but the Bank of England may have a watchful eye on potential second-round effects e.g. on wage settlements, from higher oil prices,” Citi economists Christian Schulz and Ann O’Kelly said in a note to clients.
2.40pm: US stocks rebound
US stocks have opened higher, reversing declines seen in the previous session.
The Dow Jones Industrial Average rose 12 points to 24,264, the S&P 500 increased 1 point to 2,718 and the Nasdaq added 6 points to 7,538.
Donald Trump fuelled concerns about a trade war after warning trading partners to drop tariffs or face consequences in a tweet on Sunday.
General Electric Co. (NYSE:GE) shares jumped after saying it plans to spin off its healthcare business and sell-down its ownership in Baker Hughes.
Harley-Davidson Inc (NYSE:HOG) continued to slump after saying it planned to move some production overseas to avoid trade tariffs as Donald Trump warned it would tax the company heavily.
Housebuilder Lennar Corp. (NYSE:LEN) is on the front foot after reporting second quarter results that beat analysts’ expectations.
1.45pm: Trump slams Harley-Davidson
US President Donald Trump has criticised Harley-Davidson Inc (NYSE:HOG) on Twitter over its plans to move production away from the US in order to avoid European Union tariffs.
A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end - they surrendered, they quit! The Aura will be gone and they will be taxed like never before!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
However, the motorcycle maker said it had decided to build a plant in Thailand after Trump pulled out of the Trans-Pacific Partnership (TPP).
1.00pm: US stock futures mixed
US stocks futures are mostly lower amid concerns about tensions between the US and trade partners China and the European Union.
Dow Jones Industrial Average futures fell 28 points to 24,252 and S&P 500 futures declined 2.5 points to 2,719 while the Nasdaq edged up 8.5 points to 7,081.
“With tariffs already being implemented and US President Donald Trump promising more in retaliation against the European Union and China, it seems the situation is going to get much worse before it improves,” said Oanda’s Craig Erlam.
“As it stands, it’s difficult to determine just what impact recent events will have on the economies of those involved, not to mention just how much worse the situation is going to get.
“What’s clear though is that it’s weighing heavily on risk appetite and if Trump keeps doubling down on his threats against the US trade partners, it could seriously take its toll.”
12.00pm: FTSE gains in lunchtime trading
The FTSE 100 rose 35 points to 7,544 in midday trading as the value of the pound fell following dovish remarks from incoming Bank of England policymaker Jonathan Haskel.
The pound is down 0.35% to US$1.3234.
“The pound has been pretty quiet in recent trade with the currency consolidating on its recent gains after last Thursday’s surprise hawkish shift from the BoE although there has been some mild selling on comments form incoming MPC member Haskel who appears to be potentially less hawkish than McCafferty who he will replace in September,” said David Cheetham, chief market analyst at xtb online trading.
Company-wise, Carpetright PLC (LON:CPR) shares declined 3.3% to 29p after swinging to a loss as a squeeze on household incomes, a stagnant property market and shift towards online shopping knocked sales.
J Sainsbury plc (LON:SBRY) shares fell 1.8% to 307p after data from Kantar Worldpanel showed sales and market share declined in the 12 weeks to June 17.
Tesco PLC (LON:TSCO) shares edged down 1.1% to 258p after Kantar revealed a decrease in market share for the same period.
Inmarsat Plc (LON:ISAT) tanked 10% to 568p after French rival Eutelsat ruled out a takeover bid for the UK satellite firm.
Carnival PLC (LON:CCL) shares jumped 3.8% to 4,379p, recovering from the previous session when it cut profit targets.
Royal Mail PLC (LON:RMG) gained 0.8% to 495p after RBC Capital Markets upgraded the stock to ‘sector perform’ from ‘underperform’.
11.15am: BoE's Haskel highlights risks in raising interest rates too quickly
The pound is down 0.35% versus the dollar at US$1.3235 after comments from incoming Bank of England policymaker Jonathan Haskel were seen to suggest interest rates could rise more gradually.
Haskel, who is replacing Ian McCafferty at the BoE, told MPs on the Treasury select committee that there may be more slack in the UK economy than is currently considered.
He added: “The first risk involved in raising interest rates would be if this is done too quickly, disturbing investment and borrowing plans by more than would have been expected,” he added."
Meanwhile, McCafferty, who leaves the Bank of England monetary policy committee this summer, said in his final major speech that the economy is much stronger than official figures suggest.
“We should not dally in making the next move," he said.
He added that inflation could remain above the Bank's 2% target as low unemployment pushes wages up and energy prices recover.
“Continuing with the slow reduction in monetary stimulus without undue delay could well prevent the need for a more aggressive tightening later on," he said.
10.40am: Inmarsat shares plunge after Eutelsat decides against takeover bid
Shares in Inmarsat Plc (LON:ISAT) are down 5.8% to 595p after French rival Eutelsat said it won't make a bid for the UK satellite company.
Eutelsat had said on Monday afternoon that it was considering making an offer.
The decision comes after Inmarsat rejected a takeover approach from US firm EchoStar earlier this month.
9.50am: Sainsburys and Tesco on the back foot after Kantar data
J Sainsbury plc (LON:SBRY) was the only of the UK's so-called 'big four' supermarkets to see sales drop over the 12 weeks to June 17, data from Kantar Worldpanel has revealed.
The supermarket, which has agreed a deal to merge with Asda, recorded a 0.2% decline in sales to £4.24bn and its market share fell to 15.6% from 16% as it sold an extra £60mln of goods on promotion this year.
Tesco PLC (TSCO.LN), on the other hand, grew sales 1.4% in the 12 weeks to £7.51bn, though its market share fell to 27.7% from 27.9%.
Shares in Sainsbury's fell 1.9% to 306p and shares in Tesco declined 1.2% to 257p.
"The widely followed figures on the groceries sector from Kantar make grim reading for investors in Sainsbury’s – helping to account for the slide in the share price today," said AJ Bell investment director Russ Mould.
He added: “The disappointing performance helps underpin the argument for Sainsbury’s tie-up with Asda which itself delivered a much better showing in the period.
“The heads of Asda and Sainsbury’s were forced to defend the prospective deal in front of MPs last week and getting regulatory approval for the merger is unlikely to be a straightforward process.”
8.40am: London stocks recover
The FTSE 100 rebounded slightly from Monday’s slump, rising 18 points to 7,528 at the open.
Global markets were weighed down by fresh worries about a potential trade war on Monday after US President Donald Trump told trading partners at the weekend to remove tariffs or risk a retaliation from the US.
“Concerns over the possibility of an upcoming trade war are expected to remain front and centre of investor focus once again today,” said Jameel Ahmad, global head of currency strategy & market research at FXTM.
“Although the trading atmosphere is not quite as negative as it was yesterday, clear indications of risk aversion in the financial markets remain.”
On the company front, Carpetright PLC (CPR) shares fell 3% to 29p after swinging to a full year loss.
Petrofac PLC (LON:PFC) shares dropped 1.7% to 527p even as it reported an increase in new order intake for the year to date and said trading was in line with expectations.
In economic data, The British Bankers’ Association said approvals for loans on house purchases in May were 3.3% lower than a year ago at 40,347.
Gross mortgaging lending was 9% higher at £13.3bn while consumer credit growth was 5.1%.
Proactive news headlines:
Rosslyn Data Technologies PLC (LON:RDT) said its revenue for the 2018 financial year has increased by nearly 100% following its acquisition of Integrite Ltd in May 2017.
App monitoring service AppScatter Group PLC (LON:APPS) has agreed the £13.5mln acquisition of German firm Priori Data, albeit on slightly different terms than those originally set out.
OptiBiotix Health plc (LON:OPTI) has announced that it has entered into an agreement with a global corporate for its SweetBiotix low calorie sweet fibres.
Victoria Oil & Gas plc (LON:VOG) said its wholly-owned subsidiary Gaz du Cameroun SA (GDC) has entered into an exclusive partnership agreement with Europe's largest compressed natural gas (CNG) supplier and distributor, Naturelgaz Sanayi ve Ticaret AS.
Amphion Innovations Plc (LON:AMP), the developer of medical, life science, and technology businesses, saw its net asset value improve significantly in 2017. The company’s net liabilities narrowed to US$2.81mln at the end of 2017 from US$5.89mln at the end of 2016, thanks almost entirely to the movement in value of portfolio company, Motif Bio Plc (LON:MTFB)
Westminster Group PLC (LON:WSG), the technology-based security solutions provider, expects to post positive underlying earnings this year, excluding the impact of any new major contracts.
ClearStar Inc (LON:CLSU) has announced a partnership with iCIMS Inc for integration of its mobile solutions for background screening and drug testing into the iCIMS Talent Platform, a suite of talent acquisition tools.
Cradle Arc Plc (LON:CRA) expects to achieve project-level operational cash flow break-even at the Mowana copper project in Botswana during the month of June 2018. Cash generation is expected to improve throughout the second half of this year, with the mine expected to produce at least 5,700 tonnes of contained copper during the period.
Thor Mining PLC (LON:THR) (ASX:THR) announced it has restructured the previously terminated conditional agreement to sell its stake in USA Lithium to Hawkstone Limited (ASX:HWK). The AIM-listed firm referred to a statement which said that both companies had terminated the agreement on 15 June, when Hawkstone cancelled its shareholder meeting to approve the acquisition of 100% of USA Lithium.
Active Energy PLC (LON:AEG) has raised £1m in an oversubscribed placing to fund its biomass fuel execution strategy. The company issued shares at 3p to new and existing investors. The net proceeds of the placing will fund the execution phase of the group's business plan which is focused on developing its forestry management operations and commercialising its coal replacement fuel, CoalSwitch and related products including PeatSwitch and the company's coal blended SuperFuel.
Asiamet Resources Ltd (LON:ARS) has appointed Dominic Heaton as a non-executive director to the board. Heaton is a highly experienced mineral processing engineer with an extensive background in feasibility studies, project construction, plant commissioning and mine operations throughout South-east Asia.
6.40am: FTSE to open higher
The Footsie is poised to open slightly higher this morning, however a resurgence in trade war concerns as Donald Trump targets Europe and China with new tariff rhetoric is rattling market sentiment.
Spread betting firm IG expects the FTSE 100 index to open around 26 points higher at 7,536 as the index seeks to recover from its 172 point drop yesterday. its worst daily loss since February.
Michael Hewson, chief market analyst at CMC Markets, said: “If there was any doubt at the end of last week as to whether investors were becoming increasingly nervous about where discussions on trade were going then yesterday’s price action would appear to suggest that these doubts are becoming bigger on reports that the Trump administration is looking to up the ante further by announcing restrictions on Chinese investment in certain US industries on the grounds of national security.
He added: “Adding to concerns about new tariffs on motor vehicles from the EU, after the EU announced its retaliation to Trumps metals tariffs last week, as well as the prospect of a further US$200bn of new tariffs on Chinese goods, the US administration now appears to be shifting its attention to another of President Trump’s bug bears, namely the alleged theft of US intellectual property, which has consistently been a bone of contention for the US President.
"The next question for investors now given the confused messaging coming out of the Trump administration is whether this is the latest attempt to keep his opponents off balance or whether he is serious about further escalation.”
The Dow Jones Industrial Average closed down 328 points at 24,252 yesterday, the first time it has closed below the moving average in 501 days. Meanwhile, the S&P 500 which closed down 37.8 points at 2,717 and the Nasdaq was down 160 points at 7,532 as trade war fears piled on the pressure.
In Asia today, the Japanese Nikkei was down 45.7 points at 22,332, while Hong Kong’s Hang Seng was down 120 points at 28,850 as the wave of trade tension continued around the global markets.
In the currency markets, the pound was up 0.1% at US$1.3286 against the dollar and fairly flat at €1.1338 against the euro with little in the ways of economic data to provide interest - there will only be UK mortgage lending figures from the British Bankers Association, plus US consumer confidence and house price indexes from across the Atlantic.
Petrofac and Carpetright in focus
In company news, some eyes will be on oil services group Petrofac as it issues a trading update for the first part of 2018.
Commentary around order pipelines and new contract procurement will no doubt be what investors are looking for from oil services group Petrofac PLC (LON:PFC) when it issues an update on Tuesday.
Petrofac, at its general meeting last month, described “good progress” in the year to date as it continued to bounce back from a difficult 2017.
“Tendering activity remains high and the group has been awarded more than US$1.7bn of new orders in the year to date,” chief executive Ayman Asfari said.
Meanwhile, investors will be hoping that struggling high-street retailer Carpetright PLC (LON:CPR) has put the worst behind it after a litany of profit warnings.
It’s been a tough year for the flooring retailer which has issued a string of profit warnings as a squeeze on household incomes, a stagnant property market and changes in the way we shop have knocked sales.
The market already expects to see a loss of £7mln and £9mln in Tuesday’s full-year results, while like-for-like sales in the UK – its core market – are forecast to fall 3.6%.
Investors will be looking for signs that the worst news is now behind them. Earlier this month, Carpetright began to implement its turnaround plan after raising £60mln from investors.
Significant announcements expected on Tuesday June 26:
Trading update: Petrofac PLC (LON:PFC)
Finals: Carpetright PLC (LON:CPR), HML Holdings plc (LON:HMLH), Northgate PLC (LON:NTG)
Interims: Blue Prism Group plc (LON:PRSM)
AGMs: Capita PLC (LON:CPI)
Economic data: BBA UK mortgage lending; US consumer confidence; US Case-Shiller house price index
Around the markets:
- Sterling: US$1.3286, up 0.09%
- Gold: US$1,267.2 an ounce, up 0.13%
- Brent crude: US$74.83 a barrel, up 0.13%
City Headlines:
- The Times: Plans for a third runway at Heathrow received an overwhelming support from MPs last night boosting the prospect of expanding the airport’s capacity by hundreds of thousands of flights after decades of delay.
- Financial Times: Harley-Davidson announced that it would move some manufacturing out of the US to avoid EU tariffs as the Trump administration's trade war with Europe widened.
- The Times: Trump administration yesterday prepared to ramp up trade tensions even further by curbing access to America’s technology industry; markets around the world fall upon news of more trade curbs aimed at China.
- The Daily Telegraph: European Banking Authority has asked the banks to start preparing for Brexit and should not expect "miracle" public intervention to help them.
- Financial Times: UK's largest estate agency group Countrywide plans to tap investors for fresh funds to reduce debt after issuing a fresh profit warning, leading to 28% plunge in shares.