FTSE 100 closes marginally higher
Footsie's dollar earners celebrate as sterling drops below US$1.30
Unilever top Footsie gainer
WH Ireland biffed as assets under management decline
FTSE 100 closed higher on Thursday, unlike its European peers, as the weak pound bolstered the blue-chip index.
Footsie closed up around seven points, or 0.10% at 7,683.
In Europe, the CAC 40 was down 30 points and the German DAX shed nearly 80 points.
Sterling fell due to the disappointing week of data, culminating today on weak High Street sales for June. The pound dropped below US$1.30 for the first time in ten months and is now at US$1.29 at the time of writing - down 0.48%.
Against the Euro, it lost 0.35% to €1.12.
Meanwhile, US stocks weren't doing much to cheer the mood, with the Dow Jones Industrial Index down 0.38%, or 95 points, to 25,102 and the S&P 500 is down two points at the time of writing.
Top riser on FTSE 100 was Unilever (LON:ULVR), which gained around 3% to 4,330.50p after the Anglo-Dutch firm reported higher sales in the first half despite the impact of a truckers’ strike in Brazil sparked by fuel prices.
Elsewhere, Anglo American plc (LON:AAL) shed around 4% to 1,622p to be top laggard on FTSE, despite it announcing a 6% year-on-year rise in output in the second quarter, driven by coking coal, copper and it also revised upward its platinum guidance.
3,30pm: FTSE 100 drifts back
The Footsie drifted back, almost to square one, after a weaker-than-expected opening on Wall Street.
The UK's top-share index was up 7 at 7,683 while in the US the S&P 500 was down 10 at 2,806.
“The Dow Jones’ winning streak appeared to come to an end on Thursday, with the US index dropping 120 points after the bell rang on Wall Street,” reported Connor Campbell, at Spreadex.
“That decline, at least in part informed by Donald Trump threatening the EU with ‘tremendous retribution’ through auto tariffs last night, took the Dow back under 25100, undoing the growth seen in the last couple of sessions. The dollar’s strength likely played its role as well; the greenback stole another half a percent off the pummelled pound, while nabbing 0.3% off the euro,” Campbell said.
Wealth management firm WH Ireland Group PLC (LON:WHI) was in the wars, shedding 8.6% at 117p after it said its current chief executive officer, Richard Killingbeck, would be moving on to pursue other opportunities.
$WHI WH Ireland brings in City veteran Phillip Wale as new boss https://t.co/5adS7zY10d via @proactive_UK #WHI #brighterir #AndrewScottTV #CapitalNetwork1
— Proactive Investors (@proactive_UK) July 19, 2018
He will be replaced by Philip Wale, currently the head of fixed income (Europe) at Cantor Fitzgerald Europe.
News of Killingbeck's departure coincided with the release of for the 16 months to the end of March that showed the financial services company made a loss before tax of £3.71mln, versus a loss of £3.2mln for the 12 months to the end of November 2016.
WH Ireland CEO and wealth head depart following restructurehttps://t.co/dXXRN9AFU3
— Investment Week (@InvestmentWeek) July 19, 2018
2.15pm: US expected to open lower, bringing to an end a five-day winning streak
With US markets expected to open lower after five days of gains, the UK market was trading sideways.
The FTSE 100 was up 14 at 7,691, despite the heavily-weighted miners dragging the index lower as a result of the strong dollar.
Over in the US, the S&P 500 index was predicted to open at around 2,807, down eight points from last night's close.
“The weak pound helps the FTSE take the lead so far on Thursday among equity indices. With news flow relatively low, two brokerage upgrades for Shell have caught investors’ eyes, despite oil prices drifting lower still,” observed Ken Odeluga at City Index.
Shell shares were up 1.5% at 2,750p after Credit Suisse increased its oil price forecast by US$5 a barrel and increased its target price to 3,350p from 2,850p. The bank's target price for BP PLC (LON:BP.) was raised to 640p from 610p; BP' shares were 0.7% higher at 566.1p.
Away from the FTSE 350, chemical technology group Accsys Technologies (LON:AXS) shot up 15.4p to 102p after Teslin Participaties revealed it had increased its stake in the company to 13.1%.
A trading update for Everyman Media Group PLC (LON:EMAN) sent the shares 23p higher to 227p.
The cinemas operator said it had performed in line with expectations in the first 27 weeks of 2018 and the board is confident of a successful outcome for the full year.
It added, demand for the Everyman offer continues to strengthen and the company has recently exchanged contracts for venues in Cardiff (four screens) and London Broadgate (three screens), both of which are expected to open in 2019.
11.45am: FTSE 100 firmer but FTSE 250 deep in the red
The FTSE 100 was just about keeping its head above water late in the morning session while the FTSE 250 was down in the dumps.
The FTSE 100 was up 12 at 7,688 with Dutch consumer goods giant occupying an unfamiliar position at the top of the leader-board after its second-quarter results.
Seeing Unilever at the top of the Footsie is like seeing an articulated lorry holding pole position on the grid of a Formula One race and its position was achieved despite it only achieving organic sales growth of 1.6%, versus expectations of a 2.2% increase.
“These numbers are a little shy of where some analysts were predicting, but cash flow was good and underlying progress looks solid,” declared Steve Clayton, manager of the Hargreaves Lansdown Select funds.
Clayton was not alone in expressing alarm at the company's plans to move its headquarters to the Netherlands, which could see the blue-chip disappear from the FTSE 100 indices and the portfolios of all the funds that track those indices.
Helal Miah, an investment research analyst at the Share Centre, was also perturbed.
“Management kept their guidance for full year underlying sales growth of 3-5% with an improvement in margins and a strong cash flow; they also remain on track for their 2020 goals; however the results this morning have been overshadowed by the possible move of its headquarters to the Netherlands, management confirmed this morning that shareholders will vote on the proposals on the 25 October. While simplification of the group’s structure should be welcomed, many UK based investors will object to the proposals as the move could result in the shares being dropped from the FTSE 100 index,” he said.
The FTSE 250 was down 102 points at 20,882 with Babcock International Group PLC (LON:BAB) and Sports Direct both getting clobbered after trading updates.
READ: Babcock Intl. cuts full-year revenue growth target due to temporary slowdown in defence, marine work
Babcock shed 12% at 717.2p after lowering sales guidance, but Liberum Capital Markets kept the faith.
Based on Liberum's projected earnings for 2019, Babcock is trading on an earnings multiple of 9.1, which the broker says is roughly a 34% discount to the sector average of 13.8.
It rates the stock a 'buy' and has a target price of 1,100p.
“A big slump in annual profit at Sports Direct suggests the business should stick to its core skills rather than engaging in speculative investments in the retail sector,” suggested Russ Mould, the investment director at AJ Bell, after the sportswear flogger reported a big paper-loss on its near 30% stake in Debenhams PLC (LON:DEB).
Mould's commentary on Moneysupermarket.com Group PLC (LON:MONY) – the best performing mid-cap – was less acerbic.
“The excitement around price comparison site Moneysupermarket may have less to do with the publication of its first half results and more to do with the announcement of a new mortgage fintech joint venture called Podium.
“This venture is aimed at developing a mortgage comparison tool. In the longer term the mortgage market, which the company argues is ‘ripe for disruption’, could provide a material avenue for growth,” Mould reported.
Shares in Moneysupermarket were up 7% at 330.8p.
Meanwhile, this morning's disappointing retail sales data continues to spark speculation that the Bank of England will think twice next month about hiking interest rates, although a hike is still 68% priced in (down from 72% yesterday), according to Craig Erlam at Oanda.
10.00am: Insipid retail sales data makes rate hike next month less likely
UK retail sales figures dealt a blow to the pound, giving a boost to the Footsie and its large gaggle of foreign currency earners.
The FTSE 100 was up 3 points at 7,680, with Royal Dutch Shell PLC (LON:RDSB) leading the way, up 1.7%, followed by two more big dollar-earners from the tobacco sector: British American Tobacco PLC (LON:BATS) – up 1.3% - and Imperial Brands PLC (LON:IMB) – up 1.2%.
“Retailers can always find ways to blame the weather and this time it’s the heatwave that can be blamed for a dismal performance by the UK consumer in June. That was a terrible set of retail sales figures which will do nothing to persuade the Bank of England to hike in August,” suggested Neil Wilson, the chief market analyst at markets.com.
With the market expecting that the Bank of England (BoE) is now more likely to hold off from hiking interest rates in August, sterling fell six-tenths of a cent against the US dollar to US$1.30. Higher interest rates attract foreign money into a country, thus boosting the exchange rate so forex traders have been quick to sell down sterling on any sign that the BoE will stick with the status quo when its policymakers on the Monetary Policy Committee (MPC) meet next month.
“Combined with the disappointing CPI [inflation] reading [yesterday] it suggests the MPC would be well advised to row back on plans to raise rates, a fact that seems to have been reflected by traders’ bets on sterling this morning,” Wilson commented.
The volume of retail sales fell 0.5% in June from May's level; excluding petrol sales, the index was down 0.6%.
According to the Office for National Statistics (ONS), continued growth in food sales was offset by declining spending in many other shops as consumers stayed away from stores and instead enjoyed the World Cup and the heatwave.
The 0.5% drop in UK retail sales volumes in June is not so bad after the 1.8% and 1.4% gains in April and May. Chart shows that yoy change in 3MMA picked up to 2.8%. Given the lack of growth in real wages, this => a further drop in savings rate, which cannot be repeated/sustained pic.twitter.com/KCAuNzLymy
— the belgian dentist (@belgiandentists) July 19, 2018
“The UK retail sales report was much weaker than expected, with headline sales falling 0.6% in June, the annual rate of sales growth slowed to 3% from 4.4% in May. Although retail sales figures can be volatile, there is a growing sense that the UK economy is slowing down sharply, and with the political backdrop deteriorating, the Bank of England needs to have a pretty solid reason for hiking rates when it meets next month,” suggested Kathleen Brooks, at Capital Index.
“The details of the report are worth noting,” Brooks continued.
“Declines in UK sales last month were broad-based with clothing and household goods leading the way. Not even the internet could boost the retail sales figures: non-store retailing saw volumes fall by 1.4%, and the annual rate for non-store or internet sales retreated to 9.8% in June, compared with 16.1% in May,” she added.
A much perkier consumer in Q2 was confirmed by news that #retail #sales volumes rose 2.1% q/q, which was best performance since Q1 2094. Retail sales dipped 0.5% m/m in June but this followed a 1.4% m/m jump in May and a strong rebound in April. Sales volumes up 2.9% y/y in June
— Howard Archer (@HowardArcherUK) July 19, 2018
The retail sales data will have been of more than passing interest to fast-moving consumer goods giant Unilever PLC (LON:ULVR), which was trading 0.5% higher at 4,225.5p after its second-quarter results.
Having said that, the Dutch company's reach is impressively global and management was likely more concerned about events in Brazil than Britain.
“The Brazilian truckers' strike has taken a toll, knocking Unilever off course to meet its annual sales guidance,” observed Fiona Cincotta, a senior market analyst at City Index.
“Management had already warned of the hit, but at 2.7%, first-half sales growth has still missed the revised company-compiled consensus forecast of 2.8%.
“Pressure on pricing remains a problem almost everywhere, but the low prices are at least generating a decent level of volume growth.
“A much more positive feature of this result has come through on the cost side of the equation. Major restructuring efforts appear to be bearing fruit, with underlying operating margins improving in all three divisions,” she added.
9.15am: Expectations of a subdued start are fulfilled
A half-hearted effort to continue yesterday's advance soon fizzled out and the Footsie quickly found itself in negative territory.
The FTSE 100 was down 14 at 7,662 with marketing and advertising giant WPP PLC (LON:WPP) leading the retreat.
“This is based on read-across from French peer Publicis whose shares are almost 11% offside after surprising investors with a 2.1% decline in Q2 net revenues (consensus +1.1%) attributable to a sharp drop in US healthcare communications (“we weren’t expecting this sudden dip”), currency swings and GDPR costs,” explained Mike van Dulken, the head of research at Accendo Markets.
Mining stocks – heavily represented on the Footsie – are doing the top-share index no favours, either, with the likes of Antofagasta PLC (LON:ANTO), BHP Billiton PLC (LON:BLT), Anglo American PLC (LON:AAL) and Glencore PLC (LON:GLEN) down 2-3%.
Among the mid-caps, market commentators seem to be taking a measure of delight from Sports Direct International PLC's (LON:SPD) poorly-received full-year results.
“Mike Ashley’s quest to turn Sports Direct into the ‘Selfridges’ of the sector fell flat on its face on Thursday, with the high street staple reporting a huge drop in full-year pre-tax profit, from £281.6 million in 2017 to £77.5 million in 2018. That decline is all the more ignominious because £85.4 million of the drop came from the company’s stake in Debenhams, Ashley’s habit of hoovering up an ostensible bargain biting him in the backside,” suggested Connor Campbell, a financial analyst at Spreadex.
Lee Wild at Interactive Investor takes a more measured approach, pointing out that Sports Direct shares are up 50% in the past year and at a level that has historically been difficult to breach.
Sports Direct still made a £77.5m profit, by the way. https://t.co/koodx9JyAA
— Mark Douglas (@MsiDouglas) July 19, 2018
“Given they’re up 10% in the past couple of weeks, it’s unsurprising that sellers have emerged following the results,” Wild said.
The shares were down 7.6% at 403p.
Proactive news headlines:
dotdigital Group PLC's (LON:DOTD) growth story continued in the financial year just ended, with revenues up by more than a third year-on-year.
Live Company Group PLC’s (LON:LVCG) BRICKLIVE Animal Paradise show will begin a three-year, 20-city tour of China next month.
ECR Minerals PLC (LON:ECR) told investors that whilst it has focused on the Blue Moon project, in accordance with its new strategy, it has also evaluated a number of new opportunities. Earlier this month, the company landed new capital alongside its new strategy and it has now set aside a A$100,000 fund for the new opportunities, to support initial due diligence and licence application costs.
Amryt Pharma PLC (LON:AMYT) said strong progress had been made commercially and in the clinic in the first-half of 2018. The company, which develops and sells drugs for rare and orphan diseases, posted revenues of €7mln, up 14% on the year earlier. Based on the current run rate, the year-end result will be in line with forecasts.
A boost from the World Cup helped pizza franchise owner DP Poland PLC (LON:DPP) to a bumper first half. The AIM-listed group saw total sales rise by 38% and like-for-like by 13% in the first six months of 2018. DP owns the franchise for Domino’s Pizza in Poland and achieved the sales growth despite unusually warm weather in May and June.
Be Heard Group PLC (LON:BRD) has adjusted full-year earnings guidance reflect investment in business development, service capacity and a provision for client spend volatility.
Allergy Therapeutics PLC (LON:AGY) is raising £10.6mln to fund the expansion of the Phase III clinical trial of its grass pollen-induced hay fever immunotherapy, PQ Grass.
Bacanora Lithium PLC (LON:BCN) has scrapped plans for a US$100mln placing to help fund the construction of a lithium mine at Sonora mine in Mexico. The placing was part of the funding for a 17,500 tonnes per annum lithium carbonate operation at Sonora.
Production costs tumbled at Tanzania-based gold miner Shanta Gold PLC (LON:SHG) in the last three months with further savings expected over the remainder of the year. Shanta will shift operations at New Luika completely underground from the end of next month as sufficient ore has been stockpiled to enable the open pit fleet to ‘stand down’ from August, said chief executive Eric Zurrin.
Cello Health PLC (LON:CLL) said trading in the first six months of the year had been strong, adding it expects results for the year to be in line with market forecasts. The healthcare-focused advisory group said it saw “good growth” in revenues and earnings, while profit margins were slightly higher than the comparable period last year.
Highlands Natural Resources PLC (LON:HNR) told investors that its six-well drilling campaign at the East Denver project has now been completed successfully. The programme has been entirely funded by its partners and all six wells have now been cased, cemented and secured.
Kibo Mining PLC (LON:KIBO) told investors that the Tanzanian Mining Commission is now ready to consider an application for a special mining license (SML) for the Mbeya Coal to Power Project (MCPP).
Emerging markets-focused APQ Global Limited (LON:APQ) is comfortably on track to meet its target annual dividend yield of 6%.
Diversified Gas & Oil PLC (LON:DGOC) this morning confirmed the completion of its latest transformational acquisition, buying producing wells and midstream infrastructure in the Appalachian Basin. The US$575mln deal more than doubles the group’s output, daily production rates are set to increase by 115% to over 60,000 barrels of oil equivalent per day.
United Oil & Gas PLC (LON:UOG) announced that it will be hosting an investor presentation evening on Wednesday 25, July 2018 at Prince Philip House, 3 Carlton House Terrace, St James', London SW1Y 5DG from 6-9pm. The company said its board will give an overview presentation followed by a Q&A session and informal meet and greet.
6.45am: Little movement expected
The FTSE 100 was set to open barely changed as Brexit concerns continue to hang over the market.
After rising 50 points yesterday to close at 7,676, the FTSE 100 was expected to open a point lower at 7,675.
US markets were modestly firmer yesterday except for the tech-heavy Nasdaq Composite, which was more or less unchanged.
The Dow Jones rose 79 points to 25,199 while the S&P 500 advanced 6 points to 2,816.
“There were no surprises in Fed Chair Jerome Powell's second day of testimony in front of the House Financial Services Committee, where the overall message was repeated that the FOMC will continue hiking the interest rate gradually. Like Tuesday's session in the Senate, questions yesterday were related mainly to the flattening of the yield curve and the impact on the economy from tariffs,” observed Danske Bank.
Approaching the end of trading in Asia, the Nikkei 225 was down 8 points at 22,786, while in Hong Kong, the Hang Seng was 48 points weaker at 28,069.
In the UK, retail sales are due out at 9.30am, which may give analysts who follow the sector something to chew on once they have digested the update from Sports Direct International PLC (LON:SPD).
Analysts have forecast a 7.1% increase in full-year earnings (EBITDA) to £292.1mln and a 3.9% increase in revenues to £3.37bn for the year.
George Salmon, an equity analyst at Hargreaves Lansdown, said the results will be a “very important set of numbers for Sports Direct”.
He said the recent bout of nice weather and England’s good run in the World Cup – up to the semi-finals anyway – could have boosted trading.
Significant announcements due:
Finals: Sports Direct PLC (LON:SPD), Versarien PLC (LON:VRS)
Interims: Unilever PLC (LON:ULVR), Moneysupermarket PLC (LON:MONY), Nichols PLC (LON:NICL)
Trading updates: Anglo American PLC (LON:AAL), SSE PLC (LON:SSE), Speedy Hire PLC (Q1) (LON:SDY), Euromoney Institutional Investor PLC (LON:ERM)
AGMs: Royal Mail Group PLC (LON:RMG), Babcock International PLC (LON:BAB), Electrocomponents PLC (LON:ECM), Halma PLC (LON:HLMA), AO World PLC (LON:AO.), Mothercare PLC (LON:MTC)
Economic data: UK retail sales; US weekly jobless claims; US Philadelphia Fed index
Around the markets
- Sterling: US$1.3070, down 0.01 cents
- 10-year gilt: yielding 1.279%
- Gold: US$1,223.60 an ounce, down US$4.30
- Brent crude: US$72.76 a barrel, down 14 cents
- Bitcoin: US$7,322, down US$14
Business headlines
The Times
Google has warned that it could start charging handset makers for using its Android software, after the technology company was fined a record €4.3 billion by the European Commission yesterday.
UK’s static inflation in June raised questions over whether the Bank of England will lift interest rates next month.
The Daily Telegraph
The boss of Premier Foods, Gavin Darby, who had been facing calls from a clutch of activist investors to stand down, was saved by its largest shareholder, Japanese noodle giant Nissin Foods.
TalkTalk’s chairman Sir Charles Dunstone walked out of its annual meeting unscathed after almost 97% of the broadband provider’s shareholders backed him despite advisory firms Glass Lewis and ISS calling for him to go.
Capita’s finance director Nick Greatorexis to step down from his role following a transition period with his successor.
The Competition and Markets Authority's (CMA), which has been investigating the pension investment consultants since September, has issued tough new rules for the sector but stopped short of ordering a break up of powerful consultants Mercer, Aon Hewitt and Willis Towers Watson.
The Guardian
EasyJet has increased its profits forecast after climbing revenues in the spring notwithstanding air traffic control strikes and the unusually hot weather dampening demand.
The restaurant group Gaucho is on the verge of filing for administration, putting 1,500 jobs at risk.
Daily Mail
British Steel has posted profits of £21 million for the quarter as its turnaround continues.
Dulux owner Akzo Nobel has increased the price of its paints by 5%, blaming higher raw material costs for oil solvents and the white chemical titanium dioxide.