FTSE 100 closes down 24 pts
TUI AG flies to bottom of Footsie pile
Small-cap miners Premier African and Kodal Minerals put on spurts
FTSE 100 closed lower as fears over Turkey's finances hit global markets.
The UK benchmark of leading shares closed down over 24 points at 7,642.
European shares also went lower, while the FTSE 250 shed over 92 points to 20,575.
It was a lackluster start in the US, with the Dow Jones Industrial Average down over 91 points to 25,221 and then S&P 500 down over 26 but the tech laden Nasdaq index up over 18 at 7,427.
"The FTSE gapped lower on the open, hitting a nadir of 7613 before a stronger start on Wall Street helped the UK index claw back some lost ground," said Fiona Cincotta, analyst at City Index.
"Fears of contagion from Turkey’s precarious financial position have been weighing on European markets which are more exposed to Turkey than the US.
"As the Turkish Lira extended losses by 6.5%, investors found little comfort in moves by the Turkish central bank to shore up the currency by “providing all the liquidity that banks needs”.
Top riser on Footsie was Russian steel maker Evraz (LON:EVR), which was up 2.08% to 520.60p, while the biggest loser was TUI AG (LON:TUI) as traders again fret about the collapse of the Turkish currency crisis.
3.50pm: FTSE 100 chips away at losses
The leading shares index had not quite wiped out all of the morning’s losses but it was not far off entering the final hour.
The FTSE 100 was down 16 at 7,651, with fallers among the index’s constituents outnumbering risers by around two-to-one.
The spectre of the Turkish currency crisis continued to haunt the markets but by the afternoon they were getting used to it.
“Despite President Ergodan going full-Trump – the President went all ‘fake news’ in a press conference discussing the lira’s panic-inducing losses, stating the Turkish economy was under attack – the markets managed to calm down as Monday went on,” observed Connor Campbell, a financial analyst at Spreadex.
“The fact the Dow Jones nudged higher after the bell likely helped its European peers ease reduce their losses. The US index climbed around 40 points, pushing the Dow back above 25350; this, in turn, saw the DAX and FTSE roughly halve the decline seen during the morning session, both German and UK indices now down 0.2%. The CAC, meanwhile, actually managed to do a complete 180, crossing 5400 as it rose 0.3%,” he added.
At Saxo Bank, Peter Garnry, the head of equity strategy, has had a look at how much damage Turkey’s woes could inflict on European banks.
Speaking to #Turkey ambassadors' conference TODAY, #Erdogan slammed the US president @realDonaldTrump AGAIN, saying Trump may be president but can't simply impose tariffs on Turkey, accused the US of backstabbing and shooting its partner in the foot with sanctions. pic.twitter.com/RdhJr0BewX
— Abdullah Bozkurt (@abdbozkurt) August 13, 2018
“The Turkish crisis continues to unfold with the currency weakening further today to around the 7.0000 level against the USD. It has been suggested by several analysts that a move beyond this point will deplete the excess capital of the major Turkish banks, throwing the country into a banking crisis,” he remarked.
“According to the Bank of International Settlements there were foreign bank claims on Turkey worth US$223.3 billion, with Spanish and French banks holding the largest claims worth US$80.9bn and US$35.1bn respectively. The foreign bank claims have grown significantly since 2005 as Turkey’s current deficit worsened materially from a surplus in 2002 to being -5.2% on average in the period Q4'05-Q1'18.
“The foreign bank claims figure is large, but to give some perspective the foreign bank claims were around US$300bn on Greece going into the financial crisis and US$150bn in the summer of 2010 on a much smaller GDP,” he added.
“The signal that the credit default swap market is sending today is that the probability of Turkey defaulting on its foreign obligations is moving significantly higher and unless we see some positive reaction from Ankara, the crisis could escalate further this week,” he warned.
2.35pm: FTSE 100 trims losses
As expected, US markets opened higher, giving a small fillip to the UK’s leading equities.
The FTSE 100 was down 24 at 7,643, chipping away some more at the morning’s losses, after the S&P 500 opened 3 points higher at 2,836.
Among the small caps, Premier African Minerals Ltd (LON:PREM) shares shot up some 40% on Monday’s news that the proposed restructuring of the RHA Tungsten vehicle won’t be impeded by Zimbabwe’s indigenisation policies.
Sector peer Kodal Minerals PLC (LON:KOD) was on the rise again today after issuing a statement on Friday in response to a sharp rise in the share price.
Shareholders are waiting on a maiden mineral resource estimate for the company’s Bougouni lithium project in Southern Mali; the board said last week that it expects that the report will be published in early September but could not guarantee it. The shares were up 16% at 0.255p.
AIM listed Kodal Minerals - LSE:KOD #KOD confirms new resource estimate coming as share price jumps#KOD confirmed its was close to releasing a new mineral resource estimate for its Bougouni lithium project in Southern Mali.
The company said the new estimate
— Douglas John Wright (@DouglasJohnWri1) August 13, 2018
1.30pm: Expectations of a firm start on Wall Street lift the Footsie
An hour or so ahead of the start of trading on Wall Street, the FTSE 100 was making another attempt at a rally.
The UK’s leading shares index was down 30 points at 7,637.
Spread betting quotes indicate that, stateside, the S&P 500 will open around three points higher at 2,836.6.
Insurers are leading the Footsie’s revival on bid speculation after Sheilas’ Wheels owner esure Group PLC (LON:ESUR) said it was veering towards accepting a £1.2bn offer from Bain Capital, should the private equity firm actually go firm with its proposed offer.
READ Insurers motor higher as esure “minded to recommend” £1.2bn cash offer from Bain Capital
FTSE 100 constituents Direct Line Insurance Group PLC (LON:DLG) and Admiral Group PLC (LON:ADM) were the top two riders on the Footsie, up 1.7% and 1.4% respectively, with sector peers RSA Insurance Group PLC (LON:RSA) and Aviva PLC (LON:AV.) not far behind, up 1% and 0.5% respectively.
Bain has until 5pm on September 4 to firm-up on its 280p a share proposal; shares in esure were up 63.6p at 267.6p.
Meanwhile, on the foreign exchange markets, the Turkish lira continues in freefall.
“The currency weakness spread to hit the South African Rand, Russian Ruble and Mexican Peso while the Indian Rupee dropped to a new all-time low as a result of the “risk off” atmosphere across global markets,” said Jameel Ahmad, the global head of Currency Strategy & Market Research at FXTM.
“The damage across the global markets has been far and wide following the Lira's freefall, but it is the emerging market currencies and higher-yielding assets that are up there as contenders to suffer the most from crippling investor attraction towards taking on risk. Some emerging market currencies are still not used to the type of market volatility that developed currencies can face, with some speculation already brewing that emerging market central banks might step in to prevent further respective currency weakness. I fear that because the markets are being driven by “animal spirits” stemming from external headwinds, there is very little these central banks can do and it would risk concerning investors even further if they start pushing the “panic” button,” he added.
Noon: The Footsie's rally proves to be a bit of a non-starter
Having taken a step back at the outset in the wake of the Turkish currency crisis, the Footsie largely traded sideways thereafter.
The FTSE 100 ended the morning 41 points lower at 7,626.
There was more gloomy news for the high street with the New Economics Foundation reporting that since the beginning of the year, almost 25,000 jobs at high profile retailers have either been lost or reportedly put at risk.
Analysis by New Economics Foundation says #retail lost jobs are a £1.5bn cost to GDP https://t.co/AFwHue835y
— Stella Parkes (@stellaparkes) August 13, 2018
The Foundation added that the loss, or potential loss, of those jobs puts another 8,300 jobs at risk in the retail supply chain.
“The shape of our economy is beginning to flex and buckle in response to powerful structural forces such as weakening household spending power and a shift in consumer behaviour towards online purchasing but moments like these also represent an opportunity for policymakers, businesses and communities to proactively choose a new direction going forwards,” said Alfie Stirling, the head of Economic [sic] at the New Economics Foundation.
“The high street has always provided space for tremendous economic and social value in the UK but if these broad benefits are to be preserved, the future may need to be reimagined with less dependency on short-term material consumption,” Stirling opined.
Coincidentally, high street bellwether Marks & Spencer Group PLC (LON:MKS) was one of the worst performing blue-chips, down 1.7% at 297.6p. Sector peer Next PLC (LON:NXT), down 1.5% at 5,582p, was faring little better.
TURKISH LIRA PLUNGES TO RECORD LOW OF 7.22 AGAINST DOLLAR IN ASIAN TRADE $USDTRY
— *Walter Bloomberg (@DeItaOne) August 12, 2018
Meanwhile, the assault on the Turkish currency on foreign exchange markets was having a malign effect on stocks deemed to be exposed to the currency, such as British Airways owner IAG (LON:IAG), which was down 1.7% at 667.8p.
9.45am: The Footsie bounces off the bottom
The FTSE 100 has come off the bottom but blue-chips with exposure to Turkey remain in the doghouse.
The FTSE 100 hit an intra-day low of 7,615 shortly after 9.00am but had recovered to 7,635, down 32 points, half an hour later.
Travel firm TUI AG (LON:TUI) was the worst performing blue-chip, down 4% at 1,502.5p as investors fret about the collapse of the Turkish currency crisis.
#Erdogan threatened today #Turkey's industrialists with moving for a "Plan B" or "Plan C" if they rush to the banks to convert their cash to foreign currency for an escape route. (In other words, he'll seize their assets while jailing them as he's done for some 1000 firms so far) pic.twitter.com/LJCnUg329d
— Abdullah Bozkurt (@abdbozkurt) August 12, 2018
Packaging firm Mondi PLC (LON:MNDI), which has sizeable operations in Turkey, was off 2.4%.
“It’s all about Turkey again with today’s sessions already inevitably having brought additional major lira volatility after the weekend saw Erdoğan again exhort against rate hikes and blame foreigners for the country’s financial market stress. But after the lira had initially posted another double-digit percentage decline against the dollar through 7.23, it rebounded back briefly through 6.50 before settling close to 6.80 after the Central Bank pledged to “take all necessary measures to maintain financial stability” and announced specific new measures to free up liquidity,” observed Daiwa Securities.
Drugs developer Shire PLC (LON:SHP) was wanted, rising 0.5% to 4,471p on the back of a new drug application submitted in Japan for INTUNIV, its treatment for adults with attention deficit hyperactivity disorder.
Away from the big hitters, contract research organisation Fusion Antibodies PLC (LON:FAB) – ticker symbol FAB – was less than fab, sloughing off a quarter of its value after a profit warning.
Oilex Ltd (LON:AEX) also lost around a quarter of its value on return from suspension, after an Indian court weighed in on the spat with its joint venture partner at the Cambay Field project.
READ: Oilex plunges as Indian court weighs in on Cambay joint venture dispute
The oil explorer had asked the Indian authorities to transfer Gujarat State Petroleum Corporation’s participating interest in Cambay after GSPC failed to pay its share of expenses – more than US$3mln, according to Oilex.
The Indian court, however, ruled in favour of the Indian state-owned company.
$OEX Oilex plunges as Indian court weighs in on Cambay joint venture dispute https://t.co/1WMRh1iGsI via @proactive_UK @oilexltd #OEX #brighterir #AndrewScottTV #CapitalNetwork1
— Proactive Investors (@proactive_UK) August 13, 2018
8.35am: Poor start for Footsie
The FTSE 100 made a muted start to proceedings amid worries about Turkey’s currency crisis and the threat of contagion.
The index of blue-chip shares fell 33 points to 7,634.21, mirroring the declines seen on the main Asian markets earlier.
Paddy Power Betfair (LON:PPB) led the fallers as a wave of secondary selling hit the stock in the wake of its update and bearish outlook comments last week, as Citigroup downgraded its rating for the bookies to 'sell' from 'neutral'.
Under pressure also were the holiday companies and the miners.
But topping the Footsie leader board was the aerospace giant BAE Systems (LON:BA), following an upgrade to ‘overweight’ from the London arm of Wall Street investment bank, Morgan Stanley.
Shipping services group Clarkson (LON:CKN) was ship shape following the release of interims, which pushed the stock 4% higher.
Liberum used the results statement as its cue to upgrade to stock, which is now on the broker’s ‘buy list’.
Proactive news headlines:
Sound Energy PLC (LON:SOU) has sharpened investor attention as it announced that mobilisation has now begun for its first new well for the Tendrara project area in Morocco. The company, in a stock market statement, said that the National 110 IE (1500HP) land drilling rig owned by Saipem is now on its way to the location of the TE-9 well pad, which is currently under construction.
Echo Energy PLC (LON:ECHO) told investors that it is now considering stimulation options for the ELM-1004 well, at the Fracción C project in Argentina, after the first testing operation in its programme was compromised. The company, in a stock market statement, said that the operator has found it challenging to completely isolate all of the well’s interpreted gas bearing zones.
United Oil & Gas PLC (LON:UOG) appears impressed with the first ‘fast-track’ data from the recently shot 3D seismic across the Walton-Morant licence, offshore Jamaica. Specifically, the explorer said the high-grade Colibri target, previously mapped in 2D seismic, has been clearly identified.
SIMEC Atlantis Energy Ltd (LON:SAE) believes its 220 megawatt (MW) Uskmouth power station in Wales could become the blueprint for future conversions around the world. Uskmouth is currently set up as a coal-fired power station, but SIMEC Atlantis is converting it to run on end-of-waste energy pellets – derived from a mixture of biogenic material and plastics that cannot be recycled.
IXICO PLC (LON:IXI) has secured an agreement to expand the scope of an existing clinical trial study contract with a top 10 pharmaceutical company.
Hydrogen fuel cell developer ITM Power PLC (LON:ITM) said its plans to expand the workforce and production capacity are on track. The company ended the year to April 30 with cash of £20.4mln after a successful fund-raising in December of last year.
Rockfire Resources PLC (LON:ROCK) told investors it has added material acreage to Rockfire's already significant ground-holding in Queensland. It has secured the Kookaburra Exploration Permit which spans a 232 square kilometre area with gold and copper prospectivity, including the Brigalow alluvial goldfield.
6.35am: Turkey set to dominate sentiment
The start of the trading week looks likely to be dominated by worries over the unfolding currency crisis in Turkey - and the threat of contagion.
The FTSE 100 looks set to fall 32 points to 7,635.01, according to the spread betting firms, with Chinese trade hostilities and Russian sanctions providing anxious traders with even more to ponder.
“Recent sessions have been a stark reminder that trading in August is not for the faint hearted,” said Jasper Lawler, markets commentator for London Capital Group.
“With the US and Europe on summer holidays, liquidity can be light making big swings more likely. The panic that engulfed the markets at the end of last week is showing no signs of going anywhere at the start of the new week.
“Traders were met with a sea of red as indices dived across the Asian session; investors shunned riskier assets overnight while safer havens such as the Japanese yen and Swiss Franc firmed; jitters surrounding the Turkish currency crisis were showing few signs of moving on.”
Back here in the UK, the reporting week will be dominated by a welter of second-line stocks.
Investors will be keen to see whether the heatwave has prompted the ‘staycationing’ British public to rush out and upgrade their barbecues with B&Q owner Kingfisher (LON:KGF) the likely beneficiary.
Also this week, we have results from insurer Admiral (LON:ADM) and copper miner Antofagasta (LON:ANTO).
Around the markets:
- The pound is worth US$1.2761
- Gold down US$2.60 an ounce at US$1,216.40
- Brent crude changing hands for US$72.65 a barrel, down 16 cents
City Headlines:
Financial Times
- Turkey promises plan to calm markets
- Employers resist pay rises despite staff shortages
- House of Fraser deal draws eye of pension watchdog
- Private equity spending pace slows to 10-year low
Times
- Theresa May’s plan for a bespoke customs deal with the European Union is based on flawed analysis described by trade experts last night as “fanciful”
- Saudi Arabia is exploring how it could bankroll Elon Musk’s ambitious plan to take Tesla private
- Ashley urged to pay £70m extra for House of Fraser by under-bidder
Daily Telegraph
- Department stores wilt as shopping habits shift
- Phones 4U administrators hoard £130m to take on mobile giants
- Disney offers sweetener to retain Sky chief
Guardian
- Passengers face fare rises despite waves of train cancellations
- Companies in Brexit 'supply shock' as fewer EU citizens come to UK
- High street job losses mount with Homebase next in line for closures