FTSE 100 closes lower
BT reportedly taps up Informa boss for CEO role
Royal Mail among laggards
FTSE 100 closed lower on Tuesday despite Wall Street shares firming and Turkey fears easing.
The blue-chip index of leading shares closed down almost 31 points at 7,611, weighed on by miners, while mid-cap cousin FTSE 250 shed over 65 points at 20,509.
Even sterling losing 0.32% against the US dollar couldn'tnudge the benchmark index higher.
Top laggard on Footsie was copper giant Antofagasta (LON:ANTO), down almost 7% to 886.40p. Also down was Anglo American plc (LON:AAL), which lost around 2% to 1,644.20p.
Data showing that the UK unemployment rate plummeted to its lowest level in 40 years at 4% was overshadowed by the fact that wage growth is not keeping up.
Fiona Cincotta, analyst at City Index, noted: "Whilst the UK’s labour market’s ability to generate jobs was one of the factors which led the BoE to hike interest rates earlier this month, the tighter labour market is still not translating into higher earnings which runs counter to the BoE’s expectations.
"Average weekly earnings grew 2.4% year on year in the three months to June, lower than the 2.5% forecast and slipping from 2.5% in May."
Top gainer on Footsie was United Utilities Group (LON: UU.), which added 1.6% to 751.40p.
Royal Mail PLC (LON:RMG) shares went 1.6% the other direction to 454.90p after the UK communications regulator fined the group £50mln for breaking competition law.
3.30pm: Footsie's losses lengthen
US stocks opened higher but London’s leading lights have declined to follow their lead.
The FTSE 100 was down 41 at 7,602 and heading south fast after spending all of the morning ambling around in positive territory.
Shares in telecoms giant BT Group plc (LON:BT.A) were 0.6% lower on reports that the company has been rebuffed in an approach to the former boss of Ofcom, Lord Carter, about taking over as chief executive.
Sky News reported that Carter, who is currently boss of exhibitions and events organiser Informa PLC (LON:INF), has been sounded out as a possible successor to Gavin Patterson, who is set to step down as BT boss later this year.
<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Revealed: BT Group approaches ex-Ofcom boss Lord Carter about replacing Gavin Patterson as telecoms giant’s CEO; a friend of Lord Carter tells me he “isn’t a candidate” but might still be persuaded to take the job. <a href="https://t.co/GqzWzEnyl2">https://t.co/GqzWzEnyl2</a></p>— Mark Kleinman (@MarkKleinmanSky) <a href="https://twitter.com/MarkKleinmanSky/status/1029375816906489857?ref_src=twsrc%5Etfw">August 14, 2018</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
Marketing and advertising giant WPP PLC (LON:WPP) is also on the look-out for a new boss but that has not stopped it acquiring Hirshorn-Zuckerman Design Group, a branding, content and design agency, in the US.
Financial details of the deal were not revealed. WPP’s shares were off 0.9% at 1,222.5p.
2.00pm: Shares lower on balance
London’s leading shares are now lower on balance, weighed down by soft mining shares and an a weaker dollar.
The FTSE 100 was down 13 at 7,629, with Antofagasta, 5.9% lower, leading the retreat after its disappointing half-yearly results.
Royal Mail PLC (LON:RMG) was another high-profile laggard, shedding 8.7p at 453.6p after it was fined £50mln for breaching competition law.
Royal Mail said it would appeal against Ofcom’s decision.
Royal Mail is fined £50m (roughly the same price as a book of first class stamps these days)
— Tony Shepherd (@tonysheps) August 14, 2018
“The fine – should it be upheld – would have a notable impact on Royal Mail’s current year earnings. It accounts for approximately 10% of its forecast adjusted pre-tax profit for the financial year ending 31 March 2019,” observed Russ Mould, the investment director at AJ Bell.
“While Royal Mail will no doubt fight this matter hard in the courts, management could do without such a distraction at a time when they are trying to modernise the business and improve profit margins,” he added.
Surely Vince Cable and George Osborne should personally pick up this tab: https://t.co/cI3zKyjWUa
— Matt Thomas #JC9 (@Trickyjabs) August 14, 2018
Elsewhere, the Footsie’s heavy contingent of dollar earners are out of favour as the greenback gives up some of its recent gains.
12.30pm: Footsie stuck in neutral
The Footsie is pretty much back to square one, despite expectations of a strong start on Wall Street.
In futures trade today, the Dow Jones was up 107 points; the Nasdaq was ahead by around 40 points, while the S&P 500 added 12 points.
Despite that, the FTSE 100 bandwagon was parked in the garage, listening to the Turkish weather forecast on the radio, practically unchanged at 7,643.
With nowt happening in terms of exciting developments at the blue-chip end of the market, attention focused on the talking heads and their assessment of economic data.
“Mixed news on the labour market as employment growth slowed to 42,000 in the three months to June from 146,000 in the three months to May. Indeed, employment at 32.386 million in the three months to June was modestly below the record level of 32.394 million in the three months to May. Nevertheless, the employment rate was stable at a record high of 75.6% in the three months to June,” noted Howard Archer, the chief economic advisor to the EY ITEM Club.
“The number of vacancies rose to a record 829,000 in the three months to June, indicating that employers were keen to employ,” he added.
“Despite the further tightening of the labour market, earnings growth remained weak – indeed both total and regular earnings growth softened in the three months to June,” Archer observed.
“Disappointingly, regular earnings growth (which exclude bonus payments) edged back to 2.7% in the three months to June from 2.8% in the three months to May and a two-and-a-half year high of 2.9% in the three months to March. It had earlier trended up to the March peak from a low of 1.8% in the three months to April 2017,” he said.
Matthew Percival, the head of employment at bosses’ pressure group the CBI, said that “continuing job creation shows that flexibility in the labour market is a key strength of the UK economy”.
“However, these figures show that the size of the UK workforce is shrinking at the same time as vacancies for skills and labour grow,” he continued.
“Shortages are already hampering firms’ ability to compete and create jobs, so it’s vital that the UK pursues an open and controlled post-Brexit immigration policy.
“The Government needs to guarantee that EU workers can continue to work even in a ‘no deal’ scenario, and putting migration and mobility on the table when negotiating a new relationship with the EU will help secure the best deal for the UK while ensuring companies can access the people and skills they need to succeed,” Percival suggested.
Turning to company news, Sports Direct International PLC’s (LON:SPD) purchase of department store group House of Fraser has not met with universal approval but it seems to have lit a fire under the share price of Debenhams PLC (LON:DEB), another department store group in which Sports Direct’s guv’nor, Mike Ashley, has more than a passing interest.
“Like a heavily discounted sale item in a fading department store chain, shares in Debenhams flew off the shelves this morning amid signs that Sports Direct is committed to the House of Fraser brand and most of its store footprint,” remarked Neil Wilson at markets.com.
“DEB shares were last up 13% and have enjoyed a 20% rally since Sports Direct took ownership of HoF. With Mike Ashley/Sports Direct holding a near 30% stake in Debenhams, a formal bid may be forthcoming in the near future. The rally in Debenhams shares is a clear indication the market believes Sports Direct could be ready to pounce,” Wilson suggested.
“As noted last week, a move to effectively consolidate the two troubled department store chains into a single offering looks to be the only viable solution to their problems; combining the operations to reduce overheads and stop competing against each other will prove beneficial. Moreover, heavy investment in one at the expense of the other would seem unlikely.
“However, it will probably all depend on whether Debenhams will agree to such a move. The House of Debenhams argument may be powerful but it might not happen. We may yet see a hostile takeover to create a high street giant with enough heft to survive,” Wilson said.
Debenhams shares were up almost 10% at 14p.
11.00am: Blue-chips bumble along as Turkey-US trade relations sour
The FTSE 100 continues to trade sideways as investors keep a wary eye on Turkey and its apparently deteriorating relationship with the US.
The FTSE 100 was up 8 points at 7,651.
“The lira’s advance was halted as the economic war between Turkey and the US appeared to escalate. USDTRY [US dollar/Turkish lira exchange rate] came off lows around 6.5 to push back up towards 6.6, but remains for the time being in a more stable footing than yesterday; however, we caution that both upside and downside risks remain elevated and the only certainty is volatility in the exchange rate,” commented Neil Wilson at markets.com.
“{Turkish president] Erdogan fired a shot back at the US with a statement saying he would ban US electronic goods. I can’t imagine Apple is too worried about this, but it nevertheless points to a worrying deterioration in relations between Ankara and Washington. Erdogan doubling down like this won’t help market sentiment,” Wilson opined.
Meanwhile, the “labour market continues to boom”, according to Sarah Coles, a personal finance analyst at Hargreaves Lansdown.
Coles was picking over this morning’s employment and earnings data, and noted that, “while pay excluding bonuses rose at 2.7% - ahead of inflation, pay including bonuses was up just 2.4%. It puts wage growth after inflation at just 0.4% including bonuses and 0.1% without,” Coles noted.
“Economists are predicting inflation figures tomorrow at 2.5%, so we will have to wait and see whether wages including bonuses have fallen behind inflation again.
“Given that unemployment is so low and vacancies are at their highest level since comparable records began in April 2001 (829,000), we would usually expect faster wage increases; however, higher employment doesn’t appear to be feeding so strikingly into higher wages at the moment,” she said.
In the small caps market, two drugs developers were experiencing wildly differing fortunes.
Shares in biotechnology firm SalvaRx Group PLC (LON:SALV) shot up 77% after it said it was selling its 94.2% interest in its SalvaRx Limited subsidiary.
The buyer is Portage Biotech Inc (OTCMKTS:PTGEF), a Canadian company that is paying the equivalent of US$75.8mln for the cancer-focused drug discoverer’s immuno-oncology assets.
Northland Capital Partners View on the City - Motif Bio (MTFB.L); SalvaRx (SALV.L); Premier African Minerals (PREM.L); Edenville Energy (EDL.L) https://t.co/evo8CDNO1I via @proactive_UK #brighterir #AndrewScottTV #CapitalNetwork1
— Proactive Investors (@proactive_UK) August 14, 2018
Shares in Realm Therapeutics PLC (LON:RLM) practically halved after a Phase 2 trial of PR022, its skin inflammation treatment, did not show the desired effect in the trial.
“We are conducting a full review to determine whether there is a path forward for our proprietary technology in Atopic Dermatitis, and to evaluate the implications for our Acne and Psoriasis programmes. We will provide an update on our plans in September,” the US company said.
10.00am: Stocks seeking direction after mixed news on unemployment and earnings
Despite the weakness of miners, the Footsie was just about keeping its head above water in mid-morning trading.
The FTSE 100 was up 4 at 7,647 with the dullness of the session emphasised by the fact that two of the top three risers on the index are utilities: United Utilities Group PLC (LON:UU.) and Severn Trent PLC (LON:SVT).
The UK unemployment rate fell to a 43-year low of 4% but the flip-side to this is the growth in average weekly earnings, which at 2.4% year-on-year is not having anyone doing backflips.
“Small early gains have fizzled out for the FTSE 100 this morning, while an opening bounce for the pound is also beginning to wind down as well despite a drop to 4% for the unemployment rate,” noted Chris Beauchamp of IG Group.
“The Turkish crisis remains the big news, although investors continue to sort the sheep from the goats in investment terms, with tentative buying of equities after a very mixed session in the US last night. While the drop in UK unemployment is doubtless welcome news, the weaker pace of wage increases, although broadly in line with recent months, provides little fuel for a sustained rally in sterling. Dollar strength persists too, despite the general rise in long positions across major institutions – so long as this continues there seems little to prop up the pound in the near term, even if Brexit negotiations were to go well,” he added.
8.40am: Footsie finds gains
The FTSE 100 made a tentative but positive start to proceedings as the Turkish lira found some sort of baseline and the markets fretted less about currency contagion.
The index of blue-chip shares was up 10 points at 7,652.55 after a positive start to the week on Wall Street, followed by a rather more mixed day in Asia.
“Traders will now look towards UK jobs data for the next move and to decide whether the Bank of England rate hike earlier this month was justified,” said Jasper Lawler of London Capital Group.
Official stats Tuesday morning are expected to show unemployment at around its June level of 4.2%, which was a multi-decade low.
“[This is] an impressive number particularly given the uncertainties presented by Brexit,” added Lawler.
“The fact that the labour market has managed to continue generating employment was one of the key factors behind the BoE interest rate hike in early August.”
Looking at average earnings, both including and excluding bonuses, no changes are forecast with growth set to remain at 2.5% and 2.7% respectively.
On the market, the main mover was Antofagasta (LON:ANTO), the copper miner which issued interim results earlier.
With the share price off 5%, the 16% fall in earnings wasn’t taken particularly well by the market. Neither were comments on the potential impact of US-Sino trade sanctions, analysts said.
Dropping down a division to the FTSE 250, the speciality chemicals group Elementis (LON:ELM) was given an 8% boost by an upgrade to ‘buy’ from the London arm of the German bank Berenberg.
A downgrade of Card Factory (LON:CARD) to ‘sell’ by the same house, knocked 4.4% off the share price.
The day’s biggest faller was tiddler Realm Therapeutics (LON:RLM), which halved in value after a skin treatment it was developing failed in clinical trials.
Proactive news headlines:
Pawnbroking firm H&T GROUP PLC (LON:HAT) continued to achieve growth from all of its core revenue streams in the first half of 2018.
Motif Bio PLC (LON:MTFB) (NASDAQ:MTFB) said the US regulator has begun the process of assessing whether the company’s next-generation antibiotic should be allowed to go on sale in America. Motif drug iclaprim has been granted a priority review by the Food & Drug Administration (FDA) with a decision deadline, known as a PDUFA date, of February 13 next year.
Remote meetings firm LoopUp Group PLC (LON:LOOP) is on track to meet market expectations this year following the acquisition of MeetingZone which is settling in better than had been expected.
Tekcapital PLC (LON:TEK) has reported a jump in revenue from services in the first half of the year as the value of its portfolio companies expanded.
Staff vetting specialist ClearStar Inc (LON:CLSU) has been appointed preferred provider by business jet group Gulfstream. ClearStar already handles Gulfstream’s direct hires but in future, 50 contract labour suppliers will be asked to use its screening service as well.
Live Company Group PLC (LON:LVCG) has simultaneously run two events of its BRICKLIVE brand to bolster its presence in the Japanese market.
Wolf Minerals LTD (LON:WLFE) has executed its previously announced debt restructuring deal which involves the deferred payment of principal, interest and other amounts due at the end of July 2018. To underpin this, the company has received guarantor consent from the German government’s United Loan Guarantee Scheme.
Premier African Minerals Ltd (LON:PREM) is raising £750,000 before expenses at 0.18p per share. The money raised will be allocated to the restructuring and ongoing holding costs of the RHA tungsten mine and plans to bring it back into production.
Touchstone Exploration Inc (LON:TXP) (CVE:TXP) on Tuesday confirmed strong production growth in the first half of the year and told investors that it will now expand its new drilling plans for the remainder of the year. The Trinidad-focused junior oiler intends to drill an additional four wells in the campaign, before the year’s end.
KEFI Minerals PLC (LON:KEFI) has appointed a Head of Project Implementation to oversee development of the company’s Tulu Kapi gold project in Ethiopia. A construction oversight team has also been appointed and has begun to engage with the principal project contractors Lycopodium and Ausdrill.
Galileo Resources PLC (LON:GLR) is to undertake a second diamond-drilling programme on its highly prospective 85%-owned Star Zinc project in Zambia. The programme will comprise about 1,000 metres of diamond core drilling to depths of up to 80 metres, with average depth likely to be around 60 metres.
6.45am: Positive start predicted
The FTSE 100 index is expected to rally higher on Tuesday, recouping the previous session’s falls despite overnight declines by US blue-chips, with Asian markets more mixed as the Turkish lira steadied after Monday’s drop, and UK eyes on some key data.
Spread betting firm IG expects the blue-chip index to open around 24 points higher at 7,666, having shed 24.56 points on Monday.
Overnight on Wall Street, the Dow Jones industrials dropped 125 points to close at 25,187, though the falls by the broader US stock indexes were less pronounced.
Asian markets remained cautious today with the Shanghai composite losing 0.6% as the latest Chinese economic data disappointed, but Tokyo’s Nikkei 225 index added 1.1% as the Turkish lira’s drop saw some respite, easing currency contagion worries.
Sterling was steadier against both the dollar and the euro on currency markets as traders awaited the first of this week’s batch of big UK economic pointers.
With the Bank of England having raised interest rates at the start of this month, the latest round of UK employment, average earnings, will be eyed keenly for indications of whether the move was justified or not.
Employment up, earnings flat
In a preview, economists at RBC Capital noted that the last three months have seen employment gains of 197,000, 146,000, and 137,000, and said the “continued ability of the labor market to generate employment was a key influence on the BoE’s decision to raise interest rates at its last meeting.”
For the latest numbers due today, they are forecasting a jobs gain in the region of 100,000, with the unemployment rate holding steady at 4.1%
For earnings, the RBC economists don’t see any change from last month and expect both the including and excluding measures of wage growth to remain unchanged at 2.5% and 2.7%, respectively.
Major surprises unlikely from Antofagasta
On the corporate front, blue-chip miner Antofagasta PLC (LON:ANTO) is unlikely to have any big surprises up its sleeve when it reports its first-half results on Tuesday, having recently updated investors on trading.
The Chilean-focused group published a second-quarter update in July, which showed copper production rose 6.1% to 163,200 tonnes from 153,800 tonnes a year ago. Higher output at its Centinela and Antucoya mines mitigated declines at Zaldívar and Los Pelambres, which was hit by a blockage in the concentrate pipeline in April and May.
Antofagasta left its full-year guidance unchanged for production of 705-740,000 tonnes and net cash cost of US$1.35 per pound.
Bid approach to overshadow esure interims
Meanwhile, esure Group PLC (LON:ESUR) provided a surprise on Monday after it revealed that it was “minded to recommend” a takeover proposal from private equity firm Bain Capital which is likely to overshadow the firm’s latest interim results today.
The FTSE 250-listed home and motor insurer said that, following discussions and a period of due diligence, Bain Capital had submitted a bid proposal of 280p in cash for each esure share, a 37% premium to last Friday’s closing price.
In recent years, esure’s results have been dependent on 'non-underwritten additional services' for most of its profits, which includes providing third-party services to its customers, such as breakdown assistance, and motoring legal protection.
Given the importance of these ancillary services, insurance itself has been something of a loss leader in recent years, but significant progress in underwriting last year means that could be about to change.
Significant events expected on Tuesday, August 14:
Interims: Antofagasta PLC (LON:ANTO), esure group PLC (LON:ESUR), Capital & Regional PLC (LON:CAL), JPJ Group PLC (LON:JPJ), Mears PLC (LON:MER), John Menzies PLC (LON:MNZS), Polypipe PLC (LON:PLP), Realm Therapeutics PLC (LON:RLM), Touchtone Exploration Inc (LON:TXP), Apax Global Alpha Limited (LON:APAX)
Finals: Falanx Group Ltd. (LON:FLX)
Trading updates: Castings PLC (LON:CGS)
Economic data: UK unemployment, average earnings; German ZEW survey; US import, export prices
Around the markets:
- Sterling: US$1.2769, up 0.02%
- Gold: US$1,194.90 an ounce, up 0.3%
- Brent crude: US$67.48 a barrel, up 0.4%
City Headlines:
- Sports Direct is promising to pay suppliers and concessionaires to House of Fraser only for goods sold since Friday when the sportswear retailer took over the stricken department stores – The Times
- Tim Martin, the founder of the Wetherspoons pub chain, is reviewing the “whole range” of products it sources from the EU in an attempt to find alternatives from Britain and non-EU countries – The Times
- After days of speculation, Elon Musk has revealed Saudi Arabia as the main source of cash in his grand plan to take Tesla private – Daily Mail
- Google’s artificial intelligence business DeepMind is planning clinical trials of technology that can help diagnose eye disease by analysing 3D retinal scans – Financial Times
- Netflix’s chief financial officer David Wells is stepping down after more than seven years in the role – Financial Times
- The head of Citigroup’s global cards business, Jud Linville, is departing from the bank – Financial Times
- Tencent has been ordered by Chinese authorities to halt sales of a video game that has drawn more than 1 million pre-orders just days after it was released – Financial Times
- Phones 4U’s administrators are investigating whether O2, EE and Vodafone colluded to sink the High Street phone retailer which went bust four years ago – Daily Mail
- Neptune Energy Group, founded by the former Centrica chief executive Sam Laidlaw, is buying stakes in licences owned by Apache Corporation of the US in the North Sea – The Times
- The easyjet billionaire Sir Stelios Haji-Ioannou is suing two Latin American airlines, accusing them of brand theft for using the word “easy” – The Times
- Australia’s biggest steelmaker BlueScope Steel is evaluating a $500mln to $700mln investment in its North Star business in Ohio as tariffs make foreign imports more expensive – Financial Times
- Ticketmaster UK is closing its controversial resale websites Get Me In and Seatwave and instead launching a new fan-to-fan ticket exchange to let customers sell tickets that can no longer be used – The Independent
- The German renewables firm Innogy said it would sell 41% of its Knoll project to Japan’s Electric Power Development and Kansai Electric Power for nearly £1 billion – Daily Telegraph
- Shares in German pharma and chemicals group Bayer fell 11%, wiping more than £8bn, after a court ruled the weedkiller manufactured by Monsanto – which it recently took over - caused cancer – Daily Mail
- Annual revenues of British gin around the world have surpassed the £500mln mark for the first time, according to the Wine And Spirit Trade Association – Daily Mail
- Opec predicts oil demand will dip from 1.64 to 1.63 million barrels a day this year, slowing to 1.41 million barrels a day growth next year - assuming trade tensions remain between the US and China in both cases – The Times
- UK regulators have launched a TV advertising campaign to warn the public about pension scams as new figures show that victims are losing an average of £91,000 each – The Guardian