FTSE 100 closes 32 points up
Mulberry takes £3mln hit from House of Fraser administration
US/ China talks still in focus
Sage Group tanks after Deutsche downgrade
FTSE 100 closed ahead as the new trading week began, but off the 7,600 level, adding over 32 points to 7,591.
The markets were cheered about the impending US/ China trade talks and high hopes the tensions can bea eased.
FTSE 250 was also up, the index adding almost 87 points to 20,531.
In the US, the S&P 500 is up over 16 at the time of writing, while the Dow Jones Industrial Average is ahead by over 115.
In the currency markets, the pound is ahead by 0.05% against the US dollar.
Fiona Cincotta, senior market analyst at City Index, cautioned however that traders may be overly optimistic about the trade talks.
"....there is a chance that the markets are getting ahead of themselves here given the gapping differences between the US and China on fundamental issues such as technology transfer, subsidies and local market protectionism which are a standard component of the Chinese economy," she said in a note.
"This is not just a case of China needing to open the doors just a little further, we have already seen that the White House is looking for China to make significant steps to opening its economy in order for the trade tariffs to be put on hold."
The biggest loser on Footsie was Sage Group (LON:SGE), the enterprise software form, which tanked 7% to 619.2p after a downgrade from Deutsche Bank to 'sell'.
Sage shares are down 22% in the year to date.
3.40pm: FTSE flirts with 7,600
The FTSE 100 opened in the black this morning and that’s where it has stayed ever since, flirting around the 7,600 mark for most of the day.
The index of blue-chip shares is currently at 7,601.2 – a 42.7 points, or 0.6%, gain for the day.
Miners boosted by US-China optimism
Big-name miners, which have a big say in the direction of the footsie, are among those in positive territory as optimism grows that the US and China will find some common ground and de-escalate the trade war when officials meet later this week.
As the biggest consumer of raw materials, China is important for the miners: a stronger China generally means increased demand for things like copper and iron ore.
Russian miner Evraz plc (LON:EVR) is the index’s top riser, up 3.8% to 485.6p, while Anglo American PLC (LON:AAL) (up 1.9% to 1,567p) and Glencore PLC (LON:GLEN) (up 1.2% to 309.3p) have also made solid advances.
Paddy Power PLC (LON:PPB) is another decent riser after confirming it had bought back and cancelled £200mln worth of its shares.
A share buyback helps to inflate important financial metrics such as earnings per share and lowers the total dividend repayment. It also suggests the company is in good shape financially speaking. The stock is up 2.7% to 7,155p.
Sage hit by Deutsche downgrade
Going the other way is Sage Group PLC (LON:SGE) which has dropped almost 7% to 619.6p after analysts at Deutsche Bank downgraded the software firm to ‘sell’.
Hoiusebuilders are also under pressure as Rightmove’s latest house price index survey showed prices have fallen 2.3% so far in August compared with July.
Persimmon PLC (LON:PSN) is down 1.4% to 2,428p and its rival Berkley Group Holdings PLC (LON:BKG) has lost a similar percentage to sit at 3,687p shortly before the market shut up shop for the day.
3pm: Mixed start on Wall Street
It was a mixed start to the week over on Wall Street. The Dow Jones Industrial Average gained 91 points, or 0.4%, to 25,760, while the broader S&P 500 climbed 6.5 points, or 0.2%, to 2,856.6.
The tech-heavy Nasdaq initially opened higher but almost immediately slipped into the red and is currently down 15.6 points, or 0.2%, to 7,800.7.
Tesla Inc (NASDAQ:TSLA) is, not for the first time this month, the index’s biggest faller, losing more than 3% after its eccentric boss Elon Musk rebuffed calls to take some time off and rest.
Ford & Tesla are the only 2 American car companies to avoid bankruptcy. I just got home from the factory. You think this is an option. It is not.
— Elon Musk (@elonmusk) August 19, 2018
2.45pm: Not just Mulberry owed money by House of Fraser
Brands that supply to House of Fraser (HoF) have been left counting the cost after the department store chain collapsed into administration.
HoF owes its suppliers £484mln, including £2.4mln to Mulberry, according to documents from EY.
The company also owes Giorgio Armani £1.59mln, Kurt Geiger £4.8mln, Ralph Lauren’s Polo UK Limited £4.8mln and Phase Eight £3.4mln.
Other brands that stand to lose money include Superdry PLC (LON:SDRY), Aspinal of London, Warehouse and Oasis.
However, HoF’s suppliers are unlikely to see the money since Sports Direct, which agreed to buy it for £90mln, is not obliged to pay them.
2.30pm: Sage downgraded to ‘sell’ by Deutsche Bank
Shares in software firm The Sage Group (LON:SAGE) plunged on Monday after Deutsche Bank downgraded the stock to a ‘sell’ rating from ‘hold’ and cut its target price to 540p from 630p.
Deutsche Bank said after speaking to a number of accountants and resellers across the UK, US and Australia, along with senior figures from key competitors Xero and Intuit, its key takeaway from these conversations is that the competitive situation in Sage's core mid-market franchise “appears to be worsening”.
“We would highlight Microsoft as the stand out player here, with the Dynamics suite cited by Sage resellers as the most frequently seen competitor and furthermore, the Dynamics 365 SaaS suite grew at 56% at constant currencies in the fourth quarter.” Shares fell 6% to 627.4p. Read more here.
2.10pm: Greece bailout programme ends
After almost a decade of austerity, Greece’s bailout programme is finally over. The country has received around £290bn worth of loans and bailouts since 2010.
The programme was brought in to help Greece pay off its mounting debt pile, which soared to above £200bn in the years following the financial crisis.
In order to receive the bailout, the country had to agree to a series of crippling austerity measures, which proved deeply unpopular with many Greeks. According to analysts, Greece will be paying back the EU loans until 2060.
You did it! Congratulations to Greece and its people on ending the programme of financial assistance. With huge efforts and European solidarity you seized the day.
— Donald Tusk (@eucopresident) August 20, 2018
1.45pm: Greenpeace blockades VW’s UK headquarters in MK
Activists from Greenpeace are blockading the entrance to Volkswagen’s UK headquarters in Milton Keynes in protest of the diesel emissions scandal which rocked the car industry.
The environmental campaign group have also set up a mock clinic offering health advice to staff and members of the public.
“Volkswagen sold us a lie about diesel being clean. Its diesel addiction is seriously harming people’s health,” a Greenpeace spokesperson is quoted as saying.
“Volkswagen won’t meet with us and won’t listen. So today we’ve brought the truth about diesel to its doorstep.”
Greenpeace wants VW to stop making diesel cars and move to electric-only models.
VW responded by saying: “The Volkswagen Group has launched the most comprehensive electrification initiative in the automotive industry.
“This will bring an additional 80 new electric vehicles to the Volkswagen Group model range by 2025.” It added that the matter was now with the police.
BREAKING: medics & Greenpeace activists are shutting down @UKVolkswagen’s HQ & turning it into an emergency diesel pollution clinic. They’re calling on VW to #DitchDiesel because it’s making our air dangerous to breathe pic.twitter.com/APkm5X88wg
— Greenpeace UK (@GreenpeaceUK) August 20, 2018
1.20pm: Keywords make another acquisition
12.45pm: Wall Street set for lukewarm start
Wall Street shares are set to build on last week’s gains when trading begins later on in New York.
The Dow Jones Industrial Average index gained 0.43%, or over 110 points on Friday to settle at 25,669, led higher by the likes of Verizon Communications Inc (NYSE:VZ), Pfizer Inc (NYSE:PFE), and Caterpillar Inc (NYSE:CAT).
The S&P 500 added over nine to close at 2,850, while the tech heavy Nasdaq also gained almost ten points at 7,816.
In futures trade today, the Dow Jones is up 55 points; the S&P 500 is ahead by 4.5 and the Nasdaq futures are up by nearly 22 points.
Retailers will be a big theme in the US this week, with Target (NYSE:TGT), Kohl's (NYSE:KSS), Ross (NYSE:ROST), Gap (NYSE:GPS), Foot Locker (NYSS:FL) all posting numbers.
12.10pm: FTSE still on front foot
As we head into the afternoon session, the FTSE 100 is still well ahead of Friday’s close, although it has given up some of its early gains.
Still, the blue-chip index is up 39.7 points to 7,598.3, driven by the mining sector which is benefitting from renewed optimism that the US and China can de-escalate the trade war when officials from the two super powers meet later this week.
Mining companies are some of the biggest on the London Stock Exchange, so even a slight movement can have a big impact on the footsie.
Russian miner Evraz PCL (up 5.9% to 494.5p), Anglo American PLC (LON:AAL) (up 2.3% to 1,569p) and BHP Billiton PLC (LON:BLT) (up 2.8% to 1,674p) are all among the top blue-chip performers.
Lagging towards the bottom is Sage Group PLC (LON:SGE), which is down 5.5% to 629.4p after analysts at Deutsche Bank downgraded the software firm to ‘sell’.
Housebuilders are also struggling on the overnight news that the Rightmove house price index fell 2.3% in August from July. That means, on average, vendors are asking for £7,218 less this month than they were before.
Persimmon PLC (LON:PSN) has shed 1.4% to 2,429p, while rival Berkeley Group PLC (LON:BKG) has dropped 0.9% to 3,704p.
11.50am: Benetton family coming for some stick
The Benettons, one of Italy’s richest families, are coming in for some stick for their role in the Genoa bridge disaster which killed more than 40 people last week.
The family, famous for its United Colours of Benetton fashion stores, owns a controlling 30% stake in Atlantia, the infrastructure group which operates the bridge.
Some on social media have claimed that Atlantia put profits before safety, while others said it took them too long to release a statement on the tragedy.
The Benetton family’s Edizione holding company expressed its sympathy to the victims and their families through a press release last week and emphasised that Atlantia has invested more than €10bn over the last decade into Italy’s roads.
11.35am: Screens are down at Gatwick
@Gatwick_Airport: the systems are down - get the whiteboard out!
Generation Z: what are whiteboards?#gatwick #oldschool #backinschool #onlyoneintheback pic.twitter.com/WOhYr0q9Jd
— Tamara Salem (@TamaraSalem) August 20, 2018
11.10am: Ex-Lehman bankers ‘plan secret party ten years on from bank’s collapse’
Hundreds of ex-Lehman Brothers employees are planning a secret party in London on the tenth anniversary of the bank’s collapse, according to reports.
Financial News, which claims to have seen an email invite, said the bankers have gone to great lengths to keep the details of the party out of the press.
It was originally going to be held at The Conduit – a fancy members club in Mayfair – on September 15 but has now been moved to an “undisclosed London venue”.
Labour MP and shadow chancellor John McDonnell said the public would be “absolutely disgusted” at the “inappropriate gathering”. Insiders have reportedly said it is just a reunion and is not meant to cause any offence.
Lehman Brothers’ collapse triggered the 2008 global financial crisis, which saw many banks needing government bailouts.
Lehman bankers are planning expensive slap up party to celebrate 10th anniversary of financial crash they caused and we paid for. Are the teachers,firefighters, & police officers who lost their jobs after 10 years of austerity invited ? https://t.co/IHnEOc3lQy via @FinancialNews
— John McDonnell MP (@johnmcdonnellMP) August 20, 2018
10.50am: Not much expected from trade talks
“Markets often find it difficult to focus on one topic, and thus with the focus now shifting away from Turkey and towards China, it comes as no surprise that the pessimism of last week is fading into obscurity,” said IG market analyst Josh Mahony.
“Wednesday will see a trade delegation from China kick off a two-day meeting with their US counterparts, and as long as there is hope for some form of breakthrough, markets are likely to be in a more optimistic mood.
“However, this optimism is likely to be ill-founded, for all the previous meeting have shown precious few signs of anything that looks like a breakthrough.”
10.30am: Miners boosting footsie
The FTSE 100 has got off to a chipper start on Monday on hopes that talks between the US and China later this week might yield some positive outcomes.
The superpowers are locked in a bitter trade war, with Donald Trump unhappy at what he perceives as unfair taxes on US goods being exported to China.
US officials are due to meet their Chinese counterparts in Washington tomorrow and Wednesday, shortly before new US charges on Chinese goods comes into force.
The FTSE 100 is up 42.3 points, or 0.6%, to 7,600.7 on the back of the news.
Miners have been the main beneficiaries of the optimism, as any de-escalation in the trade war stands to boost China, the world’s biggest consumer of raw materials.
Russian miner Evraz plc (up 5.8% to 26.9p) Fresnillo PLC (LON:FRES) (up 2.7% to 948.6p) and BHP Billiton PLC (LON:BLT) (up 2.5% to 1,670p) are all among the top blue-chip performers.
First place goes to Middle East-focused healthcare provider NMC Health PLC (LON:NMC) which is bullish on its full-year prospects after reporting a 32% increase in first-half underlying earnings.
Sage Group PLC (LON:SGE) was the day’s biggest faller, dropping 5.5% to 629p as Deutsche Bank issued a ‘sell’ note on the software company.
10.05am: G4S stripped of Birmingham prison contract
The UK government has had to take over the running of HMP Birmingham after deciding security services giant G4S PLC (LON:GFS) could not handle the out-of-control prison.
The unusual move comes after the prisons watchdog issued a damning assessment of the prison following its latest inspection, warning that it had “slipped into chaos”.
In that July report, the prison, which has had 1,434 assault incidents over the past year, was graded ‘poor’ in all four categories: safety, respect, activity and resettlement.
“There has clearly been an abject failure of contract management and delivery,” concluded the UK’s chief inspector of prisons, Peter Clarke. G4S shares are down 0.5% to 251p.
Is somebody counting the contracts that G4S has cocked up?
And then the number of new contracts they were awarded afterwards?#r4today #800000gone @bbcr4today
— Ed Wilson (@eddwilson) August 20, 2018
9.40am: KPMG fined £3mln for Ted Baker conflict of interest
Accountancy firm KPMG has been landed with a £3mln fine for blurring the lines between audit and other services in work for retailer Ted Baker PLC (LON:TBK).
The fine was levied by accountancy watchdog the Financial Reporting Council after KPMG appeared as an expert witness in a court case that involved the fashion store
This compromised its independence in audit work especially as the case fees were significantly higher, said the FRC.
Both the accountancy giant and senior partner Michael Barradell were sanctioned by the watchdog, with KPMG receiving a “severe reprimand”, in addition to the fine.
It is yet another blow for KPMG, which has come under fire from City regulators in recent months due to an “unacceptable” decline in the quality of its auditing work.
KPMG has been fined £2.1m by the regulator FRC for breaching the industry's ethical standards in relation to Ted Baker -- "there was a self-interest threat arising from the fact that the fees for the expert engagement significantly exceeded the audit fees in the relevant years".
— Rob Young (@robyounguk) August 20, 2018
9.20am: Genoa bridge manager’s shares fall again in Milan
Atlantia, the company which managed the bridge in Genoa, Italy which collapsed last Tuesday has seen another 10% wiped from its stock this morning in Milan.
The infrastructure group saw more than 20% knocked from its value last week in the immediate aftermath of the tragedy which killed 43 people.
9.10am: PepsiCo buys Sodastream for U$3.2bn
US drinks giant PepsiCo Inc (NASDAQ:PEP) has bought Sodastream for US$3.2bn (£2.5bn).
The deal, which has been approved by both sets of directors, gives Pepsi a new way of getting its products into homes at a time when its signature sugary drinks are becoming less popular.
Israel-based Sodastream makes a machine and refillable cylinders which allow users to make their own carbonated drinks.
It is likely to be the final acquisition made by Indra Nooyi, who is stepping down in October after 12 years at the helm.
Now I feel old. #Pepsico #Sodastream deal breaks and I start talking about getting 'bizzy with the fizzy' and get blank looks all round. Great 80s tag line but is it worth $3.2 bn?
— Geoff Cutmore (@GeoffCutmore) August 20, 2018
8.50pm: Mulberry sets out cost of House of Fraser collapse
Luxury handbag maker Mulberry Group PLC (LON:MUL) is the biggest faller in London after telling investors it will take a £3mln hit from House of Fraser’s recent collapse.
Mulberry, which operates 21 concessions in House of Fraser stores, said the exceptional charge will be reflected in its results for the six months to September 30.
Mike Ashley’s Sports Direct International PLC (LON:SPD) earlier this month said it would buy House of Fraser from administrators for £90mln in cash.
Mulberry also warned that its profit for the year will be “materially reduced” if weak sales trends in the UK retail market continue. Shares dived by a quarter to 429p.
8.30pm: FTSE 100 opens in the black
The FTSE 100 got off to a slightly better start than predicted, with a 19-point advance to 7,577.17 as it took its cue from Asia’s main markets, which in turn were lifted by a positive end to proceedings on Wall Street.
Optimism appears to be underpinned by China’s move to send a trade delegation to Washington later this week in a bid to forestall a further round of tit-for-tat sanctions.
At the same time, contagion worries, sparked by Turkey’s currency crisis, appear to be dying down.
“Over the weekend, the central banks of Qatar and Turkey signed a currency swap agreement, and this follows on from the US$15 billion that the gulf state pledged to invest in the country,” said David Madden, commentator at CMC Markets.
“Dealers are still scared that banks that have lent money to Turkish finance houses could face defaults, and it is possible we might see an increase in non-performing loans in the Turkish banking system, and that could seep into the eurozone.”
NMC Health (LON:NMC) got off to decent start after its interim results and business update with shares in the Gulf-focused private hospital operator up 2%.
RBC, Sage move on broker notes
Royal Bank of Scotland (LON:RBS) nudged 1.8% higher after the London arm of the US giant Citi upgraded its recommendation to ‘buy’, saying the stock was now ‘oversold’.
A Deutsche Bank downgrade to ‘sell’ on accounting software specialist Sage (LON:SGE) sent the shares tumbling 6.5%.
The accompanying commentary was pretty bleak: “Over the last few weeks, we have spoken to a number of accountants and resellers across the UK, US and Australia, along with senior figures from key competitors Xero and Intuit.
“Our key takeaway from these conversations is that the competitive situation in Sage's core mid-market franchise appears to be worsening.
“Entry level players at far lower price points are moving upmarket and are building functionality either internally or through third party platform partners.”
6.45am: Flat start predicted
The FTSE 100 looks set for a flat start to the week, according to the spread betting firms, with index of blue-chip shares ignoring the positivity on Wall Street Friday that pushed Asia’s main markets higher.
Instead, the pre-occupation is likely to be with matters geo-political. Turkey’s currency crisis is fermenting in the background, while Sino-American trade negotiations begin later this week.
“The most important risk event this week is the start of the US China trade talks on Tuesday and Wednesday,” said Jasper Lawler, markets analyst at London Capital Group.
“Should we start to see signs of progress in trade negotiations between the two powers, risk appetite will improve.
“However, headlines to the contrary are likely to see renewed demand for the dollar and flows out of currencies such as the aussie dollar, the pound and the euro.”
With the end of August and the final UK bank holiday before Christmas fast-approaching, the corporate diary flow slows to almost a trickle in the coming week, with little economic data due either.
Only four FTSE 100-listed companies are scheduled to unveil updates – miner BHP Billiton (LON:BLT), housebuilder Persimmon (LON:PSN), Irish construction group CRH (LON:CRH), and Middle East hospitals operator NMC Healthcare (LON:NMC).
Around the Markets
- Pound worth US$1.2744
- Gold up US$8 an ounce at US$1,192.20
- Brent crude US$71.60, down 23 cents a barrel
Proactive news headlines
Kromek Group PLC (LON:KMK) said its medical division has won two contracts worth a combined US$1mln. The radiation detection technology specialist said an equipment manufacturing customer has placed a US$700,000 order for Kromek’s cadmium zinc telluride (CZT) detectors to be used in nuclear medicine.
AdEPT Telecom PLC (LON:ADT) has acquired fellow information technology services provider Shift F7 in a deal worth up to £7.9mln.
Keywords Studios PLC (LON:KWS) has “substantially” expanded its engineering services line through the acquisition of Studio Gobo Ltd and Electric Square Ltd.
Kalahari Metals LTD, in which Metal Tiger PLC (LON:MTR) has a significant stake, is to undertake due diligence on five potential new exploration licenses in Botswana. Work on two existing licenses continues, with the aim of identifying a resource analagous to the sizeable T3 deposit now being developed by MOD Resources (ASX:MOD).
Arc Minerals Limited (LON:ARCM) posted a profit in its latest full year as numbers benefited from its shift of emphasis to Africa. The junior is now concentrating all its attention on the Zamsort copper and Misisi gold deposits in Zambia and the DRC respectively.
Tower Resources PLC (LON:TRP) told investors that an expanded reserves report for the Thali project, in Cameroon, is expected next month. The explorer, in a stock market statement, noted that earlier this month it received its certificate of environmental compliance for the project, and, it anticipates formal confirmation of an extension to the first licence period in September.
Silence Therapeutics PLC (LON:SLN) chair Annalisa Jenkins is stepping down with immediate effect, the drug development company announced on Monday. Andy Richards, CBE, a non-executive director of the group since September 2016, has been appointed interim non-executive chair to ensure a smooth transition.
Business Headlines
Financial Times
G4S-run Birmingham Prison taken over by the government.
The Treasury is set to miss out on billions in tax revenues from higher oil prices this fiscal year, as a result of tax changes that are coming under scrutiny following a recovery in production in the North Sea.
BT shareholders call on next boss to consider split with the spin-off of the regulated Openreach business.
Times
Merging Asda and Sainsbury may have to sell up to 300 stores to assuage competition fears, according to research carried out by the paper.
Business leaders are more pessimistic about the outlook for the economy than at any point this year, with concerns over Brexit and interest rates contributing to the downbeat mood, according to the Institute of Directors.
Amazon could try to snap up some Homebase stores as its seeks to find warehouse locations in urban areas suitable for “last-mile” deliveries to homes.
Telegraph
Italy’s populist government is drawing up a ‘Marshall Plan’ of up to €80bn to rebuild the country’s dilapidated infrastructure after the Genoa bridge collapse, seizing on the politically-charged disaster to smash EU budget rules.
Britain's pensions watchdog has had to drop 74 fines against fund trustees after messing up its enforcement timetable, it has emerged.
Guardian
British manufacturing output slips to ninth globally behind France.
Elon Musk has said the past year of his professional life has been “excruciating” and that stress over his business had caused his health to deteriorate. To make matters worse, the confession wiped billions off the value of Tesla, the electric car company he founded.