FTSE 100 closes firmly lower
Barnier comments send sterling soaring
Brent crude rises as Iranian oil exports pressured by US sanctions
Royal Mail delivers big share loss
FTSE 100 closed firmly in the red on Wednesday as the pound soared after what were seen as positive comments over Brexit from the EU's chief negotiator.
The UK index of leading shares, dominated by US dollar earning giants, is usually weighed down by a surge in sterling.
Michel Barnier said that the bloc was willing to offer the UK a Brexit deal, unlike that made for any other country.
The pound rose 1.04% against the Euro and was up 1.07% against the greenback.
But UK government sources were less upbeat, saying they would look into the comments but suggested Barnier had made similar remarks before.
FTSE 100 closed down 54 points, or 0.71%, to 7,563, while FTSE 250 shed over 112 at 20,736.
The biggest loser on Footsie was postal group Royal Mail Group (LON:RMG), which sank 3.19% to 464.30p but big miners also weighed.
Logistics group Bunzl PLC (LON:BNZL) was the top gainer, up 2.88% to 2,392p, following yesterday's news of the acquisition of Norwegian firm Enor AS as it reported a 4% increase in pre-tax profit for the first half.
3.45pm: Barnier comments on Brexit trade deal trigger sterling rally
The pound rallied 0.7% to US$1.2965 against the dollar in late-afternoon deals as comment by the EU’s chief negotiator, Michel Barnier, commented that the bloc was prepared to offer a partnership with Britain that has not been seen with any other country.
Connor Campbell, financial analyst at Spreadex, commented the bullish sentiment implied by the comment had been “in short supply of late” and had had a “hugely rejuvenating” effect on the currency.
However, the news was not so good for the FTSE 100, which was pushed further into the red, down 68 points at 7,548, as investors moved away from equities.
3.30pm: Oil ticks upwards amid fall in Iranian exports
Brent crude prices have risen 0.6% to US$76.39 a barrel in late afternoon trading as news of lower Iranian oil exports drove concerns over tighter supplies.
Crude oil and condensate exports from the Islamic Republic in August are set to fall below 70mln barrels for the first time since April last year as buyers were deterred by fresh rounds of US sanctions that expected to come into force on 4 November.
This news adds pressure to the oil market that is likely to drive up prices further as key oil exporters such as Venezuela and Iran suffer instability while global petroleum cartel OPEC has reported a high compliance rate in production cuts from many of its members.
The FTSE 100 meanwhile posted increased losses and was down 58 points at 7,559.
2.40pm: Wall Street sees mixed open as markets remain broadly flat
The US markets posted a mixed open shortly after the bell on Wednesday morning, although there were tentative gains following the upward revision on the US’s second quarter GDP.
The Dow Jones Industrial Average was down 19 points at 26,044 shortly after the open, while the S&P 500 was up 2.7 points at 2,900 and the Nasdaq was up 17 points at 8.047.
Investors will be keeping an eye out for any fireworks from the renewed trade talks between the US and Canada, which could potentially spark another rally similar to the one seen following the deal between the US and Mexico earlier this week.
Meanwhile, the FTSE 100 was down 23 points at 7,593.
1.50pm: US second quarter GDP stands slightly above forecasts at 4.2%
The US’s gross domestic product (GDP) for the second quarter has come in slightly above analyst forecasts at 4.2%.
Breaking: US Q2 GDP 4.2% vs 4.0% expected
— K. Tulipan (@KlausTulipan) 29 August 2018
Most had been expecting an increase of around 4%, which while a downward revision still represented a strong showing for the economy in the period.
1.30pm: US expected to open flat as traders see little incentive to push higher
Wall Street is expecting to open with little change on Wednesday as investors fail to find new reasons to push shares higher than earlier advances.
However, there could be some movement if there is any unexpected news from the US’s second quarter GDP reading, which is forecast to come in around 4%.
There is also a report on pending home sales for July due slightly later in the day, which could turn around investor caution that has pervaded the sector lately after home sales hit a fresh low the same month.
In London, the FTSE 100 had narrowed its losses, and was down 25 points at 7,591
11.45am: Dull FTSE 100 session turns red into lunchtime
What was shaping up to be a fairly dull day for the FTSE 100 turned into a sizeable drop as the morning ended, with the index hovering around a 50 point loss as lunchtime approached.
Fears of a stronger dollar, as well as weakness in several blue-chip mining stocks, caused the index to slide into the red after a set of promising gains in early deals that have since reversed.
Meanwhile, Craig Erlam, senior market analyst at OANDA, commented that the notable release of the US’s second quarter GDP will be likely to turn heads in what is a relatively quiet week, with traders looking for any deviation in the forecasted 4% growth figure, which despite beign revised lower would “still represent a very strong quarter for the world’s largest economy”.
Toward the end of the morning, the FTSE 100 was down 51 points at 7,565.
11.00am: Pound in the doldrums ahead of speech by Brexit secretary
Sterling has once again seen weakness ahead of a rare mid-recess speech by the Brexit secretary Dominic Rabb.
The currency is currently hovering around US$1.288 against the dollar, having recovered slightly from a drop to US$1.284 earlier this morning, its lowest level since Monday.
Sterling has been struggling this week following comments by prime minister Theresa May that a no-deal Brexit would not be “the end of the world”, raising concerns that the prospect of the UK leaving the EU without a deal next year is now more likely.
The comments have also been seen as undermining forecasts from UK chancellor Philip Hammond, who warned that no deal could blow an £80bn hole in the public finances.
The FTSE 100 was down 40 points at 7,576.
10.30am: Global equities going backwards as optimism over trade fizzles out
The FTSE 100 is continuing its backwards slide as global equities lose their enthusiasm following the US-Mexico trade news that bolstered a rally at the start of the week.
Lukman Otunuga, research analyst at FXTM, said that the initial euphoria over the deal has been overshadowed by growing concerns that trade relations between the US and China could deteriorate further, a much more pressing issue.
He added that the prospect of another US$200bn in tariffs on Chinese goods has impacted risk sentiment, particularly in the Asian markets.
These thoughts were echoed by David Madden, market analysts at CMC Markets UK, who commented that despite the US Mexico news, investors haven’t been given another reason to buy into the market, with most likely waiting for the US’s second quarter GDP reading due this afternoon.
9.55am: FTSE 100 pulled down by miners while action unfolds in the FTSE 250 as Diploma CEO steps down
Despite a relatively promising start to the day, the FTSE 100 has reversed its early gains and has dipped into the red, pulled down by lacklustre performances across several mining stocks such as Anglo American PLC (LON:AAL), Antofagasta PLC (LON:ANTO), and BHP Billiton (LON:BLT), which fell 1.2% to 1,606p, 1.2% to 837p, and 0.6% to 1,697p respectively in early deals.
However, there was some drama in the lower rung of the FTSE 250, with the chief executive of technical products supplier Diploma PLC (LON:DPLM) stepping down with immediate effect for what the board said was “the best interests of the company”.
Despite the resignation, the firm's shares performed well in early trading, up 2.9% at 1,405p, as a solid trading statement led broker Numis to lift its target price to 1,355p from 1,275p.
The FTSE 100 was down 15 points at 7,601.
9.10am: Modest progress
When utility companies dominate at the top of the Footsie leader-board, you know it is set to be a dull day.
The FTSE 100 was up 18 points at 7,635, with legacy software giant Micro Focus International PLC (LON:MCRO) leading the way, up 3.6%, after kicking off its share buy-back programme with an initial tranche of US$200mln.
Logistics giant Bunzl PLC (LON:BNZL) was the next best blue-chip performer, up 3.5%, as brokers chew over yesterday’s interims.
After that come the sexy utility companies, with United Utilities (LON:UU.), Centrica PLC (LON:CNA) and Severn Trent PLC (LON:SVT) up by between 1.8% and 3.4% helped by a bullish note from Citigroup.
Miners are out of favour but Randgold Resources PLC (LON:RRS) got a lift from UBS, which has upgraded the stock. Randgold shares rose 1% to 5,194p.
Proactive news headlines:
Strategic Minerals Plc (LON:SML) has received approval from the South Australian government following two submissions relating to a program for environment protection and rehabilitation at the Leigh Creek copper project. The approvals cover the Mountain of Light processing facility, as well as the Paltridge North and Lynda deposits.
Xtract Resources PLC (LON:XTR) has updated on its hard rock collaboration agreement with Omnia Mining Ltd at Xtract’s Manica mining concession in Mozambique. The AIM-listed miner said that to date 12 potential mining sites had been identified within 15 kilometres of Omnia’s plant, with eight of the potential mining sites already within the existing license areas.
Galantas Gold Corp (CVE:GAL, LON:GAL) has announced assays of 12.8 grams per tonne (g/t) gold from the Kearney vein at its Omagh gold mine.
Seeing Machines Limited’s (LON:SEE) Guardian driver monitoring system (DMS) has covered a total of over 1bn kilometres since its launch in 2016.
Touchstone Exploration Inc (LON:TXP, TSE:TXP) told investors that it expects no impact to its crude sales as a result of proposed changes at Petrotrin (Petroleum Company of Trinidad and Tobago Limited). In October, it is planned that Petrotrin will phase out refinery operations in Trinidad and instead will export crude into the international oil market.
Cradle Arc Plc (LON:CRA) has cut its 2018 production guidance for its 60%-owned Mowana Copper Mine in Botswana after some operational setbacks during the third-quarter, but expects to ramp-up to full steady state production during the fourth quarter. The African focused base and precious metals exploration and production company also announced the proposed appointment of Roy Pitchford, as its non-executive chairman.
Aminex plc (LON:AEX) has announced it has kicked off remediation work for the Kiliwani North well. The work, to tackle rising pressure in the well, will initially see the company repair a faulty valve which will allow gas to flow, and will also enable the evaluation of operational parameters of both the reservoir and gas processing facility. Big Pic in August.
Solo Oil PLC (LON:SOLO) said it is ‘pleased’ with today’s Tanzania update by partner Aminex plc (LON:AEX). Aminex told investors that it has kicked off remediation work for the Kiliwani North well.
88 Energy Ltd (LON:88E) has signed a rig contract for the drilling of the Winx Prospect, located on the Western Blocks, North Slope of Alaska. The Winx-1 well will target the Nanushuk play fairway where 3D seismic studies defined an oil prospect which has a prospective resource of 400mln barrels of oil (MMbbls).
Rare earths project developer Mkango Resources Ltd (LON:MKA) has re-jigged its board with the appointment of three new non-executive directors while two are stepping down. The three non-execs joining are finance and investor relations experts.
Asiamet Resources Limited (LON:ARS) said it has successfully intersected strong copper mineralisation at a depth well beyond the 2014 resource envelope at the easterly extensions of the Beutong West Porphyry (BWP) in Indonesia.
Canadian copper miner Rambler Metal & Mining PLC (LON:RMM) saw an improved second quarter as copper and gold grades improved and more ore was processed. Revenues rose by 31% to US$8.1mln in the three months to June, while losses were reduced to US$4.5mln from US$6.1mln.
Anglo Asian Mining Plc (LON:AAZ) has cleared a regulatory hurdle which will allow the gold, copper and silver miner to start paying a dividend. At June’s annual general meeting, chief executive Reza Vaziri said the board was considering paying a maiden dividend.
IronRidge Resources Limited (LON:IRR) announced that it will be attending the Africa Down Under Conference in Perth, Australia, which takes place between 29 August 2018 and 31 August 2018 at The Pan Pacific Perth Hotel, 207 Adelaide Terrace, Perth, WA 6000. The company has also uploaded its updated corporate presentation to the Investor Relations section of its website.
UK commercial real estate investment firm Custodian REIT (LSE: CREI) has raised £1.2mln in a share placing. The company said it issued one million new ordinary shares at 120p each to meet investor demand.
Range Resources Ltd (LON:RRL) has told investors that the announced changes to the refining policy of Trinidad’s state oil firm is not expected to have any impact on the company’s operations.
6.50am: Stocks set to open modestly firmer
Monday’s trade deal between the US and Mexico is still having a halo effect on global stock markets.
After rising 40 points on Tuesday to close at 7,617, the FTSE 100 was expected to open at around 7,540 on Tuesday following a moderately positive showing yesterday on US markets.
Across the pond, the Dow Jones edged up 14 points to 26,064 and the S&P 500 rose 0.8 to close at 2,897.5.
“The new US-Mexico agreement is part of Donald Trump’s bigger campaign promise to renegotiate NAFTA, a deal signed during the Clinton administration 25 years ago. Trump has introduced trade tariffs on imports of steel and aluminium from both Canada and Mexico this year and Mexico retaliated with tariffs on imports of US agricultural products which ended up hurting American farmers,” noted Fiona Cincotta, a senior market analyst at City Index.
“The second leg of the NAFTA negotiations, the deal between Canada and the US is starting off on an acrimonious note as Canadian negotiators have been excluded from NAFTA talks since the G7 summit in July when Donald Trump and Canada’s Prime Minister Justin Trudeau ended up in a war of words.
“This week will make clear if the trade tariffs are just a form of threat used as a precursor to the Canada trade talks or if they were really put in place to protect the US metals industry. In the best case scenario a deal could be reached before the end of the week. If that fails the US has already threatened to put tariffs on Canadian car imports and will most likely not stop there,” she opined.
Asian markets broadly positive
Heading into the close on Wednesday, Asian markets were mostly firmer, although the Shanghai Composite was 9 points in the red at 2,769.
Hong Kong’s Hang Seng index was up a couple of points at 28,354 while in Tokyo, the Nikkei 225 was up 40 at 22,853.
Back home, the corporate calendar continues to tail off as we head into autumn. Today’s big names due to report include Petrofac and Diploma.
When Petrofac issues its interims, the spotlight will likely be on sales, cash flow and debt reduction.
The rising oil price is looking healthier but having been on the back foot for so long in the wake of the slowdown in recent years the company has catching up to do.
Amid the sector recovery, expectations are now somewhat higher in terms of contract wins and the work pipeline and the focus is also on the firm’s indebtedness.
Last Friday’s US$292mln deal to sell out of the Greater Stella development in the North Sea represented what chief executive Ayman Asfari described as “a further milestone in the journey back to a capital-light business.”
US investment bank Jefferies is looking for the company to deliver US$3.5bn of new Lump-Sum E&C awards 2018, and it is only just over halfway there with two-thirds of the year gone.
Investors in FTSE 250 technical products maker Diploma will have acquisitions on their minds.
The trading update comes hot on the heels of the firm’s acquisition of cabling company FS Cable on 22 August, with chief executive Richard Ingram saying in Diploma’s half-year results in May that the group planned to make several purchases before the end of the year.
As FS Cable is the first acquisition to be announced so far since the interims, any inkling of another impending acquisition will turn heads.
Significant announcements expected on Wednesday:
Interims: Petrofac PLC (LON:PFC), IQE plc (LON:IQE), The Gym Group (LON:GYM)
Trading update: Diploma PLC (LON:DLPM)
Economic data: Nationwide UK house prices; US retail sales; US industrial production; Empire State manufacturing survey
Around the markets:
- Sterling: US$1.2858, down 0.14 cents
- 10-year gilt: yielding 1.307%
- Gold: US$1,209.70 an ounce, down US$4.80
- Brent crude: US$75.43 a barrel, up 70 cents
- Bitcoin: US$7,046;87, down US$34.64
City headlines:
The Daily Telegraph
Sports Direct has warned that it would be the fault of “greedy landlords” if hundreds of retail jobs are lost as a result of looming closures House of Fraser stores.
The Bank of England Governor Mark Carney, who was due to leave in June 2019, has been urged by the Government to stay on for an extra year in order to help calm Brexit nerves in the City.
Distribution group Bunzl has posted 5% rise in revenue at £4.3 billion despite currency movements.
Shop prices rose 0.1% in August compared with a year earlier, the British Retail Consortium said, as the prices moved into inflationary territory for the first time in five years due to hot summer.
The Guardian
Aston Martin is expected to announce on Wednesday plans for a London listing, potentially valuing the sports car brand at about £5 billion.
Receding fears of a global trade war lifted the stock markets worldwide to a six-month high yesterday after Donald Trump announced a US-Mexico trade deal.
The Times
Some of the technology industry’s most respected investors, such as, Accel, Balderton Capital and Greylock Partners, stand to lose tens of millions of pounds if Wonga fails.
Daily Mail
Tiffany’s sold £850 million of stock worldwide in the three months to 31 July, up 12% on a year earlier, beating analysts’ forecasts as the jeweller's bid to lure younger customers boosted sales.
Countrywide shares fell 10.7% to hit all-time lows; investors threw the crisis-hit estate agent a £140 million lifeline.
Scandal hit Taylor Wimpey suffered a blow after Barclays refused to offer mortgages at a flagship development because of fears over leaseholds.
Elon Musk’s aborted plan to take Tesla private has damaged the electric car firm’s credibility and distracted it during a critical time, Wall Street analysts have warned.