FTSE 100 closes lower
Wall Street shares also in the red
Trump trade tariff uncertainties weigh
BoE governor Carney's length of service under scrutiny
FTSE 100 closed the day in the red as Wall Street shares were also on the slide and WPP (LON:WPP) was top loser on the blue-chip exchange.
Footsie closed down nearly 47 points at 7,457.
Meanwhile, the FTSE 250 shed over 147 at 20,548.
Sentiment seemingly was not improved by the Bank of England governor Mark Carney indicating he was "willing" to stay on past his June 2019 deadline to help steer the economy post Brexit next year.
Fiona Cincotta, market analyst at City Index, said: "Having started the day upbeat, the FTSE proceeded to lose ground following data showing that construction activity in the UK slowed down during the summer to the lowest level in three months.
"The drop was particularly pronounced because construction work spiked in July as developers were catching up on some time lost earlier in the year caused by bad weather but also comes against a backdrop of an overall slowdown in UK manufacturing"
Top laggard on Footsie was advertising behemoth WPP, whose shares tanked 6.27% to 1,196.5p as its key North American sales started to decline.
Although revenue growth was marginally ahead of forecast, the market focused on the advertising and marketing giant’s profit margins.
In other news, tech giant Amazon (NASDAQ:AMZN) became the world's second US$1trn company by market cap.
3.45pm: US business weathering tariff storm
In a flash note to clients, economists at ING said the strong August US ISM manufacturing data suggests that “US business is weathering the protectionist storm for now, reinforcing our view that the Fed will hike rates again in both September and December.”
They added: “With profits accelerating and durable goods orders growth indicating a firm contribution to GDP from investment in 3Q18, the corporate sector is in great shape.
“Moreover, the ISM is at levels historically consistent with GDP growth of around 8%.“
However, despite the upbeat data, US stocks remained weaker but off opening lows in morning trading, with the Dow Jones industrials off 72 points at 25,892 as investors on the trade tariff worries.
Similarly, the FTSE 100 index held off the day’s low but was still down 45 points at 7,458 with three-quarters of an hour of trading to go in London.
3.25pm: US stocks drop
The FTSE 100 index held above session lows in late afternoon trading as US markets took an early tumble on their return from the Labor Day holiday, amid caution over trade tariffs although some upbeat manufacturing data provided a floor.
Around 3.25pm, the UK blue chip index was down about 49 points at 7,458, off the day’s low of 7,47.65, but well below the early peak of 7,535.12.
After almost an hour of trading on Wall Street, the Dow Jones Industrials Average was around 76 points, or 0.3% lower at 25,888, with both the broader S&P 500 index and Nasdaq composite both down around a similar amount.
Investors were wary with tariff talks between the US and Canada are expected to resume on Wednesday after failing to produce an agreement last week, while President Trump is expected to impose a further US$200bn of tariffs on imports from China as soon as a public consultation ends this Thursday.
But some better than expected US data helped stocks come off their early lows, with the Institute for Supply Management’s manufacturing survey rising to 61.3 in August, its highest level since May 2004.
Separately, the IHS Markit reading on August manufacturing came in at 54.7, compared with 55.3 in July. And Construction spending rose 0.1% in July.
2.10pm: Help "smooth" Brexit transition
Mark Carney has said he is willing to stay on as governor of the Bank of England if it will help the government "smooth" the Brexit transition, according to media reports.
In testimony to this afternoon to the Treasury Select Committee, Carney – who is due to step down from the role in June 2019 – confirmed that he has been talking to the chancellor, Philip Hammond about his future, the Guardian Live website reported
Carney hasn't explicitly said he's willing to stay on, but he also hasn't unequivocally ruled out it either. #gbp
— Michael Hewson ???????? (@mhewson_CMC) 4 September 2018
The Bank of Governor said that an announcement on his future would be made soon, and added that he was happy to do whatever he could "to promote a smooth Brexit and an effective transition at the Bank".
It is thought the Treasury would like to allow more time to recruit his successor, amid concern that few candidates would want to take on the role during an unpredictable stage of the Brexit process, the Guardian added.
Carney declined to suggest a shortlist, saying only that there are “many qualified candidates”.
The reports failed to do too much to help sterling, which remained lower against the dollar but was slightly higher against the euro, worried by Brexit talks uncertainties and some disappointing UK PMI data.
Among equities, the FTSE 100 index dropped back to session lows cautiously awaiting the Wall Street open, shedding 58 points at 7,466.
12.15pm: Carney comments awaited
On currency markets, sterling fell to a one-week low versus the dollar on Tuesday weighed by Brexit talks uncertainties and questions over the future leadership of the Bank of England.
The pound fell sharply on Monday after European Union chief Brexit negotiator, Michel Barnier, and former UK foreign secretary Boris Johnson both criticised prime minister Theresa May’s latest proposals for Brexit.
Investor's attention this afternoon, however, will shift to the question of whether Bank of England governor Mark Carney will stay on at the helm of the UK central bank beyond the summer of next year.
Mark Carney to “reveal” if he’s to remain at the helm of our central bank? That sums up so much that’s rotten with our political system. It’s not for public servants on mega salaries to decide if they hold office
— Douglas Carswell (@DouglasCarswell) 3 September 2018
Carney will testify to the Treasury Select Committee and is expected to address speculation that he will agree to extend his tenure beyond a previously agreed departure date of next June.
Craig Erlam, senior market analyst at Oanda commented: “It will be interesting to see whether Carney chooses to entertain questions on these negotiations or instead brushes them off for another day.
“He hasn’t been the most popular of Governor’s, primarily among Brexiteers, who are still angry about his predictions on the economy prior to the referendum in the event of a vote to leave.
“You have to wonder why Carney would choose to remain in the hot seat given the hand he’s been given and the constant criticism he’s received. Perhaps this is one reason why efforts are being made to retain him for now, it can’t be one of the most sought after jobs at the minute.”
Despite sterling’s fresh falls, the FTSE 100 index remained weak as well, down 33 points at 7,469 – the session low.
11.40am: Footsie declines pick-up
The FTSE 100 index dropped back to its lows for the day in late morning trading amid expectations that the US restart today following Monday’s US Labor Day holiday break will be cautious amid revived trade war tensions.
Around 11.40am, the UK blue chip index was about 20 points lower at 7,484, just above the session low of 7,482.92, having reversed from an early peak of 7,535.12.
James Hughes, chief market analyst at AxiTrader said: “Wall Street futures rallied in after-hours trade on Friday, but it has perhaps been no surprise that we’ve seen little direction since, given yesterday’s market holiday.
“Investors are focusing very much on US trade talks and with the Trump administration having missed a deadline at the end of last week to come up with a new version of NAFTA, the resumption of these negotiations will be very much in focus. That isn’t set to kick off until Wednesday however, which could keep traders side-lined in the short term.”
He added: “We do have the ISM manufacturing index due for release shortly after the opening bell and the forward-looking qualities of this print could provide some fresh direction in the interim. A modest month on month decline is forecast, but given the backdrop of impressive economic performance, this is unlikely to be much cause for concern.”
10.15am: Construction time again
After Monday’s weak UK manufacturing purchasing managers index (PMI), the latest PMI for the construction industry also showed a slowing in August, albeit after reaching a two-year high the month before, painting a gloomy picture of the UK economy.
The IHS Markit/CIPS construction PMI dropped to a three-month low of 52.9 last month, below economists forecasts, down from July’s 14-month peak of 55.8, but still holding above the crucial 50.0 level which separates contraction from expansion. The latest reading signalled a moderate overall rise in construction output, with the rate of expansion the weakest since May.
August #UK #construction #PMI shows activity disappointingly slowing to 3-month low from July 14-month high (PMI down to 52.9 from 55.8). Slowdown in #house building growth while civil engineering contracted. Commercial building activity strongest. New orders growth slowed
— Howard Archer (@HowardArcherUK) 4 September 2018
Tim Moore, associate director at IHS Markit and the report’s author commented: “The construction sector slipped back into a slower growth phase in August, with this summer’s catch-up effect starting to unwind after projects were delayed by adverse weather at the start of 2018.”
He added: ““The sector is hovering too close for comfort to the no change mark which makes it a contender for more disappointment next month.
“Though the path to Brexit is paved with good intentions, without significant progress the sector will soon be building castles in the air rather than on solid ground.”
Worries over Brexit and the weak data continued to weigh on the pound, which shed another 0.3% versus the US dollar to US$1.2830, although sterling managed to rally 0.1% higher against the euro to €1.1094.
Among equities, after strong gains on Monday thanks to sterling’s demise, the FTSE 100 beat a modest retreat today, losing about 6.5 points at 7,498 around 10.15am.
8.45am: Lacklustre start
The FTSE 100 got off to a lacklustre start amid fears of a ramping up of trade hostilities between the US and the rest of the world – though China, rather than Canada, was in the Trump cross-hairs Tuesday.
With the index of blue-chip shares up just 7 points at 7,511.44, the other hardy perennial, Brexit, looks likely to continue to shape the destiny of the pound, rather than the domestic stock market.
A diversion for those bored with both is likely to come in the form of the Treasury Select Committee later, which, under normal circumstances, would pick over the bones of the Bank of England’s hike to lending costs last month.
“Unfortunately, most attention is likely to be centred on speculation around the prospect of whether Mark Carney will extend his tenure as Bank of England governor beyond the summer of next year,” said Michael Hewson of CMC Markets.
On the markets the big mover was WPP (LON:WPP), where new boss Mark Read appears to have his work cut out.
While revenue growth was marginally ahead of forecast, the market focused on the advertising and marketing giant’s profit margins, which didn’t pass muster. The stock fell 4.5% in early trade.
Another results-driven story was Redrow (LON:RDW), whose numbers were in line with forecasts, prompting a 1.9% rise in the share price.
Earmarked for relegation from the FTSE 250, is bike and camping retailer Halfords (LON:HFD) going to stage a remarkable escape? Certainly a 6% surge in the share price will help the cause.
Proactive news headlines:
European Metals Holdings Limited (LON:EMH) has commenced work on an update of the preliminary feasibility study for the Cinovec lithium and tin project in The Czech Republic. This study will model the production of higher value lithium hydroxide, the use of which is increasing in lithium ion batteries.
Regency Mines Plc’s (LON:RGM) 47%-owned associate Mining Equity Trust (MET) has forecast revenues of US$30.5mln for the ten months to June next year. MET has just resumed metallurgical coal production at Cedar Bluff in the Central Appalachian region in Virginia.
OptiBiotix Health plc (AIM: OPTI) has licensed out its cholesterol-lowering bacteria to an unnamed US company, which plans to use it to create a high-value pharmaceutical drug. Financial details of the deal weren’t disclosed; however, Optibiotix said it would receive a six figure payment on the official signing of the agreement and two ‘milestone’ awards totalling seven figures.
KEFI Minerals plc (LON:KEFI) has received key development and financing policy approvals for the Tulu Kapi gold project from the Ethiopian government. Approval at the project level was received back in 2015, so these latest approvals almost complete the permitting process for Tulu Kapi.
BlueRock Diamonds PLC (LON:BRD) said kimberlite processing has begun from its KV1 pipe at the Kareevlei diamond mine in South Africa.
Redx Pharma Plc (LON:REDX) has confirmed it will restart a phase I/IIa clinical trial of its lead cancer drug in the first half of next year – but at a much reduced dose. It follows what it described as a “positive” meeting with the Medicines and Healthcare products Regulatory Agency, the drugs watchdog.
Taptica International Ltd (LON:TAP) has reported a jump in both income and profits in its half-year results as its newly acquired Tremor Video division boosted its earnings.
Internet of Things (IoT) enabler Telit Communications Plc (LON:TCM) has had a chequered past but said today its turnaround plan is on course with a return to double-digit top-line growth.
Europa Oil & Gas Holdings Plc (LON:EOG) has suffered a new disappointment in its efforts to test the Holmwood prospect, in Surrey, onshore UK. The company, in a statement, told investors that the authorities have decided not to renew the lease for the proposed operations site at Bury Hill Wood, Coldharbour Lane. It said it was informed by the Head of Estates at the Forestry Commission, who relayed the decision made by the Minister for the Environment, Food and Rural Affairs.
Union Jack Oil PLC (LON:UJO) chairman David Bramhill has downplayed the potential impact of the new planning disappoint for the Holmwood project. Bramhill said: "The potential consequences of the Minister's decision are minimal for Union Jack as it holds a balanced portfolio of ten attractive onshore licence interests in the UK, including producing assets at Keddington and Fiskerton, a development project at Wressle and a planned well at Biscathorpe to be drilled during October/November 2018."
Wealth management group European Wealth Group Limited (LON:EWG) saw further growth in funds under management and administration (FUMA) in the first half of 2018. EWG changing its name to Kingswood Holdings today.
The chief executive of Arix Bioscience Plc (LON:ARIX) is to step aside and move into a new role as part of a reshuffle of the life sciences investor’s executive management team. Joe Anderson has served as Arix’s CEO since its inception back in 2016 but will transition into his new role as chief investment officer where he will focus on new investments and work with existing group companies to build and realise value.
Mosman Oil And Gas Limited (LON:MSMN) told investors that production rates at the Welch project, in the permian basin, continue to increase. The company, in a statement, said that following well workovers in June the average gross production before royalties was reported to have increased to around 44 barrels of oil per day.
The latest batch of assay results from the A4 Dome in Botswana, held in joint venture by Metal Tiger PLC (LON:MTR) and MOD Resources Ltd (ASX:MOD), has confirmed further copper intersection. This mineralisation is just eight kilometres from the T3 project, which already boasts a sizeable resource.
Chaarat Gold Holdings Ltd (LON:CGH) has significantly increased the resource estimate for its Tulkubash oxide gold deposit in the Kyrgyz Republic.
Forestry and timber group Obtala Ltd (LON:OBT) posted a substantial rise in half year revenues as its Gabon-based sawmill ramped up production. Sales in the six months to June were US$6.6mln (US$149,000) with a US$1.15mln swing to gross profits of US$347,000.
Braveheart Investment Group PLC (LON:BRH) announced that, further to its announcement dated 21 August 2018, GyroMetric’s shareholders have approved the exchange of part of Braveheart's holding in GyroMetric Systems Limited in return for the issue of ordinary shares in Strat Aero PLC (LON:AERO). Accordingly, Braveheart added, the consideration of £273,600 will be satisfied by the issue of 23,791,304 new shares in Strat Aero.
Savannah Resources Plc (LON:SAV), the AIM quoted resource development company has announced that it has successfully applied for a secondary listing of the company's ordinary shares on the Quotation Board Segment of the Open Market of the Frankfurt Stock Exchange, commencing at 9am CET, 4 September 2018.
6.45am: Lower start predicted
The FTSE 100 index is expected to start lower on Tuesday, reversing some of Monday’s gains as Asian markets declined overnight amind US/China trade war worries and lacking any lead from Wall Street, which was closed for the Labor Day holiday.
Asian markets were cautious today, with Japan’s Nikkei 225 index down 0.1% as traders expect US President Donald Trump to impose a further US$200bn of tariffs on imports from China as soon as a public consultation ends this Thursday.
Emerging markets were also unsettled by worries over Argentina where a debt crisis has caused a slide in the peso leading to the imposition of new taxes on exports and steep cuts to government spending.
Spread betting firm IG expects the UK blue chip index to open around 7 points lower at 7,497 having jumped 72 points on Monday boosted mainly by a weaker pound, although the expected losses were limited by strength in US stock futures indicating Wall Street will return from Monday’s holiday in positive fashion.
On currency markets, sterling remained lower against both the dollar and the euro on Brexit worries and after a weak UK manufacturing purchasing managers index (PMI) on Monday.
The August UK construction PMI survey is due for release today and traders will be hoping that provides better reading, especially as a survey released overnight by the British Retail Consortium was pretty lacklustre.
The BRC report said retailers reported a 1.3% rise in consumer spending in August, the lowest level since November last year aside from a dip in April due to the timing of Easter.
However, by contrast, a report on consumer spending from credit card provider Barclaycard showed a 4.5% rise in August boosted by an 11.9% year-on-year jump in spending at pubs as the hot Summer weather encouraged drinkers.
Housebuilders in focus
The construction sector will also be a focus on the corporate diary on Tuesday as the first of this week’s glut of updates from UK housebuilders lands.
FTSE 250-listed Redrow plc’s (LON:RDW) full year results will mainly be eyed for the group’s forward guidance.
Redrow’s completions are expected to be up 6.2% to 5,650 units and the average selling price up 5% at £325,000, resulting in revenue of £1.86bn, up 12% year-on-year.
In a preview, analysts at Deutsche Bank said: “Markets will keenly follow comments on current trading and order books to gauge market stability.”
They added: “Given the healthy order book position, we believe FY19 assumptions should be well supported with the group nearly 50% forward sold for FY19 private sales.”
New boss the focus for WPP
The main corporate attention, however, will be on advertising giant WPP PLC (LON:WPP) which reports its half-year results a day after announcing the appointment of joint chief operating officer Mark Read as its new chief executive officer.
Read, who started with immediate effect on Monday, replaces WPP’s founder Martin Sorrell, who stepped down in April after 33 years at the helm following an internal investigation into claims of personal misconduct.
Investors will be keen to hear from WPP's new boss and any plans he may have for the company when the interims are released.
As for the financials, analysts at Deutsche Bank expect a strong set of results: “Coming at the end of a quarter where the ad agency sector has delivered volatile organic growth, we think WPP will report a solid, unspectacular set of results, with broadly flat organic growth.
“If anything, the risk is to the upside with comps easing 250 bps vs. 1Q." the bank added.
Significant announcements due on Tuesday September 4:
Interims: WPP PLC (LON:WPP), Alfa Financial Software Holdings PLC (LON:ALFA), Boku Inc (LON:BOKU), Cairn Homes PLC (LON:CRN), Dalata Hotel Group Plc (LON:DAL), European Wealth Group Limited (LON:EWG), Filta Group Holdings PLC (LON:FLTA), Gulf Marine Services PLC (LON:GMS), Inspired Energy plc (LON:INSE), Johnson Service Group plc (LON:JSG), Lighthouse Group PLC (LON:LGT), Michelmersh Brick Holdings Plc (LON:MBH), Porta Communications PLC(LON:PTCM), Taptica International PLC (LON:TAP), Telit Communications Plc (LON:TCM)
Finals: Redrow plc (LON:RDW), Craneware PLC (LON:CRW), A&J Mucklow Group PLC (LON:MKLW), Mattioli Woods plc (LON:MTW)
Trading update: DS Smith PLC (LON:SMDS)
Traffic numbers: Wizz Air PLC (LON:WIZZ)
Economic data: UK construction PMI index; US ISM manufacturing report; US manufacturing PMI index; US construction spending index
Around the markets:
- Sterling: US$1.2861, down 0.1%
- Gold: US$1,200.50, an ounce, up 0.02%
- Brent crude: US$70.04 a barrel, up 0.3%
City Headlines:
- UK retailers report lacklustre sales as shoppers head to the pub - Reuters
- Mark Read, WPP's new boss, has insisted he has no plans to break up the advertising conglomerate or cut staff as he formally steps into the job left vacant by Sir Martin Sorrell's shock exit – Daily Telegraph
- TSB was again mired in difficulties with its computer systems, with some customers unable to access their online accounts over the past few days – The Times
- Hedge fund Kreos Capital, which lent Wonga about £34mln two years ago and is understood to be still owed around £10mln by the payday loan company, is at the front of the queue to be paid by collapsed Wonga – Daily Mail
- Shares in Casino continued to plunge on Monday after S&P cut the French supermarket group’s credit rating further into junk territory – Financial Times
- Jacobs Holding has agreed to acquire private schools group Cognita for £2bn from Bregal Investments and KKR – Financial Times
- ING settles money laundering case with Dutch prosecutors for US$900mln - Reuters
- Russian bank VTB has sold its US unit VTB Capital Inc to the subsidiary’s management and will operate as Xtellus Capital – Financial Times
- The FTSE 100 is expected to remain unchanged in its quarterly reshuffle for the first time in more than a decade in a sign of relative stability in the market. – Financial Times
- The UK risks losing more than £3bn in tax on North Sea oil and gasfields if it moves ahead with plans to woo buyers for the basin's assets, according to research by a former top executive at Chevron – Financial Times
- Argentina's president unveiled new austerity measures to woo international investors and bailout lenders, admitting the country faced an "emergency" after the peso's collapse. – Financial Times
- China has strengthened its grip on Africa by pledging US$60bn in loans and investments in the continent – The Times