FTSE 100 closes down 74
US stocks under pressure
Pound up on Brexit break-through rumours
FTSE 100 closed sharply lower as traders fretted over trade and Wall Street shares also were under pressure and the pound surged.
Sterling was boosted as it was reported that the British and German governments have got rid of key Brexit demands in a bid to get deal on the table.
The pound added 0.03% against the Euro and was up 0.40% against the US dollar, which usually spells pressure on the constituents of the FTSE 100.
The UK blue-chip index closed down over 74 points at 7,383.
The mid-cap FTSE 250 was down 160 points at 20,388.
On Wall Street at the time of writing, the Dow Jones was up around 11 points, but the S&P 500 was down around 13.
Top laggard was adverting titan WPP (LON:WPP), which lost 4.10% to 1,147.5p, still falling from yesterday as its key North American sales started to decline.
3.30pm: Tech trouble
The FTSE 100 index hit session lows in late afternoon trading as US stocks took a turn for the worse on trade talk worries, with the Nasdaq composite the biggest loser as tech execs prepared to deliver testimony to Congress.
With an hour of trading to go in London, the UK blue chip index was down over 94 points at 7,364, having hit a low for the day of 7,361.81.
On Wall Street, after an early rally, the Dow Jones industrials average was down 55 points, or 0.2% at 25,897 back near opening lows, while the broader S&P 500 index shed 0.5%.
But the tech-laden Nasdaq composite tumbled 1.3% lower as executives from the likes of Facebook Inc. (NASDAQ:FB) and Twitter Inc (NASDAQ:TWTR) gathered on Capitol Hill to give testimony in front of a Senate panel centered on social-media platforms and their vulnerability to hacking and data breaches.
Twitter shares dropped 1.9%, while Facebook lost 1.3%, and Google-parent Alphabet Inc. (NASDAQ:GOOG) – whose executives had declined to take part in the hearings – shed 2.1%
2.45pm: Brexit boost for sterling
The FTSE 100 index tumbled to its worst levels for the day in mid-afternoon trading as the pound jumped higher following rumours which indicated that a Brexit deal could be done,
Around 2.40pm, the UK blue chip index was down 65 points at 7,392, just easing off the session low of 7,380 helped by a much smaller than expected decline in opening trade on Wall Street.
Having started around 50 points lower, the Dow Jones industrials average had pared its losses to just 5 points at 25,947 after a quarter of an hour of trading, although the mood was cautious as US/Canada trade talks news was eyed.
On currency markets, however, sterling 0.8% higher against the US dollar to US$1.2961 and added 0.5% versus the euro to €1.1152.
Neil Wilson, chief market analyst for Markets.com commented: “`“Stop me if you’ve heard this before, but the pound has jumped to session highs on reports that Britain and Germany are ready to drop key Brexit demands, potentially easing a path to a deal before the year end.
“The reports indicate that both sides are prepared to forego ironing out some details on the future relationship now, in order to get a deal done.”
He added: “A couple of health warnings on this: First, Germany does not – despite its clear dominance of the bloc economically - actually speak for the EU position. Michel Barnier may well have something to say about this report. As might Theresa May.
“Second, we’ve heard these kinds of rumours lift the pound before and it should be treated with caution. There is a strong chance that this rally could run out of steam and retrace in fairly short order.
“But," he concluded, “it nevertheless it does still point to a degree of softening in the general tone of talks and that a deal is more likely than not.”
2.20pm: Lift for Ryanair
Ryanair PLC (LON:RYA) got a lift on Wednesday after its pilots based in Ireland voted unanimously to accept a collective agreement deal negotiated by its trade union in a secret ballot.
In a statement on the IALPA union’s website, spokesman Captain Joe May, said: “While our members fully respect Ryanair’s operational model, they no longer accept the company’s highly problematic employment model.”
He added: “After decades of declining terms and conditions, pilots in Ryanair have now firmly found a unified voice.”
Ryanair, Europe’s largest low-cost carrier, suffered its worst ever strikes this summer, but reached agreement on issues including transfers and promotions with the Irish union two weeks ago and said it was hopeful it could secure deals in other markets soon.
In afternoon trading, the airline’s shares – listed in Dublin and London, were 0.8% higher at €13.88.
1.25pm: Russian nationals named
The FTSE 100 index barely stirs as Theresa May’s emergency statement to parliament proves – as reported – to be about national security with the naming of two Russians nationals suspected to be behind the Salisbury nerve agent poisonings earlier this year.
According to the BBC News website, the UK prime minister told the House of Commons that a European Arrest Warrant has been issued, and the government will issue an Interpol red notice to catch those suspected of committing the attack.
To get UK visa, Ruslan Borishov and Alexander Petrov had to submit high grade clear passport photos against a plain white background. So why has HMG issued deliberately foggy photos with dark areas around eyes and murky background, way below accepted for UK visa standard? pic.twitter.com/RDf8MCvmMG
— Craig Murray (@CraigMurrayOrg) 5 September 2018
She also said Russia's lack of co-operation so far suggests "any formal extradition request would be futile".
The statement came in the wake of May’s first Prime Ministers Questions after parliament’s summer recess during which, among a welter of other topics from blood cancer to police cuts, she stressed that there would be no second referendum on Brexit.
Around 1.20pm, the UK blue chip index was 28 points lower at 7,429, holding off the session low of 7,416.50, cautiously awaiting an expected lower restart on Wall Street.
12.15pm: US drop predicted
The FTSE 100 index stayed cautious in lunchtime trading with US markets expected to post sharp falls at the open, bringing declines for a fourth straight-session in New York.
Around 12.15pm, the UK blue chip index was down 29 points at 7,428, just holding off the day’s low of 7,428.
On Wall Street, the Dow Jones looks set for over a 100 point drop with talks between the US and Canada on trade set to resume after last week ending without an agreement.
Craig Erlam, senior market analyst at Oanda commented: “(President) Trump has threatened to tear up the agreement and replace it with a bilateral deal with Mexico is Canada doesn’t agree to the concessions that the US is demanding, which would likely be damaging for both countries should Congress support the decision, but prove to everyone else that he isn’t bluffing.
“That obviously isn’t the desirable outcome but as long as others believe it’s on the table, he may well draw at least some of the concessions he’s looking for.”
The analysts added: “Trump could also announce that the US will impose 25% tariffs on another US$200bn of Chinese imports over the next day or two, a move that has been criticized by many but seen by the President as being necessary to address the deficit problem that has existed for years.
11.30am: Electric cars ahead
UK new car registrations jumped an annual 23.1% year-on-year in August as demand for electric and alternative fuel vehicles soared by nearly 90%, according to a Society of Motor Manufacturers and Traders (SMMT) report.
The SMMT said overall new car sales reached 94,094 units last month with a record one in 12 buyers purchasing an electric model.
UK new car market rises in August as one in 12 buyers goes electric https://t.co/ngDmUozgHt pic.twitter.com/21DvfiWLUX
— SMMT (@SMMT) 5 September 2018
Commentators said the automotive sector will be hoping that August’s growth in sales is a harbinger for robust sales in the key month of September.
Howard Archer, chief economic advisor to the EY ITEM Club, said: “August is traditionally the second quietest month of the year for car sales given that number plates change in September.”
But he added: “Despite August’s jump, new car sales were down 4.2% year-on-year over the first eight months of 2018 at 1,571,986 units.”
The motor industry data added to the brighter picture on the UK economy, painted by Wednesday’s services sector purchasing managers index, helping the pound steady after recent falls.
However, the FTSE 100 index failed to be encouraged, remaining nearly 35 points lower at 7,422 around 11.30am.
11am: What May come?
Traders were also cautious in late morning trading in London after media reports said that UK prime minister Theresa May is to make an emergency statement to parliament on Wednesday.
The Times newspaper said the statement is most likely to be on national security, and Downing Street did not comment on the report, but it still caused some unease.
Will the Prime Minister @theresa_may be commenting on #ToryRacism #ToryIslamophobia today...Will the PM acknowledge their is a culture of racism in the @Conservatives party?...
Will PM support @SayeedaWarsi?@UKLabour ????
— Cathy Higgins.... (@JustMeBeingMe4) 5 September 2018
Around 11am, the FTSE 100 index was down 32 points 7,425, holding off the session low of 7,416.50.
10.15am: Services looking strong
After disappointing purchasing managers reports on the UK manufacturing and construction sectors so far this week, Wednesday’s final August PMI survey proved more upbeat, with the dominant services sector picking up more strongly than expected last month, although Brexit worries are still dampening investment plans and confidence for the year ahead.
The IHS Markit/CIPS PMI increased to 54.3 in August, up from 53.5 in July, beating all forecasts and rising further above the 50-mark that indicates growth.
David Cheetham, chief market analyst at XTB.com commented: “This faster pace of growth for the sector in August keeps the economy on track for growth of 0.4% in the third quarter, but it should be pointed out that increasingly pessimistic business expectations do take the shine off of it a little.”
He added: “The pound has attempted to move off its lowest level in more than a fortnight against the US dollar after sinking back near the US$1.28 handle earlier this morning.
“The lowest level in over a year of US$1.2662 remains around 1% away and but sterling bulls will be hopeful that this positive news can see the market gain traction and recoup some of the losses seen so far this week.”
Sterling’s steadier performance added to the drag on the FTSE 100 index, which was down about 35 points at 7,422 at around 10.15am, just above the session low of 7,416.57.
8.35am: Dull start for Footsie
The FTSE was on the decline again at the outset with miners and defensive stocks leading the retreat.
The FTSE 100 was down 16 points at 7,442, with Anglo American PLC (LON:AAL), down 1.6%, the biggest faller. Sector peers Fresnillo PLC and BHP Billiton PLC were also in the doghouse while defensive stand-bys such as utilities National Grid PLC (LON:NG.) and United Utilities (LON:UU.) and household goods giant Unilever PLC (LON:ULVR) were also getting little love.
The AGM statement from house-builder Berkeley Group Holdings PLC (LON:BKG) went down well, even if the main thrust of the statement was that things have not changed much in the first four months of the current financial year. The shares were up 0.7% in early deals.
Sector peer Barratt Developments PLC (LON:BDEV) was up 0.5% after its full-year results.
READ: Barratt Developments delivers record profits as housing completions hit decade high
“On the face of it, it is difficult to see what more the housebuilders could do in order to fend off the bears,” said Richard Hunter, head of markets at interactive investor.
“Today’s numbers from Barratts will pose further searching questions to detractors of the sector. Revenues are up 4.8%, operating margin continues to improve, the company’s net cash position has risen by 9.3% (potentially providing a buffer to future economic woes which Barratts has not had in the past) and the pre-tax profit number is up over 9%, as previously guided,” he added.
“And yet the naysayers continue to have the upper hand. With interest rates now potentially set on an upward curve and the economic outlook increasingly uncertain as Brexit negotiations falter, the sector is in the firing line. In addition, rising construction costs and the possibility of any government withdrawal in its current quest to reduce the housing shortage in the UK cast long shadows. Any weakness in house prices is being seized upon and despite Barratt’s protestations, these factors are prevalent,” he added.
Berkeley Group: "In essence, this is a market that lacks urgency and London remains constrained by high transaction costs, restrictive income multiple limits on mortgage borrowing and prevailing economic uncertainty, accentuated by Brexit."
— Mike van Dulken (@Accendo_Mike) September 5, 2018
Proactive news headlines:
Data will be presented at a conference that suggests Motif Bio PLC’s (LON:MTFB) next-generation antibiotic has a number of advantages over the current crop of drugs designed to combat infection. A review of the two Phase III studies carried out on iclaprim showed there were fewer adverse events among diabetic patients taking the drug than those on the standard of care, a treatment called Vancomycin.
Haydale Graphene Industries PLC (LON:HAYD) has appointed Keith Broadbent as group chief operating officer to take overall responsibility for global operations. Other boardroom changes see David Banks, previously non-executive chairman, become interim executive chairman while Roger Humm is now senior independent non-executive.
Primary Health Properties PLC (LON:PHP) has acquired three modern, purpose-built primary care centres in the Republic of Ireland.
Kodal Minerals PLC (LON:KOD) has published a first mineral resource for its Bougouni lithium project in Southern Mali. Based on the three most advanced prospects, Bougouni has an inferred 17.3 million tonnes (Mt) at a grade of 1.2% lithium.
Fuel cell firm AFC Energy PLC (LON:AFC) told investors that it has been invited to join the Hydrogen Council, a coalition for hydrogen technologies. AFC will be a new ‘supporting member’ alongside five other members - Mitsubishi Heavy Industries, Re-Fire Technology, Sumitomo Mitsui Banking Corporation, Sumitomo Corporation, and SoCalGas.
W Resources PLC (LON:WRES) has appointed former executives from FTSE 100 miner Rio Tinto PLC (LON:RIO) and Canadian mining firm Lundin Mining Corp to the management team at its La Parrilla tungsten project.
Bluejay Mining PLC (LON:JAY) has hired Dr Bo Møller Stensgaard as general manager to oversee the Dundas project as it is advanced to production. “We are delighted that Bo is joining the team and very much look forward to his contribution to deliver on the critical milestones ahead,” said Roderick McIllree, Bluejay chief executive.
Amphion Innovations PLC (LON:AMP), the developer of medical, life science, and technology businesses has announced the appointment of Stephen Austin as an additional non-executive director effective immediately. Following a career as a corporate lawyer, qualified executive and corporate stockbroker, the group pointed out that Austin is now the chief investment officer of Plumtree Capital Limited, an FCA-authorised corporate finance firm.
Kibo Energy PLC (LON:KIBO), the multi-asset Africa-focused energy company, announced that the company's new rebranded 'Kibo Energy' corporate presentation is now available to view on its website.
645am: FTSE 100 expected to open at around 7,444
London’s downward trend was expected to continue today as concerns remain over Canada’s trade talks with the US.
After giving up 47 points yesterday to close at 7,458, the FTSE 100 was tipped to relinquish another 14 points or so to open at around 7,444.
“The US and Canada are due to restart their collapsed trade talks on Wednesday with the Canadian side bringing in a tougher negotiator to the table to counteract the barrage of threats coming from the US President,” commented Fiona Cincotta at City Index.
“Over the weekend Trump tweeted that if the US doesn’t reach an agreement it considers fair, Canada would be “out” of NAFTA, the trilateral trade agreement which also includes Mexico; however, any such decision would still have to be approved by Congress which is far from given because many politicians believe that a NAFTA agreement that doesn’t include Canada would be detrimental for the US.
“However, if the two sides manage to reach an agreement this week it would provide some relief to the market and dispel worries about how a broken trade deal would affect North American industries,” she added.
US markets were soft on Tuesday, returning from the Labour Day weekend, with the Dow dipping 12 points to close at 25,952 and the S&P 500 sliding 4.8 to 2,896.7.
This morning, Asian markets were following the global trend with Hong Kong’s Hang Seng off 487 at 27,486 and Japan’s Nikkei 225 48 points in the hole at 22,649.
On the home front, attention will be on the house-building sector with statements expected from two of the bigger names in the sector, Berkeley Group and Barratt Developments.
Berkeley’s June trading update hinted of tougher times ahead so investors will be interested to see if the trading update (covering the period from May) contains more hints of that nature.
“Looking forward, we remain concerned that the impact of recognised skills gap in the UK construction workforce may become more pronounced as the UK exits the European Union. While this is hard to predict, it is a fact that over half of London's site labour comes from the EU,” said Rob Perrins, Berkeley’s chief executive.
“This needs to be addressed by a combination of continued access to EU labour, skills training and innovation in construction if the industry is to achieve its medium-term production aspirations,” he maintained.
Deutsche Bank is expecting Barratt Developments PLC (LON:BDEV) to announce full-year profit before tax of £837mln on Wednesday, in-line with the house-builder’s recent guidance of around £835mln.
Barratt has suggested net cash will be around £790mln, but the German bank is expecting it to be a little better than this, at £793mln.
Significant announcements expected on Wednesday:
Trading update: Berkeley Group Holdings PLC (LON:BKG)
Finals: Barratt Developments PLC (LON:BDEV), Haynes Publishing Group PLC (LON:HYNS), Frontier Developments PLC (LON:FDEV)
Interims: Anpario PLC (LON:ANP), Everyman Media Group PLC (LON:EMAN), Frenkel Topping Group PLC (LON:FEN), Gem Diamonds PLC (LON:GEMD), Location Sciences Group PLC (LON:LSAI), Somero Enterprises Inc (LON:SOM)
Traffic numbers: International Airlines Group PLC (LON:IAG)
Economic data: BRC UK shop price index; UK services PMI index; US balance of trade
Around the markets:
- Sterling: US$1.2857, up 0.03 cents
- 10-year gilt: yielding 1.287%
- Gold: US$1,198.50 an ounce, down 60 cents
- Brent crude: US$77.87 a barrel, down 30 cents
- Bitcoin: US$7,367.78, up US$4.80
City headlines:
The Times
TSB will hand its departing boss Paul Pester £1.7 million in pay and bonuses despite a five-month IT disaster at the company.
Pfizer is planning to spend nearly $100 million on measures such as transferring product testing and licences from the UK to other European countries to cope up with Brexit.
The Daily Telegraph
Redrow, one of Britain’s biggest housebuilders, has sought clarity from the Government on its controversial Help to Buy scheme after reports it could be stripped back.
Goldman Sachs has predicted that shares in Tesla will fall by 30% in the next six months as a series of electric car launches from more established car companies will ramp up competition.
Mercedes has launched a new all-electric car in a bid to challenge rival Tesla.
The independent oil and gas company Europa Oil and Gas has been blocked by Environment Minister Michael Gove from drilling for oil in the Surrey Hills after a ten-year battle with protesters.
The Guardian
John Lewis is axing 270 jobs, just as the department store chain changes its name to “John Lewis & Partners” to highlight it is owned by its employees.
The Daily Mail
Sales at the Danish toy maker Lego dropped 5% to £1.7 billion in the six months to June as profits fell 10% to £506.8 million, despite demand for its Jurassic World and Bugatti sports car models.
James Benamor, the founder of ‘legal loan shark’ Amigo, is stepping down from its board amid growing criticism of the company’s methods.
Halfords posted a 2.8% jump in like-for-like sales for the five months to mid-August.