FTSE 100 closes down 92
US-China trade war back in focus
Steling bounces
Ocado is Footsie's biggest laggard
FTSE 100 closed fairly deep in the red on Thursday as the bounce in sterling weighed on the blue-chip index.
The Footsie closed down nearly 92 points at 7,418, while the other major European benchmarks were also lower.
Meanwhile, FTSE 250 was also lower - off 211 points at 20,088.
"A broad based sell-off is sweeping across Europe as traders are worried about emerging market (EM) economies," said David Madden at CMC Markets.
"The prospect of four rate hikes from the Federal Reserve in the next 12 months, is driving up US government bond yields.
"Traders are worried that EM counties will be hit by higher borrowing costs, and in turn it could damage their economies. The Indian rupee has reached another record low, and the Turkish lira is weaker too as investors are fearful we could be heading for an EM crisis."
In the currency markets, the pound is up 0.27% to 1.1308 against the Euro and up 0.48% against the US dollar at 1.3014.
The biggest laggard on Footsie was supermarket retailer Ocado Group (LON:OCDO), which dropped 7.78% to stand at 843.80p.
3.30pm: All going against the blue-chips
The FTSE 100 has extended falls and is now down 94.1 points, or 1.3%, at 7,417.7.
It has been the perfect storm for the index, with trade war worries, rising US Treasury yields and falling oil prices all contributing to its downfall.
On top of that, the pound is up against the dollar, making overseas earnings worth less when translated back into sterling and making exporters’ products more expensive to foreign buyers.
Online grocery delivery company Ocado Group PLC (LON:OCDO) is now leading the blue-chip fallers, down 5.4% at 865p. It is closely followed by luxury fashion house Burberry PLC (LON:BRBY), down 5% at £19.25.
Barclays PLC (LON:BARC) is the biggest riser, up 1.4% at 174.9p.
Clothes retailer Ted Baker is leading the FTSE 250's fallers, down 9.1% at £20.97 following a fall in interim pre-tax profits.
Mining group Ferrexpo is the top riser, up 8.35% at 227.1p, on the back of a bullish ‘buy’ note from analysts at Barclays
Overall, the FTSE 250 is down 1.0% at 20,094.9.
3pm: Trade war fears and rate hike potential weigh on US stocks
US stocks traded lower on Thursday as investors’ demand for equities was constrained by rising government bond yields and mounting trade war fears.
An abrupt sell-off in government bonds made its way around the world, with the yield on ten-year US Treasuries spiking above 3.2% after better-than-expected US jobs data on Wednesday pushed up expectations of further interest rate rises.
Early in the session, the Dow Jones Industrial Average index shed 108 points to 26,719, held back by Procter & Gamble, an interest-rate sensitive stock, as well as Nike, Home Depot, Cisco Systems and Visa.
The S&P 500, meanwhile, lost 11 points to 2,914, pushed down by Coty Inc, Estee Lauder Companies, Ralph Lauren, Gap and Western Digital Corp.
Selling over at the tech-laden Nasdaq was also relatively heavy, with the index dropping 68 points to 7,956.
2.20pm: Aston Martin and Funding Circle still struggling
Two of London’s latest IPOs, Aston Martin Lagonda Holdings PLC (LON:AML) and Funding Circle Holdings PLC (LON:FCH), are both still struggling.
The luxury carmaker fell 5% yesterday on its first full day of trading and the shares are down another 2.2% today to 1,770p – well below their IPO price of 1,900p.
As for Funding Circle, the peer-to-peer lender lost 17% yesterday and a further 5.5% today to 344.8p, almost 100p below the 440p they were floated at.
Very few firms that list in London see their stock close below the offer price in the first day or two, but the consensus among analysts is that both of these were overpriced at their IPOs.
1.45pm: Ferrexpo boosted by Barclays upgrade
Ferrexpo PLC (LON:FXPO) has been upgraded by Barclays, which highlighted premium iron pellet pricing as a positive factor for the investment case.
The upgrade is driven by new supply dynamics - in other words, potential shortages - brought on by environmental restrictions in some regions, stricter emissions controls, and winter cuts.
Analyst Kennedy Nyangoni highlighted that the changing economic environment comes at “an intriguing time” amid annual pellet premium negotiations.
Barclays moved its rating to ‘overweight’ from ‘underweight’, and, more than doubled its price target to 300p from 140p.
The new target suggests some 31% upside versus the present price, which was itself boosted - up 8.1% today at 226.5p.
1.10pm: Summer heatwave dents DFS profits
DFS Furniture PLC (LON:DFS) reported a slide in full-year profit, blaming the UK’s summer heatwave for an “exceptional downturn in market demand” in its fourth quarter, sending its shares down.
The furniture retailer on Thursday reported a 7.6% fall in underlying earnings (EBITDA) to £76.1mln in the year to July 28 on like-for-like sales of £747.7mln – a 2% drop. Including acquisitions, rose 14.1% to £870.5mln.
Like many of its peers, a slowdown in the housing market and a tough retail market also contributed to its sluggish performance.
The company said it suffered a disruption to ships bringing made-to-order products from the Far East in the final quarter, while the hot weather led to much lower order intake.
“Financial results for the year reflected the exceptional downturn in market demand we saw in the fourth quarter,” CEO Ian Filby said in a statement.
12.50pm: Trade war to hit US stocks
US stock futures are pointing lower before the bell as global equities take a hit due to continued trade war fears.
On Wednesday, Wall Street had a positive close, with the Dow Jones Industrial Average closing ahead by around 54 points to 26,828 having reached a new high earlier in the session.
The S&P 500 added around two points to 2,925, while the Nasdaq added around 25 to 8,025.
New data showed that job growth in the US picked up considerably in September to reach a peak not seen in seven months, sending a signal that the US economy still looks fairly robust.
In futures trade today, the S&P 500 is down around 13 points, while the Nasdaq shed around 47 points and the Dow Jones Industrial Average is 104 points lower.
It comes as a report from Bloomberg today appeared to implicate the Chinese government in a huge hacking scandal involving some of America’s biggest companies.
12.05pm: FCA approves £1.7bn Virgin Money-CYBG merger
The £1.7bn merger of Virgin Money Holdings PLC (LON:VM.) and CYBG PLC (LON:CYBG) has been approved by UK regulators.
CYBG, the owner of Clydesdale Bank and Yorkshire Bank, announced an all-share offer to buy Virgin Money in June.
Virgin Money shareholders will receive 1.2125 new CYBG shares for every Virgin Money share held and will own about 38% of the merged business.
CYBG said on Thursday that shares to Virgin Money will be issued by October 15 when they begin trading on the London Stock Exchange.
Eek! Virgin will be brought into the Clydesdale/Yks computer system. They'll have to satisfy regulators there's no risk of another TSB-style failure
— Simon Gompertz (@gompertz) October 4, 2018
11.40am: Apple and Amazon deny Bloomberg’s claims
This is all getting quite interesting now; Bloomberg is adamant that Apple and Amazon have been hacked by the Chinese government, whereas the companies themselves have completely rejected those claims.
Amazon
“We’ve re-reviewed our records relating to the Elemental acquisition for any issues related to SuperMicro, including re-examining a third-party security audit that we conducted in 2015 as part of our due diligence prior to the acquisition.
“We’ve found no evidence to support claims of malicious chips or hardware modifications.”
“Over the course of the past year, Bloomberg has contacted us multiple times with claims, sometimes vague and sometimes elaborate, of an alleged security incident at Apple.
“We have repeatedly and consistently offered factual responses, on the record, refuting virtually every aspect of Bloomberg’s story relating to Apple.
“We are deeply disappointed that in their dealings with us, Bloomberg’s reporters have not been open to the possibility that they or their sources might be wrong or misinformed.”
11.20am: Perfect storm for FTSE 100
The FTSE 100 has lost more than 1% this morning, dragged down by trade war fears, higher Treasury yields and a fall in oil prices.
Starting with the trade war, a report from Bloomberg this morning implicated the Chinese government in a huge hacking scandal involving some of America’s biggest companies.
Trump has previously expressed his dismay at China’s alleged ‘theft’ of data from US tech companies, and today’s report is likely to add fuel to the fire.
The second factor hitting global markets is US Treasury yields which jumped to seven-year highs overnight.
Generally seen as a ‘risk-free’ investment, investors such as big pension funds tend to plough their cash in when they can get a decent return on investment.
Oil prices fall
As for oil prices, they have fallen back from a four-year high after US inventories were larger than expected whilst a report from Reuters suggested Russia and Saudi Arabia – the world’s two largest producers – had agreed to raise output.
US crude oil stocks rose by almost 8mln barrels last week to about 404bn barrels, making it the largest increase for 18 months.
Brent crude, the global benchmark is down 0.3% to just above US$86 a barrel, while West Texas Intermediate has shed a similar percentage to US$76.24 a barrel.
The dip in prices has hit the UK’s supermajors, with BP PLC (LON:BP.) (down 0.3% to 596p) and Royal Dutch Shell PLC (LON:RDSB) (down 0.5% to 2,691p) both reversing earlier gains.
All of that means the UK’s blue-chip index is down 78.9 points, or 1.1%, at 7,431.2 in late afternoon trading.
Financial stocks have been in favour this morning, with Barclays PLC (LON:BARC) (up 1% to 174.1p), HSBC Holdings PLC (LON:HSBA) (up 0.9% to 674.5p) and Lloyds Banking Group PLC (LON:LLOY) (up 0.6% to 58.7p) towards the top of the leader board.
Ex-divs weighing
A few companies going ex-dividend – meaning investors won’t get access to their latest dividend payments – are holding the Footsie back.
British American Tobacco PLC (LON:BATS) is down 4.2% to 3,423p, while British Land Company PLC (LON:BLND) has dropped 4.4% to 585.6p.
The biggest faller is online supermarket Ocado Group PLC (LON:OCDO) which is down almost 6% to 867p.
10.40am: China ‘hacked Apple and Amazon’
According to Bloomberg, China used a chip no bigger than a grain of rice to infiltrate the systems of 30 of the US’s largest companies, including Amazon and Apple.
An unnamed government official said China’s goal was long-term access to high-value corporate secrets and sensitive US government networks.
The breaking news story has spurred fears that the US-China trade war, which seemed to have cooled in recent days, is set to be reignited. Keep your eye on this one …
Businessweek Scoop: China Used Tiny Chip in Hack That Infiltrated Amazon, Apple. @tomkeene & @flacqua speak with @jordanr1000 who helped break the story https://t.co/vy73ewxsAL pic.twitter.com/QJ6OH53Fng
— BSurveillance (@bsurveillance) October 4, 2018
10.15am: Bye bye to Sky
Comcast now expects its £30bn acquisition of Sky PLC (LON:SKY) to complete on October 9, ending one of the most protracted takeover sagas on recent history.
Last week, the American media giant agreed to buy a 39% stake in the satellite broadcaster from under-bidder 21st Century Fox.
It means Comcast, which last week increased its debt to around £21bn to help fund the deal, will hold or have acceptances totalling 75% of Sky’s share capital.
It said previously that it expected the transaction to be concluded by the end of the month.
10am: Treasury yields to blame for FTSE’s slump?
The FTSE 100 has shed almost 1% of its value this morning, losing 70 points to sit at 7,441.
Trade war tensions between the US and China are no doubt playing a part, but AJ Bell investment director Russ Mould reckons the slump could be down to the yields on bonds issued by the US government.
“Markets across Europe and Asia tripped up on Thursday after a rise in US Treasury yields to levels not seen since 2011,” said Mould.
“The Treasury yield is commonly seen as the risk-free rate for investing, so an increase tends to be negative for other asset classes including shares.”
US 10-year Treasury yield at 3.18%! pic.twitter.com/taoMlr3f4U
— jeroen blokland (@jsblokland) October 3, 2018
9.35am: House of Fraser collapse hits Ted Baker
Ted Baker PLC (LON:TED) defied a high street downturn to deliver a 3.5% rise in first-half revenue but warned that the rest of the year would remain “challenging”.
The British fashion retailer posted revenue of £306.0mln for the six months to August 11, compared to £295.7mln a year ago, supported by its expansion plan.
Pre-tax profit dipped 3.2% to £24.5mln from £25.3mln last year, reflecting costs related to the expansion and a one-off £0.6mln hit from debts owed by troubled department store chain House of Fraser.
“Ted Baker isn’t having the best of times at the moment,” said Hargreaves Lansdown equity analyst George Salmon.
“That sounds a strange thing to say when sales continue to rise, but the devil is in the detail.
“New openings and strong online growth is masking a poor performance from the group’s existing store estate. A significant fall in sales per square foot is unpalatable to say the least.”
9.15am: New car sales slump in September
Sales of new cars in the UK slumped in September, falling to 338,834 from 426,170, according to the Society of Motor Manufacturers and Traders (SMMT).
The SMMT said sales fell “across the board”, with demand for people carriers and sports car particularly weak.
Hybrids and plug-in electrics saw modest sales growth of 3.9% compared to September last year.
“September’s large decline follows an unusually high August and a turbulent first eight months of the year as the market responded to a raft of upheavals, from confusion over diesel policy to vehicle excise duty changes and, latterly, transition to the new WLTP (Worldwide Harmonized Light Duty Vehicles Test Procedure) emissions standards.”
UK new car market falls -20.5% in September to 338,834 units as regulatory changes impact supply. Volumes down across all sectors, as testing backlogs affect consumer, fleet and business deliveries. https://t.co/vNAA6KsSIV pic.twitter.com/gwicgqdbHr
— SMMT (@SMMT) October 4, 2018
8.40am: Footsie takes cue from Asia
The FTSE 100 took its cue from Asia rather than Wall Street as it opened in the red with the index of blue-chip shares down 46 points at 7,463.99.
The Hang Seng closed out the session off 1.8% amid growing worries over Sino-American trade relations, which appears to have soured sentiment in London early on.
The Footsie’s biggest faller, down 4%, was British American Tobacco (LON:BATS), which went ex-dividend, having paid out to investors on the register at the close of trade last night.
Stepping down a division, Ted Baker (LON:TED) was in the wars. Shares in the fashion group fell 11% after its results revealed it had been affected by the collapse of House of Fraser.
“Ted Baker is a classy operator, but is not immune from the wider challenges affecting the retail sector,” said Lee Wild of Interactive Investor.
“Double-digit growth at the wholesale business and prediction of high single-digit growth there is a positive, but these numbers do not inspire confidence.”
Among the risers was Ferrexpo (LON:FXPO), which advanced 3% after Barclays Capital upgraded the stock to ‘overweight’.
6.45am: FTSE set to open in the red
The FTSE 100 is expected to start Thursday on the back foot, with the London index looking the weakest among the global equity benchmarks.
CFD and spreadbetting firm IG Markets sees the FTSE 100 down about 21 points, calling the spread at 7,492 to 7,496 with just over an hour until the open.
US markets, meanwhile, continue to shine as positive investor sentiments evidently overcome rising expectations for faster interest rate increases.
“The market is now pricing in an 80% probability of a rate rise in December. Additionally, the markets are reassessing how far the Fed’s tightening cycle will go and expectations are for rate rises to continue for longer,” said Jasper Lawler, analyst at London Capital Group.
He added: “The reason? Simple economics, the stunningly strong US economy is growing at a faster rate than its peers, driving treasury yields to their highest since 2011.
“As economic data from around the world misses expectations, US economic stats are consistently surprising to the upside. US non- manufacturing data proved to be a prime example, with activity in the sector expanding at the fastest pace in 20 years, whilst service sector pmi’s from the UK and Europe were lacklustre at best.”
The Dow Jones gained 54 points or 0.2% to close Wednesday at 26,828, whilst the Nasdaq added 25 points or 0.32% to 8,025. The S&P 500, meanwhile, marked only a slight positive move for the session, ending the day at 2,925.
In Asia, by contrast, Japan’s Nikkei was down 0.24% to 24,052 while Hong Kong’s Hang Seng dropped 1.8% to 26,601.
Around the markets
Sterling: US$1.2937, down 0.02%
Gold: US$1,198 an ounce, down 0.01%
Brent crude: US$86.14 per barrel, up 1.55%
Bitcoin: US$6,557, up 1.35%
Significant announcements for Thursday, October 4:
Trading update: Electrocomponents PLC (LON:ECM)
Finals: DFS Furniture PLC (LON:DFS)
Interims: e-Therapeutics PLC (LON:ETX), Morses Club PLC (LON:MCL)
Traffic figures: easyJet PLC (LON:EZJ)
Ex-dividends: British American Tobacco plc (LON:BATS), British Land PLC (LON:BLND), Intertek Group PLC (LON:ITRK), Smith & Nephew PLC (LON:SN.), Travis Perkins PLC (LON:TPK), Taylor Wimpey PLC (LON:TW.), WPP PLC (LON:WPP)
Economic data: US weekly jobless claims; US Challenger job cuts; US factory orders
Proactive news headlines
All of the planned Phase 1 reverse circulation (RC) drilling on Europa Metals Ltd’s (LON:EUZ, ASX:EUZ) Toral project in northern Spain has been completed.
E-therapeutics PLC (LON:ETX) reported a narrowed pre-tax loss in the first half of the year, while also filing a new patent for its network-driven drug discovery (NDD) platform after the end of the period.
Metminco Limited (LON:MNC) has urged shareholders to voluntarily transfer their holdings to the Australian share registry agent ahead of the October 25 deadline.
Aminex PLC (LON:AEX) revealed that its stake in the Kiliwani North and Nyuni assets, in Tanzania, are to increase as a result of a partner’s payment defaults to the joint venture.
Mosman Oil And Gas Ltd (LON:MSMN) described itself as “extremely pleased” as it confirmed first sales from the Stanley-1 well, onshore UK.
Metal Tiger PLC (LON:MTR) has confirmed copper intersections from a potential satellite to the T3 project in Botswana.
Aggregated Micro Power’s (LON:AMPH) carbon and renewables associate Incubex will launch its first range of North American environmental products in November.
Providence Resources PLC (LON:PVR) told investors that Dr Angus McCoss has now been appointed as the company’s senior independent director with immediate effect.
Business news headlines
Brexit recession warning from RBS boss - BBC News
Crossrail chair Morgan to step down amid £15bn project delay - Sky News
Treasury sell-off builds as yields eye biggest rise since 2016 election - Financial Times
Elon Musk's ultimatum to Tesla board: Fight the SEC or I quit - Independent
Apple, Google and Amazon named as most valuable brands in world - The Guardian
Amazon pay rise piles pressure on rivals - Financial Times
UberEats workers join fast food strike - BBC News
Facebook faces $1.6bn fine and formal investigation over massive data breach - The Guardian