FTSE 100 closes 92 points down
Barnier sees Brexit deal soon
FTSE 100 joined European indices in a sea of red Wednesday and the UK blue-chip index closed lower.
Footsie finished down nearly 92 points, or 1.27%, at 7,145, while its mid-cap cousin FTSE 250 also fell - shedding around 310 points to 19,239.
It appears news that Michel Barnier reckons a Brexit deal can be achieved within days has not cheered investors much, although the pound firmed against the Euro and US dollar.
On Wall Street, the Dow Jones Industrial Average is down 380 points at the time of writing, while the S&P 500 is off 47.
Fiona Cincotta, analyst at City Index, said: "European markets are on the slide, rattled by a 386-point drop in the DJIA and a 2.47% decline in the Nasdaq.
"Domestic news should have been positive for the London index as the Bank of England started making steps to prepare lenders for a no-deal Brexit but though this has supported the pound against the dollar and the euro it was not enough to help equities.
"In the US the flight from stocks continues unabated as bond yields remain high but individual companies like Sears are also weighing on the indices."
The latter famous retail store is preparing to file for bankruptcy.
Among the top losers on FTSE 100 was fashion group Burberry (LON:BRBY) as the China/US trade battles hits the firm, which is popular in China.
The FTSE 100 sharply slid in late-afternoon trade Wednesday, with pound strength accelerating as the European Union’s top Brexit negotiator said a Brexit deal appears in sight.
The UK gauge of blue-chips tumbled 69 points, or 1%, to 7,168p, heading for its fourth loss in five sessions.
That move came as the pound climbed above $1.3200 against the US dollar as Michel Barnier reportedly said 80% to 85% of an agreement over the UK’s exit from the European Union has been completed. Barnier said a deal could be reached by Wednesday.
Barnier, who spoke before the Association of European Chambers of Commerce and Industry, or Eurochambres, said the UK will leave the bloc’s single market and customs union, Reuters reported.
3:15pm: Footsie still struggling
FTSE down 21 points
Burberry shares knocked down
US stocks fall
British blue-chips returned to session lows Wednesday afternoon, with Burberry Group PLC shares struggling, and as US stocks dropped at the start of trade.
The FTSE 100 fell 21 points, or 0.3%, to 7,216, a move that could keep the benchmark around a six-month low.
Among individual movers, Burberry Group PLC (LON:BRBY) dropped 5.7% to 1,768p as Morgan Stanley cut the European luxury goods sector to an “underweight” rating from “neutral,” with the broker saying demand from Chinese consumers for high-ticket items appears to have peaked.
“We believe the recent outperformance of value vs growth has further to go,” said Morgan Stanley about the downgrade.
The FTSE 100’s decline came just ahead of Wall Street’s open. US stocks immediately came under pressure when trade began, sapped in part by renewed strength in US bond yields on speculation the Federal Reserve may raise interest rates faster than had been anticipated. The Dow Jones Industrial Average stumbled more than 250 points in early dealings.
On Wednesday, the yield on the 10-year Treasury note reached 3.22% before release of US economic data. Earlier this week, the yield rose above 3.25%, a level not seen since 2011. The 2-year Treasury note on Wednesday rose to 2.90%, the highest since 2008.
Meanwhile, the FTSE 100 was dented further as the pound gained traction against the greenback during the session, flirting with the $1.32 handle.
A Dow Jones Newswire report Tuesday said UK and EU officials may be able to reach a Brexit deal by this coming Monday.
Lukman Otunuga, research analyst at FXTM, said: “While this welcome development is likely to push sterling higher in the near term, investors should remain diligent as it is likely too early for celebrations. We have had optimism before over Brexit progress, before later reversing back.”
The European Council is slated to review progress of Brexit talks next week. The EU and the UK are aiming to strike an agreement in November.
“Even if a deal is struck before the fast approaching November deadline, it has to go through British parliament which represents another challenge of its own,” said Otunuga.
1:15pm: Footsie slightly lower
FTSE 100 down 7 points
US stock futures decline
The FTSE 100 was holding slightly in negative territory in early afternoon trade Wednesday before action begins on Wall Street, where US stock futures were lower.
The UK equity benchmark shed 7 points to 7,231p, but has come off intraday lows. The benchmark is still hovering around its lowest since April.
Futures for the Dow Jones Industrial Average sagged 20 points to 26,461 while S&P 500 and Nasdaq-100 futures were down 0.1% and 0.3%, respectively.
“Relatively flat sessions across much of Asia and some weakness in Europe on Wednesday is taking its toll on US futures,” said Oanda’s senior market analyst Craig Erlam.
“There are a number of worries for investors right now, from the pace of rising bond yields and the impact on investor sentiment, to Italy’s populist coalition playing a game of chicken with the European Commission, stalling Brexit negotiations and the ongoing trade conflict between the US and China.”
The battle between Italy and EU officials over the country’s budget has weighed on shares in some European equity markets, with Germany’s DAX 30 lower by 0.6%.
In UK market developments, AIM-quoted shares of Patisserie Holdings PLC (LON:CAKE), parent of bakery chain Patisserie Valerie, have been suspended by the company. The move comes after the discovery of “significant, and potentially fraudulent, accounting irregularities,” the company said in a statement.
11:45am: Bank shares stand out
FTSE 100 off 4 points
Bank shares rise
Pound off session highs
UK stocks narrowed losses in late-morning trade Wednesday, aided in part by a modest pullback in the pound.
The FTSE 100 was down 4 points at 7,234, Gains for bank stocks helped the benchmark improve from an intraday low of 7,214.79, with the sector finding support from a recent advance in global bond yields. Barclays PLC (LON:BARC) was up 2.7% at 295p, Lloyds Banking Group PLC (LON:LLOY) gained 1.9% to 58p and Royal Bank of Scotland Group PLC (LON:RBS) picked up 1.8% at 249p.
The index also found help from sterling, which drifted off intraday highs against the dollar. Such a move can help shares of multinational companies on the FTSE 100 as those firms generate most of their revenue overseas. The currency pair was in focus with GDP data released earlier Wednesday that showed UK economic growth stalled in August on a month-over-month basis.
The GDP data “supports the International Monetary Fund’s warning that global growth might have plateaued,” said Miles Eakers, chief market analyst at Centtrip, an FX and payments specialist.
“That said, the pound has recently gained strength, having reached a four-month high against the euro yesterday amid optimism the UK will reach a deal with the European Union,” he said.
“Whether you voted to leave or remain, a deal will mean companies and individuals can finally start to plan ahead. This should boost consumer spending, corporate profits and economic growth, bringing potential interest rate hikes by the Bank of England more to the forefront,” sad Eakers.
10:30am: GDP growth flatlines
FTSE down 8 points
UK monthly growth unchanged
BT tops gainers
British economic growth stalled in August, and the UK’s large-cap benchmark was little changed after the data disappointment in mid-morning trade Wednesday.
Growth in gross domestic product was unchanged on a month-on-month basis from July, when the economy expanded by an upwardly revised 0.4%, the Office for National Statistics said. That reading fell short of widely held expectations by analysts who had been looking for expansion of 0.1%.
The figure showed “the economy could be losing momentum as we move into the autumn. Worryingly the dominant service sector has experienced a significant slowdown in growth over the past year or so, with an emerging trend for growth of around 1.5% year on year,” said Ben Brettell, senior economist at Hargreaves Lansdown.
The growth rate of 0.7% in the three months to August was unchanged from July, and the ONS noted activity in the August period was bolstered retail, food and drinks during the hot summer weather.
Overall for the UK economy, “the picture is still one of muddling through,” said Bretell. “Markets are still pencilling in a further rise around the middle of next year – though clearly a disorderly Brexit would pose a significant risk to that outlook.”
The FTSE 100 shed 8 points at 7,229, slightly paring a loss of around 12 points as trading began.
Gainers were topped by BT Group PLC (LON:BT.A), as its shares climbed 3.6%. Last week, the Daily Telegraph reported that the telecommunications company was in early talks with Apple Inc. (NASDAQ:AAPL) about a pay-TV partnership.
8:35am: Subdued start
The FTSE 100 made a subdued start to proceedings against a backdrop of uncertainty caused by Italy’s budget wrangling with the EU.
The index of blue-chip shares fell 12 points to 7,225.61 after mixed sessions on Wall Street and Asia earlier.
“The political situation in Italy is the dominant story in Europe, and seeing as the coalition government in Italy seem keen to disobey Brussels and raise the budget deficit to 2.4%, we could be heading for a political clash,” said David Madden of CMC Markets.
“The cost of borrowing for the Italian government has risen as investors are fearful the administration in Rome is planning on racking up even more debt.
“The credit rating agencies will be paying close attention to developments in the country and any negative reviews could send Italian government bond yields higher and eurozone stocks lower.”
Rightmove (LON:RMV) nudged 1% higher after Liberum Capital raised its rating on the stock to ‘buy’.
Royal Mail (LON:RMG) fell a further 3% as it edged closer to the trap door to the FTSE 250.
6.45am: Little change expected
UK stocks were set to open little changed in a continuation of yesterday’s trend.
After rising just 4 points to close at 7,238 yesterday, the FTSE 100 was expected to hand back half of those measly gains at the outset.
“Uncertainty is prevailing n the financial markets, we are seeing more investors opting to wait and see how risks surrounding rising US treasury yields, global growth and China play out. Near-term risks to global financial stability have increased rapidly over the past few months. The markets have been relatively complacent, but we are starting to see an acknowledgement of these risks which is keeping traders on the sidelines,” said Jasper Lawler at LCG.
US markets were mixed overnight, with the NASDAQ Composite up 2 at 7,738, the Dow down 56 at 26,430 and the S&P 500 down 4 at 2,880.
Most Asian markets had a positive session. In Tokyo, the Nikkei 225 was up 27 at 23,497 and in Hong Kong, the Hang Seng was up 165 at 26,338.
Back in the UK, there is another opportunity to realise how long ago the World Cup now seems.
The UK’s largest brewer of premium cask ales releases a year-end trading update, which is expected to show a strong performance in drinks sales as people sought out beer gardens during the UK heatwave and TV screens during the World Cup in June and July.
Great to see this brewery in Los Angeles championing classic British beers. Head brewer, Andy Black at The Yorkshire Square, brews cask-conditioned bitters, milds, pales, golden and porters.— Marston's Brewery (@MarstonsBrewery) September 30, 2018
Great to see nostalgia beers making a come back. https://t.co/uBbca9HlZ4
Recruitment firm PageGroup reports its third-quarter results, with analysts predicting a strong set of results, driven by international job markets.
In the first six months of the year, the company posted a 12.5% increase in total gross profit with growth across all its markets apart from the UK.
The UK recruitment market has slowed since the Brexit vote as employers exercise more caution with hiring due to economic and political uncertainty.
UBS estimates PageGroup will deliver a 16% increase in third-quarter like-for-like gross profit, in line with the last quarter’s increase, led by a robust performance in France and Germany. It expects the UK to see gross profit dip 2%.
Around the markets
- Sterling: US$1.3170, up 0.28 cents
- 10-year gilt: 1.579%
- Gold: US$1,193.60 an ounce, up US$2.10
- Brent crude: US$84.84 a barrel, down 16 cents
- Bitcoin: US$6,492.48, down US$103.83
Proactive news headlines
Avacta Group PLC (LON:AVCT) has signed a licensing deal with New England Biolabs (NEB), an enzyme discovery and production company, to commercialise its Affimer technology for use in life science research and diagnostic assays.
accesso Technology Group PLC (LON:ACSO) has signed an agreement that will enable its clients to purchase accesso-supported inventory directly through Google.
Silence Therapeutics PLC’s (LON:SLN) patent battle with US biotech Alnylam, which is focused on the technology at the heart of latter’s first commercial drug, took a new turn Wednesday.
Columbus Energy Resources PLC (LON:CERP) told investors that it is on track to deliver on its production target for 2018, with output due to exceed 1,000 barrels of oil per day by the end of the year.
Britain’s audit industry is being reviewed by the competition regulator over concerns that it is not working well for the economy or investors in British companies.
US President Donald Trump has expressed his displeasure over the Federal Reserve’s move to raise interest rates “too fast”.
Anthony Hotson, the boss of a London-based stockbroker Cenkos, is set to step down weeks after the company reported a 90% drop in first-half profits.
Grant Thornton has accused Robert Tchenguiz of “inventing” claims and bringing a lawsuit against it worth hundreds of millions of pounds.
The Daily Telegraph
Germany's IW institute warned that German companies would face extra tariffs of more than €3 billion a year if Britain quits the European Union without a trade deal.
TK Maxx has boosted sales to nearly £3 billion and opened several new stores as the budget chain defied the high street gloom.
The owner of Patisserie Valerie will soon disclose details of financial irregularities worth millions of pounds that have been uncovered.
The value of FTSE 100 bookie Paddy Power Betfair saw its value wiped off by more than £250 million after the Irish Government announced plans to double betting duties.
HSBC will pay $765 million to settle claims connected to toxic derivatives it sold prior to the financial crisis that rocked global markets in 2007.
The Daily Mail
Official figures reveal Norwegian Air has overtaken Britain’s flagship carrier British Airways as the biggest non-US airline flying to and from New York.
Shell boss says mass reforestation needed to limit temperature rises to 1.5C
IMF warns Italy not to breach EU spending rules in next budget