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FTSE 100 closes higher after fairly unevenful traading; May gets cabinet support

Last updated: 17:03 16 Oct 2018 BST, First published: 06:50 16 Oct 2018 BST

London skyline
  • FTSE 100 closes higher 

  • US stocks up; more bank earnings   

  • May finds support from Cabinet   

FTSE 100 closed in positive territory as US shares went higher amid a flurry of earnings and  PM Theresa May was backed by her cabinet on her current Brexit negotiating stance.

The UK blue-chip index closed around 30 points higher at 7,059.

The FTSE 250, a more UK company focused index, added around 328 points to 19,131.

On Wall Street, the Dow Jones Industrial Average added 355 points at the time of writing, while the S&P 500 is up over 39.

The Nasdaq index is up 139 points after tech stocks dragged it down yesterday.

Top riser on Footsie was online retail Ocado Group plc (LON:OCDO), which added 5.52% to stand at 833.40p, while British American Tobacco plc (LON:BATS) was top loser, shedding 4.64% to 3,176.50p

3.30pm 

The FTSE 100 reached into positive territory late Tuesday afternoon, while US stocks marched higher on the back of bank results that beat expectations.

In London, the benchmark rose 18 points, or 0.3%, to 7,047, moving at intraday highs. Topping advancers was Ocado Group PLC (LON:OCDO), with shares climbing 6.7% to 842.40p. Peel Hunt backed its buy rating on the company that runs an online grocery and makes related technology.

In New York, the Dow Jones Industrial Average surged 270 points to 25,520, and both the S&P 500 and the Nasdaq Composite picked up more than 1%. Investors were in the mood take on more risk after better-than-expected earnings reports from Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS).

The FTSE 100 advanced even as the pound crept higher during the session, above US$1.3210. Sterling gained after UK wage inflation hit its highest in about 10 years, at 3.1% in August. It also rose following a Guardian Newspaper report that UK Prime Minister Theresa May won backing from her Cabinet over her stance that the UK should prevent the creation of a customs border around Northern Ireland as a result of Brexit.

European Council President Donald Tusk, speaking in Brussels, sounded downbeat about the progress on Brexit negotiations:

EU officials will discuss Brexit in Brussels on Wednesday.

Also Wednesday, the UK will release its consumer price inflation report for September.

“Economists expect headline CPI to have eased to 2.6% year-over-year in September from 2.7% previously. If correct, this would point to a sizeable pickup in real wages given today’s earnings figures,” Fawad Razaqzada, technical analyst at Forex.com, on an FXStreet.com blog.

1.15p Footsie declines, Wall Street looks to rise 

British blue-chips lost ground early afternoon Tuesday, while US stock futures pointed to an advance for Wall Street which will take in a new wave of bank earnings.

The FTSE 100 fell 13 points, or 0.2%, to 7,015.

But US stocks appeared set to rise after Monday’s sesson left key indexes in the red.

Futures for the Dow Jones Industrial Average rose 142 points to 25,343, and futures for the S&P 500 and the Nasdaq-100 each rose 0.5%. Adobe Inc. (NASDAQ:ADBE) shares bounced up pre-market after the software maker's upbeat 2019 revenue view.

“Equity markets more broadly remain calm, but hesitant. From Brexit, to US/Saudi tensions and trade worries, there are plenty of reasons to hold off on buying the dip, even if earnings season has begun in strong form,” said IG’s chief market analyst Chris Beauchamp. “While we have yet to retest the lows of last week, it doesn’t look like investors are rushing in just yet,” he said.

The bank sector will be in focus on Wall Street, with earnings due from Goldman Sachs (NYSE:GS), BlackRock(NYSE:BLK) and Morgan Stanley (NYSE:MS).

The reports will land before minutes from the Federal Reserve’s September meeting arrive Wednesday, and those should underscore expectations for another rate hike in December.

Another Fed rate hike will widen the gap between US and UK rates. UK wage growth zipped up to a faster-than-expected 3.1% rate in the three months to August, data showed Tuesday, but the Brexit process is likely to keep the Bank of England from raising rates from 0.75% until later in 2019.

Shares of interest-rate sensitive bank stocks pulled back in UK trade Tuesday, with Royal Bank of Scotland PLC (LON:RBS) down 0.5% at 241.90p and Lloyds Banking Group PLC (LON:LLOY) off by 0.8% at 57.26p.

Meanwhile, British American Tobacco PLC (LON:BAT) fell 1.6% to 3,277p after the company cut its annual revenue target for cigarette alternatives.

READ: British American Tobacco cuts full year revenue target for cigarette alternatives

Advancers included Meggitt PLC (LON:MGGT), up 5.8% to 523.20p after the aerospace and defence engineer raised its revenue guidance for the year.

READ: Meggitt raises 2018 revenue forecast but sees margins at lower end of guidance range

On the FTSE 250 mid-cap index, shares of Merlin Entertainments PLC (LON:MERL) fell 7.2% to 343.10p after the theme park operator issued a trading update for the 40 weeks ended October 6. Like-for-like revenue at the Legoland Parks group declined 0.3%. Merlin’s group like-for-like revenue growth was 1.4%. 

11.45am Bank of England may stand pat on rates this year 

British wages have increased at the fastest rate since the global financial crisis, but analysts say don’t expect the Bank of England to issue an interest rate hike in the short-run. 

Earlier Tuesday, the Office for National Statistics said basic wages rose by 3.1% in the three months to August. That’s the highest rate since the October to December period in 2008, and it outstripped expectations of 2.6%.

The “fact that UK wage growth is really motoring along might see the Bank of England accelerate its tightening plans,” said James Smith, economist at ING Economics.

But he said there’s one big issue standing in the way of an interest rate hike this year: Brexit.

With “the perceived risk of a 'no deal' Brexit higher than ever, policymakers are unlikely to raise interest rates again before May 2019 at the earliest,” he said.

Investors will be waiting for any fresh developments from the Brexit front Tuesday as UK Prime Minister Theresa May was expected to meet with her Cabinet. Hopes for a Brexit deal with the EU fizzled over the weekend as the two sides are divided on how to deal with Northern Ireland, as its neighbour Ireland will remain a part of the EU after Brexit.

“The earnings data will likely fuel Bank of England confidence that pay growth will firm over the coming months amid labour market tightness,” said Howard Archer, chief economic advisor to the EY ITEM Club. But a rate hike may not take place until later in 2019.

"On the assumption that the UK and the EU ultimately enact a Brexit transition arrangement in March 2019 and the economy sees relatively steady growth thereafter, we expect the Bank of England to next raise interest rates from 0.75% to 1.00% in August 2019," said Archer. 

The Bank of England last raised interest rates in August, by a quarter-percentage point to 0.75%. The move brought borrowing costs to their highest since 2009.

Sterling pushed to US$1.3200 after the data, trading around US$1.3180 earlier in the session.

The FTSE 100 was up 1 point at 6,980 in late morning trade Tuesday.

10:15a Wages rise 3.1% 

UK blue-chips fell further in midmorning trade Tuesday after data showed UK wage inflation had increased by the fastest rate in nearly 10 years. 

The FTSE 100 fell 17 points, or 0.2%, to 7,013, clipped as the pound climbed after the Office for National Statistics released employment data.

Among the figures, UK basic wages rose by 3.1% in the three months to August, the highest rate since October to December 2008. Analysts had expected average weekly wages to rise 2.6%. Excluding bonuses, wages rose 2.7%, higher than an expected rate of 2.6%.

Sterling traded at US$1.3192, up from around US$1.3180 ahead of the data. Sterling strength can put pressure on the FTSE 100 as many of its companies make the most of their revenue overseas.

“Wages keep on going from strength to strength, as competition for workers is finally feeding through to pay. The Bank of England will be keeping a watchful eye on any upwards pressure this puts on inflation, but it should also help support the consumer and their ability to handle higher interest rates should bank need to increase interest rates,” said Philip Smeaton, chief investment officer at Sanlam UK.

“However, until the outcome of Brexit becomes clearer, rates are likely to be placed on hold,” he said.

9.03a Footsie slips in early trade 

The FTSE 100 pulled back in early Tuesday morning trade, ahead of the release of UK jobs data and while investors await any fresh updates about Brexit negotiations.

The blue-chip benchmark fell 9 points to 7,020, nibbling away at Monday’s rise of 31 points at the close.

Tuesday’s session will feature UK employment and wage-inflation data from the Office for National Statistics. Average weekly wages for the three months to August are expected to rise 2.6%, and by 2.9% excluding bonuses.

Sterling bought US$1.318 ahead of the data.

On the political front, UK Prime Minister Theresa May is slated to meet with her Cabinet about Brexit after talks with EU officials over the weekend failed to result in a final agreement.

“It is highly unlikely that Prime Minister May will be able to coalesce a range of differing opinions about how to proceed next. The Irish border backstop continues to be the Gordian Knot that can’t be unravelled and will in all likelihood scupper any prospect of any sort of agreement this week,” said Michael Hewson, chief market analyst at CMC Markets.

Looking at individual stocks, BHP Billiton PLC (LON:BHP) shares fell 0.4% to 1,580p. The mining heavyweight said it’s nearly doubling its investment in Ecuadorian copper exploration company SolGold PLC. Shares of Rio Tinto PLC (LON:RIO) fell 0.9% as the miner posted a 5% decline in third-quarter iron-ore shipments, and said miner copper production increased 32% on a year-over-year basis.

Pulling back from recent gains, shares of gold producers Randgold Resources PLC (LON:RRS) and Fresnillo PLC (LON:FRES) fell 1.8% and 2.8%, respectively.

6.50a FTSE 100 indicated to open higher 

The FTSE 100 is seen higher, but not higher, as global equity markets remain influx and investors' focus in on macro matters.

Ahead of the London open, IG Markets sees the FTSE 100 up about 9 points calling the index at 7,033 to 7,037 with just over an hour to go until the start of trading.

Last night, Wall Street marked a broadly lower close.

The Dow Jones ended the day down 89 points or 0.35% lower at 25,250 whilst the S&P 500 gave up 0.59% to 2,750 and the Nasdaq finished down 0.88% at 7,430.

“Without a rebound in stocks in the US and whilst the focus of the market remains on the Middle East over the Saudi Arabia incidence the markets will struggle to put in a meaningful move higher,” said Jasper Lawler, analyst at London Capital Group.

“Investors will want to see US shares put in a convincing move higher following its recent higher treasury yield inspired sell off before global equities are in the clear.”

More pressing, in investor concentration span, is perhaps the imminent next Brexit meetings.

Lawler added: “As Theresa May plays for time rather than bulldozing a Brexit treaty through, the pound is in limbo. Important issues remain unresolved in Brexit negotiations and a solution won’t be found before the EU summit in Brussels on Wednesday.”

Elsewhere, in Asia, markets were mixed. Japan’s Nikkei showed a 195 point or 0.88% rally to 22,465 while Hong Kong’s Hang Seng was slightly lower at 25,407 and the Shanghai Composite was 0.3% lower at 2,560.

Around the markets

Sterling: US$1.3145, down 0.05%

Gold: US$1,225 an ounce, up 0.59%

Brent crude: US$81.00 a barrel, up 0.7%

Bitcoin: US$6,540, up 0.4%

Significant announcements expected

Trading update: Ixico PLC (LON:IXI), Merlin Entertainments PLC (LON:MERL)

Finals: Bellway PLC (LON:BWY), Dotdigital Group PLC (LON:DOTD), Nanoco Group PLC (LON:NANO), Netcall PLC (LON:NET)

Interims: Gear4Music Holdings PLC (LON:G4M), BP Marsh & Partners PLC (LON:BPM)

Economic data: UK unemployment; UK average earnings; US industrial production; US JOLT jobs; US housing market index

Proactive news headlines

Marketing automation firm Dotdigital Group PLC (LON:DOTD) has got off to a hot start in its current financial year as it continues to build on the progress made over the past 12 months. 

African Battery Metals PLC (LON:ABM) has commenced geological work on its recently acquired 380 square kilometre Lizetta II nickel, cobalt and chrome exploration project in Ivory Coast.

Arc Minerals LTD (LON:ARCM) has intersected mineralisation in all holes drilled to date as part of the current 11,000 metre programme at the Kalaba prospect in Zambia.

Highlands Natural Resources PLC (LON:HNR), the natural resources company, has formed Highlands Water Resources to provide services to the fracking industry. 

Nektan PLC (LON:NKTN), the gaming technology platform and services provider, has signed a "landmark" contract with BetVictor, one of Europe's leading gaming companies. 

Vast Resources PLC (LON:VAST) has agreed terms with Baita SA, the holder of the head licence at the Baita Plai mine, and now has the right to commence mining. 

Middle East-focused hotel owner and developer Action Hotels PLC (LON:AHCG) has struck a deal to sell off a large plot of land within Dubai’s Media City for US$10.5mln. 

Sound Energy PLC (LON:SOU) told investors that it has received ministerial approval for an eight-year petroleum agreement for the Greater Tendrara project area. 

Canadian Overseas Petroleum Limited (LON:COPL, CVE:XOP) has updated investors on the dispute between partners in its Nigerian venture. 

Metallurgical test work at the T3 copper project in Botswana has indicated lower production costs than previously estimated, Metal Tiger PLC (LON:MTR) reported today. 

ClearStar PLC (LON:CLSU) has agreed to integrate its mobile staff vetting kit into Virtual Badge, a smartphone-based ID badging system. 

appScatter Group PLC (LON:APPS) has raised £968,445 before costs via the placing of 1,383,493 new ordinary shares in the company at an issue price of 70p per share. 

Business news headlines

Trouble brewing: Climate change to cause 'dramatic' beer shortages - The Guardian

Major life-threatening cyber attack on UK 'in little doubt' in near future - Sky News

Convatec boss quits after surprise profit warning - The Times

Greencore quits US two years after expansion push - Financial Times

Porsche plans electric SUV and Tesla Roadster-rivalling sports car – AutoCar

Robert Tchenguiz drops lawsuit against Grant Thornton at last minute – The Times

People are freaking out about Tether – Financial Times

Fidelity Launches Institutional Platform For Bitcoin And Ethereum - Forbes

Carl Icahn renews fight against Michael Dell, opposing IPO plan - Financial Times

GCHQ asks tech firms to pretty please make IoT devices secure – The Register

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