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FTSE 100 closes lower as sterling gains on BoE rate comments

The bank suggested there could be a faster pace of hikes if the UK gets a smooth Brexit deal

mark carney
Pictured: Bank of England Governor Mark Carney
  • FTSE 100 closes down

  • Sterling gains 

  • BOE's Carney talks rates   

FTSE 100 closed just in then red as the pound strengthened on BoE governor Carney comments and as US stocks went higher.

The UK's blue-chip benchmark finished down around 13 points at 7,144, while the FTSE 250 zoomed up over 254 points at 19,171.

Sterling rose after  Mark Carney suggested there could be a faster pace of interest rate hikes
if the UK gets a smooth Brexit deal.

That came after the bank kept rates on hold - at 0.75%.

On Wall Street, the Dow Jones Industrial Average is up over 230 points at the time of writing, while the S&P 500 is ahead by around 23.

Top loser on Footsie was oil services giant Wood Group (LON:WG.), which shed 4.65% to 681p.

BT Group (LON:BT.A) was top gainer, up 8.61% to 261.25pafter an upbeat outlook from the telecoms giant.

3.55pm: Footsie slips again 

The UK’s large-cap benchmark dipped into the red late Thursday afternoon, while sterling gathered strength as investors latched onto comments by Bank of England Governor Mark Carney. 

The FTSE 100 shed 10 points to 7,118, as industrial and oil and gas shares pulled lower. But bank stocks remained higher in what's been a choppy day overall for stocks. 

Blue-chips were held back throughout the session as sterling rose against the US dollar. It was bolstered first by a Times newspaper report that Britain’s financial firms will be allowed access to the EU’s markets after Brexit, even though UK and EU officials reportedly dismissed the report.

Sterling later extended gains, trading at US$1.2970, after Bank of England Governor Mark Carney spoke about the central bank’s decision to leave the key interest rate at 0.75%.

“The most eye-catching suggestion made by [Carney] was that the BoE could hike rates if Britain leaves the EU without an agreement in place. And while that idea was greeted with a certain amount of scepticism by analysts, given how the central bank acted after the EU referendum, it nevertheless contributed to the pound’s 1.3% jump against the dollar and 0.6% increase against the euro,” said Connor Campbell, financial analyst at Spreadex.

Pound strength can hurt shares of multinational companies as earnings those companies make overseas can be dented when translated into sterling terms. Shares of oil heavyweight BP PLC (LON: BLT) dropped 4.9% to 539.40, and rival Royal Dutch Shell PLC (LON: RDSB) was off 3.4% at 2,145p, with its shares also hurt by a quarterly earnings miss.

Before the close, BT Group PLC (LON:BT.A) shares soared 8.5% to 260.55p, topping the FTSE 100 after an upbeat outlook from the telecommunications company.

In AIM trading,  Ascential PLC (LON:ASCL) shares rose 7.5% to 405.20p after the tech firm said it’s expanding in the US with the US$60mln cash acquisition of Flywheel Digital, which offers managed services to consumer product companies trading on Amazon.

READ: Ascential splashes out US$60mln to acquire Flywheel Digital

 

2.45pm: FTSE edges up 

UK stocks fought to hold to small gains Thursday afternoon, while US stocks sprang up after US President Donald Trump offered an encouraging update on trade relations with China.

The FTSE 100 was up 2 points at 7,130, but it has been darting between gains and losses during the session as the pound gathered strength against the US dollar.

Meanwhile, the Dow Jones Industrial Average leapt 124 points as Trump divulged his view on a recent talk he had with China's president: 

 

Some mining shares on the FTSE 100 extended gains as the world’s second-largest economy is a major buyer of industrial and precious metals. Shares of copper producer Fresnillo PLC (LON: FRES) picked up 5.5% to 894.90p, Antofagasta Holdings (LON:ANTO) moved 3.4% higher to 810.20p, and iron ore heavyweight BHP Billiton plc (LON:BLT) rose 2.9% to 1,607.20.

Elsewhere in UK trade, Shire Plc (LON:SHP) slipped 0.5% to 4,658p as a larger tax bill and restructuring costs weighed on the drugmaker’s third-quarter profit.

READ: Tax bill, restructuring drag on Shire’s third-quarter profits

Also, 4imprint Group PLC (LON:FOUR) jumped 16% to 2,100p as the promotional products marketer said full-year revenue and underlying profit should come in at the top end of market expectations.

READ: 4imprint ‘reaping the rewards of new TV and radio ads’

 

1.25pm: Footsie slips 

Blue-chips in the UK edged back into negative territory during early Thursday afternoon trade, while US stock futures indicate gains when the action gets started on Wall Street.

The FTSE 100 was off 1.5 point at 7,126 in a choppy session for the benchmark. It opened in the red then rose by as much as 38 points before turning back down. 

US stocks may see a solid advance at the open, which could bring the Dow Jones Industrial Average to a third consecutive advance. Dow futures were up 76 points and S&P 500 futures tacked on 5.5 points. Nasdaq-100 futures picked up 2 points. Apple Inc.  (NYSE:AAPL) will be in focus as the tech behemoth releases quarterly results late Thursday.

Back in London, the FTSE 100 was pressured by a rising pound and a decline in shares of Royal Dutch Shell PLC (LON:RDSB) after the oil producer’s third-quarter earnings came in shy of expectations.

The pound rose to US$1.2919, revisting the US$1.29 handle after the Bank of England released its latest monetary policy statement. The central bank held its key rate at 0.75% as expected.

“November's statement makes it pretty clear the Bank of England would like to be hiking rates further,” but Brexit is clouding the bank’s outlook, said ING.

“Despite the rise in Brexit uncertainty, trade tensions and modest Eurozone slowdown, the Bank still expects a slight acceleration in UK growth over the next year relative to its August predictions,” said James Smith, developed markets economist at ING.

The pound started rising after a Times report said Britain has reached a deal for UK financial firms to retain access to the European Union’s market after Brexit.

But Michel Barnier, the EU’s lead Brexit negotiator, poured cold water on the report in a Tweet:

 

12.15pm: Footsie's gain clipped   

UK stocks pared gains in early afternoon trade Thursday after the Bank of England met expectations in leaving its key interest rate unchanged.

The FTSE 100 was up just 1 point at 7,128, coming off session highs. A win Thursday would be the benchmark’s fourth in a row.

The Bank of England said it held the UK’s key interest rate at 0.75% in a 9-0 vote. The Monetary Policy Committee also left unchanged the size of the central bank's asset purchase programme at £435bln.

“The MPC judges that aggregate supply and demand are now broadly in balance. The labour market remains tight, with the employment rate and vacancies around record highs, and the unemployment rate at its lowest since the mid-1970s,” policymakers said in a statement.

As blue-chips came off session highs, sterling rose to US$1.2919 from US$1.2906 ahead of the BOE's statement. 

Around the market, Just Eat PLC (LON: PLC) shares were up 3% at 625.60p as the online food takeway platform posted a 41% surge in third-quarter revenue.

READ: Just Eat’s investment in its delivery fleet expected to dent full-year profits

In AIM moves, Earthport plc (LON:EPO) shares fell 8.7% to 7.00p after the payments network operator said it will restate some fair adjustment values related to reporting errors at one of its sUBSidiaries. 

 

10.50a: Housing shares rise   

UK housing stocks were among the best performing during Thursday morning trade, with investors setting aside a downbeat report on British house prices.

The moves helped the FTSE 100 turn higher, flipping up 18 points at 7,146.

Annual house price growth in October was 1.6% compared with 2.0% growth in September, Nationwide said in a survey released Thursday. October’s print was the weakest since May 2013. Month-over-month, price growth was unchanged, compared with 0.2% in September, after accounting for seasonal effects.

A squeeze on household budgets and an uncertain economic outlook has hurt housing demand even at a time of historically low borrowing costs, and as unemployment levels sit at 40-year lows, said Nationwide.

The housing market may be relatively lacklustre over the coming months, hurt in part by poor performance in London and parts of the South East, said economic forecasting group EY ITEM Club.

“Consequently, we expect overall house price gains across the UK over 2018 will be limited to 1.5% on the Nationwide’s measure. At this stage, we expect a rise of around 2.5% in 2019, on the assumption that the UK and EU ultimately agree a Brexit 'deal', said Howard Archer, chief economic advisor to the EY ITEM Club. 

It appears investors pushed up shares of home builders on the back of the Times newspaper report that Britain reached a deal with EU officials to give UK financial firms access to EU markets after Brexit.

Shares of Barratt Developments PLC (LON:BDEV) gained 3.8% to 533p, Persimmon PLC (LON:PSN) charged up 4% to 2,385p and Taylor Wimpey PLC (LON:TW.) picked up 4.4% to 168.40p.

Banks stocks were also higher, with Royal Bank of Scotland PLC (LON:RBS) up 4.1% at 246p, Barclays PLC (LON:BARC) higher by 2.4% at 176.88p and Lloyds  Banking Group PLC (LON:LLOY) gaining 3.1% at 58.97p. 

 

9.45a: UK manufacturing activity slows 

UK blue-chips remained modestly lower in mid-morning trade Thursday after data showed UK manufacturing activity in October was at its slowest pace in more than two years.

HIS Markit/CIPS said their UK manufacturing purchasing managers’ index, or PMI, came in at 51.1 in October, a 27-month low. That’s short of expectations of a 53 reading, and down from September’s revised print of 53.6.   

“New orders and employment both fell for the first time since the Brexit vote as domestic and overseas demand were hit by a combination of Brexit uncertainties, rising global trade tensions and especially weak demand for autos,” said Rob Dobson, director at HIS Markit, in a statement.

The pound traded at US$1.289 after the data. Sterling had traded around US$1.290 before the release.

The FTSE 100 slightly pared its loss to 4 points at 7,118. The benchmark opened lower as sterling rose on a Times newspaper report that Britain may be granted a Brexit deal that allows financial firms access to the European Union’s single market.

At noon London time, the Bank of England will release its latest monetary policy decision. The BOE is expected to hold its key interest rate at 0.75%, and policymakers will also release minutes from the meeting and publish their Quarterly Inflation Report.

READ: No change expected from Bank of England on 'Super Thursday' despite Budget optimism

In equity trading, Royal Dutch Shell PLC shares (LON:RDSB) were down 2.5% to 2,438p following third-quarter results from the oil and gas heavyweight. The FTSE 100-listed company’s net income attributable to shareholders based on a current cost of supplies and excluding identified items climbed 37% to US$5.624 bln, shy of a consensus estimate of US$5.766 bln. Cash flow from operations surged to US$12.1 bln.

In the AIM market, shares of Tower Resources PLC (LON:TRP) stepped up 12% to 1.60p as the oil and gas explorer released a reserves report for its Thali licence, offshore Cameroon.

READ: Tower Resources surges as it releases reserves report for Thali licence

 

8.35am: Nevvy start for Footsie

Traders ignored the buoyant mood on Wall Street as the FTSE 100 made a nervy start to proceedings.

The index of blue-chip stocks lost 33 points to 7,095.23 ahead of the Bank of England’s interest rate decision, and inflation report.

The main depressant, ironically, was a good news story for UK PLC.

Sterling reacted positively to a report suggesting Britain may be granted a Brexit deal that allows financial firms access to the single market.

However, the resurgence of the pound wasn’t particularly helpful to some of the big beasts of the Footsie, which are huge dollar earners.

“Having finished October on a strongly positive note, equity markets appear to be losing some of that momentum ahead of tomorrow’s US payrolls report,” said Michael Hewson of CMC Markets.

“The rise in US markets was mostly driven by a decent rebound in tech stocks, though the sector still finished the month lower by about 8%.”

Replacement hip maker Smith & Nephew (LONSN.), one of those big dollar earners, actually led the large-cap index after its update on trading warmed the cockles – and prompted a 7% spike in the share price.

Not far behind was BT Group (LON:BT.A), which advanced 6% after it too surprised on the upside by raising earnings guidance.

Proactive news headlines:

Shares in Tower Resources PLC (LON:TRP) jumped after it unveiled a reserves report for its Thali licence, offshore Cameroon. The AIM-listed oiler said the report had identified gross mean contingent resources of 18mln barrels (MMbbl) of oil across the proven Njonji-1 and Njonji-2 fault blocks with low/best/high estimates of 5/15/34 MMbbls respectively and a development contingency probability of 80% on first phase and 70% on second phase.

MySQUAR Limited (LON:MYSQ) shares rose after the Myanmar-language social media, entertainment and payments platform revealed that, on 30th October 2018, MyPay Limited disposed of its remaining holding and so is no longer a shareholder in the company.

Kore Potash PLC (LON:KP2) shares gained after it confirmed that, further to its announcement on 30 October, the French Consortium of Engineering Companies have delivered the final volume of the Definitive Feasibility Study (DFS) documentation for the Sintoukola Potash Project (Kola), located within the Republic of Congo. The company said it therefore has a complete set of DFS documents and has commenced its review of this study and will update shareholders further when this is complete and the DFS is finalised.

Stobart Group Ltd (LON:STOB) said its regional airline, Stobart Air, has secured a deal to provide new aircraft, crew, maintenance, and insurance (ACMI) services to BA CityFlyer, the short-haul arm of British Airways.

Rose Petroleum PLC (LON:ROSE) is to drill the GV 22-1 well at its Paradox acreage in Utah “as soon as possible” after being given the green light from US authorities.

NetScientific PLC’s (LON:NSCI) portfolio company, Vortex BioSciences, has secured a global manufacturing agreement with German firm STRATEC Consumables GmbH to scale up production of its VTX-1 liquid biopsy platform.

AFC Energy PLC (LON:AFC) has updated on the progress with its first commercial order. It said it has conducted “initial engineering and supply chain preparedness work” in advance of finalising terms for the delivery of fuel cells to customer Southern Oil’s Gladstone Refinery in Queensland, Australia.

ANGLE PLC (LON:AGL) (OTCQX:ANPCY), a world-leading liquid biopsy company, has announced the appointment of Dr Jan Groen as a non-executive director with immediate effect. The firm noted that Groen has extensive board and executive level experience in cancer diagnostics, and he is currently president and CEO of MDxHealth, a Euronext listed molecular diagnostic company.

Metal Tiger PLC (LON:MTR) said that, further to its announcement on 18 July, it now expects that completion of the sale of the T3 project and the creation of the new exploration joint venture with MOD Resources will occur by mid-November, with the only outstanding condition precedent for completion being the demerger itself. The company also announced the appointment of Strand Hanson as its nominated adviser with immediate effect, and said SI Capital is the company’s sole broker with immediate effect.

MySQUAR Limited announced that on 30th October 2018 MyPay Limited disposed of its remaining holding and so it is no longer a shareholder in the company.

Midatech Pharma Plc (LON:MTPH) (NASDAQ:MTP), the R&D company focused on delivering innovative oncology and rare disease products to patients, announced that the proposed sale of Midatech Pharma US Inc to Kanwa Holdings, LP has now completed.

PCF Group Plc (LON:PCF), the parent of specialist bank PCF Bank, announced that its acquisition of Azule Limited, previously announced on 8 October 2018, has now completed following receipt of Financial Conduct Authority approval.

Tharisa plc (LON:THA), the dual-listed platinum group metals and chrome co-producer, has announced the appointment of Berenberg as the company's joint corporate broker with immediate effect. The group said Berenberg will work alongside the company's existing UK joint corporate brokers, Peel Hunt LLP and BMO Capital Markets.

Active Energy Group PLC (LON:AEG) confirmed that Richard Spinks has now formally stepped down from the firm’s board to focus on his other business interests including the group's sUBSidiary business, Timberlands International Ltd. The company noted that its board will now temporarily comprise of only two directors and said, as such, its management team are currently evaluating potential new directors with further announcements to be made in due course.

LIVE Company PLC (LON:LVCG) said it has held discussions with candidates on the appointment of a further independent non-executive director who would add public company experience to the board, with further details to be notified at the appropriate time. The revelation came as the company confirmed the appointments of Trudy Norris-Grey as an independent non-executive director and Simon Horgan as non-executive director with effect from today.

LNS, a shareholder with more than 10% of chrome producer Afarak Group plc (LON:AFRK), has clarified its position ahead of Afarak’s upcoming extraordinary meeting. LNS has argued for some time that because of liquidity constraints, particularly in the local Helsinki market, where Afarak is based, the company should offer to buy out its shareholders.

6.30am: FTSE 100 set to start in reverse gear

The FTSE 100 index is seen retreating at the start of a new month in spite of overnight gains by US and Asian markets, reflecting a jump by sterling on Brexit breakthrough hope and as traders await another Bank of England ‘Super Thursday’ plus a further big batch of UK corporate news.

Spread betting firm IG expects the blue-chip index to open around 30 points lower at 7,098 having jumped 92 points higher on Wednesday to finish a dismal October positively.

Overnight on Wall Street, the Dow Jones Industrials Average powered 231 points higher to close at 11,447.51, albeit off earlier stronger levels as a batch of upbeat company earnings boosted beaten down tech and industrial stocks.

And Asian markets followed the US higher as well, with Shanghai’s Composite index up 1.5% while Hong Kong’s Hang Seng gained 1.5%, putting aside worries over US/China trade tensions and global growth which drove markets down by around 10% overall in October.

Sterling stronger

On currency markets, the pound rallied against both the dollar and the euro - which weighed on the internationally-focused Footsie - with sterling lifted by a report saying Britain has secured a deal that would give its financial firms continued access to European markets after Brexit.

But gains were capped with the UK central bank set to announce its latest policy decision, post minutes from its Monetary Policy Committee (MPC) meeting and publish its latest Inflation Report all at midday today.

Economists at RBC Capital expect the MPC to leave the UK bank rate unchanged at 0.75% in November, with a unanimous 9-0 vote anticipated again as in September, having hiked rates by 0.25% back in August.

They said while the recent better-than-expected domestic growth numbers and a strengthening in wage inflation will have to be factored in, these are likely to be offset by concerns over weaker global growth and stalling Brexit negotiations.

Restructuring continues at BT as investors await new boss

On the corporate front, half-year results from BT Group PLC (LON:BT.A) will be a focus though the numbers will be overshadowed by the impending end of the Gavin Patterson era at the telecoms giant following news last week that he will hand over to Philip Jansen, the former boss of payments specialist, Worldpay at the end of January.

BT’s first quarter results saw adjusted profit before tax on an IFRS 15 accounting standards basis rise to £816mln, up from £791mln a year ago despite a fall in revenues.

That improvement came largely as a result of the company slashing costs as part of its big restructuring push.

Consensus expectations are for second quarter revenues to fall by 2.4% to £5.786bn, with adjusted underlying earnings (EBITDA) down 2.3% to £1.769bn.

Not so sure of Shell

‘Could do better’ was pretty much the City’s view of Royal Dutch Shell PLC’s (LON:RDSA) last set of results, so naturally, the market will be anxious to see signs of improvement in the third-quarter.

In the summer, Morgan Stanley downgraded its rating for Shell to ‘neutral’, moving away from a previously positive stance.

“FCF and gearing are still set to improve but no longer in a differentiated manner,” Morgan Stanley analysts said at the time.

“Dividend growth is now lagging peers, and the buyback has started but at a lower than expected pace. We feel our overweight case is no longer supported.”

New broom to deliver at Smith & Nephew

Newish Smith & Nephew PLC (LON:SN.) boss Namal Nawana was bullish about the artificial hips and knees maker’s health a few weeks after taking the helm, and investors will hope the firm’s interims on Thursday will back this up.

Although there is a tendency for new management to “kitchen sink” results – throw in every write-down and exceptional charge available – investors will be hoping that at the very least Nawana will reiterate full-year guidance for underlying revenue growth of between 2-3%, with margins at or above the 19.6% it achieved last year.

The consensus forecast is for Q3 organic sales growth of 2.7%. The new boss has vowed to streamline the operating model to reduce complexity, cut costs and improve the commercial model to accelerate top-line growth.

Takeda takeover looms for Shire

Drugs blue-chip Shire Plc (LON:SHP) will also announce its third-quarter numbers with the main focus to be on anything that could potentially cause a negative shareholder vote on the firm’s planned takeover by Takeda of Japan.

Earlier this week Takeda said it sell one of Shire's drugs in development to ease competition concerns as part of its bid to gain regulatory approval in Europe, so analysts at UBS think it will be hard for the Shire results to provide much new news on that topic.

The Swiss bank’s analysts estimate Shire’s total product sales of US$3,693mln and non-GAAP operating income of US$1.358bn.

Significant events expected on Thursday November 1:

Bank of England Policy meeting, inflation report

Interims: BT Group PLC (LON:BT.A), Royal Dutch Shell PLC (LON:RDSA), Smith & Nephew PLC (LON:SN.), Shire Plc (Q3) (LON:SHP), Indivior PLC (LON:INDV), LancaShire Plc (Q3) (LON:LRE) Trading updates: Just Eat PLC (Q3) (LON:JE.), Croda International PLC (LON:CRDA), Carpetright PLC (LON:CPR)

AGMs: Sky PLC (LON:SKY), Go-Ahead Group PLC (LON:GOG) Ex-dividends to clip 1.46 points off FTSE 100 index - Unilever plc (LON:ULVR) Economic data: UK manufacturing PMI report; US weekly jobless claims; US Challenger job cuts; US ISM manufacturing report; US construction spending

Around the markets:

  • Sterling: US$1.2851, up 0.7%
  • Gold: US$1,217.30, an ounce, up 5.0%
  • Brent crude: US$74.57 a barrel, down 0.5%

City Headlines:

  • Randgold Resources and Barrick Gold both raised their dividends ahead of shareholder votes on their proposed combination to form the world’s biggest goldmining corporation – The Times
  • Thomas Cook, which a month ago produced what one analyst described as “a stinker of a profit warning”, said that it would open 20 hotels by the end of next year – The times
  • General Motors beat Wall Street’s forecasts yesterday with a 25% jump in underlying third-quarter profit with the help of price rises for pick-up trucks and sports utility vehicles in the US – The Times
  • Shares of The Kellogg Company, the American breakfast cereal and snacks maker, fell by as much as 9.2% after the company said blitz of advertising and promotions is set to pull down full-year profit – The Times
  • Samsung reported 20% rise in year on year operating profit for the third quarter to $15.5 billion but warned of a slowdown to come – Financial Times
  • Falling sales and Brexit-related risk has pushed Jaguar Land Rover to launch a £2.5bn turnaround programme to cut costs and investment – Financial Times
  •  A disorderly Brexit could have “big implications” for the country’s finances, Robert Chote, Head of the Office for Budget Responsibility has warned MPs – Daily Telegraph
  • The Financial Conduct Authority will investigate the insurance industry for potential racial bias and discrimination over the data that companies use to set their prices. – The Guardian
  • Cuadrilla, which is seeking to become the first in the UK to start commercial fracking for gas, has warned the government that its regulatory system risks “strangling” the nascent industry – Financial Times

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