FTSE 100 index closed lower
But US stocks ahead
Eyes on US mid-term results
FTSE 100 joined other European benchmarks to close lower Tuesday, but Wall Street shares are gaining.
The UK blue-chip index lost over 63 points at 7,040, while FTSE 250 also fell, dropping around 20 points at 19,043.
"Surprisingly London traders have been more cautious than their US peers who are awaiting the results of the midterm elections due later tonight," said Fiona Cincotta, at City Index.
"The vote will decide on whether the two US legislative houses remain Republican, like the President, or turn Democrat. The first results for the key swing states are expected around 10pm Eastern time and will colour the trading day Wednesday.
"For all of President Trump’s threats to his foreign trading partners his domestic economic decisions have injected the US stock markets with some vigour, particularly the massive tax cutting programme.
"A change in the texture of Congress would hamper his capacity to push through decisions that require legislative approval, causing concerns for businesses. However, some dark clouds are already gathering on the economic horizon, as seen by the massive selloff in stocks and bonds in October."
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US markets confounded expectations by heading higher at the outset, after which the FTSE 100 trimmed some of its losses.
The FTSE 100 was down 46 at 7,058.
Packaging company DS Smith PLC (LON:SMDS) took over from AB Foods as the best performing blue-chip.
The stock rose 2.4% to 389.5p as investors warmed to the company after an upbeat trading statement this morning.
Peel Hunt described it as “a typical DS Smith update statement with no numbers but plenty of adjectives”. It reiterated its ‘buy’ recommendation and 585p target price, saying the projected price/earnings ratio “just says buy me”.
"In the recycling industry, things have actually not changed that much. Is the big change still ahead of us?" - Mr Behr/DS Smith; #EPRC2018
— EUWID Pulp and Paper (@euwidpaper) November 6, 2018
British Airways owner International Cons Airlines Group (LON:IAG), or (bafflingly) IAG for short, sneaked out some traffic statistics for October at 3.00pm.
Group traffic in October, measured in revenue passenger kilometres, increased by 6.6% year-on-year, while group capacity measured in available seat kilometres rose by 6.7%.
The shares were down 0.1% at 613.4p, which in a market down 0.7% counts as a decent result.
1.35pm: Turn-out for US mid-term elections looks like it might be high
As the start of trading on the US draws closer, so the pundits are prognosticating – they can’t touch you for it – on the likely results.
“US midterm elections could produce an unexpected win for Trump that galvanises his presidency and renews the bull market for a fresh tilt at all-time highs for US equity markets,” suggested Neil Wilson at markets.com.
“Current polling suggests that the Republicans will retain control of the Senate, while the Democrats will take the House. Polling suggests strong momentum for the Democrats, with only the rotation cycle of the Senate seats ensuring that the GOP [Grand Old Party, i.e. the Republicans] will hold the upper house,” Wilson continued.
Wilson alludes to the well-known reluctance of Trump supporters to admit their allegiance to pollsters and also notes that the Republican party has a geographic advantage – a more effective distribution of votes across the country.
“This means markets are arguably not pricing in the chance that the GOP retains both houses, a scenario that would give Trump a free hand to proceed with his agenda. This would likely stoke the bullish-equities, bullish-USD, higher-yield story. It would also ensure he doubles down on his fight with China on trade.
“A GOP clean sweep would support further deregulation and tax-cutting measures, which will be positive for stocks and the dollar. It would be the necessary catalyst for this decade-old bull market to have one last hurrah, pushing back up to 27k and beyond on the Dow and potentially 3k on the S&P 500 before the inevitable correction and bear market,” Wilson declared.
Rachel Winter, a senior investment manager at wealth management firm Killik & Co, said president Trump uses the stock market as a barometer of his own success so he has clearly been keen to keep it at a high level.
“His plans for further expansionary fiscal policy, for example additional tax cuts and more infrastructure spending, would also have positive consequences for the stock market,” she said.
"There is concern that a Democrat majority in the House would cause governmental gridlock, making it difficult to pass further legislative changes. Further tariffs on China might be difficult to implement, which would potentially be good for emerging markets. That said, Democrats have long been critical of the trade imbalance between the US and China, and many leading Democrats applauded Trump’s tariffs," Winter observed.
“Will they, won’t they? No, I’m not talking about a Spice Girls reunion, rather whether the Democrats can win control of the House of Representatives,” quipped David Roberts, the co-manager of the Liontrust Strategic Bond Fund.
“Indeed, opinion polls point to a blue [i.e. Democrat] victory, and history says [an] incumbent President does badly in mid-term. Normal thinking says such a result would be a small negative for risk assets – confirming support for tax and spend policies and ‘bigger’ government,” Roberts said.
Polls just opened here in Arlington and there is already a line out the door - that’s turnout #MidtermElections2018 pic.twitter.com/9V4sxl8PCt
— Brendan Quinn (@Mighty_Quinner) November 6, 2018
“Normally volatility and trading increases ahead of major events. Investors and traders either want to add to or reduce existing positions, especially when the result seems a near foregone conclusion,” Roberts asserted, before suggesting that recent election results have reminded us that predicting election results is difficult.
“Forecasting market reaction to outcomes is equally difficult – equity markets plunge and rally anyone?” he asks.
“So, perhaps a lack of volume or volatility at its lowest for several weeks suggests we have learned our lessons. Perhaps we just admit we don’t understand or perhaps, just for once, markets truly are looking through short term noise and thinking of the long term?” he concluded.
Finally, spread betting firm Sporting Index has predicted the outcome of the Senate elections, with electoral shocks across key states set to see the GOP triumph.
“We expect it will be an incredibly tight midterm election, and it wouldn’t be the most surprising outcome if the Senate ends up without a majority. The recent galvanisation of voter bases from both sides mean it should be an election with higher voter turnout that normally expected, and marginal gains could have huge implications for American politics,” said Ed Fulton, the trading spokesman for Sporting Index.
___/ **** \=========# | ☻ ☻ ☻ ☻
;|TRUMPCARAVAN :\ | ☻ ☻ ☻☻ ☻ ☻
..(@=@=@=@=@=@) | ☻ ☻☻ ☻ ☻ pic.twitter.com/9b8HtL4A3B
— Gb Ⓕⓡⓔⓔ Ⓘⓝⓣⓔⓡⓝⓔⓣ???? (@aka_Gb) November 6, 2018
On Wall Street, the Dow was expected to open at around 25,453 and the S&P 500 at 2,735 – down 8 and 2 points respectively.
In the UK, the FTSE 100 was losing ground fast, with the fall having risen to 71 points at 7,033.
Someone’s worried about the #MidtermElections2018 pic.twitter.com/KWiHLGdejT
— Monzon (@_monzon322) November 5, 2018
11.15: Footsie treading water
US markets were tipped to open lower ahead of today’s mid-term elections, mirroring the soft start in London.
Spread betting quotes point to the Dow opening at around 25,435, down 26 points.
Meanwhile, in London, the FTSE 100 was down 23 at 7,080 and showing signs of seizing up.
Morrisons and Associated British Foods have caught the eye of investors with trading updates this morning but they were not the only blue-chip companies to lob out statements; Imperial Brands PLC (LON:IMT) and Randgold Resources Ltd (LON:RRS) have issued full-year results and third-quarter results respectively.
The former surrendered early gains to trade 24p lower at 2,619.5p after it posted a 1% rise in full-year revenue.
The tobacco firm saw its basic earnings per share (EPS) fall by 2.7% to 143.6p, with earnings affected by the Palmer & Harvey business write-off and currency factors; stripping these out saw adjusted EPS up 5% to 272.2p.
Had the pleasure of sitting down with #ImperialBrands CEO Alison Cooper this morning to talk through the group's FY results. She told me they are going "all in" on vaping products. Will this be enough to boost investor sentiment toward the tobacco giant? https://t.co/rq24YZXkMu
— Julianna Tatelbaum (@CNBCJulianna) November 6, 2018
As for gold miner Randgold, it was 60p higher at 6,400p after reporting a 25% increase in profit to US$73.2mln, helped by a 16% reduction in cash costs per ounce to US$586.
Barrick Gold shareholders approve merger with Randgold Resources to create the world’s biggest gold miner.
— Mike van Dulken (@Accendo_Mike) November 6, 2018
10.00am: BRC's retail sales monitor reveals another difficult month for retailers
The final quarter of the year is a crucial one for retailers and it has not got off to a great start.
The latest retail sales index from the British Retail Consortium (BRC) revealed that retail sales were up just 0.1% year-on-year on a like-for-like basis.
“October kicks off the all-important golden quarter, with some retailers earning the majority of their annual profits in these months alone, but with October's like-for-like sales flat-lining at 0.1%, it was a bit of a non-starter," said Paul Martin, the UK head of retail at KPMG.
Nick Bubb, the self-styled legendary retail analyst, said the LFL sales outcome was expected to be “flattish”.
“The exact Food/Non-Food LFL sales split is, as usual, buried in the 3-month moving averages (of +1.2% and -1.0% respectively), but the Food Retailers look to have slowed to little more than +0.5% LFL last month and that would imply that Non-Food was surprisingly similar, only fractionally down LFL overall in October,” Bubb said.
“That Non-Food performance last month is not at all bad, given how bad some big-ticket spending areas were, helped by a pick-up in clothing, even though half-term was more spread out than last year (delaying some sales into November this year),” he added.
October sees another month of anaemic #retail #sales growth. Brighter weather and the anticipation of Black Friday sales dampening demand. To see which categories made the most of the conditions, read our report with @kpmguk here:https://t.co/0HTBAgVXmE pic.twitter.com/82c1TFnRvp
— BRC Retail Insight (@BRCDataSpace) November 6, 2018
Coincidentally, retailers topped and tailed the FTSE 100, with Morrisons down 5.5% and Primark-owner Associated British Foods up 2.6%.
The FTSE 100 was down 25 at 7,078.
9.30am: Investors sit on their hands
There is every chance that the Footsie will not stray far from its overnight level today as the US midterm elections loom closer.
The FTSE 100 was down 12 at 7,092, with supermarket group Morrison (Wm) Supermarkets PLC (LON:MRW) leading the retreat after its third-quarter trading statement.
“The summer consumer glut has worn off at Morrisons, and leaves recent performance looking more pedestrian by comparison. Sales were behind expectations, with transaction growth in Morrisons supermarkets barely visible, and so the market has taken a red pen to the share price,” said Laith Khalaf at Hargreaves Lansdown.
The shares were off 4.4% at 246.15p, having dipped to 242.95p at one point.
“Sales are still heading in the right direction, but it’s the wholesale business holding growth up. Selling goods to the likes of McColl’s newsagents and Amazon is lower margin, so doesn’t feed through to the bottom line quite so well, though strategically this business adds another string to the Morrisons bow,” Khalaf said.
Morrisons completes third year of positive like-for-like growth https://t.co/d42Qbqy0Jo pic.twitter.com/M9E9fYKspd
— Directshopfittings (@directshopfit) November 6, 2018
At the other end of the Footsie greasy pole was Primark owner, Associated British Foods PLC (LON:ABF), which rose 40p to 2,428p following its annual results.
Liberum Capital Markets said AB Foods’ earnings per share beat the consensus expectation by 6% but the outlook was mixed.
It reiterated its ‘buy’ recommendation and 3,500p target price.
8.40am: Early slip by Footsie
The FTSE 100 was in a holding pattern ahead of the US mid-term elections as it nudged 12 points lower to 7,092.41 in the opening half hour of trade.
“The Democrats are broadly expected to flip the House of Representatives, whilst the Senate is expected to remain in Republican hands,” said Jasper Lawler of London Capital Group.
“However, the race in the House is very tight and could swing either way.
“In early trade this morning the dollar is trading higher versus the Japanese yen indicating that there is not much fear in the markets surrounding these elections despite it being the biggest political event of the year.”
On the market here in the UK, stock in the Bradford-based grocer Wm Morrison (LON:MRW) was marked down 3.8% after it revealed its sales growth had slowed now that the World Cup effect and the impact of the hot summer have dissipated.
Tesco (LON:TSC) receded in reaction to the update from its rival.
Trading statements from Primark owner Associated British Foods (LON:ABF) and cigarette-maker Imperial Brands (LON:IMB) were well received, with shares in the respective companies up 2.3% and 2.2%.
Among the mid-caps, bookmaker William Hill (LON:WMH) stood out after it sounded the earnings alarm, downgrading its forecast for full-year profit following a slowdown in business at its high street betting shops.
The shares tumbled over 7%.
Proactive news headlines:
A ground-breaking green energy pilot involving ITM Power PLC (LON:ITM) has been given the green light. The HyDeploy project will blend up to 20% hydrogen into an existing natural gas network.
SIMEC Atlantis Energy Limited (LON:SAE) has awarded the front-end engineering and design (FEED) contract for its Uskmouth power plant conversion project to a consortium consisting of WSP UK and RJM.
TLOU Energy Ltd (LON:TLOU) updated investors on its field operations in Botswana where it is advancing the Lesedi coalbed methane project. It told investors that the vertical Lesedi-3P well had now been drilled down to its total depth of 575 metres.
KRM22 PLC (LON:KRM) has inked a partnership deal with Vector Risk, a market and credit risk solution provider, to provide software for its Global Risk Platform (GRP).
Cabot Energy PLC (LON:CAB) has revealed a 26% increase in proved and probable reserves as it released its annual inventory report. It comes as a result of revised studies and documentation of the subsurface and surface facilities.
Curzon Energy PLC (LON:CZN) has unveiled a number of management changes, with the most significant being the promotion of non-executive director Scott Kaintz to the position of chief executive.
Pan African Resources PLC (LON:PAF) produced 37,729 ounces of gold during the first quarter of the 2019 financial year. And chief executive Cobus Loots struck an optimistic tone when commenting on the likely performance for the rest of 2019.
Caledonia Mining Corporation PLC (LON:CMCL) is to move ahead with the acquisition of a further 15% of the Blanket gold mine in Zimbabwe from local investment group Femiro. Separately, Caledonia has moved to reassure investors that the ongoing shortage of foreign exchange in Zimbabwe has not impacted operations at Blanket. The company said it is in touch with the highest levels of government in Zimbabwe, and that the matter is receiving urgent attention.
AfriTin Mining Limited (LON:ATM) has started drilling at the Uis in Namibia to firm up the resource ahead of the planned re-opening of the tin mine. Anthony Viljoen, chief executive, said the historical database originally created for Uis is extensive with a high level of detail and will be used to speed up the validation drilling and exploration programme.
Kazera Global PLC (LON:KZG) has now drilled and assayed 360 cores with further cores and channel sampling sent for assay at the Namibia Tantalite mine in Namibia.
6.20am: Subdued start expected
The FTSE 100 looks set for a subdued start ahead of voting in the US mid-term elections, which should provide a litmus test of the Trump presidency.
“If the Republicans do well, then many will conclude that “Trumpism” is here to stay,” said the Financial Times.
“The rest of the world would have to make a long-term adjustment to an America that is highly protectionist and suspicious of treaties on principle — whether they deal with climate change, arms control, refugees or migration.”
In London, the index of blue-chip shares will open 4 points higher at 7,107, according to the spread betting companies.
This after a mixed session in Asia where Japanese stocks were buoyant, but where the Chinese market traded lower.
Wall Street up almost 200 points
On Wall Street, meanwhile, the Dow Jones closed up almost 200 points. But at least one well-respected commentator is keeping a weather eye on the US market.
Michael Wilson, Morgan Stanley’s chief equity strategist, said over the weekend: “As we enter November, the good news is that after the last holdouts in US small caps and growth stocks have finally been taken to the woodshed, the rolling bear market arguably has finished its work, or at least the heavy lifting.
“We concur, but we have no illusions that we’re out of the woods yet on the growth slowdown next year and real earnings risk we have written about.”
Back in the UK, updates are slated from cigarette maker Imperial Brands (LON:IMB), Primark owner Associated British Foods (LON:ABF) and supermarket giant Wm Morrison (LON:MRW).
Around the markets:
- Pound worth US$1.3050
- Gold worth US$1,231.50 an ounce, down 80 cents
- Brent crude changing hands for US$72.95 a barrel, down 22 cents
City Headlines:
Financial Times
- UK warns 5G networks must consider suppliers carefully
- Carlyle scales back UK deals over Brexit uncertainty - lack of clarity on exit from EU keeps investors wary of investing, says co-founder
- Trump in last-ditch push to retain Senate majority
- Concerns about limit to trucks set to have permission to enter EU
- MoD faces £15bn budget shortfall, warns UK spending watchdog
Times
- Big Short’s Eisman bets on decline of UK banks
- Growth can wipe out deficit, says Hammond
- A runaway BHP Billiton train loaded with thousands of tonnes of iron ore travelled more than 90km across Western Australia without a driver before being deliberately derailed
- We’ll slash tariffs and trade with the world, vows China
Daily Telegraph
- Car sales dip as new emissions regime puts brakes on the market
- Services slowdown points to weak GDP growth
- Electric scooter sharing start-up Bird launches first UK service in the Olympic Park
- Anglo-Australian mining company BHP Billiton is facing a multibillion-pound lawsuit over the failure of the Samarco dam in Brazil in November 2015
Guardian
- Theresa May is to face her cabinet at a critical point in the Brexit negotiations after the Irish premier told her he could not allow the UK to dictate the terms of any backstop
- Ryanair was 'woeful', say lawyers for racially abused passenger
- Lloyds Banking Group to add 2,000 jobs in digital shake-up - bank to cut 6,000 existing positions but create 8,000 new roles
Independent
- A new type of occupational pension scheme which pools workers’ investments into one super-sized pot has been given the green light by the government