FTSE 100 closes in red
Diageo offloads a cabinet of drinks brands
Trade worries, Brexit and Italy weigh on sentiment
FTSE 100 closed in the red as traders fret over European politics and trade uncertainty.
The UK blue-chip index finished down around 52 points at 7,053.
The FTSE 250, seen as a more telling measure of the state of the UK economy, finished down over 295 points at 18,811.
On Wall Street, the Dow Jones Industrial Average is down over 423 points at 25,565, while the S&P 500 is off around 37. The Nasdaq exchange is off 157 points.
"Stock markets are in the red heading into the close as political uncertainty is weighing on sentiment," said analyst David Madden, at CMC Markets.
"The Italian government are due to send their revised budget proposal to the EU tomorrow, but it seems like the coalition in Rome are going to stick to their guns. Lega and the Five Star Movement were voted into power for many reasons, and jolting the economy out of its stagnant state was one of them."
The analyst added: "Prime Minister May continues to be boxed in, as members of her own party are deeply divided over Brexit, and she has Northern Ireland’s DUP to content with too."
Top loser on Footsie was the cigarette giant British American Tobacco plc (LON:BATS), which lost over 10.6% to 2,692.50p after reports suggested the US government is considering banning menthol cigarettes.
BATS owns Newport, the largest menthol cigarette maker in North America, which contributes as much as 25% of the group’s annual profit.
14.05: Wall Street starts lower
As expected, US indices opened lower, but significantly further in the red than anticipated.
The Dow shed 178 points at 25,812 and the S&P 500 tumbled 22 points to 2,759.
In the UK, the FTSE 100 was plumbing new depths for the day, down 36 at 7,070.
“There’s still an ongoing debate as to whether the big slide in oil prices we’ve seen of late should be viewed as a cause for concern – moves like this are often a precursor for an equity market collapse – or whether this is simply the response to the unexpected number of export waivers which were provided to Iran in the wake on new sanctions being applied,” said James Hughes at AXI Trader.
“So long as rates are rising, then equities will end up on the back foot and the consequent rising value of the dollar will leave US exporters – and many emerging market economies – struggling as a result,” he added.
News that Diageo plc (LON:DGE) was selling off 19 brands, including one or two that people have actually heard of, left the shares little changed.
READ Diageo sells off 19 brands including Seagram’s whiskeys to Sazerac for US$550mln
Among the mid-caps, engineering services group Babcock International Group (LON:BAB) has, in the words of Russ Mould, the investment director at AJ Bell, come out fighting – eventually - after Boatman Capital issued a research note last month questioning the company’s financial health and the health of its relations with the Ministry of Defence.
“While these comments partially addresses some of the criticism from Boatman, one has to question why it has taken Babcock nearly a month to go public on responding to the bear raid.
“Boatman’s research note was issued in October when Babcock traded at 672p; its shares have since fallen by 10% in value,” Mould noted.
“There remain unanswered questions regarding Boatman’s allegations of cost overruns on several projects and potentially misleading margin forecasts in Babcock’s full year results in May. Plus there is the allegation that some of the senior leadership team are not fit for purpose.
“Babcock may have pacified its shareholders temporarily with today’s update, yet it has merely given itself a couple of weeks’ breathing space before the big showdown on 21 November when half-year results are reported,” Mould suggested.
The shares were up 14p at 614.4p.
Shares in online gaming software developer Playtech PLC (LON:PTEC) have been in a tailspin since a profit warning at the beginning of June but it recovered a little today as it issued an “in-line” trading update.
The July profit warning was occasioned by deteriorating revenues in Asia but these have now stabilised, putting some vim into the share price at 463.8p, up 2.9p on the day in a falling market but way below the 750p at which the shares traded before the profit warning.
Betting and gaming solutions giant Playtech said today that it expects to meet its full-year earnings targets after revenue from Asia stabilised in the period since June 30th.https://t.co/fANefOLxiL pic.twitter.com/CauSszKRqc
— Totally Gaming (@TotallyGamingHQ) November 12, 2018
2.15pm: London unlikely to receive a lift from US markets
US markets were expected to open lower at 2.30pm, following the trend in Europe.
The FTSE 100 was down 23 at 7,082.
In the US, the Dow Jones was expected to open at around 25,941, down from Friday’s close of 25,989.
The S&P 500 was tipped to open at around 2,775, down six points from Friday’s close.
AstraZeneca PLC (LON:AZN) was defying the trend, rising 97p to 6,269p, after it served up a double dose of good news.
READ AstraZeneca serves up a double dose of good news
It said the US regulator had granted a priority review for its new cancer treatment and told investors a phase III trial of its diabetes medication delivered impressive results.
Multiple big #pharma companies are developing new anti-obesity drugs including Novo Nordisk, Sanofi, and AstraZeneca and six drugs are expected to launch by 2026. This will cause significant changes in the #obesity landscape particularly in the US and 5EU https://t.co/Jpb3ufmP3x pic.twitter.com/5eotV3z7Di
— GlobalData Healthcare (@Healthcare_GD) November 12, 2018
11.45am: The Footsie relinquishes the morning's gains
The Footsie surrendered early gains by the end of the morning and there was little hope of US markets sparking a revival.
The FTSE 100 was down 9 at 7,096.
“The futures have the Dow dipping 50 or so points when the bell rings on Wall Street, keeping it under 26000 after the November Fed statement ended the index’s post-election momentum at the end of last week,” noted Connor Campbell at Spreadex.
Mining stocks were still going well but the prospect of the US regulator banning menthol cigarettes continues to weigh on BATs, down 9.5%, and IMPs, down 4.1%.
“Along with cigarette volumes shrinking, regulation is the other inevitable fact of the tobacco industry,” declared Nicholas Hyett at Hargreaves Lansdown.
“The acquisition of Reynolds gave BATS a dominant position in US menthol. That’s a segment that’s been in regulators’ sights for some time – thanks to its perceived status as a gateway for new smokers. The FDA are now said to be considering banning them altogether. While many menthol smokers would likely move over to non-menthol products, it would still be a major blow,” Hyett predicted.
“An ever more hostile regulatory environment might explain why BATS has decided to spend big on Next Generation Products like e-vapour and heated tobacco. These products are believed to cause less harm to users, but even here the regulator is creating waves – potentially banning flavoured capsules popular with younger customers,” he added.
Cardboard box maker Smurfitt Kappa Group (LON:SKG) was off 74p%, adding to Friday’s 90p fall, despite it revealing it had been reconfirmed as a member of the Ethibel Sustainability Index for the fourth year in a row.
9.45am: Most European indices retreat but the Footsie defies the trend
Most European indices were in the red in early deals but the Footsie was going its own way, pushed higher by resource stocks.
The FTSE 100 was up 23 at 7,128, with Rio Tinto PLC, up 3.4%, and BHP Billiton plc, up 3.1%, leading the advance.
In the oil sector, the titans BP PLC (LON.BP) and Royal Dutch Shell (LON:RDSB) were up 2.1% and 1.9% respectively after the crude oil price recovered a little this morning.
“The initial headlines coming out of the OPEC meeting in Abu Dhabi that Saudi Arabia has committed itself to lower production output should be enough to prevent the value of oil from falling any further, at least for now. This meeting is still ongoing and not scheduled to conclude until later on Monday, but it does appear at least on headline that the consensus is that the price of oil would benefit from less supply heading into 2019,” said Jameel Ahmad, the global head of currecy strategy & market research at FXTM.
On the subject of Abu Dhabi, Wood Group (John) PLC (LON:WG.) has secured US$53mln of contracts with ADNOC Onshore, a subsidiary of the Abu Dhabi National Oil Company.
With prescient timing, The Share Centre made the stock its share of the week.
“This week’s share of the week has recently been upgraded to a ‘buy’ following an increase in investing activity and contract awards owing to the recovery of oil prices,” revealed Graham Spooner, an investment research analyst at The Share Centre.
“With the group's activity normally weighted towards the second half, management believe that they are on target to deliver on their forecasts and the markets expectations on a return to net profits. Prospects for 2019 are improving, with major producers allocating more capital to expand capacity,” Spooner said in a note that showed every sign of having been written before this morning’s announcement of contract wins.
Wood shares were up 3.2%.
Wood Group wins 3 new contracts worth $53m from Abu Dhabi National Oil Company
— Mike van Dulken (@Accendo_Mike) November 12, 2018
If alternative energy is more your bag then an article on waste-to-energy company Powerhouse Energy Group PLC (LON:PHE) in Resource magazine might be worth a read.
The article covers the recent “Statement of Feasibility” by DNV, a global leader in technical assurance certification, that was accorded to PowerHouse’s DMG technology.
8.45am: Miners flourish as the Footsie opens higher
The FTSE 100 got off to a bright start, rising 50 points to 7,155.12 as a Brexit-hit pound gave a boost the blue-chip index’s overseas earners.
At the vanguard were the miners, led by Rio Tinto, up 3.9%, with BHP Billiton (LON:BLT) and Antofagasta (LON:ANTO) not far behind.
Hit hard at open was British American Tobacco (LON:BATS), which fell 9%, wiping around £7bn from the value of the business, after it emerged the US regulator may move to ban menthol cigarettes.
Imperial Brands (LON:IMB) fell 4.3% in sympathy, though its exposure to the American market is minor in comparison to BATS.
Away from the stock market, Saudi Arabia’s assertion that it may be prepared to rein in production provided the crude price with some succour, as Brent nudged up more than a dollar a barrel to trade above US$71.
“We’ve also seen a decent rebound in Brent Crude Oil prices at the start of the week after hitting a six month low on Friday, on speculation that OPEC might look to cut output in response to concerns about oversupply which has seen the price decline for five weeks in a row,” said Michael Hewson of CMC Markets.
“The Saudi oil minister said this morning that he saw a need to cut output by one million barrels a day from October levels.
“This appears to be in contrast to the Russian position where the current surplus appears to be being viewed as temporary.
“These differences of opinion would appear to suggest that any production cut still remains some way off and that while we may see some sort of rebound in the short term the longer term bias appears to have shifted to the downside.”
6.33am: Footsie called higher
The FTSE 100 look set to get off to a strong start with the effects of a Brexit-weakened pound expected to give the benchmark a boost.
The spread betting firms are predicting the blue-chip index will advance around 49 points at the open to 7,154.34.
“A weekend full of Brexit headlines dragged on sentiment for the pound overnight,” said Jasper Lawler of London Capital Group.
“The pound fell over half a percentage point, tumbling to an 11-day low.
“Sterling will remain under pressure particularly as November 21st moves into sight; the date which the Brexit Secretary touted not so long ago as a possible agreement date, which is now looking extremely unlikely.”
It is reporting seasons for the house builders this week with updates from Persimmon (LON:PSN), Taylor Wimpey (LON:TW.) and Bovis (LON:BVS) scheduled.
- Pound worth US$1.286
- Gold worth US$1208.40 an ounce, down 40 cents
- Brent crude changing hands for US$71.53, up US$1.35
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