FTSE 100 up 101 at 7,081
Ceres Power surges on confirmation of talks over further investment by Weichai
Egdon Resources rises after production update from the Ceres field
The Footsie was just about holding on to a triple-digit gain in the last hour of trading although finishing above 7,100 looks a forlorn hope.
The FTSE 100 was up 101 points, or 1.45%, at 7,081 after the gains on Wall Street were not as scintillating as some had been expecting.
“Though a 340 point increase isn’t anything to sniff at, it is a decent whack lower than the 26,000-crossing 500 point surge teased at lunchtime,” said Connor Campbell at Spreadex, commenting on the Dow Jones early gains.
“Regardless, the Dow found itself at its best levels for around 3 weeks, investors relieved that the USA and China managed to agree to a trade war truce in Argentina, even if it only ends up lasting for 90 days.
“It must be said, however, that these gains are very much contingent on the whole thing not unravelling in the next few days and weeks, with the markets likely set to be sensitive to discrepancies between the countries’ differing accounts of what was agreed.
“The contextually disappointing US open resulted in a slight loss of momentum in Europe,” Campbell said.
In the first hour of trading, barely a handful of Footsie stocks were in the red; by the last hour, around one-fifth of them were.
On the mid-cap FTSE 250, around one-third of the constituents were lower on the day. The index was up 140 at 18,621, helped by the strength of resource stocks such as Kaz Minerals PLC (LON:KAZ), Premier Oil PLC (LON:PMO) and Ferrexpo PLC (LON:FXPO), all of which sported gains in excess of 6%.
Further down the food chain, Ceres – the Roman goddess of grain – was the watchword, after Ceres Power Holdings PLC (LON:CWR) rose 7.4% after it confirmed press reports it is in talks with Chinese engines giant Weichai Power regarding a potential further investment and Egdon Resources Plc (LON:EDR) climbed 14.8% after a production update from the Ceres field in the North Sea.
Ceres Power | Fully Charged https://t.co/y7b0nsl8X4
— Labour Bude&Stratton (@Labour4Bude) December 3, 2018
3.00pm: US markets open sharply higher
The Footsie was holding on to a triple-digit gain after US markets, as predicted, opened sharply higher.
The FTSE 100 was up 114 points, or 1.64%, at 7,094. Stateside, the Dow Jones average was up 329 (1.29%) points at 25,868 and the broader-based S&P 500 was up 28 (1.02%) points at 2,788.
In the wake of the thawing in relations between the US and China over the weekend, mining stocks were much in demand but elsewhere in the resources sector oil plays are also going well after Saudi Arabia and Russia agreed to curb output.
Brent crude for February delivery was up 4.2% at US$61.53 a barrel in afternoon trading.
“Russia and Saudi Arabia agreed over the weekend to continue the cooperation of managing supply of crude oil to the market which was initiated in late 2016 in the so called ‘Declaration of cooperation’ between OPEC and ten cooperating oil producers,” reported Bjarne Schieldrop, the chief commodities analyst at SEB, the Nordic corporate bank.
“No decision of any specific cuts has yet been made but the message was clear: ‘we’ll monitor the market situation and react to it quickly.’ While they may disagree on what is the right price to aim for they are all in agreement that they do not want global oil inventories to [be] rising back up again. Specific strategy and cuts will be communicated later this week when OPEC meets in Vienna on 6 December,” Schieldrop said.
“The key take away from all of this is that global oil inventories will not rise back up, the Brent Crude Oil price curve will not bend deeper and deeper into contango and the front month Brent Crude Oil will not dive lower to $55, $50, or $45/bl. Exactly what price range above $60/bl we’ll end up depends on the final decision, strategy and communication from OPEC+ at the end of this week,” the analyst said.
Oilfield support services provider John Wood Group PLC (LON:WG.) was the chief beneficiary among Footsie companies, rising 6.2% to 674.5p.
Heavy fuel users such as airline groups easyJet PLC (LON:EZJ) and British Airways owner International Airlines Group (LON:IAG) were, understandably, less enamoured of a sharply higher oil price and fell 0.1% and 0.2% respectively on a day when the Footsie was up 1.64%.
Premier Rachel Notley announced a mandatory oil production cut of 325,000 barrels (8.7%) starting in January. It's expected that the measure will help gain $4 a barrel. Right now Western Canadian is trading at $15 a barrel, 37 dollars less than West Texas. https://t.co/TFJComitVb
— CKKX-FM (@KIXFM) December 3, 2018
1.20pm: Gains pared ahead of US open
The UK’s top shares index has seen its gains pared ahead of what is expected to be a firm start to the US trading session.
The FTSE 100 was up 120 at 7,099, weighed down by GlaxoSmithKline PLC (LON:GSK), which shed 4% at 1,556.6p after it announced an agreement to buy US cancer drug maker Tesaro Inc (NASDAQ:TRO) for US$5.1bn, hot on the heels of announcing the US$3.8bn sale of its Indian Horlicks business to Unilever plc (LON:ULVR).
READ GSK to buy US cancer drug firm Tesaro after making a Horlicks with Unilever
In the US, the Dow Jones was expected to open around 414 points higher at 25,952 after positive developments at the weekend’s G20 meeting.
“The post-G20 celebrations held firm as Monday went on, while the pound abandoned its initial positivity as the month’s Brexit realities started to grip the currency,” commented Connor Campbell at Spreadex.
“With its miner sector overjoyed at the US-China trade war ceasefire, its oil stocks celebrating Brent Crude’s 4.5% rise (admittedly down from its 5.5% post-open peak) and sterling slipping into the red, everything was coming up roses for the FTSE,” Campbell continued.
Dean Popplewell, Campbell’s counterpart at Oanda, said: “Global equities have rallied overnight, alongside US Treasury yields, while the ‘big’ dollar trades under pressure after the US and China declared a temporary truce in their Sino-US trade war.
“No progress was made on key differences regarding intellectual property and forced technology transfers. The US has promised to see China buying more goods to narrow the trade gap, while China received reprieve on increased tariffs for the time being.
“Crude oil has rallied on optimism OPEC+ will address a glut in global supply later this week, while the EUR has found some support on news that the Italian government may accept a lower deficit target,” he added.
11.20am: The Footsie adopts holding pattern
The FTSE 100 was in a holding pattern in the last hour of the morning, as investors waited for Wall Street’s reaction to weekend events.
The blue-chip index was up 150 points at 7,130, some 15 points below its high point for the day.
The roller-coaster ride is set to continue on Wall Street today, with US index futures suggesting a sharp jump at the open off the back of apparent progress in terms of a trade deal between China and the USA,” said James Hughes, at AXI Trader.
“Presidents of the respective countries met over the weekend at the G20 summit in Argentina and whilst this discussion was supposed to be little more than a sideshow, by all accounts it turned into the main event. The US has committed no further tariff increases for 90 days whilst China has agreed to a string of purchases from across the Pacific. This good news spreads far beyond ties between Washington and Beijing however – it’s served up a slug of risk appetite which has in turn depressed the US dollar too, adding further upside for stocks,” he added.
Meanwhile, no UK economic data release is complete without some commentary from Dr Howard Archer at the EY ITEM club, and he has now weighed in on this morning’s manufacturing PMI data.
“While showing some improvement from October’s particularly weak survey, the November purchasing managers survey still points to the manufacturing sector having a challenging fourth quarter of the year.
“Specifically, the PMI improved to 53.1 in November after falling to 51.1 in October (the lowest level since July 2016) from 53.7 in September. In contrast, the manufacturing PMI had been as high as 57.9 in November 2017 (a 51-month high),” Dr Archer said.
“The November/October average of 52.1 for the manufacturing PMI is below the third-quarter average of 53.5, which was the weakest quarterly average since the third quarter of 2016. It was down from 54.1 in the second quarter of 2018 and 54.9 in the first quarter,” he continued.
“Manufacturers’ optimism weakened to a 27-month low in November, with concerns expressed over Brexit, the exchange rate and a slowing economy.
“Employment rose modestly in November after contracting in October for the first time since July 2016,” Dr Archer said.
Meanwhile, in the equity markets, the shares of fashion brand Ted Baker PLC (LON:TED) were in a bear-hug after an online petition was started over the weekend calling on staff to support a call to end alleged harassment.
The shares were down 12.4% at 1,599p after claims emerged that founder and chief executive Ray Kelvin has imposed a “hugging culture” on staff.
Is Ted Baker a Ferengi?https://t.co/VmJa6Lu3TW pic.twitter.com/mNROhjzDfz
— ianVisits (@ianvisits) December 2, 2018
A bear squeeze also appears to be in operation on the shares of Thomas Cook Group PLC (LON:TCG) after its profit warning last Tuesday.
The shares were down 19% this morning, marking the fifth successive day of decline; the shares currently trade at 24.4p, and have halved in price since the profit warning.
10.15am: FTSE 100 in consolidation mode
London’s leading stocks saw a slight pick-up in the wake of the UK manufacturing purchasing managers’ index (PMI) data.
The FTSE 100 was up 155 at 7,135, although the number of Footsie stocks in the red has now risen to 11 and includes two airlines – easyJet and IAG – and three house-builders – Taylor Wimpey, Barratt Developments and Persimmon.
The UK manufacturing PMI rose to 53.1 in November from October’s 27-month low of 51.1. A reading above 50 indicates expansion.
“The domestic market remained the prime source of new contract wins. Where an increase was reported, this was linked to new product launches and client stock-building. Output and new orders rose across the consumer, intermediate and investment goods sub-industries,” said IHS Markit/CIPS, the compiler of the index, in its commentary.
“The level of new export business dropped for the second straight month in November, the first back-to-back contractions since early-2016. Companies focussed on reduced client interest from overseas and ongoing Brexit uncertainties as the main factors underlying the latest decline in foreign demand. Only the consumer goods sector saw an increase in new export business,” it added.
Dutch finance house, ING, said that despite a slight improvement in the November reading, the challenges facing the sector are unlikely to fade over the winter.
“Interestingly, a slight rise in domestic new orders was the main driver of improvement, helped partly by 'client stock-building'. It's not immediately clear how much of this trend is down to Brexit, but we imagine at least some of it can be attributed to firms building up stocks as 'no deal' uncertainty rises. The question is – can this continue over the winter?” wondered ING.
“Certainly, it seems likely that we'll see greater signs of firms making contingency plans over the next few weeks, particularly if the government's deal is voted down in Parliament. Various surveys suggest that a large proportion of companies are yet to take firm action on Brexit. For instance, a recent CBI survey found that only 41% of firms had carried out some kind of contingency plans so far.
“That said, it's hard to see how far manufacturing firms can go in terms of stockpiling goods/components ahead of March. Warehouse space is already extremely limited, partly because of the growing prominence of internet shopping. According to Savills, the vacancy rate in London is just 3%, and we suspect it is likely to be more constrained for specialist or perishable goods which have more specific storage requirements,” ING added.
IHS Markit Eurozone Manufacturing PMI pic.twitter.com/1eHr4aCIhG
— RANsquawk (@RANsquawk) December 3, 2018
Among the mid-caps, Southend Airport owner Stobart Group PLC (LON:STOB) was heading in the wrong direction after it said its fourth quarter dividend would be 1.5p, compared to previous quarterly dividends of 4.5p.
The group has been funding dividend payments through the sale of non-strategic assets and the board decided that in future it would be better to spend the proceeds from disposals on investing to grow the business.
The shares fell 15.6p to 182p on the news.
Fellow FTSE 250 constituent, RPC Group PLC (LON:RPC), was also on the slide after it said private equity group Bain had withdrawn from discussions to buy the rigid plastics group.
Apollo Global Management is still interested in acquiring the company. Shares in RPC were down 25.4p at 691.4p.
9.15am: Footsie shoots higher
Happy Xmas (Trade War is Over), as the Plastic Ono Band never sang.
The FTSE 100 got off to a flying start, rising 148 to 7,129 after peace broke out in the tit-for-tat trade war between the USA and China.
The major beneficiaries are expected to be the miners, with the likes of Antofagasta PLC (LON:ANTO), Anglo American PLC (LON:AAL) and BHP Group PLC (LON:BHP) up 8.3%, 6.4% and 6.0% respectively.
Steel firm Evraz plc (LON:EVR) was up 7.5% while investors also showed plenty of love for luxury goods firm Burberry Group PLC (LON:BRBY), which was up 5.4% as China is one of its key markets – Mao Zedong is probably spinning in his grave as you read this.
Just four FTSE constituents were in the red: Royal Mail, BT, Taylor Wimpey and Vodafone.
Neil Wilson of markets.com said the trade truce was the second key ingredient to turn up that could spark an end of year rally.
“December is starting with a bang, with a de-escalation in Sino-US tensions positive for risk. Donald Trump tweeted yesterday that China ‘will reduce and remove’ tariffs on US auto imports, amid signs of progress on trade talks. It follows a more positive G20 meeting. The US will delay for 90 days any increase in tariffs to enable talks to take place. The US had planned to raise its 10% tariff on US$200bn of Chinese goods to 25% on January 1st. Some [may] be concerned that there was no official word from China in relation to auto tariffs, and that the two sides are saying different things about the meeting.
“Nevertheless, when both sides can claim they won, it’s usually good for sentiment. This is all shaping up to be positive for equities and other risk assets. Following the Powell put last week, this is the second key ingredient for a strong December rally for global equities,” Wilson said.
Proactive news headlines:
Faron Pharmaceuticals Ltd (LON: FARN) announced that Clinical Trial Application (CTA) to conduct a Phase I/II study with Clevegen, its wholly-owned novel precision cancer immunotherapy drug has been approved by the Finnish Medicines Agency (FIMEA).
Diversified Gas & Oil PLC (AIM: DGOC) told investors that results for 2018 will be “materially ahead of current market expectations”. The new guidance is based on the performance in the year-to-date, following the completion of two asset acquisitions earlier this year.
Mkango Resources Ltd (LON:MKA, CVE:MKA) told investors that the final batch of drill results from the 2018 drill programme, at the Songwe Hill rare earths project, has unearthed the highest grades to date. The company, in a statement, said that the results of the majority of the remaining holes (19 of 21) from the 10,900 metre drill programme saw significant zones of rare earths mineralisation grading above 1% total rare earth oxides (TREO).
Union Jack Oil PLC (LON:UJO) told investors that it has now completed its deal to acquire a 16.665% interest in the West Newton project, in Yorkshire. It comes ahead of an appraisal well drilling programme which is due to spud in the first quarter of 2019.
Shield Therapeutics PLC (LON:STX) has received the go-ahead to file for the US approval of Feraccru, its iron deficiency treatment. The AIM-listed company expects to hear shortly from the US Food and Drug Administration the date in 2019 it will complete its review of the drug.
BATM Advanced Communications Limited (LON:BVC) is to work with chip design giant Arm on solutions for the recently-launched Neoverse ecosystem, which serves the global internet infrastructure market.
Stobart Group Ltd (LON:STOB) said it was trading in line with expectations as it continues to progress its growth plans for its aviation and energy businesses.
Plastics Capital PLC (LON:PLA), the niche plastics product manufacturer, said its full-year performance will be ahead of last year, in line with expectations.
Ceres Power Holdings PLC (LON:CWR) has confirmed press reports that it is in talks with Chinese engines giant Weichai Power regarding a potential further investment in the AIM-listed company.
Active Energy Group PLC (LON:AEG) is to raise just under £1.5mln to kick-start its forestry operations in Canada. Last week, the company published confirmation that it had been awarded management contracts for two huge tracts of forest in Newfoundland and Labrador.
Powerhouse Energy Group PLC (LON:PHE) said it has raised £650,000 through a share placing to support the continuity and expansion of its commercial and engineering efforts.
Arix Bioscience Plc’s (LON:ARIX) portfolio company, Autolus Therapeutics PLC (NASDAQ:AUTL), has dosed the first patient in a Phase 1/2 clinical trial of its AUTO4 therapy for relapsed or refractory TRBC1-positive peripheral T cell lymphoma (PTCL).
ADES International Holding Ltd (LON:ADES) has completed the acquisition of eleven oil and gas rigs located in Saudi Arabia from US firm Weatherford International. In July, ADES agreed to pay Weatherford a total of $287.5mln for 31 rigs, eleven of which are in Saudi, twelve in Kuwait, two in Southern Iraq and six in Algeria.
Shares in W Resources PLC (LON:WRES) jumped in early trading Monday as it delivered the first shipment of tungsten concentrate from its La Parrilla mine in Spain.
Kibo Energy PLC (LON:KIBO) told investors that it has received a request from China based SEPCOIII for a further extension as it mulls a decision to potentially invest in the company. A previous extension was given in October and the AIM-quoted company said it would now hold a board meeting later this week to consider the request.
Metal Tiger PLC (LON:MTR) has returned to Greatland Gold PLC’s (LON:GGP) share register, buying shares in the market to amass almost a 0.5% stake in the Australia-focused gold, copper and nickel explorer.
Tekcapital PLC (AIM: TEK) said its wholly-owned portfolio company Lucyd Ltd has signed Richard Sherman, cornerback of the San Francisco 49ers NFL team, as its chief brand officer. The firm noted that Sherman will bring a large fan following and international recognition to the Lucyd brand.
Seeing Machines Limited (LON:SEE) has appointed Luke Oxenham as its new chief financial officer (CFO) with immediate effect.
6.45am: Markets set to shoot out of the traps
The FTSE 100 index is expected to shoot higher on Monday, recovering from Friday’s falls following strong gains by Asian markets after the weekend G20 meeting saw the US and China reach a truce on the current trade war.
Spread betting firm IG expects the blue-chip index to open around 107 points higher at 7,087 having shed 58 points on Friday.
Pre-weekend on Wall Street, the Dow Jones Industrials Average ended nearly 200 points higher at 25,538 on hope for the meeting, and US stocks futures soared 450 points higher on the news out of Argentina.
Meanwhile today in Asia, Hong Kong’s Hang Seng index jumped 2.4% while Japan’s Nikkei 225 index gained 1% encouraged by the reassurance out of the dinner meeting of the US and Chinese presidents.
Stephen Innes, Head of Trading APAC for Oanda commented: “So, with the immense weight of the global supply chain dynamic network on their shoulder, a tariff detente has emerged after a highly anticipated dinner.
“Both Presidents' XI and Trump have agreed to put on hold the menacing tariff increases expected to get imposed January 1, marking a significant de-escalation in trade tensions between the world's two biggest economies. Thankfully, for risk sentiment, the ‘dinner date of the decade’ ended with a sense of harmony rather than trade war discord.”
Short duration trade truce
He added: “The Whitehouse has subsequently stated that within the context of a 90-day window from December 1: ‘China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States. China has agreed to start purchasing agricultural products from our farmers immediately.’
“Alas, the truce is favourable but only in the short duration as the markets straw polls post G-20 are factoring in a 60% chance that trade war escalates and higher tariffs are potentially applied.”
On currency markets, the pound ticked higher against a weaker US dollar after the trade truce, but was lower against the euro with investors remaining cautious in the lead-up to the crucial House of Commons vote on Theresa May’s controversial Brexit deal due on December 11.
The economic calendar is fairly thin at the start of a new month, until the always important US jobs data is released at the end of the week, although the latest batch of purchasing managers indexes will provide some interest, kicking off with global manufacturing numbers today.
The corporate diary is also far from looking fat at the beginning of Advent, with the main interest likely to be on updates later in the week from blue-chip housebuilder Berkeley Group PLC (LON:BKG) and mid-cap fashion firm Ted Baker PLC (LON:TED).
Significant announcements expected on Monday December 3:
Interims: Plastics Capital Plc (LON:PLA), Omega Diagnostics Group Plc (LON:ODX), ULS Technology PLC (LON:ULS), UniVision Engineering Ltd (LON:UVEL)
Finals: Schroder European Real Estate Investment Trust PLC (LON:SERE)
Economic data: UK manufacturing PMI; US ISM manufacturing; US manufacturing PMI
Around the markets:
- Sterling: US$1.2781, up 0.2%
- Gold: US$1,266.10, an ounce, up 0.1%
- Brent crude: US$62.24 a barrel, up 0.4%
City Headlines:
- Theresa May will come under heavy pressure on Monday from opposition parties to publish the government’s legal advice on Brexit in the run-up to the historic Commons vote on the UK’s withdrawal agreement in eight days’ time – Financial Times
- The US and China agreed on a trade war ceasefire this weekend in Argentina amid warnings that a lasting peace will be hard to come by but giving global markets a temporary respite – The Times
- Ted Baker is expected to post disappointing sales this week amid pressures on the High Street and persistent uncertainty surrounding Brexit – Daily Mail
- British Gas owner Centrica is facing anger from its 11,000 engineers over cost-cutting plans for their pensions while leaders continue to receive multimillion-pound pay packages – The Guardian
- Royal Dutch Shell will set carbon emissions targets next year and link these to executive pay, yielding to intense pressure from shareholders – Financial Times
- The former marketing chief of Patisserie Valerie Nicola Hedley is suing the troubled bakery chain for £325,000 in a claim over the non-payment of bonuses that is critical of the company’s management – The Times
- Netflix has said that its British accounts are “under examination”, with the American digital streaming company becoming the latest technology giant to have its tax affairs scrutinised by HM Revenue & Customs – The Times
- Goldman Sachs is considering a special surveillance programme to monitor higher risk employees in far-flung locations to stem the fallout from the indictments of the bank’s bankers in 1MDB scandal – Financial Times
- A fresh banking crisis in Italy could spread across the Eurozone and eventually be transmitted to the UK economy through French and German banks, the Bank of England has warned – Daily Telegraph