FTSE 100 index closes lower
Wall Street opens sharply lower after Apple profit warning
Next is top riser on Footsie
FTSE 100 finished in the drink on Thursday having been up marginally earlier as new year worries about the state of the global economy persist and Wall Stret shares floundered.
The UK blue-chip benchmark finished around 41 points lower at 6,692, while the FTSE 250 closed down over 147 points at 17,438.
Big cap miners were among some of the biggest laggards. Retailer Next (LON:NEXT) was top riser on Footsie, adding over 14% to 4,350p.
It came as the clothing company lowered the full-year profit guidance, but not as badly as expected.
On Wall Street, the Dow Jones Industrial Average is down over 429 points at the time of writing, while the tech heavy Nasdaq index is off nearly 123 points.
The German DAX lost 163 points and the French CAC 40 lost nearly 78.
David Madden, market analyst at CMC Markets, noted: "Stock markets in Europe continue to be volatile.
"The morning session saw a large move to the downside, but we have seen some markets recover. Late last night, Apple reduced their first-quarter revenue forecast due to weaker sales in China.
"In the early hours of Wednesday morning, China posted disappointing manufacturing figures, so for the past two sessions investors have been worried about a slowdown in the Chinese economy."
3.45pm: FTSE 100 hangs on in there
The top-shares index was clinging on to meagre gains towards the end of the trading session.
The FTSE 100 was up 10 at 6,744, helped in part by sterling’s weakness.
The mid-cap FTSE 250, which tends to have a lower proportion of foreign currency earners, was down 39 at 17,548.
FTSE 250 constituent Wizz Air PLC (LON:WIZZ) defied the trend, rising 1.3% to 2,788p after revealing a 22.7% jump in passenger numbers in December, while the load factor rose to 88.8% from 87.5%.
2.45pm: Retailers drive - well, chivvy - the Footsie forward
The Footsie has found forward gear and somewhat unusually, retailers are leading the advance.
The FTSE 100 was up 4 at 6,738, despite US indices opening sharply lower after Apple’s profit warning after the bell last night.
Nobody could have seen this coming:
Nov 21: Largest Apple Supplier Planning Billions In Cost Cuts On iPhone Woes
Nov 19: Apple Slashes iPhone Production, Unleashing Supplier Turmoil
Nov.13: Apple Sells 15 Million Fewer iPhones On Weaker Chinese Demand
— zerohedge (@zerohedge) January 3, 2019
The Dow Jones and the tech-heavy NASDAQ Composite were both down 1.5%, while the S&P 500 was down 1.1% (27.5 points) at 2,481.4.
Back in Blighty, the top four performers on the Footsie were all retailers, with Next PLC (LON:NXT) top dog, up 5.9% at 4,422p, after its Christmas period trading update.
In close pursuit were supermarket chain, Tesco PLC (LON:TSCO), up 3.8%; Primark owner, Associated British Foods plc (LON:ABF), up 2.3%; and DIY retailer, Kingfisher PLC (LON:KGF), up 2.0%.
“Most investors would not expect to see a 6% rise in the share price of a firm after it has just forecast a fourth consecutive drop in annual profits, but that is what they are getting with Next today,” said Russ Mould, AJ Bell’s investment director.
“Shareholders are shrugging off guidance from the retailer’s boss, Lord Simon Wolfson, that profits will drop very slightly in the years to January 2019 and January 2020, to £723 million and then £715 million, from the £726 million made in 2018.
“They are doing so because Next has provided no nasty surprises regarding Christmas trading, despite the downbeat news flow which has coloured so much of the commentary issues on the festive season so far (notably HMV’s return to administration, weak foot fall numbers on the High Street and the often alarming level of discounting visible in shop windows),” Mould added.
Housebuilders shrugged off a report analysing Land Registry data that suggested there was a 2.3% drop in the number of transactions completed in England and Wales in 2018.
Among the 374 local authority areas, only 133 have seen an increase in the number of homes sold, according to modular smart homes provider, Project Etopia.
That analysis cut little ice with investors who chased up the price of Barratt Developments PLC (LON:BDEV), Taylor Wimpey PLC (LON:TW.) and Persimmon PLC (LON:PSN) by around 2%.
12.30pm: Footsie back above 6,700 on see-saw day
The FTSE 100 moved back above 6,700, despite expectations of US markets falling out of bed after yesterday evening’s profit warning from Apple.
The FTSE 100 was down 17 at 6,717, with Burberry and Evraz still the weakest blue-chip performers on concerns that Chinese economic growth is slowing down.
“Tech giant Apple sent alarm bells ringing last night after it cautioned the market that sales figures would disappoint. It is activity both at home and across the Pacific in China that is biting, and the implications of this saw US index futures plummet shortly after the market closed,” reported James Hughes at Axi Trader.
“With Democrats set to assume a majority in Congress today, the political situation in the US seems unlikely to offer much relief to investors either; however, a proposal to reopen a number of divisions of the government – which has been closed for almost two weeks following budget deadlock – may be sufficient to provide at least a modest degree of support for stocks, assuming it can succeed,” Hughes added.
Axi Trader said it is calling the Dow Jones to open 346 points lower at 23,000 and the S&P 500 38 points softer at 2,472.
Apple’s profit warning has put the US dollar into a spin while sterling has also taken a knock from underwhelming data on construction activity in December.
All of the above may well be music to the ears of Alpha FX Group PLC (LON:AFX), which provides foreign exchange services to the corporate and institutional market.
Alpha FX’s shares were up 5.3% at 595p after an upbeat trading statement in which it revealed that earnings for 2018 should be ahead of current market expectations.
Vectura Group PLC (LON:VEC), up 13.3% at 80.2p, was another small cap that cheered the market with a trading update.
The drug delivery device maker expects revenue to be in line with current market consensus expectations and underlying earnings (EBITDA) to be materially above them.
11.15am: Construction PMI fails to excite
The Footsie traded sideways after some lacklustre data from the construction sector.
The FTSE 100 was down 24 at 6,711.
The construction purchasing managers’ index (PMI) fell to a three-month low of 52.6 in December after climbing to a four-month high of 53.4 in November from 53.2 in October and a six-month low of 52.1 in September. Economists had predicted a December reading of 52.6. A level of 50.0 indicates flat activity.
“The fourth quarter average of 53.1 was modestly below the third-quarter average of 53.6, when hard data from the Office for National Statistics (ONS) shows construction output expanded 2.3% quarter-on-quarter. Construction activity clearly benefited in the second and third quarters from making up some of the activity lost in the first quarter to the severe weather, but help from that source has probably now come to an end," suggested Howard Archer, the chief economic advisor to the EY ITEM Club.
“Construction activity in December was primarily held back by weaker commercial activity which was at a seven-month low. House building growth also dipped. This outweighed civil engineering activity picking up to a 19-month high,” he added.
10.45am: Chinese economy concerns drag down Evraz and Burberry
The Footsie’s attempted rally quickly ran out of steam, with investors worried over how Apple’s profit warning will affect sentiment in the US.
The FTSE 100 was down 32 at 6,702.
“Stocks in Europe are lower this morning after Apple lowered its first-quarter revenue guidance last night,” noted David Madden at CMC Markets.
“The tech company warned that sales in China are slowing, and that coincided with the recent fears that China’s economy is cooling. The announcement from Apple triggered a decline in US index futures, and it hurt Asian equity markets too. In recent months there have been concerns that global growth is under threat, and the report from Apple adds weight to that argument,” Madden said.
"The phenomenal smart phone era, a period that made Apple the world's richest company, is winding down. That isn't news. It's just happening more quickly than Apple had anticipated." For more analysis from @DaveLeeBBC on Apple, take a look at our story https://t.co/ykbeYBvFaa pic.twitter.com/Sq8xpSeneH
— BBC Business (@BBCBusiness) January 3, 2019
The UK has no counterparts to Apple but it has plenty of companies that are exposed to the Chinese economy, and that includes steel maker Evraz plc (LON:EVR), down 4.8%, and the luxury goods maker Burberry PLC (LON:BRBY), down 4.7%.
#Apple to rebound in 2020. 5G-capable iPhone to help break lengthening smartphone replacement cycle, but this will give Apple only a brief respite. 10 years on, the iPhone needs a new form factor and a new reason for customers to buy. #FitchSolutions View. pic.twitter.com/IS1ZMcZJrE
— Andrew Kitson (@kitsonbmi) January 3, 2019
Elsewhere among the Footsie losers, platinum refiner Johnson Matthey PLC (LON:JMAT) was down 53p to 2,670p after Deutsche Bank to 3,700p from 4,500p.
In other broker action, Liberum responded to Next’s trading update by upgrading the stock to ‘buy’ from ‘hold’, with a 6,100p target price, while UBS stuck with its ‘buy’ rating but cut its price target to 6,000p from 6,600p.
9.45am: Blue-chip index rallies
The Footsie was beginning to right itself after falling out of bed at the outset.
The FTSE 100 was down 13 at 6,722, having fallen as low as 6,685 at one point.
Fashion firm Next PLC (LON:NXT), up 3%, was leading the fightback after a better-than-expected trading update that also prompted buying interest in Primark owner Associated British Foods plc (LON:ABF), up 1.4%, and Marks and Spencer Group Plc (LON:MKS), up 1.3%.
Next PLC xmas trading is not too shabby despite all the doom and gloom around. Full price sales up 1.5% & its profit guidance for the FY only nudged down a touch from £727m to £723m because of higher online costs & higher sales of slightly lower margin gifts and beauty products
— Deirdre Hipwell (@DeirdreHipwell) January 3, 2019
“Retail is currently about survival of the fittest and Next is certainly looking like one of the healthiest in its pack,” according to Russ Mould, the investment director at wealth management platform operator AJ Bell.
“A decade ago, Next reporting a 9.2% drop in high-street sales would have been disastrous. Yet today no-one will be surprised by such a performance as it reflects a structural change in how we shop for goods.
“The fact that Next has barely changed its earnings guidance despite high-street gloom is deemed a major success by investors, hence why its share price has shot up on the news,” he added.
Independent retail analyst Nick Bubb was one of those who had been concerned that Next would cut its profit guidance.
“Well, impressively, Next has broadly held its guidance, at £723mln, with sales actually 1% up, thanks to a strong late run (which wasn’t confined to just the last week, despite the widespread pre-Christmas discounting going on elsewhere),” Bubb reported.
“Interestingly, Next run the period from Oct 28th to Dec 29th, rather than the usual Christmas Eve cut-off, but they haven’t included Sale trading last week, so it is a LFL [like-for-like] comparison, as the focus is on full-price sales. Needless to say, the outcome is driven by Online trading, with sales up 15.2%, with Next Retail down 9.2% (or c10% down LFL), but both outcomes are better than we’d feared,” Bubb said.
“As for the outlook for the new year, Next have pencilled in broadly similar sales to H2/Christmas, despite all the Brexit uncertainty, which would mean 2019/20 PBT only down slightly to £715mln,” he added.
Away from the large-caps, most of the excitement is happening in the mining sector, where Metals Exploration and Sunrise Resources are setting the pace.
Metals Exploration Plc (LON:MTL) saw its share price more than double as it unveiled its new chief executive, Darren Bowden, who has 25 years of experience in the mining industry.
Sunrise Resources Plc (LON:SRES) climbed 23% to 0.135p on the back of positive results from the testing of perlite (a form of volcanic glass) samples at its NewPerl project in Nevada.
8.45am: Footsie falls
If Britain had a quoted tech sector – rather than a ragbag of minnows and the odd monster – the decline on the FTSE 100 may have been more precipitous after Apple sounded the earnings alarm overnight.
Instead, it was more of a dip than the vertiginous drop we saw first thing Wednesday as the index of blue-chip shares shed 33 points in the first half hour to trade at 6,701.44.
Eyes were on the risers’ column after Next (LON:NXT) survived Christmas almost unscathed, meaning its shares opened 6% higher.
“Today’s update reopens the debate as to whether Next’s glass is half-full or half-empty,” said Richard Hunter, analyst at Interactive Investor.
“There are certainly signs that the company is managing its affairs tightly, but with the outlook for the sector generally still mired in uncertainty, opinion remains divided and the market consensus of the shares as a hold is likely to remain in place for the time being.”
Next’s performance, and that of department store chain John Lewis, allowed Marks & Spencer’s (LON:MKS) to breathe a sigh of relief as its stock edged up 2.7%.
And what exactly is perlite?
January 10 will reveal whether the early optimism has been well placed.
Elsewhere on the Footsie, there appeared to be a modicum of caution around the fashion giant Burburry (LON:BRBY), which updates on January 23, as its shares fell 3% to lead the losers’ list.
Dropping down to the tiddlers, backers of Sunrise Resources (LON:SRES) saw the value of the company rise 22% after it delivered positive results from the testing of perlite samples from new discovery areas of its NewPerl project in Nevada.
Perlite is a form of volcanic glass that is mined and then heated in big ovens until it 'pops' into a round, white material that's used in seed-starting and potting mixtures to lighten the soil and allow more air around the roots of plants. Now you know.
Proactive news headlines:
Sunrise Resources Plc (LON:SRES) has reported positive results from the testing of perlite samples from new discovery areas of its NewPerl project in Nevada.
Mobile advertising group Taptica International Ltd (LON:TAP) has entered into preliminary discussions with an unnamed potential acquisition target. No further details were given in the brief statement but Taptica said it will make another announcement “in due course”.
Physiomics Plc (LON:PYC) said it was excited to be striking up new relationships in the world of oncology after inking a strategic collaboration. It is joining a network of advisors brought together by Medicines Discovery Catapult (MDC), which is charged with supporting innovation in the drugs sector.
Cyber-security firm Corero Network Security PLC (LON:CNS) expects to report a record final quarter and to roughly halve full-year losses.
Anglo African Oil & Gas PLC (LON:AAOG) told investors that it has now reinstated production from the TLP-101 well at the Tilapia field, meanwhile operations on the new TLP-103 well continue. The company explained that TLP-101 had been producing around 30 barrels of oil per day before the TLP-103 programme got underway, but, production had to be paused due to the proximity of the gas flare to drilling apparatus.
Bango plc (LON:BGO), the mobile commerce company, announced that on 1 January 2019 Nancy Cruickshank joined the board as an Independent non-executive director, to guide and support the expected rapid growth of Bango as it starts to exploit its data monetization technology and relationships. The group also confirmed that Carolyn Rand has now been appointed to the board as permanent chief financial officer, effective from 1 January 2019.
Redx Pharma Plc (LON:REDX) announced that Lisa Anson, its chief executive officer and Dr Andrew Saunders, its chief medical officer will be presenting at Biotech Showcase in San Francisco, which runs from 7 - 9 January 2019. Redx's presentation will take place at 3pm PST on Tuesday 8 January 2019 at the Hilton, Union Square in San Francisco, California, Track: Yosemite A (Ballroom Level).
Asiamet Resources Limited (LON:ARS) said yesterday that Optiva Securities, holder of 3,475,652 broker warrants exercisable at C$0.05 until expiry on 23 December 2018 delivered notice of exercise on 18 December 2018 and the company has now received C$173,783 as a result of the exercise.
6.45am: Apple alert set to unsettle the FTSE 100
The FTSE 100 is expected to open lower this morning as the ripples from Apple’s (NASDAQ:AAPL) first quarter earnings warning spread from the US.
Spread-betting firm IG expects the FTSE 100 to open around 43 points lower after closing up around 6 points yesterday at 6,734.
In an update after close on Wall Street yesterday, the tech giant warned that its first quarter revenue would be weaker than expected, forecasting approximately US$84bn, down from earnings guidance announced back in November of between US$89bn and US$93bn.
China was highlighted as a particular pain point, with Apple chief executive Tim Cook saying that revenue in the country accounts for “over 100 percent of our year-over-year worldwide revenue decline.”
Cook added that the economic environment in China had been affected by rising trade tensions with the United States, with traffic to retail stores in China declining during the quarter.
In the US session yesterday, a volatile session was essentially capped with small gains with the Dow Jones Industrial Average closing up 18 points at 23,346 while the S&P 500 was up 3 points at 2,510 and the Nasdaq was up 30 points at 6,665.
Asian markets struggled today in the wake of the Apple update, with the Japanese Nikkei 225 down 62 points at 20,014 while Hong Kong’s Hang Seng was down 209 points at 24,922.
On the currency markets, sterling was trading around 0.5% lower at US$1.254 against the dollar.
Next to take lead with post-Christmas trading update
Next PLC (LON:NXT) will be kicking off the post-Christmas deluge of retailer updates on Thursday following what has been a rough few months for the sector.
Lee Wild, head of equity strategy, interactive investor, commented: “Already struggling to grow sales in the run-up to Christmas, a profit warning from ASOS plc (LON:ASC) has dealt a massive blow to both online and high street fashion retailers.
“Next is not immune, already warning in September that the UK retail market remains volatile and is subject to ‘powerful structural and cyclical changes’.”
He added: “Next shares have lost almost a quarter of their value since the end of November, and now look cheap assuming sales do keep growing.
“Forecasts are for annual mid-single-digit profit growth over the next five years, which is hardly aggressive, but fear is that near-term headwinds could threaten full-year sales and profit guidance.”
Significant announcements expected:
Thursday January 3:
Trading update: Next PLC (LON:Q4), Staffline Group PLC (LON:STAF)
AGMs: PCG Entertainment Plc (LON:PCGE), Wishbone Gold PLC (LON:WSBN)
Ex-dividends to clip 0.7 points off FTSE 100 index: Auto Trader PLC (LON:AUTO), British Land Company PLC (LON:BLND), Experian PLC (LON:EXPN)
Economic data: UK construction PMI; US weekly jobless claims
Around the markets:
Sterling: US$1.254, down 0.47%
Brent Crude: US$54.24 a barrel, down 1.24%
Gold: US$1,289.6 an ounce, up 0.38%
Bitcoin: US$3,846.9, up 1.37%
City headlines:
The Times: Apple shocked Wall Street last night with a sharp cut to its financial forecasts; its shares fell by 8%, knocking $60 billion off its value; the company blamed President Trump’s trade war with China for prompting a slump in iPhone sales
The Daily Telegraph: Brexit stockpiling preparations delivered an unexpected boost to the manufacturing sector in December; the closely watched purchasing managers’ index scored 54.2, up from 53.6 in November
Financial Times: Tesla’s shares plunged 6.8% on Wednesday after the company said it had delivered fewer new vehicles in the last quarter; the carmaker also unveiled plans to cut prices on vehicles in the US after tax credit reduction