FTSE 100 closes higher
Crunch vote in Parliament nears
Flybe plummets as consortium amends terms of takeover deal
FTSE 100 closed Tuesday higher, aided by a weaker pound, as attention turns to the vote in Parliament on the Brexit withdrawal bill.
The word is that it could be the largest ever defeat in the House of Commons for a Prime Minister.
But amid a process that has been anything but clear over the last two years, who really knows what tonight will bring, or indeed, the next few weeks.
That said, FTSE 100 closed 40 points higher at 6,895.
The FTSE 250 closed around 12 higher at 18,429.
Top riser on Footsie was UK engineering stalwart Rolls Royce (LON:RR.), which added 2.62% to 886p, while among the losers on Footsie were housebuilders.
Barratt Developments plc (LON:BDEV) shed 1.83% to stand at 498.50p.
3.00pm: US markets open higher; London traders don't care much
US indices opened on the front foot but UK traders clearly have other things on their mind, namely tonight’s Brexit vote.
The FTSE 100 remained unchanged at 6,854. In the US, the Dow Jones was up 41 points (0.2%) at 23,951 – its gains limited by a poor reaction to fourth quarter earnings from JPMorgan – while the S&P 500 was up 15 points (0.6%) at 2,598.
The US producer prices index fell by 0.2% in December from November’s level; economists had been expecting a 0.1% fall.
It was the first monthly decline since February 2017.
Meanwhile, back at Brexit Speculation Central, Fiona Cincotta of City Index has outlined three scenarios for today’s Brexit vote: Parliament accepts Brexit deal; Parliament rejects the deal by a small margin; Parliament rejects the deal by a large margin.
Cincotta reckons the first option is the least likely while the second “could almost be considered a victory for Theresa May” and could lead to sterling gaining ground on the foreign exchange markets.
“A large majority would be a loss of more than 100 votes,” Cincotta wrote.
“There have been suggestions that Theresa May could be facing a defeat by up to 200. This would not only be humiliating but would raise the question as to how the opposition party would react. Such a significant defeat could see Labour look to call a vote of no confidence in Theresa May, pushing for a general election. Domestic political chaos, the prospect of a Labour government and on-going Brexit uncertainty would be a toxic combination for the pound, sending it back towards the $1.20 and the post Brexit referendum lows,” she opined.
Sterling has lost ground against the greenback today but is holding its own against the euro.
In the world of small caps, market makers flexed their muscles, marking down The Gym Group PLC (LON:GYM) after its trading update.
The shares were down 8% as traders focused on the higher debt expectations rather than increased membership numbers in 2018.
Shares in troubled airline Flybe Group PLC (LON:FLYB) tanked after the company revealed it had not been able to meet the conditions of a secured bridging loan facility offered by the Virgin Atlantic-backed consortium that has had a bid for the company accepted.
The shares lost two-fifths of their value at 2.37p as the company agreed to new takeover terms from the consortium that would not require shareholder approval.
Flybe to stay in air as Virgin Atlantic-led group injects cash https://t.co/7kbTja8odg
— Prof Mike Yearworth (@MikeYearworth) January 15, 2019
1.30pm: US markets set for mixed opening
UK stocks are mixed and it looks like the story will be the same in the US when trading starts there.
The FTSE 100 was barely changed at 6,856.
James Hughes at Axi Trader is “looking at a mixed start to trade on Wall Street” as investors attempt to get a handle on the fourth quarter earnings season, which is just starting to pick up momentum.
“Citigroup impressed yesterday, although the general consensus is that this round of corporate numbers will leave something to be desired. Delta Airlines and JP Morgan are amongst today’s higher profile announcers so this could provide some fresh direction for indices at the open,” Hughes said.
On the home front, Sporting Index has confirmed what most of us already know; there are two chances of Theresa May winning tonight’s Brexit vote: slim and none – and Slim just left town.
“We think that a total of 434 MPs will say no to May’s deal, which would be a heavy blow to the government and leave the Conservatives with just three parliamentary days to set out an alternative Brexit plan,” said Ed Fulton, the political trading spokesman for Sporting Index.
David Cheetham, perhaps imagining that prime minister Theresa May is secretly Black Knight character in Monty Python and the Holy Grail, wonders whether May will suffer another flesh wound today.
“It says a lot about the current state of UK politics that the PM could well suffer a large defeat, with some projecting a margin against her of more than 200 votes, on arguably the biggest piece of legislation since WWII and yet, it will in all likelihood do little to threaten her position as party leader and head of the government,” Cheetham opined.
“In the expected event of a defeat, the leader of the opposition, Jeremy Corbyn, is expected to table a vote of no confidence in the government – which could happen as early as tomorrow – but this remains improbable to succeed. Theresa May will have to scramble to rapidly construct a plan B should her initial proposal be rejected, with not even her closest cabinet members in the know as to what this would entail,” he added.
On the corporate news front, whether by accident or design, the blue-chips have largely avoided issuing any announcements today.
Brokers, however, have continued to churn out the research notes, with defence firm BAE Systems PLC (LON:BA.), up 1% at 501.4p, the beneficiary of one such note from Barclays.
Barclays has upgraded the stock to ‘equal weight’ from ‘underweight’ and nudged up the price target to 550p from 500p.
Deutsche Bank has looked at the airline sector and raised its easyJet PLC (LON:EZJ) price to 1,485p from 1,440p and its IAG PLC (LON:IAG) target price to 800p from 770p.
Despite that, easyJet was down 15p at 1,163p while British Airways owner IAG was off 11.2p at 593.2p.
11.50am: Morning's gains evaporate
Like a sprinter who has inadvertently entered a 1500 metres race, the FTSE 100 was definitely running out of puff towards midday.
The FTSE 100 was up just 4 points at 3,816, almost 100 points below its high water mark for the day.
Marks & Spencer Group PLC (LON:MKS) was down 0.9% after announcing the next 17 stores listed for closure.
M&S has released list of next 17 stores for closure: Ashford, Barrow, Bedford, Boston, Buxton, Cwmbran, Deal, Felixstowe, Huddersfield, Hull, Junction One Antrim Outlet, Luton Arndale, Newark, Northwich, Rotherham, Sutton Coldfield and Weston Super Mare
— Ashley Armstrong (@AArmstrong_says) January 15, 2019
The FTSE 250 was similarly becalmed, up 21 at 18,439, with a handsome gain on Spirent Communications PLC (LON:SPT) cancelled out by Provident Financial PLC’s (LON:PFG) plunge.
Spirent was up 18% at 147.4p after a trading update that indicated sales of US$477mln in 2018 and adjusted operating income of US$75-77mln.
Liberum Capital Markets said the communications technology company’s sales were ahead of consensus forecasts while the midpoint of the operating income range was 17% ahead of the consensus forecast.
Credit provider Provident Financial slumped 18% after a profit warning.
READ Provident Financial slumps as credit card division weighs it down once again
Provident Financial Group #PFG
Share Price 533p (-17%)
FCA mentioned 10 times in today's trading update. Not surprising legacy issues, present market conditions as credit quality deteriorates.
Company estimates for 2018 profits range are lowered to £151m to £166m.
Why bother?
— Dearg Doom (@MyDeargDoom) January 15, 2019
10.45am: Footsie heading back to Square one - a bit like the UK's Brexit wrangling
The Footsie was slowly relinquishing its gains as the Brexit vote looms.
The top shares index was up 15 points (0.2%) at 6,869, having been above 6,900 at one point this morning.
For the second day in a row, bookmakers are taking a bashing.
UK gambling stocks drop after U.S. DOJ reverses opinion on internet... https://t.co/8jtJG7hJRS
— Mike van Dulken (@Accendo_Mike) January 15, 2019
Yesterday, it was because of broker downgrades; today, the likes of GVC Holdings PLC (LON:GVC) and Paddy Power Betfair plc (LON:PPB) were getting it in the neck after a new ruling by the US Department of Justice (DOJ) on online gambling.
GVC was down 2.3% and Paddy Power was down 1.4%.
“The DOJ has returned to the view that all gambling across state borders (not just sports betting) is unlawful,” reported broker Peel Hunt.
“The implications of this may not become clear until the US Government returns from shutdown; perhaps unless/until prosecutions start. The apparent change of heart is unsettling to an already thoroughly unsettled sector,” it added.
888 Holdings PLC (LON:888) was the biggest loser in the sector, shedding 8.1%; William Hill plc (LON:WMH) was down 1.2%.
9.45am: Brexit fears offset (for now)
A bit of good news from China has been enough to take investors’ minds off tonight’s crucial – albeit largely predictable – Brexit vote in parliament.
China’s finance ministry has said it will ginger-up the economy this year by cutting value-added tax rates for some companies and dishing out tax rebates to others.
The FTSE 100 was up 20 points (0.3%) at 6,875, although in all probability most traders were sitting on their hands, waiting to see whether prime minister and parliamentary gurning champion Theresa May can pull off the political surprise of the century and get her Brexit deal passed by the House of Commons.
“It is voting day for Theresa May’s Brexit plan, which means investors are likely to remain nervous until we get the result,” commented Russ Mould, the investment director at AJ Bell.
“Key to the FTSE 100’s advance are new measures by China to stimulate its economy, which sends some reassurance to investors who had worried about the Asian superpower slowing down and this feeding into weaker performance in other parts of the world,” he added.
Around four-in-10 Footsie constituents are in the red, however, and many of them are housebuilders, following Persimmon PLC (LON:PSN) lower after the sector’s biggest company mildly disappointed with its trading update.
“Persimmon has this morning published a trading update showing a group performing well but at the same time provided a relatively mixed picture against the consensus expectations,” said Helai Miah, an investment research analyst at The Share Centre.
“Going forward the group’s strategy and outlook paints an encouraging outlook as they continue to expand on the number of sites to boost production and remains one of the few taking a proactive approach developing their own manufacturing facilities for bricks, roof tiles and frames. This is good news in a market where competition for resources and labour costs continue to rise.
“Our major concern for Persimmon and all the housebuilders is the outcome and the uncertainty over the Brexit situation. At this moment in time we are talking a relative positive outlook as a “No Deal” scenario looks unlikely, should this change though we fear a downturn for the housebuilders to come,” Miah added.
Laith Khalaf at Hargreaves Lansdown notes that Persimmon is still selling more homes at higher prices but the rate of growth is slowing.
“That’s to be expected in a cooling property market and following on from a pretty good run which has seen the housebuilder return prodigious amounts of cash to shareholders.
“Indeed the gravy train is expected to continue, and when combined with a share price that’s been battered by Brexit, Persimmon offers shareholders an absurd yield of 10% for the next two years,” he added.
Shares in Persimmon were down 1.2%, with similar falls seen on sector peers Barratt Developments PLC (LON:BDEV), Taylor Wimpey PLC (LON:TW.) and Berkeley Group PLC (LON:BKG).
Persimmon proves impervious to cack-handed leadership https://t.co/RNKDWhrN6J
— Construction Industry Trade Alliance (@CITAbuilders) January 15, 2019
8.45am: Footsie starts on the front foot
As predicted, the FTSE 100 got off on the front foot, although most expect the machinations in London’s other city, Westminster, to overshadow the goings on in the Square Mile on Tuesday.
“At long last the day of the meaningful vote cometh,” said Market’s.com’s Neil Wilson, referring to the Commons set-piece on Thersa May’s blue-print for leaving the EU.
That deal is expected fail to garner the necessary support, with the potential margin of defeat the talking point this morning.
The Guardian reckons the majority against will be in the order of 200 MPs, which, if true, would be the heaviest ever Commons defeat for an incumbent government.
Amid all the uncertainty, the pound actually firmed (albeit marginally) against the dollar to US$1.2871.
On the stock market, it was all fairly quiet on the Footsie with the house builders surrendering some of the gains made in the last two trading days.
Down a division and it is easy to be cynical about the timing of Provident Financial’s (LON:PFG) latest stock market missive, which sent the shares tumbling 20%.
Precipitating that tumble was the news the doorstep lender’s profits would be at the low end of estimates.
Proactive news headlines:
EQTEC Plc (LON:EQT) shares shot higher on Tuesday after it revealed a “landmark deal”, with Phoenix Energy signing a first equipment purchase contract in relation to the US company's first power plant in California.
Itaconix Plc (LON:ITX) shares surged on Tuesday after it signed an exclusive global agreement with Nouryon, formerly AkzoNobel Specialty Chemicals to supply it with its bio-based polymers with chelating properties for the detergents market.
Mirada PLC (LON:MIRA) has announced the commercial launch of its Iris multiscreen solution for One Communications, the leading telecommunications provider in Bermuda owned by US investment firm ATN International Inc.
Tertiary Minerals plc (LON:TYM) will assess a decision by the Swedish Mining Inspectorate to reject its application for an exploitation concession. The Mining Inspectorate stated that the economic aspects point in favour of granting the concession, and the socio-economic benefits to the community would be considerable.
Haydale Graphene PLC (LON:HAYD) has signed a supply agreement to provide 76kg of its propriety piezoresistive ink to HP1 Technologies Ltd. (HP1T) over an 18-month period. The AIM-listed advanced materials group said the value of the supply agreement is not disclosed due to its commercially sensitive nature.
StatPro Group PLC (LON:SOG) has agreed a contract for its Revolution service with a US asset management service provider carrying a minimum value of US$1.5mln.
Internet of Things enabler Telit Communications Plc (LON:TCM) said revenue for the year just ended will be at the top end of its guidance range, with underlying earnings in line with expectations.
Clinigen Group PLC (LON:CLIN) expects to report a sharp rise in revenue and profit when it publishes its half-year results next month.
International franchisor Franchise Brands PLC (LON:FRAN) expects revenues and profits for 2018 to be “at least” in line with consensus market expectations.
Eden Research PLC (LON:EDEN) expects to report full-year 2018 revenue of 48% and a modest operating profit after a year of “pleasing growth” for the biopesticide products developer.
Collagen Solutions PLC (LON:COS) shares moved up in early trading Tuesday after it signed a manufacturing agreement for the Excellagen product with Olaregen Therapeutix, a New York-based firm focused on products in the wound care market.
Genedrive PLC (LON:GDR), the handheld medical diagnostic devices maker, saw revenues rise year-on-year in the second half of 2018. Revenue clocked in at £1.5mln, up from £1.3mln the year before, and was largely generated by the US$900,000 order, placed in November 2018, for Genedrive instruments and assays from the US Department of Defense (DoD) plus ongoing grant income.
MaxCyte Inc (LON:MXCT) has said its underlying earnings (EBITDA) are likely to show “an improvement on market expectations” after a bumper end to the year. Revenues increased 19% year-on-year to US$16.7mln in the 12 months to December 31, with top-line growth of 25% in the second six months. Looking ahead, the company said expects it to maintain the momentum in 2019.
Sativa Investments PLC (AQSE:SATI) has appointed Chris Jones to launch wellness centres that will sell a medicinal range of cannabis-derived products. Retail professional Jones most recently held the role of consultant sales director at a vaping company with 110 outlets and worked with another in Northern Ireland with 20 stores.
Silence Therapeutics PLC’s (LON:SLN) lead medicine candidate SLN124 has been granted orphan drug designation by European regulators.
Anglo Asian Mining PLC (LON:AAZ) produced 83,736 gold equivalent ounces during the year to December 2018, at the upper range of guidance. The figure represented a 17% year-on-year increase in total production.
United Oil & Gas Plc (LON:UOG) told investors it has received preliminary regulatory approval for a production concession in Italy, opening up the Selva gas field development project. The company, which owns 20% of the project, believes the asset will deliver significant cash flow in 2020.
Tlou Energy Ltd (LON:TLOU) told investors that lateral drilling has restarted in the wells at the Lesedi coal bed methane project in Botswana. The company, in a statement, said that specialist directional drilling crew and other key personnel are now on site.
Touchstone Exploration Inc (LON:TXP, CVE:TXP) confirmed a positive start to 2019, in terms of production and highlighted plans for further well drilling operations. The company, which describes itself as the ‘most active onshore upstream company in Trinidad’, highlighted that it delivered an average of 1,900 barrels of oil per day through the first thirteen days of this year.
The chairman of Vast Resources PLC (LON:VAST), industry veteran Brian Moritz, has written to shareholders urging them to vote in favour of AGM resolutions that allow for new capital raising powers. The AGM will be held on 31 January 2019 in London.
Rambler Metals and Mining PLC (LON:EAB) (TSXV:RAB) said its wholly-owned Canadian subsidiary has entered into a US$1mln unsecured loan agreement with CE Mining III Rambler Limited. The group said the proceeds of the loan will be used in support of short term working capital requirements at its Canadian operation.
Chaarat Gold Holdings Limited (LON:CGH) confirmed that, further to its announcement on 21 December 2018, the subscription and issue of secured convertible notes 2021 for US$350,000 has now completed.
6.45am: FTSE 100 set for a volatile day?
This afternoon is may bring volatility as the Brexit vote nears, but, the FTSE 100 is set to start Tuesday positively.
Before Brexit takes over, equities are seeing a lift from a promise in Beijing as policy makers said they would support and stabilize the Chinese economy.
In London, CFD firm IG Markets sees the FTSE 100 up around 52 points calling the index at 6,898 to 6,902 with more than an hour to go before the open.
Wall Street last night closed lower. The Dow Jones finished down 86 points or 0.36% at 23,909, the S&P 500 gave up 0.53% to 2,582 and the Nasdaq was off 0.94% at 6,905.
Asian indices rallied after the Beijing pledge. Japan’s Nikkei added 195 points or 0.96% to 20,555, while Hong Kong’s Hang Seng rose 1.82% to 26,776 and the Shanghai Composite advanced 1.26% to 2,567.
Looking back at Brexit, it might confuse some that the pound is looking stronger yet widely there are expectations that Theresa May’s agreement won’t be backed by parliament at today’s vote.
The hope, for those backing the pound, is that the Westminster defeat will result in a ‘Plan B’ scenario that doesn’t result in a no-deal Brexit.
“Plan B is unlikely to mean a no deal Brexit. Renegotiation and an extension of Article 50 is looking much more likely,” said Jasper Lawler, an analyst at London Capital Group.
“The extension is significantly more pound friendly than a no deal Brexit.
Lawler added: “An extension boosts hope of further negotiations with Brussels, a different agreement such as the Norway style, or it could result in eventually no Brexit.
“All of these of possibilities beat crashing out of the EU with no deal, which explains why the pound has perked up over the past few sessions.
“Whether the pound can perk up after a large defeat for Theresa May depends on how quickly Plan B is put forward and also how the opposition party acts. An aggressive push from Labour towards a general election or second referendum would also impact on the pound.”
Significant announcements expected on Tuesday:
Trading updates: Persimmon PLC (LON:PSN); ), Boohoo Group PLC (LON:BOO), Hays PLC (LON:HAS), Ashmore Group (LON:ASHM), The Gym Group Plc (LON:GYM)
Interims: Games Workshop PLC (LON:GAW), Knights Group Holdings PLC (LON:KGH)
Finals: Elegant Hotels Group PLC (LON:EHG), Watkin Jones PLC (LON:WJG)
Economic data: US PPI data; NY Empire State manufacturing report
Around the markets:
- Pound: US$1.2897, up 0.26%
- Gold: US$1,290, up 0.11%
- Brent crude: US$59.82, down 1.1%
- Bitcoin: US$3,649, up 3.17%
City Headlines:
- Surge in outsourcing after Carillion collapse 'staggering' – The Guardian
- Jailed banker's £1m ring from Harrods seized by crime agency – The Telegraph
- Hundreds of Lufthansa flights grounded by strike action – The Financial Times
- HSBC settles FX deals worth $250 billion on blockchain in last year – Reuters
- California utility firm suspected of starting deadly wildfires goes bankrupt – The Guardian
- Cathay Pacific fare 'error' sees $16,000 first-class tickets sold for $1,500 – Sky News