FTSE 100 index closes lower
Theresa May's government faces no-confidence vote
UK inflation rate eases in December
FTSE 100 closed the day lower as Wall Street shares rose and publisher Pearson PLC (LON:PSON) was the biggest laggard on the index.
The group lost nearly 6% as it revealed it expects full-year profit to meet guidance on the back of cost cuts, but warned revenues would fall.
The UK's blue-chip index closed down around 32 points at 6,862, but mid-cap cousin FTSE 250 fared better. It added nearly 57 points at 18,486.
"A fall in energy and consumer stocks is hurting the British index," said David Madden, at CMC Markets, who added that politics was also in play as Prime Minister May faces a no-confidence vote after last night’s humiliating defeat in parliament.
"Mrs May is likely to survive the vote, as the Conservatives and the DUP don’t want Labour to be given a chance to contest a general election. Eurozone equity markets are broadly higher as the mood is a little on the optimistic side, but the rebound since late December is starting to look a little jaded."
On Wall Street, the Dow Jones Industrial Average is up around 140 at 24,206 at the time of writing, while the S&P 500 is up around eight points.
3.45pm: FTSE drops on stubborn losses in commodity sector
The FTSE 100 remains in the red in afternoon trading as investors look ahead to a no-confidence vote later after last night’s Brexit deal rejection.
Connor Campbell, financial analyst at Spreadex, said: “Stubborn losses in the commodity sector – with the likes of BP, Shell and Rio Tinto all feeling edgy about the state of the Chinese economy – meant that the UK index was stuck in the red, though it did manage to halve its midday decline following the US open, leaving it down around 20 points.
“Sterling spent the day acting as if it didn’t have a care in the world, posting a leisurely 0.3% increase against both the dollar and the euro. The currency is in for another rough night, however, as investors prepare for the no-confidence vote in Theresa May and, dun dun dun, whatever fresh Brexit hell its aftermath brings.”
3.10pm: Lloyds to lend £18bn to British businesses
Lloyds Banking Group PLC (LON:LLOY) said it plans to set up a £18bn fund this year to help start-ups, small and medium-sized enterprises and mid-sized firms.
Chief executive Antonio Horta Osorio said: "During these uncertain times, it is important that our customers have financial support and expert guidance to navigate the challenges they may face.
“Whatever the future brings, we will continue to support UK businesses as part of our commitment to help Britain prosper.”
The fund is part of the bank's three-year transformation strategy. Lloyds has already pledged to grow its lending to businesses by £6bn by 2020.
Last year, it also announced a £500mln growth fund to help companies invest in equipment to improve productivity and £5mln to fund 3,500 manufacturing apprenticeships.
2.40pm: US stocks open modestly higher
US stocks had a muted start to trading as a partial government shutdown entered its 26th day and as investors digested a batch of earnings.
The Dow Jones Industrial Average rose 115 to 24,184, the S&P 500 edged up 9 points to 2,620 and the Nasdaq climbed 29 points to 7,063.
Trump administration economists have estimated that gross domestic product in the first quarter will be reduced by 0.1% each week the government shutdown continues.
US investors also have one eye on Brexit developments on the other side of the Atlantic amid worries about the implications for global markets.
Bank of America shares rose after forecast-beating quarterly results while Black Rock also gained even as it reported lower-than-expected quarterly profits.
2.00pm: Pound holding up as investors optimistic about averting no-deal Brexit
The pound lost some of its ground against the dollar to trade broadly flat at US$1.2856. But against the euro, sterling is up 0.13% to US$1.1283 amid hopes that Brexit will be delayed or cancelled altogether following Theresa May’s crashing defeat in parliament last night.
“The pound is holding up well as sterling-watchers calculate that the chances of no Brexit, or at least of a softer, delayed Brexit, have just increased,” said JR Zhou, market analyst at online trading platform, INFINOX.
“True, the immediate effect of MPs’ demolition of the government’s Brexit deal has been to send Theresa May scuttling back to the drawing board and battening down the hatches for Wednesday’s no-confidence vote.
“And in absolute terms, no progress has been made. There is no parliamentary majority for any particular course – and the Government has time for just one more drink in the last chance saloon.
“But the markets’ bet is that time is now on their side. With Britain lurching, empty-handed, towards the March 29th deadline, parliament may soon be forced to come together to prevent the one thing there is a majority for – stopping a painful no deal Brexit.
“With inflation falling away and the markets also assuming the Prime Minister will swat away tonight's no-confidence vote, the renewed shot of confidence – if not absolute clarity – has kept the Pound hovering close to its best level against the Dollar for two months.”
1.30pm: How to be smart about investments during market uncertainty
Concerns about Brexit should not stop you from being proactive about your investments, said Moira O’Neill, head of personal finance at Interactive Investor.
“Whether you’re worried about political or market uncertainty, or you’re feeling frozen in fear, the worst thing anyone can do is panic,” the O’Neill advised.
On ways to make the most of your investments, O’Neill said: “Using as much of your annual tax allowances as you are able is a good start. Make sure that as much of your savings and investments as possible are in ISAs or pensions. And if you’re married, think about using your spouse’s allowances too."
She added: “Reviewing your investments to help keep fees down as much as possible can also be comforting in times of trouble. Above all, take a long-term view.
"A well-diversified portfolio, invested in UK and overseas stock markets, plus bonds, commercial property and a bit of gold, should be able to withstand bumps in the road, as long as it’s a long journey ahead. Many of us are investing for at least a 30-year period. Even if you’re at the start of retirement, you could have 20 to 30 years left in the stock markets.”
12.30pm: US stock futures point to muted start amid partial government shutdown
Across the pond and away from the madness that is Brexit, the situation in the US does not look much prettier with a partial government shutdown entering its 26th day.
Amid all the uncertainty across the two sides of the Atlantic, US stocks look set to see muted action today.
Futures for the Dow Jones Industrial Average rose 37 points to 24,019 while S&P 500 futures edged up 4 points to 2,609 and Nasdaq futures climbed 1.75 points to 6,678.
Meanwhile, analysts are also mulling over a batch of corporate earnings, including from Black Rock Inc (NYSE:BLK) and Bank of America Corp (NYSE:BAC).
Bank of America shares are up 4.4% in pre-market trading after reporting better-than-expected fourth quarter revenue and profit.
Black Rock shares are down 1.4% after quarterly revenues missed analysts’ forecasts.
12.00pm: Betway says odds are on Theresa May to survive no-confidence vote
The odds are heavily on Prime Minister Theresa May surviving today’s motion of no-confidence, according to Betway.
The online betting company said 310-319 is the most likely bracket of votes against the leader at 4/9, which would not be enough to force May’s resignation.
Odds are at 1/33 for her to survive today’s vote and 10/1 for a surprise defeat.
Betway’s Alan Alger: “Theresa May doesn’t have much room for maneuverer ahead of today’s vote of no confidence, with it just 4/9 for her to receive 310-319 no-confidence votes.
“However, there’s little sign of her own party rebelling and we expect May to get through the vote at just 1/33.
“The big question is what her next move will be, with an extension of Article 50 the most obvious play at 1/5, though Jeremy Corbyn could put a spanner in the works and endorse a second referendum first at 8/11.”
11.30am: House prices could fall 5% this year without a Brexit deal, says analyst
UK house prices fell for the third consecutive month in November, according to data from the ONS.
Prices fell 0.1% month-on-month in November after the same rate of decline in October.
The annual rate of growth accelerated to 2.8% in November from 2.7% in October but missed analysts' expectations for a 3.0% year-on-year rise.
Howard Archer, chief economic advisor to the EY ITEM Club, said it should be kept in mind that the ONS measure of house price inflation lags many of the other measures as it is based on mortgage completions.
#LandRegistry/#ONS reported #UK #house #prices edged down 0.1% month-on-month in November, which was a third successive monthly fall. The annual rate of increase edged up to 2.8% in November from 2.7% in October, which had been the weakest year-on-year increase since July 2013
— Howard Archer (@HowardArcherUK) 16 January 2019
Looking ahead, he said: “If the UK ultimately manages to leave the EU with a deal at the end of March, we expect UK house prices to eke out a modest gain of 2% over 2019.”
“Reduced uncertainty could help housing market activity pick up along with a likely gradual improvement in consumers’ real income growth. Meanwhile, high employment, still low interest rates and a shortage of houses on the market will also likely offer some support.”
However, if the UK leaves the EU without a Brexit deal, Archer said house prices could fall by up to 5% in 2019. He added: “Caution over making major purchases will likely be magnified in the near term by current heightened uncertainties over Brexit.”
11.00am: Housebuilders top the FTSE 100
Housebuilders Persimmon PLC (LON:PSN), Taylor Wimpey PLC (LON:TW),Barratt Developments PLC (LON:BDEV) and Berkeley Group Holdings PLC (LON:BKG) are currently the top FTSE 100 risers on a positive-read across on results from FTSE 250-listed Bovis Homes PLC (LON:BVS).
Bovis said it expects full-year 2018 profits to be slightly ahead of market consensus and said the early signs on 2019 trading are encouraging.
It comes a day after Persimmon upgraded its annual profit forecast following an increase in house completion and prices.
“Conditions are about as good as they can be for housebuilders, with government schemes like Help to Buy boosting demand among first time buyers, and low interest rates making mortgages easier to come by,” Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
“That said, the Brexit cloud still looms large, and a sharp downturn in house prices or demand could blow a hole in Bovis’ otherwise steady ship.”
Going the other way, education giant Pearson PLC (LON:PSON) is the biggest FTSE 100 faller after saying it expects full-year profit to meet guidance on the back of cost cuts but warned revenues would fall.
10.20am: Market reaction to Brexit-deal vote indicates expectations of no-deal, says Carney
Bank of England Governor Mark Carney is speaking before Parliament's Treasury Committee.
Asked about last night’s vote on Theresa May’s Brexit deal, he said a rebound in the pound appears to “reflect some expectations that the process of resolution will be extended ... and the prospect of no deal has diminished."
He has also been asked about assumptions about interest rates rising to 4% in the bank stress tests published in November.
"The point of the stress is that is [it's] an extreme event ... a tough event ... we do that in order to make sure the banking system can withstand something like this,” Carney explained.
"We have confidence that the core system is resilient to the types of shocks we can see.”
In response to a question about whether Apple’s recent profit warning shows that China’s downturn is coming, he told MPs there were a variety of indicators showing that growth was slowing in the nation.
Carney said China has been slowing over the past 12 months and will probably continue to do so as a result of trade wars and a contraction in lending caused by an attempt to control the banking sector more closely.
9.55am: BoE has little incentive to raise rates any time soon, says analyst
Tom Stevenson, investment director for Personal Investing at Fidelity International, said today's inflation data will help UK households shake off the January blues but it raises some questions about what it means for the trajectory of interest rates.
"With UK CPI a whisker away from the Bank of England’s target, and last night’s vote providing more questions than answers on Brexit, it would seem that the Bank of England’s Monetary Policy Committee has little incentive to hike rates any time soon," he said.
"The good news is that the pound seems to have taken political turmoil in its stride. Weaker sterling would threaten higher inflation but the prospect of a softer Brexit makes a rebound in the pound seem the likelier option."
The pound is up 0.12% versus the dollar at US$1.2877 and up 0.11% against the euro at €1.1280.
9.30am: Inflation rate eases in December
The UK’s annual inflation rate eased to 2.1% in December from 2.3% in November, as expected.
The Office for National Statistics said the slowdown reflected declines in petrol prices and airfares.
Inflation eased mainly because of downward effects from petrol prices and airline ticket prices. Elsewhere, there were small rises in hotel prices and mobile phone charges https://t.co/0u51qLBXtT
— ONS (@ONS) 16 January 2019
Core inflation, which strips out volatile items like food and oil, rose to an annual rate of 1.9% in December from 1.8% the previous month. Analysts had expected core inflation to remain unchanged.
The Bank of England is targeting an inflation rate of 2%.
“With the expectation that inflation will drop to the central bank’s target in February, the chances of further rate rises are narrowing rapidly,” said Stephen Hubble at global payments, FX and Treasury management specialist Centtrip.
“The data could weigh on the Pound, which rallied after the UK Parliament voted down Theresa May’s Brexit deal, as the BoE has lagged behind other central banks’ tightening schedules.
“The BoE has previously suggested that a “bad” Brexit could require additional stimulus or interest rate cuts to keep the economy moving. The question is how much it will need to cut and whether or not it has missed the opportunity to give itself extra breathing space.”
8.50am: What next?
London traders appeared to collectively shrug, harrumph and carry on regardless as the market was little changed following the resounding rejection of Theresa May’s Brexit plan.
The index of blue-chip stocks fell 16 points to 6,878.94 as the Prime Minister faced a Commons vote of no-confidence (one she’s expected to win easily) in the aftermath of the humiliating defeat.
“Then there is the question of what next?” said Jasper Lawler of London Capital Group.
“On surviving the vote of no confidence Theresa May has until January 21 to put forward her Plan B.
“We can expect volatility in the pound to continue. Whilst this level of uncertainty looms over UK politics and Brexit, we don’t expect the pound to push much higher.”
The old stock market adage that it’s better to travel than arrive was at play for shares in Pearson (LON:PSON), the publisher of university and school textbooks.
With share price up 28% from a year ago, investors used a fairly straight up and down trading statement to book some profits. The stock fell 6% in early deals.
Better than expected trading from Bovis (LON:BVS) put some pep into its step as the price advanced 2.4%, dragging the valuations of its rivals with it.
Proactive news headlines:
BigDish PLC (LON:DISH) has fully launched in Bournemouth its app that helps restaurants to maximise bookings following a beta testing period. Formally known in the town as Tablepouncer, the app has been rebranded and relaunched under its new name at more than fifty restaurants which will use it to offer discounts of 50% at various times of the day to boost customers.
Allergy Therapeutics PLC (LON:AGY) enjoyed another year of revenue and market share growth as it ended 2018 financially well-resources. The company, which as the name suggests develops inoculations against common allergies, also said it expects to make significant clinical headway in 2019.
Cadogan Petroleum PLC (LON:CAD) told investors that it exited 2018 with a production rate of 274 barrels of oil equivalent per day marking a better-than-anticipated performance for the year. Average production measured 250 boepd for the whole of 2018, which was 25% better than the company targeted and represents a 61% improvement from 2017.
Alba Mineral Resources PLC (LON:ALBA) executive chairman George Frangeskides has hailed the ongoing success of test production at the Horse Hill project. The AIM-quoted firm holds an 11.765% beneficial interest in the project which has now yielded some 25,000 barrels of crude oil since the current phase of production testing began in July.
Seeing Machines Limited (LON:SEE) has issued an in-line trading update for the first half of the year as it said it had seen “an increasing interest” in its driver monitoring systems (DMS) across all of its transport sectors.
BATM Advanced Communications Ltd’s (LON:BVC) subsidiary has completed an upgrade of the Kenya Education Network (KENET) from a 10-gigabit ethernet (GE) to a 100 GE.
Ethernity Networks PLC (LON:ENET) has completed the inaugural delivery of a new server product to a Korean OEM under an agreement announced in June. Ethernity’s technology is designed to help servers run faster and more efficiently and deployment of the 100Gbps ACE-NIC100 FPGA SmartNIC will mean significant power and cost reduction, it said.
Strategic Minerals PLC (LON:SML) has told investors its “primary focus” for the year ahead is to get its Leigh Creek copper project in South Australia back into production. AIM-quoted Strategic completed the acquisition of the property, which sits within a known copper-rich belt, almost a year ago and has been working ever since to bring it into operation.
Chaarat Gold Holdings Limited (LON:CGH) said its subsidiary Chaarat Gold International Limited has now extended the anticipated closing date for the acquisition of Kapan Mining and Processing Company CJSC from 15 January 2019 to 31 January 2019 with Kapan's vendor, PTML Holding Ltd, a subsidiary of Polymetal International PLC. The group said extension has arisen as a result of the extended winter holiday season in Armenia and Russia.
6.45am: Flat start predicted
The FTSE 100 is predicted to open flat on Wednesday morning following a crushing defeat for Theresa May’s Brexit deal and a looming no-confidence vote in the government later today.
Spread-betting firm IG expects the FTSE 100 to open around 1 point higher after closing up 40 points yesterday at 6,895.
After two years of tortuous negotiations, the vote on the prime minister’s deal went the way many had expected, however, the scale of the 432-202 defeat was beyond even the worst predictions.
This was followed shortly after by a motion of no confidence in the government that was tabled by Jeremy Corbyn’s Labour party, with the vote itself due at 7pm tonight.
There was one saving grace in sterling, which jumped last night after the vote as many now see the chance of a no-deal exit from the EU as less likely.
Jasper Lawler, head of research at London Capital Group, said: “The scale of the defeat prompted opposition leader Jeremy Corbyn to table a vote of no confidence for today as he pushed for a general election. Elections generally spark a sell off in a market, as they are a risky event. However, today's scenario is far more complex which is reflected by the fact the pound is flat in early trade, showing few signs of giving up yesterday's rally.”
“Rather than seeing this as a step closer towards a no deal Brexit, as Theresa May had originally threatened, traders are seeing this as a move towards extending Article 50 and delaying Brexit. The perceived probability of a no deal Brexit are diminishing, which is pound positive”, he added.
Tech rally boosts Wall Street
On Wall Street yesterday, a rally in tech stock offset some lacklustre results from major US banks. The Dow Jones Industrial Average closed up 155 points at 24,065, while the S&P 500 was up 27.6 points 2,610 and the Nasdaq was up 117 points at 7,023 with a boost from Netflix Inc (NASDAQ:NFLX).
In Asia today, the Nikkei 225 slumped 112 points to 20,442 as it was hit by weakness in Japanese auto and financial stocks, while Hong Kong’s Hang Seng was up 35 points at 26,866.
On the currency markets, the pound was relatively flat against the dollar at US$1.285 and against the euro at €1.126.
Following the result of the Brexit deal vote, there is a fresh batch of UK data in the form of various indexes which may give some context as the how the Brexit palaver has played out in the UK economy.
In the corporate diary, the march of trading updates will continue with housebuilders, cinema chains, and oilers due to report.
Significant announcements expected on Wednesday:
Trading updates: Bovis Homes PLC (LON:BVS), Tullow Oil PLC (LON:TLW), Cineworld PLC (LON:CINE), Pearson plc (LON:PSON), Diploma PLC (LON:DPLM), TheWorks.co.uk PLC (LON:WRKS)
Economic data: UK CPI, RPI, PPI, HPI inflation; US retail sales; US import/export prices; US NAHB housing market index
Around the markets:
Sterling: US$1.285, no change
Brent crude: US$60.7 a barrel, up 0.2%
Gold: US$1,292 per ounce, up 0.23%
Bitcoin: US$3,590, down 1.6%
City headlines:
Financial Times: Theresa May’s Brexit deal suffered a crushing defeat on Tuesday night in the House of Commons after MPs rejected the Prime Minister’s flagship policy by an overwhelming 230 votes.
The Independent: The pound plunged and then rallied against the euro after Theresa May’s Brexit deal was overwhelmingly rejected by Parliament; sterling fell 0.74% against the euro to hit €1.1133 but it then recovered, rising 0.37% to €1.1257.
The Times: JP Morgan yesterday missed Wall Street’s profit and revenue forecasts for the first time since 2014 as it reported a sharp fall in revenue from fixed-income, currency and commodities trading.