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FTSE 100 finishes lower as uncertainty continues to be the watchword

The UK's premier share index finished down over 27 points at 6,834

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Investors are still trying to shut out the Brexit blues
  • FTSE 100 index closes lower

  • GCM, AFC and Iofina carry the flag for the minnows

  • European benchmarks lower

FTSE 100 closed lower on Thursday as uncertainty continues to be the watchword in global markets.

The UK's premier share index finished down over 27 points at 6,834, but FTSE 250 went the other way though - gaining over 50 points at 18,537.

In Europe, the German DAX fell around 12 points and the French CAC 40 lost around 16 points.

"Equity markets in Europe are in the red as a lack of positive news has left traders feeling a little uneasy," said David Madden, analyst at CMC Markets.

"We haven’t heard any additional news regarding the US-China trade talks that ended last week, and the old concerns about a slowing global economy are still doing the rounds.

"The absence of clarity in relation to Brexit has some investors worried too," he added.

Top riser on Footsie was Associated British Food plc (LON:ABF), which added almost 7% to stand at 2,330p after it gave an update, saying that Primark sales were up 4% on last year, and the operating profit margin was also higher.

2.40pm: US indices open around 0.2% lower

The FTSE 100 was drifting down towards the 6,800 level after a soft start on Wall Street.

US indices opened around 0.2% lower after earnings releases from the big banks disappointed.

In the UK, the FTSE 100 was down 50 points (0.7%) at 6,812. The mid-cap FTSE 250 was faring less badly, down 69 points (0.4%) at 18,417.

Among the tiddlers defying the weaker trend in spectacular fashion were AFC Energy PLC (LON:AFC), up 29%, and Iofina plc (LON:IOF), up 17%.

AFC, the alkaline fuel cell power technology developer, said it has successfully demonstrated the world’s first electric vehicle charger based on hydrogen fuel-cell technology.

Iofina, meanwhile, which has an iodine extraction technology, revealed it had a strong second half to what was a record-breaking year in 2018 in terms of crystalline iodine production.

The best performing stock in London, however, was GCM Resources PLC (LON:GCM), the mining and energy company, which soared 36% to 48.5p after announcing further agreements with Power Construction of China.

12.30pm: FTSE 100 wanes as sterling waxes

Sterling had a good morning on the foreign exchange markets but as usual, that did not do many favours to the FTSE 100.

The Footsie’s losses lengthened to 37 points (0.5%) at 6,826

Airlines easyJet PLC (LON:EZJ) tumbled 3.4% to 1,152.5p after Barclays downgraded the stock to ‘underweight’ from ‘equal weight’ and chopped three quid off its previous target price of 1,500p.

British Airways owner IAG PLC (LON:IAG) was less put out by Barclays cutting its price target to 700p from 780p; the shares dipped 1.8p to 608.8p.

The bookies have taken a bashing this week – in the stock market, rather than on the racetrack – on worries that the US might not, after all, liberalise its gambling laws but GVC Holdings PLC (LON:GVC) clawed back 12p of the losses at 685p after a trading update.

“While major regulatory change on both sides of the Atlantic has commanded investor attention in recent months, these results bring a timely reminder of GVC’s credentials,” declared George Salmon, an equity analyst at Hargreaves Lansdown.

“Market share is rising in all major geographies, and a better than expected fourth quarter means profit forecasts have been upgraded. With the news coming not long after GVC also raised forecasts for cost-saving around the Ladbrokes Coral integration, there’s a lot to like about how the group is performing.

“Its excellent performance will only raise hopes GVC can repeat the trick in the recently opened up American market, although as ever with gambling, there’s no such thing as a guaranteed winner.

“Despite its strong performance and the potential in the US, uncertainty around the UK market means investor sentiment remains reasonably cautious – the shares trade on a not-too-demanding 11 times expected earnings and offer a chunky yield of 5.1%,” Salmon concluded.

11.15am: The FTSE 100 stabilises at lower levels

The Footsie remains becalmed at lower levels, with traders little exercised by the Bank of England’s credit conditions report.

The FTSE 100 was down 27 at 6,835.

The Bank of England’s survey indicated high street banks expect spending using plastic will be less drastic in the first three months of 2018.

The survey reported that borrowing using credit cards is expected to fall to its lowest levels since 2007 – the year before the credit crunch.

“Heightened concerns over the economic outlook, the very low household savings ratio and the prospect of gradual interest rate rises over the coming months are likely to limit consumer willingness to borrow,” suggested the EY ITEM club.

“The Bank of England will likely look at the ‘Fourth Quarter 2018 credit conditions survey’ with mixed feelings. While the Bank has been keen to see the rate of consumer borrowing slowing, it will not want to see unsecured lending dry up as it will weigh down on economic activity. The Bank ideally wants to see a more sedate rate of borrowing, which has seemingly been happening up until November,” commented Howard Archer, the chief economic advisor to the EY ITEM Club.

“Given the heightened uncertainties facing the economy and the Bank of England’s past concern that banks risk becoming complacent in their lending behaviour, it should take some comfort from banks reportedly further tightening their lending standards for granting unsecured consumer credit.

“Specifically, the credit conditions survey reported that lenders cut back in the amount of unsecured credit available to consumers in the fourth quarter of 2018. This was an eighth successive decline. It is expected to decline slightly further in the first quarter of 2019.

“Additionally, lenders were reported to have further tightened their lending standards for granting unsecured consumer loan applications in the fourth quarter of 2018. This was a ninth successive quarter of tightening standards. Lenders expect lending standards to tighten again in the first quarter of 2019,” Archer added.

Meanwhile, in the “are these two things possibly connected” department, it was reported overnight that the housing market outlook for the next three months is the worst in 20 years.

The survey of its members by the Royal Institution of Chartered Surveyors (RICS) found that for every 100 members, the number expecting house sales to fall was 28 higher than those expecting them to rise.

The number (per 100) expecting house prices to fall exceeded those looking for a rise by 19.

“It’s important to take the latest findings from the RICS with a pinch of salt as while they represent a small proportion of UK surveyors and agents, the top line figures fail to account for regionality and the stronger sentiment in these more stable markets,” suggested Paul Telford of OkayLah.

It’s probably important to take Telford’s views with a pinch of salt as well, as OkayLah describes itself as a “home seller empowerment platform”.

“Perhaps the member agents from the RICS are looking to scaremonger UK home sellers into holding off on a sale until the rate of price growth picks back up and they can secure a higher commission fee?” Telford speculated.

“Although muted, transaction levels remain steady, mortgage affordability remains high and prices are up on this time last year. So for those committed to a sale, there is an appetite out there and deterring them with further gloom and doom tactics is really the last thing the market needs,” he added – for which, read: “really the last thing OkayLah needs”.

In other housing market news, UK Finance’s Mortgage Trends Update for November revealed there were 36,200 new first-time buyer mortgages completed in the month, up 5.8% year-on-year.

“The average first-time buyer is 30 and has a gross household income of £42,000,” according to the report. The average home-mover is said to be 39 and has a gross household income of £55,000.

There were 36,200 new home-mover mortgages completed in the month, up 1.1% on a year earlier. The £7.8bn of new lending in the month was up 4%.

“A mixture of competitive deals and schemes, including Help to Buy, saw even more first-time buyers get a foot on the housing ladder during November,” reported Jackie Bennett, the director of mortgages at UK Finance.

"Meanwhile, homeowner remortgaging activity has steadied, after reaching its highest level in a decade the previous month as a large number of fixed-rate deals came to an end.

"In the buy-to-let market new home purchases remain subdued while remortgaging continues to grow as landlords lock into attractive rates,” Bennett added.

10.00am: ITV leads the Footsie lower

Stocks going ex-dividend and a broker bashing for ITV PLC (LON:ITV) combined to drag the Footsie lower in early trading.

The FTSE 100 was down 28 points (0.4%), with broadcaster ITV leading the retreat with a 6.9% fall to 127.75p after Merrill Lynch cut its rating to ‘underperform’ from ‘buy’ and slashed its target price to 110p from 210p.

Publishing group Pearson PLC (LON:PSN) was little changed at 918.8p after conflicting broker actions.

Deutsche Bank lifted its target price to 650p from 630p while retaining its ‘sell’ rating; Berenberg increased its price target by 50p to 600p while reiterating its ‘sell’ recommendation; Credit Suisse stuck with its ‘underperform’ assessment and cut the target price to 800p from 880p; JP Morgan remained on the fence with a neutral rating but trimmed its price target to 850p from 890p; lastly, Barclays, which recommends its clients be underweight in the stock, pared its price target to 830p from 865p.

Hotels and restaurants group Whitbread PLC (LON:WTB) shed 70p to 4,703p after it disappointed analysts by saying underlying profit before tax in the next fiscal year will be little changed from the current one as it continues to invest in growth.

“Selling Costa to Coca Cola not only raised £3.9bn, it means Whitbread can focus entirely on the Premier Inn brand.

“Unfortunately, growth at Premier Inn isn’t great just now, and improving that trend won’t be easy. Business and social travel tends to fluctuate with the fortunes of the wider economy, and with uncertainty looming over the UK, it’s no surprise customers are tightening the purse strings,” said Laith Khalaf at Hargreaves Lansdown.

“However, there is some good news for investors. Expansion in Germany is gaining pace, and the £500mln buyback probably only serves as a starter for ten. Even after making contributions to reduce debt and the pension deficit, Whitbread will still have a significant sum burning a hole in its pocket. Investors can expect another windfall to be announced next month,” he predicted.

8.45am: Footsie declines

A bout of the US-China trade jitters laid the FTSE 100 low on a busy corporate news day with the blue-chip index falling 29 points to 6,834.06.

Brexit was consigned to the back burner as traders assessed updates from Sage (LON:SGE), Associated British Foods (LON:ABF), Whitbread (LON:WTB) and Experian (LON:EXPN).

Newcastle-based accounting software group Sage topped the risers with an 8% gain after posting a positive trading update in which it reiterated full-year guidance.

ABF, meanwhile, said profit from its Primark chain was “well ahead”, pushing the shares 5% higher.

“Two things about Primark – it doesn’t discount and prices are so low it doesn’t do online, so it avoids certain pitfalls and certain opportunities that other face,” said Neil Wilson of Markets.com.

“Ultimately the lack of an online offering will cap sales growth, but as long as it can maintain margins and be the go-to high street brand for affordable clothing it should be relatively okay.”

Credit checker Experian nudged up 1.5%, while the promise of a £500mln pay-out following its Costa sale couldn’t avert the eye from budget hotelier Whitbread’s cautious outlook statement. The stock drifted 3% in early trade.

Dropping down to the small-caps, ECSC (LON:ECSC), the cybersecurity group, was in demand with its shares rising 14% on the back of unveiling a significant new contract.

Proactive news headlines:

Cybersecurity specialist Ecsc Group PLC (LON:ECSC) has extended its relationship with a major food producer after landing a new £300,000 contract.

Alkaline fuel cell power technology developer AFC Energy PLC (LON:AFC) has successfully demonstrated the world’s first electric vehicle charger based on hydrogen fuel-cell technology.

Higher grades at one of the main deposits at its New Luika mine in Tanzania helped Shanta Gold Limited’s (LON:SHG) underlying profits jump 21% in 2108. Gold production for the year was 81,872oz against guidance of 80,000oz as the higher grades at Bauhinia Creek meant fourth-quarter output rose to almost 24,000oz.

Iofina PLC (LON:IOF) had a strong second half to what was a record-breaking year in 2018 in terms of crystalline iodine production.

Mobile advertising group Taptica International PLC (LON:TAP) has confirmed it is still in discussions with a potential acquisition target.

Touchstone Exploration Limited (LON:TXP) has provided details of the Ortoire exploration block where there’s potential for a multi-year exploration campaign. The statement includes the findings of a prospect evaluation process undertaken by GLJ Petroleum Consultants Ltd, which reviewed each of the prospects previously identified by Touchstone within the  Ortoire block.

Cello Health PLC (LON:CLL) expects to hit expectations for 2018 after an “excellent year” at its big pharma consultancy division. Strong like-for-like growth in this arm, known as health, offset a slower outcome from brand and marketing operation Signal.

SigmaRoc PLC (LON:SRC) is expecting a revenue jump of over 50% in 2018 as it issued a trading update alongside news of a refinancing of convertible loan notes (CLNs).

ECR Minerals PLC (LON:ECR) chief executive Craig Brown highlighted that the explorer can now move forward confidently with ventures like the Windidda gold project, following the completion of financing in 2018.

88 Energy Limited (LON:88E) shares moved higher in Wednesday’s early deals as the Alaska oil explorer secured a permit to drill the Winx-1 well. Drilling is slated to start by mid-February, the company confirmed.

Photonstar LED Group PLC (LON:PSL) has raised gross proceeds of £100,000 via a placing to provide the company with additional working capital and further strengthen its balance sheet. The AIM-listed group said the placing of 500mln new ordinary shares was undertaken by its joint broker Peterhouse Capital with new and existing investors at a price of 0.02p each.

Kingswood Holdings Limited (LON:KWG) has issued an update on its strategy amid a board reshuffle as its chief executive (CEO), Marianne Ismail, departed after 18 months in the role.

Victoria Oil & Gas PLC (LON:VOG) has, in its quarterly operations update, confirmed that its production operation ended 2018 on a high. It reported an average gas production rate of 4.45mln cubic feet per day for the three months ended 31 December, and the average rate for the whole year measured 3.75mln cubic feet per day.

Oracle Power PLC (LON:ORCP) shares jumped by a fifth as its Thar power station project was re-affirmed as a priority for the Pakistani government. Approval to increase the capacity of Oracle’s proposed coal-fired power station to 700Mw from 600Mw was also granted along with the use of supercritical technology.

Africa-focused mineral sand miner Base Resources Limited (LON:BSE) became net positive for the first time in the final quarter of 2018. The miner started the final quarter with US$23.8mln of net debt but revealed in an activities report that it closed out the year with net cash of US$1.0mln.

Regency Mines PLC (LON:RGM) said it has been informed that Andrew Bell, a director of the company, today purchased a total of 2,028,504 ordinary shares in the group at an average price of 0.335p each. The group said, following the purchase, Bell’s holding in the company totals 4.35%.

6.45am: China worries to hit Footsie

The FTSE 100 index is expected to open lower on Thursday, extending Wednesday’s falls even though Theresa May survived last night’s vote of no-confidence in her government following the big Brexit deal rejection, with Asian stocks on trade war concerns mixed in spite of big advances overnight by US markets.

Spread betting firm IG expects the blue-chip index to open around 30 points lower at 6,832, having fallen 32.34 points on Wednesday.

Overnight on Wall Street, the Dow Jones Industrials Average ended 141 points higher at 24,207 boosted by bumper earnings from the likes of Goldman Sachs and Bank of America

But the mood in Asia was more cautious today, with Japan’s Nikkei 225 index and Hong Kong’s Hang Seng index both down 0.2% amid reports that US Federal Prosecutors are investigating China’s Huawei Technology for allegedly stealing trade secrets, a move which could endanger the 90-day trade war truce between the two countries.

Jasper Lawler, Head of Research at LCG commented: “It goes right to the heart of the unresolved IP issues with China. China are unlikely to shrug this off which is creating a risk-off environment. Signs of retaliation from China could see stocks sink further.”

On currency markets, sterling continued to hold a recent rally against the dollar and the euro after as investors await the next move on Brexit.

Corporate whirl continues

The political fall-out aside, it will also be a busy session on the corporate front on Thursday, with a big batch of diverse blue-chip updates scheduled.

After the slew of mixed Christmas trading statements from the High Street since the start of the year, discount clothing stores chain Primark will be front and centre when Associated British Foods PLC (LON:ABF) publishes its first-quarter trading new.

Investors will, of course, keep an eye out for any updates on the troubled sugar business, but how AB Foods’ star asset performed over the all-important Christmas period will be the major focus.

December’s AGM update from ABF wasn’t as bullish as they have been in the past, with the group warning that trading had been “challenging”. Still, bosses said they were confident in delivering another year of Primark profit growth and investors will want to see that that remains the case.

Analysts at UBS are forecasting 4% revenue growth from the group for the first 16 weeks of the current year.

However, they expect Primark like-for-likes sales to decline by 2%, although like some peers there may have been a modest recovery into December and total Primark sales are expected to be up 4%.

Caffeine-free Whitbread

Whitbread PLC’s (LON:WTB) latest update will also be keenly eyed, with the firm now a pure hotelier having completed the US$3.9bn sale of its Costa coffee business to Coca Cola at the start of the year.

Investors will hope to see a pick-up in occupancy levels at Whitbread’s low-cost Premier Inn hotel chain, with numbers having dipped in the first half.

In October, Whitbread said it was pressing ahead with plans to grow its number of rooms by 15% by the end of next year, but the market will be looking to see if the recent slowdown has changed that.

Significant events expected on Thursday:

Trading updates: Associated British Foods PLC (LON:ABF), Whitbread PLC (LON:WTB), Experian PLC (LON::EXPN), Sage Group PLC (LON:SGE), N Brown Group PLC (LON:BWNG), GVC Holdings PLC (LON:GVC),  Premier Foods PLC (LON:PFD), Game Digital PLC (AGM) (LON:GMD), DP Eurasia NV (LON:DPEU), SSP Group PLC (LON:SSP), Workspace Group plc (LON:WKP), Ibstock PLC (LON:IBST)

Finals: Chemring PLC (LON:CHG)

Interims: Ilka PLC (LON:IKA)

Ex-dividends to clip 2.9 points off FTSE 100 index: Ashtead Group PLC (LON:AHT), Compass Group PLC (LON:CPG), SSE PLC (LON:SSE)

Economic data: RICS house price survey; US weekly jobless claims; US housing starts; US Philly Fed manufacturing index

Around the markets:

  • Sterling: US$1.2876, up 0.1%
  • Gold: US$1,291.60 an ounce, unchanged
  • Brent crude: US$61.01 a barrel, down 0.3%

City Headlines:

  • Philip Hammond has said that the “threat” of a no-deal Brexit could be taken “off the table” within days and potentially lead to Article 50 “rescinded”, a leaked recording of his conference call with business leaders has revealed – Daily Telegraph
  • Marks & Spencer must axe even more stores than the 100 already planned to revive its fortunes, it said last night – Daily Mail
  • Patisserie Valerie has admitted that a £40mln alleged fraud was more extensive than had been thought; the company has hired KPMG to carry out a “review of all options” - The Times
  • Goldman Sachs has allocated more than $500mln to cover legal costs last year as it was drawn deeper into the 1MDB scandal – The Times
  • Sear’s chairman and largest shareholder, Eddie Lampert, won a bankruptcy auction for the company, averting liquidation of the iconic chain – The Guardian
  • Tim Stone, the chief financial officer of Snap, the company behind Snapchat, is joining an exodus of top executives after less than a year in the role –The Times
  • The US government is pursuing criminal charges against Huawei for the alleged theft of trade secrets – Daily Telegraph
  • Niantic, the company behind hit mobile game Pokémon Go, is now valued at almost $4bn, up more than three-fold in just over a year – Financial Times
  • Clarks looks set to abandon UK manufacturing for a second time with the closure of an advanced factory in the shoe-maker’s hometown less than two years after opening it – Daily Telegraph
  • The UK property market has registered prices falling at the fastest rate in six years and the outlook for sales the weakest in two decades amid the looming threat of Brexit – The Guardian
  • There will be a sharp slowdown in takeover activity and escalations in trade tensions over the coming year due to rising protectionism fuelled by heightened concerns about national security, law firm Freshfields and the World Economic Forum have warned – Daily Telegraph

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