FTSE 100 index closes over 143 pts up
Indivior on the skids after legal setback
FTSE 100 closed convincingly higher and hit a two month high, as it joined other European and Wall Street markets to head north.
The UK's premier share index closed up over 143 points higher at 7,177.
Midcap cousin FTSE 250 was also up - over 147 points at 18,996.
"The FTSE 100 hit a two month high today," noted analyst David Madden at CMC Markets.
"A strong performance from BP propelled the market higher, but there was also a rise in consumer, mining and financial stocks. Equity markets in Europe have extended their rally today despite the ongoing economic malaise in the eurozone."
BP (LON:BP.) was top gainer on Footsie, adding over 5% to 547p. The group's underlying profits more than doubled in 2018 but the oil supermajor’s UK shareholders won’t see that reflected in their latest dividend payouts.
Higher oil prices and favourable exchange rate movements saw the group turn an underlying replacement cost profit of US$12.7bn in 2018, up from US$6.2bn a year earlier.
4.15pm: Sterling's loss is the Footsie's gain
Thanks in part to a plunge in the value of sterling, London's blue-chips have had a storming day.
The FTSE 100 was up 141 at 7,175 with the index's many foreign currency earnings enjoying the pound's plummet on the forex markets.
“The FTSE has punched into a near-three month high today, as a dramatic drop in the pound helped drive UK stocks higher amid a global surge in equity prices. With just five of 100 stocks in the FTSE trading in the red, today’s surge has been remarkably well distributed,” commented Joshua Mahony at IG Group.
“The pound has come crashing down today, as the services sector wrapped up a trio of hugely disappointing economic PMI surveys for January. With manufacturers stockpiling at a record rate and construction employment growth falling to the lowest level since July 2016, there were already ominous signs that firms are preparing for the worst in the UK,” Mahony suggested.
Among the mid-caps, Indivior PLC (LON:INDV) was propping up the FTSE 250 after the US Court of Appeals for the Federal Circuit (CAFC) denied Indivior's motion to have another stab at getting an injunction granted against Dr. Reddy's Laboratories (DRL) on the grounds of an alleged patent infringement.
The shares tumbled 11.05p to 102.1p.
“Often, the problem with having a superstar product is that you become too reliant on the income it provides. This couldn’t be more applicable of the situation Indivior is facing at the moment,” suggested Jordan Hiscott at Ayondo Markets.
“Just in the summer of 2018 shares touched 500p as its investors rushed to gain exposure to the company through its product Suboxone, as opioid addiction in the US reached crescendo point.
“Today’s US court ruling paves the way for a generic version of the drug to be made, meaning Indivior‘s market shares of approximately 80% is under huge threat,” he added.
The FTSE 250 index was up 103 points (0.5%) at 18,952.
2.35pm: Pound's weakness gives the Footsie a fillip
US stocks opened higher, as expected, with the Dow faring better than the S&P 500.
The Dow Jones industrial average was up 118 points (0.5%) at 25,357 while the broader-based S&P 500 was 0.3% higher (7 points) at 2,732.
In the UK, the FTSE 100 was at its highest level for the day – 7,144, up 110 points (1.6%) - helped by the weakness of sterling, following the release of unconvincing PMI data.
“The pound has fallen to its lowest level of the day in recent trade after a third consecutive data point from the UK in as many business days has flashed a further warning sign for the economy. Following on from disappointing manufacturing and construction numbers, the latest purchasing managers index for the service sector, which due to its relative size is considered the most important of the three, has fallen to its lowest level since July 2016 - the month after the EU referendum,” commented David Cheetham at XTB online trading.
“In the initial reaction, the pound has dropped back near the $1.30 level and close to its lowest in a fortnight. PM May is set to deliver a speech in Northern Ireland later on Brexit and this will no doubt be on the radar for pound traders.
“While near term economic data has taken a back-seat to Brexit developments in the past couple of months it is becoming increasingly apparent that the economy is slowing, due both to the uncertainty surrounding leaving the EU and also a broader slowdown in global economic activity,” Cheetham said.
1.15pm: Top-share index sees its gains trimmed
The Footsie has come off the top but is still sitting on a healthy gain.
The FTSE 100 was up 88 points (1.3%) at 7,122.
In the US, futures markets suggest the Dow Jones will kick-off around 0.4% higher.
Ahead of the U.S open, gold has inched a tad higher in the Euro session in thin trading as investors made purchases after prices touched a one-week low in yesterday’s session. However, gold ‘bulls’ can expect that improved market risk appetite to cap the yellow metal’s gains. Spot gold has rallied +0.2% to +$1,314.10 per ounce, after having printed its weakest price since January at +$1,308.20 in yesterday’s session. U.S gold futures are firm at +$1,318.10 an ounce.
Retailers were in demand following the BRC-KPMG Retail Sales figures for January.
“We have been flagging that High Street sales seemed to have improved in January and so we expected the BRC-KPMG outcome to be up a bit LFL [like-for-like], but the 1.8% growth (after -0.5% LFL in November and -0.7% LFL in December) was surprisingly good, although the survey headline was 'Retailers Looking Nervously to the Future',” said retail analyst, Nick Bubb.
“The all-important food/non-food LFL sales split is, as usual, buried in the 3-month moving averages (of +1.3% and -0.8% respectively), but the way those averages have shifted from last month would imply that Food Retailers saw at least 2.5% LFL growth in January, which may explain why even Waitrose saw better trading last month; however, the BRC flags that there was a calendar benefit from the timing of New Year’s Eve, as well as some benefit from Brexit stockpiling, so the January outcome for Food feels a bit too good to be true,” he added.
“Nevertheless, it looks as if Non-Food was also up LFL last month, perhaps by 1% or so overall. That better Non-Food performance last month was driven by strong Furniture sales, albeit the BRC also flags a calendar benefit to the first week of the month, on the back of the later school holidays. It was also a better month in Clothing, despite less discounting, helped by the cold snap at the end of the period. Interestingly, Online Non-Food sales were only up by 5.3% last month, although this may be under-stating the growth in the overall Online market,” Bubb concluded.
Noon: FTSE 100 scores a ton
US markets were tipped to open modestly higher, providing the small fillip the Footsie needed to manage a triple-digit gain.
The FTSE 100 was up 100 points (1.4%) at 7,134.
“The Dow Jones is set to be a bit calmer when trading opens this afternoon, the futures pointing to a relatively mild 0.3% increase. That would, however, still lift the index above 25,300, and see it seemingly ignore the losses out-of-hours losses that greeted Alphabet’s fourth-quarter results on Monday night,” noted Connor Campbell at Spreadex.
Sales, marketing and support services group DCC PLC (LON:DCC) was marginally underperforming the FTSE after a trading statement covering the fourth quarter of 2019 – the third quarter of the company's fiscal year.
The group said operating profit in the final three months of 2018 was in line with expectations.
The trading update from food delivery technology firm Ocado Group PLC (LON:OSC) also failed to set the crepe alight although the subdued reception might have been more to do with the absence of any news about a tie-up with Marks and Spencer Group Plc (LON:MKS).
Ocado shares were up 1.1% at 1,003p.
“Despite all the fanfare about signing international deals, the reality is that its earnings status is actually getting worse.
“The company has guided for a further decline in underlying earnings because it will incur costs of setting up customer fulfilment centres but they won’t become operational in 2019.
“To its credit, Ocado has made clear progress strategically with finding overseas players who want to use its technology but when you are a FTSE 100 company, failing to make a profit is unacceptable,” Mould believes.
“Ocado needs to spell out how material these overseas contracts are going to be to its earnings if it is to win over the army of sceptics,” he concluded.
11.15am: BP leads the Footsie past 7,100
The FTSE 100 burst past the 7,100 mark and in the final hour before lunch was eyeing a treble-digit gain.
READ BP profits double again in 2018 but that won’t be reflected in shareholders’ payouts
“A slew of positive company news set the tone for trading across Europe and helped indices gain ground early Tuesday. With China covered in red lanterns to celebrate the Lunar New Year and closed for trading for the rest of the week, other markets are also taking a breather from the US-China trade dispute news,” commented Fiona Cincotta at City Index.
“In London BP dominated early headlines having reported a doubling of profit this year thanks to the acquisition of massive US shale assets,” she noted.
Helal Miah, an investment research analyst at retail investor-focused The Share Centre, said it was “an excellent set of full-year results” from BP.
“Management expect 2019 production to head higher given the new projects coming online. In addition after years of divestment to fund compensation payments for the Gulf of Mexico accident, the group’s reserve replacement has grown significantly due to the shale assets acquired from BHP Group; however, the acquisitions has left them with much higher net debts of $44.1bn and a gearing ratio of 30.3%, higher than their previous targets,” the analyst noted.
BP shares were up 4.9% at 545.4p.
9.35am: Market shrugs off stalling UK service economy
Risers outnumbered fallers by more than four-to-one among Footsie constituents despite some underwhelming purchasing managers' index (PMI) surveys.
The FTSE 100 was up 64 at 7,099.
The IHS Markit/CIPS UK services PMI business activity index fell to 50.1 in January from 51.2 in December and just about kept its head above the 50.0 level that indicates the cut-off point between expansion and contraction.
The reading was the lowest in two and a half years and the second weakest since December 2012.
“The latest PMI survey results indicate that the UK economy is at risk of stalling or worse as escalating Brexit uncertainty coincides with a wider slower slowdown in the global economy,” suggested Chris Williamson, the chief business economist at IHS Markit.
“Service sector growth ground almost to a halt in January, matching similar disappointing news in the manufacturing and construction sectors. The last three months have seen the economy slip into its weakest growth spell for six years, and indicate that GDP likely stagnated at the start of 2019 after eking out modest growth of just 0.1% in the fourth quarter,” Williamson added.
8.40am: Energy giant gives Foostie a boost
Wall Street and a buoyant financial performance from BP (LON:BP.) lifted the FTSE 100 index 43 points higher to 7,077.16.
The oil giant weighed in with forecast-beating quarterly and full-year numbers, sending its shares 4% higher and to the top of the blue-chip leader board.
“Global oil majors are performing strongly at present, but these numbers from BP are superlative,” said Richard Hunter, an analyst at Interactive Investor.
“Given the complexity of the operation, BP has the ongoing challenge of keeping the overall engine purring. This has been done with some aplomb.”
“It’s been a transformational year for the online supermarket, though its success won’t show in bottom line for several years to come.”
Legal worries and a recent US ruling felled shares in Indvior (LON:INDV), which is battling to protect the expiring patent protecting a treatment given to drug addicts. Its shares fell 18% on the latest news – that America’s Court of Appeals for the Federal Circuit has denied it a re-hearing.
Proactive news headlines:
BlueRock Diamonds PLC (LON:BRD) has announced the recovery of an exceptional 8.97 carat diamond on Friday 1 February from the Kareevlei Diamond Mine in the Kimberley region of South Africa.
Landore Resources Ltd (LON:LND) has completed the first phase of a detailed metallurgical assessment of the BAM gold deposit on the Junior Lake property in Ontario. The results show that a 98% recovery rate is achievable.
Greatland Gold PLC (LON:GGP), the precious and base metals exploration and development company, has announced excellent laboratory assay results from the company's second drill campaign at its 100% owned Havieron licence in the Paterson region of Western Australia.
88 Energy Limited (ASX:88E) (LON:88E) said drilling will get underway on Alaska’s North Slope later this month on a well targeting a prospective resource of 400mln barrels of oil. Winx-1 is around four miles east of Horseshoe-1/1A, which significantly extended the highly successful Nanushuk play fairway to the south.
Union Jack Oil PLC (LON:UJO) and Europa Oil & Gas Holdings PLC (LON:EOG) both announced that Egdon Resources Plc (LON:EGR), as operator of the Wressle oil discovery, has lodged an appeal against the refusal of planning permission for the drill site in North Lincolnshire. The appeal will be dealt with by the Planning Inspectorate.
Motif Bio Plc (LON:MTFB) (NASDAQ:MTFB), the clinical-stage biopharmaceutical company specialising in developing novel antibiotics, said it has received notification from warrant holders to exercise warrants representing 113,396 ordinary shares in the company for total consideration of £36,513.52. The exercise price of all warrants was 32.2p per warrant.
Primary Health Properties PLC (LON:PHP) said an independent adviser has determined that no adjustment is required in respect of the open offer element of the equity issues it made in March 2016 and March 2018, with his determination is conclusive and binding on the parties. Accordingly, the group added, there is no longer any contingent liability an adjustment to the exchange price of its 4.25% Guaranteed Convertible Bonds 2019.
Midatech Pharma PLC (LON:MTPH) (NASDAQ:MTP), the R&D company focused on delivering innovative oncology and rare disease products to patients, announced after the close on Monday that it conditionally raised, in aggregate, approximately £4.7mln , before expenses, via a placing of 120,966,718 units (comprising one placing share and one warrant) at an issue price of 3.85p per unit. Together with a related share subscription, the company said it conditionally raised gross proceeds of approximately £12.7mln, and looking to raise an additional £0.75 through an open offer to qualifying shareholders of up to a further 19,456,554 units.
6.45am: FTSE 100 set to push higher
The FTSE 100 index is seen pushing higher at open on Tuesday, advancing further above the 7,000 level after gains on Monday thanks to strength overnight from US markets although Asian stocks were more mixed today.
Spread betting firm IG expects the blue-chip index to open around 30 points higher at 7,065, having added 13.91 points yesterday.
Overnight on Wall Street, the Dow Jones Industrials Average ended 175 points, or 0.7% higher at 25,239 helped by comments from Federal Reserve boss Jerome Powell suggesting the US central bank’s period of monetary policy tightening may be coming to an end due to worries over global growth in the face of US/China trade war impact concerns in spite of last week’s strong jobs data.
Industrials and tech stocks led the advances in New York at the start of another busy week for US corporate earnings, although after-hours Alphabet Inc (NASDAQ:GOOG), owner of search engine giant Google, saw its fourth-quarter update disappoint as higher spending worries countered above-forecast earnings and revenue.
In Asia today, with Chinese stock markets closed for the Lunar New Year celebrations, Australian shares managed modest gains but Japan’s Nikkei 225 index surrendered earlier advances to shed 0.3%.
UK services PMI data eyed
On currency markets, sterling was a touch cautious, easing back slightly against the US dollar and the euro as investors continue to await the latest twist in the Brexit saga as well as more UK data, with the final PMI report for January focused on the dominant services sector.
Michael Hewson, chief market analyst at CMC Markets UK commented: “Services activity for so long a strong performer last year saw a drop off towards the end of last year and this may well have filtered over into this year as well. In December we saw activity come in at 51.2 after a weak November, and with retail activity also looking weak we shouldn’t rule out a similarly lacklustre reading.
“Expectations are for a slight moderation to 51.1, while the latest retail sales numbers for January from the British Retail Consortium showed that the UK consumer remained cautious after a poor December reading of -0.7%. January retail sales showed a rise of 1.8%, a welcome respite after a series of poor months, and one of the worst December performances in recent years.”
Cashflow is king for BP
Growth considerations will, therefore, potentially be a focal point - away from the usual financial bullet points - when the FTSE 100-listed firm updates the market with its full-year 2018 results on Tuesday.
In a recent sector note, Deutsche Bank analyst Lucas Herrmann said: “Sharp commodity declines combined with a challenging downstream means the strong earnings and cash momentum apparent for much of the past two years should end this quarter”.
However, he added, BP’s results should show “good year-on-year progress with headline cash flow strongly supported by the material release of working capital, helpful for balance sheets.”
The German bank believes that BP’s market valuation continues to “understate the visibility of its growth and balance in its portfolio”. Deutsche Bank retains a ‘buy’ rating on BP with a 590p price target.
Will Ocado confirm talks with M&S?
The online grocer is understood to be considering replacing Waitrose as its groceries supplier with M&S, according to a recent Mail on Sunday report.
In reaction to the news, shares in Ocado and M&S jumped last week, which suggests investors would be happy with such an arrangement.
Ocado has been transitioning to an international technology firm by supplying its digital platform and warehouses to other supermarkets. However, its own grocery delivery business is still going strong, given the competition the sector is facing.
In the fourth quarter, Ocado’s retail revenue rose 12% on the year to £390.7mln as average orders per week gained 13.1% to 320,000 after expanding capacity with new warehouses in Andover and Erith.
Significant events expected on Tuesday:
Economic data: UK services PMI; US ISM non-manufacturing; US services PMI; US balance of trade
Around the markets:
- Sterling: US$1.3037, down 0.1%
- Gold: US$1,315.12 an ounce, up 0.3%
- Brent crude: US$62.70 a barrel, up 0.2%
- Martin Selmayr, the European Union’s most senior civil servant, yesterday offered Britain a legal guarantee that it would not be trapped by the Irish backstop but was immediately rejected by Brexiteer MPs – The Times
- Alphabet earned US$39.27bn in the last three months of 2018, but its share price sank as its costs rose – The Guardian
- City broker Liberum has accused M&S of failing to go far enough with its transformation plan, warning that sales were likely to continue falling for the foreseeable future – Daily Mail
- Michael O’Leary will be chief executive of Ryanair Holdings for another five years but will step down as chief executive of the airline itself as the company overhauls its structure – Financial Times
- Bill Gross is quitting Janus Henderson after the investment fund he managed dropped below US$1bn this year – Financial Times
- A mixed trading update reinforced concerns yesterday about Sony’s ageing Playstation console business and the wider slowdown in the global smartphone market – The Times
- German payments group Wirecard is being investigated by an external law firm for alleged accounting manipulations in its Singapore operations since May 2018 – Financial Times
- Julius Baer head has pledged to hire relationship managers and hunt for acquisition targets even as the Swiss private bank reported a SFr13 billion fall in assets under management – Financial Times
- The UK home secretary has ordered the extradition of Vijay Mallya, the Indian multimillionaire chairman of Kingfisher beer and former Force India Formula One team owner, over allegations of £1bn fraud – The Guardian
- Huawei is set to face fresh pressure on its long-term role in the UK as an upcoming government report will find it has failed to address security concerns raised last year – Daily Telegraph
- Australian bank executives could face criminal charges following publication of a report on Monday detailing how financial institutions and their leaders have ripped off consumers for profit and personal gains – Financial Times
- Ineos has warned that Britain will be thrown into an “energy crisis” unless it loosens the rules for shale oil and gas developers – Daily Telegraph