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Market ReportFTSE 100

FTSE 100 joins the decline in global equities to close lower

There is not a lot of earnings news on either side of the Atlantic to drive markets higher

Bear fishing for salmon
The bears have wrestled back the initiative

FTSE 100 closed in the red on Friday, joining other global indices in tracking lower.

The UK's premier index of leading shares shed around 22 points to close at 7,071, with financial firms taking the brunt. On the week as a whole, the index was higher - climbing around 0.73%.

The FTSE 250  lost around 146 points at 18,652.

In the US, the Dow Jones Industrial Average is down around 209 points at 24,960 at the time of writing. The S&P 500 shed around 16 at 2,689 and the Nasdaq index lost around 45 at 7,243.

On London's Footsie, the top laggard was turnaround firm Melrose Industries plc (LON:MRO), which lost nearly 5% to 156.75p.  Also lower was Hargreaves Lansdown (LON:HG), which lost 4.32% to 913.40p.

2.35pm: Top-shares index stabilises at lower level

As expected, the Dow Jones opened with a triple-digit fall.

Stateside, the Dow was down 153 points at 25,-17 while the broader-based S&P 500 was down 12 at 2,694.

In London, the Footsie continues to poodle along in the red, down 12 points (0.2%) at 7,077.

The mid-cap FTSE 250 fared even worse, shedding 71 points (0.4%) at 18,729.

Among the small caps, Cluff Natural Resources PLC (LON:CLNR) was enjoying a rare sojourn at the top of the greasy pole after inking a deal with integrated oil major Royal Dutch Shell (LON:RDSB).

READ Cluff Natural Resources teams up with Shell in southern North Sea​

Shell is to acquire 70% of Cluff’s P2252 licence block; it will become the operator and will pay for 100% of a proposed seismic survey.

Cluff shares were up by almost 50%.

1.30pm: Wall Street expected to reverse again as traders fret over the prospect of trade war escalation

The Footsie is facing a drab end to a dismal week, with losses lengthening ahead of the US open.

The FTSE 100 was down 17 points (0.2%) at 7,077, with yesterday’s major casualty, travel firm TUI AG (LON:TUI) once again left at the landing gates.

After shocking the market with a profit warning yesterday and shedding around a fifth of its stock market value, the company saw another 34.4p wiped from its share price today at 920.2p.

Also on the slide was utility Centrica PLC (LON:CNA) after Citi downgraded it to ‘neutral’ from ‘buy’ and lopped 16p off the target price at 144p. The shares were down 3% at 134.9p.

Meanwhile, market sentiment has been dampened by expectations of another hairy session on Wall Street.

“Index futures are looking at a lower start to the week’s final session, with news that Donald Trump won’t meet Chinese officials until some time after the March 1st deadline for tariff increases has passed serving to weigh on sentiment,” observed James Hughes at Axi trader.

“There’s a general lack of macroeconomic fundamentals in play right now, so consequently the market is putting a lot of weight on emotive subjects like this and until there’s some clarity over whether the import levies will be deferred until after that meeting has taken place, downside pressure may well prevail,” he opined.


 

12.15pm: Footsie subsides into the red ahead of what is expected to be a weak start on Wall Street

With the start of trading in the US just over two hours away, the Footsie had fallen into negative territory.

The FTSE 100 was down 11 at 7,083.

Across the pond, spread betters were punting on the Dow Jones opening at around 25,020 after it fell 221 points to 25,170 yesterday.

The broader-based S&P 500 shed 25.6 points to close at 2,706 and is expected to kick off at around 2,690 as investors continue to fret over the US-Sino trade talks.

“Investor worries over economic growth and trade disputes have pushed global equities towards their first weekly loss in nearly two months,” observed Dean Popplewell at Oanda.

Oil giants BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB) are dragging the index down as the oil price tends softer on the futures markets.

BP was off 0.8% while Shell was down 0.5%.

“Oil fell more than -2% yesterday on investor concerns that global demand growth would lag in 2019. Also, not providing support, are worries that a trade war between the US and China would continue, weighing on demand and that oil producers would not adhere strictly to cuts agreed to last year.,” Popplewell said.

“Crude fundamentals are not helping, as weekly data published by the US EIA mid-week showed an unwelcome increase in stocks of crude oil,” he added.

10.50am: Modest gains for blue-chips

The blue-chip index was just about keeping its head above water, thanks largely to the strength of the housebuilders.

The FTSE 100 was up 12 points (0.2%) at 7,106, with Barratt Developments PLC (LON:BDEV), up 1.6%, and Berkeley Group PLC (LON:BKG), up 1.4%, leading the advance.

“The FTSE is also regaining some ground following the worst decline this year of 1.1%. The Bank of England sounded a... worried note about the UK economy with Mark Carney warning that a no-deal Brexit could cause a recession.

“But a surprise move by Jeremy Corbyn is about to start shifting the political ground. The Labour leader has written a conciliatory letter to the Prime Minister which could encourage some of his party members to vote in support of Theresa May’s proposals and give the PM ammunition against her own rebel MPs. It could mean that instead of a hard Brexit the country could walk away with some sort of deal that is not necessarily good for Britain but avoids immediate calamity,” said Fiona Cincotta at City Index.

“Sterling traders were unimpressed with that option, trading the currency down to 1.2927 against the dollar,” she added.

The FTSE 100 may have been on the up but Smith & Nephew PLC (LON:SN.) was gong the other way after some broker commentary.

Exane cut the artificial hips and knees maker to ‘neutral’ from ‘outperform’ even as it raised its target price to 1,525p from 1,475p while Credit Suisse nudged up its price target to 1,390p from 1,330p.

S&N’s shares trade at 1,522p, down 23p on the day.

9.30am: The Footsie rouses itself ... a bit 

After a subdued start, the Footsie has set about clawing back some of yesterday’s heavy losses.

The FTSE 100 was up 19 at 7,112 but already showing signs of sidling off for a mid-morning nap on what is likely to be a quiet day for blue-chip news.

When a trading statement from dull as ditchwater utility company SSE PLC (LON:SSE) is the highlight of the blue-chip reporting scene then you know you are in for a dull day.

The company was up a penny following its update – a mere drop in the ocean given its share price of 1,174.5p.

“SSE has delivered an impressive flow of dividends for shareholders, but the fact it hasn’t always covered the payout with its earnings or cash flows means there have been lingering doubts over its future for some time,” commented George Salmon, an equity analyst at Hargreaves Lansdown.

“The dividend looks OK for now, but only because it was cut in advance of the planned departure of the retail business. Npower ended up walking away from that deal, citing concerns over heightened regulation, but the longer-term plan is still to separate the business.

“Once the valuable retail cash flows are removed, the pressure will be on the group’s renewable assets to deliver. As we’ve seen this year, that’s no formality. With credit ratings being cut, tighter regulation in the networks business looming and debts approaching £10bn, the dividend policy could yet need another look,” Salmon suggested.


 

8.40am: Needle not moving very far

The FTSE 100 was trading less than 1 point lower at 7,092.81 as City traders assessed the game of trade brinksmanship being played by the US and China.

Wall Street was in selling mode, with the Dow finishing 220 points worse off than it started, while the negativity also infected Asia’s main stock indices.

“Two big China trade items knocked back markets yesterday and are likely to weigh on the European session on Friday,” said Neil Wilson of Markets.com.

“First we won’t get a Trump-Xi meeting before tariffs are set to increase on March 2. Whilst this is a bit of a blow, it’s not in itself a reason to think trade talks are not going anywhere.

“The key trigger for the selling was when White House economic advisor Larry Kudlow sounded a cautious note on trade talks, saying that there is a ‘pretty sizeable distance to go’.”

Back in the UK, action in the upper end of the stocks divisions was muted.

Among the small-caps, payment processor Earthport (LON:EPO) was feeling the love after Visa trumped Mastercard’s bid for the business in what is being dubbed by nobody as the battle of the credit cards.

The shares raced up 13% to 44p – some 7p ahead of Visa’s bid, suggesting this to-ing and fro-ing may not be over.

There was also a boost for Arix Bioscience (LON:ARIX), which rose 3% after it announced one of its portfolio investments had listed on NASDAQ.

Proactive news headlines:

Tower Resources PLC’s (LON:TRP)  50% owned Algoa-Gamtoos exploration area has been boosted by a significant new gas condensate discovery at the neighbouring Brulpadda exploration project, offshore South Africa.

Katoro Gold PLC (LON:KAT), the Tanzania focused gold exploration and development company, has settled some bills through the issue of shares and granted options to the board and management of the company.

Healthcare investment company Arix Bioscience Plc (LON:ARIX) said a fourth portfolio company is listing on the stock market – providing an uplift to the valuation of its shareholding. Harpoon Therapeutics, which is developing T-cell immunotherapies for cancer, is raising £58.4mln from the NASDAQ float.

Vast Resources PLC (LON:VAST) has appointed Paul Fletcher as its new chief financial officer with immediate effect.

Nektan PLC (LON:NKTN), the fast-growing international gaming technology platform and services provider, announced that at its annual general meeting held yesterday all resolutions were duly passed.

SigmaRoc PLC (LON:SRC) the AIM-quoted buy-and-build construction materials group, late yesterday announced the appointment, with immediate effect, of Liberum Capital as its joint broker, alongside its existing broker, Berenberg.

6.45am: Trade war fears to haunt FTSE 100

Trade war fears have returned to haunt the markets but it looks as if most of the damage was done yesterday.

Spread betting quotes suggest that after tumbling 80 points yesterday to close at 7,094, the FTSE 100 will open two or three points firmer.

“Overnight Trump said that he has no plans to meet with Xi Jinping before the 1 March deadline and the end of the 90-day truce on higher tariffs,” reported Danske Bank.

“The poor risk sentiment from Europe was carried over to the US and the major US indices ended the day roughly 1% lower and US Treasury yields dropped further and 10Y US yields are now at 2.65%. Asian markets are also in red,” the bank noted.

Specifically, the Dow Jones industrial average plunged 221 points to 25,170 while the broader-based S&P 500 shed 25.6 points to close at 2,706.

In Tokyo, the Nikkei was down 418 points at 20,333 while in Hong Kong the Hang Seng index was off 89 points at 27,902 as trading resumed after the Chinese New Year celebrations.

“Up to now, the markets have been optimistic about a trade deal being reached, despite little solid evidence. Trump’s stance is now rattling investor nerves just weeks before the deadline. With US corporate earnings starting to dry up, traders' full focus will soon be back on trade developments. With no deal in sight this will have a negative bias on equity market flows,” suggested Jasper Lawler at London Capital Group.

On the home front, the trading update from UK utility SSE PLC (LON:SSE) may be about as welcome as a winter gas bill, suggests The Share Centre.

“2018 proved to be a difficult year for the group, culminating in the failure to merge its retail business with Innogy and the rebasing of the dividend for 2020,” the broker said.

“Any further updates on the group’s future plans and regulatory issues will be worth noting. The recent cold weather is likely to have come too late to have boosted demand,” it added.

Significant events expected on Friday:

Trading updatesSSE PLC (Q3) (LON:SSE)

Economic data: US wholesale inventories

 Around the markets:

  • Sterling: US$1.2945, down 0.08 cents
  • 10-year gilt: yielding 1.067%
  • Gold: US$1,312.70 an ounce, down US$1.50
  • Brent crude: US$61.19 a barrel, down 44 cents
  • Bitcoin: US$3,395.91, up US$11.92

City headlines:

  • Financial Times

  • Britain’s biggest car maker, Jaguar Land Rover, posted its third quarterly loss in a row
  • The Times

  • The Bank of England cut its growth forecast for this year from 1.7% to 1.2%, the worst since 2009, when the economy contracted by 4.2%; the BoE governor Mark Carney said there was a one-in-four chance of recession by the summer.
  • Yum Brands missed Wall Street’s earnings forecasts yesterday as strong sales at KFC and Taco Bell failed to offset a weak performance from Pizza Hut in the fourth quarter.
  • Private investors in Britain pulled out £1.65 billion in December, following outflows of more than £2 billion in both October and November, inflicting a final blow in what has been a punishing year for the asset management industry.
  • Qantas has cancelled a long-standing order for eight Airbus SE A380 super-jumbos, putting future of the world’s largest passenger plane in doubt.
  • Coltrane Asset Management, the New York hedge fund attempting to derail the £905 million rescue plan at Interserve, is nursing losses of nearly 90% on a £25 million bet that the public services contractor could recover without falling into the hands of its lenders.
  • The demise of Carillion has boosted Mitie and Capita in a big way but public sector spending and activity appears to have slowed.
  • The Guardian

  • Twitter’s share price fell close to 10% yesterday on investors’ concerns over a drop in user numbers and a weak revenue forecast.
  • Ikea is trialling the sale of used, patched-up furniture in the UK as part of its efforts to become more environmentally friendly.
  • Woody Allen has launched a $68 million legal action against Amazon, alleging the studio has broken a four-film deal the director signed with the tech giant in 2016.
  • The Daily Telegraph

  • Superdry has blamed warm weather and issues with its winter fashion ranges for another slide in sales, sparking a fresh attack from founder Julian Dunkerton.
  • Ministers have dismissed shale gas pioneers’ calls for lifting the Government’s earthquake limits to boost fracking.
  • A former sales boss of Petrofac has pleaded guilty to 11 counts of bribery used to secure work on Middle East oil projects worth more than £3 billion.
  • The two heads of National Australia Bank, one of Australia’s biggest banks, have resigned after a long-anticipated report on the country's scandal-hit financial sector singled them out.

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