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FTSE 100 joins global benchmarks to head higher on Friday on trade deal hopes

Britain's blue chip index closed up around 39, or 0.55% at 7,236 on the day

US/China trade talks
The market remains intent on trying to read the runes in the trade talks between China and the US
  • FTSE 100 index closes higher

  • President Xi Jinping has said that the talks will continue in Washington next week

  • US stocks up and European benchmarks

FTSE 100 joined other global benchmarks Friday to head higher and finished the day nearly 40 points ahead.

It comes as traders were buoyed by positive comments from the US-China trade talks, among other factors.

Britain's blue chip index closed  up around 39, or 0.55% at 7,236 on the day. On the week as a whole, it was up around 2.3% so the gains are steady.

The FTSE 250 was also higher on the day - up by around 89 points at 18,987.

Also boosting sentiment was talk of targeted liquidity from the European Central Bank (ECB) to spur more lending at eurozone retail banks. 

Among the notable Footsie gainers  was banking giAnt RBS (LON:RBS), which posted good full-year figures. The bank also declared a final dividend of 3.5p, and it also announced a special dividend of 7.5p – its first special dividend since the credit crisis.

RBS shares added 2.44% on the day to 247.5p

On the losing side, Standard Life Aberdeen (LON:SLA) shed almost 6% to 233.75p  after Mitsubishi UFJ Trust and Banking Corporation sold-off a large block of shares in the firm.

3.00pm: US benchmarks open on the front foot

US benchmarks opened higher while in London the Footsie was busy cementing its gains.

The FTSE 100 was up 54 points (0.8%) at 7,252, about six points below its peak for the day.

Stateside, the Dow Jones industrial average was up 285 points (1.1%) at 25,724 and the S&P 500 was 22 points (0.8%) firmer at 2,768.

Both markets have been buoyed by reports that trade talks between US and China have gone well enough for further talks to be scheduled in Washington next week.

The mid-cap FTSE 250 could not quite match the FTSE 100’s pace but was still up a handy 112 points (0.6%) at 19,010, despite another tough day for trading platform operator Plus500 Ltd (LON:PLUS).

The stock, which plummeted on Tuesday after the company issued a profit warning, was down another 14% today, at 902.5p, after it emerged that Morgan had dumped a shed-load of shares on behalf of its client.

Previously, Morgan had a 5.6% stake in Plus500 but its holding is now below the 3% threshold at which it is legally required to reveal how many shares it holds in the company.

2.00pm: US industrial production falls for the first time in eight months

Uh-oh, here we go again. After being rocked yesterday by lacklustre retail sales data, US investors were poring over dome iffy industrial production numbers.

US industrial production declined for the first time in eight months in January, declining 0.6%. Economists had been expecting no change.

Despite the reading coming in below expectations, US markets were still expected to open on the front foot.

Back in Blighty, the FTSE 100 was up 50 points at 7,247.

 

12.30pm: US markets set to open modestly higher

In mid-morning trading in London, it was looking like US markets would open sharply lower but the mood has improved.

Futures markets now suggest US benchmarks will eke out a small gain, which has helped put a bit more fire in the belly of the FTSE 100, which is up 26 points at 7,222.

“A significAnt shift in sentiment occurred on Friday morning following the latest trade talks update.

“After a few days of discussion in Beijing, President Xi Jinping has said that the talks will continue in Washington next week, both sides still chasing that elusive deal before the ceasefire ceases at the start of March,” reported Connor Campbell at Spreadex.

“This faint whiff of progress was enough to cause the markets to reverse the losses that had come after the double-hit of Donald Trump’s ‘national emergency’ chat and China’s inflation-slowdown,” he added.

Steel producer Evraz plc (LON:EVR), which is heavily dependent on growth in the Chinese economy, was one of the best performing blue-chips in London, rising 3.0% to 536p.


 

11.15am: Lloyds joins RBS as a banking gainer

Banks remained the flavour of the day as the morning session progressed, with Lloyds Banking Group PLC (LON:LLOY) joining Royal Bank of Scotland Group PLC (LON:RBS) on the gainer’s board after it named its new chief financial officer.

The FTSE 100-listed lender said William Chalmers, currently co-head of the Global Financial Institutions Group of Morgan Stanley will take over from George Culmer, who it previously announced will retire in the third quarter of 2019.

Chalmers joined Morgan Stanley in 2000, after six years at JP Morgan, and was promoted to managing director of the global team in 2003, having previously led Morgan Stanley's European Financial Institutions Group.

The appointment comes ahead of the release of Lloyds’ 2018 annual results next Wednesday, February 20.

In late morning trading, Lloyds shares were 1,3% higher at 58.13p.

Meanwhile, RBS shares were up 1.1% at 244.30p after the majority state-owned lender accompanied its 2018 results with a special dividend of 7.5p a share on top of a final ordinary dividend of 3.5p per share.

The pay-out, which was larger than many in the City had been expecting, comes on the back of a hugely profitable 2018 for RBS.

The lender reported an operating profiting profit before tax of £3.36bn in the 12 months ended 31 December, 50% higher than the £2.24bn it racked up last year. Income slipped to £6.28bn from £6.48bn in 2017.

10.00am: January retail sales rose 1% from December

It appears the US import of Black Friday has not killed the British tradition of shopping in the January sales after all.

The Office for National Statistics (ONS) reported that retail sales in January were 1% higher than in December 2018, defying expectations of a more modest increase of 0.2%.

READ the ONS’s release of January’s retail sales data

January’s rise followed a 0.9% decline in December.

Year-on-year growth in the quAntity bought in January 2019 was 4.2%, the highest since December 2016; while year-on-year average store prices slowed to 0.4%, the lowest price increase since November 2016, the ONS reported.

Online sales as a total of all retailing decreased to 18.8% in January 2019, from the 19.8% share reported in December 2018.

“After a tough Christmas trading period – one that has been described by some as the worst for a decade – the British retail sector started the new year on a stronger footing. Excluding fuel, sales increased by 1.2% in January, echoing British Retail Consortium data which suggested shoppers were tempted out by post-Christmas discounts,” commented James Smith at ING Economics.

“Firstly, it’s worth remembering that January is a month where a huge chunk of unwAnted Christmas gifts get returned, while consumers also go out and spend their newly acquired gift cards. This impact on post-Christmas revenues isn’t reflected in the retail sales numbers,” the ING economist noted.

“More importAntly, though, Brexit uncertainty is likely to keep a lid on spending over the next few months. Despite an improvement in real wage growth, consumer confidence remains at the lowest level since 2013, led by concerns about both the economic climate and personal finances. There is a risk that, as the Brexit deadline draws nearer, nervousness about the impact of ‘no deal’ will creep into the consumer mindset. At the very least, shoppers may opt against bigger ticket purchases in the short-term, instead choosing to maintain savings levels,” Smith suggested.

The FTSE 100 was up 16 points at 7,213, led by bottling company Coca-Cola HBC AG (LON:CCH), which was up 4% at 2,561p, clawing back 98p of yesterday’s losses.

9.30am: Market reverses earlier negative view of RBS's update

A little bit of help from taxpayer-owned bank Royal Bank of Scotland Group PLC (LON:RBS) has nudged the Footsie into positive territory.

The FTSE 100 was up 10 points (0.1%) at 7,207, helped by a broadly positive response to the news that RBS is to pay a special divi.

READ UK treasury set for huge windfall as RBS unveils £1.3bn dividend pay-out

RBS shares recovered from a soft start to rise 1.3% to 244.7p as analysts and pundits got to grips with the bank’s results statement, which as usual was long enough to make Leo Tolstoy sick with envy.

“This feels like a significAnt moment given there would have been times in the last decade or so when shareholders would have welcomed an ordinary dividend let alone anything on top,” suggested AJ Bell’s Russ Mould.

“Today’s results saw the company beat expectations across several metrics and post a second consecutive year of profit; however, the main driver was lower impairments and a reduction in costs.

“While RBS looks like it is out of the emergency room, there remain question marks over just how healthy the underlying business is. Here the outlook looks somewhat less positive,” Mould suggested.

Elsewhere in the financial sector, property group Segro PLC (LON:SGRO) edged a penny higher to 649.2p despite announcing a share placing to raise in the region of £450mln to finance its development programme.

8.40am: Early progress dull

The FTSE 100 made lacklustre start to proceedings – rising just 1.3 points to 7,198.31 – as traders kept their powder dry ahead of Sino-American trade talks that should see the participation of Chinese premier Xi Jinping.

Royal Bank of Scotland shares (LON:RBS) appear to have priced in the good news as they fell 2p to 239.6p after the group raised the dividend on the back of booming annual profits.  

"RBS delivered a stellar set of numbers and a forecast-beating dividend payout to investors, but Brexit and other factors mean it will fall short on its cost-cutting target,” said Neil Wilson, an analyst at Markets.com.

Another Scots financial institution caught the eye as Standard Life Aberdeen (LON:SLA), or ‘Staberdeen’ as it has been christened, caught the eye. Its shares fell 5.5% after a report emerged that one of its largest investors has launched a trade to sell a large chunk of its investment in the savings and pensions titan.

Motif Bio (LON:MTFB) bounced 10% higher early on as buyers emerged after Thursday’s FDA setback, perhaps sensing the initial mark-down had been a little overdone.

Proactive news headlines:

Argo Blockchain PLC (LON:ARB) said it plans significAnt cost cuts and will mine cryptocurrencies for itself to weather “continuing difficult trading conditions”. The company, which has around £15mln in the bank, believes the strategic ‘pivot’ will see the business break even at the EBITDA level in the second half.

Clean energy technology firm PowerHouse Energy Group PLC (LON:PHE) is eyeing signing its first revenue-generating contract next quarter.

Metal Tiger PLC (LON:MTR) announced that on 14 February 2019, its chief investment officer, Mark Potter made on market purchases of 300,000 ordinary shares in the company at an average price of 1.27p each. Following the purchase, the group added, Potter is interested in 6,300,000 ordinary shares, representing approximately 0.47% of the company’s issued share capital.

88 Energy Ltd (LON:88E) this morning issued a statement telling investors it is on schedule to spud the Winx-1 exploration well later today. The explorer, in a statement, said that the drill rig arrived on site as planned last week, rig-up operations have gone smoothly, and, final preparations are underway before the spud.

Polarean Imaging Plc (LON:POLX), the medical imaging technology company, said the University of British Columbia (UBC) is acquiring one of the company’s polarizer systems. No financial details were mentioned, but the Polarean release said UBC has received support from the Canada Foundation for Innovation.

Baker Steel Resources Trust Ltd (LON:BRST), in a statement after Thursday’s close, revealed an agreement to invest US$3mln into Azarga Metals Corp, a company listed on the Toronto Ventures Exchange. It is investing via a 4-year term 8% secured convertible loan.

APQ Global Limited (LON:APQ), the emerging markets growth company, announced that as at the close of business on 31 January 2019, its unaudited book value per ordinary share was 96.32 US cents, equivalent to 73.22p.

6.45am: Subdued start predicted 

The Footsie was tipped to give back all of yesterday's meagre gains following the rejection in the Commons last night of Theresa May’s latest Brexit plan.

Spread betting quotes point to the top-share index opening 9 points lower at 7,188 after it rose 6 points yesterday to close at 7,197.

As well as the retail sales data from the UK due this morning, investors will be keeping an eye on developments in the trade talks between the US and China.

“According to Chinese media, US representatives Steven Mnuchin and Robert Lighthizer will meet President Xi Jinping today. The recent news flow indicates that the two parties remain far apart from each other. We think this is in part expectation management,” said Danske Bank in its morning briefing.

“Also, we believe focus will remain on the risk of a new partial US government shutdown. At this stage, it seems President Donald Trump will sign the spending bill that Congress has passed this morning. This would avoid another shutdown. Meanwhile, tensions are running high, as the President has indicated he plans to declare a national emergency to get funding for his border wall with Mexico. The deadline is midnight US time,” it added.

US markets took a bath yesterday following some alarming retail sales data for December. The Dow tumbled 104 points to close at 25,439 and the S&P shed 7 points at 2,746.

In Asian markets this morning, the mood was downbeat with Tokyo’s Nikkei 225 off 239 points at 20,901 and Hong Kong’s Hang Seng down 506 points at 27,926.

RBS results the main focus

Back home, Royal Bank of Scotland Group PLC (LON:RBS) kick-starts the 2018 full-year results season for the listed UK banks on Friday and investors will be hoping that strong profit growth will bring a further dividend reward for long-suffering shareholders.

Friday’s full-year results will be an importAnt measure of how much things have improved for RBS, although growth seems to be slowing across the sector; on the plus side, low interest rates and high levels of employment should mean that bad loans issues remain subdued.

Although Brexit remains a cloud on the horizon, and analysts expect the bank to strike a cautious note in its outlook, with markets now pricing in a UK rate rise before the end of the year – a boost to margins for the banking sector - the longer term outlook for RBS is looking rosier than it has for a long time.

Elsewhere, FTSE 250 real estate investment trust Segro PLC (LON:SGRO) will also issue its 2018 results.

The property group, which specialises in warehousing and it also has some exposure to light industrial properties, is expected to see its net asset value grow, with consensus estimates looking for a rise in the key metric to 641p per share.

SignificAnt events expected on Friday:

Finals: Royal Bank of Scotland Group PLC (LON:RBS), Segro PLC (LON:SGRO)

Trading update: Ocean Outdoor Limited (LON:OOUT)

Economic data: UK retail sales; US export/import prices; US retail sales; US manufacturing, industrial production; NY Empire State manufacturing survey; University of Michigan preliminary consumer confidence index

Around the markets

  • Sterling: US$1.2806, up 0.04 cents
  • 10-year gilt: yielding 1.051%
  • Gold: US$1,316.80 an ounce, up US$2.90
  • Brent crude: US$64.73 a barrel, up 16 cents
  • Bitcoin: US$3,611.81, up US$7.87

City headlines:

  • Financial Times

  • The prime minister’s Plan B suffered a resounding parliamentary defeat n Thursday
  • Jack Ma’s Chinese financial services giAnt Ant Financial is to snap up British payments group WorldFirst in a US$700mln deal
  • The Daily Telegraph

  • Amazon has pulled the plug on opening a new headquarters in New York after fierce local opposition.
  • Credit Suisse’s first annual profit since 2014 was held back by its struggling global markets trading operations, which registered a 10% decline in annual net revenue.
  • ConvaTec’s shares fell almost a fifth on Thursday after the medical technology company launched a $150 million restructuring.
  • Interserve will be forced to immediately hand over £66 million to its lenders if its largest shareholder thwarts a controversial debt-for-equity rescue deal announced last week.
  • The Guardian

  • Renewable energy sources will be the world’s main source of power within two decades, according to BP.
  • Ryanair has said air traffic control strikes and staff shortages will cause record levels of disruption to holiday flights this summer.
  • Daily Mail

  • Sales at Puma jumped 12.4% to £4.1 billion last year as younger shoppers snapped up crop-tops, leggings and chunky trainers.
  • German sports car firm Porsche has written to customers to warn them that they might have to pay extra for their new cars after Brexit.
  • The Times

  • The Restaurant Group announced the resignation of its chief executive less than two months after he pushed through the controversial acquisition of the Japanese noodle bar chain Wagamama.
  • The Bank of England will probably cut interest rates in the event of a no-deal Brexit, one of its nine policymakers has said.

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