FTSE 100 index closes lower
But Wall Street stocks are up
HSBC top Footsie laggard
FTSE 100 closed in the red on Tuesday as a lack of positive catalysts made investors uneasy.
The UK's blue chip benchmark closed down around 40 points at 7,179, while FTSE 250 shed around 58 at 19,068.
On Wall Street though, returning after the long weekend, benchmark indices were pushing higher. The Dow Jones Industrial Average is up around 29 points at the time of writing, while the S&P 500 added around six at 2,781.
"The FTSE 100 is in the red this afternoon as a lack of positive news has encouraged some traders to take money off the table," said David Madden, analyst at CMC Markets earlier.
He added; "The disappointing results from big-hitters, HSBC and BHP Billiton has weighed on the British equity benchmark. There are some concerns that President Trump could trigger a trade war with the EU in relation to the importation of vehicles and auto parts, so some investors are cautious."
The top loser on Footsie was HSBC Holdings plc (LON:HSBA), which shed 4% to 637.10p.
3.45pm: Drab end to a drab day for the Footsie
A sense of ennui continues to hang over the London stock market.
Since noon, the FTSE 100 has traded in a narrow band between 7,167 and 7,182 – where it is now, down 37 points (0.5%) on the day.
Legacy software firm Micro Focus International PLC (LON:MCRO) was again one of the better blue-chip performers today, thanks in part to its ongoing share buyback programme.
The shares rose 3.78% to 1,813p today as the company revealed it had bought another 170,677 shares yesterday, at an average price of 1,736.6p.
Since it released its 2018 results last Thursday, the shares have risen from around 1,517p.
Results today from Holiday Inn outfit Intercontinental Hotels Group PLC (LON:IHG) failed to elicit the sort of response Micro Focus's update did last week.
The shares were down 0.6% despite the hotels group hiking the final dividend by 10% and announcing planss for an “upper midscale” brand.
READ Intercontinental Hotels up as it hikes dividend and announces plans for upmarket brand launch
2.40pm: US stocks make slow start after long weekend break
As expected, US benchmarks opened modestly lower.
As expected, the FTSE 100 continued to trade sideways at its lower level, down 41 points (0.6%) at 7,178.
In the US, the Dow Jones was down 12 points (0.1%) at 2,871 and the S&P 500 was off 2.6 points (0.1%) at 2,273.
Among mid-caps, well-received trading statements from hot snacks seller Greggs plc (LON:GRG) and bus & trains operator FirstGroup PLC (LON:FGP) were not enough to prevent the FTSE 250 from sliding 97 points (0.5%) to 19,030.
Greggs was up 8.8% at 1,743p after the company surprised the market by reporting “an exceptionally strong start to 2019”.
“The new vegan sausage roll has helped bring home the bacon for Greggs, prompting a spike in sales at the start of this year. The company has therefore upgraded its profit expectations for the coming year, and that’s sent the share price up sharply,” said Laith Khalaf, a senior analyst at Hargreaves Lansdown.
“It’s unclear how much of the boom can be attributed to sales of actual vegan rolls rather than simply the publicity associated with the launch; however, catering for vegan diets is now rising up the priority list for many food retailers, with M&S recently launching its new vegan range, Plant Kitchen,” he added.
FirstGroup motored 3.7p higher to 95.2p after it sold the Queen's Road bus depot in Manchester plus 163 buses to Go-Ahead Group PLC (LON:GOG) for £11.17mln.
Go-Ahead agrees terms with FirstGroup to purchase Manchester bus depot https://t.co/uNL0adufsZ pic.twitter.com/SCUVImhRtI
— The Go-Ahead Group (@TheGoAheadGroup) February 19, 2019
1.15pm: The Footsie fails to find its mojo
The Footsie has been searching for its mojo all afternoon and finding it harder to locate than a seat on the Central Line.
The FTSE 100 was down 44 points (0.6%) at 7,175, with HSBC PLC (LON:HSBA) leading the retreat after it laid an egg with its full-year results.
READ HSBC weak as 2018 results miss forecasts following a drop in fourth-quarter profit
Merrill Lynch responded to the results by cutting its recommendation on the stock to 'neutral' from 'buy' while Goldman Sachs cut the price target to 780p from 815p.
HSBC shares currently trade at 635.8p, down 4.2% on the day.
In comparison, mining giant BHP PLC (LON:BLT) got off relatively lightly with its underwhelming trading update, sliding 12p to 1,787.6p.
RBC Capital Markets stuck with its 1,625p price target after BHP's underlying earnings (EBITDA) for the half-year came in 1% below the broker's forecast.
“The underlying result was impacted, as expected, by a challenging operational period with disruptions at Spence, Olympic Dam and WAIO. Strength in the Petroleum division offset weaker financial performance in copper, iron ore and coal,” the broker said.
“Free cash flow was much better than we had anticipated as a mix of less working capital impacts, lower cash interest charges, and modestly lower capex in the period drove the improved performance,” it added.
12.10pm: Leading shares continue to flounder; no sign of Wall Street rushing to the rescue
The release of UK productivity data got somewhat overlooked this morning in the barrage of commentary over the jobs figures.
A flash’ estimate from the Office for National Statistics (ONS) showed that UK productivity (measured in terms of output per hour worked) edged up by 0.2% in the fourth quarter of 2018.
“This continued an overall weak performance in productivity during 2018, with erratic quarterly movements,” said Howard Archer, the chief economic advisor to the EY ITEM Club.
“The subdued performance in Q4 2018 and weakness over the year reinforces concerns over the UK’s overall poor productivity record since the deep 2008/9 recession.
“The UK has a lot of catching up to do on the productivity front. Indeed, when releasing the full productivity data for the third quarter of 2018, the ONS reported that ‘Productivity in Quarter 3 (July to Sept) 2018, as measured by output per hour, was 18.2% below its pre-downturn trend – or, equivalently, productivity would have been 22.3% higher had it followed this pre-downturn trend’,” Archer said.
The FTSE 100 remained in the doghouse, down 46 points (0.6%) at 7,174, ahead of what is expected to be an indifferent start on Wall Street, as it resumes trade after the long weekend.
“Asian markets may have been buoyed by further signs of progress in the US-China trade talks, but the positive sentiment hasn’t been shared on Wall Street. Futures suggest we’ll see a largely unchanged start to trade as markets return from the long weekend break, arguably adding credence to the idea that China will get the edge in the outcome of any trade agreement,” said James Hughes at Axi Trader.
The online platform operator is calling for the S&P 500 to open a point or so lower than Friday's close.
11.00am: Jobs, jobs, jobs
For all the people lauding this morning's jobs figures, the top-share index remains determined to stay stuck in the mire.
The FTSE 100 was down 37 points (0.5%) at 7,182.
“Against a backdrop of tepid economic growth and heightened uncertainty, the labour market continued to grow strongly at the end of 2018. While pay growth stalled, it’s still stronger than it has been for almost a decade, giving some relief to households’ budgets,” commented Alpesh Paleja, the principal economist at the bosses' pressure group, the CBI.
“Yet, productivity remains weak, posing a risk to the sustainability of the recovery in pay going forward. With the fog of political and economic uncertainty remaining thick, it’s important that politicians do not lose sight of this major challenge to the UK economy,” the economist added.
Howard Archer, the chief economic advisor to the EY ITEM Club, said there is certainly survey evidence that labour market tightness has recently supported higher starting salaries and pay for people switching jobs.
“The latest monthly REC/IHS Markit Report on Jobs observed that ‘starting pay continued to increase sharply in January. Notably, permanent starters' salaries and temp wages both rose at historically strong rates’.
“There is also survey evidence that employers are currently offering modestly higher pay increases for their existing staff, although the increases are limited. A survey released in mid-February by the Chartered Institute of Personnel and Development (CIPD) indicated that employers in the private sector plan to raise average basic pay by 2.5% over the coming year. This was up from 2% in the November survey and the highest rate since the survey started in 2012; however, the CIPD also revealed that public sector employers expect pay increases to fall back to an average of 1.1% in 2019 after a temporary rise to 2%,” Archer noted.
The number of people born in the EU in employment in the UK continues to fall in today’s figures. pic.twitter.com/INZuRAGeVD
— ResolutionFoundation (@resfoundation) February 19, 2019
Meanwhile, all the talk of a robust jobs market is likely to ring hollow today in Swindon where the Japanese car giant, Honda, has confirmed it is to close its factory.
“The timing could not have been worse as Honda takes some of its car making back home,” suggested Graham Spooner, an investment research analyst at The Share Centre.
“Yes the B word will be cited by some, but this is a decision based on the global economy and changes in the industry, along with the recent EU – Japan trade deal. Unsettling for many in the industry and a reminder if one was needed that giant corporates, at what might seem like a drop of a hat, can impact so many,” he added.
10.15am: Pound little changed after jobs and earnings numbers
Jobs news – or jobs loss news – was to the fore in mid-morning after the release of UK employment and earnings data.
According to Matt Hughes, the senior statistician at the Office for National Statistics (ONS), the labour market remains robust.
The ONS reported that the employment rate remained at a record high while vacancies reached a new record level/
“The unemployment rate has also fallen, and for women has dropped below 4 per cent for the first time ever.
“Most of the growth in employment over the past year is among British nationals; however, the number of overseas nationals in work is still rising, despite a drop in the number of so-called ‘A8’ workers, due to more people from non-EU countries being in work,” Hughes observed.
David Cheetham at forex trading platform xtb said the most recent data on the UK labour market “continues to be strong on the whole”.
“The headline average earnings number was a little softer than expected in remaining at 3.4%, but the ex-bonus was in line with forecasts and overall it represents another solid reading. The data relates to December of last year so there is something of a lag, and the recent decline in industry surveys last month will not be seen until the release in March.
“Due to the lag in this data, it is often not the most market moving, and we’ve seen that this morning, with a pretty subdued reaction in sterling which has drifted back down near the US$1.29 handle since the release,” Cheetham observed.
Fiona Cincotta at City Index said that “despite the fairly positive global trading environment, lower-than-expected profits and plant closures in the UK are putting the FTSE under pressure this morning”.
“Adding to concerns about what Brexit is doing to Britain’s economy, Japanese car maker Honda decided to close its plant in Swindon in three years’ time. Granted, global car makers are battling fires on several fronts including Trump’s tariffs on foreign car imports, lower Chinese demand and slowdown in demand in other regions, but with Brexit around the corner, Britain is losing any advantage points in what is already a cut-throat game.
“Honda’s decision comes only weeks after Nissan decided to halt plans to build a new car model in its plant in Sunderland which will have obvious repercussions in terms of employment and investment. The pound, which currently acts as a barometer for all things Brexit, is flat-lining against the euro and the dollar, trading 0.1% lower against the common currency and up 0.1% against the greenback,” she noted.
The FTSE 100 was - like the forex markets – not taking much notice of the employment data. The index was down 41 points at 7,179.
There were 870,000 job vacancies for the three months to January 2019, 46,000 more than a year earlier and a record high https://t.co/RlnDDOioqV pic.twitter.com/dYRO1pfQ7d
— ONS (@ONS) February 19, 2019
9.50am: Honda confirms it is to close its factory in Swindon; blames the rise in popularity of electric vehicles
The immediate reaction to the release of the UK unemployment figures was muted, which at least was on theme for the week.
The UK claimant count rate in December remained unchanged from the previous month at 2.80%. Employment rose by 167,000 in the three months to December to 32.6mln, which is the highest level since records began in 1971.
For October to December 2018, there were 844,000 people whose main job was on a zero-hours contract (2.6% of all in employment), 57,000 fewer than for a year earlier. https://t.co/hMGsecdqGo
— Richard Clegg (@ONSRichardClegg) February 19, 2019
The data release came shortly after Japanese car giant Honda confirmed it would be shutting its Swindon factory, endangering the jobs of around 3,500 workers.
Average earnings increased by 3.4% in 2018, which was the highest level for a decade.
“You have to consider the decline in demand for diesel too: Honda’s Swindon engine plant produced diesel engines...there’s the ever-growing rise in popularity of SUVs, which is harming sales of...cars such as the Civic – the only model made in Swindon.” https://t.co/4FdLL4Y1TF
— Owen Paterson MP (@OwenPaterson) February 19, 2019
Approaching ten o'clock, the FTSE 100 was down 41 points at 7,179; shortly before the release of the employment data, it was about five points higher.
9.00am: HSBC leads the Footsie lower
Ahead of the UK unemployment report this morning, London's leading shares continued in yesterday's lethargic mood.
The FTSE 100 was down 29 points (0.4%) at 7,190, with banking giant HSBC PLC (LON:HSBA), down 3.3%, leading the retreat after its 2018 results were released.
Sector peer Standard Chartered PLC (LON:STAN) fell 2.9% in sympathy.
“A tough fourth quarter took its toll on some of the numbers, whilst a slowing Chinese economy, partially fuelled by the ongoing trade spat with the US, has yet fully to wash through. As such, 2019 could begin to see some real impact in an Asian region whose reported profits contribute almost 90% of the group total,” said Richard Hunter, the head of markets at interactive investor, in his analysis of HSBC's figures.
“Meanwhile, the key metric of the adjusted jaws figure slipped into negative territory and resolving this is a priority in the coming year,” he added.
HSBC misses earnings expectations- EMEA Brief 19 Feb https://t.co/IhVpdfGHVq
— Ton Oliveira (@rubberduck42B) February 19, 2019
Steve Clayton, manager of the Select UK Income Shares fund at Richard Hunter's former employer, Hargreaves Lansdown, said the results were disappointing.
“HSBC has always been a bank built around facilitating international trade between Asia and the rest of the World. Today’s tariff spats between the US and China are hardly helpful and could begin to hurt the group’s customers in Asia and beyond. It is disappointing to see the group’s performance so impacted by short term market conditions, highlighting the need to see the bank continue to focus on pivoting toward Asia and growing its less volatile retail and commercial banking activities,” he declared.
8.40am: Weak start as results drag
The FTSE 100 resisted the pull of Asia’s buoyant stock markets to open in the red.
The index of blue-chip shares fell 15 points to 7,204.48 in spite of growing optimism that Washington and Beijing may be close to breaking the trade impasse hobbling the world economy.
Another drag on performance was HSBC, one of the major constituents of the Footsie, which dropped 2.8% in the wake of its annual results statement.
“These are generally – and typically - strong numbers from HSBC, but they come with a tinge of disappointment,” said Richard Hunter of Interactive Investor.
“A tough fourth quarter took its toll on some of the numbers, whilst a slowing Chinese economy, partially fuelled by the ongoing trade spat with the US, has yet fully to wash through.
“As such, 2019 could begin to see some real impact in an Asian region whose reported profits contribute almost 90% of the group total.”
Half-year results from BHP Billiton (LON:BHP) led to a 1.8% fall in the shares of the mining major and placed the skids under the sector.
On the plus-side, TUI (LON:TUI) shares bounced 2.2% after their recent profit warning-inspired collapse.
Among the tiddlers, Armadale Capital (LON:ACP) was an early riser after agreeing to sell graphite production from a mine it has yet to build.
Proactive news headlines:
Seeing Machines Limited (LON:SEE) has secured a new programme design win for its Driver Monitoring System technology with a US-based original equipment manufacturer.
Arc Minerals Ltd. (LON:ARCM) has raised £2.2mln through a placing of 73.6mln units at 3p each, with each unit consisting of one share and one warrant. The money raised will be used to fund the continuing exploration and development work on the Zamsort copper project in Zambia and for general working capital purposes.
Strategic Minerals PLC (LON:SML) (USOTC: SMCDY) announced that its managing director, John Peters and chairman, Alan Broome gave exercised 17,500,000 existing vested options. Accordingly, the group added, Peters has sUBScribed for 16,000,000 new ordinary shares taking his holding in the company to 50,500,000 ordinary shares of 3.6% of its total issued share capital. The group said Broome has sUBScribed for 1,500,000 new ordinary shares, increasing his holding to 6,147,319 ordinary shares, or 0.44% of the total issued share capital.
FairFX Group Plc (LON:FFX) has been given access to settlement accounts at the Bank of England following an extensive audit, in a move it said represented “a significant endorsement” of its services.
Diversified Gas & Oil PLC (LON:DGOC) has struck a deal with the Kentucky authorities over its field retirement obligations for the next five years. It relates to the assets acquired by DGOC in its 2018 transaction with Core Appalachia Holding Co LLC.
Touchstone Exploration Inc (LON:TXP) has raised £3.8mln through a share placing to fund a new exploration well in Trinidad. The capital injection will support the proposed drilling of an exploration well in the Corosan west region of its Ortoire exploration property. It is planned that drilling will kick off in the second quarter.
Arix Bioscience PLC (LON:ARIX) said chief investment officer Joe Anderson has been re-appointed chief executive. Executive chairman Jonathan Peacock will stay in role, but in a non-executive capacity at the life sciences investment company, while biotechnology entrepreneur Sir Christopher Evans is retiring as a director after a three-year term. Evans will continue as a consultant.
Primary Health Properties PLC (LON:PHP) has contracted to fund and acquire a purpose built primary care centre in County Kildare.
Asiamet Resources LTD (LON:ARS) is continuing to intersect broad intervals of copper mineralisation with high-grade intervals in ongoing drilling at its Beruang Kanan Main project (BKM) in Indonesia. The drilling comprises part of the ongoing bankable feasibility study on the project.
Motif Bio Plc (LON:NASDAQ) (LON:MTFB), the clinical-stage biopharmaceutical company specialising in developing novel antibiotics, said it will hold a conference call on Tuesday, February 19, 2019 - at 8:30 AM ET/1:30 PM GMT/2:30 PM CET - to discuss recent events and the company's plans.
6.45m: FTSE 100 set to edge higher
The FTSE 100 index is expected to edge higher at the start on Tuesday, recovering after falls on Monday helped by gains from Asian stocks on US/China trade deal hopes, with US markets closed yesterday.
Spread betting firm IG expects the blue-chip index to open around 3 points higher at 7,022 having shed 17.21 points on Monday.
Wall Street was closed on Monday for the US President’s Day holiday, so the only lead today comes from Asia where markets which were supported by signs of progress in Sino/US trade talks, with China’s Shanghai composite index up 0.1% and Japan’s Nikkei 225 index ahead 0.2%.
On currency markets, the pound was a touch easier against the US dollar and the euro as investors eyed the latest twists in the Brexit saga and awaited the latest batch of UK data.
UK employment to rise, but wages to dip
The UK labour market report, due at 9.30am, is still likely to show little impact from Brexit uncertainties, however, as the figures only run to the end of December.
Economists at RBC Capital expect another healthy gain in employment after last month’s 141,000 rise, which would see the unemployment rate hold at 4%.
Despite that, there could be a dip in wage growth this month, with base effects seeing a slowing in pay growth excluding bonuses to 3.2% on the three-month year-on-year basis.
However, given the drop in inflation numbers for January to below the Bank of England’s 2% target figure, this shouldn’t worry investors too much.
HSBC to continue bank’s results season
On the corporate front, HSBC PLC (LON:HSBA) continued the blue-chip bank’s full-year reporting season on Tuesday, with its numbers missing forecasts as a slowing Chinese economy impacted the global giant, which is increasingly geared towards Asia.
Around 43% of HSBC's profits come from Hong Kong and it has increased investment in China. The bank reported a pre-tax profit of US$19.9bn for 2018, up from US$17.2bn a year earlier but below the consensus forecast of around US$22bn.
BHP misses forecasts too
Meanwhile, the world’s biggest miner BHP PLC (LON:BHP) saw its first-half profits fall, hit by production disruptions and declines in commodity prices.
The FTSE 100-listed firm reported from continuing operations of US$4.03bn for the six months to December 31, down from US$4.4bn a year earlier and missing the consensus forecast of around US$4.2bn.
Special dividend eyed from Intercontinental Hotels
Investors will also have money on their minds as Holiday Inn-owner Intercontinental Hotels Group PLC (LON:IHG) is expected to include plans for a US$500mln special dividend payment with its full-year results.
Analysts at UBS forecast IHG reporting full-year revenue of US$4.305bn, up from US$4.075bn in 2017, with underlying earnings (EBITDA) seen at US$911mln, up from US$862mln.
Significant events expected on Tuesday:
Finals: HSBC PLC (LON:HSBA), Intercontinental Hotels Group PLC (LON:IHG), Spectris plc (LON:SXS), Bank of Georgia Group PLC (LON:BGEO)
Interims: BHP PLC (LON:BHP), Dotdigital Group PLC (LON:DOTD), Blancco Technology Group PLC (LON:BLTG)
Trading updates: Walker Greenbank plc (LON:WGB)
Economic data: UK unemployment; UK average earnings; US NAHB housing market index
Around the markets:
- Sterling: US$1.2903, down 0.2%
- Gold: US$1,324.20 an ounce, up 0.4%
- Brent crude: US$66.25 a barrel, down 0.3%
City Headlines:
- HSBC profit disappoints as China, Britain weakness poses challenge – Reuters
- Global miner BHP Group first-half profit falls 8% as copper earnings slump – Reuters
- Barclays launches more than 100 Brexit 'clinics' for small businesses - Reuters
- Huawei founder says Huawei CFO arrest was politically motivated – BBC News
- Honda is set to close its plant in Swindon, putting 3,500 British jobs at risk just weeks before Brexit – Financial Times
- Facebook has joined Amazon and Google in the race to develop artificial intelligence chips, as the social media giant needs faster hardware for smart digital assistant and real-time video moderation - Financial Times
- Citigroup chief executive Mike Corbat has suggested that “tens of thousands” of people working in the US bank’s call centres are likely to be replaced by machines Financial Times
- Laing O’Rourke, Britain’s largest private construction company, reported a £46.5mln post-tax loss for its latest financial year but said that a no-deal Brexit would pose a minimal risk, if any, to its present projects - The Times
- Norwegian Air bosses have said they will sell at a discount some of their rights to purchase more shares as part of the NKr3bn fundraising effort announced last month – Financial times
- President Trump has threatened to reignite a transatlantic trade war by imposing hefty tariffs on European car imports – The Times
- Anxieties about Brexit and a slowdown in economic growth have knocked consumer confidence to its lowest level since March 2018, according to IHS Markit