FTSE 100 index closes down around 44 pts
US shares lower
Marks & Spencer top Footsie laggard
FTSE 100 closed out Wednesday in the red to join other global markets lower as geopolitical issues weigh on investors.
The UK's blue chip index closed down nearly 44 points at 7,107. Meanwhile, mid-cap cousin FTSE 250 fell more than 116 at 19,513.
"The euphoria that was experienced during the week on the deferral of higher tariffs on Chinese imports into the US, has been replaced by impatience about the lack of clarity over trading relations," noted David Madden, at CMC Markets.
The market analyst noted that Robert Lightizer, US trade representative, suggested that a deal with China wasn't "a done deal just yet" and won’t be reached just by China agreeing to purchase more US goods.
On Wall Street, the Dow Jones Industrial Average is down nearly 86 points at the time of writing, while the Nasdaq and S&P 500 are also in negative territory.
High street bellwether Marks & Spencer (LON:MKS) was the biggest casualty on Footsie, tanking over 12% to 265.40p. It came as it emerged that the group will invest up to £750mln in a new 50:50 online grocery joint venture with Ocado Group PLC (LON:OCDO) but the retailer will need to launch a £600mln rights issue, which will lead to a cut of 40% in the dividend.
3.00pm: Metro Bank and Ted Baker drag down the FTSE 250
As expected, US benchmarks opened lower, albeit not as severely as expected.
The Dow Jones industrial average was down 75 points at 25,983 and the S&P 500 was off 9 points at 2,785.
In Blighty, the FTSE 100 had recouped some losses and was down 42 points at 7,109.
The mid-cap FTSE 250 was 116 points in the hole at 19,154, with Metro Bank, down 21.5% after its cash call, leading the retreat.
Ted Baker’s house broker Liberum chopped its target price for the troubled fashion group. Liberum’s target is now to 2,800p compared to 3,100p previously, but the broker remains upbeat for the long term.
“There is no reason to change our view on the long-term fundamentals and we keep a buy, said the broker.
That bullish view was at odds with other brokers and the market price of 1,738p, down 13% today.
Peel Hunt’s target price is 1,400p with a ‘hold’ rating.
It expects profit forecasts to be reduced for the 2020 trading year as well.
The gaming software developer was up 3.7%; GVC edged up 0.5%.
2.15pm: US benchmarks set to open lower
US benchmarks were expected to open lower as President Trump met with North Korean leader Kim Jong Un.
Spread betting quotes indicated the Dow Jones industrial average would open at about 25,985, down 73 points, while the broader-based S&P 500 was tipped to open just below 2,786 after closing at 2,794 last night.
With no sign of the US cavalry arriving, the FTSE 100 remained deep in the red, down 53 points at 7,098, with investors' minds focused on the Brexit saga.
“Tensions ahead of the Vietnamese summit between Donald Trump and Kim Jong-un, the lack of tangible progress between the US and China despite the trade talk deadline delay, the ongoing and never-ending Brexit disaster, the prospect of an explosive testimony from Michael Cohen, an aggressive flare-up in relations between Pakistan and India: there were plenty of reasons for the markets to be in a bad mood,” said Connor Campbell at Spreadex, noting that the Dow was set to be dragged back below 26,000.
12.30pm: Banks among the few blue-chips to prosper
Despite the strength of banks, the Footsie remained deep in the red.
The blue-chip index was off 56 points at 7,096 despite the likes of Lloyds Banking Group PLC (LON:LLOY), Royal Bank of Scotland Group PLC (LON:RBS) and Barclays PLC (LON:BARC) advancing 1% - 1.4% on the day it emerged Metro Bank PLC (LON:MTRO) went from challenger bank to challenged bank.
READ Metro Bank to raise £350mln in emergency cash call and CEO to waive bonus after accounting blunder
Shares in Metro lost a fifth of their value as the company said it plans to tap investors for a further £350mln of capital to plug a hole in its balance sheet.
Metro Bank's PR team at Teneo clearly think it's OK to bury the PRA/FCA probes on page 8 of the stock exchange announcement. Brilliant.— Jim Armitage (@ArmitageJim) February 26, 2019
Regulators, the Financial Conduct Authority (FCA) and Prudential Authority (PRA), have notified the bank that they intend to investigate the accounting error that wiped millions of pounds off the group's market value last month.
11.00am: Sterling's strength weighs on the blue-chip index
Footsie's losses lengthened in the second half of the morning session as the pound strengthened in the wake of the latest Brexit development.
The FTSE 100 was down 65 points (0.9%), with many of the index's big dollar earners not reacting well to sterling gaining more than half a cent against the greenback.
“The implications of a potential delay in Brexit and the pound’s new found strength are working against the FTSE this morning and even though several blue chips like ITV, Weir Group and homebuilder Taylor Wimpey turned in good results, this was not enough to stem the tide,” said Fiona Cincotta at City Index.
“While the delay helps avoid some of the consequences of an abrupt departure from the EU it also is keeping industry in a sort of limbo that doesn’t allow for long term planning and hampers a number of business decisions. Brexit could end up being delayed until 2021, which, for a lot of businesses will mean operating with one hand tied behind their backs for another two years,” she observed.
While retailer Marks & Spencer occupied the bottom slot in the Footsie's cellar after its rights issue and dividend cut, terrestrial broadcaster ITV PLC (LON:ITV) was not far behind with a 5% fall on the back of underwhelming full-year results.
“On the advertising front, things were not as bad as feared, with total ad revenues rising 1% for the year. Online advertising more than offset the decline in spot revenues. Online grew 36%,” reported Neil Wilson at markets.com.
“This year is proving tougher - already ad revenues are seen 3-4% lower in the first four months. It will also face a very tough comparative against last year's World Cup - although the flat spend last year it is not nearly as tough as it should be,” he added.
“36% of Taylor’s sales are coming from Help to Buy, which helped it post record revenue, despite flat-lining house prices. That’s a theme we’re seeing across the sector at the moment, and with the scheme set to end in 2023, the builders will be scratching their heads wondering how to plug that hole when the time comes. Taylor is in a better position than it has been in the past, which will help it stand firm – but the truth is, no one knows what a post - Help to Buy world will look like for new-build demand,” declared Laith Khalaf at Hargreaves Lansdown.
1/3 This will be the worst decade for housebuilding since WW2 - but it's worked out nicely for some.— Steve Howell (@FromSteveHowell) February 27, 2019
Taylor Wimpey is going to pay out £600m in dividends to shareholders in 2019 - that's £40k per house completed.
Its 2018 results - just announced - show profit up 19% to £811m. pic.twitter.com/CFKJ9qjI8Z
“Overall, results from the housebuilders feel a bit like Groundhog day at the moment, and Taylor Wimpey is no different. The general picture is, the underlying business is performing very well, more houses are being built at higher margin and the balance sheet is in good health – but it won’t last forever.
“The other thing to keep in mind is Taylor’s relatively high exposure to the London market, compared to peers like Persimmon. With any future headwinds expected to blast the capital more so than elsewhere in the country, that shouldn’t be overlooked. Still, for now, Taylor will be enjoying the view from the top, the question will be what happens if the tide starts to turn,” the analyst added.
9.45am: Retailers in focus
London’s leading shares have joined their mainland European brethren in retreat in early trading.
"M&S’s purchase of Ocado’s UK retail business looks rather like one of its own ready meals – expensive, not very good for you but easy, quick and ready to heat up,” suggested Neil Wilson at markets.com.
“Investors were happy with the deal outline yesterday but they won’t be too chuffed that the board is slashing the dividend by 40%,” he added.
M&S shares were down 8.3% at 278p.
???? Despite significant post-Christmas discounting, shop prices in January were slightly up on last year, our new BRC-@Nielsen Shop Price Index shows.— BRC (@the_brc) January 30, 2019
????️ Liliana Danila, our Economist, explains ????
Get more info ???? https://t.co/7Fins3bHGn pic.twitter.com/EicuIRZ47w
Elsewhere on the retail scene, the British Retail Consortium (BRC) Shop Price index revealed that retail prices were up 0.7% year-on-year this month, which was the strongest increase since March 2013.
“Food price inflation inched up only slightly to 1.6%Y/Y and remained within the recent range. But following January discounting, non-food price inflation rose to 0.2%Y/Y, the first positive reading in six years, suggesting that retailers are looking to pass on to shoppers some of the cost pressures from sterling depreciation, higher wages and past increases in energy prices,” commented Daiwa Capital Markets.
“Of course, it remains to be seen if demand will be sufficiently strong to absorb further such price increases, in particular given Brexit risks and subdued consumer confidence. We expect that, before too long, retailers will have to resort to heavy discounting once again in order to lure customers into the shops,” it added.
8.40am: Early falls for Footsie
As predicted the index of blue-chips opened in the red with the FTSE 100 dropping 39 points to 7,112.55 after a down day on Wall Street and a mixed session in Asia.
There were some nerves ahead of President Donald Trump’s visit to Vietnam to meet North Korea’s Kim Jong-un as trade talks between the US and China take a back seat to international diplomacy (if one can call the President’s visit that).
Under the terms of the £750mln deal, Marks is acquiring 50% of Ocado’s UK retail business, which Neil Wilson, of Markets.com said: “looks rather like one of its own ready meals – expensive, not very good for you but easy, quick and ready to heat up”.
A tie-up with the BBC to create a Netflix competitor in the form of the Britbox streaming service did little to distract from ITV’s (LON:ITV) financial performance. With the shares down 1.75% in the wake of the broadcaster’s prelims, it appears to be a case of ‘could do better’.
Richard Hunter, an analyst at Interactive Investor, remains a believer: “ITV has a strategy which is delivering the required results, even though in the very near term the company’s own outlook is more guarded.
“The inevitable culprit is Brexit, as advertisers become less willing to commit to an expensive, yet usually successful, outlay.
“In addition, the first half of this year will also bring some tough comparatives, in the absence of the World Cup which was a welcome addition to revenues in 2018.”
Proactive news headlines:
Clinigen PLC (LON:CLIN) is predicting another half of “good progress” as it said adjusted earnings and cash flow grew strongly in the six months to the end of December. The speciality pharma group, which earlier this month unveiled an ambitious £158mln deal to acquire the US rights to a Novartis cancer drug, reported its revenues had grown by a quarter to £208.9mln, buoyed by recent purchases it has made.
Eco Atlantic Oil & Gas Ltd (LON:ECO) (CVE:EOG) chief executive Gil Holzman has told investors the company is very excited by the opportunity to hopefully discover very significant oil resources in the coming months. As it looks forward to the upcoming high-impact Jethro-Lobe exploration well, in the second quarter, the company today released its financial results statement for the three months ended 31 December.
Bluejay Mining PLC (LON:JAY) has confirmed it is in discussions with Rio Tinto Iron and Titanium Canada Inc. (RTIT) in connection with an agreement to assess the commercial potential of Bluejay's Dundas ilmenite project in Greenland. The AIM-listed group said it is optimistic that an agreement will be concluded with RTIT in due course, however, nothing has been finalised at this stage.
Premier African Minerals Limited (LON:PREM) announced a placing on Wednesday to raise around £400,000 to fund due diligence and deal costs for its ongoing acquisitions.
Alba Mineral Resources PLC (LON:ALBA) is evidently pleased with the pace of response by Brockham project operator Angus Energy which has detailed the steps it is taking to address water influx issues at the well. The company, in a statement after Tuesday’s stock market close, noted that long lead equipment to isolate the water zones has now been sourced and is ready for shipping from the USA.
KR1 PLC (LON:KE1) announced that yesterday it had issued 3,806,675 new ordinary shares in the company following the exercise of 3,806,675 warrants, due to expire on 14 March 2019. The group said the warrants were exercised at a price of 0.76p each and the proceeds of £28,930 will be used by the company for additional working capital.
Franchise Brands PLC (LON:FRAN) announced that, in accordance with the authority granted by shareholders at the company's AGM, on 26 February 2019, it purchased 2,400 of its own ordinary shares at a price of 70p each. The group said these shares will be held as treasury shares.
6.45am: FTSE 100 set to open lower
The FTSE 100 is poised for a lower open on Wednesday morning to reflect a sluggish performance from US stocks after a neutral picture painted by the Fed chair Jerome Powell at his Senate testimony on Tuesday.
Spread-betting firm IG expects the FTSE 100 to open around 11 points lower after a surge in the pound yesterday pushed the index to close firmly down 33 points at 7,151.
Markets in the US were in a similarly gloomy mood, with all the main indices closing lower after a mixed message from Powell at his testimony in front of the Senate committee on banking, housing and urban affairs, in which he described the US economy as “healthy” but added that financial conditions were less supportive now than last year, reiterating that he was willing to alter his policy if needed.
Jasper Lawler, head of research at London Capital Group, said that traders were “un-enthused” by the comments and that Powell had “delved into the conflicting signals from the economy that the Fed has been trying to decipher across recent months”.
“Disappointing US housing data and stronger than forecast consumer confidence figures provided further evidence of these mixed signals.”
The Dow Jones Industrial Average closed down 34 points at 26,058, while the S&P 500 was down 2.2 points at 2,794 and the Nasdaq was down 5 points at 7,549.
In Asia today, the main markets were higher on the back of the upcoming meeting between US President Donald Trump and North Korean leader Kim Jong Un in Vietnam later in the day.
The Japanese Nikkei 225 was up 107 points at 21,556 while Hong Kong’s Hang Seng was up 178 points at 28,950.
On the currency markets, sterling’s Tuesday rally sparked by Theresa May’s concession to MPs, which will allow them to vote on both rejecting a ‘no deal’ Brexit and delaying the UK’s departure date, had left the pound at US$1.324 against the dollar.
ITV finals take spotlight for ‘hump day’ results
FTSE 100 broadcaster ITV PLC (LON:ITV) will be taking the spotlight among results from the blue-chip companies on Wednesday, while there will also be added flavour from both the miners and housebuilders as Rio Tinto and Taylor Wimpey release their full-year results.
Away from the company news, US factory orders and home sales data may catch some eyes ahead of the US GDP data on Thursday.
Significant announcements expected on Wednesday:
Finals: ITV PLC (LON:ITV), Taylor Wimpey PLC (LON:TW.), Rio Tinto PLC (LON:RIO), St James’s Place PLC (LON:STJ), Weir PLC (LON:WEIR), Provident Financial PLC (LON:PFG), Metro Bank PLC (LON:MTRO), Capital & Counties PLC (LON:CAPC), Nichols PLC (LON:NICL), Tarsus Group PLC (LON:TRS), FBD Holdings PLC (LON:FBH), Unite Group PLC (LON:UTG)
Economic data: US factory orders; US pending homes sales
Around the markets:
- Sterling: US$1.324, down 0.08%
- Brent crude: US$65.78 a barrel, up 0.6%
- Gold: US$1,327.1 an ounce, up 0.15%
- Bitcoin: US$3,804, up 1.1%
- Marks and Spencer has revealed that it is in talks with Ocado to create a partnership that would shake up the growing online grocery sector – Financial Times
- Bank of England Governor Mark Carney has said that business cannot prepare for a chaotic no-deal Brexit because there is not enough warehouse space in the UK for manufacturers to stockpile goods – The Times
- Rio Tinto shareholders are in line for another big payday after the Anglo Australian miner announced plans to pay a $4bn special dividend – FT
- Saudi Aramco has said the industry faces a “crisis of perception” because society believes it has no future, which it says could threaten world energy security – The Guardian
- Britain's blue-chip FTSE 100 index is to get a seventh female chief executive as Penny James takes over at insurer Direct Line – Daily Mail
- Elon Musk has attacked the US Securities & Exchange Commission after the organisation claimed that the Tesla chief executive had breached the rules of an agreement it reached last year – The Times
- Income inequality grew last year in the UK with the poorest fifth having their incomes fall by 1.6% as the value of benefits dropped, according to the ONS; the richest fifth, on the other hand, grew income by 4.6% as earnings rose – The Daily Telegraph