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FTSE 100 closes higher at traders focus on Federal Reserve's dovish tone

The FTSE 250 though, seen as a better indicator of the state of UK companies, closed down around 41 points at 19,347.

Cityscape
FTSE 100 closed up on Thursday
  • FTSE 100 closes up

  • Next gains

  • Sterling sheds more than a cent against the greenback

FTSE 100 closed higher Thursday as resource and consumer stocks firmed, the pound weakenedm  and as traders appeared to  like the Fed's dovish tone last night.

The UK blue-chip index finished over 64 points higher, at 7,355.

The FTSE 250 though, seen as a better indicator of the state of UK companies, closed down around 41 points at 19,347.

Next PLC (LON:NXT)  shares were among notable gainers, adding 2.59% to 5,316p as  the fashion giant confirmed a 0.4% dip in 2019 profit but maintained its expectations for the current fiscal year as it laid out a plan to address the challenges it faces.

David Madden, analyst at CMC Markets, said: "Last night, the Federal Reserve made it clear that they won’t be hiking interest rates in the near-term, and they lowered their growth outlook to 2.1% from the 2.3% forecast in December.

"The announcement from the US central bank weighed on investor sentiment this morning, but traders have shrugged-off the growth downgrade, and focused on the Fed’s hint that rates won’t be hiked in the foreseeable future."

On Wall Street at  the time of writing, the Dow Jones Industrial Average is up around 183 points and the broader -based SA&P 500 is up around 23 at 2,847.

3.30pm: The Footsie nudges up towards intra-day high

Entering the final hour of trading, the Footsie was loitering close to its high point for the day.

The FTSE 100 was up 46 points at 7,337, about three points below the index’s intra-day high.

“The FTSE was once again outpacing its European peers on Thursday. Stronger miners and a Brexit hit [the] pound, overshadowed weaker banks, housebuilders and retailers. A higher start on Wall Street also helped the FTSE remain comfortably above 7,300,” summarised Fiona Cincotta at City Index.

Sterling had a rough day on the foreign exchange markets, losing more than a cent against the US dollar, at US$1.3082.

Gold had its adherents, rising US$8.40 (0.65%) to US$1,310 while Brent crude ebbed from a four-month high, sliding 33 cents (0.48%) to US$68.17 a barrel.

Cadence Minerals Plc (LON:KDNC) was the top riser in London after some good news from associate company Macarthur Minerals.

Macarthur has entered into a binding life-of-mine off-take agreement with Glencore International for the sale of iron ore to be produced from the Lake Giles iron project in the Yilgarn region of Western Australia.

Cadence, which has a 10% stake in Macarthur, shot up 164% to 0.29p on the news.

2.15pm: After a weak start, US stocks roar higher

After flirting with a return to par, the Footsie has perked up again after US stocks recovered quickly from a weak start to post gains.

The FTSE 100 was up 30 points (0.41%) at 7,321.

In the US, the Dow Jones was up 84 points (0.33%) at 25,830 while the S&P 500 was up 10 points (0.35%) at 2,834.

The focus in the UK remains firmly on the Brexit farce, which feels like it has been running as long as Agatha Christie's The Mousetrap and is set for an equally implausible ending.

Bookie Betway said the odds on a “no deal” Brexit are now 5/2, having been 7/2 at the start of the week.

“Sadly for Theresa May, the old adage of, if at first you don’t succeed, try and try again, is not working. The latest developments in Brussels are not at all promising and the odds of a No Deal Brexit have just dived to as short as 5/2 having been 7/2 at the start of the week,” noted Betway's Alan Alger.

The latest tittle-tattle indicates the EU will not grant May her desired extension until the end of June; the EU's movers and shakers want the deadline shifted no further than 22 May, which is the date before the EU elections.

The French president, Emmanuel Macron, has said he is open to the idea of a technical extension but only if May wins, at the third time of asking, the so-called meaningful vote on her Brexit deal.

“In the case of a negative vote in the British parliament, we will be going to a no-deal. We all know that,” he told reporters.

Meanwhile, while the Footsie was having a decent time of it, thanks to sterling's travails on foreign exchange markets, the mid-cap FTSE 250 was lying low in the water, down 133 points (0.69%) at 19,390.

Renishaw PLC (LON:RSW), down 10.4%, was leading the retreat after a profit warning.

 

“With only 5% of its sales going to firms based in the UK and a wide spread of client industries Renishaw has a good insight into what is going on globally and it is always worth listening whenever this high-quality company speaks. Today’s profit warning and forecast of lower annual profits will, therefore, be a worry for investors, especially as Renishaw has suffered just seven drops in earnings in the past 25 years and they all came during times of a slowdown or recession around the world,” noted Russ Mould, AJ Bell's investment director.

Renishaw’s rare profit stumbles came in 1997 (Asian debt crisis), 2002 (bursting of the tech bubble and a US recession), 2007-2009 (great financial crisis) and 2013-16 (European debt crisis and stagnating global growth).

Housebuilder Crest Nicholson PLC (LON:CRST) was down 8.8% in ex-dividend form while fashion firm Ted Baker PLC (LON:TED) was down 6.8% at 1,593p after its results.

1.00pm: US stocks to open lower

A triple-digit fall is in store for the Dow Jones when trading starts in the US, which has taken some of the sheen off the Footsie.

The FTSE 100 was up 14 points (0.19%) at 7,305.

“Yesterday’s much awaited FOMC meeting verdict certainly didn’t fail to disappoint, with a significantly more dovish that expected message emerging. Just three months ago, the Fed was talking of two rate hikes this year, but now that’s been revised down to none,” commented James Hughes at Axi Trader.

“With domestic growth revised lower and a slowing global economy being flagged too, even the prospect of cheaper borrowing was insufficient to shore up stocks. Yesterday’s selling therefore looks set to be continued at the opening bell on Thursday, with the most obvious question being whether this is indeed the end of the decade-long bull run,” he added.

The S&P 500 was tipped to open around 7 points softer at 2,817.

12.10pm: Bank of England leaves interest rates unchanged at 0.75%

To no-one's great surprise, the Bank of England has kept UK interest rates unchanged at 0.75%.

The index of blue-chip shares was up 29 points (0.4%) at 7,320, having risen as high as 7,340 at one point.

“Coming hard on the heels of a dovish Fed announcement, it’s no surprise to see Carney & Co sit on their hands today,” said Kevin Doran, the chief investment officer at investment platform operator, AJ Bell.

“Ten years on from the introduction of QE [quantitative easing] and ultra-low interest rates, it’s clear that the ‘emergency’ path we took back then has proven to be more a cul-de-sac with no escape. In the meantime, cautious savers – the folk with no culpability for the crisis – continue to be punished with punitive rates of return way below the rate of inflation,” Doran ranted.

“Over the decade, a UK bank account will have given savers a 5% return, during which time the cost of living has increased by 34%. These savers will be hoping that the Bank can find reverse gear sometime soon, but today’s announcement will provide them with little hope,” he suggested.

 

11.45am: Sterling's losses are the Footsie's gains

Sterling continues to lose ground on the foreign exchange markets, which is music to the ears of investors in multi-national blue-chips.

The FTSE 100 was up 44 points (0.60%) at 7,335 as sterling lost three-quarters of a cent in value against the US dollar, tumbling to around US$1.3120.

“For a third time this week a better than expected key bit of UK data was ignored by a pound choking on Brexit anxiety,” noted Connor Campbell, in colourful form as usual.

“At 0.4%, February’s retail sales reading was light years away from the forecast 0.4% decline, following on from the wage growth and inflation beats on Tuesday and Wednesday; however, this meant little to sterling, the currency sat on the Brexit brink, falling 0.7% against the dollar and 0.3% against the euro to hit one-week and one-month lows respectively.

“The pound’s worsening condition came as reports emerged that the EU is only willing to offer an Article 50 extension to May 22nd, i.e. just before the European Parliament elections, rather than the end of June as requested by Theresa May,” he added.

As well as ignoring the retail sales data, the market also gave a half-hearted shrug to the UK's improved public finances in February.

Borrowing (public sector net borrowing excluding public sector banks) in February 2019 was £0.2 billion, £1.0 billion less than in February 2018 and the lowest February borrowing requirement since 2017.

“An improved performance in February on the public finances was countered by a downward revision to January’s record surplus. As a result, the Chancellor may just miss out on the downwardly revised budget deficit Public Sector Net Borrowing excluding Banks (PSNBex) forecast of £22.8bn contained in last week’s Spring Statement,” cautioned Howard Archer at the EY ITEM Club.

“Even so, the 2018/19 budget deficit still looks set to the lowest shortfall since 2001/2 and substantially down on the 2017/18 shortfall of £41.8bn,” he added.

11.00am: Retail sales received a boost from the warm weather in February

 UK retail sales rose 0.4% in February after rising 0.9% in January.

A 1.2% decline in food stores was more than offset by growth in all other main sectors, the Office for National Statistics (ONS) said.

“Retail sales continued to bounce back in the three months to February with strong increases in fuel sales and online shopping,” said Rhian Murphy, the head of retail sales at the ONS.

“Food growth slowed, however, due to a significant fall for supermarkets, specialist food and alcohol stores in February after the sales and promotions seen in January came to an end.”

The FTSE 100 was up 36 points (0.49%) at 7,327.

DIY-retailer Kingfisher PLC (LON:KGF) received a pick-me-up from the retail sales figures, with observers noting that the mild weather had lured out the DIY enthusiasts.

The Kingfisher share price had fallen to 223.3p after closing overnight at 229.7p, following Credit Suisse’s move to cut its price target to 255p from 280p; the shares have now recovered to 228.1p.

“Retail sales in February reportedly got help from the warm weather lifting sales a garden centres and for sales of sporting equipment. There was a drop in food sales while sales of clothing fell back after getting a significant lift in January from the sales,” observed Howard Archer, the chief economic advisor to the EY ITEM Club.

“There could also be the possibility that retail sales could have gained a modest lift in February from some stockpiling of goods by consumers wary of a disruptive Brexit at the end of March. There have been some limited reports of this occurring. It is also possible that some consumers brought forward purchases amid concern prices could rise if a disruptive Brexit at the end of March sees sterling weaken sharply,” he added.

10.00am: Mining stocks drive the Footsie higher

The Footsie has extended early gains, despite ex-dividend stocks and housebuilders weighing on the index.

The FTSE 100 was up 28 points (0.39%) at 7,319, buoyed by mining stocks such as Fresnillo plc (LON:FRES), Antofagasta PLC (LON:ANTO), Glencore PLC (LON:GLEN), Anglo American PLC (LON:AAL) and BHP Group PLC (LON:BHP), all of which are up 1.9% or more as the US dollar labours on foreign exchange markets.

Rubbing shoulders in the Footsie basement with ex-dividend stocks such as Royal Bank of Scotland Group PLC (LON:RBS) and British American Tobacco plc (LON:BATS) was fashion firm Next PLC (LON:NXT), down 3.3% following its full-year results.

"As expected, profits at Next have dipped slightly although in line with previous guidance, whilst revenues are ahead of expectations,” said Richard Hunter at interactive investor.

“The difference between the fortunes of stores and online is becoming increasingly marked. The online business, which has long been the jewel in the crown, continues its growth apace with full-price sales increasing nearly 15% over the period. The fact that there is a slow transition to this channel (now representing 53% of sales as opposed to 47% for retail) is of comfort, even though the additional costs of transferring in the form of warehouse picking and delivery, need to be carefully managed.

“Less positively, the Retail performance, where full-price sales declined by 7.3%, is symptomatic of the difficulties which many rivals in the sector are facing. In its usual perspicacious way, Next has outlined its views not only on the bigger picture within the industry but has also taken a 15-year stress scenario which aims to identify future challenges and the way the business will need to be shaped. More immediate challenges are likely to come from an online environment where barriers to entry for new competitors are much lower, let alone the existing ferocity of competition. In addition, whilst containable, the increase of 9.4% to net debt will also need to be monitored closely,” Hunter declared.

Sector peer Ted Baker PLC (LON:TED) was down 3.8% after its full-year results.

“These are turbulent times for Ted,” stated George Salmon, an equity analyst at Hargreaves Lansdown.

“The top line is still heading in the right direction, but only on account of the continued addition of new sales space and the strong contribution from online sales. Tellingly, in-store sales densities in the key UK, European and US markets are falling, and with the group having to cut prices to stay competitive, margins have gone into reverse. That’s led profits down, and caused Ted to trim the dividend - breaking a record of dividend growth that had stretched back into the 1990s,” he noted.

“However, Ted had already braced investors to expect a drop in profits this year, and sentiment was already frayed on the back of the ongoing investigation into the former CEO’s conduct. We think the share price movement is more to do with Ted’s notably downbeat outlook – which will be a surprise to many after the positive trading statement in January,” he added.

8.30am: Blue-chips open mostly higher

London's leading shares have opened mostly higher, comforted by sterling's insipid performance, despite the US dollar getting ambushed on forex markets.

The FTSE 100 was up 20 points at 7,311, despite a lacklustre showing by the housebuilding sector. The likes of Persimmon PLC (LON:PSN), Taylor Wimpey PLC (LON:TW.), Berkeley Group Holdings PLC (LON:BKG) and Barratt Developments PLC (LON:BDEV) were all down 3% or more.

“Little bid for the pound despite the dollar weakness, with GBP/USD now slipping from support on 1.32 to trade around 1.3170 at send time amid yet more Brexit chaos,” reported Neil Wilson at markets.com.

“Increasingly it looks like MPs are going to be bounced into accepting her deal as the only option to avoid a no-deal exit. Was this May’s plan all along – to call it brinkmanship would be an understatement,” he added.

Proactive news headlines:

ValiRx Plc’s (LON:VAL) boss has said she is “delighted” with the progress being made by two of the junior biotech’s drugs – cancer therapeutic VAL201 and VAL301, a treatment for endometriosis.

LoopUp Group PLC’s (LON:LOOP) shares were performing loop-the-loops in early deals after the company revealed all of its core business metrics remain strong

Kibo Energy PLC (LON:KIBO) shares were boosted in early deals on Thursday after it completed a definitive feasibility study (DFS) at its Benga power plant in Mozambique ahead of schedule.

Sound Energy PLC (LON:SOU) told investors it is financially well positioned for the remainder of 2019, as it reported results for last year. The explorer said that it ended December with £20.5mln of cash.

Sativa Investments PLC (LON:SATI) has completed its 1000th test of cannabinoid and terpenes at its on-site PhytoVista testing laboratory.

Cello Health PLC (LON:CLL) has begun 2019 with good levels of forward bookings and has already landed a good number of new business wins.

A feasibility study for its Toliara project in Madagascar has confirmed it is a world-class project, said minerals sands miner Base Resources Limited (LON:BSE). The net present value of Toliara was estimated at US$671mln in the study, which was better than expected said Peel Hunt.

Aminex PLC (LON:AEX) has updated investors on the ongoing efforts to close the proposed farm-out for the Ruvuma asset, in Tanzania. The company, in a statement, highlighted that the completion is conditional upon the receipt of certain approvals – including joint venture partner approvals, and, regulatory approvals from Tanzania government departments.

Jubilee Metals Group PLC (LON:JLP) said on Wednesday that its recent acquisition, PlatCro Minerals is contributing to earnings ahead of schedule.

PCG Entertainment Plc (LON:PCGE) has noted recent speculation regarding the possible acquisition of VOX Markets Ltd and Align Research Ltd. The company can confirm that it is advanced discussions with both Align and VOX, and that if the transactions were to proceed, they would constitute a reverse takeover under AIM rules and, as a result, its shares were suspended with effect from 7.30 am today.

Scancell Holdings PLC (LON:SCLP) has announced that its chief scientific officer, Professor Lindy Durrant is to receive the Swedish Society of Oncology's Waldenström award at the Swedish Society of Oncology Annual Meeting on Thursday 21 March 2019 at 13:30 CET in Stockholm. The group said he will give an honorary lecture to fellow society members the theme of which will be on novel approaches to cancer vaccinations, including references to both ImmunoBody and Moditope, Scancell's novel immunotherapies for the treatment of cancer.

Chaarat Gold Holdings Limited (LON:CGH), the AIM-quoted gold mining company with assets in the Kyrgyz Republic and Armenia, has announced the appointment of Warren Gilman as a non-executive director with immediate effect. The group noted that Gilman founded Queen's Road Central Capital Ltd, where he is chairman and CEO, in 2019 and previously was chairman and CEO of CEF Holdings Ltd, a mining-focused investment company.

Chaarat also announced it has concluded that major shareholder Labro Investments Limited, and its board members Martin Wiwen-Nilsson and Willem De Geer shall no longer be considered to be acting in concert.

The Marketing Group PLC (NASDAQ OMX:TMG), which trades as RYVL, said it has resolved to terminate agreements with Mangold Fondkommission AB regarding its services as certified adviser and liquidity provider to the company, the notice period of both being for six months. The company said it has initiated the process of appointing a new certified adviser and added that it currently foresees no need for a liquidity provider.

6.30am: FTSE 100 poised to open higher

The FTSE 100 is poised to open higher ahead of the Bank of England’s interest rate decision later on Thursday after a dovish Fed drove a mixed finish on Wall Street on Wednesday.

Spread-betting firm IG expects the FTSE 100 to open around 12 points higher after closing 33 points lower yesterday at 7,291.

Yesterday, US markets closed mostly flat-to-lower after the Federal Reserve left its rates unchanged while also signalling that there would be no further rate hikes for the rest of the year and cutting its gross domestic product (GDP) forecasts to 2.1% from 2.3% in 2019.

The Dow Jones Industrial Average closed down 141 points at 25,745, while the S&P 500 closed down 8.3 points at 2,824. The one outlier was the Nasdaq which closed up 5 points at 7,729.

“As widely expected the Federal Reserve unanimously left monetary policy unchanged with the fed funds target range maintained at 2.25-2.50%”, said analysts at ING, adding that the accompanying forecasts indicated that the Fed would be “very, very patient”.

“Such a move will only boost the market conviction that the next Federal Reserve move will be an interest rate cut. Concerns over economic headwinds such as trade protectionism, the government shutdown, weak figures from Europe and China (which Jerome Powell emphasised in the press conference) and the lagged effects of higher interest rates and the strong dollar all do justify caution.”

“The recent weak run of US activity data has also been disappointing while core inflation has undershot expectations. However, today's sharp shift from the Fed may risk exacerbating any business and household concern about the outlook”, they added.

By contrast, Asian markets were given a boost from the Fed's dovish stance, with the Japanese Nikkei 225 up 42 points at 21,609 and Hong Kong’s Hang Seng up 4.6 points at 29,328.

On currency markets, the Fed’s stance put pressure on the dollar, helping to lift the pound 0.1% to US$1.32 against the greenback.

UK rate hike inconceivable

With Brexit uncertainties at a peak, it is inconceivable that there will be an outcome other than a unanimous 9-0 vote from the Bank of England Monetary Policy Committee (MPC) to keep UK interest rates on hold on Thursday.

The sharp slowdown in the economy in the fourth quarter of 2018 and weak activity overall in the first quarter - amid heightened Brexit uncertainties and a weakened global economic environment - has diluted the case for any near-term increase in interest rates, according to Howard Archer, chief economic advisor to the EY ITEM Club.

In a preview of the MPC decision, he said: “We believe that it is ever more likely that the Bank of England will hold interest rates throughout 2019 - assuming the UK ultimately leaves the EU with a ‘deal’.

“If there is a UK exit from the EU with a ‘deal’ by the end of the second quarter, it is possible that the Bank of England could raise interest rates from 0.75% to 1.00% in November if the economy is showing improvement helped by reduced uncertainty. Even if this is the case though, the MPC may prefer to hold off acting for longer until there is sustained evidence of stronger UK economic activity.”

Significant events expected on Thursday:

UK Bank of England rate decision

Finals: Next PLC (LON:NXT), Ted Baker PLC (LON:TED), Lamprell PLC (LON:LAM), Enquest PLC (LON:ENQ), Cello Health plc (LON:CLL), LoopUp Group PLC (LON:LOOP), Portmeirion Group PLC (LON:PMP), Integrated Diagnostics Holdings PLC (LON:IDHC),  Sopheon PLC (LON:SPO), Sportech plc (LON:SPO), Venture Life PLC (LON:VLG)

Interims: Xaar PLC (LON:XAR), Spitfire Oil Ltd (LON:SRO)

Trading update: MITIE Group PLC (LON:MTO), IG Group Holdings PLC (LON:IGG)

Ex-dividends to knock 7.5 points off FTSE 100 index: British American Tobacco plc (LON:BATS), Phoenix Group PLC (LON:PHNX), Royal Bank of Scotland PLC (LON:RBS), Segro PLC (LON:SGRO)

Economic data: UK retail sales; UK public sector finances; US weekly jobless claims; US Philly Fed manufacturing index

Around the markets:

  • Sterling: US$1.321, up 0.11%
  • Brent crude: US$68.41 a barrel, up 0.2%
  • Gold: US$1,318.48 an ounce, up 1.38%
  • Bitcoin: US$4,024, up 0.9%

City headlines:

  • Superdry co-founder Julian Dunkerton has expressed his disappointment after a major advisory firm declined to back his call to return to the board – The Daily Telegraph
  • British private-sector employers expect to give staff a basic annual pay rise of 2.5% this year, the same as in 2018, though some will delay awards until after government Brexit plans are clearer, an industry survey showed on Thursday – Reuters
  • Departing SSP chief executive Kate Swann heads list to replace Kingfisher CEO Véronique Laury – The Times
  • The US Federal Reserve has been accused of 'kowtowing' to Donald Trump after it scaled back plans for interest rate increases – Daily Mail
  • Theresa May last night tried to deflect blame for the Brexit crisis on to parliament saying the public “have had enough”, before an EU summit today where leaders will decide whether to allow a Brexit delay – The Times
  • The turmoil in Westminster surrounding Brexit has hit Government’s attempt to reboot the UK car industry after a blizzard of bad news – Telegraph
  • Dealmaking in the UK by some of the largest sovereign wealth funds has plummeted because of the growing uncertainty around Brexit, a report by from IE Business School in Madrid has revealed – Financial Times
  • One of the City’s most influential investors has warned Standard Chartered that it faces scrutiny over pension arrangements for Bill Winters that will hand the bank’s chief executive £474,000 this year – The Times
  • Lloyds Banking Group boss has been attacked for making an "insulting" sacrifice by agreeing to cap his pension payout while still pocketing another retirement contribution worth "several Ferraris" – Telegraph
  • The diamond tycoon Nirav Modi has been remanded in custody in London, more than a year after Indian authorities alleged he was involved in a £1.3 billion bank fraud - Guardian

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