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FTSE 100 finishes higher as Brexit rumblings continue

Footsie gained around 27 points at 7,418, while FTSE 250 added 234 points at 19,563

Wall Street
A last roll of the Brexit dice for May?
  • FTSE 100 closes higher

  • Wall Street stocks up

  • UK Services PMI marks worst month since Brexit referendum

  • Housebuilders gain

FTSE 100 closed higher while Wall Street shares gained on Wednesday as Brexit rumblings continued.

Among top risers on Footsie were big housebuilders on hopes of a 'softer' UK departure from the EU. Taylor Wimpey (LON:TW.) was top dog, adding 4.35% to 187.05. Persimmon (LON: PSN) gained 3.65% to stand at 2,241p.

Footsie gained around 27 points at 7,418, while FTSE 250 added 234 points at 19,563.

Prime Minister Theresa May is due to meet opposition leader Jeremy Corbyn for Brexit crisis talks.

It came as elsewhere, European benchmarks hit a six month high.

"Stronger-than-expected services PMI reports from China and the eurozone, along with optimism surrounding US-Chain trade talks boosted sentiment. The services industry reports from the euro-area helped shake-off the negative image of the currency bloc," said David Madden, analyst at CMC Markets UK.

On Wall Street, the Dow Jones Industrial Average added nearly 75 at 26,248, while the S&P 500 is up around 15 at 2,881.

3:40pm: FTSE 100 holds positive ground as pound’s ‘softer Brexit’ enthusiasm fades

A good start trading in New York and fatigue in the pounds rally saw the FTSE 100 in relatively positive ground heading towards the close.

Standing at 7,417, the London index was up 26 points or 0.35%.

“Sterling’s giddy start proved to be somewhat unsustainable, the enormity and urgency of what faces Theresa May (and now also Jeremy Corbyn) gradually eroding the currency’s Wednesday growth,” said Connor Campbell, analyst at Spreadex.

He added: “Cable’s gains were trimmed to 0.2%, around a third of what they were at the start of the day, while against the euro the pound actually found itself dipping into the red, having opened the session up 0.3%.

“This finally allowed the FTSE to participate in the growth posted by its Eurozone peers, even if the UK index’s 0.2%, 7400-crossing rise was barely a slither of the DAX’s 170 point, 11900-breaking surge.”

2:50pm: FTSE 100 holds earlier gains as Dow starts higher

After the opening minutes of trading, the Dow Jones was up 34 points or 0.13% at 26,219.

The S&P 500 and Nasdaq also began in positive territory, trading at 2,867 and 7,890 respectively.

In terms of news stories, Caterpillar Inc (NYSE:CAT) was a feature in New York as its shares fell after Deutsche Bank downgraded the stock to Hold from Buy and cut its 12-month price target to $128 from $152, CNBC reported. That’s a decrease of more than 10% for the construction-equipment manufacturer from Tuesday’s closing price.

Analyst Chad Dillard wrote that “Synchronized global growth has collapsed, the China Land Cycle is rolling over … and the US is oversaturated with construction equipment.”

Elsewhere, PG&E Corporation (NASDAQ:PGC) rallied amidst a ruling from a US District Court Judge that the company is prohibited from reissuing dividends. Instead, the energy company must use its money to remove trees and trim branches that risk hitting power lines.

The San Francisco company facing $30 billion in wildfire liabilities is tasked with removing 375,000 dead, dying or hazardous trees in 2019.

The ruling is a result of a 2010 felony conviction for a natural gas pipeline blast that killed eight and injured 58 people. Meanwhile, the company is likely to name Bill Johnson its new CEO as soon as Wednesday, Reuters reported. John has served as CEO of the Tennessee Valley Authority since 2013.

Investors are energetic about the change, powering the stock 3.6% to $18.29.

Blackbaud Inc (NASDAQ:BLKB) dropped after a downgrade from Stephens to Equal-Weight with a price target of $86. That’s a nearly 5% premium over Tuesday’s close. The firm attributed the shift to the software company's recent outperformance.

In London, meanwhile, the FTSE 100 was holding higher – up 22 points or 0.31% changing hands at 7,413.

2:10pm: FTSE 100 sees positive ground as Wall Street poised to start higher

The FTSE 100 found a degree of strength this afternoon as Wall Street futures pointed to a positive start.

It was up 17 points or 0.23% to change hands at 7,408.

On Wall Street, the Dow Jones was indicated to rise some 112 points to 26,265. At the same time the S&P 500 and Nasdaq were also seen on the front foot.

Markets are optimistic about further trade talks set to resume between China and the US.

China's vice premier is heading to Washington with a delegation of negotiators.

12:01pm: Sterling holding positive ground on softer Brexit hopes

Hopes for a softer Brexit helped the pound through Wednesday morning - against the US dollar sterling was priced at US$1.3179 while EUR-GBP was priced at 0.8534, up 0.03%.

“Sterling is holding onto this week’s gains, shrugging off a weaker-than-expected U.K services PMI,” said Dean Popplewell, analyst at OANDA.

“The pound remains driven by Brexit developments and remains in firm territory after PM May said yesterday that she would look for cross-party support for a new Brexit deal.”

He added: “The risk for the pound is that hard-Brexiteers within the Conservative party strongly oppose PM May’s decision to seek a Brexit compromise with the opposition Labour party.

“What will be their response? Lack of unity in parliament is the key reason why the U.K. has so far failed to endorse a Brexit deal with the EU.”

11:20am: FTSE 100 turns red as Brexit focus turns to May-Corbyn talks

The FTSE 100 moved onto the back foot as the earlier ‘global market’ positivity gave way, somewhat inevitably, to revert back to Brexit.

Traders in London continue to see the inverse relationship between the pound, Brexit, and the share prices of the capital’s multinational dollar-earning blue-chips.

At 11:15, the FTSE 100 was down around 3 points at 7,388, meanwhile, the pound was up 0.35% at US$1.3174.

“The pound has signalled a clear optimism over Theresa May’s shift in tact yesterday, with the Prime Minister handing the levers of power to Jeremy Corbyn and away from the harder line Brexiteers in her own party,” said Josh Mahony, analyst at IG Markets.

“The sceptics certainly see this last-minute shift from the PM as a means to share blame onto the opposition in the event that a no-deal Brexit comes about.

“However, the GBP gains highlight the feeling that the involvement of Labour will not only raise the likeliness of an eventual agreement, but also drive the direction towards a softer Brexit that could include a customs union.”

10:15am: ‘Long’ Article 50 extension may keep a lid on investment and growth for foreseeable future

James Smith, economist at Dutch bank ING, reacting to the March services PMI data, highlighted the negative impact of Brexit uncertainty and said that a nine-to-twelve month extension of the Article 50 process would continue to stunt growth.

“Amid all the noise in Westminster, the latest Markit/CIPS purchasing managers index (PMI) makes it clear the economy is being hit hard,” Smith said in a note.

He added: “this latest reading implies that the first quarter as a whole could see near-stagnant growth.”

Smith noted that it is ING’s ‘base case’ view that the Article 50 process would be extended again, potentially for a long period.

“While this would give firms a temporary reprieve from the ‘no deal’ risk, we suspect companies will continue to make their preparations for this scenario.

“Depending on how long the extension lasts, it’s possible that existing contingencies will need to be repeated.

“On the manufacturing side, this could happen where firms have for example built up perishable stock, or don’t want the expense of holding higher inventory levels for such a prolonged period of time.”

“All of this is costly, and we think under the scenario of a long extension, growth would continue to suffer.”

The ING economist noted that, consequently, it is increasingly unlikely that the Bank of England will increase interest rates this year.

9:50am: FTSE 100 treads higher, UK services sector sees worst month since Brexit referendum result

As Brexit looms, the UK services sector struggled to secure new business to replace completed contract, that’s according to analyst of PMI statistics released this morning.

The services PMI measure for the month of March was marked at 48.9, down from 51.3 in February.

It signalled the first monthly decline in service sector in over two and a half years (taking the clock back to the month immediately after the Brexit referendum).

Cursory analysis of the economic indicator suggests the sector is reaching crunch-time in regards to the impact of Brexit.

It noted by survey respondents that corporate clients had delayed spending decisions due to “intense political uncertainty” and that there were also indications that household spending had also been held back because of ‘Brexit concerns and worries’.

Chris Williamson, chief business economist at the survey compiler IHS Markit, described an increasingly bleak economic trend at the precipice of Brexit.

“A drop in service sector activity indicates that UK GDP contracted in March, with the economy stalling over the first quarter as a whole and at risk of sliding into a deepening downturn in coming months,” he said.

“Both the services and construction sectors are now in decline and manufacturing is only expanding because of emergency stockpiling ahead of Brexit.”

He added: “Service sector order books have contracted at the steepest rate since the height of the global financial crisis in 2009 so far this year, with companies reporting that Brexit uncertainty has dampened demand and led to cancelled or deferred spending, exacerbating a headwind from slower global economic growth.

“A stalling of the economy in the first quarter will therefore likely turn into a downturn in the second quarter unless demand revives suddenly which, given the recent escalation of Brexit uncertainty, seems highly improbable.”

According to the economist, the current consensus forecast – which sees the UK economy growing by 1.3% in 2019 – now looks “far too optimistic”. Instead, IHS Markit presently expects just 0.8% growth this.   

Williamson added: “even this modest performance is perhaps somewhat hopeful given the recent lack of any Brexit developments.”

8.45am: Negative start for FTSE 100

The FTSE 100 has started on the back foot despite initial expectations of a positive open after hopes of a softer Brexit boosted the pound.

The blue-chip index dropped about 4.5 points to 7,386 shortly after the open while sterling jumped 0.4% against the dollar to US$1.3185.

The currency has been under pressure in recent days after a second round of ‘indicative’ votes to try and find a Brexit option failed as none of the options found majority approval with MPs.

However, news on Tuesday night that Theresa May would meet with Labour leader Jeremy Corbyn to try and reach an agreement on a Brexit deal, as well as requesting yet another extension to the UK’s exit date from the EU, has provided renewed vigour.

“None of this guarantees Britain won’t bumble out of the EU sans deal, especially given the frothing fury May’s cross-party olive branch has caused among the hard right of her Tory party. However, it is better than nothing, with sterling grabbing what it can”, said Connor Campbell, financial analyst at Spreadex.

He added that the surge in sterling meant the FTSE 100 “couldn’t enjoy” the fruits of the positive trade news and signs of Chinese economic recovery that had helped lift global markets overnights.

An early mid-cap mover was FTSE 250 transport operator Stagecoach Group PLC (LON:SGC), which jumped 9.4% to 169.4p after raising its earnings forecast for the year on the back of a better-than-expected performance in its UK rail division.

Meanwhile, FTSE All-Share spreadbetter CMC Markets Plc (LON:CMCX) sank 6.6% to 78.2p due to a gloomy trading update that predicted a 37% drop in revenues for its latest full year.

Proactive news headlines:

Chariot Oil & Gas Limited (LON:CHAR) has expanded its footprint offshore Morocco, with the award of the Lixus licence. It will own 75% of Lixus alongside state-backed partner ONHYM (Office National des Hydrocarbures et des Mines) which holds the other 25%.

Minds + Machines PLC (LON:MMX) has seen an ‘exceptionally strong’ start to the current year while recurring revenues now account for the majority of income. The registry owns a raft of internet addresses including .law, .luxe and .xxx.

AdEPT Technology Group PLC (LON:ADT) has said it will increase its final dividend in its upcoming results for the year ended 31 March 2019 after its revenues and underlying earnings (EBITDA) rose in line with market expectations.

StatPro Group PLC (LON:SOG) has landed a three-year, US$1.2mln contract extension for its cloud-based portfolio analytics product, Revolution. The customer is an unnamed fund administrator, which has won a new client.

Shield Therapeutics PLC (LON:STX) expects to sign more out-licence agreements in the coming months for Feraccru – its flagship iron deficiency treatment. The AIM company struck a deal which gave Dutch pharma group Norgine the right to sell the drug in Europe, Australia and New Zealand towards the end of 2018. Big Pic in December.

After a year of investment, virtual reality firm Immotion Group PLC (LON:IMMO) has told investors it is ready to push on towards break even. The AIM company, which makes immersive VR ‘pods’ and the content that goes with them, ploughed money into opening new ImmotionVR arcades and developing games and experiences in 2018.

KRM22 PLC (LON:KRM) said it plans to raise up to £1.8mln via a share placing and subscription for new stock as it revealed it is in early talks to tap a venture debt provider for up to £10mln to fund potential acquisitions. If the debt deal is agreed, the company would draw down an initial £1-£2.5mln, investors were told.

Sound Energy PLC (LON:SOU) is looking forward to the start of testing at the TE-10, once certain equipment arrives from Tunisia. The company, in a statement after Tuesday’s close, confirmed that TE-10 will undergo testing after a ‘rig-less re-entry’ to the well, following the receipt of coiled tubing which is on the way.

Jersey Oil and Gas PLC (LON:JOG) has revealed results from the Equinor-operated Verbier appraisal well which has failed to deliver the potential upside case for the project. The well, designed to confirm and upgrade resources, did not encounter the targeted Upper Jurassic sands as anticipated.

African Battery Metals PLC is to push ahead with its work in Cameroon following a review, with the tenements held seen as highly prospective for elevated grades of nickel and cobalt. Paul Johnson, African Battery Metals’ executive director said "ideally we would like to commence as soon as possible to enable work to be completed prior to the heavy rains expected after June."

Kibo Energy PLC (LON:KIBO) has said that, further to its announcement dated 11 December 2018, a final decision regarding the Strategic Development Agreement with SEPCOIII has not been made, with discussions ongoing. The company added that it looks forward to updating the market further in this regard in due course.

Taptica International Ltd. (LON:TAP), a global leader in advertising technologies, announced that following the completion of its merger with RhythmOne, a lunch meeting will be held for private investors at 1.00 pm on Friday, 12 April 2019 at the offices of finnCap, 60 New Broad St, London EC2M 1JJ.

6.45am: FTSE 100 tipped slightly higher

The FTSE 100 is tipped to open slightly higher on Wednesday after signs of a recovery in the Chinese economy as well as reports that the US and China may be closer to reaching a trade deal.

Spread-betting firm IG expects the FTSE 100 to open around 7 points higher after closing up 74 points on Tuesday at 7,391.

“China’s service PMI picked up to a 14-month high in March as both domestic and international demand improved. This is yet further evidence that stimulus policies by the Chinese government are starting to take affect and that fundamentals are showing signs of improvement”, said Jasper Lawler, head of research at London Capital Group.

“It will take more than one month’s worth of data to see whether the Chinese economy has turned a corner and is starting to stabilise. However, investors are starting to get optimistic that a recovery is setting in.”

The US markets had a mixed performance on Tuesday after some gains were sparked by the Chinese data and a stronger than expected US manufacturing sector, although the Dow was weighed down by weaker earnings from Walgreens Boots Alliance Inc (NASDAQ:WBA).

The Dow Jones Industrial Average closed down 0.3% at 26,179, while the S&P 500 was flat at 2,867 and the Nasdaq was up 0.25% at 7,849.

The Chinese recovery and trade reports drove a much stronger performance in Asian markets on Wednesday, with the Japanese Nikkei 225 up 1% at 21,719 while Hong Kong’s Hang Seng was up 1% at 29,919.

On the currency markets, the pound was 0.1% higher at US$1.3142 against the dollar after Theresa May said on Tuesday night that she would seek another extension to the Brexit date and work with the Labour party to break the impasse over a departure deal.

AA performance eyed for signs of breakdown

Investors already know that AA PLC’s (LON:AA.) full-year results on Wednesday will be at the top end of expectations thanks to February’s pre-closing trading update.

All eyes will, therefore, be on whether that improvement can be sustained, which could be welcome change for the company given the battering its share price has faced in recent years.

The AA provides breakdown services for all new vehicles made by VW, Jaguar, Land Rover and many more.

These partnerships account for almost four-fifths of all AA customers, and progress in this division is more important than ever as the number of higher-margin personal memberships fell last year.

At the half-way stage of its year in July, the company had net debt of more than £2.5bn, and the dividend won’t surpass 2p until cash flows improve.

There will also be trading updates from Stagecoach PLC, Topps Tiles Plc and CMC Markets Plc, while on the economic data front there will be the latest UK services PMI.

Significant announcements expected for Wednesday April 3:

Trading updates: Stagecoach PLC (LON:SGC), Topps Tiles Plc (LON:TPT), CMC Markets Plc (LON:CMCX)

Finals: The AA PLC (LON:AA), Minds + Machines Group Limited (LON:MMX), Shield Therapeutics PLC (LON:STX), JTC PLC (LON:JTC)

Interims: Applied Graphene Materials PLC (LON:AGM), Gattaca PLC (LON:GATC)

Economic data: UK services PMI; US ISM non-manufacturing; US non-manufacturing PMI

Around the markets:

  • Sterling: US$1.3142, up 0.11%
  • Brent crude: US$69.75 a barrel, up 0.55%
  • Gold: US$1,293.1 an ounce, up 0.24%
  • Bitcoin: US$4,954.7, up 2.37%

City headlines:

  • Superdry founder Julian Dunkerton was reinstated as the fashion chain's chief executive yesterday after a bitter power struggle saw almost the entire board resign – Daily Mail
  • Walgreens Boots Alliance warned it may be forced to close stores and cut jobs after suffering the “most difficult quarter” since its formation in a mega-merger in 2014 – Telegraph
  • Theresa May will put a soft Brexit on the table in talks with Jeremy Corbyn in a dramatic change of tactics to get a deal through parliament – Times
  • Royal Dutch Shell is leaving one of the largest US oil industry groups because of differences over climate policy – Financial Times
  • Shop prices in Britain recorded the biggest rise in six years in March, mainly due to a sharp increase the cost of non-perishable food, the British Retail Consortium said on Wednesday – Reuters
  • Ford’s Europe chairman Steven Armstrong has warned it will reconsider its UK investments if MPs cannot agree a Brexit deal - Independent
  • Reckitt Benckiser is heading for a fresh row over fat cat pay after it defied investors and handed boss Rakesh Kapoor £15.2 million, 70% higher than his previous year’s compensation – Daily Mail
  • The International Monetary Fund chief Christine Lagarde has warned that most of the countries around the world can expect slower growth in 2019 as the global economy loses momentum – Guardian
  • Bitcoin broke through the $5,000 mark yesterday for the first time since November, sparking a rally in the battered digital currency market – Times
  • A senior analyst at Moody’s has warned that the US and China risk plunging the global economy into a recession if the nations cannot agree a trade deal within three months – Daily Mail

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