FTSE 100 closes 39 points down
Centrica the best blue-chip performer
Steel maker Evraz hit by trade fear concerns
FTSE 100 closed in the red as the new trading week began and as Wall Street shares also took a pasting as the trade war between the US and China ramps up.
China has retaliated against Trump, slapping $60 billion on a list of US goods from June 1 this year. It comes after Washington last week increased duties on Chinese imports.
The UK's blue-chip index finished the day around 39 points lower at 7,163.
Mid-cap benchmark FTSE 250 was also down - off almost 240 points at 19,126.
On Wall Street, the Dow Jones Industrial Average isdown nearly 583 points at 25,357. The S&P 500 index shed nearly 66 at 2,815.
Among the big Footsie casualties, as expected under the trade situation, was steel maker Evraz plc (LON:EVR), which lost 5.12% to 556.40p.
3.55pm: Footsie down but look across the Pond
Considering what is happening across the pond, the Footsie has got relatively lightly in terms of panic over deteriorating US-China trade relations.
The FTSE 100 was down 31 points (0.4%) at 7,172 – a good 15 points or so from its intra-day low.
“We have always maintained a failure from the US and China to find a way to agree on trade is the only genuine threat to economic growth in 2019,” said the implausibly monikered Brad Tank, the chief investment officer (fixed income) at Neuberger Berman.
“If reports are correct, the current breakdown in negotiations has been caused by a fundamental and difficult sticking point. US trade representative and long-time China hawk Robert Lighthizer has been leading the demand for China’s concessions on trade policy to be reflected in changes to Chinese law. This would make any new agreement easier to enforce and more likely to survive beyond the current US administration. There may have been some progress towards this goal, but it appears President Xi Jinping himself led the pushback.
“An escalation of tariffs does not necessarily mean an end to negotiations and any hope of a deal. Indeed, our view is this is very unlikely. Both sides can make space to climb down into, but it will take more than a couple of days and it will likely be done against a background of higher tariffs,” Tank said.
One London-listed company definitely getting it in the neck over trade war worries was Evraz plc (LON:EVR), the steel-making and mining company. The shares were down 4.3% at 561p.
Centrica Plc (LON:CNA) was the best performing blue-chip, climbing 2.1% despite a set of interim results that was decidedly on the cautious side.
“Despite the clearly cautious tone of the statement the market decided to take a positive view of the update and the shares rose 2% in early trading; however, this follows a sharp dip last week and several years of underperforming the market so it may be more relief than anything else,” suggested Ian Forrest at The Share Centre..
“Following the profit warning in February, confidence in the group and management was already low and today’s news has done nothing to improve that. The market is expecting a 20% drop in the dividend this year but even that now looks optimistic given the very high prospective yield of 10%. This is a medium to high risk hold for income seekers only,” Forrest suggested.
Here’s my col from Saturday looking forward to Centrica’s AGM today and Iain Conn’s undeserved bonus. Don’t expect a big shareholder revolt. https://t.co/qjzDVcDXCf
— Alistair Osborne (@aliosborne20) May 13, 2019
2.35pm: Dow Jones crumbles
As expected, US stocks took a bath at the outset, which has coincided with increased losses for the Footsie.
London’s index of heavyweight shares was down 39 points at 7,164, about four points above its low point for the day.
Stateside, the Dow Jones industrial average was down 467 points (1.8%) at 25,475 while the broader-based S&P 500 was off 50 points (1.7%) at 2,831.
Tariff Man vs. the Dow Jones pic.twitter.com/S2VPa9YlUl
— ElElegante101 (@skolanach) May 7, 2019
“US equity markets are taking a battering as China has responded in kind to US tariffs. Beijing will slap tariffs on up to $60bn in goods, and reports suggest China may also stop purchasing US agricultural products. There is even talk – the ultimate worry – of China dumping US Treasuries. This was also the ace up the sleeve for China. Whilst China is running out of US goods to tax, it does have other tools it can use to put pressure on the White House,” proclaimed Neil Wilson at markets.com.
“Make no mistake this is a serious escalation and we have a trade war on our hands again. The breakdown last week has not proved temporary and it seems China is prepared to go toe-to-toe with the US on this. Ultimately though we should assume that after this spat – which is about face as much as anything – we should see the parties come around to talks again. Quite whether they can ever achieve a meaningful deal is another matter – talks could extend into 2020 with no result. I just have this sense this going to rumble on fruitlessly for a long time,” Wilson added.
Crisis stock Metro Bank PLC (LON:MTRO) was down 7.4% at 493.8p despite the company issuing a statement designed to prevent a run on the bank and put to bed rumours circulating on social media that the bank is about to go belly-up.
READ Metro Bank confirms plans for £350mln equity raise after 'false rumours' about financial health
Given that the stock is reportedly the most shorted share on the London market and those who have sold the shares short stand to make a lot of money from a panic, protestations that the rumours are “false” may not be wide of the mark.
1.15pm: US stocks set for a shake-out
US stocks are expected to take a battering when trading starts in just over an hour’s time.
Spread betting quotes indicate the Dow Jones index will open more than 400 points lower at around 25,536 while the S&P 500 was pegged to open at around 2,833, down almost 50 points.
UK investors remain relatively phlegmatic about the prospect of a US shake-out; the FTSE 100 was down 18 points (0.3%) at 7,185.
“Equity markets have been knocked down by the escalation of trade tensions between the US and China with global equities now some 3-4% off their recent highs,” noted Rupert Thompson, the head of research at asset manager, Kingswood.
“The correction is not a big surprise as hopes of a trade deal were a major factor behind the 15% gain racked up this year before the latest sell-off. The US carried out its threat to raise the tariff on US$200bn of Chinese imports to 25% from 10% on Friday. It is also threatening to impose a 25% tariff on a further $300bn of goods, which would leave almost all Chinese imports subject to a tariff, although this wouldn’t be implemented for a couple of months. China has yet to announce any retaliation but may well do so over coming days,” he added.
On the UK companies front, Argo Blockchain PLC (LON:ARG) and Wey Education PLC (LON:WEY) were battling it out to be the top performer.
Argo Blockchain, the data centre management business, shot up 43% after it unveiled a strategic co-operation deal that values its shares well in excess of the current market price as it took aim at a proposal from an activist investor to place its own appointee to the board.
Ever wonder why the price of #cryptocurrencies changes so often? Influencing the price of #cryptocurrency can be summed up in two simple words: supply and demand. Check out our latest video to find out more. #video #crypto #cryptonews #blockchain #bitcoin #finance #cryptomining pic.twitter.com/GQR1hfroSj
— Argo (@ArgoMining) December 17, 2018
Online education specialist Wey Education PLC (LON:WEY) was up 43% after it virtually broke even in the first half of the year.
11.45am: Footsie limps into positive territory
London’s index of leading shares has limped back into positive territory but not with a lot of enthusiasm.
The Footsie was up 6 points (0.1%) at 7,209, despite a heavy stumble by mobile phones network Vodafone PLC (LON:VOD), which was 4.2% lower on speculation that heavy investment in the 5G technology would put the dividend in danger.
$VOD.UK Expected to cut its dividend ~50% to £0.075 from £0.15 in order to finance 5G - UK press (Vodafone Group plc)
(More at https://t.co/5nYPEhN0e8)
— TradeTheNews.com (@Trade_The_News) May 12, 2019
“The trade war is back in full flow, as both sides look set to impose further tariffs. Meanwhile, Farage is putting pressure on the traditional parties, as the European elections loom,” observed Joshua Mahony at IG Group, finding reasons not to be cheerful.
The prospect of the Brexit party having a stormer in the European elections does not seem to be upsetting sterling; the pound was 0.2 cents up against the greenback at US$1.3018.
A strong pound is usually bad for the Footsie but it did not seem to be worrying fags makers Imperial Brands PLC (LON:IMT) and British American Tobacco PLC (LON:BATS), which were both up 0.4%.
Also on the rise was United Utilities PLC (LON:UU.) as it named Sir David Higgins as a non-executive director and anointed him as the successor to Dr John McAdam, who will step down as chairman at the end of this year.
10.45am: Week gets off to a "tariffic" start
The week has got off to a tariffic start, which is definitely not the same as a terrific start.
The FTSE 100 was down just 4 points (0.0%), despite fallers among the index's constituents outnumbering risers by around three-to-one.
Larry Kudlow admits that the Chinese do not directly pay tariffs on goods coming into the U.S., as Trump has repeatedly, and incorrectly, claimed.
Via Fox pic.twitter.com/sbXvfBbktf
— Kyle Griffin (@kylegriffin1) May 12, 2019
The inconsequential size of the Footsie's fall was largely down to the heavily weighted oil majors, BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB), which were up 0.9% and 1.4% respectively on the back of a stronger oil price.
On the futures market, the June contract for Brent crude was trading US$1.27 (1.8%) higher at US$71.87.
“Oil prices are more than 1% higher on Monday, getting the week off to a positive start even as risk aversion drags equity markets lower. The risks to global growth of a trade war between the US and China would typically have been a bearish development for oil prices but reports of vessel sabotage in the Gulf appears to be supporting prices,” commented Craig Erlam at Oanda.
“The increase in tensions in the region as the US proceeds with efforts to reduce Iranian exports to zero and crush the economy is a risk for oil markets and could see prices rise further if these flare ups continue. As it is, we remain a little off the recent highs and today’s gains are likely being limited by the overall risk environment but that could all change very quickly,” he added.
Ironically, a heavy fuel user, the British Airways owner International Consolidated Airlines (LON:IAG), was the top riser, advancing 1.6% after it posted its first quarter results on Friday.
8.45am: London off to a lacklustre start
The FTSE 100 made a lacklustre start to the trading week amid continued worries over the deteriorating state of trade relations between the US and China.
In early deals the index of blue-chips fell three points to 7,200.61, but it resisted being pulled lower by the sharper declines seen across Asia’s main markets.
“There are three possible outcomes from here,” explained Jasper Lawler of London Capital Group, referring to the trade impasse.
“Firstly, a deal gets agreed quickly; secondly after extensive further negotiations a deal finally gets agreed; or thirdly the talks completely break down and a full-blown trade war ensues.
“We are definitely not there yet. The base case scenario is that a deal will still be achieved, it is just going to take a lot longer than the market had been pricing in over recent months.”
Closer to home, Brexit was once again on the agenda with Labour signalling it could walk away from talks if a confirmatory referendum isn’t baked into any cross-party agreement on the issue.
At the same time, Prime Minister Theresa May is coming under renewed pressure from her MPs to resign – or at least set a departure date.
Turning to the market, investors in Centrica (LON:CNA) appeared a little cheerier on Monday after the owner of British Gas said it was maintaining its current profit and revenue forecasts in the face of some fairly stiff financial headwinds. The shares rose 2.3%.
Its stock has fallen amid worries it may be forced to slash the dividend.
Vodafone (LON:VOD) was off 2.4% after weekend reports suggested it was also considering cutting its investor payout.
6.45am: Subdued start predicted
The FTSE 100 is expected to open flat on Monday as trade war jitters kept investors in wait and see mode at the start of the week.
Spread-betting firm IG expects the FTSE 100 to open flat after closing down 4 points at 7,203 last Friday.
The US markets ended last week higher despite US$200bn of new trade tariffs on Chinese goods after positive signals on negotiations, with the Dow Jones closing 0.4% higher at 25,942. The S&P 500 meanwhile closed up 0.4% at 2,881 while the Nasdaq was up 0.08% at 7,916.
However, Asian markets headed lower after the trade talks wrapped up last Friday without an agreement and concerns arose around an imminent Chinese retaliation. The Japanese Nikkei 225 was down 0.7% while Hong Kong’s Hang Seng was closed for a public holiday.
“The US sharply hiking tariffs on Chinese imports and China threatening to retaliate has thrown into doubt the possibility of the two sides reaching a deal after almost a year of talks”, said Jasper Lawler, head of research at London Capital Group.
“There are three possible outcomes from here. Firstly, a deal gets agreed quickly, secondly after extensive further negotiations a deal finally gets agreed or thirdly the talks completely break down and a full-blown trade war ensues. We are definitely not there yet. The base case scenario is that a deal will still be achieved, it is just going to take a lot longer than the market had been pricing in over recent months.”
On the currency markets, the pound was relatively flat against the dollar at US$1.3 as traders awaited the outcome of cross-party Brexit talks, while the European elections next week are expected to provide downward pressure on the currency as Theresa May is again pushed toward resignation by her own party.
Centrica investors hope for no more bad news
“The best the market will be hoping is for no more bad news.” That’s one analyst’s take on what Centrica PLC (LON:CNA) shareholders will be looking for in Monday’s first-quarter update.
The British Gas owner has suffered a lot in 2019, with the stock down by almost a third since the turn of the year to 20-year lows.
Centrica warned in February that its 2019 results will be hit by caps to energy tariffs, which has sparked fears over the sustainability of its dividend.
Extensive cost-cutting plans have been put in place in a bid to protect cash and profits, but that can’t last forever. Analysts think the “writing is pretty much on the wall” for the dividend to be cut.
Mild first-quarter weather hasn’t helped sentiment either, with Brits not needing to whack up the thermostat like they did in the opening months of 2018.
Significant announcements expected Monday May 13:
Trading updates: Centrica PLC (LON:CNA), Dignity PLC (LON:DTY)
Interims: Diploma PLC (LON:DPLM), Wey Education PLC (LON:WEY)
Finals: Angling Direct PLC (LON:ANG), ClearStar Inc. (LON:CLSU)
AGMs: Anglo Pacific Group PLC (LON:APF), Centrica Plc (LON:CNA)
Economic data: US consumer inflation expectations
Around the markets:
Sterling: US$1.3007, up 0.06%
Brent crude: US$70.86, up 0.34%
Gold: US$1,284.6 an ounce, down 0.08%
Bitcoin: US$7,116, down 2.6%
Proactive news headlines:
Europa Metals Ltd(LON:EUZ) will commence drilling at the Toral zinc project in Spain within five days, following the mobilisation of a rig to site.
Live Company Group Plc (LON:LVCG) has inked a multi-year deal to stage its BRICKLIVE shows in Belgium. Under the deal, its partner Exhibition Hub will stage one BRICKLIVE show in the country each year up to 30 November 2021, with the first show to be held between 25 October and 3 November this year.
Polarean Imaging Plc (LON:POLX) is adding a third clinical trial site to the phase III study of its hyperpolarised 129-Xenon (129Xe) gas magnetic resonance imaging (MRI) technology.
Columbus Energy Resources PLC (LON:CERP) told investors it has received a private petroleum licence for the Bonasse licence area in the South West Peninsula of Trinidad.
Union Jack Oil PLC (LON:UJO) chairman David Bramhill today told investors that the “future remains bright” as the company continue to advance it onshore UK growth strategy.
Hurricane Energy Plc (LON:HUR) has confirmed a key milestone towards the delivery of the Lancaster field early production system (EPS), with the Aoka Mizu vessel taking on hydrocarbons.
Angling Direct PLC (LON:ANG), the fishing tackle and equipment retailer, has seen like-for-like (LFL) sales continue to surge this year. The first two months of the current financial year – i.e. February and March – saw LFL sales rise by 28.5% year-on-year, while overall sales were up 50.7% on the previous year.
Argo Blockchain PLC (LON:ARB) unveiled a strategic co-operation deal that values its shares well in excess of the current market price as it took aim at a proposal from an activist investor to place its own appointee to the board.
Background checking group ClearStar Inc (LON:CLSU) swung to an underlying profit in 2018 as a jump in big-name clients helped it generate record revenues.
WideCells Group PLC (LON:WDC) said it had made a strong start to “establishing its offering and building out its presence” in the new media space as it announced plans to change its name.
Strategic Minerals PLC (LON:SML) is now close to completing on its acquisition from New Age Exploration Ltd of the 50% of Cornwall Resources that it doesn’t already own. Cornwall Resources is the joint venture vehicle holding the Redmoor tin and tungsten project located in Cornwall.
African Battery Metals PLC (LON:ABM) has acquired an 18.26% stake in Kalahari Key Mineral Exploration Ltd. Kalahari Key owns the Molopo Farms Complex project in south-west Botswana, known to be highly prospective for nickel and platinum group metals.
Internet domain name seller CentralNic Group PLC (LON:CNIC) saw revenue double in 2018.
Bluejay Mining PLC (LON:JAY) has joined a local workforce training scheme to build a skilled labour pool for its Dundas ilmenite project in Greenland.
Avation PLC (LON:AVAP) has added Cebu Air, the largest domestic airline in the Philippines, to its growing roster of customers.
City headlines:
Metro Bank has drawn up plans to sell more than £1 billion worth of loans hit by accounting error – Financial Times
Balfour Beatty, Britain’s biggest construction contractor, faces potential dissent from shareholders this week after concerns at links between one of its directors and its clients – Telegraph
Philip Green has fallen out of the billionaires’ club after the Topshop tycoon’s fortune halved over the past year, according to the Sunday Times rich list - Guardian
Arriva has become the second train operator in a week to launch legal action against the transport secretary Chris Grayling over his handling of a rail contract – The Times
US official sought to contain the fallout from the escalation of trade tensions with Beijing, saying there was a “strong possibility” for a deal at the G20 summit next month – FT
A legal duty for banks to act in the best interests of their customers may be needed, British lawmakers said on Monday, piling pressure on regulators to step up protection of consumers after a string of mis-selling scandals spanning decades – Reuters
Boeing is expecting “far reaching” changes to the way aircraft are certified safe across the global aviation industry, according to its lead director, as pressure builds on regulators to prevent further fatal accidents like the two recent Boeing 737 Max air disasters – FT
Lloyds Banking Group, Foxtons and Paddy Power are among almost 100 firms that will be highlighted this year by an influential investor group for failing to boost the number of women on their boards – Guardian