FTSE 100 closes slightly ahead but Wall Street shares slide

The Footsie closed out at 7,334 - up around five points, while mid-cap index was firmly lower- down 129 points at 19,307

Wall Street
There is speculation that the PM could be gone as soon as Friday
  • FTSE 100 index closes ahead- just

  • Sterling sinks to fresh lows amid rumours of May ousting

  • US stocks slip

FTSE 100 closed only slightly in the green on Wednesday as investors are still wary of taking on risk.

The Footsie closed out at 7,334 - up around five points, while mid-cap index was firmly lower- down 129 points at 19,307 as Brexit chaos continues and there are rumbling about Prime Minister May's premiership.

Over in the US, stocks are lower, with the Dow Jones Industrial Average down almost 70 points at 25,807.

The broader-based S&P 500 exchange is also down - around six points and the Nasdaq index shed around 27.

David Madden, at CMC Markets, said: "Trade concerns are lingering and that is why stock markets are largely mixed this afternoon. It seems the dust has settled in relation to the Huawei situation, but traders are wondering will Beijing hit back at the US. The trading relationship between the two largest economies in the world has been setback and dealers are on edge."

Top laggard on Footsie was retailer and High Street bellwether Marks & Spencer (LON:MKS), which shed around nine points at 245.80p as City analysts raised doubts on its turnaround plan.

The top riser on the blue-chip index was packaging group Smurfit Kappa Group (LON:SKG), which gained around 5.5% to 2,305p.

3.15pm: Sterling slides over half a percent amid rumblings of imminent PM ousting

The pound’s miserable day has continued to get worse with the currency dropping over half a percentage points amid rumblings that Conservative cabinet members are currently moving to oust Prime Minister Theresa May.

Just after 3pm sterling was down 0.57% at US$1.2632 against the dollar, its lowest in around four months, and down the same amount against the euro at €1.1316.

The renewed tumble, however, provided a welcome boost for the FTSE 100, which had recovered some gains into late-afternoon and was up 28 points at 7,357.

"Friendless and running out of time, the heightened speculation that Theresa May might be moving out of No. 10 very soon cranked up the pressure on an already exhausted pound", said Connor Campbell, financial analyst at Spreadex.

"Things are so bad for the Prime Minister that some are suggesting she will be gone by the end of the week, the party mobilising to find a way to get her out, by hook or by crook. Her Cabinet is reportedly incensed at what is actually contained within the Withdrawal Agreement Bill, with claims that it goes far beyond what was agreed in the room.

"The growing sense that May’s premiership isn’t long for this world – setting up a Tory leadership battle that could well put a hardline Brexiter in power, especially if the party does as badly in the European elections as expected – was ruinous for sterling."

2.45pm: Wall Street opens on the back foot

The US markets opened in the red on Wednesday with traders sitting on their hands ahead of the release of the latest batch of minutes from the Fed.

Shortly after the open the Dow was down 0.28% while the S&P 500 dropped 0.3% and the Nasdaq was 0.36% lower.

The FTSE 100 was also on the slide as late-afternoon approached and was down 4 points at 7,324.

The blue-chip index’s key faller, M&S, was still at the bottom of the pile having extended its losses over the afternoon and was 8.5% lower at 248.2p.

The mid-caps were similarly bloodied with the FTSE 250 tumbling 69 points to 19,366, with Babcock International Group PLC (LON:BAB) and Just Group PLC (LON:JUST) serving as the key weights on the index.

On the currency markets, the pound was still in the doldrums having slipped 0.4% to US$1.2654 against the dollar as Theresa May’s attempts to defend her ‘new’ Brexit deal at PMQ’s fell flat with MPs.

There could also be more political turmoil on the horizon with reports that members of May’s cabinet could be making a move against her later this afternoon.

1.30pm: US market tipped for subdued start as traders await Fed minutes

Wall Street is pointing to a somewhat lower start on Wednesday morning as traders await the minutes from the last meeting of the Federal Reserve, which some think may offer guidance on whether the central bank will be looking to change interest rates this year after staying put at its last meeting at the end of April.

The gloomy trade picture may also be dampening investor sentiment after Monday’s drubbing and reports that the US could potentially blacklist a number of Chinese technology companies from using American technology.

In the pre-market, one company hitting the mark was discount retailer Target Corp (NYSE:TGT), which was up 7.4% at US$77.3 after its first quarter results surpassed expectations.

Meanwhile, in London the FTSE 100 has lost all of its morning gains and was down nearly 9 points in early afternoon at 7,319.

12.10pm: FTSE 100 ends morning on a high as sterling suffers

The FTSE 100 managed to close out the morning with a solid set of gains as a dismal performance from the pound gave equities a boost.

The abortive launch of Theresa May’s “new Brexit deal” yesterday has been immediately trounced by MPs on both sides of Parliament, providing little hope that the agreement with pass the commons when it returns in two weeks’ time.

Although according to Connor Campbell, financial analyst at Spreadex, there is now speculation that the vote may not even go ahead at the start of next month, with markets also starting to consider the possibility that a ‘hard’ no-deal Brexiter might seize the Tory leadership once May resigns.

The faltering state of Brexit, accompaneid by some fairly benign inflation figures, meant the pound had slumped 0.31% to US$1.2666 by lunchtime.

In the equity markets, blue chip paper and packing firms Smurfit Kappa Group PLC (LON:SKG) and Mondi Plc (LON:MNDI) were leading the risers into lunchtime, up 5.3% at 2,301p and 5% at 1,745p respectively.

Meanwhile, Marks and Spencer Group PLC (LON:MKS) was languishing at the bottom of the fallers pile, down 4.6% at 258.7p, after the high street retailer cut its dividend and confirmed plans for a £601.3mln rights issue to fund an joint venture with online grocer Ocado Group plc (LON:OCDO).

Just after midday, the FTSE 100 was up 31 points at 7,360.

11.45am: British Steel falls into administration, UK house price inflation ticks up in April

British Steel has collapsed into administration after failing to agree a £30mln rescue package from the UK government, putting around 5,000 jobs at risk.

The UK’s second-largest steelmaker, which is owned private equity firm Greybull Capital, has been under pressure for a while as it has struggled to cope with competition from cheap Chinese steel, while recent Brexit uncertainty has also been blamed as weakness in sterling pushed up the price of raw material imports.

Greg Clark, the UK’s business secretary, said that while the government had worked with both British Steel and GreyBull to find a solution, it would have been “unlawful” for the state to provide the funding injection. Meanwhile, Labour's shadow business secretary, Rebecca Long Bailey, has called on the government to nationalise the group to protect the jobs of workers at its Scunthorpe and Teeside plants.

EY have now been appointed to assist with the firm’s liquidation.

Meanwhile, figures have shown that UK house price inflation ticked up in April, however London continued its long downward trajectory.

Average house prices increased last month by 1.4%, up from a 1% rise in February, while house prices in the capital dropped 1.9%, with the North East and South East of England also reporting declines of 0.8% and 0.4%.

However, the fall in London was less than the 2.7% drop reported in February, which may suggest that the fall could be starting to bottom out.

In late-morning, the FTSE 100 was up 38 points at 7,367.

10.50am: Pret A Manger to snap up EAT

Following news last week that the two were in advanced talks, food chain Pret A Manger has agreed to acquire rival EAT as part of a plan to expand its footprint and increase the number of vegetarian and vegan outlets.

In a statement, the company said it planned to convert as many of EAT’s outlets as possible into ‘Veggie Pret’ branches, adding that the acquisition was expected to “significantly accelerate” the growth of the brand. EAT has over 90 branches across the UK, most of them in London.

“The purpose of this deal is to serve a growing demand of vegetarian and vegan customers who want delicious, high quality food and drink options. We have been developing the Veggie Pret concept for over two years and we now have four hugely successful shops across London and Manchester”, said Clive Schlee, Pret’s chief executive.

“The acquisition of the EAT estate is a wonderful opportunity to turbo charge the development of Veggie Pret and put significant resources behind it.”

10.40am: Sterling drops back below US$1.27

Benign inflation and the ongoing disintegration of Theresa May’s Breixt plan have pushed sterling back below the US$1.27 mark following a brief rally overnight.

In mid-morning, the currency was down 0.3% at US$1.2667 against the dollar and had also slumped 0.31% against the euro to €1.1346.

Joshua Mahony, senior market analyst at IG, said that while talk of a potential second referendum on Brexit as part of Theresa May’s last ditch set of compromises, the mood quickly turned sour as the deal looked likely to fail for the fourth time when it reaches parliament in two weeks.

“May’s admission that it is impossible to fulfil everyone’s personal form of Brexit is key here, for where she shifted the goalposts to appease some MPs, she similarly alienated those than had provided her their support in the past. With calls for a new vote of no confidence highlighting the fightback that is already taking shape, Theresa May seems to have an impossible task as she aims to win over support for the deal.”

Meanwhile, Ed Monk, associate director for Personal Investing at Fidelity International, said that today’s inflation figures, which have drifted just above the Bank of England’s 2% target, could underpin the central bank’s case for “potentially faster interest rates rises than we’ve been expecting”.

“The prospects for economic growth in the UK are improving and rising inflation reflects that, but of course it comes with a huge asterisk - they are predicated on a smooth Brexit transition which it’s still out of reach. A chaotic Brexit outcome will require a much more dovish position at the Bank.”

The pound’s misery however was providing a boost for the FTSE 100, which was up 31 points at 7,359.

9.55am: UK inflation rises to 2.1% in April, above BoE target but less than expected

UK inflation rose over the month of April to its highest level so far this year and above the Bank of England’s 2% target, however the increase was less than many had predicted.

The UK’s consumer price index (CPI) rose to 2.1% in April, up from 1.9% in the prior month but below the predicted estimate of 2.2%.

Rising bills for electricity and gas following the lifting of the cap on energy costs earlier in the year were a big contributor to the increase, while air fares also pulled upwards as airlines hiked prices as a result of the Easter holiday rush.

Meanwhile, recreational and cultural products including video games and package holidays were the biggest downward contributors.

Phil Smeaton, chief investment officer at Sanlam UK, said that with prices starting to creep above the central bank’s target, improvements in wages seen earlier in the year were being “cancelled out” and with the Brexit process currently paralysed the rising inflation would present a challenge for the bank’s governor Mark Carney.

“Uncertainty persists around the UK’s future relationship with the EU and the US trade war with China shows little sign of abating. This prompts a certain wariness about a rate increase in the short term. The unexpectedly strong performance of the UK economy, however, has increased the Bank of England’s ability to sustain an interest rate rise if it’s deemed necessary. But until Brexit clarity is finally established, Carney must continue to walk a tightrope.”

Shortly after the figures were announced, the pound had dropped 0.21% to US$1.2678 against the dollar.

Meanwhile, the FTSE 100 was up 27 points at 7,356.

8.40am: Positive start for Footsie

The FTSE 100 rose ahead in early trade, boosted by a weaker pound ahead of UK inflation figures due later Wednesday, also taking its cue from Wall Street, which traded positively.

The index of UK blue-chips opened 36 points higher at 7,364.69, though analysts warned the mood could change quickly and dramatically depending on the machinations around Sino-American negotiations.

“Traders are waiting for the next chapter in the unfolding trade drama,” said Jasper Lawler of London Capital Group.

“Sentiment remains fragile as investors digest the changing face of the trade dispute from broad sweeping tariffs to direct action against single Chinese companies. Some investors are clinging to hope that a US –China trade deal can still be achieved, most likely at the G20 at the end of June,” he added.

The big news of the day came from Marks & Spencer (LON:MKS), which, as expected, launched a discounted £600mln rights issue to fund its home delivery deal with Ocado (LON:OCDO). The retailer also said it was cutting the dividend and closing more stores than first projected.

Given the welter of bad news – and the fact that new shares are set to enter the market – a 4% mark-down of M&S stock wasn’t a bad outcome.

Meanwhile, full-year results from Pets at Home (LON:PETS) were something to bark about as the shares advanced 9%.

But the same couldn’t be said of Babcock (LON:BAB), with shares in the defence group falling 9% after it warned the current year will be “challenging” – that’s not a word City traders like to hear.

Proactive news headlines:

In the wake of another well disappointment, Sound Energy PLC (LON:SOU) revealed on Wednesday it may hoist the ‘for sale’ sign over its operations in Morocco. In a strategy update, the company told investors that the TE-10 well result, announced on Tuesday, “does not diminish Sound Energy's overall assessment of its Eastern Morocco acreage”.

Bushveld Minerals Limited (LON:BMN) has revealed an updated resource estimate for the Vametco vanadium mine, in South Africa, following successful drilling operations. The company highlighted that ore reserves have more than doubled at the mine, to 279,100 tonnes of vanadium pentoxide in magnetite, notwithstanding some 5,700 tonnes of production since the last accounting period.

Motif Bio PLC (LON:MTFB) is to explore the possibility of using its iclaprim next-generation antibiotic to treat people with a rare blindness-causing disease called toxoplasma chorioretinitis. Big Pic in February.

Australian mining giant Newcrest Mining Ltd (ASX:NCM) has started drilling at Greatland Gold PLC’s (LON:GGP) Havieron gold-copper project in the Paterson region of Western Australia.

IXICO PLC (LON:IXI) has swung to a profit in its first half as the company began to reap the benefits of a number of contract wins. For the six months ended 31 March, the neuroscience-focused data analytics group reported a pre-tax profit on ordinary activities of £106,000, up from a £514,000 loss in the prior year, while revenues jumped to £3.4mln from £2.8mln. Gross margins also rose by 610 basis points to 66.3%.

The commercial momentum at OptiBiotix Health PLC (LON:OPTI) continues to build. After a string of deals for its health products, including one earlier this week, the company said it had inked an exclusive agreement in Poland.

Live Company Group Plc (LON:LVCG) shares surged on Wednesday after it signed a licensing and merchandising agreement for its BRICKLIVE brand with Licensing Management International Limited (LMI), a marketing consultancy involved in the promotion of Game of Thrones.

MTI Wireless Edge Ltd (LON:MWE) has seen pre-tax profits more than double in its first quarter, while also recording significant growth in its order book. The antenna maker reported that for the three months ended 31 March pre-tax profits had risen to US$560,000 from US$250,000 previously, while revenues had jumped 16% year-on-year to US$9.1mln.

NQ Minerals Plc (NEX:NQMI) told investors it has made the first bulk shipment of precious metal pyrite concentrate from the Hellyer gold mine. The shipment, which left Burnie Port in Tasmania, contained higher than forecasted grades for both gold and silver, meanwhile, the pyrite component had high sulphur and iron grades.

NetScientific PLC (LON:NSCI) chief executive Ian Postlethwaite has reiterated the group’s confidence in its remaining portfolio companies as it said it would use its cash reserves to focus on extending its lifespan.

ValiRx Plc (LON:VAL) updated on a potential second round of funding as it provided some minor and revised guidance on the first financing round. A follow-on convertible and warrant funding arrangement with the same investor is in negotiation, though definitive documentation has yet to be inked and shareholder approval needs to be sought and given, it added.

Chaarat Gold Holdings Limited (LON:CGH) said that it was informed on 21 May 2019 that Labro Investments Limited held 138,337,302 shares in the company, representing 34.40% of the issued share capital, following the purchase of 316,186 shares at an aggregate share price of 30.8p each on 17 May 2019 and 1,000,000 shares at an aggregate share price of 29.8p each on 20 May 2019. It noted that Martin Andersson , Chaarat’s executive chairman is indirectly beneficially interested in the majority of shares in Labro Investments.

Savannah Resources PLC (LON:SAV), the resource development company, confirmed that a new corporate presentation can be viewed on its website.

6.45am: FTSE 100 set to trader higher 

The FTSE 100 is expected to open higher on Wednesday ahead of the latest batch of UK inflation data while also taking a positive lead from global markets overnight.

Spread-betting firm IG expects the FTSE 100 to open up around 18 points after finishing on Tuesday with an 18 point gain at 7,329.

Wall Street logged solid gains overnight, with the Dow closing up 0.77% while the S&P 500 was up 0.85% and the Nasdaq 1.08% higher, with traders taking some positivity from a slight reduction in trade tensions as the US said it would offer temporary exemptions to an export ban against Chinese tech giant Huawei.

Asian markets were also lifted today, albeit slightly, on the marginally improved trading picture, with the Japanese Nikkei 225 rising 0.14% while Hong Kong’s Hang Seng was up 0.26%.

On the currency markets, the pound was slightly higher against the dollar, up 0.08% at US$1.2715 as traders awaited Wednesday’s inflation data following a slight rise overnight as Theresa May unveiled a “new deal” for Brexit in an attempt to break the political deadlock among MPs.

Inflation figures lead macro news

Economists are expecting the consumer price index to be well below the recent growth in average earnings at around 1.8% year-on-year in April, down from the previous month’s 1.9% rate, when the latest UK inflation numbers are released on Wednesday.

Falls in clothing and food prices should once again act to counter a rise in transportation costs as an increase in energy prices takes time to feed through the system.

Nonetheless, the rate of inflation is likely to stay below the Bank of England’s 2% target range and have little impact on the chances of a rate rise for the time being given the political uncertainty caused by Brexit.

Meanwhile, the corporate calendar will see results from Royal Mail and M&S alongside utilities group SSE.

Significant announcements expected on Wednesday:

Finals: Royal Mail Group PLC (LON:RMG), Marks & Spencer Group PLC (LON:MKS), SSE PLC (LON:SSE), Babcock International PLC (LON:BAB), Pets at Home PLC (LON:PETS), Great Portland Estates PLC (LON:GPOR), C&C Group PLC (LON:CCR), Intermediate Capital Group PLC (LON:ICP), HICL Infrastructure PLC (LON:HICL); Picton Property Income Ltd. (LON:PCTN)

Interims: Britvic Plc (LON:BVIC), IXICO PLC (LON:IXI), Paragon Banking Group PLC (LON:PAG), IXICO PLC (LON:IXI)

Trading updates: Bovis Homes PLC (LON:BVS), IG Group PLC (LON:IG.), Close Brothers Group PLC (LON:CBG)

AGMs: Motif Bio PLC (LON:MFTB), Sound Energy PLC (LON:SOU)

Economic data: UK CPI, RPI, PPI; UK house price index; UK public sector finances

Around the markets:

  • Sterling: US$1.2717, up 0.08%
  • Brent crude: US$71.73 a barrel, down 0.62%
  • Gold: US$1,273.6 an ounce, up 0.13%
  • Bitcoin: US$7,925.8, up 0.34%

City headlines

  • Theresa May’s final attempt to break the Commons deadlock failed yesterday after Tory MPs including Boris Johnson turned down a “new Brexit deal” offered by her – The Times
  • Sterling slipped below $1.27 for the first time in almost five months, as traders fretted over the perils of a no deal Brexit and Labour seizing power – Daily Mail
  • Bridgepoint, the European private equity giant that raises funds in euros, is looking at moving back-office jobs from mainland Europe to the UK if sterling weakens significantly – Financial Times
  • KPMG could face a record £12.5mln fine for misconduct after signing off on accounts for the world’s largest custodian bank, BNY Mellon, despite its failure to keep customers’ money safe during the financial crisis - Times
  • Morgan Stanley has warned that Tesla’s shares could drop from $97 to just $10 in the worst case scenario due to fears that it could be entangled in the US' trade war with China – Telegraph
  • All but three of Jamie Oliver’s 25 UK restaurants have closed, with the loss of 1,000 jobs, after the business called in administrators – Guardian
  • Metro Bank's boss said he feels 'humbled and chastened' after an accounting error wiped more than £1bn off the lender's market value – Daily Mail
  • British Steel is on the brink of collapse risking thousands of jobs, after talks with the government over an emergency £75 million loan appeared all but dead - FT

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