FTSE 100 closes higher on day
Theresa May to quit on 7 June
Evraz top gainer on Footsie
FTSE 100 posted a positive gain Friday to close higher but off the 7,300 level as European and Wall Street stocks also rose.
The UK benchmark added over 46 points at 7,277, but over the week the index dropped 0.96%. Mid-cap index FTSE 250 gained over 96 points on the day to close at 18,127.
It came as the Brexit confusion continues and as UK Prime Minister Theresa May said she would step down on June 7, which will mean a leadership contest to find the next leader of the Tories and PM.
"Theresa May is heading for the exit door, but any optimism that this is going to make a significant shift towards finding a positive solution to the current deadlock were fleeting at best," noted Joshua Mahony, senior market analyst at spreadbetter IG Index.
"Half the party seems to be throwing their hat in the ring to take over as the PM, yet Boris Johnson is the name on everyone’s lips. For the UK to appoint the very man that many blame for the referendum result would do little to encourage the EU from expecting anything other than a hard-Brexit."
Steel maker Evraz (LON:EVR) was top dog on Footsie, adding 3.41% to close at 606.60.
2.45pm: US stocks open on the front foot
The Footsie was having a serious look at 7,300 after US indices opened on the front foot.
London’s index of big-cap shares was up 60 points (0.8%) at 7,291.
Across the pond, the Dow Jones index was up 145 points (0.6%) at 25,636 and the S&P 500 was 14 points higher at 2,837.
“The US April Durable Goods Report was weak with steep declines in orders and shipments of non-defence capital goods, but flat orders excluding transportation,” reported Mickey Levy at Berenberg’s US division.
“The US industrial sector is mired in a slump—so far milder than 2015-2016-- business equipment investment is declining, and demand for manufactured goods remains soft. This is consistent with the global industrial slump; moreover, US manufacturers are dealing with an inventory overbuild due to sluggish sales. A stabilisation in factory activity is still a ways off,” he added.
Back in the UK, the market is not shedding any tears over Theresa May’s imminent departure.
“The FTSE’s reaction has been minimal to Theresa May’s resignation. With around 70% of the FTSE made up by international firms the US – Sino trade dispute developments have had more of an impact driving the index higher,” said Fiona Cincotta at City Index.
”Within the FTSE there are certain sectors which are more vulnerable to Brexit and domestic political changes. Stocks exposed to the UK economy, such as house-builders, UK domestic banks RBS and Lloyds, retailers and airlines which could be grounded in the case of a no deal Brexit, are keeping their head above water today. These are stocks which could tumble should Boris Johnson come to power and re position the UK towards the hardest of Brexits,” she added.
1.15pm: US markets set to open firmer
As has been the case in the UK today, US investors are in the mood to pick up a bargain.
Spread betting quotes point to the Dow Jones opening around 100 points higher at 25,589 while the broader-based S&P 500 is seen rising 11 points or so to 2,833.
In London, the FTSE 100 was very close to its high pint of the day, hitting 7,291, up 60 points (0.8%).
Whether that is a reaction to the prime minister, Theresa May, finally taking the hint and announcing her departure doubt is unclear; many commentators believe the decision was already priced in.
“Theresa May’s resignation came as no surprise, but the modest support sterling and UK rates have enjoyed since her announcement is somewhat remarkable. We suspect that support will prove temporary. Not only do proponents of a no deal Brexit dominate the list of her likely successors, Parliament has almost no options at its disposal to check any future Prime Minister who wants to leave the European Union without a deal,” observed Tim Graf, the head of macro strategy for Europe, Middle East and Africa at State Street Global Markets.
May’s announcement has somewhat overshadowed the CBI distributive sales survey for May, although that may be no bad thing.
“A sharply weakened CBI distributive sales survey for May fuels suspicion that consumer spending is likely to be significantly softer in the second quarter. Specifically, the CBI’s sales balance fell back sharply to -27% in May, which was the weakest level since October 2017. Furthermore, sales for the time of the year were reported to be the weakest since March 2009,” reported Howard Archer, the chief economic advisor to the EY ITEM Club.
Our analysis of the #CBI distributive trades survey showing sharply weakened #UK #retail sales in May after ONS data revealed a pretty resilient performance in April following a buoyant first quarter https://t.co/8lDwSOvD8F via @EYNews
— Howard Archer (@HowardArcherUK) May 24, 2019
It was not all bad news, however.
“Retail sales were relatively resilient in April after a robust first quarter as they were likely helped by the later Easter this year.
“Specifically, retail sales volumes were flat month-on-month in April but were still up 5.2% year-on-year. The underlying performance in retail sales still looked strong, with volumes up 1.8% in the three months to April compared to the three months to January,” Archer commented.
11.45am: May's going; who's next in the hot seat?
With the prime minister, Theresa May, having finally confirmed her departure date, attention has turned towards her likely successor.
Stock markets tend to not like uncertainty but they don’t much like deadlock either and London’s leading shares have reacted phlegmatically to the prospect of political upheaval, with the FTSE 100 up 46 points (0.6%) at 7,277.
“The Conservative Party leadership election is likely to result in a Brexiteer in Number 10, possibly pushing for a no-deal exit from the European Union. This, combined with a possible prolonged leadership contest, is likely to see sterling face further stiff political headwinds," said Rehan Ansari, the head of foreign exchange (forex) risk management at forex services provider, Caxton.
That may be bad news if you are about to go on your holipops but a weak sterling is generally good for the many multinationals that dominate the Footsie.
“Sterling’s record losing streak combined with the growing risks that Brexit will see a hard exit, is making fund managers abandon long-term ‘bullish’ bets. Just a few months ago, the base case was that Brexit would be delivered by PM May and that it would be a soft exit,” observed Dean Popplewell and Oanda.
“However, if we do see Boris Johnson, the current odds-maker favourite, become Theresa May’s successor, we could see the ‘hardest’ Brexit occur. The pound (US$1.2645), which is currently atop of its four-month lows, could see further pressure to target the psychological US$1.2000 level and eventually the 2016 lows. A no-deal Brexit and a general election risks are likely to keep the pound under pressure,” he added.
“But a weaker than expected showing for the Brexit party in the EU elections could potentially provide some relief for sterling, particularly if the Liberal Democrats perform strongly. A new Tory leader that is less of a Brexiteer than the likes of Boris Johnson could also see a modest bounce in the pair.
“Support for Nigel Farage’s ‘no-deal’ supporting party is at +37%, according to a recent survey, compared to +19% for the pro-remain Liberal Democrats and just +7% for PM May’s Conservatives,” Popplewell said.
When Theresa May is resigning but Boris Johnson is probably going to be the new Prime Minister pic.twitter.com/AN4qVRm6J5
— Mattyh_08 (@mattyh_08) May 24, 2019
Away from the political arena, mobile phones networks operator Vodafone PLC (LON:VOD) was getting a bit of lover from HSBC.
The bank has raised its rating on the stock to ‘buy’ from ‘hold’; it has a price target of 160p, versus the current price of 126.14p (up 2.3%).
Brokers have been sticking the boot in on Marks and Spencer Group PLC (LON:MKS), however; despite this the shares are up 2.5% at 250p.
UBS has cut its price target to 250p from 295p while JP Morgan has cut its target to 230p from 250p and RBC has cut to 250p from 280p.
10.30: May to go in June
In an extended farewell that would have embarrassed James Brown, prime minister Theresa May has announced she will resign as Tory leader on 7 June.
The announcement – if not the actual date – was expected but even so the FTSE 100 kicked on a bit more and was up 52 points (0.7%) at 7,284, just a few points below its highest level for the day.
Let’s just make the sound engineer Prime Minister and move on with our lives pic.twitter.com/iSwTo6VOtw
— Scott Bryan (@scottygb) May 24, 2019
Better-than-expected retail sales data added a bit of extra fizz to an already effervescent equity market.
In truth, it is the commodity plays rather than the retailers that are driving the advance, with steel maker Evraz plc (LON:EVR), up 3%, the best performing blue-chip.
In the three months to April 2019, the quantity of goods bought (in volume terms) in retail sales increased by 1.8% when compared with the previous three months, with strong growth in non-store retailing, which reached a record high of 9.4%.
Online retailers selling clothing items were the driver to this growth, with the warm weather helping to boost sales, the Office for National Statistics (ONS) said.
Online clothes retailers ASOS plc (LON:ASC) and Boohoo.com (LON:BOO) were wanted in the wake of the ONS release; the former was up 2.2% and the latter up 0.9%.
“Retail growth was strong in the three months to April with a record quarter for the online sector, driven mainly by clothing purchases, with warmer weather boosting sales. Elsewhere, department stores continued to see their sales fall,” said Rhian Murphy, the head of retail sales at the ONS.
9.45am: Sterling has rallied and so have blue-chips
Almost half of yesterday’s losses have been clawed back by the Footsie, with traders prepared to risk opening new positions ahead of the long weekend.
London’s index of heavyweight shares was up 41 points at 7,273 with barely more than a dozen of the index’s constituents in the red.
Informa PLC (LON:INF), the publisher and exhibitions organiser, outperformed the index, rising 1.6% to 782p after a reassuring trading update released ahead of the company’s annual general meeting today.
"Informa has performed well through the first four months of the year, with steady trading across our enlarged portfolio of specialist international brands,” the chief executive, Stephen Carter, was set to tell shareholders today.
PRESS RELEASE: Ofgem confirms network price control methodology so consumers can benefit from cheaper, smarter and more sustainable energy network ▶️ https://t.co/mrciIjRH5l pic.twitter.com/rRNjr3fCOt
— ofgem (@ofgem) May 24, 2019
Investors were getting excited – well, (very) mildly enthused – about Ofgem’s RIIO-2 sector specific consultation, an update on which was published today.
National Grid PLC (LON:NG.) was up 0.8% after expressing pleasure that Ofgem has refined its approach to incentives but remains disappointed with the proposed cost of equity range.
Ofgem has published an update to the timeline for their Future Charging and Access reforms. #energy #triadhttps://t.co/YbJzA0zIDx
— EIC (@EICinsights) May 23, 2019
The watchdog’s new calculations do not fairly reflect the level of risk borne by networks in National Grid’s view.
8.35am: Footsie recovers early on
City traders ignored the pull lower of Wall Street in early trade on Friday, with the FTSE 100 index rallying 38 points higher to 7,268.78.
They also appeared more sanguine about the state of Sino-American trade relations and executed a collective eye-roll at the Brexit-related strife that is expected to see UK prime minister Theresa May announce her intention to quit later today.
“Traders have been focused on the damage to the global economy that a prolonged trade war could cause, so a break from the bad news is cautiously lifting sentiment,” said Jasper Lawler, market analysts at London Capital Group.
Buyers went on a bargain when it came to Royal Mail (LON:RMG), whose shares bounced 5.6% after a recent sustained sell-off.
Broker Liberum Capital upgraded its rating for the mail delivery firm, although it on was only to lukewarm from cold (sell to hold) - and he target price was slashed to 185p from 240p.
“Royal Mail’s new strategy has brought clarity to how management intends to deal with the substantial structural challenges faced by the group,” said Liberum analyst Gerald Khoo.
“We remain deeply cautious on the short-term outlook, the long-term challenges and the execution risks in Royal Mail’s new strategy. We believe there could be yet more downside risk in the short term.”
Proactive news headlines:
Strategic Minerals PLC (LON:SML) (USOTC:SMCDY) said its wholly-owned subsidiary, Southern Minerals Group (SMG) has reached an agreement with its major client at Cobre in relation to arrears to date and payments going forward, leading to the potential receipt of US$4.065mln within two weeks.
Victoria Oil & Gas PLC (LON:VOG) financial results for 2018 show the company at a low point, as a hiatus in supply to its largest customer caused sharply lower production volumes. Output was down through most of the year until the company reached an agreement in December with Cameroon power firm ENEO to restart gas supply.
ImmuPharma PLC (LON:IMM) has confirmed that discussions with potential partners are ongoing as it assess the best route forward for its lead drug. The results from an extension study of Lupuzor, a treatment for the autoimmune disease Lupus, will feed into the decision making.
Aminex PLC (LON:AEX) has announced that Jay Bhattacherjee is stepping down from his position as chief executive with immediate effect for health reasons. "We are all very sorry that Jay has had to step down at short notice due to a medical condition which requires immediate attention,” said John Bell, Aminex chief executive.
Location Sciences Group PLC (LON:LSAI) has announced the appointment of Donald "Donnie" Williams as a non-executive director of the company with immediate effect. The group noted that Williams has worked at Horizon Media, Inc. for nearly 13 years and has served as chief digital officer since 2010.
Diversified Gas & Oil PLC (LON:DGOC) has announced the appointment of David J Turner, Jr. as an independent non-executive director, with effect from 27 May 2019. Turner serves as chief financial officer at Regions Financial Corporation, an NYSE Listed S&P 500 banking group.
Rose Petroleum PLC (LON:ROSE) has confirmed the receipt of £300,000 from its recent subscription for 25,000,000 new ordinary shares at 1.2p each, details of which were announced on 20 May 2019. In addition, the company also confirmed the appointment of Colin Harrington as its executive chairman with immediate effect.
6.45am: FTSE 100 set to rise
After yesterday’s shake-out, bargain hunters are expected to emerge on Friday and nudge the Footsie higher.
Spread betting quotes point to London’s index of heavyweight shares advancing 22 points to open at 7,253 after it shed 104 points yesterday to close at 7,231.
There is still plenty of scope, however, for political events to sour sentiment; newspapers are confidently reporting that the prime minister, Theresa May, will set out her departure timetable today to the Conservative Party’s “men in grey suits” but given May’s barnacle-like propensity to cling to power this timetable – if announced – could cover a different duration to the one the market would like.
Theresa May set to reveal No 10 departure date on Friday https://t.co/GqVmm5ddxy
— BBC News (UK) (@BBCNews) May 23, 2019
Sterling has at least stabilised against the dollar but the yield on the 10-year gilt has dropped below 1%, making the UK a less enticing place to park money.
“Sterling has had a turbulent few days given the questions hanging over Theresa May’s future. UK voters went to the polls yesterday to cast their vote on the EU elections, and the speculation was that the Tories got trounced. The possibility of Mrs May leaving Downing Street in the near-term has weighed on the pound as dealers ponder the possibility of pro-Brexit Boris Johnson leading the country, or it might set in motion a chain of events that brings about another general election. Talk of Theresa May stetting set out a time-frame to set down has been has been doing the rounds in the past 24 hours,” observed David Madden at CMC Markets.
US stocks took a bath yesterday with concerns rising over what could turn out to be a long drawn-out trade war between the US and China.
“With Trump now considering putting Huawei-like sanctions on another Chinese technology firm, the trade dispute is quickly morphing into a technology Cold War,” said Fiona Cincotta, the senior market analyst at City Index.
The Dow Jones index gave up 286 points at 25,490 and the S&P 500 fell 34 points to 2,822.
In Asia, Japan’s Nikkei 225 has continued the retreat, shedding 87 points at 21,064 but Hong Kong’s Hang Seng index has advanced 62 points to 27,329.
Perhaps mercifully, it looks like it will be a quiet day for news flow on the UK equity markets.
The main focus will be on trading updates from FTSE 100-listed exhibitions and business-to-business (B2B) publisher Informa PLC (LON:INF) and FTSE 250-listed engineer Spectris PLC (LON:SXS), while retailer Mothercare PLC (LON:MTC) will also posts its slightly delayed full-year results.
“UK retail sales will be announced at 9.30am (UK time), and economists are expecting -0.3%, and that would be a sharp drop from the 1.1% growth previously achieved. The report that excludes fuel is tipped to drop by 0.5%, and keep in mind it saw 1.2% growth in March. The UK CBI realised sales update will be announced at 11am (UK time), and traders are expecting a reading of 8, and the previous report was 13,” reports CMC’s David Madden.
“US durable goods will announced at 1.30pm (UK time) and the consensus estimate is for a 2% decline, but the report that strips out transport is tipped to show an increase of 0.2%,” he added.
Significant events expected on Friday:
Trading update: Informa PLC (AGM) (LON:INF), Spectris PLC (LON:SXS)
Finals: Mothercare PLC (LON:MTC), Westminster Group PLC (LON:WSG), Volvere PLC (LON:VLE), Urban Logistics Reit PLC (LON:SHED)
AGMs: Bezant Resources PLC (LON:BZT)
Economic data: UK retail sales; CBI UK distributive trades survey; UK BBA mortgage lending figures; US durable goods orders
Around the markets
- Sterling: US$1.2661, up 0.04 cents
- 10-year gilt: yielding 0.954%
- Gold: US$1,282.80 an ounce, down US$2.60
- Brent crude: US$68.54 a barrel, up 78 cents
- Bitcoin: US$7,819.80, down US$34.35
Business headlines
The Times
- Theresa May is set to announce her resignation as the Conservative leader today, paving the way for a new prime minister by the end of July.
- Global equity markets traded sharply lower last night after fears that trade relations between the US and China could worsen soured investor sentiment.
- Marks & Spencer’s shareholders have expressed concerns about the £30 million in fees and expenses the retailer is spending on its cash call to finance its food delivery venture with Ocado.
The Daily Telegraph
- The US Federal Reserve has said that it will not bail out the Trump administration as the trade war expands.
- European private equity giant Triton has made a bid for Thomas Cook’s Scandinavian business, providing a much-needed boost to its parlous financial situation.
- Deliveroo is on track to create 70,000 jobs in UK restaurant sector by next year.
- British mobile network operator Three is urgently reviewing a planned launch of Huawei 5G smartphones after a US Presidential order threatened to block software updates to the Chinese company's phones.
Daily Mail
- Retailer B&M plans to open 50 new stores across Britain, bucking the trend of the failing High Street.
- Investment firm boss Andy Brown, chief executive of investment firm Cedar Rock Capital, has received a bumper £46 million pay package even as his fund shrank in size over the last year.
The Guardian
- Philip Green is seeking up to 70% cut in rents on a swath of stores on top of the closure of 23 outlets as part of a rescue restructure of his retail empire.
Financial Times
- US activist investment group ValueAct has called on Merlin Entertainments to go private, saying its approach is too long-term to be appreciated by the investment community.
- There were “critical flaws” in the certification process for Boeing’s 737 Max 8, which crashed twice in five months, according to Jon Horne, the president of the European Cockpit Association