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FTSE 100 closes higher despite continued trade worries

The UK's blue-chip benchmark added over 23 points to close at 7,184

Cityscape
FTSE 100 closed ahead on the day
  • FTSE 100 closes higher

  • US markets lower 

  • Miners among the gainers

  • BP and Shell lend their weight to the rally as Brent crude heads higher

FTSE 100 closed Monday higher, despite continued trade fears, with mining firms making into the list of top gainers.

The UK's blue-chip benchmark added over 23 points at 7,184.

But the mid-cap index and more UK company focused  FTSE 250 shed around 93  points to stand at 18,877.

"It was been an impressive turnaround seeing as the major indices were offside this morning, and traders seem to have shrugged off the negative sentiment," pointed out analyst David Madden, at CMC Markets on FTSE 100's performance.

"Tensions between the US and China, and the US and Mexico are still high - the highest they have been recently, so today’s move might turn out to be a relief rally, as the political standoff continues," added the analyst, who added that traders were also keeping an ear on any comments from President Trump on UK, US relations as he begins a  state visit.

Among the gainers on Footsie, silver giant Fresnillo (LON:FRES) added  3.75% to 796.80p.

On Wall Street, stocks are down at the time of writing.

3.15pm: UK blue-chips back to square one as Wall Street finds forward gear

The Footsie has struggled into positive territory, helped by a positive performance by Wall Street.

London’s index of heavyweight shares was up 5 points (0.1%) at 7,167.

Stateside, the Dow Jones industrial average was 82 points (0.3%) higher at 24,899 while the broader-based S&P 500 was up 7.7 points (0.3%) at 2,760, despite a decline in the Institute for Supply Management’s manufacturing index in May.

The index value declined to 52.1% from 52.8% in April; economists had been expecting a reading of around 52.6%.

2.15pm: The day's Footsie losses have largely been erased

The Footsie has now more or less recovered all of its losses; President Trump is probably getting ready to claim the credit.

London’s index of leading shares was down 4 points (0.1%) at 7,158.

In contrast, the mid-cap FTSE 250 – full of companies that are more exposed to the UK economy than the global one – was down 109 points (0.6%) at 18,861, thanks in large part to the profit warning that sent Kier Group PLC (LON:KIE) 41% lower at 164.8p.

Liberum Capital Markets was quick off the mark reacting to the profit warning, cutting its Kier target price to 320p from 400p.

Specialist Information company Ascential PLC (LON:ASCL) was also under the cosh, slumping 5.2% to 363.8p even after Goldman Sachs added it to its “conviction buy” list; Goldman’s price target was trimmed to 510p from 525p previously.


 

1.10pm: US markets expected to open lower

Investors are bracing themselves for a soft opening on Wall Street this afternoon.

Spread betting quotes suggest the Dow Jones, which tanked by 355 points on Friday, will open 75 points lower at 24,740.

The S&P, which shed 37 points to close at 2,752 on Friday, is expected to open about 8 points lower at 2,744.

Despite that, the FTSE 100 index in London continues to make a steady comeback and has almost wiped out the morning’s losses at 7,153 – down 10 points.

The Footsie’s rally may have more to do with sterling sliding versus the US dollar; having been higher against the greenback earlier today by around one-tenth of a cent, sorry sterling is now down by a similar amount at US$1.2620.

Marketing and advertising conglomerate WPP PLC (LON:WPP) was just about defying the weaker trend, advancing 0.1% to 941.8p, helped by an upgrade to “buy” from “neutral” by Goldman Sachs.

The “vampire squid” of Wall Street has raised its target price for WPP to 1,150p from 870p.

Oil giant BP PLC (LON:BP.) was also marginally firmer, up 0.1% at 540.6p, on the back of a firmer Brent crude price.

“Oil prices have firmed on Monday. Amid fears about global growth and trade, Brent was threatening to push south of US$61 but was last firming around US$62.50. This area constitutes the 50% retracement of the bottom-to-top rally from last December through to the Apr highs and will be a key redoubt for bulls to hold,” opined Neil Wilson of markets.com.

“Prices and sentiment remain fragile, but this rally today, if it holds on the close, may suggest the worst of the drop is over for the time being, particularly if the 50% level holds as support,” he added.

11.45am: Slow recovery continues

The UK market's recovery from a bad start continues although the UK's leading shares index remains in the red.

The FTSE 100 was down 26 points at 7,135, around 55 points above its low point for the day.

The index has been helped by a bit of buying interest in mining giants such as Fresnillo plc (LON:FRES), Anglo American PLC (LON:AAL), Rio Tinto PLC (LON:RIO) and Glencore PLC (LON:GLEN), all of which are in positive territory, if not by much.

Drugs giants GlaxoSmithKline PLC (LON:GSK) and AstraZeneca PLC (LON:AZN), up 0.7% and 0,4% respectively, were also feeling the love.

Terrestrial broadcaster ITV plc (LON:ITV) and groceries delivery technology outfit Ocado Group plc (LON:OCDO) were the two worst performing blue-chips following broker comment.

Goldman Sachs resumed coverage of ITV plc (LON:ITV) with a “neutral” rating and a 121p target price at a time when pundits are speculating whether Netflix, now the third most widely watched TV channel in the UK, will introduce advertising on its service.

ITV shares traded at 104p, down 3.0% on the day.

Ocado was down 2.9% at 1,160.5p after US broker Jefferies cut its rating to “underperform” from “hold” even while bumping the target price to 600p from 450p, grudgingly acknowledging the recent rapid appreciation of the share price from around 890p at the end of February.

10.45am: The Footsie and the pound hit the comeback trail

The FTSE 100 index struggled back above 7,100, despite a recovery by sterling, but remained firmly in the red.

London's index of leading shares was down 36 points, or 0.5% at 7,125, although the number of its constituents in positive territory barely made it into double figures.

The pound has gained ground against the US dollar on foreign exchange markets, rising one-tenth of a cent or so to US$1.2639.

“Global markets are kicking off a new week in a similar vein as the week just gone, with another bout of selling taking hold amid a ramp-up in trade war fears. In a week that saw the focus shift to a breakdown in relations between the US and Mexico, a weekend report from China drew the ire of markets once more,” reported IG's Joshua Mahony.

“With China drawing up a list of ‘unreliable’ US firms that could be targeted in response to the US blacklist, there is a good chance we will see a further escalation of the trade war in the coming days. The Chinese report cited exorbitant demands from the US, and that is very telling as a signal that Chinese and US expectations are wildly out of sync,” he added.

The dramatic fall-off in UK manufacturing activity in May, as measured by the latest IHS Markit/CIPS purchasing managers' index (see below) has largely been shrugged off by the market.

“The stockpiling frenzy of the first quarter is translating into a lull in activity for UK manufacturers in the second but while this is partly a temporary correction, the sector faces a challenging summer as firms grapple with how best to prepare for a possible October 'no deal' Brexit,” declared James Smith at ING Economics.

Although 89% of Footsie firms were having a tough time of it, their losses were small beer compared to the damage inflicted to adhesive films maker, Scapa Group PLC (LON:SCP).

Scapa's investors did a runner, resulting in the share price plunging 45% to 162p, after it said it faces the loss of a material contract in the USA.

9.50am: UK manufacturing sector activity contracted in May

An ailing stock market got no boost from the latest data from the UK manufacturing sector.

The FTSE 100 was down 70 points (1.0%) at 7,091 after the IHS Markit/CIPS Purchasing Managers’ Index for May slumped to 49.4 from 53.1 in April.

A reading below 50 indicates contraction; May’s level was the first time since July 2016 that the index had fallen below the 50 point level.

Manufacturers reported increased difficulties in convincing clients to commit to new contracts during May, IHS Markit/CIPS reported.

“This mainly reflected the already high level of inventories following recent stockpiling activity in advance of the original Brexit date. The total volume of new business placed fell for the first time in seven months. The rate of contraction was the greatest since July 2016 and one of the fastest seen over the past six-and-a-half years,” IHS Markit/CIPS said.

Footsie winners were in short supply and not even a decent set of results from a Phase III trial of a cancer treatment, Lynparza, developed with US drugs giant Merck could lift AstraZeneca PLC (LON:AZN).

The shares were down 1.1% at 5,768p, which meant they were underperforming the market.

READ AstraZeneca reports positive results from trial of pancreatic cancer treatment

Results from the trial of Lynparza showed “statistically significant and clinically meaningful improvement” in the time patients could live without their disease getting worse

8.55am: Footsie beats a retreat

The FTSE 100 fell a sharper than expected 69 points to 7,092.88 in early trade as Donald Trump flew into the UK for his controversial state visit.

Perhaps images of the American president disembarking Air Force One put the latest trade machinations in sharp relief, though China’s strong rebuttal to US tariffs probably carried more weight.

“The trade war is not cooling down,” said Neil Wilson, analyst at Markets.com. “In fact, it looks like the rhetoric is heating up and further escalation seems likely.”

Indeed, Beijing is raising tariffs on US$60bn of US goods in retaliation for American surcharges in Chinese goods, and it has launched an investigation FedEx. No doubt the latter is a tit-for-tat exercise related to America’s apparent blackballing of China telco Huawei.  

“The Chinese defence minister says if the US wants a fight, they will ‘fight to the end’. No end in sight, and the chances of a G20 détente are slim,” added Wilson.

Kier (LON:KIE) rained misery down on long-only investors as it sounded the earnings alarm, sending the shares tumbling 25%. For those shorting the stock – and there were a few notable funds in there – the retreat will have provided vindication for their stance.

Ocado (LON:OCDO) fell 4% amid continued competition worries, while media stocks were on offer with ITV (LON:ITV), off 2.2%, and Lloyd’s list owner Informa (LON:INF), down 1.8%.

Fresnillo (LON:FRES) led the short list of Footsie winners Monday as the silver miner was dragged higher by the resurgent gold price. In the second-tier, gold diggers Centamin (LON:CEY) and Hochschild (LON:HOC), lead the league with gains of 3.5% and 2.8% respectively. 

Proactive news headlines:

Argo Blockchain PLC (LON:ARB) has reported “significantly better” trading conditions since early May and has raised expectations for its second quarter on the back of improving prices in the cryptocurrency market.

Sareum Holdings PLC (LON:SAR) chief executive Tim Mitchell said he was “extremely encouraged” by preliminary efficacy data released over the weekend on a drug his company helped to develop. Most eye-catching among the headlines was the impact SRA737 had in harness with a common chemotherapy called gemcitabine in patients with anogenital cancer, where the response rate was 30%.

WideCells Group PLC (LON:WDC) has won its first contract for its new Iconic Labs business and said it was “very close” to completing its restructuring.

Sirius Minerals PLC (LON:SXX) said it has received four conversion notices in respect of the US$106.6mln Guaranteed Convertible Bonds due 2027, which were issued in connection with the company's Stage 2 financing announced on 30 April 2019 and 1 May 2019, and will allot and issue 17,191,975 new ordinary shares of 0.25p each as a result.

i3 Energy PLC (LON:I3E) has announced the successful closing of the £22mln junior loan note facility, announced on 1 March, and the £2mln share placing with funds managed by Lombard Odier Investment Managers, announced on 30 May, which - in combination with the £16mln share placing announced on 12 March - means the company is now funded for its summer 2019 drilling programme.

Avacta Group PLC (LON:AVCT) has said it will go to clinic “well ahead of original plans” with a drug candidate that combines its binding protein technology with chemotherapy. The group's tumour microenvironment activated drug conjugates (TMAC) are a ground-breaking new form of cancer immunotherapy.

Risk management software firm KRM22 PLC (LON:KRM), which floated in April 2018, said its 2018 results represented just the first few steps on its journey, as it seeks to ring increased visibility and lower cost risk management to capital market organisations.

The executive chairman of hotel group INTOSOL Holdings PLC (LON:INTO), Rainer Spekowius, has said the company will look to add more luxury properties to its portfolio in its current financial year, with a view to expanding beyond the South African market.

Applied Graphene Materials PLC (LON:AGM), the producer of speciality graphene materials, has signed a distribution agreement with Carst & Walker (C&W), covering South Africa. C&W SA, part of Hobart Enterprises Ltd, is the market-leading supplier of key additives to the South African paints and coatings industry.

Benchmark Holdings PLC (LON:BMK) said it expects its full-year results to meet market estimates after delivering a 23% rise in adjusted earnings (EBITDA) in the first half. The aquaculture health, nutrition and genetics firm posted adjusted EBITDA of £7.5mln for the first half on revenue of £78.3mln, up 3.4% on a year ago.

Shield Therapeutics PLC (LON:STX) has said it will continue to “robustly defend” its intellectual property  after receiving notice that Teva Pharmaceutical Industries Ltd had appealed a ruling by the European Patent Office (EPO) regarding STX’s Feraccru iron deficiency treatment.

Nektan PLC (LON:NKTN has appointed ex-GVC Holdings director Simon Hay as new chief financial officer of the online gaming technology specialist.

Advanced Oncotherapy PLC (LON:AVO) was lifted by positive results from its comparative study on the LIGHT system, the company's proprietary proton accelerator.

Plexus Holdings Plc (LON:POS) has formed a new joint venture vehicle, to be called Plexus Pressure Control (PPC), which will supply surface production xmas trees and wellhead annulus outlet valves. The unit will be majority owned by Plexus and its partner is BEL Valves Limited, a subsidiary of Newcastle based British Engines Group.

Investors in Alba Mineral Resources plc (LON:ALBA) can look forward to the next phase of work at the Brockham field in the coming weeks. Brockham operator Angus Energy has announced that preparatory operations for the second stage of work will start in the week of 17 June.

Mining and stockpiling of ore at the West Kytlim platinum group metals mine owned by Eurasia Mining plc (LON:EUA) commenced in the first quarter of 2019.

Yellow Cake PLC (LON:YCA) has bought and taken delivery of US$30mln worth of uranium.

Richland Resources Ltd (LON:RLD) has extended its convertible loan note facilities to 30 June.

Sunrise Resources PLC (LON:SRES) presented at a symposium in the US last week and reports considerable interest from the audience in its portfolio of unusual minerals.

Chaarat Gold Holdings Ltd (LON:CGH) said an investor has increased its subscription of convertible bonds by US$5mln.

Landore Resources Ltd (LON:LND) has raised £1mln (C$1.72mln) through a placing and subscription of shares at 0.7p each. The new shares represent approximately 11.87% of the company's enlarged issued ordinary share capital.

Cabot Energy PLC (LON:CAB), in its financial results, described 2018 as a year of necessary transition - including and following the appointment of Scott Aitken as chief executive last June. "Despite growing average annual production in Canada by 71% to 703 bopd, enabling a 154% increase in revenues, the board uncovered significant unbudgeted cost overruns,” Aitken said.

Chariot Oil & Gas Limited (LON:CHAR), the Atlantic margins focused oil and gas company, has announced the appointment of Andrew Hockey as an independent non-executive director with immediate effect. It noted that Hockey was a founder of Fairfield Energy Limited with whom he is a non-executive director and was previously a non-executive director and chairman of Sound Energy PLC (LON:SOU).

Echo Energy PLC (LON:ECHO), the Latin American focused upstream oil and gas company, announced that, having supported her successor as CEO through the planned transitionary period, Fiona MacAulay is stepping down from the board as a non-executive director with immediate effect.

G3 Exploration Ltd. (LON:G3E) is pleased to announce that it has appointed VSA Capital Limited as joint corporate broker to the Company with immediate effect.

Europa Oil & Gas (Holdings) PLC (LON:EOG), the UK and Ireland focused oil and gas exploration, development and production company, said it has completed the sale of its 20% interest in the UK onshore PEDL143 exploration licence to AIM listed UK Oil & Gas PLC (LON:UKOG) for a consideration of £300,000, satisfied through the issue of 25,951,557 UKOG shares.

Union Jack Oil PLC (LON:UJO), a UK focused on-shore hydrocarbon production, development and exploration company also confirmed that, further to its announcement dated 16 April, it has now completed the sale of its 7.5% interest in PEDL143 to UK Oil & Gas PLC (LON:OKOG).

6.345am: FTSE 100 set to tumble 

The FTSE 100 looks set to open in the red, taking its cue from Asia’s main markets, which continued to wobble in the face of mounting trade tensions.

Over the weekend China hit out at the US and its apparent intransigence during talks, citing its “exorbitant demands” while accusing the Trump administration of “resorting to intimidation and coercion”.

At the same time, Beijing’s response to US sanctions came into effect with US$60bn of tariffs on American goods. And, in an apparent dig at the Washington’s blacklisting of Huawei, China also announced an investigation into US parcels giant FedEx.

“For most of this year the assumption had been that, for all the sound and fury around the imposition of tariffs, they wouldn’t last that long and any damage could be easily mitigated,” said Michael Hewson, analyst at CMC Markets.

“Now it seems that tariffs are likely to last a lot longer and be more wide ranging than originally thought, and investors seem to be now slowly waking up to this.”

Around the markets:

  • Pound worth US$1.2634, up 0.11%
  • Gold changing hands for US$1,317.60 an ounce, up US$6.50
  • Brent crude worth US$61.20 a barrel, down 79 cents

Significant announcements expected on Monday, June 3:

Interims: Record PLC (LON:REC), Tricorn Group PLC (LON:TCN); Sirius Real Estate PLC (LON:SRE); Tatton Asset Management PLC (LON:TAM)

AGMs: Synairgen plc (LON:SNG)

Economic data: UK manufacturing PMI; US ISM manufacturing; US construction spending; US manufacturing PMI

City Headlines

Financial Times

  • Tory talk of no-deal exit costs jobs, warns industry
  • BFI sets up tax-break fund to attract film investment
  • Private equity firms circle Bayer’s animal medicine unit
  • Facebook talks to US regulator over digital currency
  • US tech groups scour supply chains for China risks

Times

  • Delaying Brexit will hand Jeremy Corbyn No 10, Michael Gove told
  • Administrators of Lendy, the collapsed peer-to-peer lender, are to seek legal advice over the status of its retail investors
  • Meg Whitman is one of the star witnesses in Hewlett Packard’s civil claim against Mike Lynch, the founder of Autonomy
  • Aberdeen Standard Investments comes out against hostile Provident Financial bid
  • William Hill on a losing streak after yet another takeover fails

Telegraph

  • Investment adviser Glennmont set to reveal €850m green energy fund
  • Plant-based burger company Beyond Meat hit by $575m short selling bet
  • FTSE chiefs to meet Donald Trump on state visit next week
  • Mitie set for profit fall as outsourcers feel aftermath of Carillion collapse

Guardian

  • Distilleries fear climate crisis will endanger whisky production
  • Arcadia faces angry creditors in battle to stave off bankruptcy

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