FTSE 100 closes lower on day but up slightly on week as trade tensions still weigh

The UK's index of leading company shares closed Friday down nearly 23 points at 7,345

FTSE 100
The FTSE 100 started on the back foot this morning and never recovered
  • FTSE 100 closes lower on day

  • US stocks seeing red

  • GAN jubilant as sixth US state this year legalises betting on sport

FTSE 100 closed in the red on Friday but the index was up over the week as a whole as trade and political tensions continue to dominate.

The UK's index of leading company shares closed Friday down nearly 23 points at 7,345.

Over the week as a whole, the FTSE added around 0.19%.

Mid-cap FTSE 250 on the day shed around 54 points to close at 19,118.

In the US at the time of writing, the Dow Jones Industrial Average is down around 45 points, the S&P 500 is off nearly nine and the tech heavy Nasdaq exchange is down 46.

"Washington DC and Beijing are still locked in their trade spat, and President Trump has reiterated that he believes that China will make a trade deal. The situation with Iran has become tenser in light of the attack on two oil tankers, and Mr Trump will hold his tough stance on Iran as he feels they were behind the attack," noted David Madden, analyst at CMC Markets.

On the US data front though, updates were generally positive. Retail sales last month (May) jumped by 0.5%, and the negative 0.2% reading for the previous month (April) was revised to 0.3%.

3.00pm: US stocks lose ground

The Footsie remained in a rut and in the red as the afternoon trading session moved into the second half.

The index was down 31 points (0.4%) at 7,337.

Across the pond, the performance of US indices was similarly lacklustre; the Dow Jones average was down 77 points (0.3%) at 26,030 and heading further south while the S&P 500 was off 9 points (0.3%) at 2,883.

Events in the US were occupying shareholders of gaming firm GAN PLC (LON:GAN) as well today, as New Hampshire became the fourteenth American state to legalise sports betting.

GAN shares rose 3.6% to 72p.

2.15pm: US retail sales data casts doubt over prospect of a rate cut

US benchmarks are still tipped to open lower despite some decent US retail sales figures.

US retail sales rose 0.5% in May following a revised 0.3% increase in April; the originally April reading had showed a 0.2% month-on-month (MoM) decline. Economists had predicted a rise of around 0.6% for May.

“US retail sales for May are broadly in line with expectations, but significant upward revisions give the report a positive glow,” said James Knightley at ING Economics.

“The ‘control group’ which strips out some of the volatile components, such as autos, gasoline stations and building materials, was actually a touch above expectations, rising 0.5%MoM versus the 0.4% consensus, while April’s figure is now +0.4%MoM growth versus the 0% figure originally reported,” Knightley reported.

“Decent US retail sales numbers suggest consumers are shrugging off the negative trade headlines and support our view that markets may be too aggressive in their interest rate cut expectations,” Knightley cautioned.

The prospect of the Fed taking the retail sales figures as a sign that it does not need to be hasty in countenancing a rate cut might account for why the predictions of the opening value for the Dow Jones has barely moved; spread betting quotes currently suggest an opening reading of 26,070, down about 37 points from last night’s close.

Things were similarly ossified in London, where the Footsie has been bouncing around between 7,330 and 7,340 for much of the afternoon; the index is currently closer to the lower level at 7,334, down 35 points (0.5%).

1.30pm: US indices tipped to open lower

The downbeat mood in London looks set to be replicated in the US, with spread betting quotes pointing to a soft start on Wall Street.

In London, the FTSE 100 was down 38 points (0.5%) at 7,331.

Across the pond, the Dow Jones is expected to open at around 26,066, down 41 points. The broader-based S&P 500 was tipped to shed 6 points at 2,886.

With tensions rising in the Middle East, risk-averse investors were seeking the haven that is gold; the yellow metal was up US$15.20 to US$1,358.80 an ounce.

Having been chased higher in the wake of the tanker fires in the Sea of Oman yesterday, the oil price was a bit more subdued today, with Brent crude up just 14 cents at US$61.45 a barrel.

11.45am: Geopolitical tensions take their toll

A drab morning session was showing few signs of brightening, as geopolitical tensions took their toll.

London’s index of heavyweight shares was down 44 points (0.6%) at 7,325 – its lowest point of the day.

“The mood across financial markets was cautious this morning as rising geopolitical tensions in the Middle East and persistent uncertainty over US-China trade developments capped risk appetite,” commented Lukman Otunuga, a research analyst at FXTM.

“It must be kept in mind that the fundamental ingredients for a sell-off across stock markets are bubbling dangerously in the cauldron. Equity bears remain in the vicinity and may be simply waiting for the perfect opportunity to make their move,” Otunuga warned.

The mid-caps got off a bit more lightly than their larger brethren, with the FTSE 250 down 59 points (0.3%) at 19,113, although that was also the index’s low point for the day.

Much of the fall could be attributed to Kier Group PLC (LON:KIE) heading for the exits at pace after The Times newspaper reported the contract engineer is preparing to sell off its housebuilding unit to bolster its sickly balance sheet.

The shares were down 19% at 165.1p.

Fellow mid-cap stock Royal Mail PLC (LON:RMG) posted a 1.9% rise at 199.25p after French broker SocGen upgraded the stock to ‘hold’ from ‘sell’, even as it chopped the price target to 208p from 235p.

10.15am: It's a risk-off day, which means gold is back in fashion

With gold hitting its highest level since April of last year, it is clearly not a “risk on” day in the markets.

The FTSE 100 was down 28 points (0.4%) at 7,341, led by DS Smith PLC (LON:SMDS), off 1.4% at 355.8p, despite UBS raising its price target to 350p from 336p following results yesterday from the cardboard packaging company.

Sentiment has been soured by some underwhelming economic data from China.

“Chinese industrial production, in particular, was soft, with a year-on-year increase of 5% marking the lowest reading for this metric in 17 years and further supporting the notion of a slowing global economy,” said David Cheetham, the chief market analyst at xtb.

“The largest market reaction to the Chinese data can be seen in gold with the market jumping over 1% in response. The price of bullion has moved up to its highest level since April 2018 and at $1355/oz the market is only just over 1% from the 2016 peak. If the market can get up to $1390/oz then you have to go back to 2013 to find a higher price,” Cheetham added.

“The Chinese national stats bureau have since attempted to play down the significance of the poor data, but it’s pretty obvious that their economy is slowing. Moreover, given the past lack of credibility associated with economic data from Beijing, the true figures could well actually be even worse,” he speculated.

Switching to the tiddlers, hope springs eternal at Faron Pharmaceuticals Oy (LON:FARN), the cancer drug developer that was rocked by an unexpected outcome in the Phase III trial last year of its lead drug Traumakine.

READ Faron getting to the bottom of the Traumakine conundrum

The shares surged 23% higher to 155.31p as the company said its own study into why the impressive Phase I/II data wasn’t replicated in the Phase III trial involving patients suffering acute respiratory distress had turned up further evidence to support the company’s belief that co-administration of steroids with Traumakine in patients inhibited interferon beta action.

Performance-based mobile marking specialist Taptica International Ltd (LON:TAP) was lifted by news that the next phase of US$10mln share repurchase programme has kicked off. The shares were up 12% at 113p.

8.30am: Dull start for the Footsie as Chinese data disappoints

London’s blue-chips opened lower on balance in the wake of disappointing data from China overnight.

The FTSE 100 was down 21 points (0.3%) at 7,348.

“The Chinese data overnight was not good, the country clearly feeling the trade war pinch. Fixed asset investment fell from 6.1% to 5.6%, its worst level in 7 months, while industrial production dropped to 5.0% for the first time in 17 years. Only the retail sales reading avoided a precipitous decline, instead unexpectedly jumping from 7.2% to 8.6%,” reported Spreadex’s Connor Campbell.

Packaging companies Smurfit Kappa Group PLC (LON:SKG) and DS Smith PLC (LON:SMDS) were the two biggest fallers among Footsie constituents, falling 2% to 2,340p and 353.6p respectively; both stocks were among the better blue-chip performers yesterday aftewr DS Smith results pleased the market.

At the happier end of the Footsie leader-board defensively-perceived utilities stocks were to the fore, with the likes of National Grid PLC (LON:NG.), United Utilities PLC (LON:UU.), Centrica Plc (LON:CNA), Severn Trent PLC (LON:SVT) and SSE PLC (LON:SSE) all up by between 0.4% and 0.9%.

Away from the big caps, SciSys Group PLC (LON:SSY) shot up 22% to 249p after the board recommended a 254.15p per share offer from CGI Inc, the Canadian global information technology consultant.

Proactive news headlines:

Faron Pharmaceuticals Oy (LON:FARN) has found more evidence to support its hypothesis on the mystifying outcome of a trial of its interferon-beta drug Traumakine.

Highlands Natural Resources PLC (LON:HNR) has launched a new cannabidiol (CBD) brand in the US with the first shipment of products due to start next week.

Immotion Group PLC (LON:IMMO) has signed a three-year deal with Survios, a virtual reality (VR) studio backed by media firm MGM, for content to install in its new VR Arena.

Taptica International Ltd (LON:TAP) announced that it has approved a further share buyback programme of ordinary shares for an aggregate purchase price of up to US$10mln. The group said the buyback programme, which forms part of its broader strategy to deliver shareholder value, will be independently managed by its broker, finnCap which will make trading decisions independently and without the influence of the company.

Asiamet Resources Ltd (LON:ARS) brought the market a trio of updates, all from the Beruang Kanan Main (BKM) project. The company revealed that a ‘detailed and comprehensive’ feasibility study has confirmed a robust project based on open pit mining and solvent extraction-electrowinning (SX-EW) copper heap leach processing.

Frontier IP Group PLC’s (LON:FIPP) portfolio firm Exscientia has entered a drug discovery collaboration with Shanghai-based biotech firm GT Apeiron Therapeutics.

Live Company Group Plc (LON:LVCG) saw revenues surge in 2018 as the media group targeted continued expansion of its BRICKLIVE brand in the current year.

Kore Potash PLC (LON:KP2) has secured a US$13mln fundraising to continue development of its Kola project in the Republic of Congo over the coming 12 months.

Bluebird Merchant Ventures Ltd (LON:BMV) said it was “largely debt free” and has cleaned up its balance sheet, as it looks to begin construction to reopen two mines in South Korea.

CentralNic Group PLC (LON:CNIC), the internet platform that derives revenue from the worldwide sales of internet domain names, has said its acquisition of KeyDrive SA on 16 July 2018, has exceeded the performance expectations set for FY2018. As a result, it added, an additional consideration of US$ 6,834,000 is payable to vendor Inter.Services, US$1,025,100 of which has been settled in cash, with the remainder settled by the issue of 7,384,978 additional consideration shares. This will see Inter.Services holding in the company increase to around 19.9% from circa 16.4%.

APQ Global Limited (LON:APQ), the AIM-listed emerging markets growth company announced that as at the close of business on 31 May 2019, its unaudited book value per ordinary share was 89.54 US cents, equivalent to 71.04p.

Shefa Yamim (LON:SEFA), a company focused on advanced exploration and development of multi-gemstone projects in Northern Israel, announced that, further to the passing of the resolution at its Annual General Meeting on 23 May 2019, its change of name to Shefa Gems Ltd has completed with effect from today.

 Bezant Resources PLC (LON:BZT), the copper-gold exploration and development company, announced that it has uploaded two new fly-through videos for its Mankayan copper-gold project in the Philippines to the China-based video platform "Youku" in both Standard Chinese and English.

Impax Environmental Markets PLC (LON:IEM) announced that details of its portfolio as at the month end 28 February 2019 are now available on the company's website.

Polarean Imaging PLC (LON:POLX), the medical-imaging technology company, with a proprietary drug-device combination product for the magnetic resonance imaging (MRI) market, announced that it held an Investor Symposium for investors yesterday, with the presentations now available to view on the company website.

6.45am: Trade talk hopes to trump Middle East tension fears

UK blue-chips were expected to open modestly firmer, with bullish sentiment reined in by rising tensions in the Middle East.

Spread betting quotes indicate the FTSE 100 will open around 11 points higher at 7,380 after an inconclusive day yesterday.

“US Secretary of State Michael Pompeo said on Thursday in Washington that Iran had threatened earlier to restrain oil transport in the Strait of Hormuz. While Pompeo gave no evidence and did not take any questions from reporters, Trump administration officials said that at least one of the ships was attacked by mines. They showed a picture of a tanker with a hole caused by a mine that had exploded and an undetonated mine inside,” reported Danske Bank.

The price of Brent crude was on the up again this morning, hardening by 30 cents to US$61.68 a barrel, meaning it is up by around 3.8% from yesterday’s lows (before news of the tanker fires broke).

US markets had a positive session yesterday, buoyed by a commitment from President Trump to meet China’s President XI for trade talks at the G20 meeting of big-wigs later this month.

The Dow Jones rose 102 points to 26,107 and the S&P 500 advanced 12 points to 2,892.

In Asia, Japan’s Nikkei 225 and Hong Kong’s Hang Seng went their separate ways. The former was up 65 points at 21,097 and the latter was down 156 points at 27,139.

Today’s news diary looks fairly threadbare, with a second-quarter trading update from recruitment firm SThree PLC (LON:STHR) the most eye-catching of the scheduled trading updates.

Analysts at Numis are predicting SThree will report like-for-like net fee growth of 9% in the quarter, the same as the previous three month period, with conditions expected to have remained the same. Overall, the broker is expecting the firm to deliver a “solid” performance.

On the macro front, with markets increasingly expecting the Federal Reserve to cut interest rates even further this year, after recent weak consumer prices inflation and non-farm payrolls numbers, the US May retail sales figures will be eyed with interest.

US retail sales slipped by -0.2% in April, albeit after a blowout showing in March when they jumped +1.7%.

However, the year-over-year retail sales figure remained firm at +3.1% in April, and with wage growth picking up, despite markets fretting over trade, the US consumer looks to be remaining very resilient, according to Neil Wilson of Markets.com.

Significant events expected on Friday:

Trading update: SThree PLC (LON:STHR)

Economic data: US retail sales; US industrial production, capacity utilisation; University of Michigan preliminary consumer confidence index

Around the markets:

  • Sterling: US$1.2673, unchanged
  • 10-year gilt yield: 0.8390%, -0.0317
  • Gold: US$1,349.50 an ounce, up US$5.80
  • Brent crude: US$61.68 a barrel, up 37 cents
  • Bitcoin: US$8,237, down US$31

City Headlines:

Financial Times

Boris Johnson is the runaway favourite to be the next occupant of 10 Downing Street after topping the first round of voting in the Conservative Party leadership contest.

The UK government has stepped in to block the sale of stakes in the Independent and the Evening Standard newspapers to a Saudi buyer on public interest grounds.

Daily Telegraph

Oil prices surged yesterday after a suspected attack on two tankers in the Gulf of Oman escalated geopolitical tensions in the region.

A joint venture between Go-Ahead and French operator Keolis has been granted extension to run South-eastern train network to at least November with an option to continue until April 2020

The Times

Kier Group has sounded out advisers about the potential to sell its housebuilding unit, amid increasing evidence of financial pressure.

Tesco suffered a slowdown in sales growth in the three months to May due to “some weakness in consumer sentiment”.

Toymaker Hornby has reported a sixth consecutive year without a profit.

Wm Morrison and Amazon have expanded their “ultra-fast” same-day home delivery partnership further across Britain.

Iceland Foods is planning to open 50 more stores this year after recording a 2.2% rise in sales to £3.1 billion in the year to 30 March.

The Guardian

The Institute of Directors – one of the UK’s employers’ groups – has urged its members to step up their preparations for a no-deal Brexit.

Shares in Majestic Wine have plunged after the company warned that the sale of its retail chain could slip into 2020 and suspended its dividend.

Hargreaves Lansdown has dealt another major blow to the embattled stock-picker Neil Woodford by pulling £45 million from his remaining open fund this week.

Arcadia is slashing 170 jobs at its main offices a day after Sir Philip Green’s retail empire secured backing for a rescue restructure.

Daily Mail

Shares in Marks & Spencer fell yesterday after the group revealed just over 85% of the retailer's shareholders supported its £600 million rights issue meant to fund its joint venture deal with Ocado.

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