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FTSE 100 closes lower as traders catch breath after recent excitement

After being in the black for much of the day, the Footsie has slipped into the red

FTSE 100
The index is still in positive territory but gains are slip-slidin' away
  • FTSE 100 index closes lower

  • Big pharma rattled by threat of Trump forcing the disclosure of health industry prices

  • US stocks mixed

  • Ocado top Footsie gainer

FTSE 100  closed in the red Friday while US stocks were mixed as traders took a breather from the last few days' excitement.

"Between the dovish update from Mario Draghi, the head of the European Central Bank, and the remarks from Fed chief, Jerome Powell, the bulls have had a good run this week. It comes as no surprise that equities are a little lower as we approach the weekend," David Madden, analyst at CMC Markets, had said heading towards the close.

Footsie closed down nearly 17 points at 7,407, while FTSE 250 shed over 59 points to stand at 19,324.

In Germany the DAX was off around 15 points at 12,339, while the French CAC 40 is down seven at 5,528.

On Wall Street, the Dow Jones Industrial Average added around 34 to 26,791, while the S&P 500 shed around two points.

Ocado (LON: OCDO) was top gainer on Footsie, up 4.17% to 1,148.5p. It came after analysts at investment giant Citi forecast an even bigger market for the online grocery specialist in coming years.

Citi’s rating of ‘buy’ was reiterated with the share price target hiked to 1,450p from 1300p.

2.50pm: The Footsie falls into the red

The Dow Jones industrial average was mixed in early deals, defying expectations that it would take a step back.

The Dow was barely changed but the S&P 500 gave up 3.5 points (0.1%) at 2,950.

In the UK, the FTSE moved into the red, having been in credit for most of the day. The index was down 6 points (0.1%) at 7,419.

The index was dragged lower by selling pressure on pharmaceuticals on a report that US president Donald Trump is seriously mulling an executive order to force the disclosure of health industry prices.

GlaxoSmithKline PLC (LON:GSK) was down 1.9% at 1,576p, Reckitt Benckiser PLC (LON:RB.) was off 1.5% at 6,218p and AstraZeneca PLC (LON:AZN) was 1.4% lighter at 6,393p.

2.10pm: Gold in favour

The Footsie’s gains have all but evaporated with the appeal of equities losing out to the rival charms of gold.

The FTSE 100 was up just 5 points (0.1%) at 7,429, well below its intra-day high of 7,457.

Gold, meanwhile, was up US$5 at US$1,401.90 an ounce as risk-averse investors chased up the price of the yellow metal, mindful of the rising tension between US and Iran and the fact that US equity benchmarks hit new highs yesterday.

The mid-cap FTSE 250 was in the red, shedding 26 points (0.1%) at 19,358, with cash-starved contracting engineer Kier Group PLC (LON:KIE) leading the retreat; the number of short positions has almost doubled in June – a month in which the company revealed some of the conclusions from its strategic review of the business.

Kier shares were down 6.2% at 118.5p.

Electronic gizmos and extended warranties pedlar Dixons Carphone Plc (LON:DC.) was down 5.6% at 111.55p after comment from HSBC and Barclays following the retailer’s full-year results release yesterday.

HSBC abandoned its ‘buy’ position, moving to ‘hold’ as it cut its target price to 130p from 160p. Barclays’ recommendation remains for its clients to be overweight in the stock but it has cut its price target to 130p from 175p.

12.45pm: Morning's gains ebbing away

US indices are expected to pull back from the record highs achieved last night.

The Dow Jones, which closed at 26,753 yesterday, up 249 points, is expected to shed around 31 points when trading starts this afternoon.

The S&P 500 is tipped to shed five or six points at 2,948.5.

The anticlimactic outlook for the US has provided little impetus for UK investors to push the Footsie higher ahead of the weekend, and London’s index of leading shares is slowly seeing the morning’s gains dissipated; it is currently at 7,435, up 11 points (0.1%) on the day.

Banking giant HSBC PLC (LON:HSBA) was one of the heavyweights letting the side down, shedding 4.5p at 649.5p after Morgan Stanley cut the stock to ‘equal weight’ from ‘overweight’. Morgan Stanley also cut its target price to 690p from 740p.

House-builder Berkeley Group Holdings PLC (LON:BKG) shrugged off a price target cut by Liberum, which now projects a 12-month target price of 3,700p, down from 3,750p previously.

Berkeley’s shares rose 1.9% to 3,593p, boosted by Berenberg cranking up its target price to 3,480p from 3,280p.

11.00am: Resource plays in focus as oil and gold prices head higher

It’s all quiet on the western front and, mercifully, on the Middle Eastern front too.

The FTSE 100’s advance has been pared to 19 points (0.3%) at 7,443.

“European markets were relatively flat at the open but a batch of encouraging PMI [Purchasing Managers’ Index] numbers from the euro area has given stocks a bit of a lift,” reported Craig Erlam at Oanda.

“The focus now switches to North America on the data front, with US manufacturing and services PMIs due, as well as Canadian retail sales,” he added.

The good news from the Eurozone PMIs has more than offset concerns over rising tensions in the Middle East after Iran reportedly shot down a US drone yesterday over the Strait of Hormuz.

Even there, the news has given a lift to the Footsie as the US-Iran situation has buoyed the price of oil (and therefore index heavyweights BP and Shell) and gold; gold producer Fresnillo plc (LON:FRES), up 2% at 886.2p, was the second-best performer on the Footsie entering the final hour of the morning trading session.

10.00am: Oil price rise gives Footsie a leg-up

A leg-up from oil giants BP and Shell has provided a bit of impetus for a sleepy Footsie on Friday morning.

Brent crude was up 0.7% at US$64.88 a barrel on the futures market, prompting a 1.7% increase in BP PLC’s (LON:BP.) share price to 558.7p and a 1.2% hike to 2,627.5p for Royal Dutch Shell (LON:RDSB), which in turn contributed to a 25 point rise (0.3%) to 7,449 for the Footsie.

“The FTSE 100 is on track to end the week around the 7,450 mark, putting it back up at highs previously seen in April and at nearly an 11% gain year-to-date,” observed AJ Bell’s Russ Mould.

The Office for National Statistics revealed that the UK’s borrowing level (public sector net borrowing excluding public sector banks) in May was £5.1bn, that was £1.0bn more than in May 2018.

Borrowing in the current financial year-to-date (April 2019 to May 2019) was £11.9bn - £1.8bn more than in the same period last year.

Meanwhile, ING Economics commented that it is not all bad news coming out of the Eurozone, as it flagged the increase in the June Purchasing Managers’ Index (PMI) to 52.1 from 51.8.  The June reading marks the strongest reading so far in 2019.

“After some dismal PMIs at the start of the year, the cautious improvements in May and June can be seen as a positive sign. The way to interpret this is probably: growth remains weak at the moment, but the Eurozone is not getting closer to recession,” suggested ING’s Bert Colijn.

On the corporate news front, the limelight has been hogged – for all the wrong reasons – by two technology groups.

Nanoco Group PLC (LON:NANO), the quantum dots specialist, lost three-quarters of its value, with the shares down to 7.5p, after it said a significant contract it has with a US customer will not run beyond the end of the year.

The company’s market capitalisation is now around £25mln and the only consolation for long-suffering shareholders is that it might now be an attractive acquisition target for any company looking to pick up its intellectual property.

Serial profit warner and short-seller’s favourite IQE PLC (LON:IQE) plunged 36% to 45.78p after it lowered revenue and margins guidance for the current year.

The management of the supplier of advanced wafer products and materials solutions to the semiconductor industry had played down last month the impact of the US government’s displeasure with Huawei but has now acknowledged what a monumental headache it will be for the supply chain of the semiconductor sector.

8.40am: Footsie edges higher

The FTSE 100 made subdued start to proceedings, opening just 7 points higher at 7,431.80 as London’s traders responded rather nervously to Wall Street’s latest venture into record territory.

The news that Donald Trump had authorised strikes against Iran in retaliation for the Oman tanker attack last week but then quickly cancelled them had the Square Mile a little jumpy.

Analysts said the ratcheting up of Middle East tensions partly explained the rise of gold over the US$1,400 an ounce threshold.

The yellow metal tends to be a refuge investment in times of trouble, though its inverse relationship with the US dollar and the prospect of real interest rates heading towards zero have also fuelled a rise in its value.

On the stock market, meanwhile, the rescue boats came out for cruise operator Carnival (LON:CCL) after it sounded the earnings klaxon on Thursday. The stock bounced 2% higher, dragging fellow travel specialist TUI (LON:TUI) with it.

Proactive news headlines:

Security and managed services specialist Westminster Group PLC (LON:WSG) has signed an agreement with Hazar International that will see the two companies work together on projects in Saudi Arabia. Hazar has been working in aviation and other sectors in Saudi for over 30 years and will form a joint venture with Westminster to target screening and other security work at the Kingdom’s airports and ports as more of its infrastructure is devolved to the private sector.

Africa-focused oil and gas explorer Tower Resources PLC (LON:TRP) has raised £150,000 after its chief executive, Jeremy Asher, subscribed for another slew of shares. The cash injection will keep the business ticking over while bosses continue with talks regarding the financing of the NJOM-3 well on the Thali licence, offshore Cameroon, which they hope to wrap up soon.

Bushveld Minerals Limited (LON:BMN), the vanadium producer, has provided a maiden mineral resource estimate for the Brits Vanadium Project in South Africa that it said confirms it as a high-quality asset.

ANGLE PLC (LON:AGL) said it believes there is the potential to develop the company’s liquid biopsy as a companion diagnostic in clinical trials to assess which patients might respond to immunotherapies being developed for cancer. This, the firm said, would require building on the work carried out by the University Medical Centre Hamburg-Eppendorf.

FairFX Group PLC (LON:FFX) has received permission from the Financial Conduct Authority (FCA) to provide credit facilities and loan products to its business and retail customers.

BigDish PLC (LON:DISH) said it has received the £2.1mln it raised from an institutional investor at the start of June as the restaurant booking platform issued an update on its expansion plans. The firm, which uses its technology to help restaurants fill tables during quieter periods, said the launch of its platform in Brighton and Reading would be happening “soon” following a slight delay to focus on the recruitment of new territory managers as part of a UK-wide rollout.

Premier African Minerals Limited (LON:PREM) has raised US$350,000 via a  convertible loan note with Regent Mercantile. The annual interest rate is 10% per annum with the money to be advanced in one payment. Big Pic in May.

Adamas Finance Asia Limited (LON:ADAM) has announce the appointment of Stuart Crocker as an independent non-executive director of the company with effect from 21 June 2019. The Crocker noted that, who was in the British Army until 1985, began his career in banking at Merrill Lynch and has lived in the Middle East for over 20 years, and latterly was CEO of HSBC Private Bank UAE and Oman and subsequently the Global Head of the Private Banking Group at Abu Dhabi Islamic Bank.

Adamas Finance also announced a change to the company's AIM market quotation from US Dollars to Pounds Sterling, with the change to take effect from 8:00am on 24 June 2019.

Keywords Studios PLC (LON:KWS), the international technical services provider to the global video games industry, announced that 64,521 new ordinary shares have been issued to the founder of Blindlight LLC in respect of the non-contingent deferred share consideration due on the first anniversary of the company being acquired. It pointed out that, since acquisition the shares to be issued relating to Blindlight have been fully represented in the reported earnings per share numbers through the basic and diluted weighted average denominators used.

Integumen PLC (LON:SKIN) announced that it has received notification from a warrant holder to exercise warrants over 6,766,667 shares in the company, with the consideration for the exercise of amounting, in aggregate, to a cash value of £101,500.

Bluebird Merchant Ventures Limited (LON:BMV), the Korean focused gold development group, today announced that 4,000,000 warrants at 4p expired on 18 June 2019, and a further 2,060,000 warrants expired on 20 June 2019.

6.45am: FTSE 100 set to open in reverse gear

The Dow Jones and S&P 500 hit new highs yesterday on expectations that the Fed will cut rates soon but London seems unimpressed.

Spread betting quotes suggest the FTSE 100 will open 18 points lower at 7,406, giving up almost all of yesterday’s gains.

“In the US, the Dow Jones index rose 0.9%, the S&P recorded all-time highs and the European Eurostoxx 50 rose 0.4%,” reported Danske Bank.

“The global central banks changing their tune and the upcoming meeting at the G20 between Trump and Xi are all supporting risk sentiment. At the same time, global bond yields continue to fall. The 10Y treasury yield flirted with the 2% psychological threshold as Bund yields fell to -32bp [basis points – 100 bps = one percentage point],” it added.

The Dow Jones closed at 26,753, up 249 points, while the S&P 500’s new closing high was 2,954, up 28 points on the day.

In Asia, the euphoria has been noticeably absent this morning. In Tokyo, the Nikkei 225 was off 215 points at 21,248 while in Hong Kong the Hang Seng index was 105 points lighter at 28,445.

On the home front, it should be a quiet day of financial news with no major corporate announcements due and just a few bits of economic data.

The UK public finances report from the Office for National Statistics will be released, showing the country’s deficit for May.

In April, UK government borrowing came in at £5.8bn, starting off the 2019-20 financial year with nearly the same deficit level as a year ago.

For May, economists expect borrowing to fall to £4.2bn.

The PM Sweepstake is down to two runners

In Westminster, the Tory Party leadership is down to just two nags, after Michael Gove fell at the latest fence yesterday.

Hardline Brexiter Boris Johnson is pegged to become the next prime minister and analysts have warned that this could spell trouble for sterling.

He has vowed to take the UK out of the European Union by October 31 regardless of whether a deal has been agreed with the bloc.

Johnson is a man, however, who finds it difficult to decide whether to keep his trousers on or not and to no one’s surprise he has recently indicated a change of heart might be on the cards; during a televised debate this week, he said he wanted to avoid leaving the EU without a deal

The winner of the leadership battle – and therefore Britain’s next prime minister – is expected to be announced the week beginning July 22.

Across the pond, US data scheduled today includes manufacturing and services purchasing managers’ index reports from Markit and existing home sales from the National Association of Realtors.

Significant announcements due on Friday (!):

AGMs: Xtract Resources PLC (LON:XTR)

Economic data: UK public sector finances; CBI industrial trends survey; US existing home sales

Around the markets:

  • Sterling: US$1,2703, up 0.01 cents
  • 10-year gilt: yielding 0.811%, down 5.62 basis points
  • Gold: US$1,350.20 an ounce, up US$10.80
  • Brent crude: US$64.38 a barrel, down 7 cents
  • Bitcoin: US$9,751.90, up US$185.44

City headlines:

  • Financial Times

  • Boris Johnson, a Brexit advocate, and Jeremy Hunt, who had previously expressed a preference for remaining in the EU, will face each other in a showdown to become Britain’s next prime minister after Michael Gove was ousted from the contest.
  • Technology companies will be welcome to bank at Threadneedle Street, the Bank of England has indicated. This would enable them to offer payments systems on a level playing field with commercial banks.
  • The Daily Telegraph

  • Shares in the office messaging app Slack jumped by more than 60% on its market debut, valuing the company at more than $25 billion.
  • Neil Woodford's investment firm has conducted a fire sale of at least £169 million of publicly-listed shares in a bid to raise cash ahead of the reopening of his suspended Equity Income Fund.
  • Rate-setters at the Bank of England resisted cutting interest rates at their latest meeting despite the economy grinding to a standstill in the second quarter.
  • May’s rainy and cold weather led to the biggest drop in retail sales this year.
  • Britain’s biggest mobile operators have been accused of attempted price fixing and collusion as part of a £1 billion High Court battle over the sudden collapse of Phones 4U.
  • Deutsche Bank is facing further scrutiny in the US over whether it followed rules aimed at stopping financial crimes such as money laundering.
  • The Times

  • British arms sales to Saudi Arabia were suspended yesterday after a court ruled that Saudi ministers failed to assess if the weapons could be used against civilians in Yemen.
  • Tariff war with China could harm Apple’s international standing and reduce its multibillion-dollar contribution to the American economy, the tech giant has warned.
  • Sales at N Brown have fallen by 4% as the group continues to move the bulk of its business online.
  • Carnival lost nearly US$5 billion of its market value after it warned that its full-year profit would be hit by a new American ban on cruises to Cuba.
  • The Guardian

  • Serco was awarded new contracts to house vulnerable asylum seekers despite having been fined nearly £7 million for previous failings.
  • Electrical and mobile phone retailer Dixons Carphone’s shares slumped almost 20% after it reported a big fall in profits.
  • Zero-carbon energy sources are poised to overtake fossil fuels as the UK’s largest electricity source over a full calendar year.
  • Daily Mail

  • Legal & General Investment Management has released its second blacklist of companies which are failing to address environmental concerns.

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