FTSE 100 finishes lower
US producer prices rise a bit more than expected in June
US stocks up at time of writing
FTSE 100 turned south heading towards the close to finish lower on Friday as it was a mixed picture in European markets.
The UK's premier shares index closed down over eight points at 7,501.
Over the week as a whole, the index's performance was lacklustre, shedding almost 0.7%.
The FTSE 250 went the other way and added over 87 points.
The German DAX is down nearly nine points, while in France, the CAC 40 added nearly 21. On Wall Street, stocks are higher. The Dow Jones Industrial Average is up around 125 points, while the Nasdaq is ahead by over 29 points.
"The FTSE 100 was in positive territory for much of the day, but as mining stocks drifted lower, so did the equity benchmark," said David Madden, analyst at CMC Markets UK.
"China revealed disappointing trade figures, and there seems to have been a delayed reaction to the numbers, and now mineral extractors like Rio Tinto are firmly in the red." Rio Tinto (LON: RIO) shares dropped 0.32% to 4,808.5p.
The analyst also noted that Chinese imports fell by 7.3% last month, which exceeded the 4.5% fall that economists were anticipating, which underlines the poor demand levels in the second-largest economy in the world.
2.45pm: US stocks open firmer
The FTSE 100 dipped its toe into the red despite a solid start to trading on Wall Street.
The index of London’s leading shares was down a point at 7,509.
In the US, the Dow Jones average was up 138 points (0.5%) at 27,226 while the S&P 500 was 5 points to the good at 3,005.
US producer prices rose 0.1% in June, confounding expectations of a repeat of May’s index reading. The core inflation rate rose 0.3%, which was slightly above the consensus forecast of 0.2%.
“The headline [number] was constrained by the drop in oil prices, while food prices rebounded by 0.6%, reversing declines in April and May. The core increase was all in the services sector, up 0.4%, while core goods prices were unchanged for the third straight month,” commented Ian Shepherdson at Pantheon Macroeconomics.
“The downshift in core PPI goods inflation over the past year reflects the steep drop in Chinese PPI inflation for manufactured goods, which is yet to hit bottom,” he added.
1.00pm: Footsie treading water
London has entered a lunchtime lull; it follows the late morning lull that saw the Footsie mark time.
London’s index of leading shares has held on to a 12 point gain (0.2%) at 7,521.
Things are a lot more lively on the cryptocurrency markets, where Bitcoin is up US$488 (4.4%) at US$11,649, even though – or maybe because – President Trump has tweeted he is “not of fan” of cryptocurrencies.
“Given his propensity to recklessly take to social media and fire off his views on such a wide range of topics, it’s surprising that given its popular nature it has taken Trump this long to opine on cryptos,” observed David Cheetham at xtb.
The heads of the US and British central banks, Jerome Powell and Mark Carney (respectively) have both urged caution when it comes to cryptocurrencies but that is holding little sway with speculators today.
“There was [a] notable wave of selling seen in the markets after Powell’s comments on Wednesday, but the reaction to Trump’s remarks has been far more sanguine with cryptocurrencies on the whole actually trading higher since the series of tweets,” Cheetham noted.
Turning to company news, antivirus software developer Sophos Group PLC (LON:SOPH) hacked its way 4.4% higher to 431p despite posting a first-quarter loss and losing its chief financial officer.
“With billings growth back in positive territory, and underlying profits and cash flows both rising too, pretty much all of the key metrics in Sophos’s numbers are moving in the right direction,” declared George Salmon, an equity analyst at Hargreaves Lansdown.
11.00am: Chinese trade data gives pause for thought
The Footsie has stalled after a decent start, with some of the wind taken out of its sales by Chinese trade data.
The index of heavyweight shares was up 23 points (0.3%) at 7,533, largely thanks to demand for housebuilders, packaging companies and miners.
The latter group is going well despite a bigger than expected decline in Chinese imports in June.
Chinese imports fell by 7.3%, whereas economists had been expecting a decline of 4.5%; exports fell by 1.3%, versus the consensus forecast of a fall of 2%.
“Chinese trade data surprised investors with an 11% increase in the trade surplus with the US in June, unexpected at a time when the trade tensions between the two countries are still rising. The data will be a double-edged sword for the market. On the one hand, it will work towards the economic growth in China on which many Western markets depend for their own expansion but at the same time will only intensify the friction with the US because the issue of the massive surplus is the original cause of their trade dispute,” said Fiona Cincotta at City Index.
Meanwhile, industrial production in the Eurozone increased by 0.9% month-on-month in May, which was well above the consensus forecast of a 0.2% increase.
The year-on-year decline was 0.5%, versus a decline of 0.4% in April; the market had been expecting a fall of 1.5%.
“A solid headline, but remember that it excludes construction, which was a big drag on the headline German data earlier in the week. In any case, the details are solid across the board,” was the verdict of Claud Vistesen at Pantheon Macroeconomics/
In corporate news, it looks like the end of the road as an independent entity for travel firm Thomas Cook Group PLC (LON:TCG). The shares practically halved to 6.8p after it revealed it is looking to its largest shareholder to bale it out with a £750mln cash injection.
When you have a holiday booked with Thomas Cook and you wake up to see them trending on Twitter... pic.twitter.com/pzUdk5mlyD
— Thomas devlin (@DevlinLFC) July 12, 2019
You may have seen that we’ve announced a new plan for our business today. Rest assured nothing changes for you. Your holiday will go ahead as planned and if you’re still looking to book a break, you’re in safe hands with us. https://t.co/urxzGYJ7VL pic.twitter.com/d1MqP8E1Fv
— Thomas Cook (@ThomasCookUK) July 12, 2019
“Thomas Cook – a one-time stalwart of the UK corporate world and a name with a history which goes back to the middle of the 19th century – looks like it will end up in the hands of its major Chinese shareholder Fosun,” reported Russ Mould, the investment director of AJ Bell.
“Customers may not see a huge difference, at least in the short term; however, the details of the rescue plan outlined by the travel operator suggest there will be very little left on the table for existing shareholders with debt being written off and converted into shares,” he added.
9.45am: The Footsie returns to where it was at Wednesday's close
Buoyant miners and housebuilders have been instrumental in the Footsie wiping out yesterday’s losses.
The FTSE 100 was up 22 points at 7,532, returning it more or less to Wednesday’s closing level.
Optimism has returned, albeit in a small dose, following the testimony to law-makers in Washington by the head honcho at the US central bank, Jerome Powell.
“It may be a relatively quiet end to the week as traders digest the last two days of Powell's testimony and US data and weigh up the prospects for interest rates this year,” suggested Craig Erlam at Oanda.
“Powell's appearance Wednesday was extremely well received, with the Fed Chairman giving us as dovish a message as he was ever likely to. There was no attempt to discourage investors from fully pricing in a July cut so that looks as close to a certainty as you can expect to see,” Erlam ventured.
“Investors appear encouraged that it won't be the last as well, with his gloomier assessment of the outlook appearing an indication of future cuts,” he added.
The much-trailed sale of 60% of its Kantar market research arm, to private equity firm Bain Capital, gave a small lift to advertising and marketing conglomerate, WPP PLC (LON:WPP).
WPP will receive US$3.1bn from Bain, most of which will go on reducing debt but there will still be US$1.2bn left to return to shareholders, either as a special dividend or through a share buy-back programme.
So @BainCapital has acquired 60% stake in @Kantar pushes the valuation to $4bn. It will be interesting to see how they accelerate growth in the data industry.
— Amir Lodge (@lodge28) July 12, 2019
“Kantar has been on the block for a while, as CEO Mark Read looks to streamline the sprawling media empire built under Martin Sorrell’s tenure.
“Like the Chime Communications agency WPP sold at the beginning of the month, Kantar has the advantage of being relatively self-contained and so can be split off from the parent with minimal restructuring costs. As a result the proceeds of the sale will drop straight through to the balance sheet and shareholders pockets,” observed Danny Cox at Hargreaves Lansdown.
“With the balance sheet back in rude health, and complexity significantly reduced, WPP needs to focus on the technological and creative transformation that will be vital to its long term future in a rapidly changing industry,” Cox suggested.
WPP shares were up 0.8% at 962.4p.
8.40am: Footsie bounces higher
The FTSE 100 picked up some of Thursday’s lost ground, taking its cue from Wall Street where the Dow Jones smashed through the 27,000-point mark on US rate cut hopes.
The index of UK blue-chip shares opened 20 points higher at 7,550.91
Once again Jerome Powell, who was being grilled for a second day by the House Financial Services Committee, strongly hinted the Federal Reserve was preparing to reduce borrowing costs.
“More from Fed chair Jerome Powell yesterday on The Hill,” said Neil Wilson, analyst at Markets.com.
“And it was more the same rhetoric. The more Powell talks up the risks to the US economy the more equities rise. It’s backwards stuff but it’s how the market is moving.”
In London there was no doubting the big talking point – insurer Hiscox’s (LON:HSX) warning that its markets had deteriorated. This knocked 4% off the value of the business.
On the up and leading the blue-chip index with a 1.5% gain was Ocado (LON:OCDO), which has continued to find support in the wake of its interims earlier in the week.
Among the tiddlers, Faron Pharma (LON:FARN) made a strong start. The shares shot up 23% after promising early results from its phase I/II cancer trial.
Proactive news headlines:
Faron Pharmaceuticals Oy (LON:FARN) chief executive Dr Markku Jalkanen has said he is “thrilled” with the progress of the firm’s early-stage cancer clinical trial. Faron has outlined plans to expand the phase I/II MATINS study of its Clevegen treatment in patients with CLEVER-1 positive cancer types.
Pan African Resources plc (LON:PAF) has told investors it is assessing options to build on the momentum achieved in the past year. Ahead of results for the twelve months ended 30 June 2019, the company highlighted that through the year it has emerged as a safe, low-cost and long-life gold producer.
Production at Iofina PLC’s (LON:IOF) iodine plants in Oklahoma rose 10% in the first half of the year. In the six months ended 30 June, the AIM company ,which extracts iodine from brine produced by onshore oil wells, produced 286.7 metric tonnes of crystalline iodine from its four working plants, up 9.8% year-on-year (H1 18: 264.1 MT).
Open Orphan PLC (LON:ORPH) has sold its remaining shares in cosmetics testing group Integumen PLC (LON:SKIN). Integumen.
HemoGenyx Pharmaceuticals PLC (LON:HEMO) has filed a new patent application for its CDX antibody. It covers its use in conditioning patients for bone marrow transplant and its deployment in a number of hard-to-treat blood borne diseases, including acute myeloid leukaemia (AML).
Anglo African Oil & Gas PLC (LON:AAOG) told investors it will go ahead with talks to secure new funds from current co-investor Riverfort Global Capital. In a statement, AAOG said that its board unanimously chose Riverfort following a competitive process in which three potential investors provided their best and final offers to the company.
ReNeuron Group PLC (LON:RENE) has appointed a business development director as it hunts for potential collaborations and out-licensing deals.
6.30am: FTSE 100 set claw back losses
The Footsie was expected to claw back all of yesterday’s losses this morning as optimism grew over the prospect of US rate cuts.
Spread betting quotes point to London’s index of blue-chip shares opening 28 points higher at 7,538 after it fell 21 points yesterday.
Not for the first time, London traders are taking their cues from Wall Street, where the Dow Jones industrial average soared 228 points to close at 27,088 and the S&P 500 climbed 7 points to finish at 3,000, after investors convinced themselves that Federal Reserve chairman Jerome Powell and his fellow policy makers at the US central bank are in the mood to cut interest rates soon.
“Jerome Powell, the Federal Reserve chief, left the door open to interest rate cuts, and that helped the Dow Jones trade above 27,000 –for the first time ever. Given how much expectations have been built up, markets are likely to react badly should interest rates be kept on hold later this month,” declared David Madden, a market analyst at CMC Markets.
“The Fed boss might trim rates later this month, and drop another hint about potentially lower rates later this year as a way of keeping equity markets on side. There has been a lot of talk of rates being cut by 50 basis points [half a percentage point], but some people think that would be excessive when you remember that the unemployment is close to a 50 year low,” he added.
Asian markets this morning were buoyant ahead of the Chinese trade data report, due out this morning.
In Tokyo, the Nikkei 225 was 33 points higher at 21,677 while in Hong Kong the Hang Seng was 121 points to the good at 28,553.
Turning to UK corporate news, updates from Gym Group PLC (LON:GYM) and Ashmore group PLC (LON:ASHM) look to be the pick of the scheduled announcements.
Gym Group releases a trading update for the six months to June 30 on Friday and analysts at Liberum expect another positive set of numbers.
Liberum said it expects the company to have opened six gyms in the first half, bringing the total estate to 164, and to reiterate its target for 15-20 gym openings in 2019.
Emerging markets asset manager Ashmore group PLC (LON:ASHM) is expected to post solid growth in assets under management (AUM) in the fourth quarter of its financial year.
UBS analysts expect the FTSE 250-listed firm to post AUM of US$92.1bn, up 8.0% quarter-on-quarter and 24.7%year-on-year, with inflows during the quarter of US$4.6bn, down slightly from the US$5.0bn of inflows seen in the previous quarter, which was Ashmore’s strongest quarterly inflow since 2013.
The analysts added: “We expect market performance to add another US$2.3bn to AUMs during the quarter, equal to 2.7% of AUMs.
“Going forward, we expect inflows to average US$3.0bn per quarter over Ashmore's FY 2020-21.”
Significant announcements due:
Trading updates: DCC PLC (LON:DCC), Gym Group PLC (LON:GYM), Ashmore Group PLC (LON:ASHM)
Economic data: US PPI
Around the markets:
- Sterling: US$1.2544, up 21 cents
- 10-year gilt: yielding 0.839%, up 7.81 basis points
- Gold: US$1,409.30 an ounce, up US$2.60
- Brent crude: US$66.95 a barrel, up 43 cents
- Bitcoin: US$11,280, +US$119
City headlines:
- Just hours after the US threatened sanctions against France for imposing a special tax on large technology companies, the UK moved ahead with its plans to introduce a similar levy.
- The returns on sovereign debt from Europe’s emerging markets is now in sub-zero territory, as even these riskier bonds have shot up in price.
- The announcement of a new, cheaper version of its flagship console sent shares in Nintendo to a nine-month high yesterday.
- The Bank of England Governor Mark Carney has said that the central bank is planning a major crackdown on investment funds following a series of scares in property, debt and equity markets.
- Travel agent and airline Jet2 is bucking a malaise in the industry as profits soared more than a third to £178 million.
- BAE Systems is positioning to sell its Type 26 frigate to New Zealand, making it the third export customer for the advanced warship.
- Jill McDonald, the boss of Marks & Spencer's struggling clothing business, has been ousted less than two years after joining the retailer.
- Reckitt Benckiser’s senior executives face pressure to return lucrative bonuses after the company agreed to pay $1.4 billion to resolve long-running US investigations into the sales and marketing of a treatment for opioid addiction.
- Cuadrilla plans to restart fracking at its Preston New Road site in Lancashire in a last-ditch effort to convince policymakers to relax safety rules.
- HSBC is expected to pay out millions more in compensation to credit card customers who were overcharged when they fell behind with payments.
- US officials are investigating whether the crisis-hit Deutsche Bank violated foreign corruption or anti-money-laundering laws in its work for the Malaysian state fund 1MDB.
- Will Deer, another leading figure at Neil Woodford's empire, has departed amid a wave of redundancies.