FTSE 100 closes higher
Sterling slides against the dollar
Burberry hits the spot with its new fashion lines
FTSE 100 closed in positive territory on Tuesday, while US stocks were mixed as UK stocks were boosted by the weaker pound.
Concerns over a potential no-deal Brexit has weighed on the currency, which bolsters US dollar earning constituents.
The UK's premier share index finished around 45 points higher, at 7,577, while the FTSE 250 also went higher, gaining nearly 72 points at 19,656.
Fashion giant Burberry (LON:BRBY) was top dog on Footsie, finishing over 15% higher at 2,295p after sales were boosted in the opening few months of the fashion house’s financial year.
Like-for-like sales growth accelerated to 4% in the 13 weeks ended 29 June to £498mln, up from £479mln in the same period a year earlier.
That was much better than what had been expected by City analysts, who had been looking for growth of closer to 2%.
On Wall Street, the Dow Jones Industrial Average is up around eight points higher at 27,364, while the S&P 500 is down nearly five points at 3,009 at the time of writing.
Earlier in the day, David Madden, market analyst at CMC Markets UK, had said that the bullish move that some equity markets enjoyed thanks to the slight improvement in US-China trade talks, and the chatter about the Federal Reserve lowering rates, had run out of steam.
But nearing the close he added: "The bullish sentiment that was doing the rounds yesterday and has continued today. It seems that a lack of negative news has prompted traders to buy into the market."
3.55pm: Footsie sidles up to 7,585
Somewhat stealthily, the FTSE 100 has accumulated a 50 point gain, driven by miners and travel stocks – plus Burberry.
London’s index of blue-chips shares was up 54 points (0.7%) at 7,585, just a couple of points off its high point for the day.
Fashion firm Burberry PLC (LON:BRBY) was cock of the catwalk – if that’s not a contradiction in terms – after a trading update revealed its new designs are hitting the right spot.
“If the market was waiting for signs of an immediate improvement in Burberry’s fortunes, it will not be disappointed as Burberry has delivered an update which is much better than expected – and on a number of fronts,” said Richard Hunter, the head of markets at interactive investor.
“The Riccardo collection is gaining traction, new products are for the first time making a meaningful contribution and the company is beginning to benefit from a stronger digital presence. It is building its own “brand heat” with social media increasingly becoming a driver, with its innovative offers keeping the iconic brand fresh,” he added.
Travel stocks enjoyed a spell in the sun and proved the old adage that it is an ill wind that blows nobody any good.
British Airways owner International Consolidated Airlines (LON:IAG) was up 2.9% and TUI AG (LON:TUI) was 3.3% better after no-frills airline Ryanair Holdings PLC (LON:RYA) said it was not sure when Boeing's troublesome MAX aircraft would return to service.
As a result of the lower number of new aeroplanes and the subsequently lower summer growth forecast, full-year traffic growth for 2020 is now expected to be around 157mln passengers, down from previous estimates of 162mln.
That was music to the ears of shareholders of rival budget airline, easyJet PLC (LON:EZJ), which climbed 5.2% to 1,047.5p on a bit of surplus capacity being removed from the airline market.
Not that Ryanair shareholders were complaining; the shares were up 2.1% in London although the euro quote was off 0.1%.
2.50pm: US stocks open mixed
US stocks opened mixed, with the Dow Jones on the front foot and the S&P 500 on the back.
The Dow was up 28 points (0.1%) at 27,386, helped by positive responses to second quarter results from investment banking titans Goldman Sachs and JP Morgan.
The S&P 500, on the other hand, was down a point or so (0.0%) at 3,013.
In the UK, the FTSE 100, having hit an intra-day peak of 7,575 at the end of the lunchtime trading session, pulled back a little to 7,567, up 35 points (0.5%).
The mid-cap FTSE 250, meanwhile, stumbled into positive territory with a 19 point (0.1%) gain at 19,603, despite being weighed down by soft drinks maker AG Barr PLC (LON:BAG), which plunged 29% to 614.5p after issuing a profit warning.
they know what to do...
BBC News - AG Barr's share price plummets after profit warning https://t.co/WLBm1cybc2
— Patrick McGuire (@paddimir) July 16, 2019
“To say this is a curve ball is an understatement,” said Nicholas Hyett, borrowing a phrase from baseball in the week the England cricket team won the cricket World Cup.
“Consumer goods companies like AG Barr are supposed to be reliable compounders, with sales that turn up come rain or shine. Unfortunately the combination of price changes and a bit more rain than shine has seen sales of Barr’s soft drinks trailing behind last year’s performance, and profits struggling even more.
“The pain for shareholders has been compounded by the fact that, with a price to earnings ratio of 26, the shares were priced for perfection, leaving them vulnerable to a tumble on the smallest disappointment,” he added.
2.15pm: US retail sales top expectations
US retail sales put a dent in prospects of US markets opening higher this afternoon.
Retail sales rose 0.4% in June, which was above the consensus forecast of a 0.2% increase.
Sales excluding automobiles also rose 0.4%; economists had pencilled in a gain of 0.1%.
The Dow Jones, which had been tagged to open some 23 points higher is now expected to open barely changed.
“US June retail sales look very strong with the ‘core’ retail sales control group rising 0.7% month-on-month (consensus 0.3%) with upward revisions to the history. Headline sales rose a more modest 0.4% (consensus 0.2%), but even this is a firm figure that suggests the market is too aggressive in terms of pricing for interest rate cuts,” opined James Knightley, the chief international economist at ING Economics.
Back in the UK, the FTSE 100 was up 31 points (0.4%) at 7,563, with sentiment boosted by sterling’s slump on the foreign exchange markets.
Sterling was down by 0.93 cents at US$1.2424 against the US dollar.
“Having broken through resistance at $1.2440, the pair is looking to test $1.24. A breakthrough her could open the doors to $1.2370,” suggested Fiona Cincotta at City Index.
12.30pm: Footsie perks up as sterling goes into lead balloon mode
London's index of leading shares has perked up ahead of what is expected to be a modestly firm start on Wall Street.
The FTSE 100 was up 30 points (0.4%) at 7,561, just a handful of points below its intra-day high.
Across the pond, where the second-quarter results season is getting into its stride, the Dow Jones was expected to open around 23 points higher at 27,382.
“Markets are trading very flat on Tuesday, a theme we may become accustomed to this week as we head into what could be a very interesting summer,” ventured Craig Erlam at Oanda.
“With central banks turning far more dovish in a bid to support the economy and equity markets, attention is shifting to companies who will report second-quarter earnings over the coming weeks. This week the focus will primarily be on the banks and in particular, Goldman Sachs and JP Morgan on Tuesday,” he noted.
Sterling continues to take a shellacking on the foreign exchange markets; it has fallen by nine-tenths of a cent against the greenback to US$1.2425.
11.00am: Hopes of a base rate cut fade in the aftermath of another solid jobs report
The Footsie's gains have virtually evaporated in the aftermath of this morning's jobs figures, despite sterling taking a hammering on forex markets.
The FTSE 100 was up just 6 points (0.1%) at 7,537.
“UK wage growth has a hit another post-crisis high as skill shortages continue to bite. There are structural reasons to suggest this trend is unlikely to reverse just yet, but the cyclical story is looking a little less encouraging. We don't expect any change in policy from the Bank of England this year,” declared ING Economics.
Pantheon Macroeconomics was similarly dismissive of the chances of the Bank of England cutting its base rate in the wake of the jobs report.
“The labour market is emitting enough upward inflation pressure to dissuade the MPC from cutting interest rates over the coming months. Admittedly, the jobs data have deteriorated. The 26K (0.1%) three-month-on-three-month rise in employment was the smallest since August and entirely reflected strong growth in self-employment; employee numbers fell by 85K (0.3%), the most since November 2011. In addition, the official measure of job vacancies was 19K lower in the three months to June than in the prior three months, though the level of vacancies remains very high by past standards,” said Pantheon's chief UK economist, Samuel Tombs.
“Nonetheless, the employment components of business surveys generally still are consistent with solid year-over-year growth in employee numbers ahead,” he added.
On the foreign exchange markets, the pound slumped from US$1.2463 to US$1.2448 against the dollar. A weak pound normally boosts sentiment towards UK blue-chips but not today, apparently.
Shares in publishing group Pearson PLC (LON:PSON) rose 3% to 889.8p after the firm announced that all future releases of its US college textbooks would be published in digital format before printing.
Investors were less enamoured with news from credit checking outfit Experian PLC (LON:EXPN), which saw its shares slide 2.1% to 2,368p after it revealed sales growth slowed in the first quarter of its fiscal year.
READ Experian experiences slight slowdown in first quarter
9.45am: UK jobs market remains tight
The UK unemployment rate in May was estimated at 3.8%, unchanged from April, the Office for National Statistics reported.
The unemployment rate has not been lower since late 1974.
The estimated annual growth in average weekly earnings for employees in Great Britain increased to 3.4% for total pay (including bonuses) and 3.6% for regular pay (excluding bonuses).
In real terms (after adjusting for inflation), total pay is estimated to have increased by 1.4% compared with a year earlier, and regular pay is estimated to have increased by 1.7%.
UK unemployment rate unchanged at 3.8% - a 45 year low. While this confirms that the UK jobs market remains tight, the continued slowdown in the number of jobs created (just 28k in the 3m to May 2019) points to a labour market starting to lose a bit of momentum pic.twitter.com/WBhFqM5rzf
— Suren Thiru (@Suren_Thiru) July 16, 2019
The FTSE 100 lost ground on the release of the figures, sliding from around 7,555 to 7,548, up 16 points (0.2%) on the day.
9.25am: Burberry leads the Footsie higher
Fashion firm Burberry Group PLC (LON:BRBY) led the Footsie higher in early deals after a strong trading update.
The FTSE 100 was up 22 points (0.3%) at 7,553 with Burberry the top riser, up 8.4% at 2,158p.
READ Burberry tops first-quarter forecasts amid “excellent” response to Tisci’s debut collection
“The strong uptake of the new designs means the transformation, led by Riccardo Tisci and Marco Gobbetti, has started well but the Italian job is all about the end. Burberry will need to prove itself capable of maintaining this momentum over the next couple of years,” cautioned George Salmon, an equity analyst at Hargreaves Lansdown.
CRH PLC (LON:CRH) was up 0.6% at 2,666p after agreeing to sell its European distribution unit in a deal worth €1.64bn.
8.45am: FTSE 100 makes tentative start
The FTSE 100 made a rather tentative start to proceedings, rising just three points to 7,534.31.
While Wall Street nudged into record territory overnight, it only managed to register marginal gains with impetus behind the current bull-run seemingly fizzling out.
The Sino-American trade stand-off is providing a dampener to rate US rate cut hopes, according to market watchers said.
Closer to home, the election of Ursula von der Leyen to the role of European Commission President later tonight could have a bearing on sentiment for the rest of the week. According to political commentators the German is no shoe-in.
“If she fails it would be big a blow for the main centrist groupings and further indicate the splintering within European politics. Make no mistake, she is no certainty,” said Neil Wilson, analyst at Markets.com.
“She needs 347 MEPs to back her but with the major centrist grouping not what it once was, and the Greens and Socialists against, there is a risk of falling short.”
In London early on, Burberry’s trading update revealed a robust sales performance from the high fashion retailer, prompting a 6.3% surge in the share price.
“If the market was waiting for signs of an immediate improvement in Burberry’s fortunes, it will not be disappointed as Burberry has delivered an update which is much better than expected – and on a number of fronts,” said stocks guru Richard Hunter of Interactive Investor.
Ryanair (LON:RYA) said the delay to bringing its fleet of ground 737 Max airliners back into service would force it to cut flights. With market having anticipated the call, the shares flew 1.8% higher on a minor relief rally.
Rival easyJet (LON:EZJ) took off 2.2% as City traders predicted it may be the beneficiary of its budget rival’s woes, while British Airways owner IAG (LON:IAG) crept 1% higher.
In the second tier, Irn Brew and Tizer maker, AG Barr (LON:BAG) lost its fizz big style after it sounded the earnings alarm. The stock shed 25%.
6.43am: Waiting on the UK jobs report
The FTSE 100 is expected to give up some of the previous day’s gains on Tuesday morning ahead of jobs data later in the day.
London’s blue chip benchmark was being called 12.7 points lower to 7529.8 on the IG spread-betting platform.
This comes after a 26-point, 0.3% gain at the start of the week and a positive session on Wall Street overnight, where the Nasdaq hit a record high as technology stocks led gains.
The Nasdaq Composite rose 0.2% to 8,258.19, while the S&P 500 trod water near its historical high as well, up half a point to 3014.3, with the Dow Jones adding 27 points or 0.1% to close at 27,359.16.
Asia has been mixed, with the Nikkei down 0.7% in Tokyo, the Hang Seng up 0.2% in Hong Kong and the Shanghai Composite down 0.25%.
With the pound unmoved so far at $1.2514, the "muddy political scene" was giving no respite to the currency, said analyst Ipek Ozkardeskaya at London Capital Group.
With the UK entering the final week of the Conservative’s leadership race, both Boris Johnson and Jeremy Hunt have said that even a large concession on the Irish border may not be enough to seal a Brexit deal with the European Union.
"It becomes increasingly clear that the British government will toughen its tone in the Brexit negotiations under the new Prime Minister and that could well lead to a no-deal exit, even though Britain’s Parliament will try its best to avoid a no-deal outcome," Ozkardeskaya said.
She said that if the pound slips below the 1.25 mark against the dollar, it could surge lower, but a cheaper pound should continue providing support to the British equities as the global risk appetite remains solid.
"The FTSE 100 is expected to see solid support near the 7500 mark," she added.
Rio reports
After a relatively quiet start to the week, the corporate news flow is set to pick up on Tuesday, with several big names due up.
Rio Tinto PLC (LON:RIO) is the first of three mining giants to put out a trading statement, releasing news to Australian investors before the London open.
The FTSE 100 group reported a 3.5% drop in second-quarter iron ore shipments on Tuesday, with tropical cyclone Veronica in late March hitting output in the subsequent period, as expected.
Rio also warned of a delay of 16-30 months for the start of sustainable production at its Oyu Tolgoi project in Mongolia, increasing costs by $1.2bn.
In a note last week Deutsche Bank suggested Rio was perhaps the best short-term investment in the sector as it “offers the most powerful cash return story in 2019” from elevated iron ore prices.
The number crunchers expect iron ore prices to peak in the current quarter, underpinned by strong demand for steel.
Experian’s growth to ease in first quarter
Experian PLC (LON:EXPN) is expected to report a slowdown in organic revenue growth for the first quarter after strong end to the 2019 financial year.
The credit score giant posted a 10% rise in fourth quarter organic revenue as more banks and businesses in North America hired the company. In the full year, organic revenue rose 9%.
Credit Suisse expects the company to report a 7% rise in organic revenue for the first quarter.
“We believe [this slowdown] creates a challenging environment for further re-rating.”
The longer-term outlook “remains positive” though, with strong underlying markets and a “raft of new market opportunities” supporting growth.
German economy key for Hays
Hays PLC (LON:HAS) is also set to shove out a fourth-quarter update, and shareholders will be hoping the ongoing slowdown in the German economy, its largest market, hasn’t dented prospects too much.
In its third quarter the company reported a 6% increase in its German like-for-like net fee income (NFI), a drop from second quarter growth of 16%, although as this was against tough comparatives from the prior year investors may be expecting an improvement.
Brexit will likely continue add a grain of uncertainty the firm’s UK arm, while the group may be looking for a turnaround in its New Zealand market, where NFI fell 8% last quarter.
Analysts will also be looking for more assurances to confirm their forecasts for the full year, which are currently predicting a pre-tax income of £245mln.
UK jobs data
Looking at the UK, economy, employment data for the three months to May will be released on Tuesday as well, which will be supplemented by other macro figures later in the week to paint a full picture of the UK’s economic health as it gears up for Brexit.
In the three months to April, UK jobs growth eased amid the uncertainty over the exit from the EU.
The Office for National Statistics said employment rose by 32,000 to 32.75mln in the period, marking the weakest rise since August and significantly lower than the 99,000 jobs added in March.
However, the jobless rate held at 3.8% – the lowest since the mid-1970s – and annual growth in average weekly wages accelerated to 3.4% from 3.3% in March.
Significant events expected on Tuesday July 16:
Trading update: Rio Tinto PLC (LON:RIO), Burberry PLC (LON:BRBY), Experian PLC (LON:EXPN); Hays PLC (LON:HAS)
Finals: Gately Holdings PLC (LON:GTLY)
AGMs: APQ Global PLC (LON:APQ)
Economic data: UK labour market data; US retail sales; US import/export prices; US manufacturing, industrial production
Proactive news headlines
Discount dining platform operator BigDish PLC (LON:DISH) has signed an exclusive partnership with Oceanic Media, which runs restaurant awards across the UK.
Clinigen Group PLC (LON:CLIN) expects profits to have soared by more than a third when it reports its full-year results in September, driven by better-than-expected performances from two of its new drugs.
Bushveld Minerals LTD (LON:BMN) has corrected the resource numbers for its Brits vanadium project in South Africa. The attributable resource numbers have been readjusted to take account of Bushveld’s 62.5% ownership in Brits.
European Metals Holdings Ltd (LON:EMH) has secured a €2mln convertible loan from CEZ Group, one of Central and Eastern Europe's largest power utilities.
INTOSOL Holdings PLC (LON:INTO) has completed the first tranche payment of €367,348 for its flagship Oceans Wilderness boutique hotel in South Africa.
Marketing intelligence specialist Albert Technologies Limited (LON:ALB) is to delist from AIM to seek cash to continue its development.
ClearStar Inc (LON:CLSU), the background and medical screening specialist, has promoted internally to a key director role with Todd Shoulberg becoming president of the medical information services (MIS) business with immediate effect.
ReNeuron Group PLC (LON:RENE) has secured international patents covering its exomes discovery. New protections for the cell technology cover China, Korea, Japan and Europe and include claims over the method of creating and producing exomes from certain types of stem cell.
Business news headlines
Financial Times
- A new body to run the UK’s railways is being considered by the independent chair of a review of the industry, who says that the current franchise system has “had its day” and greater priority must to be given to passenger needs.
- Europe is not well enough prepared for an economic shock and faces a “crying need” to loosen the public purse strings to stimulate growth, the OECD’s chief economist has warned.
- Standard Chartered launched a blistering attack on “immature” investors after almost 40% of the bank’s shareholders declined to back its new remuneration policy.
The Times
- The insurance industry has warned that premiums could rise after the government changed the method for calculating compensation for accident victims.
- An American hedge fund with a record of intervention at British companies was revealed yesterday as a substantial investor in Sports Direct, only hours after the retailer had rattled investors by delaying its annual results.
- A review of alleged regulatory failings surrounding the collapse of a fund that led to more than £100 million of investors’ losses is unlikely to get to the bottom of the scandal, the Financial Conduct Authority has been warned.
- MPs are calling on Astrazeneca to pay former staff £12 million in redundancy after the collapse of the Avlon manufacturing site just over two years after it had been sold for £1 by the FTSE 100 pharmaceuticals company.
Telegraph
- A rescue plan for embattled Thomas Cook that would see its banks and biggest shareholder inject £750m in a debt for equity swap could be blocked by the holiday company’s bondholders.
- Citigroup has kicked off Wall Street's earnings season with higher profits despite a tough few months for its traders and M&A bankers.
The Guardian
- A Boeing 737 Max due to be delivered to Ryanair has had the name Max dropped from the livery, further fuelling speculation that the manufacturer and airlines will seek to rebrand the troubled plane once it is given the all clear to fly again.
- The government has handed Jaguar Land Rover a £500m loan guarantee to help accelerate its progress in the global electric vehicle race.
- London and the southern regions of England are facing a dearth of teachers, nurses and police officers as rising rents make housing in large parts of the UK unaffordable for key public sector workers.
- The pharmaceutical giant Johnson & Johnson ran a “cunning, cynical and deceitful scheme” to mass-market opioid painkillers that created the biggest drug epidemic in US history, Oklahoma’s attorney general alleged in closing arguments on Monday in the first major industry trial over the crisis.