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FTSE 100 closes in the red as China, US trade worries come back on the agenda

In Europe, the German DAX is around 90 points lower at 12,341, while the French CAC 40 is down around 42

offshore oil well
US oil production is better than had been expected given the impact of Hurricane Barry
  • FTSE 100 closes lower

  • US stocks see red

  • Fresnillo hammered after cutting guidance

  • Oil prices fail to recover from Tuesday's plunge

FTSE 100  joined global stock markets to head lower midweek as trade worries are back on the agenda.

The UK's blue-chip index finished down by nearly 42 points at 7,535, while FTSE 250 shed around the same number to close out at 19,614.
 
"Yesterday, President Trump said a trade deal with China has a ‘long way to go’, and he also reminded the Chinese government that tariffs could be slapped on $325 billion worth of goods. The announcement from the US leader was a gentle reminder the situation isn’t resolved, and traders used it as an excuse to trim their equity positions," said David Madden, market analyst at CMC Markets.

In Europe, the German DAX is around 90 points lower at 12,341, while the French CAC 40 is down around 42.

On Wall Street, the Dow Jones Industrial Average is down around 33 points, while  the  S&P 500 is off around six points.

The British pound is up 0.27% against the US dollar at the time of writing.

The top riser on Footsie was Burberry (LON:BRBY), the coat and handbag giant, which added 2.99% to stand at 2,345p, following on from yesterday's gains. Specialty chemicals firm Johnson Matthey (LON:JMAT) lost around 5.4% to stand at 3,204p to be the biggest laggard.

It came after a mixed set of first-quarter numbers was compounded by the departure of John Walker, the long-serving boss of its Clean Air division.

3.35pm: London follows New York lower

The slow start across the pond has taken its toll on UK stocks as well, with the FTSE 100 down 38.7 points, or 0.5%, to 7,538.4.

Oil stocks were dragging the blue-chips down: BP PLC (LON:BP.) dropped 2.5% to 530p, while fellow supermajor Royal Dutch Shell PLC (LON:RDSB) fell 1.3% to 2,562p.

Prices of the black stuff shed more than 3% yesterday and there was little bounce-back on Wednesday, as industry data suggested US crude inventories fell less than expected.

Mining giant Fresnillo plc (LON:FRES) was also in the red, falling 2.7% to 896.6p after bosses cut their production guidance.

They blamed lower-than-expected ore grades and delays in construction at its Herradura gold mine in Mexico hit second quarter output.

The group cut its 2019 gold output forecast to 880,000-910,000 ounces from a previous target of 910,000-930,000 ounces and sliver production to 55-58mln ounces from 58-61mln ounces.

Cigarette maker Imperial Brands PLC (LON:IMB) did its best to prop up the index, rising 2.3% throughout the day to 2,098p.

In close second was Burberry Group PLC (LON:BRBY), which was still in fashion after Tuesday’s upbeat update sent the shares soaring. Shares were up 2.2% to 2,339p.

 

3.05pm: US stocks open in the red

Stocks in New York opened slightly lower at the opening bell on Wednesday.

Shortly into trading, the Dow Jones has dropped by 15.5 points to 27,320.1, while the broader S&P 500 has shed 1.8 points to 3,002.2.

The tech heavy Nasdaq has completed the set, down 8.8 points to 8,214.0.

The dip in US stocks comes after a record run which has seen all three indices hit all-time highs.

But a mixed bag of quarterly results, coupled with trade worries and concerns about interest rates weighed on Wall Street on Wednesday.

2.35pm: Galliford Try making ‘strong progress’ so far in 2019

Down on the FTSE 250, housebuilder Galliford Try plc (LON:GFRD) is climbing higher – up 3.5% for the day to 633p.

The company said it expects pre-tax profit for the year to be in line with analysts’ expectations on the back of good housing demand.

Its Linden homes division delivered 3,229 housing completions, including joint ventures, for the year, compared to 3,442 last year as the company reduced its exposure to the slowing central London property market.

The average selling price fell to £351,000 from £367,000.

The sales rate was 0.56 per site per week from an average of 80 outlets, compared to a sales rate of 0.59 and 85 outlets in 2018.

"We are making strong progress against the operational targets we set out in 2017," said chief executive Graham Prothero.

"We are reviewing our 2021 volume targets to ensure that growth is controlled, and our gearing is managed."

 

2.15pm: AstraZeneca sets aside £12mln for former staff

AstraZeneca PLC (LON:AZN) has been under pressure this week to pay former staff £12mln in redundancy following the collapse of the Avlon manufacturing site it sold a couple of years ago.

Administrators were appointed in February, raising doubts about enhanced redundancy payments to around 230 employees.

After some lobbying from MPs and journalists, it now looks like Astra will cover the redundancies should the administration not generate enough funds.

 

1.35pm: BT sells London HQ for £210mln

BT Group PLC (LON:BT.A) has sold its London head office building for £210mln as it looks to make efficiencies in order to fund investment in the business as well as its dividend.

The FTSE 100 telecoms group has inked a deal to sell the BT Centre building next to St Paul’s Cathedral to a fund managed by London-based Orion Capital Managers.

As part of the deal, BT will lease back the 300,000 sq ft building for up to 30 months while it moves headquarters to a new location in London.

BT, which said it would soon announce the location of the new HQ, is making the move as part of a wider turnaround plan that includes cutting 13,000 jobs and shrinks its number of offices across the UK from 300 to around 30 sites.

BT shares are down 0.5% to 189p on Wednesday afternoon. They have dropped by a fifth so far in 2019.

 

1.10pm: Slow start predicted in the US

The Dow Jones is seen 12.0 points higher at 2,3747.1 when trading begins in New York later this afternoon.

As for the tech-heavy Nasdaq, spreadbettors expect that to open 4.9 points in the black at 7,930.7, while the broader S&P 500 is forecast to climb 2.0 points to 3,005.2 at the opening bell.

US futures gave up most of their overnight gains after a mixed bag of earnings statements.

Bank of America was one of those to fall short of expectations with its second-quarter results, although the banking giant did say the US economy appears to be improving.

 

12.30: TalkTalk reaffirms full-year guidance

More on Talktalk Telecom Group PLC (LON:TALK), which is up 4% to 110p today as it reaffirmed its full-year earnings target after adding 118,000 new customers to its fibre product in the first quarter.

The company said 70% of new customers took fibre in the three months to the end of June, which helped boost revenue.

Total headline revenue rose 1.3% to £387mln in the first quarter with on-net revenue up 2.6% to £317mln.  Average revenue per user edged up to £24.72 from £24.65 a year ago.

Customer churn was 1.29% for the quarter, up from 1.28% last year.

"Our 2020 guidance of strong (earnings) EBITDA growth remains unchanged, underpinned by accelerated fibre penetration and our cost reduction plans," TalkTalk said.

 

12pm: Burberry too expensive for Jefferies

Burberry PLC (LON:BRBY) is the day’s top blue-chip riser, despite Jefferies downgrading the trench coat maker on valuation grounds.

The luxury fashion retailer on Tuesday reported a 4% rise in like-for-like sales to £498mln for the 13 weeks ended 29 June, citing an “excellent consumer response” to the debut collection from new chief designer Riccardo Tisci. Analysts were expecting a 2% increase in like-for-like sales for the period.

Following a 17% rise in the share price since the update, Jefferies has cut its rating on the stock to ‘underperform’ from ‘hold’ but raised its target price to 2,000p from 1,800p.

“Much as we remain supporters of Burberry’s management strategy, we think the stock now prices in a very optimistic scenario and trades at a significant premium to peers in the absence of a very strong 2020-21 performance (i.e. needs close to double digit like-for-like sales growth to even justify this today),” Jefferies said.

“Visibility is limited and the magnitude of ongoing challenges do not support this premium at this time: we increase our price target by 11% to 2,000p but cut our rating to ‘underperform’ as a pure valuation call.”

Still, shares are up 3.4% today to 2,355p, making it the best performer on the Footsie.

 

11.30am: Johnson Matthey drags FTSE 100 lower

The FTSE 100 has been in the red for most of the day, although it has steadily recovered some of its earlier losses since inflation data came in as expected.

The index of blue-chip shares is currently down 9.1 points, or 0.12%, to 7,568.1p.

Catalytic converters maker Johnson Matthey PLC (LON:JMAT) is the biggest drag, falling 3.9% to 3,256p after a mixed set of first-quarter numbers was compounded by the departure of John Walker, the long-serving boss of its Clean Air division.

On the flip side, luxury clothing brand Burberry Group PLC (LON:BRBY) remained in fashion following yesterday’s upbeat first-quarter update. Shares are up 3.3% to 2,353p.

Down on the FTSE 250, housebuilder Galliford Try plc (LON:GFRD) is the top riser, climbing 7.5% to 657p after confirming full-year results are on track. Investors had feared another profit warning, like the one they were greeted with back in April.

Talktalk Telecom Group PLC (LON:TALK) is also among the morning’s winners. Its shares are up almost 4% to 110p as it too reaffirmed full-year guidance.

 

10.45am: Elliott will be hoping to drive a change of fortune for Saga…

Shares in Saga PLC (LON:SAGA) jumped on Wednesday after it was revealed that activist investor Elliott Advisors had taken a stake in the over-50s insurance and cruises specialist.

Elliott, which is famed for its activism both in the US and the UK, has bought a 5.1% stake in Saga.

Saga’s shares have more than halved since the start of 2019, a fall that was accelerated by a profit warning in April, when bosses said they would have to slash prices in the insurance business. They also cut the dividend.

The company is also looking for a new chief executive after Lance Batchelor, who has led the firm since its float in 2014, said last month he would step down in January.

Saga shares were up 4.2% to 44.7p on Wednesday.

 

10.15am: Pound little changed

The latest inflation data, which was as analysts had expected, has had little effect on the pound so far.

Sterling is broadly flat against both the euro and the dollar, at €1.106 and US$1.240, respectively.

 

9.45am: Inflation holds at 2% in June

Inflation remained steady at 2% in June, according to figures from the Officer for National Statistics, the same as in May.

Pleasingly for workers, that figure is below average UK wage growth which rose to 3.6% in May, the highest rate since 2008.

“The overall rate of inflation remains steady, with no change in pace this month,” said the ONS’s head of inflation, Mike Hardie.

“Petrol and diesel prices fell this year but rose a year ago, while clothes prices dropped by less than this time last year.”

 

9.15am: GVC gaming revenue rises despite tough comps and rule changes

Net gaming revenue at Ladbrokes and Coral owner GVC Holdings PLC (LON:GVC) rose 5% in the first half of the year, despite tough comparatives and changes to UK betting shop regulations.

As has been the case for a few years now, gambling apps and websites were the big driver, with online net gaming revenue surging 17% during the six months ended 30 June, which analysts at Peel Hunt described as “remarkable”.

That growth came despite this year’s numbers running up against the World Cup, which was a huge boon for GVC in the same period of 2018.

Unsurprisingly, UK retail like-for-like gaming revenue slumped by 10%, reflecting the government’s recent decision to slash the maximum stake on in-store gaming machines to £2, down from £100 previously.

 

9am: Wednesday's investor update...

 

8.45am: FTSE 100 nudges lower

The FTSE 100 made a quiet start to proceedings ahead of the latest batch of inflation data as it eased nine points lower to 7,568.16 shortly after the open.

It followed a rare down day on Wall Street, which represented a modest pullback after Dow Jones Industrial Average skated into record territory earlier in the week.

Asia’s main markets, meanwhile, were haunted by the simmering trade feud between America and China with President Trump hinting he is ready to slap further tariffs on around US$325bn of goods from the People’s Republic.

The pound, meanwhile, remained unloved as it challenged new lows against major world currencies.

On the market this gave a small bump to big dollar earners such as Rolls Royce (LON:RR.) – up 1.25% - and plant hire firm Ashtead (LON:AHT), up 1%.

Burberry (LON:BRBY), which surprised Tuesday with a stronger than expected trading statements, topped the Footsie with a 1.84% gain as it continued to win support in the Square Mile.

The opposite was the case for silver miner Fresnillo (LON:FRES) and platinum specialist Johnson Matthey (LON:JMAT), which put out updates earlier that failed to wow investors. The shares fell 3.5% and 3.4% respectively.

6.45am: FTSE 100 called lower

The FTSE 100 is expected to open lower on Wednesday ahead of the UK’s latest batch of inflation data, which could have implications for the Bank of England’s stance on interest rates.

Spread-betting firm IG expects the FTSE 100 to open 17 points lower after closing 45 points higher at 7,577 on Tuesday.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said it was “surprising” that improve conditions in the UK labour market hadn’t exercised upside pressure on inflation, which isn’t expected to move much from its 2% level reported in May.

“If lower unemployment and higher wages don’t translate into increased consumer spending and higher price inflation…then there is no reason for the Bank of England (BoE) to tighten its interest rates in the foreseeable future. UK policymakers would do better to tune their monetary policy according to global trade tensions and of course, the increasing odds of a no-deal Brexit. That means a more supportive action plan”, she said.

However, Ozkardeskaya added that if inflation unexpectedly increased, the “less dovish” expectations from the BoE could push sterling higher.

This may be music to the ears of currency traders with the pound having slumped to a two-year low to currently trade at US$1.2415.

The gloomy start for the FTSE 100 follows a lacklustre performance in the US overnight, which saw the Dow close down 0.09% at 27,335 while the S&P 500 fell 0.34% at 3,004 and the Nasdaq fell 0.43% to 8,223.

Asian markets also took their lead from the US on Wednesday, with the Japanese Nikkei 225 down 0.31% and Hong Kong’s Hang Seng 0.31% lower.

The UK’s inflation data will be the main macro headline, while the corporate calendar will be taken up mostly by trading updates from blue-chip miner BHP and utilities group Severn Trent among others.

Significant announcements expected Wednesday July 17:

Trading updates: BHP PLC (LON:BHP); Severn Trent PLC (LON:SVT); TalkTalk PLC (LON:TALK), Galliford Try plc (LON:GFRD), Premier Oil PLC (LON:PMO), GVC Holdings PLC (LON:GVC); Hochschild Mining PLC (LON:HOCH), Euromoney Institutional Investor PLC (LON:ERM); Headlam PLC (LON:HEAD)

Interims: Augean PLC (LON:AUG)

AGMs: Yellow Cake PLC (LON:YCA)

Economic data: UK CPI, RPI, PPI, HPI inflation data; US housing starts; Fed Beige book

Around the markets:

Sterling: US$1.2415, up 0.1%

Brent crude: US$64.47 a barrel, up 0.19%

Gold: US$1,405 an ounce, down 0.3%

Bitcoin: US$9,510.7, down 10.9%

City headlines:

Sterling fell below its lowest level in more than two years, touching $1.2433 yesterday, as no-deal Brexit worries intensified – Daily Mail

British companies made no change to their marketing spending in the second quarter this year compared to the previous quarter, as a leadership change in Britain and continued ambiguity over Brexit made clients hesitant and delayed decision making, a survey showed – Reuters

Living standards of people in Britain has taken a severe hit amid weak wage growth and rising prices, a leading thinktank Resolution Foundation has said – Guardian

StanChart chief executive Bill Winters faced shareholders’ backlash after he branded them “immature” for voting against the lender’s new pay policy at its annual meeting – Financial Times

The chairman of banknote and passport maker De La Rue is being given a last chance to leave with dignity before a furious activist investor starts proceedings to oust him – Daily Mail

Thousands of investors are facing losses of close to half the £152mln they put into failed peer-to-peer lender Lendy that is being investigated for moving assets to related parties before its collapse – Times

Three of America’s big-name banks - Goldman Sachs, Wells Fargo and JP Morgan - beat expectations for their quarterly profits in a bumper day for the sector – Daily Mail

Ursula von der Leyen secured narrow parliamentary backing for her appointment as European Commission president on Tuesday - FT

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