FTSE 100 closes in red
Move to prevent prorogue of parliament provides a lift to sterling
Top FTSE laggard is Fresnillo
FTSE 100 closed in the red on Thursday, taking the cure from global stock markets, which were lower, as trade fears continue to do the rounds.
The UK's blue-chip benchmark index closed out around 42 points lower at 7,493 as sterling's gain against the US dollar also impacted.
Meanwhile, FTSE 250 was lower too, down over 79 points at 19,535.
The German DAX dropped over 113 points at 12,227, while the French CAC 40 shed around 21 points.
On Wall Street, the Dow Jones Industrial Average is down 105 points at the time of writing, while the Nasdaq and S7P 500 are also lower.
"The negative sentiment that was doing the rounds yesterday is still hanging over the markets, and traders are still worried about the trade spat with China," noted analyst David Madden, analyst at CMC Markets.
On the wider US economy, he added: "The jobless claims report came in at 216,000, and that was in line with forecasts. The Philly Fed manufacturing index jumped to 21.8 in July, from 0.3 in June, and the reading was the highest since October last year. The update is unlikely to silence all those traders calling for a rate cut from the Fed, but it shows that some aspects of the US economy are performing well."
Resource stocks were lower on Footsie, with silver giant Fresnillo (LON:FRES) top laggard, crashing over 9% to 813.4p, after yesterday's profit warning.
4pm: Sterling's gain is the equity market's pain
The Footsie has spent most of the afternoon hovering around the 7,500 level, nursing a loss that has much to do with sterling’s recovery.
Rajan Naik, a director of Financial Markets Online, said that “sterling is rejoicing” after an amendment was passed in the House of Commons designed to further complicate any attempt to prorogue parliament in order to force through a no deal Brexit.
“Britain’s new leader, whoever he is, will now not be able to suspend parliament in order to force a ‘no-deal’ Brexit through the Commons,” Naik said.
“Mr Johnson’s suggestion that he may bypass a recalcitrant Parliament in order to deliver a ‘do or die’ Brexit by Halloween had struck fear into the currency markets, who saw in it a sharply increased risk of a chaotic ‘no-deal’ Brexit, and the potential for prolonged political uncertainty.
“Two days after the pound plumbed a two-year low against the dollar, surprisingly robust retail sales figures and the reassurance that parliament will be a player, rather than a passenger, in the Brexit endgame has put a spring back into sterling’s step,” Naik added.
Sterling was almost half a cent higher on the day at US$1.2482.
A strong exchange rate is generally reckoned to be bad news for the plethora of big dollar earners in the Footsie constituent list, and so it was little surprise that the benchmark index was off the pace, 31 points (0.4%) lower at 7,504.
2.45pm: US stocks open lower
US stocks opened lower but not calamitously so, adding to yesterday’s losses.
The Dow Jones industrial average was down 63 points (0.2%) at 27,157 while the S&P 500, at 2,981.4, was down 3 points (0.1%).
US first-time jobless claims last week rose by 8,000 to 216,000, which was slightly less than the 221,000 economists had been expecting.
In the UK, the FTSE 100 has dipped just below 7,500 to 7,498, down 37 points (0.5%) on the day.
Two companies suffering hangovers from yesterday were the biggest blue-chip fallers: Fresnillo PLC (LON:FRES) was down 8.6% at 818.4p after yesterday’s profit warning while platinum refiner Johnson Mathey PLC (LON:JMAT) was off 4.9% at 3,047p after it warned that its clean air division, which makes catalytic converters, would be less profitable than previously expected thanks to higher costs.
Low-cost airline easyJet PLC (LON:EZJ), now travelling economy class in the FTSE 250, climbed 2.8% to 1,063p after it left full-year profits guidance unchanged; some analysts had been expecting a profit warning.
1.30pm: The Footsie trades sideways over the lunchtime trading session
The Footsie continues to keep its head above water like a desperate swimmer floundering in a sea of apathy.
The Mexico-focused miner reduced its production targets for the year yesterday. Barclays responded by cutting its earnings forecast, which was already 20% below consensus, although it stuck with its “equal weight” rating.
Shares in Royal Mail PLC (LON:RMG) were 1.8% lower at 215.8p after the company’s annual general meeting, at which the company revealed it had traded in line in the first three months of the current financial year.
Elsewhere in the communications game, mobile phone network carrier billing company Boku PLC (LON:BOKU) tumbled 5% to 122.5p despite maintaining full-year guidance in its half-year results.
11.30am: US stocks expected to open lower
London’s leading shares remain dull ahead of what is expected to be a weak start on Wall Street.
The FTSE 100 was down 33 points (0.4%) at 7,502, having fallen below the 7,500 level at one point, all the way down to 7,483.
There was some surprisingly upbeat news from the retail sector, which has helped the likes of supermarket group Wm Morrison Supermarkets PLC (LON:MRW), DIY specialist Kingfisher PLC (LON:KGF) and Primark owner Associated British Foods plc (LON:ABF) defy the trend and notch up gains of between 0.8% and 1%.
“Retail sales were markedly stronger-than-expected in June as volumes rose 1.0% month-on-month. This was a much better performance than had been indicated by soft June surveys from the CBI and the British Retail Consortium and followed month-on-month declines in both May (0.5%) and April (0.3%),” commented Howard Archer, the chief economic advisor to the EY ITEM Club.
“Non-food sales led the way in June with volumes rising 1.7% month-on-month in June with a decent gain in sales of textiles, clothing and footwear (1.2%) which was helped by sales and also reflected a bounce-back after a marked fall the previous month. Sales of household goods rose 1.9%,” he added.
“Consumers have clearly been more resilient than most other sectors of the economy and have seemingly largely brushed off Brexit concerns – no doubt helped by the overall improvement in their spending power since mid-2018 as well as record-high employment,” Archer suggested.
On the US front, Axi Trader mouthpiece James Hughes notes that economic data is relatively thin on the ground but earnings season continues to accelerate.
“Honeywell International and Microsoft are two of the stand-outs for the day ahead and with both having meaningful exposure to overseas economies too, again there’s the potential for this to provide further guidance over the state of US trade relationships. The DOW may have given back a couple of hundred points this week, but given the generally effervescent state of the market, this is unlikely to prove much cause for concern yet,” Hughes said.
“Ahead of the open, the market is calling the DOW to open down 54 at 27166 and the S&P down 9 at 2975,” he added.
Turning to corporate news, market makers moved the share price of Anglo American PLC 0.3% lower to 2,196.5p after the mining giant issued a second-quarter production update that revealed demand for diamonds remains flaccid.
“Diamonds are not turning out to be investors' best friends at Anglo American this year,” said Fiona Cincotta at City Index.
“Weaker demand for the precious gems and disruptions created by a transition to underground mining at a key pit in South Africa have triggered a disappointing production downgrade at De Beers,” she added.
“Much of Anglo American's longer-term prospects hinge on demand from big commodities importers like the US and China. Today's diamond downgrade shows that trade tensions between the world's two biggest economies are really starting to bite,” Cincotta opined.
9.45am: Trade talks fears hamstring the Footsie
Press reports that trade talks between the US and China have hit the buffers sent markets into reverse on Thursday.
The FTSE 100 was down 34 points (0.5%) at 7,501, with sentiment not helped by sterling recovering almost half a cent against the US dollar.
“Wednesday night’s Dow decline, and the subsequent losses in the Asian session led to a duff start from the European indices,” noted Connor Campbell at Spreadex.
“The catalyst for all this was a report from the Wall Street Journal claiming that the US-China trade talks had stalled due to the tech-elephant in the room: Huawei. The White House are trying to figure out how to handle Beijing’s demands regarding de-black listing the smartphone maker, apparently, the key reason why there has been so little movement since the latest truce was announced in Osaka. This WSJ update comes not long after Donald Trump claimed there was ‘a long way to go as far as tariffs’, highlighting the $325 billion in Chinese goods yet to be effected,” Campbell added.
With investors feeling a tad nervous, defensive stocks such as utilities and cigarettes makers are in demand.
SSE PLC (LON:SSE) was 1.6% higher at 1,171.5p after a trading update while Severn Trent PLC (LON:SVT) climbed 1.7% to 2,039p after the water industry regulator, Ofwat, published new information on its PR19 assessments including its draft determination for Severn’s Welsh business, Hafren Dyfrdwy.
There was some cheery news for retailers at the Office for National Statistics reported a 1.0% increase in monthly retail sales volumes in June; economists had been expecting a fall of around 0.3%.
Shares in ASOS were down 13% at 2,379p.
Elsewhere on AIM, Fox Marble Holdings PLC (LON:FOX), the company focused on marble quarrying and processing in Kosovo and the Balkans region, has suspended operations in its Malesheva quarry in Kosovo pending a resolution to a dispute.
The shares crumbled 14% to 5.875p.
8.15am: London takes its cue from Wall Street
The FTSE 100 took its cue from Wall Street and Asia’s main stock markets, opening 37 points lower at 7,498.22 amid renewed trade fears.
On Tuesday President Trump showed China the stick by saying the US could still implement tariffs on US$325bn of imports from the People’s Republic.
Traders will have half an eye on UK retail sales later this morning, with economists predicting a 0.2% drop in activity in June compared with 0.5% in May.
“Judging by updates from UK retailers, the consumer climate seems fragile, and workers might be keen to save rather than spend,” said David Madden, analyst at CMC Markets.
However, it was fair to say the mood was lacklustre.
There was a little more action among the second-tier players with EI Group (LON:EIG) jumping 38% after the pub chain agreed to be bought by Slug and Lettuce owner Stonegate for £3bn including debt.
easyJet (LON:EZJ) flew 3.8% higher in the vapour trails of its third-quarter trading update, which wasn’t as catastrophic as bearish analysts were predicting.
Around the markets: Pound worth US$1.2455 (up 0.18%); gold US$1,421.80, down US$1.50 an ounce; Brent crude US$63.62, down 4 cents a barrel
Proactive news headlines
APQ Global PLC (LON:APQ) nudged up exposure to risk assets during the second quarter but said its portfolio was still “fairly defensive” and left it on track to meet its target annual dividend yield of 6.0%.
Minds + Machines Group Limited (LON:MMX) has announced plans for a £1mln share buyback alongside “healthy” growth in its first half.
Tanzania-focused miner Shanta Gold PLC (LON:SHG) is comfortably on track to hit its guidance of 80-84,000oz this year says Eric Zurrin chief executive.
Yellow Cake PLC (LON:YCA) has appointed Alexandra Nethercott-Parkes, a client director of Langham Hall Fund Management and former assistant vice president of Deutsche Bank’s corporate services division, as an independent non-executive director.
Thursday’s main corporate news
Trading updates: Royal Mail Group PLC (LON:RMG); Anglo American PLC (LON:AAL), SSE PLC (LON:SSE), easyJet PLC (LON:EZJ), Thomas Cook PLC (LON:TCG), eve sleep PLC (LON:EVE), Centamin PLC (LON:CRY); Hilton Food Group PLC (LON:HFG)
FTSE 100 ex-dividends: None
Economic data: UK retail sales; US weekly jobless; US Philadelphia Fed manufacturing index