FTSE 100 closes in red
European Central Bank makes no change to its key interest rates
Euro declines on forex markets
FTSE 10 closed lower Thursday, joining European and US stocks lower, as traders were not impressed much with today's European Central Bank update.
The UK index of premier shares closed down around 12 points at 7,489.
The FTSE 250, on the other hand, added around 32 at 19,820.
David Madden, market analyst, at CMC Markets, said it was a mixed bag from Mario Draghi, the head of the European Central Bank (ECB).
"Going into the meeting the central banker was tipped to deliver a dovish update, in the form of a rate cut or at least dovish language. Rates were kept on hold, and hints were dropped about loosening monetary policy in September, but there were also calls for fiscal stimulus," noted the analyst.
"The update wasn’t as dovish as expected, and that prompted the sell-off in stocks."
On Wall Street, the Dow Jones is down around 131 points at the time of writing, while Nasdaq is off around 62 points.
3.45pm: Footsie modestly positive
The Footsie has struggled its way back into positive territory, albeit by a modest amount.
The index of heavyweight shares was up 2 points (0.0%) at 7,503, with most of the attention on the European mainland after the decision by the European Central Bank to keep its interest rates unchanged.
“Investors who were looking for a quick opportunity to attack the Euro were given the thumbs up this afternoon after the European Central Bank (ECB) left the doors wide open for an interest rate cut later this year,” said Lukman Otunuga at FXTM.
“At already a record low of minus 0.4%, investors will wonder whether lower interest rates will be enough to sustain the EU’s economic growth momentum. Mario Draghi has stated that ‘data point to somewhat weaker growth in Q3 and Q4’. ‘Significant monetary stimulus’ may be required to ensure the EU’s economic conditions do not deteriorate further amid external risks,” he noted.
2.45pm: US markets open lower
The European Central Bank has all but confirmed it will cut its ratess next month, prompting a sell-off of the euro.
Sterling’s rise against the single currency has not gone down well with equity traders and the FTSE 100 has subsided into the red, down 8 points to 7,494.
Meanwhile, US markets have opened lower, with the Dow Jones down 55 points (0.2%) at 27,216 and the S&P 500 off 7 points (0.2%) at 3,012.
“Short of brandishing a pair of scissors for the assembled cameras, Mario Draghi’s hints about an impending rate cut couldn’t have been more explicit,” quipped Sam Fuller, the director of Financial Markets Online.
“The ECB’s forward guidance was littered with clues that Europe’s ratesetters are preparing to cut rates sooner rather than later.
“Most striking of all was the line about the Bank putting its researchers to work on finding a way for interest rates to be tiered.
“This raises the prospect of some rates plunging deeper into negative territory as early as September,” Fuller said.
1.45pm: ECB leaves its rates unchanged
The European Central Bank (ECB) left its key rates unchanged. Traders now await the press conference that follows the rate decision.
The Footsie remained dozing in its hammock, resting snugly on a 7 point rise (0.1%) at 7,506.
“As if it wasn't hot enough already in the eurozone today, expectations about today’s ECB meeting also raised the temperature levels. The ECB refrained from cutting rates or new monetary stimulus but are clearly preparing markets for a rate cut and probably even more at the September meeting,” according to Carsten Brzeski, ING’s chief economist for Germany.
“Let’s wait until the press conference, starting at 2.30pm CET [central European time], but up to now, it is clear that today’s meeting was the last stop before new ECB action.
“The last talk before the ECB will have to walk the walk. It now increasingly looks as if the September meeting will not only bring a single measure but rather a package of several measures,” Brzeski added.
In the US, June durable goods orders rose 2.0%, which was well above the consensus of 0.7%. Orders excluding transport rose 1.2%, which was also higher than the consensus of 0.2%.
“The net headline revision is -0.8%, but it's mostly in the noisy transportation sector; it doesn’t matter. What does matter, though, is the huge upside surprise in core capital goods orders, which jumped by 1.9%, the biggest one-month increase since February last year,” said Ian Shepherdson at Pantheon Macroeconomics.
“Admittedly, orders rose at a mere 0.3% annualised rate in Q2 as a whole but the y/y [year-on-year] rate now stands at a 2.0%, much better than the minus 8% or so implied by the roll-over in the ISM manufacturing index. The clear implication is that capital spending by non-manufacturers—who account for some 80% of investment—is much stronger than in the manufacturing sector,” he added.
“We’d be surprised to see such a big gap between the ISM and the hard data persist indefinitely, but we’re beginning to think that the survey is undershooting to the downside and is primed for a modest revival by the fall as China’s policy stimulus starts to work through global manufacturing. In the meantime, expect modest upward revisions to forecasts for business capex in Q2 [capital expenditure in the second quarter],” Shepherdson suggested.
12.05pm: Mood of ennui continues
A lacklustre July CBI distributive sales survey has done nothing to disturb the mood of ennui in London.
The FTSE 100 was up 10 points (0.1%) at 7,511, pretty much where it has been since 10.30am, as traders wait for the European Central Bank’s decision on its deposit rate, due to be announced at 12.45pm (UK time).
Retail sales fell for the third consecutive month in the year to July, marking the longest period of decline since 2011, according to the latest CBI monthly Distributive Trades Survey.
The survey of 93 firms, of which 46 were retailers, showed that sales volumes fell in the year to July, albeit to a lesser extent than in June. Orders placed with suppliers also declined for the third consecutive month but at a slower pace than the previous month.
“Whilst last year’s summer strength in retail sales is driving some of the comparative weakness this year, it is still hugely concerning that sales have fallen for the longest period in almost eight years. Despite the recent pick-up we’ve seen in households’ real earnings, the sun is clearly not shining on the British High Street,” said Rain Newton-Smith, the CBI’s chief economist.
“The UK economy has reached a fork in the road. The new Prime Minister must now do everything in his power to achieve a good Brexit deal, thus protecting jobs and our economy,” Newton-Smith declared.
Some big-name retailers were among those lurking in the red today, including Wm Morrison Supermarkets PLC (LON:MRW), down 2% at 197.4p, J Sainsbury PLC (LON:SBRY), down 1.4%, and Marks and Spencer Group PLC (LON:MKS), down 1.1% at 209.3p.
Travel firm TUI AG (LON:TUI) was down 2.1% at 840p on the day the Office for National Statistics revealed UK residents made 13.6 million visits abroad in the first quarter of 2019, which was 2% more than the corresponding period the previous year.
Overseas residents spent £4.3 billion on their visits to the UK during the same period, which was down 5% year-on-year.
Drinks brands giant Diageo plc (LON:DGE) sank 1.3% at 3,309.5p after announcing its full-year results.
“Global spirits group Diageo reported a good set of full-year results today along with plans for a further return of £4.5bn to shareholders,” said Ian Forrest, an investment research analyst at The Share Centre.
“Overall sales rose 6% to £12.9bn helped by a 22% increase in gin sales. The company said all of its regions had contributed to the growth and operating profit margin had increased by more than expected. Operating profit was up 10% to £4bn and further growth in net sales and profit margins was forecast to be in the mid-single digits range for the new financial year.
“These figures from Diageo again demonstrated the strength of its global business and its ability to generate cash, which can be invested or returned to shareholders. The shares dropped back slightly in early trading, but that is probably just some profit-taking given that they’ve outperformed the market over the past year,” Forrest added.
10.00am: Big movements among Footsie giants offset each other
London’s market remains in torpid mood, with big changes in some Footsie constituents largely offsetting each other.
London’s top-shares index was up 9 points (0.1%) at 7,510, with drugs giant AstraZeneca PLC (LON:AZN) and contract caterer Compass Group PLC (LON:CPI) leading the leisurely advance.
Astra was up 5.2% after it upped its product sales guidance for the year while Compass Group was 3.6% higher after it said it expects to deliver full-year organic revenue growth at the top of its 4-6% range.
Shares in Sage PLC (LON:SGE) had the stuffing knocked out of them, however, as the accountancy software group warned that margins in the current fiscal year would likely be at the lower end of its guidance range.
The Footsie’s advance was also slowed by big dividend payer SSE PLC (LON:SSE) going ex-dividend today; the utility company’s stock was down 6.7%.
8.40am: Slow start for the Footsie
The FTSE 100 made a subdued start, rising just seven points to 7,508.91, as London’s traders kept their powder dry ahead of the European Central Bank’s interest rate call later.
The nuance is less about an imminent cut to interest rates, which looks unlikely, but the content of ECB chief Mario Draghi’s speech – and any hint of further fiscal easing.
Closer to home, the political headlines at least will fixate on the new Johnson administration’s early preparations for a No Deal Brexit, which could have a knock on impact on the pound.
“Now we know the cabinet members – more Brexit than was Theresa May’s by a long chalk – we can look to how Boris and co manage Brexit and talks with the EU in the coming day,” said Neil Wilson, analyst at Markets.com.
On the market, defence group Cobham (LON:COB) soared 34% higher after saying it had agreed to be taken over by a private equity group for £4bn.
Also on the up was AstraZeneca PLC (LON:AZN), although the rise was a comparatively modest 5% after it followed in the wake of GlaxoSmithKline (LON:GSK) earlier in the week by upgrading guidance.
Shares in the accounting software group Sage (LON:SGE) fell 8% in early deals after it essentially did the reverse of AZ in its nine-month trading update.
6.45am: FTSE 100 to make subdued start
The FTSE 100 is seen slightly higher ahead of Thursday’s open as traders brace for more Brexit talk now that the Conservative party and the government has a new leader.
IG Markets calls the London index up 11 points at 7,517 to 7,520 with a little over an hour to go until the open.
Prime Minister Boris Johnson and his new cabinet may be the focus of Thursday’s headlines and social media chit-chat, but, the markets this morning eye the European Central Bank as it will make its latest interest rate decision later today.
“Although European policymakers are expected to maintain the interest rates unchanged at today’s meeting, President Mario Draghi will likely deliver a dovish accompanying statement, as the ECB is faced with slowing economic activity, waning inflation expectations, topped up with souring Brexit negotiations. But there could be more in Draghi’s hat today,” said Ipek Ozkardeskaya, analyst at London Capital Group.
“So, what will happen next is quite clear to everyone.
“The ECB will likely navigate through further negative territories in terms of policy rates and step up its asset purchases via another round of TLTRO (targeted long-term refinancing operation) hoping that additional easing measures would lift the inflation expectations more sustainably this time.
“Although there is no guarantee that more easing will bring back the consumer inflation, a surprise policy move could pull the euro down significantly and boost the expectations for a while.”
Overnight, global equity markets were mostly positive.
Although on Wall Street the Dow Jones was down 0.29% at 27,269, the S&P 500 and Nasdaq both rose, up 0.47% and 0.85%, at 3,019 and 8,321 respectively.
In Asia, Japan’s Nikkei is up 72 points or 0.34% at 21,782 while Hong Kong’s Hang Seng added 0.25% to 28,595. The Shanghai Composite meanwhile edged 0.13% higher to 2,926.
Around the markets
Pound: 1.2478, down 0.05%
Gold: US$1,422 per ounce, up 0.01%
Brent crude: US$63.36 per barrel, down 0.74%
Bitcoin: US$10,055, up 3.97%
Proactive news headlines:
Advanced Oncotherapy PLC (LON:AVO) chief executive Nicolas Serandour said the company remained on course to treat its first patient with its next-generation proton therapy system for cancer by the end of 2020.
Trading in the current fiscal year has been strong at custom electronics maker discoverIE Group PLC (LON:DSCV).
Primary Health Properties PLC (LON:PHP) said that its March merger with MedicX has already delivered a 22.7% total shareholder return as well as the expected efficiencies.
Frontier IP (LON:FIPP) said an investee company specialising in artificial intelligence has signed a drug discovery deal with an American biotech.
Shares in Greatland Gold PLC (LON:GGP) glittered in early deals following the publication of the first results from Newcrest’s drilling campaign at Havieron.
Strategic Minerals PLC (LON:SML) has restructured its purchase of the outstanding half of its Cornwall tungsten and tin mine joint venture Redmoor.
Base Resources Limited (LON:BSE) hit production targets in 2019 while it shifted operations to a different area of mining at Kwale in Kenya.
Highlands Natural Resources PLC (LON:HNR) financial results highlight a significant period in which the company has added a second distinct business.
Shefa Gems PLC (LON:SEFA) has had its exploration permits for the Kishon River and Kishon Mid Reach Zones 2 and 3 prospects for a further year.
PCF Group Plc (LON:PCF) has appointed a former Virgin Money director to its board. Marian Martin, who was chief risk officer at Virgin Money, has joined PCF as a non-executive director with immediate effect.
Personal Group Holdings PLC (LON:PGH) said it remains confident in the long-term outlook for the business after a solid first half.
A substantial shareholder in forestry and timber group Woodbois Limited (LON:WBI) has agreed to vary the redemption terms of an internal trade finance note.
Union Jack Oil PLC (LON:UJO) highlighted comments made by the operator of the West Newton oil discovery.In a stock market statement, the company relayed what Rathlin Energy told a community liaison group which said that it is progressing plans to test the WNA-2 well.
TomCo Energy plc (LON:TOM) told investors that its field testing programme continues to run to schedule in Utah.
Westminster Group PLC (LON: WSG) has conditionally raised £1mln through the placing of new shares to support its contracts and project developments.
PowerHouse Energy Group plc (LON:PHE) said non-executive chairman Cameron has bought £492,000 worth of shares in the company.
Significant announcements due Thursday
ECB rate decision
Finals: Diageo plc (LON:DGE), Fuller Smith & Turner PLC (LON:FSTA), Highlands Natural Resources PLC (LON:HNR), NCC PLC (LON:NCC), Scholium Group Plc (LON:SCHO)
Interims: AstraZeneca PLC (LON:AZN), Unilever plc (LON:ULVR), RELX PLC (LON:REL), Robert Walters PLC (LON:RWA), National Express PLC (LON:NEX), Anglo American PLC (LON:AAL), Inchcape PLC (LON:INCH), Bodycote PLC (LON:BOY), Acacia Mining PLC (LON:ACA), Capital & Counties PLC (LON:CAPC), Howden Joinery PLC (LON:HWDN), Lancashire PLC (Q2) (LON:LRE), Morgan Advanced Materials plc (LON:MGAM), Tyman PLC (LON:TYMN), Vesuvius Plc (LON:VSVS), Primary Health Properties PLC (LON:PHP)
Trading updates: Compass Group PLC (LON:CPG), AJ Bell PLC (LON:AJB), Sage Group PLC (LON:SAGE), CMC Markets Group PLC (LON:CMCX), Daily Mail & General Trust PLC (LON:DMGT), Intermediate Capital PLC (LON:IOP)
AGMs: Advanced Oncotherapy PLC (LON:AVO), BlueRock Diamonds PLC (LON:BRD), Polarean Imaging Group PLC (LON:POLX)
FTSE 100 ex-dividends: Land Securities PLC (LON:LAND), Royal Mail Group PLC (LON:RMG), SSE PLC (LON:SSE)
Economic data: German IPO business climate report; US weekly jobless; US durable goods orders
Headlines
Nissan set to double expected job cuts - The Times
Virgin Media pledges gigabit broadband to millions of homes – BBC News
Facebook reveals new FTC antitrust investigation – Financial Times
Vaccines give Glaxo resurgence a shot in the arm – The Times