FTSE 100 down nearly 60 points at close
Sterling rallies against greenback
Lloyds' PPI nightmare continues
5.00pm: Footsie down as traders await Fed decision
FTSE 100 closed in the red mid-week as markets await the Federal Reserve's latest interest rate decision, where it is widely expected there will a cut for the first time since the recession.
The UK's index of leading stocks ended 59.99 points lower at 7,586.78. The FTSE 250 also sank, losing over 108 points at 19,666.
On Wall Street, the Dow Jones Industrials scored modest early gains, but those were shrinking as the US session progressed.
The US central bank has been under increasing pressure to ease up on interest rate increases since pushing through a fourth rise in December last year amid heightened uncertainty about the strength of the global economy and the impact of President Donald Trump's trade war.
Investors are expecting a 0.25% cut in the benchmark short-term rate at around 7.15pm BST this evening, a move which is likely baked in to the markets.
"It will be the press conference that is likely to be most instructive, with Fed chair Jerome Powell looking to navigate a tricky path of keeping the markets happy, while not pushing the US dollar too much higher, and not incurring the wrath of President Trump. Whatever happens, it’s quite likely that whatever Powell and the Fed does today, the President is likely to criticise them, because that is what he does," noted Michael Hewson, senior market analysts at CMC Markets (UK).
Meanwhile, Footsie's loss was sterling's gain, as the pound clawed back some of its recent losses against the US dollar, 0.49% higher at $1.2210.
4.00pm: Blue chips lower
A busy day for company results proved sufficiently distracting to take traders’ mind off the imminent interest rate decision by the US central bank.
The FTSE 100 was down 60 points at 7,587, largely reflecting a rally by sterling on the forex market.
"As the dollar frets over Wednesday evening’s rate-cutting Fed meeting, and the euro worries about the fact the Eurozone grew by just 0.2% in Q2, sterling was able to find a pocket of positivity. Cable crossed $1.22 as it rose half a percent, while against the single currency the pound was up 0.6%," noted Connor Campbell at Spreadex.
"This left the FTSE, which received a huge bump from sterling’s panic – alongside Monday’s M&A action from Just Eat and LSE – in quick retreat, the UK index falling 0.75% to tumble back under 7,600. Slides from Lloyds and Taylor Wimpey didn’t help, even if the blow was softened by an 8% surge from Next and a 5.5% increase from Rentokil Initial," he added.
2.35pm: US markets open modestly lower
US markets opened modestly higher ahead of the US central bank’s interest rate decision, to be announced later today.
The Dow Jones industrial average was up 59 points at 27,257 while the S&P 500 was up 1.3 points at 3,014.6.
“The bar is high for the Federal Reserve to meet the market's dovish expectations, suggesting the FOMC [Federal Open Market Committee] will struggle to push the dollar lower; however, the Fed will be loath to disappoint markets and we think the high yielders (especially the Canadian dollar) could outperform,” speculated Francesco Pesole, a foreign-exchange strategist at ING Markets.
“As the FOMC announces policy today, only a few market participants are still betting on a 50bp [half point] cut (16% implied probability), as the recent constructive data flow has helped to cement expectations of a quarter-point reduction. This is also our call and we find it hard to believe that the Fed will surprise in this regard,” he added.
In the UK, the pound was resurgent, thus diluting the appeal of British blue-chips. Sterling was trading at around US$1.2214, up almost two-thirds of a cent against the US dollar.
The FTSE 100 was down 58 points (0.8%) at 7,588.
With the price of silver down 0.6% on futures markets and hot on the heels of its underwhelming half-year report yesterday, investors did not need much encouragement to continue selling precious metals miner Fresnillo PLC (LON:FRES).
The stock fell 6.6% to 611p and was the biggest faller on the Footsie after RBC Capital Markets downgraded the stock to ‘sector perform’, having previously earmarked it as its top pick in the sector. The target price was slashed to 650p from 1,150p.
Half-year results from housebuilder Taylor Wimpey PLC (LON:TW.) this morning failed to impress; the shares were down 5.7% at 166.5p.
An interim statement from St James’s Place PLC (LON:STJ) also underwhelmed, pushing the asset manager’s shares down 4.4% to 997.6p. The group enjoyed a net inflow of funds of £4.4bn in the first half of 2019 but this was down from inflows of £5.2bn in the same period of 2018.
At the other end of the Footsie leader-board, fashion flogger Next PLC (LON:NXT) shot up 8.5% to 6,094p following its fashion statement.
“The woes of high street retailers don’t seem to have touched Next judging by these numbers,” enthused Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.
“That’s because an impressive online division is managing to offset declines in the physical store estate, meaning overall sales growth is in the positive territory. Not everyone in Next’s business can say the same. Half the reason Next has managed to ride the e-commerce wave is because of its history as a catalogue company. Next’s directories meant it already had an effective distribution network to fire up when digital change came knocking. That saved it precious time, and allowed Next to get ahead of the online-shopping curve,” she opined.
Next boss recently said that retail continues to pay higher rent than any other time of commercial property use . You are seeing some mixed-use aparthotels moving into some old BHS sites though https://t.co/DZt7hmOmJw
— Ashley Armstrong (@AArmstrong_says) July 31, 2019
Rat-catcher and laundry group Rentokil Initial PLC (LON:RTO) also scrubbed up well after its half-year results in which it boasted of organic year-on-year revenue growth of 4.2%. Its shares were up 5.4% at 434.4p.
12.35pm: Footsie's losses lengthen
The Footsie’s losses has lengthened by lunchtime with sentiment not helped by the latest Nationwide House Prices index.
Taylor Wimpey PLC (LON:TW.), down 6.0% at 165.95p, was the hardest hit of the housebuilders, also impacted by its interim results, and contributed to a 55 point (0.7%) decline to 7,592 for the FTSE 100.
The Nationwide said house prices rose 0.3% month-on-month in July, which was the joint highest monthly jump so far in 2019. The year-on-year increase, however, slowed to a six-month low of 0.3%.
“It is worth noting that there have been appreciable differences in house price performances across the regions with the overall national performance dragged down by London and the South East. Indeed, a regional breakdown of the second quarter data by the Nationwide show that at the top end there were year-on-year gains in Northern Ireland (5.2%), Wales (4.2%), Yorkshire & Humberside (3.0%), West Midlands (2.6%) and East Midlands (2.0%),” commented Howard Archer, the chief economic advisor to the EY ITEM Club.
“In contrast, prices fell year-on-year in the second quarter in London (0.7%), Outer South East (1.6%) and Outer Metropolitan (1.8%),” he added.
“We believe with Brexit due to occur on 31 October – and it currently very unclear what will happen then – uncertainty will weigh down on the economy over the next few months at least and hamper the housing market. Consumers may well be particularly cautious about committing to buying a house, especially as house prices are relatively expensive relative to incomes,” Archer said.
“Additionally, it looks questionable whether the labour market and earnings growth will sustain their recent strength as companies tailor their behaviour to a relatively lacklustre domestic economy, prolonged Brexit uncertainties and a challenging global environment.
“Consequently, we suspect house prices will rise by no more than 1.0% over 2019 on the Nationwide’s measure,” he predicted.
House prices remain ‘subdued’ ‒ Nationwide - https://t.co/wDkYbuWlvp House prices grew by an average of 0.3 per cent in July according to the latest house price index from Nationwide Building ... pic.twitter.com/tL51ZEDNxJ
— Mortgage Solutions (@mortgagesols) July 31, 2019
Property companies were friendless after a bleak update from shopping centres owner Intu Properties PLC (LON:INTU).
The group swallowed an £872mln property revaluation deficit, which was even bigger than the £650.4mln buzz-cut it suffered the year before. Net asset value per share plunged to 252p from 312p a year earlier. Intu shares, at 54.18p, were down 23% on the day.
FTSE 100 peers Land Securities PLC (LON:LAND) and British Land PLC (LON:BLND) shed 2.8% and 2.1%, respectively, in sympathy.
10.30am: Traders sit on their hands, waiting for the Fed
Trade talks between the US and China have hit a snag but investors seem more preoccupied with this afternoon’s announcement from the Federal Reserve.
The FTSE 100 was down 27 points (0.4%), with Lloyds Banking Group PLC (LON:LLOY) prominent among the walking wounded after a disappointing half-year update.
BBC News - Lloyds now receiving over 190,000 PPI queries a week https://t.co/FiYhzxopXC
— APPG Banking (@APPGbanking) July 31, 2019
The lender’s shares were down 4.4% at 52.64p after it set aside a further £550mln to cover potential payment protection insurance (PPI) mis-selling claims.
“With less than a month to go before the deadline, Lloyds’ interim results showed the long-running burden of PPI mis-selling continues with the bank having to make another £550mn provision in the period, taking the total to £20bn,” noted Ian Forrest, an investment research analyst at The Share Centre.
“Beyond that, there were some mixed figures as underlying profits were slightly better than expected while the full-year forecast for return on tangible equity was lowered from 14-15% to 12%. The dividend was raised by 5% but the bank does not expect to build its capital base as fast as previously forecast which could have implications for dividend increases in future,” he added.
8.40am: Footsie edges lower on trade worries
The FTSE 100 defied early predictions suggesting that it would kick off in positive territory to open 17 points lower at 7,629.56.
The negativity was understandable given President Trump’s latest trade-inspired, China-focused twitter rant, which left Wall Street and Asia’s main markets in the red.
There was also a degree of nerves ahead of the Federal Reserve’s monthly interest rate decision later Wednesday.
While a quarter-point cut is on the cards, there may be a knee-jerk reaction if US keeps borrowing costs on hold; particularly after a flurry of speculation around a 50 basis-point cut.
“We have to wonder just how much the Fed can deliver for the market now so much is already expected of it,” said Neil Wilson, analyst at Markets.com.
“It’s a high bar but the recent drop in the markets offers some in.”
In early trade, Next (LON:NXT) revealed there was still life on the High Street as it increased earnings guiding. The shares rose 7.4%, dragging with it stock in Marks & Spencer (LON:MKS), which was up 2.3%.
By contrast, results from Lloyds (LON:LLOY) failed to pass muster, prompting a 4.4% fall in the shares.
“[These were] a largely uninspiring second quarter has contributed to a half-year result which is for the most part forgettable, even if Lloyds itself is for the moment content with plotting a stable course,” said Richard Hunter, head of markets at Interactive Investor.
If retailers Next and Marks were enjoying a rare day in the sun, the same could not be said for Intu (LON:INTU), the company owns the shopping centres that house their stores. The shares tumbled 17% after Intu reported a weakening of rental income.
Proactive news headlines:
hVIVO PLC (LON:HVO) said a potentially breakthrough vaccine for mosquito-borne diseases is set to undergo a phase I clinical trial.
Shares in StatPro Group PLC (LON:SOG) nudged higher in a falling market after the provider of portfolio analysis tools posted an increase in underlying profits.
Integumen PLC told investors “current activity continues to be significantly higher than the company has experienced in the past”.
Sunrise Resources PLC (LON:SRES) is now on the regulatory fast track with its permitting application for the NewPerl perlite project in Nevada, USA.
Immotion Group PLC (LON:IMMO) has signed a deal with US firm The Virtual Reality Company to roll out 'Jurassic World VR Expedition' virtual reality franchise to partners.
Salt Lake Potash Ltd (LON:SO4) has completed construction of its first two commercial-scale evaporation ponds and has begun pumping of sulphate of potash (SOP) brine.
Bushveld Minerals Limited (LON:BMN) said the Vametco vanadium mine in South Africa is on course to meet full-year production guidance.
Mosman Oil And Gas Ltd (LON:MSMN) reported a sharp rise in second-half production, driven by strong output from the Stanley project in Texas.
Berkeley Energia Ltd (LON:BKY) highlighted that its primary focus continues to be on securing approvals to start building the Salamanca mine and bring it into production.
Premier African Minerals PLC (LON:PREM) chief executive George Roach has written to shareholders to explain the lack of progress at the RHA tungsten mine and Zulu lithium projects in Zimbabwe.
MidaTech Pharma PLC (MTPH.L) has appointed a former GlaxoSmithKline PLC (LON:GSK) director to its board.
Sure Ventures PLC (LON:SURE) finished its financial year invested in a much more diverse portfolio of software companies operating across the fields of augmented and virtual reality, the internet of things, fintech and artificial intelligence.
AfriTin Mining Ltd (LON:ATM) has completed the construction of a new plant at its flagship Uis Tin Mine in Namibia.
Anglesey Mining PLC (LON:AYM) says the detailed review of its Parys Mountain project in Wales has identified several ways to improve its economics.
ANGLE PLC (LON:AGL) still expects to make a US regulatory submission for its Parsortix cancer-detecting system in or around October, offering the chance that it could be given the green light early next year.
Falcon Oil & Gas Ltd (LON:FOG, CVE:FO) gave investors an update on operations at the Beetaloo basin project, in Australia’s Northern Territory, where preparations are underway for a drill programme.
Keywords Studios PLC (LON:KWS), the technical and creative services provider to the video games industry, has seen strong like-for-like revenue growth in 2019.
Genel Energy PLC (LON:GENL) in an update highlighted that its 25% owned Tawke field remains the largest independent oil firm operated field in Kurdistan, with production averaging 71,700 barrels of oil per day in the first half of 2019.
6.15am: FTSE 100 set for a modest gain
The FTSE 100 looks set to resist the pull lower from Wall Street and Asia’s main markets to open a modest 7 points higher at 7,653.77 on US/China trade talks concerns.
Overnight traders were a little jittery after a series of tweets by Donald Trump, which ramped up the trade rhetoric between the world’s two largest economies.
Later Wednesday, the US Federal Reserve makes its monthly call on interest rates.
According to financial bookmakers there is an 80% chance of a 25 basis point cut to borrowing costs.
After getting a little giddy about a potential half point cut, the market’s price setters are likely to have a meltdown if the Fed decides to stand pat.
Lot of speculation
“There’s been a lot of speculation over the past few weeks over whether we’ll get to see the US Federal Reserve cut rates by 25bps [basis points] or 50bps when they conclude their July meeting later today, when the real discussion ought to be about whether they should be even cutting rates at all,” said Michael Hewson, analyst at CMC Markets.
“For years now we’ve heard the Federal Reserve insist that they would be driven by the data, and for the most part they have been true to that narrative in the aftermath of the financial crisis over ten years ago.
“This narrative appears to have undergone a marked shift in the past few months, and in some respects it’s not hard to see why, with political pressure to cut rates at abnormally high levels, and a global economy that is struggling to maintain momentum.”
Here in the UK, the big corporate news comes from Lloyds (LON:LLOY), Taylor Wimpey (LON:TW.) and Next (LON:NXT).
Around the markets:
Pound worth US$1.2165;
Gold trading at US$1,441.50 an ounce, down 30 cents
Brent crude US$65.26 a barrel, up 54 cents
Significant announcements due Wednesday:
US Federal Reserve rate decision
Trading updates: Next PLC (LON:NXT), 3i Group PLC (LON:III), Mitchells & Butlers PLC (LON:MAB)
Interims: Lloyds Banking Group PLC (LON:LLOY), BAE Systems PLC (LON:BA.), Taylor WimpeyPLC (LON:TW.), Direct Line Insurance Group PLC (LON:DLG), Smith & Nephew PLC (LON:SN.), St James’s Place PLC (LON:STJ), Rentokil Initial PLC (LON:RTO), Smurfit Kappa Group PLC (LON:SKG), Serco PLC (LON:SRP), Dignity PLC (LON:DTY), Indivior PLC (LON:INDV), Man GroupPLC (LON:ENG), 4Imprint PLC (LON:FOUR), Ibstock Plc (LON:IBST), International Personal Finance PLC (LON:IPF), Intu Properties PLC (LON:INTU), Restore Plc (LON:RST), StatPro Group PLC (LON:SOG)
City Headlines:
Financial Times
- Johnson set to pledge billions for new hospitals and social care
- Apple ups forecasts despite iPhone sales decline
- UK watchdog triples fines on accountancy firms
- Saudi stocks attract billions of dollars in inflows
Times
- Trump raises pressure on Fed for ‘large’ rate cut today
- MP urges Woodford to suspend fees
- Apple close to regaining $1 trillion status despite iPhone sales drop
- Carmakers slash factory investment to spend on Brexit preparations
Daily Telegraph
- Britain reclaims title of world's second-biggest arms exporter
- InterContinental Hotels goes to war on plastic by binning millions of shampoo miniatures
- UK ‘failing’ to prepare for foreign investment after Brexit, MPs warn