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FTSE 100 closes in the red as Wall Street retreats, hopes of a Brexit deal boosts sterling

Last updated: 17:20 27 Aug 2019 BST, First published: 06:35 27 Aug 2019 BST

Brexit clock
  • FTSE 100 loses 5 points

  • Pound boosted by hopes no-deal Brexit can be averted

  • US stocks reverse opening gains

5.20pm: Footsie closes lower

The FTSE 100 index closed narrowly in the red on Tuesday on the first session after the August Bank holiday weekend as a weaker Wall Street and a stronger pound hit the blue-chips.

Sterling gained ground on hopes that a 'no-deal' Brexit could be averted. Reportedly, the European Commission President Jean-Claude Juncker and UK  Prime Minister Boris Johnson were set to have a phone call on the withdrawal agreement.

Against the US dollar, the UK currency added over half a percent to $1.2287.

The more internationally-focused Footsie finished 5.40 points lower at 7,089.58, while the FTSE 250, seen as a better gauge of UK PLC, went the other way, adding 99.75 points at 19,335.88 as domestic stocks benefit from a firmer pound.

Joshua Mahony, senior market analyst at IG Index said: "With a positive tone emerging from G7 talks over the weekend, the pound is rising in response to both optimism over a potential deal and a growing feeling that a no deal Brexit could be blocked even if those talks fail."

"With UK parliament in recess, markets have been waiting patiently for a sign on whether we will see a vote of no confidence called when it reconvenes next week," he added.

But the analyst noted that today’s cross-party meeting amongst MPs had instead pushed the focus towards a more legislative approach.

The top laggard on the FTSE 100 was cigarette maker British American Tobacco PLC (LON:BATS), which shed 4.36% to stand at 2,832p amid reports US rivals Philip Morris and Altria are exploring a merger, more than ten years after they split.

3.30pm: US-China trade war optimism

All three of the major US indices opened higher on Tuesday morning in New York, buoyed by hopes that Donald Trump and his Chinese counterparts can find a way to settle the ongoing trade war.

Markets were rattled last week by Trump’s decision to hike tariffs on Chinese goods being shipped to the US, the latest in a series of tit-for-tat moves.

But Trump said last night that he had received calls from Beijing officials who wanted to “make a deal”.

That appears to have soothed investors’ worries, with the Dow Jones adding 77 points, or 0.3%, to 25,976 in early trading on Wall Street.

The broader S&P 500 is up by 11.4 points, or 0.4%, to 2889.7, while the tech heavy Nasdaq has gained 9.8 points, or 0.3%, to 2,888.3.

On this side of the pond, the US rally has rubbed off on London’s traders, with the FTSE 100 now 8.2 points higher at 7,102.7, having spent all morning in the red.

3pm: London set for quiet Wednesday

Not much is scheduled to happen tomorrow (Wednesday), with WH Smith PLC (LON:SMWH) and café-bar operator Loungers PLC (LON:LGRS) headlining a pretty thin-looking City diary.

Analysts are looking for Loungers to have delivered further strong like-for-like sales growth in the opening few months of its new financial year when it reports its maiden set of annual results.

With much of last year’s numbers already in the public domain, investors’ attention will turn to how things have fared so far in the 2020 financial year, which runs until the end of April.

According to Peel Hunt’s calculations, Loungers has hiked food prices by 2.9% and drink prices by 2.1% over summer – bigger raises than usual.

“As this represents just six months, there should be a larger price component to like-for-like sales in 2020, with a follow-on benefit to gross margins,” said analysts.

“LFL sales should also benefit from the introduction of the Big Lounge Breakfast, at £11.95 vs £7.65 for a Lounge Breakfast.”

As for WHS, its pre-close trading update will likely once again see investors focus on the group’s airport business as it continues its shift towards travel retail and away from its declining high street stores.

Nearly one year after the group acquired US airport retailer InMotion for £155mln, investors will be looking to see if things are still moving in the right direction, while tough trading conditions mean sales on the high street are likely to continue their decline alongside more store closures.

2.40pm: Berenberg bigs up Frontier Dev’s Planet Zoo game

Sales of Frontier Developments PLC’s (LON:FDEV) new Planet Zoo video game could perform more strongly than the market expects when it launches in early November, analysts at Berenberg reckon. 

Last week, Planet Zoo was named best simulation game at Gamescom, the biggest computer game trade show in Europe.

Even though it is still only open for pre-orders as of June, the game is the top-selling simulation game on the Steam platform and among the 10 top sellers overall, the German bank said in a note to clients on Tuesday.

Currently, City analysts have pencilled in £20mln-£25mln of revenue for Planet Zoo for the seven months to the May 2020 year-end.

But Berenberg’s analysis of Steam player data and conversations with management “suggest that pre-orders for Planet Zoo have been strong and are tracking similarly to those for Jurassic World Evolution”, which generated £65mln of revenue in its first full year.

2pm: Footsie turns black, US to follow suit

The FTSE 100 has finally got in line with its European peers and is now in the black, up 8.2 points or 0.1% to 7,103.3p.

European indices opened cautiously on Tuesday, but sentiment has picked up throughout the day as traders digest President Trump’s latest comments on his trade war with China.

Last night, the President lauded his Chinese counterpart, Xi Jinping, who Trump said was actively reaching out to resume talks and “make a deal”.

US stocks, which had looked set to open slightly lower as well, are now seen higher when the opening bell rings in New York shortly.

The Dow Jones is seen opening 159.0 points in the black at 26,060.1, while the broader S&P 500 is expected to add 16.5 points at the open to 2,895.8.

Spreadbettors have the tech-heavy Nasdaq opening 57.7 points up at 7,632.5.

1.20pm: Metro Bank now most shorted stock in London

Short-sellers have been raising bets against Metro Bank PLC (LON:MTRO) as the lender seeks to rebuild its reputation after an accounting scandal earlier this year.

The bank is the ninth most-shorted company on the London Stock Exchange with 7.6% of its shares held by four short sellers, according to the ShortTracker website.

Last week London-based ENA investment Capital raised its short position against Metro by 0.09% to 1.71% while Canadian asset manager Connor Clark & Lunn upped its bets against the shares by 0.1% to 1.00%.

Marshall Wace and Odey Asset Management hold short positions of 1.46% and 3.4%.

12.40pm: Arcadia’s US landlords withdraw CVA rejection

Sir Philip Green’s Arcadia Group has said two of its US landlords have withdrawn their legal challenges to the Topshop owner’s company voluntary y arrangements.

Vornado and Caruso have agreed to drop their challenges following “significant and constructive dialogue”, which means Arcadia is now free to move forward with its CVAs which were voted through by creditors in June.

“With these legal challenges now withdrawn all the components of the CVAs can now be implemented," Ian Grabiner, CEO of Arcadia Group, said.

"On behalf of the board, I would like to thank all of our staff, customers and creditors for their loyal support during this tough period for retail businesses. We can now look forward to implementing our strategy and delivering our growth plan for the Group.”

Like many UK retailers, Arcadia has been hit by rising costs and falling sales amid a weak consumer backdrop.

Most of Green’s brands have a big high street presence, which has exacerbated problems as those who are still spending money are increasingly doing so online.

After Arcadia’s CVA in the UK was given the green light, it decided to push its US subsidiary into administration as well.

12pm: ‘Bank of Mum & Dad’ now tenth largest lender

Parents are spending so much to get their children on the housing ladder that the Bank of Mum & Dad is now one of the biggest lenders in the UK.

The average parental contribution for homebuyers this year is up to £24,1000 – more than £6,000 compared to 2018.

Collectively, parents have given £6.3bn, high enough to rank as the 10th largest if it was a proper mortgage lender.

L&G said thousands of UK buyers were reliant on their parents to either get onto the housing ladder in the first place, or upgrade to a larger home.

11.30am: Hong Kong protests and stronger pound drag FTSE 100 lower

A warning from Hong Kong leader Carrie Lam that violence in the region’s anti-government protests has stepped up over the weekend weighed on London’s Asia-focused stocks.

Standard Chartered PLC (LON:STAN) (down 1.7% to 604.2p), insurer Prudential PLC (LON:PRU) (down 1.7% to 1,340p) and HSBC Holdings PLC (LON:HSBA) (down 0.4% to 584.2p) are all in the red.

Big dollar earners are also struggling as the pound gained after Prime Minister Boris Johnson revealed at the G7 summit in France that he was “marginally more optimistic” about striking a new Brexit deal.

Sterling has climbed to US$1.227 against the dollar and to €1.104 against the euro this morning.

That is bad news for that make most of their profits in dollars companies – like many on the FTSE 100 – as they are worth less once translated back into pounds.

Cigarette makers Imperial Brands PLC (LON:IMB) (down 3.9% to 1,993p) and British American Tobacco PLC (LON:BATS) (down 3.6% to 2,878p) both puffed lower, while plumbing giant Ferguson PLC (LON:FEG) is also down 2.2% to 5,844p.

The political storm in Hong Kong and the stronger pound have culminated in a disappointing morning session for the FTSE 100, which is down 15.7 points to 7,079.3. At one point, it had been as low as 7,046.

Among the few risers is NMC Health PLC (LON:NMC), which is up another 5% to 2,266p after soaring at the end of last week amid reports that Fosun is one of two parties interested in taking a big stake in the hospital operator.

10.55am: RBS and Natwest sites crash

10.25am: IWG nears all-time highs

The world’s largest shared-office group IWG PLC (LON:IWG) came to close to all-time highs on Tuesday after reports surfaced over the weekend that it was looking to spin out its US business and list it in New York.

Chief executive Mark Dixon is said to have already held early-stage talks with investment banks about the plan, which was first reported by Sky News.

According to the article, the spun off business could be valued at as much as £3bn – not much less than the combined group’s value.

The news sent shares in the Regus owner up by 2.5% to 417.3p, just 10p short of their record.

9.45am: Bunzl hikes dividend

Bunzl PLC (LON:BNZL) could only deliver flat underlying earnings for the first half of the year, though the business supplies distribution giant received a sizeable benefit from the weak pound.

Having already revealed two months ago that underlying sales growth was slowing due to the softening global economy, the FTSE 100 group repeated its assurance that full-year results remained unchanged and upped the dividend another 2% to 15.5p.

Profit before tax of £200.5mln in the six months to 30 June was up 1.6% on the same period last year, although adjusted operating profits at constant currency rates were up only 0.3%.

“Against the background of slowing macroeconomic and market conditions across the countries and sectors in which we operate, Bunzl has produced a resilient operating performance,” said chief executive Frank van Zanten.

Shares are down 0.3% to 2,028p.

9.15am: Burford fends off another attack from short seller

Shares in Burford Capital Ltd (LON:BUR) have continued to recover on Tuesday as the litigation finance group fielded another attack from short-seller Muddy Waters.

Following up from the initial shots fired earlier in the month, where the San Fransisco-based hedge accused the AIM-listed company of “egregiously misrepresenting” returns, an update was issued on Tuesday relating to a $7.4mln investment in fledgling biotech Napo Pharmaceuticals.

Muddy Waters attests that Burford manipulated its return on invested capital (ROIC) and internal rate of return (IRR) on the investment by categorising Napo's case against Salix Pharmaceuticals over its diarrhoea drug as a win with a significant return “when it should have been a loss”.

Burford, in its original response on 8 August, said it had structured its financing agreement with Napo so that any funds recovered could come from not just Napo’s dispute with Salix, but from other litigation, although it didn’t mention which.

Muddy Waters in its latest post on Tuesday said this was a “depraved” effort to “conceal adverse results”.

Burford shares are up 3.2% to 787p.

8.45am: Slow start to the week for FTSE 100

As expected, the FTSE 100 began the shortened trading week in the red, losing 24 points to 7,070.94.

The pre-occupation with a hard Brexit and continued concerns over recession overshadowed some seemingly backstage movements on Sino-American trade talks.

“Today investors will be looking towards consumer confidence data for signs as to whether the trade dispute is spilling over from the manufacturing sector into the consumer sector,” said Jasper Lawler of London Capital Group.

“So far consumer confidence has remained resilient, thanks to the solid labour market.”

On the market a late summer torpor appeared to settle over the major London trading desks with early volumes exceedingly low.

Against this backdrop, NMC Health (LON:NMC) continued its ascent after last week receiving competing bid approaches for a stake in the Gulf-focused private hospitals group.

Stepping down a division, biotechnology group PureTech Health (LON:PRTC) rose 7% as the market took comfort from the healthy cash position of it and its affiliates.

6.30am: FTSE 100 set to start week on back foot 

Traders look set to ignore the pull of Wall Street and Asia with the FTSE 100 expected to open its weekly trading account in the red.

The world’s main markets were buoyed Monday by the prospect of America and China edging towards the trade negotiating table.

However, in London the fixation is likely to be with Germany’s uncertain economic prospects coupled with Boris Johnson’s apparent inability to move on Brexit negotiations at the G7 in Biarritz.

The gold price, a haven investment in times of volatility, posted a new six-and-a-half year high on Monday and wasn’t far off its latest peak overnight with an ounce of the yellow metal changing hands for US$1,538.30, up US$1.10. 

Around the markets: Pound worth US$1.222; Brent crude US$58.94 a barrel, up 24 cents; Bitcoin US$10,194.34, down US$6.88

Tuesday's Major Corporate News 

Interims: PureTech PLC (LON:PRTC), Jadestone Energy PLC (LON:JSE), Bank of Cyprus Holdings PLC (LON:BOCH), Bunzl PLC (LON:BNZL)

Economic data:  US house price index, US consumer confidence

Business Headlines 

Financial Times

  • Trump prepared to meet Iran for new nuclear deal
  • World’s top wealth manager turns bearish on stocks – UBS recommends customers trim positions
  • Sports Direct board faces investor rebellion at AGM
  • Biotech companies issue first declaration on human gene editing
  • J&J ordered to pay US$572mln in opioid trial

Times

  • The chief executive of the empire behind the Daily Mail said there were no “sacred cows” as he announced a new disposal to boost its war chest before an anticipated economic downturn
  • CBI poll: vital services sector hit by Brexit uncertainty
  • Huge rewards lure shale US oil workers to the desert ‘war zone’
  • Ferdinand Piëch, the man who turned around Volkswagen, dies

Daily Telegraph

  • British start-up beats world to Holy Grail of cheap energy storage for wind and solar
  • Small companies face spiralling business rates for keeping workers cool in the heatwave
  • Boss of Uber rival Kapten unfazed by threat of new car restrictions in London

Guardian

  • Greece to lift debt crisis-era restrictions on sending money abroad
  • Boris Johnson gives struggling high street fund pre-election boost

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