FTSE 100 ends up 25 points
Government plans to dissolve parliament in mid-September
Return for Queen's Speech on October 14; Brexit deadline October 31
5.15pm: Sterling falls lifts Footsie
FTSE 100 closed higher on Wednesday as the seemingly never-ending Brexit process reached new territory, with Prime Minister Boris Johnson calling to prorogue parliament in the latest bid to take Britain out of the bloc.
It means that the amount of time MPs will sit between now and the planned EU exit day of October 31 has been curtailed thus limiting the potential time that a departure, under a deal or not, could be halted. The Queen has agreed to the move.
"The UK government's decision to suspend parliament means the Brexit process is likely to go down to the wire. 'No deal' has become more likely, although we still narrowly think a no-confidence vote, which leads to an Article 50 extension and early elections, remains the most probable scenario," said analysts at ING Economics.
The move sent the pound south, always good news for the internationally inclined Footsie which closed 25.13 points higher at 7,114.71, but the more domestically focused FTSE 250 tanked 111.09 points to finish at 19,224.79.
Sterling lost 0.44% against the dollar to US$1.2232.
4pm: Footsie rallies
The FTSE 100 today has, to quote Monty Python, been up and down like the Assyrian Empire; it’s currently in up mode.
Despite the four housebuilders suffering falls of more than 3%, the FTSE 100 was up 17 points (0.2%) at 7,106.
Berkeley Group Holdings PLC (LON:BKG), Taylor Wimpey PLC (LON:TW.), Persimmon PLC (LON:PSN) and Barratt Developments PLC (LON:BDEV) all got a Brext-biffing after the Queen agreed to the government’s request to suspended parliament next month.
3.00pm: Footsie floundering despite stronger-than-expected showing by US indices
US benchmarks opened lower, albeit not as low as expected.
The Dow Jones industrial average was down just 6 points at 25,772 and the S&P 500 was down a point at 2,868.
In London, the FTSE 100 was off 24 points (0.3%) at 7,065, despite the pound being around three-quarters of a cent cheaper at US$1.2216; a weak pound is normally a boost for the Footsie, which has a large number of big dollar earners among its membership.
“How much more 'excitement' can sterling take?” wondered Ken Odeluga at City Index.
“Parliament will be suspended for more than a month from 12th September. The impact of the news on sterling has been its deepest one-day drop in almost four weeks, with a fall against the dollar of around 130 pips in the hour after reports emerged and sterling/dollar still 0.8% lower on the day into the afternoon,” he continued.
“Still, there are signs of restraint in the market reaction. The pound quickly erased around a half of its loss in the immediate aftermath of its slump, before slipping again, though it has held around the 50% mark of its slide. Sterling implied volatility across terms spanning one month or more remains elevated relative to July floors but like shorter-term measures of how much options traders expect the pound to swing, it is not rocketing,” Odeluga added.
ING Economics admitted the prospect of a “no-deal” exit has become much more likely but it still thinks “a no-confidence vote, which leads to an Article 50 extension and early elections, remains the most probable scenario”.
“It goes without saying however that the next few weeks are heading into uncharted territory. For the pound, all of this means further weakness to come,” ING predicted.
1.20pm: Rally proves short-lived
The Footsie’s gains proved transitory as traders wrench their attention away from the Brexit soap opera – not so much “East Enders” as “World Enders” - on to US sentiment.
Spread betting quotes indicate US stocks will add to yesterday's losses, which might account for why the FTSE 100 is now 18 points (0.3%) in arrears at 7,072.
As for the US benchmarks, the Dow Jones was expected to open its account at around 25,660, down 118 points on last night's close, while the S&P 500 was tipped to open 13 points weaker at 2,856.
London-listed tobacco giants Imperial Brands PLC (LON:IMB) and British American Tobacco PLC (LON:BATS) have trimmed early losses, and are now down 0.8% and 1.0% respectively.
Market makers marked the shares lower in response to reports that US peers Philip Morris International and Altria are in talks to merge, more than a decade after they demerged.
Among the mid-caps, WH Smith PLC (LON:SMWH) fell 2.8% to 1,938p after a pre-close trading update.
The update seemed reasonably solid but what do you expect when you don't let customers out at the end of the day unless they buy something?
Customer tweets for help after being locked in a WHSmith for an hour after closing https://t.co/dCydVyFN2z pic.twitter.com/xBXthbj4bk
— Nicholas Norman (@nicholasanorman) August 28, 2019
11.50am: FTSE 100 rallies as Britain prepares for Cavaliers vs Roundheads re-run
The Footsie remains in positive territory as all hell lets loose in Westminster over the government’s plans to suspend parliament before the Brexit deadline.
The Queen’s Speech has been set for 14 October, which effectively means parliament will be dissolved in mid-September.
The prime minister, Boris Johnson, denied that the decision to dissolve parliament was a manoeuvre designed to thwart plans being hatched by some MPs to prevent a “no deal” Brexit.
“There will be ample time on both sides of that crucial 17 October summit, ample time in parliament for MPs to debate the EU to debate Brexit and all the other issues,” Johnson told reporters.
Nicola Sturgeon, Scotland's First Minister, seemed in little doubt that the move was designed to force through a “no-deal” Brexit.
“Unless MPs come together to stop him next week, today will go down in history as a dark one indeed for UK democracy,” she tweeted, and she also called on Ruth Davidson, the leader of the Scottish Conservative Party, to give assurances that “all Scots Tory MPs will back the cross party effort next week” to block the close-down of parliament.
The House of Commons will return from its summer recess next week and it is probable that some MPs will attempt to prevent the prorogation of parliament.
Full Bercow statement
- constitutional outrage
- trying to stop parliament debating Brexit
- shutting down parliament an offence against the democratic process
- he’s on holiday (I was too, but I’m not anymore) pic.twitter.com/nPF0GdIXv0
— Beth Rigby (@BethRigby) August 28, 2019
For what it is worth, amid all this political uncertainty, investors appear to be going for defensive favourites, such as supermarkets, drugs companies and utilities, as much as global companies that would be expected to benefit from the weakness of sterling.
Drugs giant AstraZeneca PLC (LON:AZN) was among those outperforming, with its 1.5% rise to 7,348p in part due to another late-stage trial success, this time with its Breztri Aerosphere chronic obstructive pulmonary disease (COPD) drug.
READ AstraZeneca scores another late-stage win, this time with COPD drug
While the FTSE 100 - up 20 points (0.3%) at 7,110 - is enjoying a boost from slumping sterling, the mid-cap FTSE 250, which has far fewer multinational companies in its midst, is off 135 points (0.7%) at 19,200.
Having led the index higher yesterday, doorstep lender Provident Financial PLC (LON:PFG), down 8.3% at 377.3p, was the biggest mid-cap faller this morning.
Petrofac PLC (LON:PFC) tumbled 2.9% to 394.2p after its half-year results, dragging fellow oilfield support services provider John Wood Group PLC (LON:WG.) down with it; Wood Group was 4.4% lower at 372.8p.
Breaking: PM on @SkyNews now, saying parliament will be prorogued for Queens Speech on 14 October.
He says Parliament will have “ample time” to debate Brexit before and after the EU council.
— Tamara Cohen (@tamcohen) August 28, 2019
10.30am: Pound plummets as government attempts to sidestep parliament
The pound has stepped off a cliff on reports that the government wants to dissolve parliament before the 31 October Brexit deadline.
Sterling has plunged by almost nine-tenths of a cent against the US dollar to US$1.2204; as is often the way when sterling plummets, the Footsie has perked up and is now 30 points (0.4%) up on the day at 7,120.
Government expected to suspend Parliament from mid-September, meaning MPs have limited time to stop no-deal Brexit https://t.co/6QDIT1IfgY
— BBC Breaking News (@BBCBreaking) August 28, 2019
“The pound is in freefall this morning after plans emerged to prorogue parliament and prevent MPs from passing legislation to prevent no deal [on Brexit],” said Craig Erlam at Oanda.
“This isn't the first we've heard of these dirty tactics but it was maybe hoped that such un-democratic measures would not be needed or used. Some may have thought them inevitable but perhaps not at this point in the process,” Erlam opined.
“Either way, it certainly caught markets off-guard and came at a time when the pound had been recouping some of its losses. The FTSE, as ever, is the unintended beneficiary of the plunge in the currency, given that the vast majority of its earnings are generated outside of the UK,” he added.
Regardless of whether this is another negotiating tactic or not - No Deal liklihood has increased here.
— stewart hampton (@stewhampton) August 28, 2019
Although the pound’s plunge has given a lift to the index, it has done no favours to the housebuilders, which have moved from being among the best blue-chip performers to among the worst, with falls of 2% or more.
With that particular political bombshell having been dropped, company news seems a bit run of the mill.
Shipping services firm James Fisher and Sons PLC (LON:FSJ) was sitting a bit low in the water after it warned this year’s results would be more weighted to the second half of the year.
“While the shares have outperformed the FTSE 250 year to date, they have encountered slightly choppier waters after the group highlighted that the performance for the year will be weighted to the second half,” observed Graham Spooner, an investment research analyst at The Share Centre.
“We have long been fans of the group and its ability to provide a range of specialist services to oil rigs, nuclear decommissioning, wind farms, transporting oil, wharf operations, marine equipment and monitoring stress in structures and submarine rescue creates an expertise and limits competition. We continue to view the stock as a medium risk ‘buy’ for investors looking for a company that provides niche maritime services around the globe,” Spooner said.
9.00am: Gentle slide for Footsie in thin trading
The dog days of summer continue and appropriately enough, the London market is proving to be a bit of a dog this morning.
London’s index of heavyweight shares was down 28 points (0.4%) at 7,061, with financials, cigarette makers and packaging companies prominent among the blue-chip losers.
Insurer Prudential PLC (LON:PRU), down 2.5% at 1,314.5p, was the biggest blue-chip loser.
Heavy oil users Carnival PLC (LON:CCL), the cruise ship operator, and easyJet PLC (LON:EZJ), the no-frills airline, were down 1.3% to 3,363p and 958.8p respectively, reflecting the rise in the oil price.
Brent crude is trading 0.7% higher at US$59.44 on futures markets, which has at least given a fillip to oil giant BP PLC (LON:BP.), up 1.2% at 493.65p.
“Concerns over the health of the global economy and over the trade dispute are keeping optimism after the G7 in check,” suggested Jasper Lawler at London Capital Group.
“Getting a feeling for where the trade dispute is heading is proving to be challenging, not least because the credibility of what Donald Trump says about the progress has been thrown into question. China sounding out Trump on the lack of any phone call has put an end to the Trump-inspired market rally earlier in the week,” Lawler reported.
“Optimism of a resolution has drifted off into the distance as investors attempt to second guess the next moves in the trade dispute. The next round of tariffs are to be staggered starting from 1st September,” he noted.
Elsewhere, the advance GfK consumer sentiment index in Germany was unchanged at 9.7 in September, slightly higher than the consensus forecast of 9.6.
Claus Vistesen, the chief eurozone economist at Pantheon Macroeconomics, said it was a “lukewarm” reading.
“This month’s report points to tentative signs of stabilisation in the headline index, though the overall trend since Q1 is still down. That said, the headline advance index is poorly correlated with spending. The details —reported for August — are better, and they were mixed this month. The income and overall expectations indices dipped, but the willingness-to-buy index rose,” Vistesen observed.
“Overall, these data suggest that growth in consumers’ spending will hold on to its recent increase. Growth in consumption slowed sharply quarter-on-quarter in Q2, but this was mainly due to base effects. The year-over-year rate now appears to be settling at around 1.5%,” he added.
Switching to corporate news, the roller-coaster ride for Thomas Cook Group PLC (LON:TCG) shareholders continues, with the travel firm announcing that substantial agreement has been reached with its “white knight” backer, Fosun, its core lending banks and the majority of its senior noteholders regarding key commercial terms of its proposed recapitalisation.
With the shares down 13% at 6.158p, the market is either not impressed with the terms or it reckons that agreement has effectively kiboshed any chance of an alternative rescue plan getting off the ground.
6.00am: Holiday mood set to continue
The London market appears to be well and truly in holiday mode.
After a 5.4-point decline on Tuesday, backed by very thin volumes, the FTSE 100 looks set to open Wednesday a point lower at 7,088.58.
Compare that with the first weeks of the month where worries over trade, the trajectory of US interest rates and recession amped up the volatility.
In Asia, the mood was subdued with Japan modestly higher, Hong Kong flat and China’s main market slowly losing traction.
On Wall Street, the Dow and broader-based S&P fell as the inverted bond yield phenomenon occurred once more.
This is where the interest rate paid on long-dated government bonds falls below the return from shorter-held debt and is said to be a recession indicator.
“On a technical level it appears that a dam has been broken and with gold prices also breaking higher, and the US yield curve inverting even further, with the US 30-year yield breaking below 2%, the bond market appears to be flashing a variety of amber warning lights about the US as well as the global economy,” said Michael Hewson of analyst at CMC Markets.
“While some of this move lower in US bond yields can be partly put down to the fact that they still return a positive rate of return, unlike most of Europe’s bond market, it doesn’t explain why investors prefer to invest in bonds as opposed to stocks which now offer better returns.”
Wednesday looks to be another slow day for scheduled corporate news with updates from bar chain Loungers (LON:LGRS), technical products group Diploma (LON:DPLM) and retailer WH Smith (LON:SMWH) unlikely to send pulses racing.
Major announcements expected on Wednesday:
- Finals: Loungers PLC (LON:LGRS)
- Interims: Arix Bioscience PLC (LON:ARIX), Headlam PLC (LON:HEAD)
- Trading statements: Diploma PLC (LON:DPLM), WH Smith PLC (LON:SMWH)
- AGM: Collagen Solutions PLC (LON:COS)
Around the markets:
- Pound worth US$1.2277
- Gold US$1,545.60 an ounce, down US$6.40
- Brent crude US$59.92, up 41 cents a barrel
Proactive news headlines:
Argo Blockchain PLC (LON:ARB) shares bounced on Wednesday after it recouped the cost of its investment into new cryptocurrency mining hardware faster than expected.
OptiBiotix Health PLC (LON:OPTI) expects the dozens of commercial deals it has signed over the past few years to soon be reflected in its sales and profit figures.
Ongoing drilling at Chaarat Gold Holdings Ltd's (LON:CGH) Tulkubash project in the Kyrgyz Republic has continued to hit good grades at or just below the surface.
Ariana Resources PLC (LON:AAU) is chuffed with the recent rally in the gold price, which it said would be reflected in its third-quarter results.
It looks set to be a busy year or so for venture capital group Arix Bioscience PLC (LON:ARIX) and its portfolio of life sciences companies.
Tissue Regenix Group (LON:TRX) has appointed a new chief financial officer. The regenerative medical devices specialist said Mike Barker will join the board with immediate effect having held the role on an interim basis since the start of the year.
Collagen Solutions PLC (LON:COS) chief executive Jamal Rushdy said the regenerative medicines specialists was seeing “continued growth as expected”, supported by June’s £5.96mln fundraiser.
EQTEC PLC (LON:EQT) has announced the appointment of David Palumbo and Yoel Alemán Méndez who join as executive directors with immediate effect.
Tower Resources PLC (LON:TRP) has switched rig contracts for the scheduled drilling work on the Thali block in Cameroon.
Albert Technologies Ltd (LON:ALB), which will delist from AIM tomorrow, has put a secondary market trading facility in place for shareholders.
City headlines:
Financial Times
- Investor reaction puts $200bn tobacco merger in doubt - shares in Philip Morris International and Altria slump after revelation of talks
- Sajid Javid to fast-track spending review
- Tencent sues critics in clampdown on reputational damage
Times
- Deloitte partners race clear of Big Four rivals with £882,000 payday
- Carney under fire for ‘secret trip’ to meet Zuckerberg
- Arcadia set to shut stores after US deal
- Boost for Carpetright as investor buys debt
Telegraph
- Carlos Ghosn faces new allegation he used Nissan funds to bankroll tech investment fund
Guardian
- NatWest and RBS hit by second IT glitch in a week
- Mitsubishi invests in UK company to bring off-grid solar to Asia
- Construction firms brace for recession as EU workers leave UK