FTSE 100 closes over 74 pts higher
UK factory output contracts in August
AstraZeneca gains on positive trial results
US markets closed for Labour Day
515pm: Footsie closes up as pound weakens
FTSE 100 closed the first day of the trading week higher as US markets were closed for Labour Day.
The decline in sterling was the main reason for Footsie's rise, as the UK currency floundered amid talk of a snap UK general election and Brexit chaos continued.
The pound slipped 0.75% against the US dollar and commentators said it could go further south as there could be more uncertainty surrounding the economy if an election was called or even make 'no-deal' more likely.
"Brenda from Bristol’ might not be too happy about it, but there is talk the government is considering calling a snap general election, and that is chipping away at the pound," said analyst David Madden, at CMC Markets.
"It has been obvious that Prime Minister Johnson has been on a charm offensive around in the UK in recent weeks, and he might be laying the groundwork for an election."
FTSE 100 finished ahead by 74.76 points at 7,281.94.
FTSE 250 added 83.26 to close at 19,476.89.
3.30pm: Footsie higher
The founder of Moneysavingexpert has told the BBC that about 510,000 people left it until the last minute to claim compensation for the payment protection insurance mis-selling scandal.
Martin Lewis said the number of claims in the final two days before the Financial Conduct Authority's 29 August deadline was higher than he expected.
Banks and loan providers mis-sold PPI policies between 1990 and 2010 to those who did not need them or would not be covered.
Some £36bn in compensation has been paid out so far.
2.50pm: Hundreds of jobs could go at Tata Steel plant
Tata Steel is to shut part of its operations in south Wales in a bid to cut costs, putting hundreds of jobs at risk.
The steel giant said it would close its Orb Electrical Steels base in the Pill area of Newport and up to 380 jobs could go from the plant, which makes electrical steel used in power transmission for vehicles.
Tata Steel's European operations head Henrik Adam said: "I recognise how difficult this news will be for all those affected and we will work very hard to support them."
Tata will also sell a Canadian unit with about 300 employees to a Japanese buyer.
1.40pm: FTSE continues to rise, led by AstraZeneca
The FTSE is trading up 89 points to 7,296 as worries about a hard Brexit and a general election add pressure on the pound.
Sterling is down 0.66% versus the dollar at US$1.2076.
AstraZeneca is the biggest riser on the FTSE 100 after the drugmaker said a trial of its Brilinta drug was shown to reduce the risk of heart attacks and strokes by 10%. It also said final-stage trials for its diabetes drug Farxiga was able to help patients with heart and cardiovascular problems.
Dollar earners Experian and Diageo were also topping the index, boosted by a weaker pound.
On the downside, Marks & Spencer has slumped after analysts at Goldman Sachs expect the retailer to record another double-digit drop in profits this year after a “disappointing” opening few months.
Micro Focus, which is facing relegation from the FTSE 100 index week, is also under the cosh after its boss Kevin Loosemore took an extra role as chairman of De La Rue in the middle of the software firm's strategic review.
12.40pm: 'Very strong general election rumours'
The Guardian's chief political correspondent Jessica Elgot says there are “very strong rumours” that a general election could be announced this week to take place before Brexit on 31 October.
Very strong rumours in Westminster today that election could be called this week - with verbal commitment of polling day pre-Oct 31 https://t.co/nUodGYRYTA— Jessica Elgot (@jessicaelgot) September 2, 2019
Sky News political correspondent Tamara Cohen says Cabinet has been summoned to meet this afternoon, adding to speculation that a general election could be on the cards.
Breaking: Cabinet summoned to meet this afternoon.— Tamara Cohen (@tamcohen) September 2, 2019
Is it an election?
11.40am: Weak PMI not a surprise, says EY ITEM Club
Howard Archer, chief economic advisor to the EY ITEM Club, said he believes the weak UK PMI manufacturing data was hardly surprising given the fact that global growth is slowing, international business confidence is being hit by US-China trade tensions and Brexit uncertainty is rising.
“Based on past form, August’s PMI is consistent with manufacturing output falling at around 2% in the third quarter,” Archer said.
“However, with the CIPS surveys tending to be overly sensitive to political uncertainty and car makers maintaining production in August (having brought their annual summer shutdowns forward this year), the sector’s performance is unlikely to be that grim.
“But with global and domestic headwinds showing no sign of easing, the remainder of 2019 is set to remain a difficult period for manufacturers.”
Does not appear to be major overall #stockbuilding occurring in August #manufacturing purchasing managers survey as 31 October #Brexit date looms; contrasts with manufacturing activity being buoyed through first quarter by stockbuilding ahead of original late-March Brexit date https://t.co/7tA0fcVGRZ— Howard Archer (@HowardArcherUK) September 2, 2019
The pound has lost three-quarters of a cent against the US dollar to US$1.2080, a two-week low.
Worries about a snap general election are also dragging on sterling. Boris Johnson has threatened to bar Tory MPs from running in the next election if they back legislation to stop a no-deal Brexit.
The drop in the pound has pushed the FTSE 100, which includes a large chunk of dollar-earning stocks, up 102 points to 7,309.
10.40am: Jefferies weighs in on Brexit
Jefferies chief European economist David Owen thinks Boris Johnson’s move to suspend parliament from 10 September until the Queens’ Speech on 14 October has "certainly brought matters to a head".
“Arguably, part of the rationale for proroguing parliament for such an unprecedented length of time was that the Queen’s Speech could lay the ground-work for the next election,” he said.
“This becomes much more of an issue if, because of the events of the last few days, the government has to make up the loss of seats in regions like Scotland, London and the South East, with leave supporting traditional Labour seats, with a broken Conservative party suffering more defections.
“But, at the same time, marking a new parliamentary session, the Queen’s Speech does give the government the potential opportunity of trying to push through a tweaked Theresa May deal through the House of Commons. Who knows, perhaps fourth time lucky?”
MPs will on Tuesday vote on legislation to stop a no-deal Brexit on October 31. Johnson has threatened to sack Tory MPs who back the proposal.
Owen thinks if parliament manages to take no deal off the table, it needs to “coalesce around what to do next”.
“We still would not rule out a national unity government being formed with the express purpose of calling another election or a second referendum,” he said.
“We would also not rule out everything going to the wire after the EU Heads of State, 17 and 18 October, with parliament revoking Article 50 and calling another election.
“And, we would not rule out Boris Johnson calling an election himself after the Queen’s Speech.”
9.40am: UK factory PMI hits seven-year low
UK manufacturing activity fell to a seven-year low in August as business optimism was hit by Brexit uncertainty, key data has revealed.
The IHS Markit/CIPS purchasing managers’ index for UK manufacturing dropped to 47.4 in August from 48.0 in July, signalling a further contraction in output.
Business optimism fell to its lowest level since July 2012 due to weakening market conditions, signs of a global economic slowdown, Brexit uncertainty and subdued client confidence.
“Demand from domestic and export markets both weakened in August, with new export business suffering the sharpest fall in seven years,” said Rob Dobson, director at IHS Markit.
“The global economic slowdown was the main factor weighing on new work received from Europe, the USA and Asia.
“There was also a further impact from some EU-based clients routing supply chains away from the UK due to Brexit.”
The pound is now down 0.53% against the dollar at US$1.2092. Versus the euro, sterling is down 0.52% to €1.1012.
the PMI stupid. not a great start to the week. pic.twitter.com/2BWyvXXMqY— Neil Wilson (@marketsneil) September 2, 2019
8.50am: FTSE 100 opens in positive territory
The FTSE 100 opened 33 points higher at 7,239.97 as traders began the new month in a positive frame of mind.
That said, worries over American and Chinese trade relations and Brexit are likely to continue to bubble away in the background.
The former first: Washington followed through on its threats by introducing tariffs of 15% on $112bn of Chinese imports. Beijing retaliated by bringing in additional levies on US goods, including crude oil.
Closer to home, the Remain faction continues to look for a method of preventing Britain’s exit from the EU without some sort of a deal with the trading bloc.
“Expect fireworks as Parliament returns this week. If the rebels and Remainers want to stop the no-deal Brexit then this is the time,” said Neil Wilson, analyst at Markets.com.
“Ringleader Nick Boles has apparently said the plan is to force the government to get an extension beyond October 31st - not exactly enough to get a second referendum in so just more can-kicking. Probably futile – no deal increasingly looks the only route.
“If they don’t get their way, the EU may offer a last-minute olive branch; but the chances are slim given their principled approach to the sanctity of the single market and not wanting to throw Ireland away.”
On the market, Marks & Spencer (LON:MKS) fell 1.5% as the trackers began offloading stock ahead of the retailer’s possible relegation from the Footsie.
Elsewhere, the market was fairly subdued with NMC Healthcare (LON:NMC) continuing to gain traction after bid approaches for a stake in the private hospitals operator.
7am: FTSE 100 set to make a positive start to new trading month
The FTSE 100 is seen starting the week on the front foot as the pound remains under pressure amid concerns the UK could crash out of the European Union without a deal next month.
London’s top tier index is expected to open 28 points higher from Friday’s close of 7,207.
MPs will this week seek to bring forward legislation against a no-deal Brexit in parliament.
Prime Minister Boris Johnson has threatened to sack Tory MPs who vote for a plan to block a no-deal Brexit. He has said the UK must leave the EU with or without a deal on October 31 and last week was granted permission to suspend parliament in order to push through his plan, prompting opponent MPs to launch legal action.
“Losing majority and blocking a no-deal Brexit would mean an extended Brexit deadline beyond October 31st, a scenario utterly dreaded by Boris Johnson and investors who are ready to swap some certainty against a prolonged period of negotiations with the EU,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group.
“On the other hand, it would obviously be shocking for the British democracy if the Parliament didn’t have a final say in such a historically critical decision. As a result, September will likely be no respite for the pound.”
The pound was flat against the dollar at US$1.2164 ahead of the opening bell.
On Monday’s agenda, investors are awaiting results from Dechra Phamaceuticals PLC (LON:DPH) and Centralnic PLC (LON:CNIC). In economic data, there is the Markit UK purchasing managers’ index report and British Retail Consortium sales data.
Proactive news headlines
CentralNic Group PLC (LON:CNIC) reported a tripling of underlying revenue and earnings and said it is confident that full-year results will be around the top end of current market forecasts.
BlueRock Diamonds PLC (LON:BRD) shares sparkled on Monday after the miner reported that revenues and production had more than doubled in its first half.
One of Ashley House PLC’s (LON:ASH) long-awaited extra care facilities has reached financial close after months of legal delays. The 54-apartment building in Romsey was built by Morgan Ashley – the company’s joint venture with Morgan Sindall.
Hurricane Energy Plc (LON:HUR) says the Lancaster field’s early production system has been operating “above guidance”. Between first oil on 4 June and 17 August, production averaged 14,400 barrels of oil per day.
Motif Bio PLC (LON:MTFB) said it will pay interest only on its loan from Hercules Capital after the latter pushed out the latest amortisation date a month to October 1 to support Motif’s cash management efforts.
Faron Pharmaceuticals Oy (LON:FARN) said recent data from its Clevegen phase I/II study will be the subject of a poster presentation at a world-leading cancer conference.
Coinsilium Group Limited (LON:COIN) has hailed progress from Indorse, a company in which it holds a 10% stake, following an agreement where India’s largest media house invested up to US$6.5mln in the firm.
Cabot Energy Plc (LON:CAB) has updated on its financing arrangements as it enters into a term-sheet for a C$5mln loan. The non-binding term sheet with a private energy lender is expected to be at asset level and would be non-recourse to Cabot.
Major announcements due Monday, September 2
Finals: Dechra Pharmaceuticals PLC (LON:DPH)
Interims: Centralnic PLC (LON:CNIC), Globaltrans S PLC (LON:GLTR)
Economic data: Markit UK manufacturing PMI, BRC sales
Business news headlines
- HSBC UK is to push ahead with plans to lend an extra £35bn to homeowners as chief executive Ian Stuart denied claims that the bank's expansion was distorting the market, according to the Financial Times.
- Accounting firm KPMG has warned that UK house prices could fall by as much as a fifth if Boris Johnson pursues a no-deal Brexit, The Guardian reported.
- Pub group Greene King, Carpetright, Dixons Carphone and property firm Berkeley Group are braced for investor revolts over executive pay this week at their annual shareholder meetings, the Daily Mail reported.
- In an interview with The Telegraph, Advent has dismissed fears that US ownership of Cobham operations would damage Britain’s industrial base by moving jobs abroad.
- According to The Times, National Grid boss John Pettigrew has said preventing a repeat of the worst blackout in a decade by running more backup power plants could cost consumers £1bn a year.