FTSE 100 closes 13.75 points lower
Pound up a shade against the greenback
Crunch vote later in the House of Commons
5.15pm: Footsie weighed by Brexit troubles
The FTSE 100 index closed in the red on Tuesday as the political rumblings in the UK reached fever pitch, while other global indices also headed south on continuing US/China trade war uncertainties.
The UK blue chip index finished 13.75 points lower at 7,286.19, while its mid-cap cousin, the FTSE 250 index shed 17.41 at 19,464.14.
On currency markets, the pound was up a bit against the dollar, adding 0.17% to US$1.2086 following a recent slide.
Members of Parliament are currently making a bid to block Prime Minister Johnson's possible 'no-deal' Brexit at the end of October ahead of the proguing of Parliament from the end of this week.
But that in turn could mean a snap UK general election because the Prime Minister wants to use the threat of a no-deal Brexit as a bargaining tool with the EU. The upshot - no one knows what's going to happen next.
"Stocks are in the red heading into the close as traders are worried about the state of politics. The Conservative party have lost their majority in the commons as Philip Lee defected to the Lib Dems," noted David Madden, analyst at CMC Markets.
"Tonight, there is a crucial vote in the commons whereby law makers will vote on a three month extension, and depending on the outcome, a general election could be announced in the next 24 hours. The political rumblings in the UK, and the worries about US-China trade spat is weighing on sentiment across the board."
In New York, the Dow Jones Industrials was down over 300 points by London's close.
3.50pm: US manufacturing shrinks
The US Institute of Supply Management revealed manufacturing output across the Atlantic shrank in August.
The ISM index fell to 49.1 last month from 51.2 in July, compared to analysts' expectations for a reading of 51.3. A reading below 50 signals a contraction in sector activity.
The US data followed weak manufacturing data on this side of the pond, released yesterday. The Markit/CIPS UK purchasing managers' index dropped to 47.4 in August from 48.0 in July.
3.20pm BP considers snapping up PKN Orlen assets
BP PLC's (LON:BP.) European chief has said the company may be interested in buying the assets of Polish oil refiner PKN Orlen if they are put up for sale as a result of PKN's proposed acquisition of rival Lotus.
Last month, European Union antitrust regulators said PKN’s bid for Lotos may reduce competition in Poland, meaning the company may need to sell some of its assets to get the deal approved.
BP has the largest petrol station network in Poland after PKN Orlen.
“If the EC (European Commission) decides that the market structure needs opening up a bit after the merger, then of course we and other companies would be happy to enter into any discussion about assets that potentially could be for sale,” BP head of Europe Peter Mather said in an interview with Reuters on the sidelines of an economic conference in Poland.
“That could be anything across the whole value chain."
2.50pm: US stock open lower
US stocks dropped at the open as concerns about a trade war between the US and China continued to drag on investor sentiment.
US and China tariffs on each other’s imports started on Sunday while Bloomberg News reported on Monday that Beijing and Washington were struggling to agree on a schedule for talks to end their truce.
The Dow Jones fell 254 points to 26,149, the S&P 500 decreased 16 points to 2,909 and Nasdaq fell 35 points to 7,927.
2.20pm: Goldman Sachs expects MPs to legislate against no-deal Brexit
Goldman Sachs said it expects MPs to legislate against a no-deal Brexit before parliament is suspended.
"We do not envisage opposition MPs giving their consent to a general election in mid-October," the investment bank added.
"In response, we think the prime minister will re-engage in Brexit negotiations with the EU, aiming to confront MPs in late October with a binary choice between a Brexit deal and a pre-Brexit general election.
"We see this binary choice as PM Johnson’s best attempt to coerce pro-Leave MPs on the Labour backbenches and purist Eurosceptics on the Conservative backbenches into delivering on the result of the Brexit referendum.
"Faced with the electoral threat posed by the Brexit Party and the Liberal Democrats, we expect a sufficient number of those pivotal MPs to acquiesce to a Brexit deal which — in substance — is similar to the Brexit deal that was repeatedly rejected earlier in the year.
"We leave our odds on this 'deal' base case unchanged at 45%.
In response to the prolonged suspension of Parliament but ahead of this week’s legislative counter-attack by backbench MPs, Goldman raised its probability on a no deal Brexit from 20% to 25%.
The investment bank lowered its probability on no Brexit from 35% to 30%, but maintained its view that a pre-Brexit general election preserves a plausible path to a second referendum.
1.40pm US stock futures drop
US stock futures are pointing to a lower open on the first day of trading this week after markets were closed Monday for the Labor Day holiday.
Dow Jones Industrial Average futures fell 224 points to 26,182, S&P 500 futures dipped 17 to 2,902 and Nasdaq futures declined 50 points to 7,639.
The US added tariffs of 15% to US$112bn of goods from China on Sunday and in retaliation Beijing triggered the imposition of additional tariffs on US goods including crude oil.
The news sent US oil futures down 2% on Tuesday.
1.00pm: Just Eat shares fall as analysts doubt Takeaway.com takeover
Just Eat PLC's (LON:JE.) shares are down 2% to 759p after analysts suggested a takeover by Dutch rival Takeaway.com could soon fall apart or be hijacked by rival bidders after a second major investor objected to the "grossly inadequate" terms of the deal.
Eminence Capital, a hedge fund with what it says is a 4.4% beneficial holding, put out a statement suggesting the agreed Takeaway.com bid for Just Eat significantly undervalued the FTSE 100 takeaway food specialist, following similar resistance from fellow investor Aberdeen Standard.
Broker Liberum said it is "increasingly likely the Just Eat bid will not be agreed".
"We would also agree the bid undervalues the company and it is likely that other bidders will emerge, with the soon to be listed Prosus the most likely candidate in our view," analysts said, adding that the likes of Amazon and Uber Eats are likely to be discouraged by the recent pronouncements by UK competition authorities.
12.00pm: MPs prepare to vote on bill to block no-deal Brexit
MPs are gearing up to vote on a bill to extend the Brexit date from October 31 to at least the end of January 2020 in a bid to avoid a no-deal scenario.
Those opposed to Boris Johnson's plan for the UK to leave the European Union with or without a deal by the end of October are hoping to get the bill passed this week before parliament is suspended for five weeks ahead of the Queen's Speech on 14 October.
Government officials have warned the prime minister would call for an election on 14 October if the bill passes.
Johnson has also threatened to sack Tory MPs that back the bill, meaning if a general election is held and the Conservative Party gains a majority, he could push through a no-deal Brexit.
An emergency debate on Brexit could be held later today.
An application for an #emergencydebate on the European Union (Withdrawal) has been submitted. The Speaker will consider it later today. If successful, the debate takes precedence over today's scheduled business under Standing Order 24.https://t.co/mmWOWfREgI pic.twitter.com/vnZFlbNRBA— UK House of Commons (@HouseofCommons) September 3, 2019
11am: Ferguson a top riser
The plumbing and heating products supplier’s repositioning towards North America was further enforced as chief executive John Martin will in November be replaced by current US CEO Kevin Murphy, who was promoted after a decade-long stint as chief operating officer.
Martin said the demerger of UK-based Wolseley, the original core of the business, from Ferguson will enable both business “to focus on accelerating the execution of their independent plans, providing clear investment propositions for each business”.
Ferguson shares are up 2.9% to 6,322p.
“This will be music to the ears of American activist investor Nelson Peltz, whose Train Partners vehicle took a 6% stake in June and pointed out that Ferguson traded at a substantial valuation discount relative to its US peers,” said AJ Bell’s Russ Mould.
“Ferguson is already running a share buyback programme but tidying up the corporate structure to make the company a pure play on the USA would be one way of potentially closing up the discount, especially as the non-US operations are way less profitable than the American ones.”
10.30am: Weak pound drags on banks, supermarkets and housebuilders
A drop in the value of the pound below US$1.20 has put pressure on FTSE 100 housebuilders, banks and supermarkets.
“The market hates uncertainty and that extends to politics. The current chaos around the UK exiting the EU threatens to push down sterling even further unless we get a clear idea of what is happening and when,” said Russ Mould, investment director at AJ Bell.
10.00am: UK construction PMI slips
UK construction output contracted by more than expected in August, led by the sharpest fall in new work since March 2009 at the height of the financial crisis.
The IHS Markit/CIPS UK construction purchasing managers’ index fell to 45.0 last month from 45.3 in July. Analysts had expected a reading of 49.9.
A level below 50 signals a contraction in sector activity.
The decline was driven by commercial building and survey respondents said Brexit uncertainty had caused clients to tighten their budgets.
Tim Moore, economics associate Director at IHS Markit, said: "Concerns about softening demand for new projects resulted in a fall in business optimism across the construction sector to its weakest since December 2008. This provides an early signal that UK construction companies are braced for a protracted slowdown as a lack of new work to replace completed contracts begins to bite over the next 12 months."
It follows Monday’s UK manufacturing PMI, which fell to a seven-year low of 47.4 in August from 48 in July.
The pound is now down 0.66% versus the dollar at US$1.1994.
8.40am: FTSE opens higher
Equity traders took a sanguine view of the latest political machinations around Brexit as the blue-chip index defied early predictions to open in positive territory.
In fact, it was the pound, languishing at US$1.1968, that took the early pummelling as Boris Johnson faced down rebels and Remainers with a threat of a general election.
The Prime Minister is unwilling to back away from a No Deal exit from the EU, so is hoping an October 14 election will help lance the boil, providing him with a working majority to pursue his own Brexit strategy.
Still, he has to enlist a two-thirds parliamentary majority in order to go to the polls and there is no guarantee opposition leader Jeremy Corbyn will heed the call.
“There is more downside risk and very little to give bulls encouragement,” said Neil Wilson, analyst at Markets.com, referring to sterling’s demise.
“Ignoring the flash crash, we are very much in uncharted waters here,” he added, stating we could see the pound go as low as US$1.10.
“Elections are never easy to call – the risk of Corbyn to UK assets is probably greater than a no-deal Brexit, after all,” Wilson went on.
“The outlook for sterling may well worsen if there is an election and will certainly deteriorate if it’s a no-deal.”
Turning to the stock market, volumes were still fairly light as traders began to return to their desks after the rather shorter than usual summer break.
Builders’ merchant Ferguson (LON:FERG) led the Footsie pack, rising 2.3% after unveiling plans to do the splits.
On the FTSE 250, Restaurant Group’s (LON:RTN) latest trading figures apparently failed to pass muster as the stock fell 4%.
6.30am: Footsie called a sliver lower
The FTSE 100 is set to start Tuesday just a sliver lower as the market continues to be preoccupied with the latest layer of political uncertainty, bracing for a possible pre-Brexit snap election.
CFD firm IG Markets is calling the London benchmark down 1.5 points, making a price of 7,285 to 7,288 with just over an hour to go until the start of trading.
Whilst UK equities appear sanguine currency markets have been seeing more volatility with the pound again down notably - something that itself supports a certain swathe of the FTSE 100’s dollar earning multinational stocks.
There’s now less than two months until the Brexit deadline and investors can increasingly expect UK politics to steer or at least distract trading in London.
The most recent attention has been on the possibility of a snap general election and the apparent gamesmanship taking place in Westminster.
“Mr Johnson doesn’t want a general election, and he feels the UK’s chances of getting a deal from the EU have increased,” said David Madden, analyst at CMC Markets.
“Today’s vote about a possible extension will determine the next course of action, and should MPs try and block a no-deal Brexit by obtaining an extension, the Prime Minister would likely call a general election, and that might put further pressure on the pound.”
Elsewhere, there was no action on Wall Street with the market closed for Labor Day.
In Asia, Japan’s Nikkei edged 0.1% higher to trade at 20,641. Hong Kong’s Hang Seng dipped 0.21% to 25,577, the Shanghai Composite similarly was 0.16% lower at 2,919.
Around the markets:
- Pound: US$1.2034, down 0.27%
- Gold: US$1,525 per ounce, up 0.44%
- Brent Crude: US$54.82 per barrel, down 1.04%
- Bitcoin: US$10,398, up 6.4%
Proactive news headlines:
Synnovia PLC (LON:SYN) is being taken private in a deal that values the company at £48.8mln. A fund advised by California-based Camelot Capital is offering 125p a share, a 43% premium to Friday’s closing price.
It’s all change at Rose Petroleum PLC (LON:ROSE) after a series of moves designed to create a “well-balanced, diversified and experienced board”. Chairman Colin Harrington is moving to become chief executive, while independent director Rick Grant, appointed at the end of June, will step into Harrington’s role, but in a non-executive capacity.
Significant announcements expected on Tuesday September 3:
Interims: Alfa Financial Software Holdings PLC (LON:ALFA), Dalata Hotel Group Plc (LON:DAL), Frenkel Topping PLC (LON:FEN), Gamma Communications PLC (LON:GAMA), Impact Health PLC (LON:IHR), India Cap PLC (LON:IGC), IQE PLC (LON:IQE), Johnson Service PLC (LON:JSG), Michelmersh Brick Holdings Plc (LON:MBH), Restaurant Group PLC (LON:RTN), STV Group PLC (LON:STVG), Wentworth Resources PLC (LON:WEN)
Economic data: Markit UK construction PMI, Markit US manufacturing PMI, ISM US manufacturing
- Why the UK might already be in recession – Sky News
- 400 jobs at risk as Tata shuts plant – The Times
- One in six families is stockpiling food for Brexit – Daily Mail
- Nickel hits five-year high as price surge continues – Financial Times
- Shareholders ‘ignored’ as De La Rue names new boss – The Times
- No-deal Brexit could knock 6% off house prices next year – This is Money
- ECB board member slams “cartel-like” Libra cryptocurrency – Financial Times