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FTSE 100 closes firmly higher as traders upbeat on US, China trade, possible Brexit deal

The UK's blue-chip benchmark closed 60.72 points up at 7,247.08 on the day. On the week as a whole, it added nearly 1.3%

Jupiter Fund Management PLC - FTSE 100 fails to get invitation to the party
FTSE 100 closed higher on Friday as traders basked in positive macro news
  • FTSE 100 closes over 60pts up; index is higher on week too

  • FTSE 250 surges as hopes of a Brexit solution rise

  • US markets up

5.20pm: FTSE 100 closes higher

FTSE 100 index closed higher on Friday as Wall Street shares also rose as traders were treated to burst of positive macro news on the US/China trade front and on Brexit.

The UK's blue-chip benchmark closed 60.72 points up at 7,247.08 on the day. On the week as a whole, it added nearly 1.3%.

Meanwhile, the more UK company focused FTSE 250 fared even better, surging 805.90 points up to close at 20,041.71, as optimism ramps up over a possible Brexit deal.

"In a nice change of pace, we heard positive mood music yesterday from the meeting between Prime Minister Johnson, and Ireland’s Leo Varadkar," said David Madden, market analyst at CMC Markets.

"The politicians said there is a ‘pathway’ for an agreement being struck, but both sides have been guarded when it comes to the finer details."

Meanwhile, US-China trade talks have entered their second day and the negotiations are reportedly going well so far.

In the US, the latest consumer sentiment data was positive, which also added to the optimistic mood.

The Dow Jones Industrial Average added 390.54 points at 26,886, while the S&P 500 gained 42.49 points at 2,980.49.

3.05pm: US shares open higher

US markets have got off to a flyer ahead of the trade talks scheduled today between President Trump and China’s vice premier, Liu He.

The Dow Jones was up 366 points (1.4%)at 26,863 and the S&P 500 was up 41 points (1.4%) at 2,979.

In London, the FTSE 100 has come off the top but is still sporting a 36 point gain (0.5%) at 7,223.

That’s despite a stonking performance by sterling on the foreign exchange markets on hopes that a way out of the Brexit jungle has been sighted by Boris Johnson and Irish Taoiseach Leo Varadkar.

“After continued combative comment from Brussels earlier in the week, the complexities around the workability of the Ireland scenario took a major step in the right direction yesterday. Sterling was immediately bid up on this news, and as it was reported the Barclay/Barnier meeting took a positive step, sterling gained to hit three-month highs,” said Harry Adams, the co-chief executive officer of Argentex Group, the recently listed provider of foreign exchange services.

“If this breakout gets traction and rhetoric continues to be positive we could easily see a very aggressive rally through major levels at 1.33. Any potential deal that looks palatable with parliament would push sterling to 1.40 and beyond,” he added.

Banks are among the main beneficiaries of this Brexit euphoria.

“Banks with the biggest exposure to the domestic markets are soaring,” reported Neil Wilson at markets.com.

Taxpayer-owned Royal Bank of Scotland Group PLC (LON:RBS) was the top performer, surging 16% to 226.3p.

“On the other side of the equation, big dollar earners like Shell, Diageo and Imperial Brands are all feeling the heat from the stronger pound today,” Wilson added.

The FTSE 250 has racked up an eye-catching 608 point (3.2%) gain at 19,843.

CYBG PLC (LON:CYBG), the owner of the Clydesdale Bank and Yorkshire Bank brands, was the top performer on the mid-cap index, with a 14% gain at 127.3p.

1.10pm: FTSE 250 puts its bigger brother in the shade

Today seems like a good day to focus on the mid-cap FTSE 250 as it is putting the FTSE 100 in the shade.

Buoyed by hopes that an 11th-hour deal might be within grasp ahead of the Brexit deadline at the end of this month, the FTSE 250 has stormed higher, rising 555 points (2.9%) to 19,790, after rising above 19,900 at one point.

Its bigger brother, the FTSE 100, has almost made progress but is up just 54 points (0.8%) at 7,240.

The FTSE 100’s rise has been on the back of banks and housebuilders, all of which are inward focusing – there not being much of an export market for semi-detached houses.

“The FTSE 250, which is compiled of mainly domestically focused stocks is soaring up 2.5% [at the time of writing] from the open. The likes of Marks and Spencer, Galliford Try and Grafton Group have gains into double digits, to name a few,” reported Fiona Cincotta at City Index.

“The stocks on the FTSE 250 are very exposed to the UK economy and UK consumer sentiment. They took a big hit following the Brexit referendum and have experienced a challenging trading environment since as Brexit uncertainty has dragged on consumer confidence. A no-deal Brexit could have inflicted significant further damage on these stocks. The prospect of a no-deal Brexit being avoided is like Christmas has come earlier and this optimism is being reflected in the soaring prices.

“These will be some of the stocks to continue watching; stocks that could well push higher on increased Brexit optimism, or slip lower should fear of a no-deal return,” she added.

OneSavings Bank PLC (LON:OSB), up 12.7%, is the joint top performer among FTSE 250 constituents, while Galliford Try PLC (LON:GFRD), up 11%, was the best performing mid-cap housebuilding stock.

Barclays emerged today as a major stakeholder in OneSavings with a 7.3% stake.

Piping, underfloor heating and ventilation specialist Polypipe PLC (LON:PLP) may not be a housebuilder but it is a fellow traveller and like OneSavings, it too is up 12.7%.

Builders merchants such as Travis Perkins PLC (LON:TPK) and Grafton Group PLC (LON:GFTU) are also hitched to the housebuilding bandwagon; both are up a little more than 10%.

There’s even some love for retailers such as fallen Footsie giant Marks and Spencer Group PLC (LON:MKS), up 11%, and “sorry to hear the high street appears to be in terminal decline” condolence cards flogger Card Factory PLC (LON:CARD), up 8.5%.

 

12.10pm: The Footsie makes progress despite a strong rally by sterling

Sterling is off the canvas and ready to go another round with the dollar, despite which, the Footsie is in positive territory.

London’s index of heavyweight shares – which normally regards a strong exchange rate like Superman views kryptonite – was up 9 points (0.1%) at 7,232, reversing an earlier loss.

On the foreign exchange markets, the pound was up 1.21 cents at US$1.2565, so it is time to think about nipping over to the USA to celebrate Halloween (somewhere like Salem, perhaps) at the end of the month and simultaneously avoid the hoo-ha in the UK when the Brexit deadline passes.

“European markets are trading in the green as we look to close out the week in a positive fashion. With Trump expected to meet the Chinese Vice Premier today, there is a growing sense of optimism over a potential deal that could at least de-escalate the situation by delaying or postponing currently planned tariffs. Suggestions of a currency pact point towards a short-term solution that could appease Trump for now, buying room for both sides to continue negotiating without the threat of the December tariffs hanging over talks,” reported Joshua Mahony at IG.

“The pound has enjoyed an almighty rise off the back of yesterday’s positive statement from Irish Taoiseach Leo Varadkar who points towards a potential pathway to success in talks between the two sides. Rumours of a new treaty to avoid Brexiteer fears of being trapped in the Irish backstop help raise hopes of an eventual deal that could pass in parliament.

“Today’s headlines are likely to be dominated by the outcome from a meeting between Barnier, Barclay and Tim Barrow, as the sides seek to ascertain a pathway to avoid a no-deal Brexit. Meanwhile, with the pound driving higher off the back of an optimistic tweet from Tusk, it is clear that GBP traders will find plenty of volatility given the raft of statements coming out from both sides,” Mahony added.

Looking at the FTSE 100 constituents, there is a very clear divide between the perceived losers from a stronger currency – companies with global brands, such as drinks giant Diageo plc (LON:DGE), fast-moving consumer goods makers Unilever PLC (LON:ULVR) and Reckitt Benckiser PLC (LON:RB.), fags makers British American Tobacco PLC (LON:BATS) and Imperial Brands PLC (LON:IMT) and drugs makers such as GlaxoSmithKline PLC (LON:GSK) and AstraZeneca PLC (LON:AZN) – and those seen as likely to benefit from a return of confidence in the UK should the Brexit mess be satisfactorily (relatively speaking) resolved.

Falling into the latter group are the banks and the housebuilders, which are notching up gains ranging up to 11.3% in the case of Royal Bank of Scotland Group PLC (LON:RBS).

In the losing group mentioned above, the losses are of the order of 2% or 3%.

READ: Lloyds and other banks surge on Brexit deal hopes

 

10.00am: Not much movement for Footsie but plenty going on beneath the surface

London’s leading shares are mixed with the weakness of big-dollar earners offset by gains for housebuilders and lenders.

The FTSE 100 was down 4 points (0.1%) at 7,183.

Fashion firm Burberry Group plc (LON:BRBY) was one of the big blue-chip fallers, sliding 3.8% to 1,970.5p after Hugo Boss put the frighteners on backers of shares in the luxury goods sector by issuing a profit warning.

Hugo Boss’s business in North America has run into tough trading conditions while its operations in Hong Kong have taken a big knock from the political unrest in the city.

The update from Hugo Boss contrasts with yesterday’s update from LVMH Moët Hennessy Louis Vuitton, which issued a set of third-quarter results that appeared to lay to rest bubbling concerns about the luxury goods sector.

In the mining sector, Rio Tinto plc (LON:RIO) was boosted by Jefferies upgrading the stock to ‘buy’ from ‘hold’. The shares were up 0.6% to 4,128p.

On the other hand, sector peer Anglo American plc (LON:AAL), up 0.1% at 1,926p, seemed unfazed by the same broker cuttings its price target to 2,200p from 2,500p.

In a similar vein, hotels and restaurants group Whitbread plc (LON:WTB) shrugged off a downgrade to ‘hold’ from ‘buy’ by Deutsche Bank, rising 0.5% to 4,059p.

In a buoyant housebuilding sector, Barratt Developments PLC (LON:BDEV) and Bellway PLC (LON:BWY) were both endorsed by UBS, which initiated coverage on both with ‘buy’ recommendations ahead of trading updates next week.

The price target of Barratt was set at 650p – the shares are currently up 3.7% at 608.6p – while the target for Bellway was pitched at 3,600p; Bellway shares are up 4.2% at 3,334p.

8.40am: FTSE off to a subdued start

London’s blue-chips opened slightly lower on balance, with the strength of sterling more than offsetting optimism relating to Sino-US trade talks.

The FTSE 100 was down 19 points (0.3%) at 7,167. On foreign exchange markets, the pound is up by around a tenth of a cent to US$1.2453.

“UK Prime Minister Boris Johnson and Irish premier Leo Varadkar said they have identified a ‘pathway’ towards a Brexit deal. Following the news, GBPUSD breached the 1.245 mark for the first time since September 25 after seeing its biggest one-day jump in seven months, before moderating slightly to converge around its 100-day moving average,” reported Han Tan, a market analyst at FXTM.

“With three weeks remaining before the existing October 31 deadline, markets can expect more twists and turns in the Brexit saga, as has been the case since 2016. This uncertainty also means that the Pound will be highly volatile as the UK endeavours to find its way out of the European Union. The 1.20 level remains the floor supporting Sterling, unless a no-deal Brexit becomes an absolute certainty,” the analyst suggested.

While the Footsie is weighed down by sterling, the mid-cap FTSE 250 – an index populated by companies less reliant on a soft exchange rate – was up 107 points (0.6%) with potash project developer Sirius Minerals PLC (LON:SXX) leading the advance.

Outside of the FTSE 350, Dart Group PLC (LON:DART), the company behind the Jet2 travel brand, climbed 11% to 1,035p as it raised profit guidance for the current financial year. (Read more here: Dart cheers Thomas Cook collapse

This is off the back of the collapse of Thomas Cook, which has also led TUI AG (LON:TUI) to add 2mln seats on its flights next summer, sending its shares 3.8% higher to 956.2p. 

Proactive news headlines

Supermarket Income Reit PLC (LON:SUPR) has acquired its third property where Sainsbury’s is the tenant, picking up the grocer's Cheltenham superstore and associated multiple purpose-built distribution docks. 

Salt Lake Potash Ltd (LON:SO4) has delivered an “outstanding” bankable feasibility study (BFS) for the commercial-scale development of the 245,000 tonnes per annum Lake Way sulphate of potash project in Western Australia.

Oil rig contractor ADES International Holding PLC (LON:ADES) has won a second deepwater drilling campaign in the Egyptian Mediterranean area.

Columbus Energy Resources PLC (LON:CERP) has teed up the drilling rig for its Saffron well in Trinidad’s South West Peninsula and is just waiting on official ministry inspection and approval.

Symphony Environmental Technologies PLC (LON:SYM), the biodegradable plastic technology firm, is one of the first companies to be awarded the new “Green Economy” classification by the London Stock Exchange.

Tremor International Ltd (LON:TRMR)’s multi-screen media platform has been ranked the most trusted in mobile, video, and global advertising.

The 15.97mln shares in Polarean Imaging PLC (LON:POLX) held by Amphion Innovations PLC’s (LON:AMP) loan facility provider as security against the loan have been sold.

Gaming Realms PLC’s (LON:GMR) founder, Simon Collins, will step down from the board with effect from Friday, having been sitting on the board as a non-executive director.

6.40am: US-Sino trade talks enthuse global markets - except the UK

Hopes of progress in the US-China trade talks have fired up global markets but the Footsie does not seem to be getting the message this morning.

Spread betting quotes indicate that London’s index of leading shares will open around 17 points lower at 7,169, wiping out most of yesterday’s 20 point gain.

“Global markets are reassured by hints that the US and China could eventually reach an interim deal after US President Donald Trump said the first day of Washington negotiations went ‘very well’,” reported Ipek Ozkardeskaya at London Capital Group.

Part of the reason why the Footsie’s response to developments in the trade talks could be the strength of sterling, which has edged higher against the dollar following the latest Brexit negotiations twist.

The UK’s prime minister, after Boris Johnson and Irish Premier Varadkar, said in a joint statement that they saw a ‘pathway’ to a possible Brexit deal.

“How exactly the leaders plan to solve the Irish customs puzzle remains blurry. Boris Johnson proposed limiting custom checks away from the Northern Ireland border, while Varadkar responded that any custom checks inside Ireland would threaten the peace within his country. Dismissing custom inspections in Ireland would mean that goods could be smuggled from the UK to the EU and vice versa. One possible solution to avoid that would be leaving Northern Ireland out of the UK’s custom zone but this would see a solid resistance from many policymakers, especially from Democratic Unionists.

“We do not want to be a wet blanket, but the optimism over yesterday’s statement could rapidly fade if the European leaders don’t adhere to what Irish Times called a ‘very significant movement’ on the Irish border enigma. Today’s meeting between Brexit Secretary Barclay and EU’s chief negotiator Barnier should throw some light on whether the recent Brexit optimism has solid founding, or it was just a flash in the pan,” Ozkardeskaya said.

Asian markets this morning have got the feel-good message, however, with the Nikkei 225 in Japan up 240 points at 21,792 and the Hang Seng index up 583 points at 26,291.

Last night, US benchmarks surged higher, with the Dow 151 points heavier at 26,497 and the S&P 500 19 points to the good at 2,938.

On the corporate front, it looks like it could be a fairly dull end to the week unless asset management updates really float your boat; both Jupiter Fund Management PLC and Man Group PLC are set to give trading statements.

Of slightly more interest to the person on the Clapham omnibus is the scheduled update from Quiz PLC, the clothing retailer that has been experiencing “difficult” market conditions.

The womenswear brand said the period between April and August reported revenues “broadly in line” with last year, after adjusting for the closure of stores and terminations of third-party online contracts.

The retailer scrapped its final dividend in June as full-year pre-tax profit almost halved due to costs related to the collapse of House of Fraser and an increased level of discounting.

Consumer uncertainty continues to loom over the outlook, with analysts expecting flat earnings performance for 2020 and suggesting stability as the main goal.

Significant announcements expected

Trading statement: Jupiter Fund Management PLC (LON:JUP), Man Group PLC (LON:EMG), Quiz PLC (LON:QUIZ)

Economic data: German CPI, US Michigan confidence index

Around the markets

  • Sterling: US$1.2452, up 0.08 cents
  • 10-year gilt: yielding 0.589%, up 12.67 basis points
  • Gold: US$1,499.60 an ounce, down US$1.40
  • Brent crude: US$59.44 a barrel, up 34 cents
  • Bitcoin: US$8,544, down US$38 cents
     

Business headlines

Financial Times

The ambitious electric car project announced by Dyson has been binned, as the company said making the vehicles would not be commercially viable

Japanese car-maker Nissan has stuck its oar in on Brexit negotiations, saying its European business model would be at risk were the company to face tariffs resulting from a “no deal” Brexit.

The Times

The Renault board is likely to dismiss chief executive Thierry Bolloré at a meeting today.

Apple and Nike have pulled some of their products from China and Hong Kong amid pressure from Beijing to withdraw support for anti-government protesters.

Regulators must ensure that Heathrow passengers do not end up paying for a third runway that is “unlikely to ever actually be built”, Willie Walsh, chief executive of International Airlines Group, has said.

Hargreaves Lansdown warned that Brexit and the trade war between America and China are knocking investor confidence, shrugging off the furore caused by the Woodford affair.

Mondi, the paper and packaging group, registered an 18% decline in profits in the third quarter due to falling prices and rising costs, the company said in a trading statement.

Pret A Manger said while its UK revenues rose by 11% on the back of 29 new stores, but underlying earnings for the sandwich chain’s 389 British stores fell by 7% amid Brexit uncertainty and rising business rates.

Online fashion retailer N Brown Group reported a return to profit in the first half of the year as it shut all of its shops to focus on online sales.

HMV is opening its largest store just eight months after a spate of closures, as its new owner, Doug Putman wants to introduce live music to his stall to revive entertainment shopping.

Delta Airlines beat Wall Street’s profit forecast after the worldwide grounding of Boeing 737 Max helped the carrier pick up business from competitors that flew the jet.

Boris Johnson can secure a Brexit deal as early as next week, the Irish prime minister claimed yesterday.

A deal between British Airways and its striking pilots is within reach, Willie Walsh, chief executive of International Airlines Group, has claimed.

The Daily Telegraph

Dozens more of Boeing’s planes were grounded after cracks were discovered in the wings, dealing another blow to the plane maker.

The film and TV industry in the UK expanded a blockbuster 9% in the three months to August, driving growth in services and rescuing the economy from a pre-Brexit recession.

The housing market stumbled again in September as new sales fell after fresh listings plunged to a three-year low amid political turmoil over Brexit.

Hargreaves Lansdown has clashed with its eponymous founder and largest shareholder Peter Hargreaves over political donations.

The Guardian

Donald Trump will meet China’s negotiating team at the White House on Friday for the latest round of trade talks.

Daily Mail

Hundreds of Thomas Cook employees could still lose their jobs, despite a rescue deal from Hays Travel as almost a tenth of the 555 former Thomas Cook shops, which were snapped up by Hays this week, are within 100 metres of the buyer’s existing estate.

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