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FTSE 100 finishes in red as traders fret about UK election uncertainty

Last updated: 17:12 29 Oct 2019 GMT, First published: 06:45 29 Oct 2019 GMT

BP PLC -
  • FTSE 100 closes down 25 points

  • Sterling higher as MPs begin debating December 12 election

  • BP is top Footsie laggard

5.10pm: London stocks close down

FTSE 100 index closed in the red on Tuesday as traders grew wary of the potential for a UK general election before the year's out.

The UK index of leading shares finished 25.02 points lower at 7,306.26. The FTSE 250 fell 41.83 points to close at 20,168.33.

Members of Parliament are debating a bill, which could lead to a national vote on December 12 this year. It comes as Labour, the main opposition party, says it will back the poll, as it says the 'no deal ' Brexit risk has been removed after the EU allowed the three month extension.

Sterling gained 0.16% against the US dollar.

"Hoping that an election will create some Christmas clarity – however misguided that belief might be – the pound just about swung positive after the news," noted  financial analyst Connor Campbell at spread better Spreadex.

David Madden, at CMC Markets, added: "Today the chatter of an election is heating up. Elections can be risky as Mrs May found out in 2017. The Conservatives are polling well ahead of the Labour Party but traders have learned not to rely on opinion polls given the events of the past three years, hence why equities are down."

Top laggard on Footsie was oil behemoth BP (LON:BP.), which sank 3.8% to 492.55p after the group posted a 41% fall in third-quarter underlying replacement cost profit, used as a proxy for net profit, and a key metric to assess profitability of oil companies.

4.12pm: FTSE 100 lower

London stocks are continuing to very gradually crawl away from their worst losses of the day, led by miners, financials and overseas earners.

The Footsie is down 36 points or 0.5% at 7,295.49.

Top of the leaderboard is 3i Group plc (LON:III), with Standard Life Aberdeen Plc (LON:SLA) high up the list, International Consolidated Airlines Group SA (LON:IAG) and Melrose Industries PLC (LON:MRO) not far behind.

The pound has touched $1.3, up 0.2% on the day, as it struggles to make sense of the conflicting noises from parliament.

A Downing Street spokesman confirmed the government would pull the general election bill if amendments are passed to allow EU nationals and 16 and 17 year olds to vote in the election, saying it would be "administratively impossible".

Westminster watchers suggested that such amendments are unlikely to even be given a vote.

Among the fallers today is Royal Mail Group PLC (LON:RMG), where the shares were returned to sender and downgraded to 'underweight' by JPMorgan Cazenove, where analysts cut their price target to 192p from 252p.

There was also a downgrade to 'neutral' for Royal Bank of Scotland PLC (LON:RBS) from UBS, which cut its price target to 235p from 255p as it removed its previous 'buy' rating. (READ more here.

Over in the States, President Trump has been trying to put more pressure on the Federal Reserve to lower interest rates, though policymakers are expected to deliver one anyway.

The Dow Jones and S&P 500 have now slipped very slightly into the red, both less than 0.1% lower however. The Nasdaq Composite has edged lower, now down 35 points or 0.4%.

US data on consumer confidence from the Conference Board earlier came in below expectations, with the index rising to 125.9 from 125.1. Economists had been looking for 128.0.

House price data was mixed, with pending home sales beating expectations but the Case-Shiller index coming in short.      

2.40pm: UK stocks in the red, S&P 500 hits new record

Sterling is crawling higher in afternoon trading as MPs start debating the government’s proposal to call an election on 12 December, or maybe the day before, or maybe three.

Before Boris Johnson stood up to speak, there was some greasing of the wheel as well as some political spanners being thrown in the works.

The Commons first approved the timetable for the general election bill to pass through all stages of the House today, a speeded-up process that will be needed in order to schedule an election before Christmas.

The pound seemed to like this, climbing into positive territory, up 0.2% to $1.2892.

An early amendment to the bill was passed that will allow MPs to try and amend the election bill as well as the government, though there were reports from lobby journalists on Twitter that the government could pull the bill if it decides it doesn't like the way the sands are shifting.

Meanwhile, over in New York, stock indices were mixed after the opening bell.

The Dow Jones was up 0.2% to 27,146.8 and the S&P 500 continued to nudge new all-time highs, creeping up another 0.2% and notching up another record at 3,047.87 along the way. 

However, the tech-heavy Nasdaq Composite retreated 0.2% after a disappointing earnings update from Google owner Alphabet Inc (NASDAQ:GOOG) overnight. 

A shot in the arm for the Dow came from big pharma pair Merck & Co Inc (NYSE:MRK) and Pfizer Inc (NYSE:PFE) as both delivered a Street-beating third quarter.

1.10pm: US stocks predicted to drop

Wall Street is expected to open slightly lower, with investors on standby for tomorrow’s Federal Reserve announcement.

The Dow Jones futures market is poised to open 41 points below yesterday’s close, at US$27,012.

The Fed is expected to announce its third interest rate cut this year hoping to cushion business against economic volatility.

Chris Beauchamp, IG’s chief market analyst called the overall tone is "still positive", with investors looking to get onboard the “rally train” ahead of any upswing from the Fed decision.

Beauchamp noted though that equities are likely to slide from today and tomorrow, and that with indicators like put/call ratios “already close to ‘greed’ rather than ‘fear’ readings”, a bout of volatility to the downside “cannot be ruled out”.

Meanwhile, the FTSE 100 recovered some ground, now down only 40 points at 7,291.77.

12.40pm: FTSE in the red as Labour backs pre-Xmas election

As Britain’s first December general election since 1923 looms, UK stocks seen as facing political risks are moving lower, led by water companies United Utilities Group PLC (LON:UU.), Severn Trent PLC (LON:SVT) and Pennon Group PLC (LON:PNN).

This is because of Labour’s plans to renationalise the UK’s key utility companies if it gains power, with British Gas owner Centrica PLC (LON:CAN), SSE PLC (LON:SSE) and National Grid PLC (LON:NG.) also dropping further into the red as Tuesday’s session wears on.

The Twittersphere is alive with election buzz already and polling updates, including on what the exact date of the election will be and of course if anyone will win a majority.

The Footsie is erasing some of its earlier losses now, down 43 points or 0.6% at 7,288, with the pound treading water.

11.55am: Stocks fall further as Labour backs pre-Xmas election

The FTSE 100 has lurched lower as the pound climbs "curiously" on the back of the Labour Party’s decision to back a December general election.

The UK benchmark index is down 55 points or 0.75% to 7,276.58, while sterling has recovered from earlier losses against the dollar to 1.2865.

Labour leader Jeremy Corbyn is now willing to fight an election before Christmas as no-deal is temporarily “off the table” after the EU yesterday granted a Brexit extension until 31 January.

Boris Johnson plans to put forward a House of Commons vote later today for a 12 December election, but Downing Street is reported to be willing to accept an amendment for an election on 11 December.

The date of 9 December has also been mooted.

“Little is straightforward here, as is seemingly always the case with Brexit,” said market analyst David Cheetham at XTB.

He said sterling’s initial rise was “quite curious” as general elections are often seen as bringing heightened uncertainty and therefore negative in the near-term for affected markets.

“But in this case there is a hope that it will bring an end to the present quandary we find ourselves in.

“The pound will likely stay fairly well supported unless a no-deal outcome becomes more than marginally possible once more and there is also the hope that a softer version of Brexit than the latest WAB could receive greater support.” 

Cheetham also noted there was potential for “wrecking ball” amendments to the vote, including for lowering the election voting age to 16.

10.50am: FTSE dragged down by BP dividend disappointment

London’s blue chip benchmark is heading lower in sync with index heavyweight BP after its mixed set of quarterly results.

The British oil supermajor swung to a third-quarter loss as profits were hit by falling oil prices and hurricane season, but strong trading for the Downstream division and the contribution from its stake in Russia’s Rosneft meant the numbers beat analyst expectations.

On a call with analysts later in the morning, the company's finance chief said BP was unlikely to raise its 2019 dividend. 

This saw the shares battered lower, with the stock now down 3% to 495.2p.

READ: BP swings to loss in third quarter

Analysts were mostly sanguine, however, even though debt gearing remains well above the usual range at around 35.6%.

Nicholas Hyett at Hargreaves Lansdown said: “BP is relying on more disposals to help get debt under control by the middle of 2020. With market conditions what they are that might be less than ideal, but it’s probably a necessary evil.”

But analysts at RBC saw the positives as BP decided to remove its scrip dividend option: “Based on our recent conversations, we think some investors have been calling for a dividend per share increase in the near term, however given where the balance sheet stands, this is a prudent step in our view.”

Over at UBS, the number crunchers welcomed the ending of the scrip option, saying it was “simplifying the shareholder distribution message, signalling normalisation of the company's financial position and setting up for possible full share buy-backs in due course”.

The FTSE 100 is now down 32 points (0.4%) to 7,298.84.

9.40am: Banks and housebuilders weigh on Footsie

The FTSE 100 is being dragged down by domestic-focused stocks in early trade on Tuesday, with banks, housebuilders, retailers and utilities among the main losers.

Brexit and election caution is what's behind this lurch lower, as parliament is set to begin debating the prospect of a December election just after lunch.

As well as the big weight from BP, Centrica PLC (LON:CNA) and United Utilites Group PLC (LON:UU.) are fallers from the utilities sector; Lloyds Banking Group PLC (LON:LLOY), Royal Bank of Scotland Group PLC (LON:RBS) and Barclays PLC (LON:BARC) in the banks; Wm Morrison Supermarkets PLC (LON:MRW) and Kingfisher plc (LON:KGF) in the retailers; and Taylor Wimpey PLC (LON:TW.) and Barratt Developments PLC (LON:BDEV) are down the bottom of the table in early trading.

Not helping was news that house prices continued to see subdued growth in October, according to data from building society Nationwide.

London’s blue chip index is 29 points or 0.4% lower at 7,303.62, while the pound is down 0.4% at 1.2815.

The reason sterling is not sliding even further despite all the uncertainty is, says Craig Erlam at Oanda, "regardless of what happens, no deal remains very unlikely and traders aren't particularly concerned about the political nonsense which takes place in the interim".

What Boris Johnson does if he fails to win today's vote on a one-line bill to schedule an election on 12 December is anyone's guess, Erlam added.

"The very reason why an election is in doubt is exactly the reason it is needed, numbers. Unfortunately, the opposition aren't particularly keen and Johnson has worked very hard over the last two months to convince MPs that they can't trust him, to the point that they now don't. It's not impossible to get this done but he may be forced to make concessions."

8.35am: FTSE limps lower as BP investors left unimpressed

So, Brexit is the gift that keeps on giving. After the Commons rejected a call for a December 12 election, Prime Minister Boris Johnson will try again Tuesday – this time with the backing of the Lib Dems and the Scottish National Party.

With only a simple majority required (Monday’s motion to overturn fixed-term parliament rules required two-thirds of MPs to back it), Johnson appears to have a better shot at a pre-Christmas poll. He hopes it will provide him a better mandate (backed by a fatter majority) for his EU exit deal.

Against this backdrop, the FTSE 100 opened 19 points lower at 7,312.70.

While BP’s (LON:BP.) third-quarter results were slightly above consensus, the market remained wary following a sharp slide in earnings as it was hit by weaker global demand and contracting chemicals industry margins. The shares receded 0.6%.

“Today’s numbers weren’t expected to come in close to the levels seen in Q2 given the decline in oil prices seen since then; however they still show a company that is nimbler and more efficient than it was a decade ago,” said Michael Hewson, analyst at CMC Markets.

Stepping down a division to the FTSE 250, Royal Mail (LON:RMG) was off 4.5% amid worries it may be hit by industrial action in the run-up to its busiest period.

6.45am: FTSE 100 set for limp start

The FTSE 100 is expected to continue dragging its feet at Tuesday’s open, as markets wait and see whether Boris Johnson has any more success in his push for a December election.

London stocks were being called four points lower on the IG spread betting platform, having finished very modestly higher at 7,331.28 the day before.

On Wall Street overnight, S&P 500 recorded a new all-time high just above 3,044 in early trading, before treading water for the rest of the session to finish at 3,039.4, a gain of almost 17 points or 0.6%.

The Dow Jones added 0.5% to close at 27,090.7, while the tech-laden Nasdaq jumped 1% to 8,325.98.

Sterling regained some ground against the dollar to $1.2859 after the EU granted the UK a Brexit “flextension” until 31 January, leading to reports that the government will sadly have to melt down the commemorative 50p coins that were due to celebrate the planned 31 October exit date.  

In an evening vote, Boris Johnson was again defeated in parliament as he failed to win a vote that required two-thirds support of MPs for his proposal for a 12 December general election.

Brexit will remain the main theme on Tuesday, as the PM returns to the political ring with a slightly different approach, Downing Street revealed.

This will be for a vote on a one-line bill seeking to amend the Fixed-Term Parliaments Act to hold an election on 12 December, which will only need a simple majority in order to provide a rare Commons victory for Johnson.

“Although Parliament tonight voted against holding a general election, it seems likely that MPs will soon change their minds and in the next day or two will vote for an election that will decide the fate of Brexit,” said Paul Dales of Capital Economics.

For the economy and the financial markets, neither election result looks particularly appealing, Dales said.

“If the Conservative Party won, business profits would be supported by Tory policies. But the Conservatives would pursue a hardish Brexit in the form of Boris Johnson's deal, there would be some chance of a no-deal Brexit on 31st January and also a chance of something similar to a no-deal in December 2020.”

Meanwhile, he predicted that a Labour government “would rule out a no-deal on 31st January or in December 2020 and would pursue either a softer Brexit (probably involving the UK staying in the EU’s customs union) or a second referendum that could lead to a decision to remain. 

“But Labour’s policies imply that its other aim would be to shrink the share of GDP that goes to businesses as profits.”

How's BP's cash flowing?

Investors will be eager to see how far declining oil prices have affected oil major BP (LON:BP.) when it provides a trading update on Tuesday.

Brent crude prices have fallen by a fifth since April with trade war tensions accompanied by intrigues in the Iranian gulf, down below $60 a barrel for Brent crude at the start of October.

BP’s shares have responded in tune with a 12% drop from their year-high in March and were hovering at 512p overnight.

Earnings are likely to have been damaged by the dip in prices, as well as ongoing environmental concerns, but for most investors the cash flow will be the all-important number, since this will dictate the dividend.

Tense times for trader Plus500

Ever-volatile Plus500 Ltd (LON:PLUS) is due to give a trading statement, hoping to continue the uptick in its last quarterly revenues.

Back in July, the online trading platform, which is headquartered in Israel but operates a subsidiary in London, said turnover was up to US$148mln helped by increased volatility in financial markets.

Investors will be hoping to see last quarter’s gain in customers spilling over into higher revenues in the third quarter.

Shares have more than halved since February, hovering at 788p on Friday, following a profit warning that said tighter regulations were causing a slump in CFD (contract for difference) trading, sending revenues down from a mega-year in 2018 based on surging cryptocurrencies.

Significant events on Tuesday 29 October:

Interims: Bloomsbury Publishing Plc (LON:BMY)

Trading statement: BP PLC (LON:BP.), Hunting PLC (LON:HTG), Plus500 Ltd (LON:PLUS)

AGMs: Vela Technologies PLC (LON:VELA)

Economic announcements: US consumer confidence, US home sales

Business headlines

Financial Times

- TikTok-owner ByteDance, the $75 billion Chinese start-up, is eyeing an initial public offering in Hong Kong.
- Vodafone’s joint venture in India is under threat after a supreme court ruling left the telecom group’s local unit facing billions of dollars in retrospective fees, interest and fines.
- AT&T has placated the activist investor Elliott Management with a “three-year action plan” to sell up to $10 billion of assets and reconfigure its board.
- Operating profit at Commerzbank jumped 29% in the third-quarter, as Germany’s second-biggest bank clamped down on costs.

The Times

- Google’s parent company Alphabet announced a profit of $7 billion for the three months to the end of September, weaker than expected, despite strong growth in its lucrative online advertising.
- Political uncertainty and a slowdown in global growth have cut the flow of new foreign direct investment to Britain by more than half.
- The group behind the Soho House private members’ clubs has raised $100 million in equity investment, giving it a $2 billion valuation and further delaying any plans to list the business.
- Spotify brought in more paying subscribers than had been predicted in the third quarter and made an unexpected profit, sending shares in the world’s most popular music streaming service up 18.6%.
- The government has shortlisted five sites for the first Virgin Galactic spaceport in Britain as the company made its stock market debut in New York.
- Beyond Meat, the plant-based burger business, recorded a maiden net profit of $4.1 million in the three months that ended on 28 September.

Guardian

- Britain’s biggest retailers have been ramping up their stockpiling efforts to record levels in the run-up to Brexit, according to the Confederation of British Industry.
- John Lewis trials sustainability schemes at Oxford store, including ban on 5p single-use plastic bags and replacement of bubble wrap with eco-wrap.
- The decision by the billionaire Barclay brothers to put the Daily and Sunday Telegraph up for sale could herald the breakup of a vast but faltering business empire.
- Labour has demanded Sajid Javid immediately publish economic forecasts prepared for the budget to ensure the government does not avoid public scrutiny before a potential election.

Telegraph

- Embattled Aston Martin suffered a fresh blow as Bank of America Merrill Lynch, the lender behind the luxury car maker’s disastrous float, urged investors to dump its shares.
- Fitbit’s shares skyrocketed yesterday after Google's parent company Alphabet reportedly made a bid for the troubled activity tracker company.
- Former Skyscanner and Just Eat backer Vitruvian Partners has won the race to buy Sykes Cottages in a deal worth £375m.
- Volkswagen is seeking to take on tech giants such as Google’s Waymo in the race to create self-driving systems for cars.
- Premiership rugby sponsor Gallagher has been told to publicly apologise for allegedly making racist remarks to an ex-employee after an explosive trial over the executive’s exit came to a close.

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