FTSE 100 closes in the red as US-Iran tensions put off investors

The UK's blue-chip benchmark index finished around 47 points down, or 0.62%, to 7,575 on the day

WM Morrison Supermarkets PLC -
FTSE 100 joined most other markets to head lower on Monday
  • FTSE 100 index closed down 47 points
  • NMC Health leads the index lower
  • Hargreaves Lansdown off the pace despite price target hike

5pm: FTSE 100 closes in negative territory

FTSE 100 index closed in negative territory on the first day of the new trading week as US-Iran tensions ramped up and the pound firmed.

The UK's blue-chip benchmark index finished around 47 points down, or 0.62%, to 7,575, having been as high as 7,622 within the session.

The FTSE 250 closed down over 226 points at 21,761.

"The rhetoric from both sides has been upped, which has prompted traders to dump equities," said David Madden, at CMC Markets.

"The Iranian regime has suggested it will carry out an attack on US interests as a payback for the killing of one of its military commanders in Iraq last week. President Trump has warned Iran that any military response will bring about further US attacks."

On Wall Street, stocks were generally lower. The Dow Jones Industrial Average dropped around 66 points at 28,568. But the Nasdaq gained ground, up around 11 at 9,032.

Meanwhile, sterling has gone higher against the US dollar, up 0.61% to US$1.3160 after better than forecast UK service sector data last month (December) as the decisive general election result and more clarity over the Brexit process booted business optimism.

3.00pm: FTSE pares losses

US markets opened lower albeit not as severely so as expected.

After half an hour or so of trading the Dow Jones average was down 125 points (0.4%) at 28.510 and the S&P 500 was off 8 points (0.3%) at 3,227.

Back in Blighty, NMC Health PLC (LON:NMC) – down 4.7% - was leading the Footsie lower after it announced the members of the committee that would be overseeing the independent review of the company’s accounting practices.

The FTSE 100 was down 51 points (0.7%) at 7,571.

Funds supermarket Hargreaves Lansdown PLC (LON:HL.), down 3.8% at 1,863.5p, was another heavy faller, despite Deutsche Bank raising its target price by a quid to 1,800p.

1.45pm: US indices to fall sharply

US benchmarks are set to start the week on the back foot, as investors continue to fret over worsening relations between the US and Iran.

Spread betting quotes indicate the Dow Jones, which shed 234 points on Friday, will give up another 182 points to open at around 28,452, while the S&P 500, which surrendered 23 points to close at 3,235 on Friday is expected to give back another 19 points at the outset.

Gold continues to be the asset class of choice today, with the price up 1.4% at US$1,574.30 an ounce, although oil is also rising fast, with Brent crude climbing to US$69/59 from US$68.60 overnight.

“Gold initially traded higher throughout the Christmas holiday. A move known as the Santa Rally by markets that we can observe each year due to an increased demand for obvious reasons combined with thin liquidity in FX during the year-end season. The escalation of tensions in the Middle East has since sent gold to a seven-year high, as markets seek refuge in a traditional ... haven in times of uncertainty,” said Olivier Konzeoue, a foreign exchange trader at Saxo Markets.

In the UK, the FTSE 100 now has 10 constituents that are in positive territory, with the index now down 67 points at 7,556.

Oil giants BP and Shell are among those profiting, thanks to the strength of the oil price, while retailer Next PLC (LON:NXT), up 0.4% at 6,966p, is getting some love after last week’s sparkling trading update, despite the stock being downgraded by SocGen to ‘sell’ from ‘hold’.

11.50am: Investors flock to gold

For the last two hours or so the FTSE 100 has been moving sideways, waiting for more developments in the Middle East.

London’s index of leading shares has been in the 7,540 – 7,550 groove for much of the morning and is currently loitering around 7,544, down 79 points (1.0%) on the day.

As Connor Campbell noted, “investors [are] processing the ongoing aftermath of the assassination of Iranian general Qassem Suleimani”.

According to Rabobank, “the subsequent news flow has only served to further weigh on risk appetite with Trump tweeting that the US had identified 52 sites in Iran that would be targeted in the event of a retaliation and that it could act in a ‘disproportionate’ manner in such an instance, Iran announcing that it no longer considers itself bound by the 2015 nuclear deal and that its targets in response to the killing would include Israeli military bases while the Iraqi parliament called for US forces to leave its territory (this prompting Trump to respond that sanctions could be imposed were this to happen while local Iranian backed militia announced the US would be considered an occupying force if it were not to comply)”.


Not surprisingly, as tensions rise funds are being switched to gold, long regarded as a haven – or “safe haven” as those who don’t know what a haven is would term it – for risk-averse investors.

On the futures markets, gold for February delivery was up US$28.60 (1.8%) to US$1,581 an ounce.

10.30am: New car registrations rise in December

Private new car registrations rose 0.1% from a year earlier in December.

This represented a decent end to a year in which the average year-on-decline each month was 3.2%.

Total registrations, including fleet and business sales, rose 3.4% in December.

Shares in car dealers Pendragon PLC (LON:PDG) and Lookers PLC (LON:LOOK) were up 1.4% and 0.4% respectively.

“Car sales were pummelled last year by subdued consumer confidence, a near-4% increase in new car prices and uncertainty about the future regulation of diesel cars. The downward trend also was amplified after new testing procedures—the Real Driving Emissions tests—were introduced in September,” observed Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.

“After seasonal adjustment, we estimate that car sales fell 6.4% quarter-on-quarter in Q4, subtracting 0.16pp [percentage points] from growth in households’ spending and 0.10pp from growth in GDP. Car sales, however, should stabilise this year,” Tombs predicted.

“Admittedly, any recovery in demand will be constrained by a declining flow of people coming to the end of PCP finance deals, which typically last three years; registrations were 10% lower in 2017 than in 2016. But consumer confidence should recover, now that the immediate threat of a no-deal Brexit has been lifted; indeed, the -11 level of GfK’s composite index of consumer confidence in early December exceeded its prior 12-month average, -13. In addition, the recovery in sterling to €1.17 should help to bear down on future price increases, while the recent fall in unsecured borrowing rates will help to lower total costs too,” he continued.

“Meanwhile, clarity regarding the future taxation of diesel vehicles could emerge in the Budget in February, following the Conservatives’ landslide win,” Tombs predicted.

Tombs also weighed in on the latest UK Markit/CIPS Services Survey, where the purchasing managers’ index (PMI) reading came in at 50, which marks the crossover point between expansion and contraction.

“Business optimism recovered to its highest level since September, and firms returned to increasing their staffing levels, with the employment index rising to 51.1, from 50.1. Crucially, the vast majority—about 85%—of responses to Markit’s survey were received before the general election on December 12, implying that firms that submitted results too late for the flash reading were much more upbeat than the rest,” Tombs opined.

“Admittedly, it’s unclear whether the recovery in the PMI simply reflects an improvement in sentiment, or a genuine pick-up in activity. The PMI was misleadingly downbeat throughout 2019, with output in the services sector rising despite the business activity index repeatedly pointing to a downturn, so its recovery might just reflect this gap narrowing. For now, though, the survey data are starting to move in the right direction, significantly weakening the case for the MPC to cut Bank Rate over the coming months,” he concluded.

The FTSE 100 was down 77 points (1.0%) at 7,545.

9.45am: UK services sector stabilises in December

The IHS Markit/CIPS UK services purchasing managers’ index (PMI) for December stabilised in December, helped by a rebound in new work.

The seasonally adjusted PMI business activity Index registered 50.0 in December, up from 49.3 during November, and the previous 'flash' estimate for December of 49.0.

A value of 50 represents a balance between those survey respondents seeing an increase in activity and those seeing a decline.

"Service companies widely commented on delayed spending decisions and a headwind to sales from domestic political uncertainty in the run-up to the general election. With manufacturing and construction output also subdued in December, the latest PMI surveys collectively signal an overall stagnation of the UK economy at the end of 2019,” said Tim Moore at IHS Markit.

"However, the latest UK service sector figures are an improvement on those seen in November and strike a slightly more positive tone than the earlier 'flash' PMI for December.

“The final IHS Markit/CIPS UK Services data includes survey responses from after the election, unlike the earlier flash estimate.

"It is notable that the forward-looking business expectations index is now the highest since September 2018 and comfortably above its 'flash' reading for December. The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape," he added.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said a marginally less volatile picture emerged in December.

“The sector was rescued by a small uplift in new orders for the first time since August, elevating it out of its doldrums, but only just. European customers were less convinced, experiencing ongoing Brexit nerves, and were unwilling to take out their wallets,” Brock said.

The FTSE 100 was down 77 points (1.0%) at 7,545, weighed down by a resurgent sterling on foreign exchange markets.

8.45am: Weak start to the week

The FTSE 100 saw red as it opened the week sharply lower amid worries the powder keg ignited by America’s assassination of Iran’s military leader Qasem Soleimani could explode into a far more serious international conflagration.

The index of blue-chips opened 47 points lower at 7,575.61 

However, oil majors BP (LON:BP) and Royal Dutch Shell (LON:RDSA) led the risers as the crude price jumped 2.5% overnight amid supply fears in the wake of the drone attack.

“The big uncertainties right now for crude [oil] centre on the Iranian response to the killing and on that front we should expect some kind of response. Will Tehran target US bases?” asked Neil Wilson, analyst at Markets.com.

“It could focus more on shipping in the Strait of Hormuz, but we have already seen attacks on a US base in Kenya killing three and rockets fired into the Green Zone in Baghdad. Iran does not need to use conventional military forces to respond and indeed so far it has not delivered a conventional military response despite all the chest-thumping. It does not want to give the US further excuses to bomb it to the ground with an overt reply.”

Among the blue-chip fallers, British Airways owner IAG (LON:IAG) and easyJet (LON:EZJ) were grounded amid worries over soaring fuel bills, a large part of both companies’ overheads. Share prices of the respective companies were down 2.4% and 2.3% respectively.

Meanwhile, grocer Morrisons (LON:MRW) fell 2.8% as it suffered a bout of the jitters on the eve of its post-Christmas update, hit too by reports of a downgrade in rating from BofA Merrill Lynch.

Proactive news headlines:

Avation PLC (LON:AVAP) has begun a strategic review which may include the possibility of the company selling itself. The aircraft leasing firm said the strategic review will consider multiple options to “maximise value for shareholders” including merger and acquisition activity, sales within the firm’s aircraft portfolio, as well as the sale of the entire company.

Open Orphan PLC (LON:ORPH) has landed a three-year contract with a ‘tier-one’ German pharmaceuticals company, building on an existing relationship. No financial details were given, though the group said the new deal guaranteed “significant annual revenue” with work expected to get underway this month. Open Orphan unit Venn Life Sciences will provide the new customer pharmacokinetic services that allow the researchers to decide dosing and assess for drug side-effects.

Echo Energy PLC (LON:ECHO) told investors that it has carried out perforation and started stimulation operations for the Campo La Mata x-1 well, at the Tapi Aike project. The mechanical stimulation of the Campo La Mata x-1 well’s deeper secondary target, in the Anita formation, will now begin shortly, the company said. It noted that it will subsequently move on to the shallower primary target, the ‘Magalllanes 20’, which will be perforated and undergo mechanical stimulation. This work is expected to take two weeks.

Tremor International Ltd (LON:TRMR), the video advertising technology company, is to acquire Unruly, News Corp's programmatic video marketplace. In return for transferring ownership of Unruly to Tremor, News Corp (NASDAQ:NWS) will receive a 6.91% stake in the AIM-listed firm. Tremor has also entered into a global partnership with News Corp that will equip Tremor with the exclusive right to sell out-stream video on more than 50 News Corp titles in the UK, US and Australia.

Seeing Machines Ltd (LON:SEE) says it has optimised its FOVIO driver monitoring system (DMS) to specially address new European requirements on driver drowsiness and distraction detection due to come into force in 2022. The AIM-listed firm said the new FOVIO variant will be optimised for basic systems that are compliant with the Euro new car assessment program (NCAP), a performance review to evaluate the safety of new vehicles, with the capacity to support more advanced DMS requirements if needed. In a separate announcement, the firm also unveiled plans to showcase its FOVIO DMS technology at the CES 2020 consumer technology show in Las Vegas between 7-10 January.

Bahamas Petroleum Company PLC (LON:BPC) has opened its new Bahamian mutual fund to investors. The company set up the fund last month in order to give qualifying Bahamian investors a route to invest in the company and its upcoming hydrocarbon exploration activities in the waters off the islands. The fund is open to qualifying investors between 6 January until 7 February 2020.

NQ Minerals PLC (LON:NQMI) (OTCMKTS:NQMLF) has delivered another record-breaking set of production results from its Hellyer mine in Tasmania, Australia. During 2019 the company returned steadily increasing production of lead concentrate, such that, in the first quarter, production was running at 4,712 tonnes, while by the end of the year production had hit 8,160 tonnes. Total lead concentrate production for the year rang in at 24,980 tonnes.

Shefa Gems Ltd (LON:SEFA) said its chief financial officer, David Ben David is investing US$50,000 (£38,290) in the company via a convertible loan made out on the same terms as a previous loan of US$200,000 announced in November 2019. This loan is in addition to another previous loan made by David in March.

Genel Energy PLC (LON:GENL) has announced that the TT-34 well at the Taq field will commence production “around the middle of January”. In a statement, the oiler said the well is nearing completion, with a maximum combined flow rate of over 3,900 barrels of oil per day (bopd), while it will have an initial output of between 1,500 and 2,000 bopd once it comes on stream.

Nu-Oil and Gas PLC (LON:NUOG) has raised £420,000 in a share placing to enable the company’s entry into new contracts. Nu-Oil, in a statement, said that the injection of capital will allow it to engage consultants and third party due diligence providers as it moves towards a ‘reverse takeover’ transaction. It issued 800mln new shares to investors at a price of 0.0525p

Zenith Energy Ltd (LON:ZEN, CVE:ZEE) has agreed to advance £250,000 to Anglo African Oil & Gas PLC (LON:AAOG) in the form of a secured loan. The purpose of the loan is to give Anglo African (AAOG) additional working capital to tide it over until Zenith buys AAOG’s 80% interest in the latter's subsidiary company that owns a 56% stake in the Tilapia field in the Republic of Congo. The acquisition of the stake is, it should be noted, conditional on AAOG shareholders approving the sale; there is potentially another option on the table in the form of a proposal from Jub Capital, the investment manager focused on smaller companies, to pump money into AAOG although AAOG’s management has expressed scepticism over Jub’s proposition.

OPG Power Ventures PLC (LON:OPG) as confirmed that, under the payment of a scrip dividend of 0.6p per share in respect for full-year 2019, shareholders will receive one new ordinary share for every 30.25 existing ordinary shares, based upon the scrip price of 18.15p per share.  As a result, a total of 12,823,311 scrip shares will be issued today to shareholders on the register as at 13 December 2019.

6.30am: FTSE 100 set to open in the red

The FTSE 100 look set to open its first full week of the trading year firmly in the red amid rising Middle East tensions.

Brent crude advanced 2.5% overnight to nudge over US$70 a barrel after America’s drone strike on Iran took out its military leader Qasem Soleimani, potentially setting off a powder keg.

Worries over crude supply as a result of the American action were exacerbated by an update on US oil inventories, which showed them to be much lower than forecast.

Gold, a haven investment in times of turmoil, powered up 1.5% to US$1,576.40 an ounce after Tehran promised reprisals and Donald Trump warned of the consequences of a revenge attack.

Asia’s main equity markets were rattled, providing a cue to their European counterparts.

“We see a risk that the weekend's events will be viewed as an escalation of the crisis and with a market waiting for a possible Iranian retaliation, uncertainty is expected to stay high,” said Danske Bank.

“When we combine that with the weakening of the US manufacturing cycle it does not bode well for risk appetite the coming days.”

Elsewhere, China added to the mounting economic gloom as it weighed in with worse than expected monthly service sector data, suggesting its trade stand-off with the US continuing to hurt the world’s second-largest economy.

In terms of corporate news, the week will see a welter of retailers share their Christmas scars including Morrisons (LON:MRW), Tesco (LON:TSCO) and Sainsbury (LON:SBRY). We'll also hear from three from the High Street apparently bucking the gloomy trend - Dunelm (LON:DNLM), Greggs (LON:GRG) and JD Sports (LON:JD.).

Significant announcements expected on Monday January 6:

Economic data: UK services PMI

Around the markets:

Pound worth US$1.3071

Gold worth US$1,570.50

Crude oil worth US$70.14

City Headlines: 

  • Financial Times
  • Iran pulls back from nuclear deal as tensions rise - Trump threatens sanctions after Iraqi parliament votes to end US troop presence
  • UK chiefs paid 117 times more than average worker
  • KPMG faces testing 2020 following string of scandals
  • France warns US against digital tax retaliation
  • Times
  • Time to buy shopping centres, says top investor
  • CVAs ‘failing to save’ struggling stores
  • Numis chiefs in line for £9m bonuses despite tough year
  • Telegraph
  • M&S break-up chatter lingers as it pins hopes on Ocado deal
  • Treasury the ‘biggest barrier to pensions policy’, says ex-minister
  • HSBC suffers biggest plunge in investment banking fees in the City
  • Guardian
  • HMV confirms three stores are closing with job losses expected
  • Netflix faces crunch year as Disney, Apple and more vie for streaming crown

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