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FTSE 100 closes ahead as investors focus on trade not war

The UK's blue-chip benchmark on Thursday finished ahead by around 23 points at 7,598

Tesco PLC - FTSE 100 set to start Thursday higher as US-Iran war tensions ease
FTSE 100 rose but FTSE 250 fell on Thursday
  • FTSE 100 index closes up 23 points but below 7,600
  • Wall Street shares reach new highs
  • All eyes on first phase China/US trade deal

5pm: FTSE 100 finishes to the good

FTSE 100 index closed in positive territory on Thursday, joining global indices to head higher as investors focused on US/China trade talk progress rather than Middle East worries.

The UK's blue-chip benchmark finished ahead by around 23 points at 7,598.

The midcap FTSE 250 though ended a tad lower, shedding around nine points.

Wall Street stocks also headed north, with all three benchmarks hitting fresh intraday highs, as traders brushed aside fears on war to focus on trade.

Reportedly, China's top trade negotiator will lead a delegation to Washington next week to sign the first phase trade deal according to China’s Commerce Ministry.

It comes after the US postponed planned tariff increases following the announcement of this first deal in October last year.

"The bullish sentiment is doing the rounds as traders are not afraid of a full-on war between the US and Iran," said David Madden, analyst at CMC Markets in a note.

"Relations between the two counties are still poor, but traders only really care about the prospect of a war, which now seems to be very low. President Trump made it clear yesterday that he doesn’t want to start a conflict with the Iranian regime, and that acted as a cue from buyers."

2.50pm: US first-time jobless claims fall more than expected

As expected, US indices opened higher albeit not as buoyantly as anticipated after mildly disappointing weekly jobless numbers.

First-time jobless claims fell 9,000 last week to 214,000, compared to the consensus forecast of 220,000.

“The spike in claims in early December, to a two-year high of 252K, has now fully reversed, confirming that seasonal adjustment problems over the holiday season were the issue, rather than a genuine increase in the pace of lay-offs. Before the December jump, the trend in claims was stable at about 215K, and that’s the level we expect to see over the next few months, at least. Note that the next couple of weeks, though are likely to see a modest bounce, again due to seasonal adjustment issues,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.

The Dow Jones industrial average was up 136 points (0.5%) at 28,881 while the S&P 500 was 16 points to the good at 3,268.

In Blighty, the FTSE 100 continues to coast after a bright start and is up 38 points (0.5%) at 7,613, helped by the weakness of the pound, which is down by about half a cent against the greenback.

2.15pm: US benchmarks to open higher

With the threat of WWIII apparently receding, US benchmarks are expected to open higher today.

Spread betting quotes point to the Dow Jones average opening just above 28,900, which would represent a rise of around 155 points. The S&P 500 is expected to jump 17 points to just below 3,270.

In the UK, the FTSE 100 was 38 points (0.5%) higher at 7,613.

12.30pm: Sterling slumps after Bank of England governor's speech

Sterling is floundering on foreign exchange markets following a speech by Bank of England governor, Mark Carney.

The spells good news for the FTSE 100, which is up 41 points (0.5%) at 7,616.

Sterling is currently trading down two-thirds of a cent at US$1.3030 after Carney said that the economic rebound forecast by the Bank of England for this year is not assured.

“With the relatively limited space to cut bank rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response,” Carney said.

Andy Scott, an associate director at JCRA, said Carney sent a clear signal that the Bank of England is ready to provide monetary support if economic growth doesn’t pick up.

“Mark Carney said the Bank could cut interest rates and increase the asset purchase programme ‘if evidence builds that the weakness in activity could persist.’

“Following an emphatic victory for the Conservative Party which has a clear message and determination to 'get Brexit done' and quickly, there is an expectation that consumers will begin to spend and businesses invest more. It is built on the premise that there is a more certain path ahead, as Boris Johnson has a commanding majority in Parliament so is not restricted by either opposition MPs or rebel sections of his own party. Already, there have been tentative signs of improvement in the services sector PMI from the December survey and in Halifax house price data, but we will need to wait and see what the first quarter releases show,” Scott said.

11.00am: BRC reports rebound in LFL sales in December but ...

On the corporate news scene, it has been a fairly busy day for the retail sector, where the post-Christmas updates are trickling out.

The British Retail Consortium (BRC) said retail sales fell year-on-year for the first time in 25 years in 2019. Total sales were down 0.1% from 2018.

Like-for-like sales in December were up 1.7% year-on-year, after falling 0.5% in November. The consensus forecast for December was for a 0.5% decline.

While like-for-like retail sales rose in December, once November's performance was added to the figures the aggregate result was a 1.2% year-on-year fall.

“If you factor in the disruption from the December UK election, you can conclude that [the] British consumer is not quite tapped out just yet. We are expecting a business investment comeback in 2020 and these Christmas sales results tell us consumer spending can prop up the economy until it does,” opined Jasper Lawler at LCG.

Moving on to specific retailers, it has not been a good day for Card Factory PLC (LON:CARD), which plummeted 27% to 102.2p after the retailer said it was looking at changing its strategy to address long-term performance issues; it has also opted not to pay a special dividend in 2020.

“Before today’s Christmas trading update, which featured profit warnings for this trading year and the next one as well as a share price plunge, analysts had been expecting a total dividend of 14.3p on a share price of 140p, for a yield of more than 10%.

“With cash in the bank yielding nearly nothing and the UK 10-year Government bond, or Gilt, yielding 0.80% that may have looked like picking up money in the street to some investors.

“However, Card Factory has now decided that it will not offer a special dividend in 2020, after payments of 5p a share in 2018 and 2019 and 15p a share in the three years before that,” reported Russ Mould at AJ Bell.

9.50am: FCA proposes to simplify the easy access savings market

Despite the Iranian missile attacks on US bases in Iraq, the attitude of the market appears to be “could've been worse” and sentiment is generally positive.

The FTSE 100 opened positively and has since cemented early gains, rising 32 points (0.4%) to 7,607.

Iran's foreign minister, Mohammad Javad Zarif, described the missile attack as a “proportionate” response to the US assassination of Iranian general, Qassem Soleimani, and there are signs that tensions are cooling.

“Trump’s White House address at 17:30CET provided further reassurance that this flare-up in US-Iranian tension will prove a flash in the pan rather than the beginning of a conflagration with the president noting that Iran appeared to be standing down in the wake of the attack and that the US would be heaping additional sanctions upon the county (both implying a lack of military response from the US),” reported RaboResearch.

In UK news, the Financial Conduct Authority (FCA) has issued a consultation paper on “introducing a single easy access rate for cash savings”.

The FCA is consulting on proposals to improve competition in the easy access cash savings market (including cash ISAs) in the hope of making it simpler and easier for consumers to understand the savings market and get a good

deal.

“We want firms to focus more on how they treat their long-standing customers than they do currently,” the FCA said.

Laura Suter, a personal finance analyst at investment platform AJ Bell, said the plans from the FCA would be a dramatic change for the cash savings market, making it less easy for banks and building societies to profit from customers' confusion and inertia.

“It will be much simpler for customers to find the rate they are being paid, and to then compare that figure to what they could get elsewhere. It also means customers of the same bank with multiple accounts won’t find they are being paid a range of different interest rates.

“Banks will also no longer be able to quietly ratchet down interest rates they pay on cash savings over time, in the hope that customers won’t notice. This means that the most vulnerable customers, who aren’t as likely to shop around, should get a better deal. Hopefully, the ‘cliff-edge’ effect of the interest rate reducing after the initial 12-month offer period will spur more people into action to switch to a better rate,” Suter said.

“However, the move will still mean that to get the best rates you need to shop around. It’s estimated that cash account customers miss out on £1.1bn in interest by not switching to a better rate, and this fix from the FCA doesn’t solve that,” she added.

Lloyds Banking Group PLC (LON:LLOY), thanks to its Halifax division, and Royal Bank of Scotland Group PLC (LON:RBS) are clearly the two big banks the market expects to be hit hardest by the new proposals; both are barely changed in a rising market while Barclays PLC (LON:BARC) and HSBC Holdings PLC (LON:HSBA) are both up by more than 1%.

8.40am: Retail the key

The FTSE 100 opened its account on Thursday in positive territory as worries over hostilities between the US and Iran abated.

The index of blue-chips advanced 35 points to 7,609.72

Recent rallies in the gold price, a haven asset in times of uncertainty, and crude oil fizzled out as traders relaxed a little.

In London, Thursday was all about retail. And while Tesco (LON:TSCO) came through the festive period unscathed, it was the same old story for Marks & Spencer (LON:MKS).

The latter’s sales were almost static exiting this key selling period, and the share price fell a further 8%, suggesting Marks promotion back to the premier league of UK companies may be a long time coming.

“Discounting is murderous and there are still a lot of issues to fix,” Neil Wilson of Markets.com, said of M&S.

Tesco, by contrast, edged 3% higher as it performed solidly in a difficult climate for grocers fighting a rear-guard against the discounters. Profit margins may come under further pressure in 2020, analysts said.

The big faller was in the FTSE 250 with building materials group SIG (LON:SIG) tumbling a fifth in value after sounding the earnings alarm.

Proactive news headlines:

ECSC Group PLC (LON:ECSC), the provider of cyber-security services, has unveiled five major contract wins across a range of sectors. The contracts have a combined revenue value in excess of £750,000. The revenue will be recognised throughout the duration of the contracts, which vary between one and three years.

IQ-AI Limited’s (LON:IQAI) subsidiary, Imaging Biometrics (IB), has signed a global distribution deal for imaging analysis software designed to detect chronic liver disease (CLD). Under the agreement with US firm AI Metrics, IB will receive non-exclusive global rights to market and distribute the product, known as LSN.

Columbus Energy Resources PLC (LON:CERP) executive chairman Leo Koot described himself “very pleased” as drilling operations for the Saffron exploration well, on Trinidad’s south-west peninsular, completed successfully. The AIM-quoted oiler, in a statement, said that the well was drilled down to a depth of 4,634 feet as planned, and, logging work is presently ongoing. Interpretation results are anticipated in the coming weeks.

Arecor Ltd has inked an agreement with FTSE 100 firm Hikma Pharmaceuticals PLC (LON:HIK) to develop a new, ready-to-use injectable medicine. The new product, to be announced before launch, will use Arecor’s Arestat drug formulation technology and is expected to be submitted to the US Food and Drug Administration for regulatory approval in 2021.

Pembridge Resources Plc (LON:PERE) has released production statistics from the Minto copper mine, as the ramp-up in mining operations continues at the Yukon-based project. Operation resumed at the Minto mine back in October 2019 and in the remainder of the year, some 104,005 tonnes of ore was processed, with average head grades of 2.27% and 95.1% average copper recovery.

Providence Resources PLC (LON:PVR) has named Alan Linn as the company’s new chief executive. Linn joins from UK onshore shale firm Third Energy and he has previously held senior positions at Lasmo, Cairn Energy, Tullow Oil, ROC Oil, and with Afren during its restructuring.

Circassia PLC’s (LON:CIR) revenues in 2019 were in the middle of its guidance of £60-65mln while cash at the year-end was higher than expected. The Inhaled drug specialist said sales in the middle of the range represent an annual increase of about 31% and include a modest contribution from Duaklir, which was launched in the US at the end of October. Circassia also announced the appointment of Michael Roller as the chief financial officer to replace Julien Cotta, who has stepped down after eight years in the role.

Redx Pharma PLC (LON:REDX) said its second fibrosis drug candidate will enter the clinic in the first half of next year. RXC007 has been designed to target ROCK2, a nodal enzyme in cell signalling pathways associated with idiopathic pulmonary fibrosis (IPF), a chronic lung condition with a poor prognosis.

Itaconix PLC (LON:ITX) saw a sharp year-on-year increase in revenue in 2019. In a short trading update, the polymers specialist said unaudited revenue for the year just ended was £1.1mln, up 59.6% on 2018. Loss before interest, tax, depreciation and amortisation was in line with management’s expectations.

InnovaDerma PLC (LON:IDP) saw its revenues for the half ended December 31, 2019, advance 28% year-on-year, led by the performance of its Skinny Tan beauty range. The company, which posted sales of £5mln, up from £3.9mln, reminded investors that its financial performance would be heavily second-half weighted, “reflecting the peak tanning season”.

MetalNRG PLC (LON:MNRG) will blend material from waste dumps and mined ore to optimise gold production at its project in Arizona. Drilling will be carried out to delineate additional metal at the Gold Prince mine, which will be combined with ore from Level 6 and waste at Gold Ridge, the company said.

Seeing Machines Limited (LON:SEE) is teaming up with US chipmaker and telecoms firm Qualcomm Inc (NASDAQ:QCOM) to develop driver monitoring systems (DMS) for the world’s automakers. The AIM-listed tech firm said the two companies will be focusing specifically on in-vehicle infotainment systems, areas of the car which allow the driver or passengers to control functions such as music, navigation or answering phone calls, usually through a touchscreen.

Avation PLC (LON:AVAP) has delivered the first of two Airbus A321 aircraft to VietJet Air as part of a transition from a prior operator. The firm said the aircraft will be leased to the airline for eight years, after which it will be returned following a major airframe maintenance check.

Solo Oil PLC (LON:SOLO), a gas-focused production and development company targeting attractive growth opportunities within the European gas market, announced that it has appointed Strand Hanson Limited as its broker, in an interim capacity, with immediate effect while the company continues discussions with ONE-Dyas BV on the proposed reverse takeover transaction first announced on 9 October 2019.

ADM Energy Plc (LON:ADME), an AIM-listed oil and gas investing company announced that it has appointed Fox-Davies Capital as the company's Lead Broker, and Fox-Davies Capital DIFC as a financial adviser, with immediate effect. Osamede Okhomina, CEO of ADM, said: "As ADM moves forward to execute on its business plan to build on its existing asset base, we are delighted to be working with a specialist broker with a deep knowledge of the industry and the African Markets.  As a broker, Fox-Davies Capital's wide network of relationships with specialist oil investors in Asia, the Middle East, Europe and Africa, will complement the work of our existing advisers and help the Company to maximise its potential."

6.45am: Footsie called higher

The FTSE 100 index is set to start Thursday on the front foot amid a cooling of tensions between the United States and Iran.

CFD and spread betting firm IG Markets sees the blue-chip benchmark around 28 points higher, calling a price of 7,595 to 7,598 with just over an hour to go until the start of trading.

Worst fears appear to have eased, for now at least as, as Iran’s retaliation fell short of consequential escalation.

“It is quite clear that investors are still nervous that the various chess games being played out in the shadows could cause one side or the other to overplay their hand, however it is clear that neither side wants to go down the route of an outright break out of hostilities,” said Michael Hewson, analyst at CMC Markets.

He added: “On Iran’s part, the supreme leader Ali Khamenei called the strikes a ‘crushing response’ on state TV, while internationally it soon became apparent that Iranian forces had forewarned Iraqi forces that the missiles were coming their way, allowing time for their personnel, along with US personnel to get clear.”

In New York, last night, the Dow Jones gained 161 points or 0.56% to finish Wednesday’s trading at 28,745.

The S&P 500 similarly rose by 0.49% to end the session at 3,253, while the Nasdaq advanced 0.67% to finish at 9,129.

In Asia, this morning, Japan’s Nikkei ran up a 535 point or 2.31% lead to change hands at 23,739 and Hong Kong’s Hang Seng climbed 1.34% to reach 28,466. The Shanghai Composite, meanwhile, added 0.87% to 3,093.

Around the markets:

Pound: US$1.3112, up 0.11%

Gold: US$1,544 per ounce, down 1.72%

Brent crude: US$66.58 per barrel, down 4.1%

Bitcoin: US$7,921, down 4.97%

Significant events expected on Thursday:

Trading updates: Tesco PLC (LON:TSCO), Marks and Spencer Group PLC (LON:MKS), International Consolidated Airlines Group SA (LON:IAG), Card Factory PLC (LON:CARD), Dunelm Group plc (LON:DNLM), Mitchells & Butlers PLC (LON:MAB), Nichols PLC (LON:NICL)

Economic data: US weekly jobless claims

FTSE 100 ex-dividends to knock 0.04 points off the index: AVEVA Group PLC (LON:AVV)

City Headlines:

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