- FTSE 100 index finishes higher
- Verona Pharma soars following Phase 2b dose study
- Richland slumps after tapping the market
5.05pm: FTSE 100 closes up
FTSE 100 index perked up a bit to close firmly in positive territory on Monday but it was after a fairly uninspired trading session.
Britain's blue chip benchmark finished ahead by over 29 points at 7,617. Its midcap cousin FTSE 250 added 150 points to finish at 21,716.
The weak pound was a theme of the day after a key member of the Bank of England’s Monetary Policy Committee said he’d be willing to vote for an interest rate cut and amid more disappointing UK economic data.
Sterling lost 0.60% against the US dollar, at US$1.2985.
"An absence of major macroeconomic news has brought about an uninspired trading session," said David Madden, market analyst at CMC Markets.
"This week the US and China are due to sign phase one of the trade deal, and dealers are looking forward to the event. Equity markets have gained major ground in recent months on the back of the trade story, and now it seems that traders are content to sit on the hands until the agreement has been made official."
4.00pm: Gains dissipate
Despite a considerable leg-up from a faltering pound on foreign exchange markets, the FTSE 100 looks set to end the day little changed.
The index of leading stocks was up 11 points (0.1%) at 7,599.
Among the small-caps, Verona Pharma PLC (LON:VRP) was the outstanding performer, shooting up 31% to 76p after it announced positive top-line data from a Phase 2b dose-ranging study of the firm's drug for chronic obstructive pulmonary disease.
2.35pm: US indices open on the front foot
The Dow Jones average opened higher in the US, albeit not as high as expected.
The 30-share average was up 26 points (0.1%) at 28,847. The broader-based S&P 500 was up 6 points (0.2%) at 3,271.
In the UK, the FTSE 100 was alone among the major European indices in showing a gain although that was much reduced; the index was up just 9 points (0.1%) at 7,597 and steadily sinking back to last night’s closing level.
Banks are among the high profile stocks weighing down the Footsie. Lloyds Banking Group PLC (LON:LLOY) was down 2.1% at 59.08p and Royal Bank of Scotland Group PLC (LON:RBS) was off 1.8% at 231.1p as traders bet that the Bank of England will cut its base rate sooner rather than later; lending banks generally do better when interest rates are higher.
According to CME Group, the derivatives and options marketplace operator, the chances of the Bank cutting its key lending rate at the end of this month are about 50/50 – 49/51 in favour of no change if you want to be totally accurate.
Airline groups International Consolidated Airlines (LON:IAG), which owns British Airways, and easyJet PLC (LON:EZJ) are 0.3% and 0.5% lower respectively as the market holds its breath to see whether rival FlyBe goes belly-up.
1.40pm: NMC Health the top blue-chip faller as it reportedly mulls legal action against Muddy Waters
London’s index of blue-chip shares had a bit of a pre-noon dip but has edged higher over the lunchtime trading session to 7,613, up 25 points.
The UAE-focused hospitals operator is reportedly preparing to take legal action against US hedge fund Muddy Waters, which has conducted a short-selling campaign on the company’s shares.
12.45pm: FTSE 100's gains trimmed; US benchmarks to rally
US indices are expected to bounce back today after Friday’s reverse as traders look ahead to the expected signing of the US-China trade deal.
After tumbling 133 points to close at 28,824 on Friday, the Dow Jones is tipped to open around 71 points higher at 28,895. The broader-based S&P 500 is expected to start 9 points higher at 3,274.
“The equity rally has resumed. The bout of nerves triggered by the escalation of US-Iran tensions proved short-lived as both sides signalled there would be no further tit-for-tat retaliation. The positive mood has been reinforced by the prospect of the US and China signing their ‘phase one’ trade deal which should cement the major easing in trade tensions seen of late,” said Rupert Thompson, the chief investment officer at Kingswood, the asset management firm.
“Forthcoming negotiations over a ‘phase two’ trade deal are likely to prove much more intractable and compliance with the existing deal may also become a source of friction. Even so, the risk of a major escalation of tensions looks quite small. The Chinese will wish to minimise the risk of growth falling much below 6% while President Trump will be keen not to jeopardise the current favourable economic and market backdrop ahead of the November elections.,” he added.
In the UK, the FTSE 100 was off its highs for the day but still up 24 points (0.3%) at 7,611.
The mid-cap FTSE 250, normally choking on the FTSE 100’s dust when sterling is in the wars (as it is today), was outstripping its bigger brother with a 192 point (0.9%) rise to 21,758, thanks in no small part to strong rises for Spirent Communications PLC (LON:SPT) and Savills PLC (LON:SVS).
The former was up 16% and the latter 7.4% after trading updates.
The 5G telecoms equipment company topped the FTSE 350 after increasing its full-year profits guidance after a strong finish to 2019, while estate agent Savills said it expects underlying results for 2019 to be at the upper end of guidance thanks to “excellent” UK performance, “significant” growth in the US and a “strong” year in its investment management arm.
11.20am: Blue-chips in consolidation mode
With all the focus on this morning's UK gross domestic product and what it means for interest rate policy, the surprising trade figures got somewhat overlooked.
The balance of trade was in surplus in November with a positive balance of £4.03bn, compared to a deficit of £1.34bn in October. Economists had predicted a November deficit of £2.6bn.
“November’s hefty trade surplus—the largest on record—was due to both a £3bn month-to-month surge in exports of erratic items and a huge £5.0bn drop in the value of goods imports, as firms decided to run down their stocks of imported components, rather than place new orders,” explained Samuel Tombs at Pantheon Macroeconomics.
“We expect the monthly trade balance to return to a deficit of £2bn-to-£3bn once Brexit-related volatility has washed out. Growth in domestic demand looks set to recover in the first half of 2020, now that political uncertainty has declined,” Tombs predicted.
“The recent rise in oil prices also will increase the size of the monthly trade in oil deficit, which averaged £0.6bn in 2019. Finally, export demand is weak—the export orders balance of the Markit/CIPS manufacturing survey hovered at just 46 in the final two months of 2019—and likely will remain under pressure this year, as the threat of trade barriers at the end of 2020 comes into view,” he added.
Surprising though the trade figures were, pundits still seem more inclined to talk about the gross domestic product (GDP) data.
“With the Brexit deal making progress through Parliament, attention is squarely on the UK’s trade deal with the EU,” said Robert Alster, the head of investment services at Close Brothers Asset Management, setting the scene.
“Greater clarity around the future relationship is expected to help the somewhat weak economy. The Bank of England forecasts a meaningful recovery in business investment, as companies benefit from greater certainty. Meanwhile, an improvement in consumer confidence could also translate into an increase in spending. We can see that this has already been anticipated in the share price moves of the house builders and airlines.
“It’s still early days and, if today’s weak data persists, a base rate cut may be deemed necessary further down the line. We expect the tone of negotiations to determine the evolution of business and consumer sentiment,” he added.
Ahead of the results season for the housebuilders, Peel Hunt has been revising its recommendations and price targets, generally with a positive impact on the share prices of sector constituents.
Barratt Developments PLC (LON:BDEV) and Berkeley Group Holdings PLC (LON:BKG) were both up 1.4% after Peel Hunt cranked up the price target for the former to 805p from 650p and the target for the latter to 5,130p from 4,020p.
10.30am: Sterling below US$1.30
With the pound dipping below US$1.30 after a mediocre November GDP reading, blue-chips are mostly on the rise.
The FTSE 100 was 41 points (0.5%) firmer at 7,629.
“Official data from the Office for National Statistics showed the economy contracting 0.3% in November, worse than the unchanged picture expected by economists, but broadly in line with the trend signalled by recent survey data,” reported Chris Williamson at IHS Markit.
“Manufacturing led the decline, with output dropping 1.7%, but the vast service sector also contracted, with output falling 0.3%. The construction sector surprised to the upside, with a 1.9% surge in output, though data for this part of the economy are subject both marked volatility and revisions, suggesting this upturn be taken with a pinch of salt,” he added.
Neil Wilson at markets.com reckons “an early rate cut is just what the nine-strong MPC is about to order”.
“Some nasty GDP and manufacturing numbers for November seem to have been front run by the MPC,” he added, referring to the trio of Monetary Policy Committee (MPC) members at the Bank of England who have now come out and said the MPC should cut rates if the expected post-Brexi
Key sign of how pathetic the UK economy is right now:— Jim Edwards (@Jim_Edwards) January 13, 2020
This GDP chart is in gradations of 0.1%.
The entire y-axis is sub-1%. pic.twitter.com/neZ0B8laqr
9.45am: GDP weaker than expected in November
An indication that at least one Bank of England policy maker is receptive to an interest rate cut has sent sterling reeling.
The pound lost almost a cent against the US dollar at US$1.2971 after Gertjan Vlieghe, a member of the Monetary Policy Committee (MPC), tipped the wink the Financial Times that he would be minded to vote for a cut if the economy looks like it needs a pick-me-up.
A weak pound is generally regarded as catnip for Footsie stocks and the index duly barged 47 points (0.6%) ahead to 7,635.
Bank of England— Justin McQueen (@JMcQueenFX) January 13, 2020
Carney: Persistent weakness could require prompt response
Tenreyro: Inclination is toward a cut if downside risks emerge
Vlieghe: Need imminent and significant improvement in UK data to justify waiting a little longer
Saunder & Haskel dovish dissenters pic.twitter.com/IalqPsJtwy
Given that the UK's gross domestic product (GDP) fell by 0.3% in November – economists had been expecting today's release to show no change – it might be expected that a rate cut would now be more likely, although Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, reckons “the MPC will see through November’s weak print”.
“The latest GDP data are nowhere near as horrendous as they appear initially. The sharp fall in November has followed upwardly-revised growth in the previous two months. In addition, nearly all of November's fall in GDP was attributable to temporarily weakness in the manufacturing and distribution sectors,” Tombs wrote.
“The 1.7% month-to-month decline in manufacturing output reflected both the impact of the October Brexit deadline on the timing of demand and temporary closures of car plants. Meanwhile, the 0.9% drop in distribution output reflected the impact of the shift in the timing of Black Friday this year. Output in both the manufacturing and distribution sectors will rebound in December. This should ensure that quarter-on-quarter GDP growth in Q4 comes in at zero, only a bit below the MPC’s 0.1% forecast,” he predicted.
9.25am: Blue-chips on the front foot as sterling buckles
After rising steadily in the first half-hour of trading, the FTSE 100 has come off the top and seen its gains trimmed.
Helped by sterling shedding more than three-quarters of a cent against the US dollar at US$1.2984, London's index of heavyweight shares was up 30 points (0.4%) at 7,618.
“In a week that is meant to see the signing of the US-China trade deal, the markets were sleepy at Monday’s open. The pound, meanwhile, took a tumble,” said Connor Campbell at Spreadex.
“According to a tweet from Donald Trump on December 31st, the ‘phase one’ trade deal should be signed on January 15th. Then, on January 10th, he muddied the waters somewhat, stating that the agreement could be signed ‘shortly thereafter’. The 86-page document is also yet to be released, with both sides reportedly still in the process of reviewing its text.
“If this lack of clarity persists as Thursday approaches, investors might start to get a bit antsy about any hold-up or conflict, potentially threatening to drag the Dow Jones further away from its recent all-time high of 29,000,” Campbell suggested.
8.40am: Lively start to proceedings
The FTSE 100 index got off to a better than expected start to proceedings on Monday with traders in optimistic mood ahead of the official signing of a long-awaited trade pact between China and the US.
In opening trade, the index of UK blue-chips advanced 43 points to 7,630.62
“With the phase-one deal baked in, what markets want to know is how quickly - if at all - the two sides can move things forward to phase-two,” said Neil Wilson, senior markets analyst at Markets.com.
“There’s no doubt that building on this deal is going to take a lot more effort and compromise. Of course, phase one could unravel at any moment if either side wants to walk. Enforcement is an issue too,” he added.
On the market, the housebuilders were in demand ahead of the sector’s reporting season.
Lloyds Banking Group (LON:LLOY), where bonus cuts are reportedly likely, was the top faller after rival Santander’s moves to shore up its UK business, which is being hard hit by mortgage competition. Lloyds, down 2%, owns the Halifax chain and is the UK’s largest purveyor of home loans.
In the second-tier, Spirent (LON:SPT), the 5G telecoms group, rose 10% after increasing its profit guidance.
Proactive news headlines:
Verona Pharma PLC’s (LON:VRP, NASDAQ:VRNA) lead investigator for its phase IIb study of the firm's drug for chronic obstructive pulmonary disease (COPD) has described the results from the trial as “impressive”. The nebulized ensifentrine treatment was being assessed in harness with a current established treatment called tiotropium, a long-acting anti-muscarinic, which relaxes and enlarges the airways in the lung. The combination had a “strong effect” on both bronchodilation (opening of the airways) and quality of life.
Anglo African Oil & Gas PLC (LON:AAOG) and Zenith Energy PLC (LON:ZEN) have agreed a ‘put and call’ option deal for Zenith to acquire a final 20% stake in the AAOG Congo subsidiary which holds a 56% interest in the Tilapia field. In December, Zenith agreed a deal to acquire 80% of AAOG Congo from AOOG, and, via the new option deal, it can take full ownership of the subsidiary subject to Tilapia’s production performance in the next year.
Faron Pharmaceuticals Oy (LON:FARN) (NASDAQ-FIRSTNORTH:FARON) said the data monitoring committee overseeing the phase I/II trial of its cancer drug has approved an expansion of the study into late-stage colorectal cancer. The MATINS assessment is currently gauging safety and tolerability as well as the efficacy of its Clevegen treatment in people with melanoma, pancreatic, ovarian and colorectal cancer. The drug, which can switch immune suppression to immune activation, will be administered in a low dose (0.3 milligrams per kilogram) in colorectal patients.
KRM22 PLC (LON:KRM) said it is “on track” to be profitable in 2020 following a strong uptick in revenues for 2019. In a trading update for the year ended 31 December, the risk management specialist said revenues for the period had risen to £4mln from £1.3mln and its adjusted underlying loss (EBITDA) will be “in line with expectations”
Instem PLC (LON:INS), the provider of information technology solutions to the life sciences market, saw strong organic revenue growth in 2019. Strong performance across the group's operations, combined with healthy new business pipelines, underpin management's confidence that the momentum achieved during 2019 will continue into the current year. The company revealed that revenues in 2019 were around 12% higher than in 2018 with underlying earnings (EBITDA) in line with management's expectations.
Remote Monitored Systems PLC's (LON:RMS) Cloudveil subsidiary has successfully completed testing of its unique mobile protective surveillance programme (MPSP) with a new client. The unnamed new client is a manufacturer and distributor of fast-moving consumer goods. The pilot scheme involved transporting a high-value cargo that was at serious risk from identified malicious threats across a continent at short notice.
Caledonia Mining Corporation Plc (LON:CMCL) (TSE:CAL) has produced a record 16,876 ounces of gold during the quarter ended 31 December 2019. In a statement, Caledonia’s chief executive Steve Curtis said that an improvement in the electricity supply and a rigid focus on grade control had helped boost production at the Blanket gold mine in Zimbabwe by 24% over the previous quarter, and by 13% compared to the corresponding quarter in 2018.
Base Resources Ltd (ASX:BSE) (LON:BSE) has issued revised production guidance for the Kwale mineral sands project in Kenya. In a statement, it said production of rutile is now expected to be between 75,000 and 81,000 tonnes, up from a previously forecast range of between 64,000 and 70,000. It said ilmenite and zircon guidance has also been boosted, as separation efficiency has improved following the transition from mining at the Central Dune to the South Dune.
NQ Minerals PLC (LON:NQMI) (OTCMKTS:NQMLF) generated A$15.5mln in revenue and gross profits of A$7.4mln during the fourth quarter of 2019. In a statement, the NEX-listed firm said base and precious metals production from the flagship Hellyer mine amounted to 8,160 tonnes of lead concentrate and 4,904 tonnes of zinc concentrate, while full-year revenues amounted to just under A$54mln.
Seeing Machines Limited LON:SEE) has announced a renewed supplier agreement with US chip firm Xilinx, which will supply the AIM-listed firm’s FOVIO Chip directly to automotive Tier 1 customers that are pre-approved by Seeing Machines The news came in a statement in which the advanced computer vision technology company said it will be exhibiting its FOVIO chip driver monitoring systems (DMS) technology at Automotive World in Tokyo, Japan's largest exhibition for advanced automotive technologies, on the Xilinx stand.
The City Pub Group PLC (LON:CPC) said difficult trading in December has prompted it to caution that it will miss the market’s profits expectations. Sales over 2019 rose by 31% to £59.8mln and by 1.7% like-for-like, but December was hit by the election uncertainty, higher wage costs, heavy rain and the impact of the strikes on South-West trains.
Feedback PLC (LON:FDBK) has entered a commercial partnership with tech firm Imaging Engineering (IE) to support the installation and refitting of fluoroscopy equipment across the US. Fluoroscopy is a type of medical scan where an X-ray is passed through the body continuously, allowing doctors to see real-time moving images of the inside of a patient.
Falcon Oil & Gas Ltd (LON:FOG) (CVE:FO) told investors that the Kyalla 117 N2-1H well, at the Beetaloo shale project, will undergo sidetrack drilling after the well’s original horizontal section experienced operational challenges. The Australian shale well’s vertical section was completed in November, and, horizontal drilling subsequently began in early December. After 700 metres of an intended 1,000-metre section, drilling challenges were encountered affecting the maintenance of clean hole conditions and stability in certain sections.
Sound Energy PLC (LON:SOU) has extended negotiations over the gas sales agreement for the Tendrara gas project in eastern Morocco, with a new deadline of 31 March 2020. It comes as the company continues to move Tendrara towards a Final Investment Decision. The company is working on a ‘build-own-operate-transfer’ funding solution for the infrastructure development that will support Tendrara, it noted.
Polarean Imaging PLC (LON:POLX), the medical imaging technology company, with a proprietary magnetic resonance imaging (MRI) drug-device combination, said it received notification on 10 January 2020 that Tyndall Investment Management now holds 4,917,016 ordinary shares in Polarean, which represents 4.3% of the company's issued share capital.
6.35am: Muted start predicted
The FTSE 100 looks set to make a muted start on Monday, taking its cue from Asia where traders were keeping their powder dry ahead of the signing of a phase-one trade deal between the US and China.
China's vice premier and lead negotiator Liu He will be in Washington on Wednesday to formally rubber-stamp the accord.
The agreement should see some US tariffs rolled back, increased Chinese purchases of American farm output and changes to rules around intellectual property.
Stateside we have the latest banks reporting season as well this week, while in the UK the main news looks to be of the economic variety.
Later Monday UK manufacturing and trade data are expected to show the economy struggling to fend off recession.
These latest updates could shape the narrative around the Bank of England’s Monetary Policy Committee meeting at the end of the month.
Independent member Gertjan Vlieghe said on Sunday he would vote for a cut in rates later this month, adding to the numbers in favour of looser monetary policy.
Around the markets:
Pound worth US$1.3022, down 0.3%
Gold fell US$4 an ounce to US$1,556.10
Brent crude up 14 cents a barrel at US$ 59.18
Significant corporate events expected on Monday:
Economic data: UK GDP, industrial production, UK trade balance
- Nissan executives step up planning for potential split from Renault
- Head of the competition watchdog, Andrew Tyrie, meets Big Four bosses as audit reform slows
- Santander retrenches in UK as mortgage price war bites
- Boeing is facing a bill of more than $8 billion in compensation for airlines whose 737 Max aircraft are grounded or undelivered
- Tesla setbacks led second-biggest investor to consider selling stake
- Aston Martin Lagonda: Marketing chief Simon Sproule quits as carmaker counts its losses
- City watchdog readies crackdown on fund supervisors in wake of Woodford meltdown
- Drinks giants say farewell to alcohol and hello to profits
- Runaway success of Rolls-Royce sees chief executive's contract extended
- Lloyds warns staff to expect first bonus cut in four years
- Gambling watchdog plans to ban online credit card bets