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FTSE 100 closes lower, hit by strong pound after CBI data

The midcap FTSE 250 though gained over 17 points to finish at 21,782.

Burberry Group PLC - FTSE 100 to open higher as traders shrug off China virus concerns
The strong pound capped gains on Footsie
  • FTSE 100 index closes down 38 points
  • Pound gains after upbeat CBI survey
  • US stocks higher

5.10pm: FTSE 100 index finishes lower

FTSE 100 index closed lower midweek while Wall Street shares advanced.

The UK's premier share index was hit by the strong pound, which gained 0.66% against the US dollar, after a strong  report from the Confederation of British Industry (CBI).

Total orders improved in January this year compared to December, which beat expectations, and was the strongest reading in  five months.

Footsie closed down nearly 39 points on the day at 7,571.

The midcap FTSE 250 though gained over 17 points to finish at 21,782. FTSE AIM 100 added over 38 points at 4,952.

"After a strong start the FTSE has pared gains across the session, moving firmly into negative territory. Despite a stronger start on Wall Street and a boost to home builders, the firmer pound and disappointing corporate updates have dragged the UK index further from its recent 6 month high," noted Fiona Cincotta, analyst at City Index.

However, broadly speaking, she said, risk sentiment was on a stronger footing on Wednesday, as fears about China’s coronavirus eased.

In the US, the Dow Jones Industrial Average gained 22 points to 29,218. The S&P 500 index added around eight points.

3.30pm: FTSE 100 stuck in doldrums; Wall Street opens in the green

The FTSE 100 drifted down further even though Wall Street opened strongly.

London’s blue-chip index shed 30 points to 7,579, although one of the earlier negatives eased as the pound trimmed its rise to 0.6% to US$1.3132.

In New York, the Dow gained 82 points to 29,279, with the S&P 500 up 14 points to 3,335.

North America shrugged off the coronavirus fears that shook the Asian markets overnight.

Analysts at Well Fargo said this disease is not as deadly and potentially damaging as SARS, an epidemic that cost the global economy US$40bn in 2003.

“For the United States, it is unlikely that the current outbreak will have any material effect on the macroeconomy, at least not at this time,” they said, adding the outlook for Asia is not clear yet.

2.30pm: FTSE 100 firmly in the red while sterling’s rally continues

FTSE 100 was firmly in the red as sterling kept rising on the back of improved orders in a CBI survey.

The big cap index shed 26 points to 7,584, with the pound up 0.7% to US$1.3148.

Broker downgrades added to the downbeat mood. 

M&G PLC (LON:MNG) dipped 2% to 244.5p as Barclays lowered its view to ‘equal weight’, while  Unilever PLC (LON:ULVR) shed 1% to 4,385.5p after Berenberg revised down its recommendation to ‘hold’.

Rio Tinto plc (LON:RIO) was also downgraded to ‘neutral’ by Bank of Montreal but shares rose 1% to 4,635.5p.

1.30pm: FTSE 100 keeps falling as pound strengthens

The Footsie kept sinking in the early afternoon as the pound got stronger over revived optimism among UK businesses.

The UK big cap index dropped 23 points to 7,587 as sterling jumped 0.6% against the dollar to US$1.3131.

Latest data from the business trade body the Confederation of British Industry showed the total orders balance improved to -22 in January, from -28 in December and above the consensus of -25.  

While it is still negative territory, it is the best result in five months, said David Madden at CMC Markets.

Stronger sterling is not necessarily good news for the blue chips, analysts say.

 “When you have a higher value of the pound, that usually impacts the Footsie, as the foreign exchange reduces profit,” Madden told Proactive on the phone.

This would hit companies like AstraZeneca plc (LON:AZN) and Diageo PLC (LON:DGE), which have large overseas earnings. 

12.10pm: FTSE 100 lingers underwater; Wall Street expected to open higher 

The Footsie stayed in the red around lunchtime even though analysts forecast a positive start on Wall Street.

The UK benchmark was off 13 points at 7,597. But the Dow Jones Industrials Average is expected to open 104 points higher at 29,300, with the broader S&P 500 seen up 12 points at 3,332.

UK and US markets seem fairly able to resist the fears around the spread of coronavirus, but this may change if there are reports of cases outside of China.

“It is difficult to say at this stage how much and quickly it will spread but everyone is clearly very alert to the prospect of this becoming a much greater problem,” said Craig Erlam, analyst at OANDA.

While much of the headlines will continue to come from Davos today, another big batch of US companies are scheduled to report fourth-quarter results, including Johnson & Johnson (NYSE:JNJ).

11.45 am: CBI survey shows business optimism jumps

The FTSE 100 index slipped into the red just before lunchtime as sterling got a boost after a survey by the Confederation of British Industry showed revived positivity among business leaders.

Despite the UK being set for a hard Brexit on January 31, the CBI’s business optimism balance rose to its highest level since 2014.

However, since the CBI survey is compiled in the first half of the month, analysts pointed out that it probably has not captured manufacturers’ reaction to Chancellor of the Exchequer Sajid Javid’s recent comments that “there will not be alignment” to EU rules and regulations post-Brexit.

Plus, the pool only counted 300 participants, Samuel Tombs from Pantheon Economics noted.

Tombs said: “After adjusting for its seasonality and excessive volatility, we judge that the total orders balance is consistent with a rise in the manufacturing PMI to 49.3 in January, from 47.5 in December, only a bit above the current consensus, 48.8.

Around 11.45am, the UK blue chip index was 3 points easier at 7,608, with sterling rising 0.3% to US$1.3088.

10.45am: Government spending could be increased

The FTSE 100 index and sterling were both inching up in mid-morning trade.

London’s big caps gained 17 points to 7,627.9 even though the pound rose 0.1% to US$1.3061.

Following today's figures on UK public sector spending, economists said they expect a boost for the British economy from higher investment when Chancellor Sajid Javid unveils his Budget on 11 March,

“We suspect he will increase investment by about £10bn a year (0.5% of GDP),” said Capital Economics’ Andrew Wishart.

“On top of a similar-sized pre-announced rise in spending on government services, that would provide a substantial and much-needed boost to economic activity.”

Wishart pointed out that, even if government borrowing rose in the year to date, it is on track to be below the Office for Budget Responsibility forecast.

Javid is expected to announce plans to ramp up investment spending by billions of pounds in the Budget, which should allow the government to borrow for more capital projects too, with plans also expected to invest in new infrastructure and a focus more on skills and vocational education. 

Increased spending in infrastructure could see winners in the construction sector such as Balfour Beatty plc (LON:BBY), Galliford Try PLC (LON:GFRD) and Kier Group PLC (LON:KIE). 

Housing also remains a government focus, with Persimmon PLC (LON:PSN), Taylor Wimpey PLC (LON:TW.) and Berkeley Group Holdings PLC (LON:BKG) shares in the green on Wednesday morning, with the latter lifting the sector after announcing an extra £455mln payout to shareholders.

9.45am: Monthly public sector borrowing shrinks

The FTSE 100 index trimmed its gains in mid-morning trading as sterling headed back towards positive territory after the latest UK data.

The blue-chip index was up 5 points at 7,615.4, while the pound was flat at US$1.3051.

UK public sector finance figures showed Britain’s government borrowed less than expected in December. Borrowing last month was £4.8bn, 4% lower than in December 2018.

However, borrowing in the fiscal year-to-date, was 7.9% higher than the same period last year at £54.6bn, meaning the new Conservative government still has limited room for manoeuvre in the upcoming Budget in March.

8.35am: Early gains

The FTSE 100 index shrugged off the potential threat posed by the coronavirus and navigated the political bow waves caused by Donald Trump’s impeachment to open in positive territory.

The index of UK blue-chips started 14 points higher at 7,624.48

Overnight, Netflix provided a better than expected update to trading, quelling (some) fears over its growth trajectory, while Tesla also defied the naysayers to become a US$100bn company.

Closer to home, Burberry’s (LON:BRBY) post-Christmas round-up prompted some mild profit-taking with shares falling 2% early on.

The early price reaction was more about the outlook for the luxury fashion retailer than the most recent sale performance, which topped expectations.

“Burberry cautioned that full-year total revenue will grow by a single-digit percentage, while the previous guidance was for growth to be broadly stable,” said David Madden of CMC Markets.

“It seems the high-end fashion house is a little less certain about the future, so that is likely to weigh on the share price.”

News of Sainsbury's (LON:SBRY) boss Mike Coupe’s departure after the Asda merger debacle was met with only very mild dismay as the share price fell 1.4% early on.

Top of the risers was builder Berkeley Group (LON:BKG), which was bid 5% higher on cash return plans.

Among the small-caps, cancer detection specialist ANGLE (LON:AGL) was up 7% after constructive talks with US Food & Drug Administration.

Tissue Regenix, by contrast, was off 10% after providing a trading and funding update.

Proactive news headline:

ANGLE PLC (LON:AGL) has predicted that it will receive regulatory clearance for its Parsortix cancer test by the third quarter of this year following a successful face-to-face meeting with the US Food and Drug Administration (FDA). The AIM-listed firm said it is now preparing for a full De Novo submission to the FDA, a process that allows the regulator to approve medical devices that have no comparative already on the market.

Ceres Power Holdings PLC (LON:CWR) has announced that German engineering and technology giant Bosch will increase its stake in the company to 18% from 4% though a share subscription, netting the fuel cell firm £38mln. In a statement, the AIM-listed group said Bosch will acquire the additional stake through a subscription of around 11.9mln new shares at a price of 320p each, a 7.8% discount to Ceres’ Tuesday closing price.

United Oil & Gas PLC (LON:UOG) has updated investors on the ASH-2 well at the Abu Sennan field - part of a package of assets to be acquired from Rockhopper PLC (LON:ROK) - which came online earlier this month. In a statement. United noted that ASH-2 was drilled to a depth of 4,030 metres into the Alem El Buieb (AEB) formation and was completed in two reservoir intervals, each testing at 7,027 barrels of oil equivalent per day (boepd) and 3,851 boepd respectively.

Yellow Cake PLC (LON:YCA), a specialist company operating in the uranium sector with a view to holding physical uranium for the long term, said it to initiate a share buyback programme to purchase up to US$2mln of its ordinary shares over three months, commencing on 22 January 2020. The group said its board notes that the company's shares continue to trade at a material discount to its underlying net asset value hence the decision to implement a share buyback programme as a means of effectively acquiring exposure to uranium at a discount to the commodity spot price. It said the programme forms part of the group's broader strategy to deliver value to its shareholders.

Alliance Pharma PLC (LON:APH) has revealed that its 2019 underlying profit was in line with expectations after turnover grew 16% last year, while strong cash generation saw a significant fall in the company’s net debt. The group, which has a number of international star medicine brands as well as important regional product lines, weighed in with what it described as “see-through revenues” of £144.3mln.

SDX Energy PLC (LON:SDX) described 2019 as a successful year as it provided a trading update ahead of its financial results, revealing a 12% rise in production. For the year, production averaged 4,020 barrels of oil equivalent per day (boepd) and the company noted that, at asset level, it had either exceeded or reached the upper end of guidance. Looking to 2020, the company’s guidance is pitched at 6,750 to 7,000 boepd, 68-74% higher, as operations continue to ramp-up.

Asiamet Resources Ltd. (LON:ARS) said it intends to relocate its corporate head office function to Jakarta, Indonesia from Melbourne, Australia commencing immediately following on from a review of its operations. In a statement, the group noted: “While there are a number of drivers for the relocation, the Asiamet Board considers that a significant increase in corporate and project activities relating to ongoing funding and development of the Company's asset portfolio, in particular the nearer term BKM Copper Project, is best served by moving the Corporate head office to Jakarta.”

Oriole Resources PLC (LON:ORR) has revealed positive initial results from its 2020 exploration campaign at the Bibemi gold project in Cameroon. Mapping work, at the 90% owned project, has shown a continuation of mineralisation at the main Bakassi area adding 1.3 kilometres to the known strike which now exceeds 5 kilometres. Preparations are underway for a drill programme of 1,500 metres.

88 Energy Limited (LON:88E) (ASX:88E) said it is considering a potential capital raising which has led it to place a trading halt on its shares on the Australian Securities Exchange. In a brief statement, the energy group said it is currently intended that any such capital raising will utilise the company's existing authorities and will not be subject to shareholder approval.

NQ Minerals PLC (LON:NQMI) (OTCMKTS:NQMLF) is looking to investors across the Atlantic and has retained the services of Ortoli Rosenstadt LLP, an internationally focused, New York-based law firm to pursue a potential ADR listing of the company's securities in the United States.  In a brief statement, the NEX-listed base and precious metals producer, which operates the flagship Hellyer Gold Mine in Tasmania Australia said no timetable for a listing has been set.

Tissue Regenix PLC (LON:TRX) said it expects to report sales and earnings (EBITDA) in line with revised expectations as it re-confirmed it is looking for sources of additional finance for the regenerative medicines business. Revenues for the year gone rose 12% to £13mln, the company said in a comprehensive trading update, which also revealed it had £2.4mln of cash, including a £1mln revolving credit facility. This, Tissue Regenix said, was enough to see it through to “at least the end of April”.

6.45am: Footsie called higher

The FTSE 100 is expected to begin Wednesday’s session on the front foot as investor optimism began to return despite lingering concerns around the spread of the Wuhan virus.

Spread-better IG expects the FTSE 100 to open around 27 points higher after ending Tuesday’s session 41 points lower at 7,611.

News that the pneumonia-like virus has spread to the US caused some jitters on Wall Street overnight as investors remain concerned that a potential pandemic could drag on economic growth.

The Dow Jones Industrials Average ended Tuesday’s session 0.5% lower at 29,196 while the S&P 500 was down 0.27% at 3,320 and the Nasdaq fell 0.19% to 9,370.

However, those concerns had mostly dissipated for Asian markets by Wednesday, with the Japanese Nikkei 225 up 0.7% while Hong Kong’s Hang Seng was 1.3% higher.

Michael Hewson, chief market analyst at CMC Markets, said that markets are currently adopting “a safety-first approach” in the face of the disease, particularly with concerns that Chinese New Year celebrations, which begin this weekend, could help the virus spread on a wider scale.

On the currency markets, the pound was 0.1% higher at US$1.3057 against the dollar, with today’s CBI business confidence data possibly providing some catalysts as a barometer for the UK’s economic health in the final weeks before Brexit.

There could also be some movement in cable as the Senate impeachment trial against Donald Trump continues to shake US politics.

Significant announcements expected for Wednesday January 22:

Trading announcements: Burberry Group PLC (LON:BRBY), JD Wetherspoon PLC (LON:JDW), Sage Group PLC (LON:SGE), AJ Bell PLC (LON:AJB), Antofagasta PLC (LON:ANTO),Connect Group PLC (LON:CNCT), Close Brothers Group PLC (LON:CBG), Pets at Home Group PLC (LON:PETS), WH Smith PLC (LON:SMWH)

Interims: Van Elle Holdings PLC (LON:VANL)

Economic data: US house prices

Around the markets:

  • Sterling: US$1.3057, up 0.1%
  • Brent crude: US$64.31 a barrel, down 0.4%
  • Gold: US$1,552.27 an ounce, down 0.27%
  • Bitcoin: US$8,712, up 0.7%

City headlines:

  • Sirius Minerals has launched an internal investigation after a senior worker was allegedly heard discussing the controversial takeover by Anglo American with a hotel barmaid before it was publicly announced – Daily Mail
  • Washington has threatened retaliatory tariffs if the British government did not back down on plans to impose the levy digital tax from April – Financial Times
  • Boeing has been forced to halt trading in its shares as the commercial aerospace titan warned of yet another delay to its grounded 737 Max fleet – Telegraph
  • The probability of the Bank of England cutting interest rates next week is less than 50 per cent, according to financial markets, after the employment rate hit a new record high – Times
  • Forensic analysis by experts hired by Jeff Bezos to investigate 2018 phone hack has pointed to attack on the Amazon boss from Mohammad bin Salman’s WhatsApp account – FT
  • Netflix attracted more new subscribers than expected at the end of last year, but still missed its target for the United States and offered a pessimistic forecast for the coming quarter – Times

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