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FTSE 100 closes in positive territory despite Trump trade war fears

Last updated: 04:26 08 Mar 2018 AEDT, First published: 17:40 07 Mar 2018 AEDT

London
  • FTSE 100 closes up just 11 pts

  • US stocks open lower after Trump economic advisor quits

  • Rolls-Royce top Footsie riser as results beat forecasts

 

FTSE 100 closed in positive territory, but not by much,  as US stocks saw red, and traders wait to see what President Trump will do next on his tariff threats.

The UK blue-chip benchmark closed up around 11 points at 7,157, while FTSE 250 fared a little better - up nearly 84 at 19,774.

Trump has plans to impose tariffs on imported steel and aluminum.

Now  Europe has retaliated with the EU unveiling a raft of tariffs  that it would place on American-made goods if the United States followed through on this.

US shares are well down at the time of writing, with the Dow Jones off over 299 points, blasted also by the news that the White House's top economic adviser Gary Cohn has stepped down from his role in protest at the tariff plan.

"US stocks are off the lows of the day, but are still in the red. The concern that US traders had for a trade war is fading, but that is not to say it has gone away," said David Madden at CMC Markets.

"The stepping down of Gary Cohn as chief economic advisor to President Trump left traders thinking the US could be heading toward an economic conflict. The announcement from Steven Mnuchin, the treasury secretary, that the US ‘will definitely’ impose steel and aluminium tariffs just reinforced those fears held by investors."

Rolls Royce (LON:RR. was top Footsie riser, up 11.46% to 924p after solid results impressed the market.

Top laggard was advertising giant WPP plc (LON:WPP), which shed 3.89% to 1,210.5p.

 

3.50pm: EU hits back at US tariff plan

The European Union has retaliated against US plans for hefty tariffs on steel and aluminium imports with a proposed tougher stance on its own trade rules.

EU trade commissioner Cecilia Malmstrom said plans include raising import duties on bourbon, peanut butter, cranberries, orange juice, steel, and industrial products.

“Peanut butter and orange juice may not be the most obvious battleground for an international dispute between the US and the European Union, but as tension rises, they may be where a trade war is fought,” said Dennis de Jong,  managing director at UFX.com.

“President Donald Trump’s inflammatory decision to slap tariffs on steel and aluminium imports as he attempts to reduce America’s trade deficit has already prompted a global backlash, and heightened fears of a tit-for-tat trade war across the globe.”

3.20pm: New Look to close stores in rescue deal 

New Look plans to close 60 stores as part of a rescue deal, putting 980 jobs at risk. 

The fashion retailer has started a company voluntary arrangement, a form of insolvency aimed at protecting a business from collapsing. 

The plan still needs approval from creditors and comes amid a difficult trading environment.

High street retailers have been struggling as higher inflation puts pressure on disposable incomes and as consumer behaviour shifts in favour of online shopping.

New Look said its key problem was its over-rented UK store estate. In response, it has held talks with its landlords in a bid to reduce its fixed costs and restore profitability.

2.30pm: US stocks open lower

US stocks opened in the red following the shock news that National Economic Adviser Gary Cohn has resigned from the White House.

Cohn’s departure came after he lost a battle with Donald Trump over the president’s plan for hefty tariffs on steel and aluminium imports.

Craig Erlam, senior market analyst at Oanda, said the prospect of a trade war will be a big concern for markets, with many of the view that such action would drive up prices and weigh on economic growth.

“Some Republicans, including House Speaker Paul Ryan, have warned against starting a trade war that could damage the economy and undo the benefits of the recently passed tax reforms, highlighting that Trump is lacking the full support of his party on this particular issue,” said Oanda’s Craig Erlam.

“Trump’s comments linking the tariffs to NAFTA negotiations also suggested that they could be dropped if a new agreement is signed, suggesting he may simply be using the threat of tariffs to put pressure on others to deliver what he considers to be fair and reciprocal trade.

“That may enable Trump to extract some concessions from Mexico and Canada, or at least allow him to claim credit for securing a better deal, but it’s unlikely to work as well with the European Union and China, among others.”

The Dow Jones Industrial Average shed 200 points to 24,692, the S&P 500 fell 15 points to 2,712 and the Nasdaq dropped 25 points to 7,345.

2.00pm: US trade deficit widens 

The US trade deficit widened in January to the highest level since October 2008, the Commerce Department revealed.

The deficit rose to US$56.6bn in January from US$53.9bn in December, compared to analysts’ expectations of USS$55bn.

The trade gap has continued to widen since Donald Trump entered the White House, in part because US consumers’ appetite for imports has grown.

1.20pm: US private payrolls rise more than expected in February

US employers added 235,000 jobs in February, according to the ADP private payrolls report.

Economists were expecting payrolls to rise by 200,000. The figure for January was revised up to 244,000 from the initially reported 234,000.

February was the fourth month in a row that private payrolls reached at least 200,000.

The report comes ahead of Friday's all-important US non-farm payrolls report, which is expected to reveal 205,000 jobs were added to the economy in February.

12.15pm: Investors nervously await US restart

The Footsie was modestly higher in lunchtime trading as investors nervously awaited the New York reaction to the resignation of President Trump's key economic advisor, Gary Cohn.

Around 12.15pm, the FTSE 100 index was 8 points higher at 7,155, albeit just below the session peak at 7,157.59 and above the early low of 7,109.56.

US stock index futures still pointed to sharp opening falls on Wall Street, following a flat close on Tuesday before the news of Cohn’s resignation broke, with the adviser’s departure seen linked to his opposition to Donald Trump’s planned trade tariffs.

David Cheetham, chief market analyst at XTB.com commented: “Cohn was seen as one of Wall Street’s guys and in his role as adviser to the president he was widely viewed as having the markets back, meaning that his decision to step down could lead to further declines.

“Global risk sentiment remains not far from its most fragile levels in over a year and should we get another wave of selling this afternoon when the US enters then a retest of the recent lows becomes increasingly likely.”

He added: “The big question then would be if the bulls can defend what is now a critical region. The latest development has certainly added to the growing pile of evidence that Trump’s administration won’t end up being quite as market-friendly as many had hoped.”

Restaurant Group wanted at lunchtime

Among equities in London, Restaurant Group PLC (LON:RTN) shares were big gainers on the FTSE 250 index, jumping 9% higher to 259p as the Frankie & Benny's and Chiquito brands owner maintained its dividend, reflecting confidence in the delivery of its strategic plan, even though 2017 adjusted profit and sales fell.

Elsewhere, St Ives PLC (LON:SIV) gained 11.9% at 83p after the mid-cap international marketing services group reported strong half-year results boosted by the strength of its Strategic Marketing division.

St Ives’ group revenue in the 27 weeks to February 2 rose 7% year-on-year to £146.5mln, with the Strategic Marketing segment delivering like-for-like revenue growth of 23%, which more than offset an 11% decline in its Marketing Activation business

And under pressure outsourcer Capita Group (LON:CPI) gained 3.9% at 157.9p as City broker Shore Capital raised its rating on the stock to ‘hold’ from ‘sell as it thinks chief executive Jonathan Lewis is taking the right steps to put the business back on track – although it’s going to take a while.

Capita is undergoing a major restructuring after issuing a profit warning and announcing a £700mln rights issue in January.

10.40am: Cashflow growth helps Rollers

Rolls-Royce Holdings PLC (LON:RR.) remained far and away the biggest FTSE 100 gainer in mid-morning trading, up 13.2% at 938.4p after the engines maker swung to an annual profit as it cut costs as part of a restructuring to turn around the business. 

The blue-chip company reported a pre-tax profit of £4.9bn for the year to December 31, 2017, compared to a record loss of £4.6bn a year earlier which had reflected a £651mln settlement with US and UK authorities over corruption charges and the impact of a weaker pound on certain contracts.

READ: Rolls-Royce swings to annual profit as restructuring pays off

Chief executive Warren East said the company was making good progress in its restructuring and is on track to meet its target of generating free cash flow of £1bn by 2020.

Russ Mould, AJ Bell’s investment director, commented: “Cash pays the bills and cash funds investment in a business and its competitive position, so it is encouraging today to see cash flow improve markedly at Rolls-Royce as boss Warren East nears the end of his third year at the helm.”

He noted: “One quick test to tell if something odd is going on with a company’s accounting is to compare sales, profit and cash flow growth. If all is healthy, they will tend to rise or fall together, albeit by differing degrees. But a company where sales and profits grow but cash flow does not is one that requires further investigation, as it could mean the firm is deploying aggressive accounting techniques.”

Around 10.45am, the FTSE 100 index was just 1 point higher at 7,148, below the session peak of 7,157.59 but above the earlier low of 7,109.56.

9.25am: UK house prices slowing

UK house prices rose at their slowest annual pace in nearly five years last month, according to the latest numbers from mortgage lender Halifax, the latest sign of weakening in the housing market as Brexit worries take their toll.

Halifax said average house prices increased by 1.8% in the three months to February compared with the same period in 2017, slowing from 2.2% growth in January and the weakest increase since March 2013, but was a touch above forecasts for a 1.6% rise.

In monthly terms, prices rose by 0.4% in February from January, the first increase in three months, the lender added.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics commented: “The slowdown in the three month average of year-over-year growth in house prices to the lowest rate since March 2013 demonstrates that even the modest rise in mortgage rates over the last few months has hit the market hard.”

He added: “Record-high loans-to-income ratios mean that new buyers will have to devote a much larger share of their annual incomes to monthly loan repayments in order to borrow as much as their predecessors.

“Admittedly, a slight uptick in wage growth and a continued lengthening of mortgage terms will provide some counterbalancing support to prices. But the rise in mortgage rates will be the dominant influence on the market, depressing demand and ensuring that house prices merely hold steady this year.”

The data kept up pressure on the pound which was down 0.3% against the US dollar at US$1.3852 and lost 0.2% versus the euro at €1.1159.

Among equities, the FTSE 100 index turned modestly higher, up 5 points at 7,152, having recovered from an early low of 7,109.56.

8.45am: Footsie falls muted

The FTSE 100 index eased back in early trading after a volatile performance overnight on Wall Street, shocked by the resignation of President Trump's key economic advisor, Gary Cohn.

However, the Footsie’s opening fall was not as bad as feared, helped by a near 12% post-results leap from engineer Rolls-Royce Holdings PLC (LON:RR.).

Around 8.45am, the UK blue-chip index was about 13 points lower at 7,133, having gained 31 points on Tuesday.

US stock futures were above their initial sharp falls which followed news of Cohn’s departure amid worries on a global trade war over Trump’s tariff plans, but they still pointed lower.

Neil Wilson, senior market analyst at ETX Capital said: “What does it mean? The implication is that without the restraining influence of Cohn on Trump, the president will now have a free hand to press ahead with further tariffs and generally up the ante on trade.

“Clearly he fought back on trade and lost. This in itself does not bode well for risk despite that small boost we saw on news that North Korea could consider denuking.”

“But,” he added, “Cohn’s departure was not entirely a surprise and this fact may give markets another reason to view everything through rose-tinted spectacles.”

In London, Rolls-Royce was by far and away the top FTSE 100 gainer, up 11.5% to 925p as the engine maker reporting a forecast-beating profit for 2017, although it also said that for the current year, group operating profit could be at the lower end of expectations.

Legal & General Group PLC (LON:LGEN) was a more modest blue chip gainer after results, adding 0.6% at 259.4p after the insurer reported an above-forecast 32% jump in 2017 operating profit, helped by reserve releases related to changing longevity expectations.

Weaker mining and metal stocks was the main drag on blue chip sentiment amid the Trump trade war fears, with Glencore PLC (LON:GLEN) shedding 1.5% at 362.75p, and Anglo American PLC (LON:AAL) losing 1.5% at 1,734p.

Proactive news headlines:

Instem PLC (LON:INS) will see a rise in revenue after one of its clients, one of the world’s largest chemical products companies, chose to adopt the group’s Software-as-a-Service (SaaS) delivery model.

Harvest Minerals Ltd (LON:HMI) has signed a major sales order with Agrocerrado Produtos Agricolas e Assistencia Tecnica LTDA, a fertiliser distributor in Brazil, and said additional discussions regarding sales are on-going.

MySQUAR Ltd (LON:MYSQ), the Myanmar-language social media, entertainment and payments platform, is to raise £2.11mln through the issue of unsecured convertible bonds to fund a potential acquisition.

Sound Energy PLC (LON:SOU) told investors that the completion date for the sale of its Italian assets to Saffron Energy has moved to April 9. Saffron (which is due to be renamed Coro Energy) is due to hold a shareholder general meeting on March 29 in order to secure approval for the proposed transaction and other changes including its £13.4mln equity funding.

Allergy Therapeutics PLC (LON:AGY) made further market share gains as it headed into a ‘pivotal’ 12 months. Interim revenues at the hay fever vaccine specialist rose by 4% to £42.2mln despite the pollen season being described as ‘abnormally weak’.

Over the top TV software specialist Mirada PLC (LON:MIRA) has arranged a new loan facility with major shareholder Ernesto Tinajero. The facility, for US$3mln, is repayable in a year’s time and charges interest of 15% on funds drawn.

In its full year results AFC Energy PLC (LON:AFC) chief executive Adam Bond told investors that the fuel cell company completed its three-year plan as promised. “The funding put in place early in 2017 allowed us to enhance the 10kW fuel cell system design to support scaling-up of this modular design basis, complete technical milestones to deliver the longevity and reliability required for power plant application and develop the strategic partnerships to underpin the future commercial manufacturing and supply of fuel cells,” Bond said.

Jubilee Metals Group PLC (LON:JLP) turned a profit before non-cash operating expenses and interest in the second half of 2017.

Horizonte Minerals PLC (LON:HZM, TSE:HZM) has issued its first quarter interim update which provides commentary around the mine developer’s recent progress, including its successful funding and latest acquisition. It raised £9.2mln in January, leaving the company fully funded for two years – a period in which it plans to deliver work programmes at the flagship Araguaia project and the newly acquired Vermelho project.

Wolf Minerals Ltd. (LON:WLFE) latest interim results statement reveals a narrowed loss, thanks in part to higher revenues generated by its tungsten mine in Devon. Revenue improved to £23.12mln for the period, up from £10.93mln in the same period in 2016, though cost of sales rose also to £42.72mln from £39.27mln.

6.40am: Big falls expected

London's index of leading shares was expected to give back all of yesterday's gains, after the resignation of president Trump's key economic advisor, Gary Cohn.

After rising 31 points to 7,147 on Tuesday, the FTSE 100 was expected to open at around 7,100.

Cohn's resignation is widely thought to be down to differences of opinion with the president over trade policy and Trump's announcement last week of import tariffs on steel and aluminium.

The resignation happened after the US market closed last night; the main indices closed higher, with the Dow Jones up 9 at 24,884 and the S&P 500 up 7 at 2,728.

The former is expected to open more than 400 points lower today and the latter is tipped to shed 40 points.

Asian markets did not react favourably to the news, with the Nikkei 225 down 165 at 21,253 in Tokyo and the Hang Seng off 381 at 30,129 in Hong Kong.

In London, there will be plenty of corporate news to take traders' minds off the mayhem in the White House with blue-chips Rolls-Royce, Paddy Power, Legal & General and DS Smith among those updating the market.

Paddy Power shareholders might be awaiting the results with a soupçon of trepidation after news this week that chief financial officer Alex Gersh wants to quit.

UBS analyst Chris Stevens is expecting the bookie to reveal full-year revenue of around £1.7bn and £457mln of underlying earnings (EBITDA).

Adjusted earnings are forecast by UBS to be around 380p per share, with the dividend anticipated at 190p.

In January, power systems developer Rolls-Royce confirmed that it was on track to meet in full-year expectations. Deutsche Bank expects revenue to rise to £14.8bn from £13.7bn in 2016 and pre-tax profit to increase to £887mln from £813mln.

Significant an nouncements expected

Finals: Rolls-Royce Holdings PLC (LON:RR), Paddy Power Betfair PLC (LON:PPB), Legal & General Group PLC (LON:LGEN), Restaurant Group PLC (LON:RTN), Anpario PLC (LON:ANP), Breedon Group PLC (LON:BRE), Bioquell PLC (LON:BQE), CLS Holdings PLC (LON:CLS), esure Group PLC (LON:ESUR), FDM Group Holdings PLC (LON:FDM), 4Imprint Group PLC (LON:FOUR), Hill & Smith Holdings PLC (LON:HILS), Lookers PLC (LON:LOOK), Microgen PLC (LON:MCGN), PageGroup PLC (LON:PAGE), NMC Healthcare PLC LON:NMC), Ophir Energy PLC (LON:OPHR), Stock Spirits Group PLC (LON:STCK), Tritax Big Box REIT PLC (LON:BBOX), Tyman PLC (LON:TYMN), WANDisco PLC (LON:WAND)

Interims: 88 Energy Limited (LON:88E), Netcall PLC (LON:NET), River and Mercantile Group PLC (LON:RIV), St Ives PLC (LON:SIV)

Trading updates: DS Smith PLC (LON:SMDS)

Economic data: Halifax UK house price survey; US ADP employment; US international trade; US Consumer credit; Federal Reserve Beige Book

Around the markets

  • Sterling: US$1.3904, up 0.16 cents
  • 10-year gilt: 1.522%
  • Gold: US$1,336.20 an ounce, up $1
  • Brent crude: US$62.07 a barrel, down 53 cents
  • Bitcoin: £7,621.42, down £149.50

Business headlines

The Daily Telegraph

Radisson owner re-brands as part of €160 million five-year overhaul plan: The major hotelier behind the Radisson brand is set to splash €160 million (£143 million) on overhauling its hotel estate as part of a five-year plan announced by the company.

Thomas Cook launching fund to ramp up own brand hotel roll-out: The tour operator has put two of its Sunwing hotels, which are on the Greek islands of Rhodes and Crete, into the Thomas Cook Hotel Investments fund alongside another three owned by its partner in the scheme, the Swiss-based hotel property development company LMEY Investments.

BlackBerry suing Facebook for patent infringement: BlackBerry has filed a patent infringement lawsuit against Facebook and its WhatsApp and Instagram apps, arguing that they copied technology and features from BlackBerry Messenger.

Ashtead finance chief stands down as hurricanes boost profits: Equipment rental giant Ashtead has revealed the departure of its finance chief alongside another quarter of surging profits and revenues as it continued to benefit from a particularly violent North American hurricane season and US corporate tax cuts.

The Guardian

Brexit deal: Hammond says financial services will not be frozen out: Philip Hammond will insist on Wednesday that Britain can overcome EU opposition and include financial services in a post-Brexit free trade deal.

F1 tycoon Vijay Mallya’s super-yacht impounded over wage dispute: A US$93 million (£67 million) super-yacht owned by Indian multimillionaire Vijay Mallya has been impounded in Malta in a dispute over the businessman’s failure to pay the crew more than US$1 million in wages.

US investigation into BAE Saudi arms deal watered down, leaked memo suggests: The outcome of a US criminal investigation into alleged bribery in a £43 billion arm deal between Britain and Saudi Arabia was watered down following a secret lobbying campaign, according to a leaked document.

Daily Mail

McCarthy & Stone reins in development as lease scandal slows building of elderly flats: McCarthy & Stone has reined in development in the wake of a government crackdown on toxic leases. The firm, which builds homes for pensioners, sold just 760 homes in the six months to the end of February, down from 864 in the same period last year.

Tesco gets 3% boost as brokers bet on success after it is named one of the UK’s fastest-growing supermarkets: Tesco shareholders were dancing in the aisles for a second day running as the supermarket chain was named one of the fastest-growing in the UK.

Discounter Lidl records highest sales growth of all Britain’s major supermarkets: Discounter Lidl raced ahead to boast the highest sales growth of all the major supermarkets in the 12 weeks to February 24 to total 14.8%, according to data from Nielsen.

William Hill gambles on a sports betting boom in the US after selling its Australian business at a loss: William Hill is putting its money on a sports betting boom in the United States after selling its Australian business at a loss.

Why Just Eat needs drivers: Food delivery firm dives more than 12% after revealing £50 million investment plan: Shares in Just Eat dived more than 12% after it revealed plans to invest £50 million this year to increase its own army of delivery drivers.

Daily Express

‘Take Trump seriously’ Fiat Chrysler CEO issues warning to EU amid fears of trade war: The European Union must take Donald Trump’s threats to impose tariffs on steel and aluminium seriously, the CEO of Fiat Chrysler has warned amid fears of a trade war breaking out.

North Korea denuclearisation news boosts Wall Street – investors turn to riskier assets: US stocks opened higher this morning as news of North Korea’s openness to talks with Washington injected renewed energy into the stock market.

The Scottish Herald

Argentina inflicts yet more woe on Aggreko: Argentina continues to weigh on Aggreko as profit for 2017 tumbled by almost 12% because of ongoing legacy contract issues in the South American country.

FTSE 100 pushes higher on Smurfit Kappa takeover approach: A takeover swoop for packaging giant Smurfit Kappa sent shares soaring on Tuesday, helping London’s premier index climb for the second straight session.

City AM

John Lewis tops retail Employers charts: John Lewis is the top big retailer to work for in the UK, according to analysis of reviews from staff. The department store topped a ranking produced by jobs site Indeed, based on ratings given by employees of the firm.

Goldman Sachs hits out at Trump’s “draconian” metals tariffs: Goldman Sachs has blasted Donald Trump’s plans to impose tariffs on steel and aluminium, saying the “draconian” move had created friction with key US allies.

Brick maker Ibstock builds for the future after “strong” 2017: British housing bellwether Ibstock today hailed a “strong” year, benefiting from rising builder brick demand.

The Times

Mining company collapses amid corruption claims: BSG Resources Ltd, a Guernsey-based holding company of Mr. Steinmetz’s international mining business, which is involved in mining and refining iron ore, diamonds and nickel, was placed in administration by a court on the Channel island, according to BDO, the accountancy firm.

Generation Rent lays the foundations of huge rise in build-to-let schemes: The buy-to-let business has already been shaken to its foundations by punitive tax changes and now it faces more painful disruption from burgeoning build-to-rent schemes.

Jupiter Fund Management vows to close 40% gender pay gap: A leading listed investment company has acknowledged that it “must do better” after revealing that its female employees receive nearly 40% less than men.

Overseas deals rocket after companies go on foreign shopping spree: According to official statistics, UK groups splashed £76.6 billion on overseas deals in 2017, with £9 in every £10 spent on businesses in the Americas. The last time that such deal-making was higher was in 2000 when the total reached £181.3 million.

Dyson says models with cords suck: After 25 years, Dyson is to pull the plug on vacuum cleaners with electric cords and will turn its attention to developing cordless models.

The Independent

Sainsbury’s announces pay rise for store staff and contract shake-up: Sainsbury’s has announced that it plans to boost the base rate of hourly pay across its stores from £8 to £9.20 as part of a £100 million investment plan.

Australian Strategic Materials signs US$600 million LoI

Rowena Smith, CEO and managing director of Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF), joins Jonathan Jackson in the Proactive studio to discuss the company’ s Dubbo Project, in Central West New South Wales. This project aims to extract and process critical minerals and rare earth...

12 hours, 57 minutes ago