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FTSE 100 pushes higher as crude rallies; US stocks up

Last updated: 02:40 28 Jun 2018 AEST, First published: 15:36 27 Jun 2018 AEST

London
  • FTSE 100 closes 84 pts higher 

  • Brwent crude advances over 2%

  • Whitbread among top risers

  • UK house price growth eases in June

FTSE 100 joined other global indices to head higher on Wednesday as trade war fears eased and US stocks were heading higher.

The UK index of leading shares closed almost 84 points higher at 7,621.

FTSE 250 was also up - almost 87 points to 20,844.

Brent crude gained 2.11% to US$76.31 as traders pushed the price up on market supply concerns and US inventories fell last week.

On Wall Street, the Dow Jones is up 192 points, while the S&P 500 is around 20 higher.

"Stock markets are stronger today as Washington DC will be taking a softer stance on international investment. The move from the Trump administration gave investors some hope that a full-on trade war will be avoided, and this prompted a wave of buying," said David Madden, at CMC Markets.

Among the top risers was Costa Coffee owner Whitbread (LON:WTB), which added 3.44% to stand at 4,027p after the group revealed that sales for the first three months had jumped by 3.2%.

The Premier Inn division saw like-for-like (LFL) sales fall by 0.9%, and the Costa Coffee department saw sales slip by 2%.

The firm has finally bowed to pressure from some shareholders to spin-off its Costa Coffee business and said constructive early steps have been taken in preparation for the demerger.

Top laggard on Footsie was take-away app Just East plc (LON:JE), which lost 7.11% to 755.20p. The company announced it would carry  out a delivery trial with Subway.

3.50pm: Weekly US crude inventories fall

Oil prices have extended gains after official data showed US crude inventories fell last week.

The Energy Information Administration said crude inventories dropped by 9.9 million barrels to 416.6 million barrels.

Brent crude increased 1.5% to US$77.55 per barrel and West Texas Intermediate crude rose 1.9% to US$71.95 per barrel.

Earlier, oil prices jumped after the US State Department said it will require companies to cut all oil imports from Iran to zero by November.

3.20pm: Wetherspoons hit by CO2 shortgage 

JD Wetherspoon PLC (LON:JDW) has run out of some drinks at its pubs, becoming the latest victim to a shortage of CO2.

It has run out of John Smith’s Strongbow and Strongbow dark fruits.

“The affected drinks are supplied by Heineken but they have started taking some orders again so things should be back to normal in a couple of days,” Wetherspoons said.

"It’s disappointing we can’t offer a complete range of drinks but we do still have more than 200 drinks on offer across 880 pubs.”

The scarcity of CO2 has also hit food wholesaler Booker, Heineken, Coca-Cola and pub operator Ei Group.

2.50pm: US stocks open higher

US stocks have opened higher after the Trump administration revealed that it would back softer restrictions on Chinese investment in US tech.

The Dow Jones Industrial Average jumped 144 points to 24,432, the S&P 500 gained 16 points to 2,739 and the Nasdaq added 39 points to 7,601.

President Donald Trump asked Congress to strengthen a government agency that would limit or stop investments by China and other countries suspected of stealing US technology.

Trump was expected to directly impose limits on Chinese investment in US technology companies.

On the company front, World Wrestling Entertainment Inc(NYSE:WWE) shares shot higher after announcing a deal for its wrestling programme with USA Network and Fox Sports.

Sonic Corp(NASDAQ:SONC) shares dropped after the fast-food company posted quarterly revenue that missed analysts’ forecasts.

Aquinox Pharmaceuticals Inc. (NASDAQ:AQXP) slumped after the group’s cystitis drug failed to meet its main goal.

2.00pm: US trade deficit in goods narrows in May

The US trade deficit in goods narrowed by 3.7% to US$64.8bn in May as exports rose at a faster pace than imports, official figures have revealed.

Economists had expected a deficit of US$69.2bn, up from US$67.3bn in April.

The report also showed a 0.5% increase in wholesale inventories and a 0.4% gain in advanced retail inventories in May.

Separately, government data showed orders for durable goods fell 0.6% in May after a revised 1% decline in April. Analysts had predicted a 1% drop.

1.40pm: Aldi and Co-op to take over closing Waitrose stores

Aldi and the Co-op have swooped in to take some of the sites where Waitrose stores are set to close.

The John Lewis Partnership announced plans to close five Waitrose stores earlier today as it issued a profit warning, blaming a tough UK retail market.

Aldi has exchanged contracts to acquire the Waitrose Camden store while the Co-op is to take the other four convenience stores in Manchester.

1.00pm: US stock futures edge lower

Worries about a trade war is weighing on US stocks in pre-market trading.

Dow Jones Industrial Average futures fell 126 points to 24,176, S&P 500 futures declined 12 points to 2,716 and Nasdaq futures dropped 57 points to 7,047.

US President Donald Trump threatened to tax motorcycle maker Harley Davidson “like never before” on Tuesday over the company’s plans to move production to Europe to avoid tariffs. Meanwhile, US Treasury Secretary Steve Mnuchin has denied reports that the country is looking to block investment from China in US tech but said there will be a statement aimed at all countries trying to steal technology.

“While this appears to neither escalate nor de-escalate the trade dispute the US is raising with a number of countries, it is yet another reminder that Trump is not softening his stance and instead continuing to double down on efforts to pressure countries into submission, something that does not appear to be working yet,” Oanda analyst Craig Erlam said

12.00pm: Lunchtime trading

The FTSE 100 edged up 19 points to 7,556 as energy stocks railed on the back of higher oil prices.

BP PLC (LON:BP. and Royal Dutch Shell PLC (LON:RDSB) were among the biggest risers on the FTSE 100 as Brent crude rose 0.6% to US$76.76 per barrel and West Texas Intermediate crude grew 0.8% to US$71.16 per barrels.

Oil prices gained after US President Donald Trump urged oil buyers to cut their purchases of Iranian production.

“Iran is OPEC’s third largest producer, at some 3.8 million barrels a day, equivalent to 12% of OPEC’s total output and some 4% of global daily consumption,” said AJ Bell investment director Russ Mould.

“Any cut in demand for Tehran’s oil could go some way to negating the effect of the increase in Saudi Arabian production agreed by OPEC in Vienna last week, especially as the terms of that deal remain unclear and supply from both Libya and Venezuela is also falling.”

Meanwhile, J Sainsbury PLC (LON:SBRY) continued to gain after broker upgrade. 

On the downside, Bunzl PLC (LON:BNZL) shares fell after saying it has sold its marketing services business in the UK, which generates annual revenue of £46mln.

ITV PLC (LON:ITV) was also on the back foot after announcing the resignation of finance director and chief operating officer Ian Griffiths.

11.30am: EU needs to address Brexit risks, says Carney

Bank of England Governor Mark Carney is speaking at a press conference following the release of the central bank's financial stability report.

In response to a question about whether the UK is well prepared for Brexit, Carney said the government has put in place temporary permissions to allow financial institutions to continue trading across the EU after Brexit in March. 

But he warned that the EU has not done enough to address risks stemming from Brexit. 

"The biggest remaining risks of disruption are areas where action is needed by both UK and EU authorities, such as ensuring the continuity of the £96 trillion of existing derivative contracts - in both cleared and uncleared markets," he said, according to the BBC.

"Based on our experience and knowledge of these markets, it will not be possible, ahead of March 29, for private financial institutions on their own to mitigate fully the risks of disruption to financial services."

11.00am: Bank of England says UK banks are prepared for hard Brexit

UK banks could handle a 'hard Brexit' if neccessary, according to the Bank of England's Financial Policy Committe (FPC). 

The European Union's banking watchdog had warned on Monday that lenders are ill-prepared for the event the UK leaves the bloc without a deal next March.

But the FPC said in its latest financial stability report that lenders hold enough capital to cope with turmoil in the markets.

"The FPC continues to judge that the UK banking system could support the real economy through a disorderly Brexit," the FPC said.

10.20am: John Lewis issues profit warning, says it will close Waitrose stores

The John Lewis Partnership has become the latest company to fall victim to the struggles facing the UK high street.

It has warned that it does not expect to make a half year profit and said that it will close some Waitrose stores, including four convenience shops and one small supermarket. 

Profits for the full year will come in "substantially" lower than last year, John Lewi said.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, said: "It is very important that we feel the jeopardy of what is happening right now."

9.30am: UK house price growth slows to five-year low in June

UK house price growth slowed to a five-year low in June, Nationwide has revealed.

Prices rose 2.0% year-on-year, easing back from the 2.4% increase reported in May, though it was better than the 1.7% gain expected by analysts. 

Month-on-month, prices increased 0.5% in June after falling 0.2% in May. Economists had forecast a 0.2% monthly rise.

Robert Gardner, Nationwide's chief economist, said: "Surveyors continue to report subdued levels of new buyer enquiries, while the supply of properties on the market remains more of a trickle than a torrent.

"Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates."

8.30am: Energy stocks provide boost

The Footsie moved higher in early trading supported by gains in heavyweight energy stocks on oil price strength, while supermarket giant J Sainsbury PLC (LON:SBRY) got a boost from a broker upgrade.

Around 8.30am, the FTSE 100 index was up 11 points at 7,548, albeit below opening highs, having added 28 points on Tuesday.

Jasper Lawler, head of research at London Capital Group commented: “Oil was a central driving force behind the positive close on Wall Street overnight, amid reports that supply disruptions are expected to outweigh the impact of the recently agreed OPEC increase in production.

“An earlier pledge by Saudi Arabia to lift production to a record was shrugged off by the markets, as the US pressed allies to cut Iranian oil imports to zero by early November.”

He added: “Oil charged over 2% higher on supply disruption fears pushing through $76 per barrel. Traders will now look towards oil inventory data later today, signs of a strong drawdown in addition to the supply disruption fears could be sufficient to lift oil back towards $80 per barrel.”

Oil giants provided the main boost for London’s blue-chips early on, with BP PLC (LON:BP.) gaining 1.7% at 573.1p and Royal Dutch Shell PLC (LON:RDSA) up 1.4% at 2,609.5p.

Sainsbury’s was also a good gainer, adding 2.2% at 312.7p as Barclays Capital upgraded its rating for the food retailer to ‘overweight’ ahead of a trading update due next week. 

Proactive news headlines:

The long-awaited next phase of flow testing at the Horse Hill discovery in southeast England has begun. All of the equipment needed to carry out the 150-day long-term extended flow test campaign at the HH-1 well is now on site. UK Oil & Gas Investments PLC (LON:UKOG) has a 32.4% stake in the project, Alba Mineral Resources PLC (LON:ALBA) owns an 11.8% interest, while Solo Oil PLC (LON:SOLO) holds a 9.8% stake.

Cadence Minerals PLC (LON:KDNC) has signed a conditional heads of terms agreement to acquire up to a 30%  stake in Zulu Lithium Mauritius Limited (Mauco), a wholly-owned subsidiary of Premier African Minerals Ltd (LON:PREM). Under the agreement, Cadence will invest up to US$5.1mln in Mauco, the parent company of Zulu Lithium (Private) Ltd, which owns the Zulu Lithium Project.

Tavistock Investments PLC (LON:TAVI) saw its shares leap up in early morning trading Wednesday after reporting a jump in its underlying earnings for the full-year and a maiden pre-tax profit.

i3 Energy PLC (LON:I3E) has granted a period of exclusivity to an unnamed company for a potential farm-in deal for both the Liberator and Liberator West blocks in the UK North Sea.

W Resources PLC (LON:WRES) has announced that development work is “advancing well and remains on schedule and on budget” at its flagship La Parrilla tungsten project in Spain.

Rainbow Rare Earths Ltd (LON:RBW) has announced that Phase 1 drilling results at its maiden drilling campaign at Kiyenzi target at Gakara project in Burundi has confirmed the presence of multiple intersections of high grade rare earth elements (REE).

Shares in 88 Energy PLC (LON:88E) dipped on Wednesday morning as the oil explorer said it was still struggling to recover stimulation fluids from the Icewine#2 well in Alaska as fast as it would like. On Friday, the AIM-quoted firm said the rate of recovery had slowed due to the optimisation of nitrogen lift operations – an intervention method designed to accelerate the rate of recovery.

Coinsilium Group Limited (AQSE:COIN) said its advisory client, FANTOM Foundation, has raised US$39.8mln following a successful token sale.

FairFX Group PLC (LON:FFX) has launched a new global current account aimed at small businesses. The AIM-listed international payments and e-banking group said its Fair Everywhere account would allow customers to manage all day-to-day business banking and international money transfers in one place with balances in sterling, euros and US dollars.

Last year was another year of significant technological development for Advanced Oncotherapy PLC (LON:AVO) that saw the installation of the company's first proton-based LIGHT radiotherapy system.

Highlands Natural Resources PLC (LON:HNR) said it has been testing a new bottom-hole-assembly (BHA) drilling technique at its Grizzly, Ouray and Thunder wells at the East Denver shale oil and gas project which has led to a revision in its drilling timetable.

Block Energy PLC (LON:BLOE) has announced the acquisition of an additional 20% interest in the ‘highly prospective’ West Rustavi licence in Georgia, increasing its working interest to 25%. The oil and gas company said West Rustavi licence has proven reserves and multiple gas discoveries have already been made in the Lower Eocence and Upper Cretaceous within the licence.

The terms of US oil firm Diversified Gas & Oil PLC’s (LON:DGOC) deal to pick up more assets in the Appalachian Basin have been finalised. The company said it expects the agreement to be signed shortly.

Shanta Gold Limited (LON:SHG), the East Africa-focused gold producer, developer and explorer, said that over 75% of the holders of its unsecured subordinated convertible loan notes due April 2019 have voted in favour of a planned buy-back. The group added that, following the passing of the written resolutions, a subsidiary of the company will proceed to buy-back approximately 33.33% of the notes currently held by third parties (around US$5mln) in April 2019 at par value.

6.40am: Gains expected on oil price strength

The FTSE 100 is expected to push higher again in early trade on Wednesday, extending Tuesday’s rally following overnight gains by US stocks on oil price strength although Asian markets were lower as Trump trade war fears ebb and flow.

Spread betting firm IG expects the UK blue chip index to open around 37 points higher at 7,574, having closed up 28 points on Tuesday.

Overnight on Wall Street, the Dow Jones Industrials Average added 30 points to close at 24,283 boosted by gains from energy stocks as oil prices rose following news President Trump is putting pressure on allies not to take crude supplies from Iran.

Asian markets, however, fell back as worries over the escalating US/China trade war situation continued to keep the mood subdued, with Japan's Nikkei 225 index shedding 0.5%.

Michael Hewson, chief market analyst at CMC Markets UK, commented: “Given the current uncertainty investors appear to be taking the opportunity to adopt a more safety first approach as we head towards the end of the month, the quarter and the half year in terms of doing a little bit of portfolio readjustment, as we head towards the second half of the year.”

On currency markets, the pound was fairly steady against both the dollar and the euro, shrugging aside Brexit worries ahead of a European Union summit meeting tomorrow, with the only economic data due today, the CBI’s distributive trades survey, unlikely to move the needle too far.

Whitbread update to add flavour

On the corporate front, the latest trading statement from Whitbread PLC (LON:WTB) will have an added flavour, given that the blue chip leisure firm has finally bowed to pressure from some shareholders to spin-off its Costa Coffee business.

Deutsche Bank is expecting the FTSE 100-listed firm’s first quarter update to be weak, reflecting recent trends in the UK hotels market and the tough market conditions hitting retail footfall.

“However,” the German bank’s analysts said in a preview, “we believe efficiency savings (raised recently from £150mln to £250mln) provide some protection to consensus estimates. Still, recent corporate announcements including the Costa demerger would likely support the shares.”

The decision to hive off Costa Coffee came after activist investors Elliott Advisors and Sachem Head, which together control 10% of shares, urged Whitbread to split the business into two.

Meanwhile, a half-year trading statement from fellow blue-chip firm Bunzl PLC (LON:BNZL) may show a tapering off of revenue growth at the distribution and outsourcing group.

In an update in April, Bunzl said its group revenue in the first quarter increased by 7% year-on-year at actual exchange rates and by 14% on a constant exchange rates basis, thanks to underlying growth of around 6% and an impact from acquisitions of about 8%.

That trading update contained news of two bolt-on acquisitions and commentators think it would not be a massive surprise were Bunzl to unveil another purchase or two.

Significant results expected on Wednesday June 27:

Trading updates: Whitbread PLC (LON:WTB), Bunzl PLC (LON:BNZL)

Finals: Great Eastern Energy Group Ltd (LON:GEEC), Liontrust Asset Management PLC (LON:LIO), Sysgroup PLC (LON:SYS) Tatton Asset Management PLC (LON:TAM), ULS Technology LON:ULS)

Economic data: CBI distributive trades survey; US durable goods orders, US pending home sales; US international trade in goods

Around the markets:

  • Sterling: US$1.3223, down 0.02%
  • Gold: US$1,256.60, an ounce, unchanged
  • Brent crude: US$70.82 a barrel, up 0.4%

City Headlines:

  • Uber has received a new 15-month license to operate in London, the ride handling app’s biggest European market – Financial Times
  • The 'bad bank' UK Asset Resolution (UKAR), which is winding down the mortgage books of failed lenders Northern Rock and Bradford & Bingley, is aiming to sell all the assets it took control of after the financial crisis in the next three years – Daily Mail
  • Bank of America has relocated three senior UK-based executives to Paris as it sped up its preparations for Brexit – Financial Times
  • General Electric is to spin off its healthcare division and exit its oilfield service business to focus on aviation, power and renewable energy  – The Times
  • Ferrovial, the Spanish infrastructure firm that manages Heathrow and owns 25% of the airport, is relocating its international head office from the UK to Amsterdam to cope up with Brexit – The Guardian
  • The Serious Fraud Office has launched criminal proceedings against Monaco-based Unaoil as part of its probe into corruption at the oil services group – The Times
  • US President Donald Trump has warned that he will impose unprecedented tax Harley-Davidson if the company goes ahead with plans to move production outside the US – Daily Telegraph
  • The Bank of England has undermined its credibility by offering unreliable economic forecasts and statements, Ian McCafferty has warned in his final speech before he steps down – Daily Telegraph
  • Andrew Bailey, chief executive of the Financial Conduct Authority, has hit back at claims by European officials that banks based in London are not ready for a hard Brexit – The Times
  • Europe-wide shortfall of carbon dioxide has entered second week disrupting supply chains at fizzy drinks manufacturers and poultry producers – Financial Times
  • Escalating trade dispute between US and China has jeopardised American plans to export increased volumes of liquefied natural gas to China – Financial Times
  • Rapper Jay-Z has launched a new venture capital fund with Walden Venture Capital – Daily Telegraph

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