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FTSE 100 closes in red as financial stocks hit

The index of blue-chip shares closed down 24.92 at 7,447
parliament
The Queen's Speech was delivered at the House of Lords

FTSE 100 closed down almost 25 points at 7,447 on Wednesday as financial stocks took a hit and the pound firmed.

The biggest laggard was Provident Financial (LON: PFG), which tanked over 17% to 2,361p a share  after it warned that a restructuring at its consumer credit division would hit profits more than expected.

The broker and investment manager Hargreaves Lansdown (LON:HL.) dropped 2.42% to 1,329p on the day.

Meanwhile, hawkish remarks from the Bank of England sent the pound higher, which was up 0.28% and 0.19% against the US dollar and Euro respectively.

One of the monetary policy committee and chief economist at the bank Andy Haldane, who has previously been considered on the dovish side of the spectrum, surprised the market by saying that interest rates need to rise “relatively soon” to stem rising inflation.

Among the gainers on FTSE 100 was Centrica (LON:CNA), adding over 2% to 206.40p

The parent company of British Gas revealed it had agreed to sell its operational Langage and South Humber Park combined cycle gas turbine power stations to EP UK Investments for £318mln in cash.

 

3.57pm: Analysts question where BoE's newest member stands on interest rates

The BoE’s hawkish Kristen Forbes is set to the leave the Monetary Policy Committee at the end of the month and little is known on where her replacement Professor Silvana Tenreyro stands on interest rates.

Connor Campbell, financial analyst at Spreadex, said: “The big question now surrounds Silvana Tenreyro, who replaces the departing Kristen Forbes ahead of the next Monetary Policy Committee meeting in August.”

He added: “If she picks up where the hawkish Forbes left off, and Haldane votes in line with the contents of his speech, the central bank could be looking at a 4-4 summer split. If not then Carney may continue to get his way until the end of the year and beyond.”

 

3.48pm: FTSE in the red, pound stronger after hawkish remarks from BoE

The FTSE 100 is down six points to 7,466.53 as the pound rose after Bank of England Governor Andy Haldane argued for an interest rate hike later this year.

The pound rose 0.27% against the dollar to US$1.2663, recovering from lows yesterday when BoE Governor Mark Carney said the central bank should hold off of raising rates until it sees how Brexit plays out and wage growth picks up.

Haldane, who has previously been considered on the dovish side of the spectrum, surprised the market by saying that interest rates need to rise “relatively soon” to stem rising inflation.

"Provided the data are still on track, I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year," he said

Company-wise, Whitbread topped the FTSE 100 after reporting a solid start to the year, with strong sales at its Premier Inns hotel chain offsetting slowing growth at Costa Coffee. Shares rose 3.69% to 3,995p.

Centrica edged up 1.53% to 205.20p as it said it was selling two gas power stations in England to EP UK Investments for £318mln.

Shire increased 2.48% to 4,479.0p as it announced that the US Food and Drug Administration approved its Mydayis treatment for attention deficit hyperactivity disorder.

Provident Financial was the biggest faller with shares down 17.0% to 2,378.0p after warning that a restructuring at its consumer credit division would hit profits more than expected.

Insurance and financial stocks were also on the back foot, including Standard Life, Hargreaves Lansdown and Direct Line Insurance.

Meanwhile, oil prices recovered as the Energy Information Administration said crude inventories fell 2.5 million barrels last week to 509.1mln barrels.

Brent crude rose 0.94% to US$46.46 per barrel and West Texas Intermediate grew US$44.06 per barrel.

 

 

3.24pm: Tesco reveals plans to close call centre to cut costs

Tesco has revealed plans to close a call centre in Cardiff early next year, which would put 1,100 jobs at risk.

The supermarket chain said one its two call centres would be shut as part of plans to cut costs amid fierce competition and rising inflation. The centre handles customer emails, social media inquiries and phone calls.

Matt Davies, the UK chief executive of Tesco, said: “The retail sector is facing unprecedented challenges and we must ensure we run our business in a sustainable and cost-effective way, while meeting the changing needs of our customers.

“To help us achieve this, we’ve taken the difficult decision to close our customer service operations in Cardiff.”

 

2.33pm: BoE likely to keep interest rates unchanged this year, says EY Item Club

Bank of England’s chief economist Andy Haldane may have argued that interest rates may need to rise later this year but EY Item Club’s Howard Archer thinks unlikely to happen.

Archer noted that Kristin Forbes, who was one of three members of the MPC to vote for an interest rate hike last week, is set to leave. She will be replaced by Professor Silvana Tenreyro, and there are no indications as to where she stands on nterest rates, Archer said.

“Additionally, the MPC could have a ninth member in place for the August meeting, as it is currently one short following the resignation of Charlotte Hogg. While it seems unlikely that a new MPC member would vote for an interest rate hike straight away, it clearly could happen.

“For now at least, we maintain the view that the Bank of England will hold off from raising interest rates in 2017 - but confidence in this call has taken a hit. The outlook for interest rates in 2018 is also murky given the cloudy economic and political outlook.”

 

2.07pm: What's missing from the Queen's Speech?

The Queen’s Speech left off a few items from the agenda including Donald Trump’s state visit as well as the government’s plans for grammar schools, social care and fox hunting.

David Newman, head of pensions at Close Brothers Asset Management, also noted the government’s policy on pensions was omitted. 

The missing items come as the Conservatives are yet to confirm a pact with the Democratic Unionist Party on forming a government.

“Pensions policy was conspicuous by its absence from the Queen’s speech, with any drive to reform sliding down the political agenda in the wake of the result of the snap election, Brexit negotiations and the complexity of forming a new government,” said Newman.

“The pensions industry has experienced rapid change in recent years, so a ‘business as usual’ approach may be no bad thing for UK savers for the time being as they adjust to new options and products. However, there are still elements we need clarity on. The future of the triple lock and confusion around the Money Purchase Allowance to name but two. This may become clearer in due course, as we see the new Pensions Minister has settled into the role, but it’s clear that major reform is off the table.”

 

 

1.53pm: Renewable energy trade body welcomes Queen's Speech

The UK's renewable energy trade body said it welcomes the government's committment to industrial strategy, as laid out in the Queen's Speech.

"Wind, wave and tidal energy are new industries which are already creating highly-skilled, high-paid jobs, exporting around the world," said RenewableUK’s executive director, Emma Pinchbeck.

"Renewables can and should be the engine room of the government’s flagship Industrial Strategy, driving our low-carbon economy."

Pinchbeck added: "It was important that the government reaffirmed its strong support for action on climate change, including the implementation of the Paris Agreement. President Trump’s decision to turn his back on this has been greeted with bafflement and incomprehension in the US energy sector, as the global renewable energy market is worth US$290bn a year. The UK government is showing leadership on energy policy and environmental issues which matter to the majority of the British public."

1.19pm: BoE's Andy Haldane considered rate hike at MPC meeting

Bank of England’s chief economist Andy Haldane had considered the case for an interest rate hike at the Monetary Policy Committee but said there were " strong grounds for holding back until later in the year, for two reasons".

He said: "First, despite upwards pressure on inflation, there are still few signs of higher wage growth. And despite robust surveys, there is still some chance of a sharper than expected slowing in the economy. Both are reasons for monetary policy not to rush its fences. Nor does it need to do so, given the slow build of nominal pressures in the economy.

“Second, there is the election. This has thrown up a dust-cloud of uncertainty. Financial markets-wise, that is manifesting itself in a weaker exchange rate. It is unclear what twists and turns lie ahead, with potentially important implications for asset prices and, at least potentially, confidence among businesses and consumers. I do not think adding a twist or a turn from monetary policy would, in this environment, be especially helpful in building confidence, at at least until the dust-cloud has started to settle.”

 

1.05pm: CBI responds to Queen's Speech

Here's what Carolyn Fairbairn, the director general of CBI Director, had to say about the Queen's Speech: “It’s good to see that the recent heatwave has warmed the government’s view of business and its contribution to people’s lives. But this welcome change in tone needs to be backed by clarity and action now. Firms will expect all politicians to put pragmatism before politics, starting with Brexit. Fast action on Industrial Strategy, skills and infrastructure will show that the UK is a great place to do business. But now it’s all about pace.”

 

 

12.10pm: FTSE falls as pound recovers on hawkish remarks from BoE chief economist

The FTSE 100 fell 19 points to 7,453.06 at the midday mark, as the pound recovered against the dollar after the Bank of England’s chief economist said UK interest rates may have to rise later this year.

The pound rose 0.44% versus the dollar to US$1.2684 after the BoE’s Andy Haldane argued that the recent spike in inflation meant the central bank may need to tighten monetary policy.

On the upside, Whitbread’s shares rose 3.82% to 4,000p after a well-received tradSpeaking in Yorkshire, Haldane said: “Having weighed the evidence, I think that the balance of risks associated with tightening “too early”, on the one hand, and ‘too late’, on the other, has swung materially towards the latter in the past six to nine months.

“The risks of tightening ‘too early’ have shrunk as growth and, to lesser extent, inflation have shown greater resilience than expected. And if policy tightened ‘too late’, this could result in a much steeper path of rate rises later on, contrary to the MPC’s collective expectation that Bank Rate would increase ‘at a gradual pace and to a limited extent’.”

His remarks come in contrast to BoE Governor Mark Carney, who said yesterday that interest rates should remain unchanged until the Bank sees how Brexit plays out.

On the company front, Provident Financial remained the main. Shares fell 16.34% to 2,398p after saying its recent reorganisation had caused more disruption that expected to its full year profits.ing update.

Meanwhile, oil prices remained under pressure with Brent crude down 0.32% to US$45.87 per barrel and West Texas Intermediate down 0.18% to US$43.43 per barrel on doubts that OPEC’s production cuts will curb the global supply glut.  Traders will be eyeing official weekly crude inventory data later. 

 

11.52am: Government to ensure UK keeps 'leading role on world stage' after Brexit

On Brexit, the Queen said the government will ensure that the “UK’s leading role on the world stage is maintained and enhanced as it leaves the European Union”.

“As a permanent member of the United Nations security council, committed to spending 0.7% of national income on international development, my government will continue to drive international efforts that increase global security and project British values around the world.”

The Queen concluded her speech by saying that estimates for the public services will be laid out to members of the House of Commons.
“I pray that the blessing of Almighty God may rest upon your counsels.”

 

11.49am:  Queen reveals proposals to protect national security 

The government will bring forward proposals to ensure that national infrastructure is protected to safeguard national security, the Queen said.

“A commission for countering extremism will be established to support the government in stamping out extremist ideology in all its forms, both across society and on the internet, so it is denied a safe space to spread,” she said.

“In the light of the terrorist attacks in Manchester and London, my government’s counter-terrorism strategy will be reviewed to ensure that the police and security services have all the powers they need, and that the length of custodial sentences for terrorism-related offences are sufficient to keep the population safe.”

 

11.45am: Queen says government will keep taxes low, improve public finances

The Queen said the government will continue to improve the public finances, while keeping taxes low.

“My ministers will strengthen the economyso that is supports the creation of jobs and generates the tax revenues needed to invest in the National Health Service, schools, and other public services,” she said.

She added that the government will make further progress to tackle the gender pay gap and discrimination against people on the basis of their race, faith, gender, disability or sexual orientation.

 

11.41am: Bill to repeal the European Communities Act, says Queen

The Queen said a bill will be introduced to repeal the European Communities Act and "provide certainty for individuals and businesses".

“This will be complemented by legislation to ensure that the United Kingdom makes a success of Brexit, establishing new national policies on immigration, international sanctions, nuclear safeguards, agriculture, and fisheries,” she said.

“My government will seek to maintain a deep and special partnership with European allies and to forge new trading relationships across the globe. New bills on trade and customs will help to implement an independent trade policy, and support will be given to help British businesses export to markets around the world.”

 

11.35am: Queen's Speech begins

The Queen has arrived at the House of Lords, accompanied by Prince Charles to deliver her speech.

"My government’s priority is to secure the best possible deal as the country leaves the European Union. My ministers are committed to working with parliament, the devolved administrations, business and others to build the widest possible consensus on the country’s future outside the European Union."

 

11.28am: Duke of Edinburgh admitted to hospital

The Duke of Edinburgh has been admitted to hospital for an infection arising from a pre-existing condition, Buckingham Palace has said.

This Prince of Wales will accompany the Queen to deliver her speech to Parliament instead of the Duke, 96. The Duke is being treated at the King Edward VII Hospital, London, as a precautionary measure.

"Her Majesty is being kept informed and will attend Royal Ascot as planned this afternoon," the palace said.

 

11.03am: Public finances to come under pressure, says EY ITEM Club

Howard Archer, chief economic advisor to the EY ITEM Club, said while public financials look set to come under increasing pressure from a weakened economy despite improvement in May.

“It is very early on in the fiscal year 2017/18 and not too much should be read into two months’ data as the monthly public finance figures can be volatile and subject to significant revisions," he said.

"While the performance of the public finances in April-May suggest that fiscal year 2017/18 could see a similar shortfall to the £46.2bn seen in 2016/17, a weakening economy is expected to take an increasing toll on the public finances over the coming months. The Office for Budget Responsibility forecast a shortfall of £58.3bn.    

 

 

Public finances showed fractional improvement in the first two months of 2017/18 but they are still in far from healthy shape, Archer added.

"Pressure on the Government to recalibrate fiscal policy away from austerity, is likely to result in limited adjustments to the fiscal approach rather than radical changes in November’s Budget.

"The Chancellor appeared open to such an approach in his key Mansion House speech, but stated that he remains committed to the fiscal rules set out at the Autumn Statement, which lead to a balanced budget by mid-2020. However, there is some wiggle room within this.”

10.28am: Theresa May bowing to pressure of the left, says IG

IG market analyst, Joshua Mahony, said the Queen's Speech today looks set to be the most "memorable in living memory" amid calls for Theresa May's resignation following the shock general election losses by the Tories. 

"She is a leader by name, but seemingly not by nature, and the crises of recent weeks have laid bare Theresa May’s personal shortcomings, which only add to the difficulty of passing a raft of unpopular austerity-focused policies," Mahony said.

"Ultimately the fact that Theresa May is having to drop so many elements of the Queen’s Speech not only goes to show that she is bowing to the pressure of the left, but  also highlights the difficulty she would have passing any Brexit bill in two years’ time."

Ahead of the Speech, the FTSE is down 22 points to 7,450.20p, led by Provident Financial. The index has shrugged off a 0.18% drop in the pound against the dollar to US$1.2606.

 

10.05am: Oil prices still under pressure

Oil prices continue to come under pressure even after data showed a decline in US crude supplies last week, easing worries about a global production glut.

The American Petroleum Institute said US crude supplies fell 2.7mln barrels. However, gasoline supplies rose 346,000 barrels and inventories of distillates gained 1.8mln barrels.

The Energy Information Administration will release its crude inventories report later today. Analysts expect a 1.2 million barrel drop in the US crude inventories last week.

Brent crude fell 0.17% to US$45.94 per barrel and West Texas Intermediate dropped 0.18% to US$43.43 per barrel. 

Dennis de Jong, managing director at UFX.com, said the current quarter has been a “nightmare for energy investors”.

“Despite reductions to OPEC production, U.S. shale oil production has bounced back and that has nullified the impact of OPEC’s cuts,” he said.

“Prices are sliding down towards the $40-mark and it’s difficult to be sure where the bottom is on oil prices for the moment. Bearish news of one inventory build, along with the continued rise in U.S. oil production, would tilt prices down further.

“Whilst consumers may benefit from a small drop in energy prices, and certain economies will welcome possible lower manufacturing costs, the damage to the oil sector will ultimately cancel out any small gains.”

 

09.45am: UK public sector borrowing falls to lowest point since 2008

Uk public sector net borrowing in the year to date has reached its lowest level since 2008, the Office for National Statistics revealed. Excluding public sector banks, it fell by £0.1bn to £16.1bn in the year to date (April 2017 to May 2017).

In May, public sector net borrowing  fell by £0.3bn to £6.7bn in May, compared to a year ago, the lowest point in May since 2007.

In the year to March 2017, public sector net borrowing,excluding public sector banks, decreased by £25.6bn to £46.6bn.

However, public sector net debt, excluding public sector banks, was £1.72trn at the end of May, up £121.6bn from the previous year and 56.5% of gross domestic product. 

 

 

08.45am: FTSE 100 opens lower ahead of Queen's Speech

The FTSE 100 effectively marked time ahead of Queen’s Speech with the index of blue-chip shares down 14 points at 7,458.54.

According to the BBC, the minority Tory administration, who are yet to conclude co-operation deal with the DUP, will promise work with “humility and resolve”.

Brexit will of course be front and centre of the Parliamentary set-piece, which will cover a two-year legislative period rather than one.

However, there are also expected to be measures on domestic violence and car insurance.

On the markets, matters more international were dictating the direction of share prices with the fall of the oil price to a nine-month low a major depressant. Unsurprisingly, Royal Dutch Shell (LON:RDSA) was one of the early fallers.

An earnings alert from life and pensions group Provident Financial (LON:PFG) catapulted its shares to the top of the losers’ list as they wilted 15%.

The reverse was true for the Premier Inns and Costa Coffee chain, Whitbread (LONLWTB), which topped the list of risers (up 5%) after issuing a good news statement, which revealed its sales were ahead 7.6% in the early part of the financial year.

Dropping down a division to the FTSE 250, an early casualty was the Egypt-focused gold digger Centamin (LON:CEY), which fell 4% after Wall Street investment bank Morgan Stanley downgraded its call on the stock to ‘equal weight’ from ‘overweight’.

 

Proactive news headlines...

Ergomed Plc (LON:ERGO), the drug development and pharma services company, has brought forward the reporting date for top-line results for its phase-IIb trial of a potential blockbuster blood thickening agent. bp may 3

Braveheart Investment Group PLC (LON:BRH) enjoyed an ‘exceptional’ year as it moved from a significant loss to a profit. The turnaround was in part due to the sale of a stake in one of its investee companies, mLED, a developer of ultra-high brightness technology. BP just completed 

Ferrum Crescent Ltd (LON:FCR)  has beefed up the technical contingent of its management team with the appointment of Myles Campion as a technical consultant. A geologist and fund manager, Campion's financial experience ranges from Australian and UK equities research through to project and debt financing in London, said Ferrum.

LekOil Limited (LON:LEK) highlighted its transition into a fully-fledged oil production company, with the ramp-up of the Otakikpo asset. In the financial results statement, for the twelve months to December 31, the Nigerian oiler emphasised its continuing commercial production at Otakikpo where a US$15mln offtake deal with Shell is providing the liquidity to complete the planned ramp-up to 10,000 bopd.

Goldplat PLC’s (LON:GDP) Kilimapesa gold mine in Kenya is now operating profitably with a processing plant upgrade also now in the commissioning stage. A throughput of 120 tonnes per day of ore during May was on  target, it said, as stockpiled fine material and a spare crusher were utilised while the new crusher and leach tanks were installed.

Oracle Coalfields PLC (LON:ORCP) has been set a date of 13 July for the public hearing on the environmental and social impact (ESIA) of its thermal power station project in Sindh, Pakistan.

Unconventional gas group Highlands Natural Resources Plc (LON:HNR)  is to focus on the East Denver Niobrara project in Denver, where it will seek a partner to help develop it. Losses in the year to March were US$3.37mln. The group has also landed its first US patent for its DT Ultravert well services technology.  

Greatland Gold plc (LON:GGP) noted Antipa Minerals (ASX:AZY) has reported positive high-grade gold results from its drilling campaign at its Minyari Dome Project, approximately 35km along strike from Greatland's Havieron project.

 

6.45am...oil woes to dominate 

The FTSE 100 is set to open lower this morning as the sliding oil price continues to unnerve markets.

The price of the black stuff fell to nine-month lows as the problem of too much supply and not enough demand continues to weigh, while copper prices also fell sharply on Tuesday which hit the miners.

Financial spread bet firms expect the blue chip index to drop 22 points at the opening bell to 7,456, compounding Tuesday’s 51 point loss.

The bleak start predicted follows on from a similarly miserable day for US markets which also gave up most of Monday’s gains as they eased lower.

The S&P 500 slipped 0.7% to 2,437, the Dow Jones fared a little better with a 0.3% fall to 21,467, but the tech-heavy Nasdaq lost just over 0.8% to sit at 6,188.

Asian stocks were also flagging overnight, with shares in Hong Kong and Tokyo both nursing 0.5% losses, although the SSE Composite in Shanghai was just about keeping its ahead above water.

Away from stocks, today's the day we finally get to hear the delayed Queen’s Speech which is due later today.

Expect Brexit to dominate but there will also be interest in which plans, if any, the Conservatives have dropped following the unexpected election result earlier this month.

Business headlines

  • A former boss of Barclays faces a potentially lengthy prison sentence after becoming the first bank chief to be prosecuted for his role in the financial crisis, reports the Times.
  • John Varley, the former chief executive of Barclays, was charged yesterday with two counts of conspiracy to commit fraud and a further count of unlawful financial assistance over his part in two controversial multi-billion pound fundraisings involving Qatar’s wealth fund and the Gulf state’s royal family. 
  •  
  • The Telegraph adds that Varley faces a maximum 22 year prison sentence after he and three other ex-directors of the lender became the first British bankers to face criminal charges for actions taken during the financial crisis.
  • Barclays was plunged into turmoil on Tuesday after the Serious Fraud Office charged the bank with fraud and unlawful financial assistance over its dealings with Qatari investors, including former prime minister Sheikh Hamad bin Jassim bin Jabr al-Thani, in 2008 when Britain’s banking system was on the verge of collapse.
  • Oil prices fell to a seven-month low last night amid signs that a recovery in production from Libya and Nigeria was feeding a global supply glut, The Time reports. The price of Brent crude dipped 2.3% to $45.81 per barrel, its weakest since November last year.
  • Pallinghurst Resources has lowered the acceptance condition of its takeover offer for ruby and emerald miner Gemfields, after Chinese conglomerate Fosun earlier in the day confirmed a bidding war. Pallinghurst lowered the acceptance condition to 60% from 75%, meaning the offer would now be unconditional, reports the Times.
  • Britain's biggest supermarkets are planning an overhaul of their stores – putting in juice and sushi bars, tyre-fitting services and gyms in a bid to fight off the threat from Amazon, writes the Mail. The big names are desperately trying to encourage shoppers back as they embark on a war with online rivals and German discounters Aldi and Lidl.
  • Spanish prosecutors have accused Manchester United manager José Mourinho of defrauding the country’s tax authorities of €3.3m, after finding that the Portuguese coach used a company in the British Virgin Islands to conceal earnings from the sale of his image rights, reports the FT.
  • Chinese stocks have gained direct entry to MSCI’s global benchmark equity index for the first time, marking a milestone in Beijing’s efforts to draw international funds into the world’s second-largest market, the FT reports.
  • Mark Dixon has sold another chunk of shares in IWG, taking the amount he has taken out  to more than £260mln during the past decade. The entrepreneur behind the serviced office provider previously known as Regus Group sold 27.3 mln shares at 345.1p raising £94.2 mln. 

Commodities/currencies

  • Gold: US$1,245, up 0.19%
  • Oil (WTI): US$43.83, up 0.74%
  • £/$: 1.2664, up 0.28%

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