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FTSE 100 pares losses as US bond yields rise above 3%

Resource stocks suffer as US dollar makes headway on forex markets

Rising dollar
Rising bond yields in the US encouraged buying of the greenback
  • FTSE 100 down 46 points at 7,379

  • Glaxo slides as first-quarter earnings decline

  • Persimmon shareholder blasts "excessive" £110mln bonus for CEO

Despite a rally in the last 90 minutes of trading, London's blue-chip index ended another day in arrears.

The FTSE 100 index closed at 7,379, down 46 points.

Drugs giant GlaxoSmithKline PLC (LON:GSK) was a drag on the index after it reported a 2% decline in first-quarter adjusted earnings per share to 24.6p, although this was slightly ahead of the 24.25p analysts were expecting.

Sales fell 2% to £7.2mln, broadly in line with forecasts.

The group ruled out a launching a bid for Shire, which today succumbed to the umpteenth bid approach by Takeda Pharmaceuticals.

Medical imaging company Feedback PLC (LON:FDBK was the day's best performer after it secured a software licence and distribution agreement for its TexRAD technology with General Electric Healthcare (GEHC), a subsidiary of US conglomerate General Electric (NYSE:GE).

Feedback's shares closed 71% higher at 3.15p.

3.45pm: The Footsie stages half-hearted rally

US President Donald Trump is expected to visit the UK in July, with an announcement expected within days, according to a report from Sky News.

The possibility of a visit has drawn ire from various sections of the UK population since it was first proposed, with concerns about protests rumoured to be a factor in Trump putting off the engagement.

In other news, European aircraft manufacturer Airbus has confirmed plans to increase the production of its A320 aircraft to 63 per month.

Over the longer term, Airbus is considering raising output for the A320 family to as high as 75 per month, a source familiar with the plans told Reuters.

The reports echo previous statements from Airbus chief executive Tom Enders, who has referenced increasing production to 70 per month over an undefined period to reflect rising air travel and strong demand for commercial jets.

Currently, the company is producing 55 aircraft every month.

3.20pm: Persimmon shareholder blasts "excessive” bonus for chief executive

One of the biggest shareholders in house-builder Persimmon (LON:PSN) has branded a £110mln bonus package for its chief executive Jeff Fairburn as “excessive” as the shareholder vote on the company’s pay report is on a knife-edge.

Euan Stirling, head of stewardship at Aberdeen Standard Investments which holds a 2.3% stake in Persimmon, said his firm had voted down the pay report and that the enormous payment would “tarnish” the reputation of the company.

Although Stirling admitted that shareholders were partially to blame for the massive bonus, as a long-term incentive plan passed in 2012 allowed for uncapped bonuses, he said Persimmon's board and remuneration advisers must also shoulder responsibility.

The bonus was later reduced to £75mln; however, Stirling argued this "does not even get close to acceptable".

2.40pm: Lloyds' private equity arm invests £13mln in Star Wars gift wholesaler

The private equity division of Lloyd’s Bank (LON:LLOY), LDC,  has injected £13mln of investment into gift wholesaler Paladone, who holds licenses for brands including Walt Disney, Warner Brothers, Star Wars and Nintendo.

The business has a catalogue of more than 800 products and generated revenues of more than £30mln last, with 60% of it coming from international sales.

Paladone said it would use LDC’s investment to bring its products to the stores of US retial giants such as Target and Kohl’s.

LDC has also brought in private equity veteran James Barbour-Smith as non-executive chairman of Paladone.

2.00pm: Euro drops ahead of ECB rate meeting, Twitter earnings beat expectations

The euro dropped against most of the major currencies in anticipation of the European Central Bank’s (ECB) rate-setting meeting on Thursday.

The prevailing expectation is that the ECB with signal no change in policy, and will refrain from any hints about the future of its quantitative easing program which ends in September.

The euro is currently down 0.01 cents against the dollar at US$1.22, while it is steady against the pound at £0.87.

Social media giant Twitter (NYSE:TWTR) was strong in the US pre-market after it reported first-quarter earnings boosted by revenue from advertising income that beat Wall Street analyst expectations.

READ: Twitter 1Q earnings beat Street as its revenue surges on ad sales

Twitter reported net income of US$0.16 per share on revenue of US$664.9mln. The consensus earnings estimate was US$0.11 per share on revenue of $609.9mln, according to Earnings Whisper.

Twitter shares were up 2.8% at US$31.3 in pre-market trading

1.30pm: Wall Street set for falls as bond yields pressure equities

After yesterday's shake-out, investors were bracing for more of the same on Wednesday.

The Dow Jones average, which plunged 425 points yesterday to close at 24,024, was expected to open at around 23,929, setting it up for its fifth losing session in a row.

READ: The only way is down for equities as bond yields top 3%

The broader-based S&P 500, which plunged 36 points to 2,634.6 yesterday, was expected to open at around 2,624.

Attention was expected to focus this morning on US Treasury yields where the yield on the 10-year note has moved above 3%.

1.00pm: Glaxo rules out joining Shire takeover battle

GlaxoSmithKline (LON:GSK) has ruled itself out of entering a takeover battle for fellow FTSE 100 pharma company Shire.

Emma Walmsley, GSK chief executive, speaking to reporters after first-quarter results, said the British drugmaker's focus would be on deals to acquire early-stage experimental drugs that would help rebuild the company's pharmaceuticals pipeline.

The announcement followed a disappointing set of first quarter results for GSK, which saw both sales and earnings drop by 2% as a stronger pound offset gains from its new shingles vaccine Shingrix.

Meanwhile, in what seems to be a day for withdrawing recommendations, UK shopping centre operator Intu Properties (LON:INTU) has dropped its own recommendation for a £3.4bn takeover offer from Hammerson (LON:HMSO).

The move comes a week after Hammerson withdrew its recommendation to shareholders to vote in favour of the deal.

12.35pm: Sky bins recommendation for Fox bid

Sky has withdrawn its recommendation for a takeover bid by Rupert Murdoch’s Fox following a £22bn bid (1,250p per share) from cable company Comcast.

The independent directors of the FTSE 100 pay-TV company added that a co-operation agreement between Sky and Fox would also be terminated in light of the higher bid.

Sky shares were up 4.3% at 1,365p in lunchtime trading.

Meanwhile, British wholesale gas contracts reversed their earlier losses from this morning as an outage at a major Norwegian gas processing plant sparked a flurry of buying.

The day-ahead gas price rose 0.4p to 51.5p/therm, overturning a 0.1p decrease in mid-morning trading.

12:05pm: German economy minister: trade war with US “careless”

The German economy minister, Peter Altmaier, has said a trade conflict with the US would be negligent just days before Chancellor Angela Merkel is due to travel to Washington D.C. for talks with President Donald Trump on the issue.

Altmaier said: "I remain convinced that it would be careless to stumble into a trade conflict so I think a consensual solution should take precedence over a confrontational one."

Commenting on German growth forecasts incorporating a ‘hard’ Brexit, he added: "We don't know whether there will be a hard Brexit. We are all interested in avoiding it and the EU Commission is negotiating with Britain in this spirit. Even if these negotiations were not to lead to the desired outcome, there would unlikely be an impact on economic growth this year. So we are safe with the forecast for this year."

In other Brexit news, UK trade minister Greg Hands has said Britain is using Brexit as an opportunity to “spread the word worldwide” about the liberalisation of trade in services, which he says has "historically resisted liberalisation much more than trade in goods".

Speaking at a private event hosted by law firm DWF, Hands added: "The IMF estimated that we were the world’s fifth largest economy at the end of last year, and in today’s world, where there’s so many forces in favour of protectionism, it is to everyone’s benefit to have a nation of Britain’s stature making the case for free trade."

11.35am: Comcast makes £22bn offer for Sky

US cable company Comcast Corp (NASDAQ:CMCSA) has made a £22bn offer for FTSE 100 TV group Sky (LON:SKY), upping a previously agreed takeover bid by Rupert Murdoch’s Fox (NASDAQ:FOXA) by 16%.

Comcast outlined the offer at 1,250p per share, above the previous Fox bid price of 1,075p, and said it would continue to engage with Sky’s independent directors with a view to obtaining a recommendation for the new offer.

Sky shares were up 3.7% at 1,357p in late-morning trading.

--Adds offer price per share--

11.00am: London house prices rise in March

House prices in London rose 1.6% in March, according to data from property analyst group Hometrack.

Its Cities House Price index for the month showed UK house prices had risen 5.5% overall, with most of the growth coming from urban centres in the north.

Edinburgh was the biggest riser at 8.8% while Nottingham flowed close behind at 8% with Manchester rounding off the top three at 7.4%.

The rise is better news for the capital's property market, which has been lagging behind the rest of the UK in recent months with several periods of price decline.

10.30am: UK Brexit secretary says “massively higher probability” of deal with EU, Sterling continues slump

The UK Brexit secretary David Davis has said he believes that there was a “massively higher probability” the UK would negotiate a deal to leave the EU while dismissing fears that Britain could crash out of the block next year.

Speaking to the Commons Brexit committee, Davis said there was a tiny probability of no deal, saying: “I think the massively higher probability is a deal”.

In the currency markets, the pound continued its slump, falling 0.2% against the dollar in its biggest weekly loss in 10 weeks as the greenback bounced on Treasury yields.

Morten Helt, an FX strategist at Danske Bank, said: “The price action today reflects more dollar strength than sterling weakness,”

He added that despite earlier comments by governor Mark Carney, he expected the Bank of England to hike rates as it followed the tightening policy of the US Federal Reserve.

10.00am: Dollar rises to 4-month high; UK gas prices dip lower as wind power surges

The dollar has hit a 4-month high after a rise in US Treasury yields above the psychological 3% barrier rattled bearish currency traders.

It marks a continuous rise for the greenback over much of the past week as receding fears of a US-China trade war allowed the market to focus back on dollar-supportive fundamentals.

Meanwhile, British wholesale gas prices dropped slightly this morning by 0.1p to 51p/therm as fresh supplies of liquified natural gas and strong output from wind farms curbed demand.

Peak wind power is forecast at 7.8 gigawatts today, rising to 9 gigawatts on Thursday according to data from the National Grid.

9.30am: FTSE 100 fall deepens; Vodafone to merge Indian tower venture with local rival

FTSE 100 telecoms giant Vodafone Group (LON:VOD) has said it will merge its Indian mobile tower joint venture with a local rival.

The company said its joint venture Indus Towers Ltd, in which it holds a 42%, would merge into Bharti Infratel Ltd to create a combined company known as Indus Towers Ltd and would continue to be listed on the Indian Stock Exchange.

The transaction values Indus at around US$10.8bn, with Vodafone receiving around 29% of the new company following the merger.

8.40am: Footsie weak

The FTSE 100 index fell back in early trading under-pressure from an overnight plunge on Wall Street as investors digested a mixed bag of UK corporate news, with results from Lloyds Banking Group PLC (LON:LLOY) missing forecasts, while Whitbread plc (LON:WTB) confirmed plans to demerge Costa Coffee.

Around 8.40am, the UK blue chip index was down around 28 points at 7,397, retreating after gains in the first two sessions of the week.

Miners led the falls in London as metal prices retreated in tandem with the dollar on rising bond yields. Chile-focused copper miner Antofagasta PLC (LON:ANTO) was the worst off, down 3,3% at 945.5p after its latest production update failed to impress.

Lloyds Banking shares shed 0.5% at 65.8p after its first quarter results included a further £90mln charge related to claims for the payment protection insurance mis-selling scandal.

But on the upside, Whitbread rose 1.3% to 4,242p as it said it will split the Costa Coffee business from the rest of the group after receiving pressure from activist investors.

The leisure company said the demerger of Costa is expected to be completed within two years and it will be listed a separate business. Whitbread will remain the owner and operator of the Premier Inn hotel chain.

Drugmaker Shire Plc (LON:SHP) was the biggest blue chip gainer, however, up 2% to 4,007.5p after it said it is willing to recommend the Takeda takeover deal to its shareholders after the Japanese conglomerate upped its offer.

The new offer from Takeda values Shire at around £46bn, or £49 per share, up from its previous bid of £43bn.

The market’s biggest riser was AIM-listed Feedback plc (LON:FDBK) which surged 44% higher to 2.65p after the medical imaging company revealed it has secured a software licence and distribution agreement for its TexRAD technology with a subsidiary of US giant General Electric (NYSE:GE).

And Futura Medical PLC (LON:FUM) was also strong, up 16% to 37.75p after unveiling positive data from its pharmacokinetic study of MED2002, the company's topical gel for erectile dysfunction.

Proactive news headlines:

Feedback plc (LON:FDBK) was a top gainer in early trading Wednesday as it secured a software licence and distribution agreement for its TexRAD technology with General Electric Healthcare (GEHC), a subsidiary of US conglomerate General Electric (NYSE:GE). Big Pic in November.

Futura Medical PLC (LON:FUM) shares jumped 16% higher on Wednesday after the firm revealed positive data from a pharmacokinetic study of MED2002, its topical gel for erectile dysfunction (ED), which contains glyceryl trinitrate (GTN) as its active ingredient. Big Pic in March.

Mosman Oil And Gas Ltd (LON:MSMN)  has released the findings of Moyes & Co which has confirmed the Arkoma Stack Pay project’s reserves. The project has been confirmed to have gross proved and probable (2P) reserves of 336,000 barrels oil equivalent, along with 2.4mln barrels of contingent resources. Big Pic in February.

ValiRx Plc (LON:VAL) said it has received a patent grant from the EU patent and trademark office for its VAL201 prostate cancer treatment that is currently in clinical trials. The AIM-listed pharmaceuticals company said the patent grant represented another major milestone in its commercial strategy, with the VAL201 portfolio having received patents in the US, UK, Japan, and Australia previously. Big Pic in December.

Learning Technologies PLC (LON:LTG) has made its first significant move into the US with the acquisition of digital human resources group PeopleFluent for US$150mln. A placing at 98p, a 4% discount to last night’s close, raised £85mln to fund the deal. Big Pic in September.

Digital advertising group Mporium PLC (LON:MPM) expects to benefit from fall-out from the Cambridge Analytica/Facebook data use scandal. Advertising and marketing platforms that rely on the targeting of individuals’ personal data will be ‘severely exposed’ by the Cambridge Analytica investigation and the incoming GDPR legislation, Mporium believes. Big Pic in November.

Personal Group Holdings plc (LON:PGH) has said it is confident of achieving market expectations after an encouraging start to the year. In a statement to be delivered at today's annual general meeting, the AIM-listed firm's chairman, Mark Winlow said: "The Company's core insurance business has seen another strong start to the year, with record first quarter sales and productivity." Big Pic in October.

Savannah Resources Plc (LON:SAV) has unearthed more higher grade lithium results from its ongoing drill programme at the Mina do Barroso project in Portugal. Results from twelve holes confirmed further lithium containing mineralisation, including higher grade over what it describes as significant widths. Big Pic in January.

Cabot Energy PLC  (LON:CAB) has taken a step closer to drilling an exploration well to test the Vesta prospect, offshore Sicily. The company, in a statement, told investors that its Environmental Impact Assessment (EIA) has been approved by the Italian regulatory authorities. Big Pic in January.

Minds + Machines Group Limited (LON:MMX), one of the world's leading owners and operators of Internet Top-Level Domains, said it now intends to publish its results for the year ended 31 December 2017 in early May, together with the conclusion of the strategic review where constructive discussions continue to progress. It added that further announcements will be made in due course. 

MaxCyte Inc (LON:MXCT) has announced the appointment of Claudio Dansky Ullmann as its chief medical officer, as the firm prepares for clinical testing of its first cell therapy drug candidate The AIM-listed company said in his new role Ullmann will be responsible for overseeing clinical development of MaxCyte’s CARMA drug development program, with the company’s first candidate, MCY-M11, is expected to enter the clinic this year. Big Pic in April.

Cradle Arc Plc (LON:CRA), the African focused base and precious metals exploration and production company, has announced the appointment of Oscar Ernst Kirkovits to the board of the company as a non-executive director with immediate effect.

Hurricane Energy PLC (LON:HUR) announced that electronic copies of its Annual Report and Group Financial Statements for the year ended 31 December 2017 have been published today in the Investors section of the company's website. It also added that its annual general meeting will be held at 11.00am on Wednesday, 6 June 2018 at The Science Suite, Royal Society of Chemistry, Burlington House, Piccadilly, London, W1J 0BA.

Rambler Metals and Mining PLC (LON:RMM) (TSXV: RAB), a Canadian copper and gold producer, explorer and developer said it has now filed the full NI43-101 Technical Report for the Ming Copper-Gold Mine Project previously announced on 5 March 2018. The full technical report can be downloaded from the company's website.

6.50am: Big falls predicted

The Footsie is seen dropping back on Wednesday following gains in the first two sessions of the week following big falls overnight by US stocks amid a rise in US bond yields to 3% and a big sell-off in tech issues.

Spread betting firm CMC Markets expects the FTSE 100 index to open around 51 points lower at 7,374, having gained 26.5 points on Tuesday.

Michael Hewson, chief market analyst at CMC Markets UK, commented: “We have seen some decent gains in European markets over the last four weeks, however with bond yields in the US suddenly spiking higher in the last few days investors appear to be taking the opportunity to take some profits on some of these gains.”

He added: “Markets in the US also opened the day in a positive vein buoyed by a series of earnings announcements that beat expectations. As the day went on and after Europe had closed, sentiment started to turn sour and US investors appeared to get a touch of the vapours with respect to the tech sector, with Google owner Alphabet leading the declines, as US markets finished the day sharply lower.”

Overnight on Wall Street, the Dow Jones Industrials benchmark plunged 424 points to close at 24,024, while today in Asia Japan’s Nikkei 225 index shed 0.7%

On currency markets, the pound was fairly flat versus both the dollar and the euro with little important economic data due for release.

It is, however, a big day for blue chip results on Wednesday with the start of the first-quarter reporting season for both the UK banking and drugs sectors.

For the lenders, the focus at Lloyds Banking Group PLC (LON:LLOY) is likely to remain on the payment protection insurance (PPI) scandal, which has remained  the thorn in the bank’s side in spite of its successful turnaround under chief executive Antonio Horta-Osório.

In its full year results in February, the group revealed it had set aside a further £600mln for PPI claims in the fourth quarter, bringing its total bill for the scandal to £18.7bn.

Alongside the annual results, Lloyds unveiled a strategic plan for 2018-2020, which included targets for improving capital generation in order to deliver “progressive and sustainable ordinary dividends”, and any update on that strategy will be eyed closely.

Glaxo in flux

Meanwhile first quarter results from drugs giant GlaxoSmithKline plc (LON:GSK), due out at noon, come at a time of flux for the company.

The drugs giant recently agreed to buy out Novartis's 36.5% stake in their consumer healthcare joint venture - the division that houses brands such as Beecham's and Panadol - for US$13bn in cash, which the management deemed was a better option than getting involved in the bidding for Pfizer's consumer division.

Glaxo is considering selling its Horlicks malted drinks business and its other consumer healthcare nutrition products to help fund the deal and is to kick off a strategic review of the assets.

All of which makes it unlikely the company will commit to firm earnings guidance but it will probably try to talk up the new drugs pipeline, which while not one of the best in the industry does have some potential winners in it.

Elsewhere in the drugs sector, Shire Plc (LON:SHP) said last night that it was willing to recommend a deal with Takeda Pharmaceutical Co to its shareholders, after the Japanese company sweetened its proposed offer to £46bn.

Shire said in a statement after trading hours that it had agreed to extend a Wednesday regulatory deadline for the deal talks to conclude to May 8 in order to allow Takeda to carry out more due diligence and firm up its bid

Significant events expected on Wednesday April 25:

Trading updates: Lloyds Banking Group PLC (LON:LLOY), Croda International PLC (LON:CRDA), Antofagasta PLC (LON:ANTO), Fresnillo PLC (LON:FRES), Intu Properties PLC (LON:INTU), Persimmon PLC (LON:PSN), Tullow Oil plc (LON:TLW)

Interims: GlaxoSmithKline plc (Q1), Metro Bank PLC (Q1) (LON:MTRO), Fenner PLC (LON:FENR)

Finals: Whitbread plc (LON:WTB), Boohoo.com PLC (LON:BOO), Keystone Law Group PLC (LON:KEYS), Warpaint London plc (LON:W7L)

Around the markets:

  • Sterling: US$1.3968, down 0.1%
  • Gold: US$1,331.40 an ounce, unchanged
  • Brent crude: US$67.470 a barrel, unchanged

City Headlines:

  • Shire says willing to recommend Takeda's $64 billion offer to shareholders –Reuters
  • Apple shares drop on more warnings from iPhone supply chain – Reuters
  • Amazon boss Bezos supports scrutiny of big companies – Reuters
  • Credit Suisse posts first-quarter profit beat - Reuters
  • SoftBank to move ride-hailing stakes worth $20 billion to Vision Fund – Financial Times

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