Market ReportFTSE 100

FTSE 100 closes marginally higher as PM May defends draft Brexit deal

The UK's premier share index closed up around four points at 7,038, while the FTSE 250 shed almost 248 points at 18,662.

Theresa May held a press conference at the end of the working day
  • FTSE 100 index closes four points ahead

  • Brexit chaos dominates day

  • FTSE 250 loses 248pts 

FTSE 100 closed a shade higher, having been negative earlier, as Brexit and the fall-out from the draft deal took centre stage.

The UK's premier share index closed up around four points at 7,038, while the FTSE 250 -  a better measure of the domestic corporate mood - shed almost 248 points at 18,662.

"The departure of a number of cabinet members, especially Dominic Raab, Brexit secretary, has cast serous questions over May’s ability to get the withdrawal draft approved," said David Madden, at CMC Markets.

"Investors are scrambling to get out of banking and house building stocks. The political uncertainty is so great, dealers are cutting their exposure to the British economy, and stocks like, Lloyds, RBS, Persimmon and Barratt Development are bearing the brunt of the decline."

At a press conference tonight, Theresa May defended the deal and  noted that Brexit touched  "almost every area of our national life - our whole economy and virtually every job, the livelihoods of our fellow citizens, our integrity as a United Kingdom of four nations, our safety and security - all of these are at stake".

Top loser on Footsie was banking group Royal Bank of Scotland (LON:RBS), which plunged 9.63% to 224.20p

US stocks open lower

US markets opened sharply lower, prompting a dip in the Footsie on this side of the Atlantic.

The FTSE 100, which had been little changed for most of the day, was 38 points in the hole at 6,996 and trending lower.

In the US, the Dow Jones was down 137 at 24,944 and the broader-based S&P 500 was down 15 at 2,687.

US stocks fell back despite strong US retail sales in October, which increased 0.8%, compared to expectations of a 0.5% rise, although the figure was distorted slightly by August and September’s index values being revised lower.

Back in the increasingly less United Kingdom, it has been all about Brexit.

“Up until this morning the news flow surrounding the Brexit negotiations has primarily been reflected in the movements of sterling and in the lead up to yesterday along with mutterings of a deal being announced, sterling had been appreciating and sat at above 1.30 against the dollar.

“The stock market was, however, more distracted by other issues in the global economy namely the relatively sharp movements in oil and the fear that the global economy could be facing a period of slower growth,” commented Helal Miah, an investment research analyst at The Share Centre.

The spate of resignations from Theresa May’s Cabinet today has changed all of that.

“Naturally, the precious metals mining companies are doing well,” Miah noted.

“Also those businesses that are very international in nature, mostly the mega caps whose business is primarily exposed to other currencies other than sterling, are performing well. These are the big oil companies, the mining companies, large pharmaceuticals such as AstraZeneca and GlaxoSmithKline, and the globalised consumer businesses such as Unilever, Diageo and Coca Cola,” he added.

“On the other hand there are many companies and sectors taking a pounding, mostly UK focussed businesses such as the housebuilders as fear mounts that uncertainty will put off buyers. The retail stocks have also been punished, as it is deemed that consumers may spend even less on the already troubled high street,” Mial continued.

“Financial services companies are also taking a big hit; the big banks are leading the market down with UK Lloyds, RBS and Barclays down heavily. This will partly be due to the hit on consumer confidence, potentially resulting in fewer mortgages and loans being taken out,” Mial suggested.

While the miners were lending some support to the Footsie, the FTSE 250 was getting absolutely hammered. As in the FTSE 100, house-builders were toxic – Countryside, Bovis and Redrow were down 8% or more – while infrastructure specialist Kier Group PLC (LON:KIE) tumbled 63p to 812p after it agreed on terms for the disposal of KHSA Limited to Downer Group for a total consideration of up to AUS$43.7m (roughly £24mln).  

1.10pm: Snap election fears have UK-focused stocks on the run

Considering we could be on the cusp of a Ted Heath-style “who runs the country?” general election, the Footsie is holding up remarkably well.

The blue-chip index was virtually unchanged at 7,035 ahead of what is expected to be a firm start on Wall Street.

READ Wall Street seen starting on front foot as traders eye potential interest rate rises; Brexit chaos in UK

Spread betting quotes indicate the Dow will open around 20 points higher.

House-builders, banks and airlines are all suffering heavy Brexit fall-out, while trading updates have done no favours to 3I Group PLC (LON:III), down 5.9%, and Royal Mail PLC (LON:RMG), down 6.1%, and yet still the Footsie is barely changed, thanks almost entirely to minerals stocks and fellow travellers, such as steel-maker, Evraz plc (LON:EVR), which was up 5.8%.

In contrast, the FTSE 250, generally regarded as much more harnessed to the UK economy, was down 199 points, or 1.05%, at 18,711.

Trading updates from Intermediate Capital Group PLC (LON:ICP) and Spirent Communications PLC (LON:SPT) prompted both to defy the trend.

The former rose 8.1% after it revealed a 17% increase in assets under management at the end of September compared to six months before, and the latter advanced 4.9% after it revealed that sales have resumed to controversial Chinese firm ZTE following the lifting of US sanctions on the firm, while Spirent is seeing particularly strong demand from the US for satellite navigation products for military and other programmes.

11.30: It's all kicking off on the Brexit front

It’s all kicking off on the Brexit front today, with sterling plummeting after the resignation of UK Brexit secretary of state, Dominic Raab.

Sterling was down just over two cents against the dollar at US$1.2789 and a quarter of a cent against the euro at €1.1287.

The latest ministerial resignation is Esther McVey, the Work & Pensions Secretary.

READ Brexit Live

Sterling may have been rocked by the latest signs of discord in the government but the FTSE 100, with its plethora of big dollar earners, is taking the news relatively phlegmatically.

The index was down 5 points at 7,028, having been modestly in credit before McVey’s resignation.

“Dominic Raab’s resignation as Brexit Secretary didn’t go down well with currency markets, sending the pound down more than 1% against the euro and the US dollar. In contrast, the FTSE 100 was given a lift by global firms including miners which benefited from renewed strength in copper, aluminium and other metal prices,” observed Russ Mould, the investment director at AJ Bell.

Banks were taking a bashing, particularly Barclays PLC (LON:BARC), down 6.6%, and Royal Bank of Scotland PLC (LON:RBS), down 6.3%.

The trading update from Bovis Homes Group PLC (LON:BVS), which revealed the group is having to offer considerably more part-exchange deals to lure the buyers in, has upset the apple-cart in the housebuilding sector.

Bovis itself was down 6.4% while sector peers Persimmon, Barratt Developments and Taylor Wimpey all lost more than 5% in a development that will have their executive directors weeping over their long-term incentive plans documentation.

“Bovis typifies how the UK housebuilders are dividing opinion in the markets,” declared George Salmon, an equity analyst at Hargreaves Lansdown.

“Greg Fitzgerald has done a sterling job of improving the group’s operating performance and balance sheet, and the shares offer an attractive yield of 10%. All the while, supportive government policies like Help to Buy are providing a tailwind,” Salmon continued, making an interesting choice of description of Fitzgerald’s performance (“a sterling job”).

“However, Brexit is proving to be a fly in the ointment. The housing market is already slowing, and the worry is it grinds to a halt in the event of a disorderly Brexit – which would clearly be bad news for the builders. A weak secondary market means around 15% of Bovis’ transactions now rely on part-exchange, hardly reassuring.

“Overall, the sector looks something of a binary bet at the moment,” Salmon suggested.

8.40am: Solid start by Footsie

London’s traders ignored the din around Brexit and Wall Street’s mini-meltdown to open 34 points to the good at 7,067.90, also shrugging a big 16-point deficit from stocks trading ex-divident today.

The mining stocks bounced back after a concerted sell-off on Wednesday with Randgold Resources (LON:RRS) and BHP Billiton (LON:BLT) leading the charge with gains of 2.4% and 2% respectively.

After the price nudged up more than 2% ahead of its interim results, dealers were in a quandary as to how to react to the figures that landed from Royal Mail Group PLC (LON:RMG) on Thursday.

Veteran markets watcher Richard Hunter of Interactive Investor reckoned the figures were nothing to write home about.

“Unlike the shock profit warning, which wrong-footed investors given that it was announced late in the trading day, these numbers have been delivered on time. Even so, the update still makes for generally uncomfortable reading,” he said.

No strategy update 

“It had been hoped that this set of figures would be accompanied by a strategy update, but this is not likely to arrive in detail until a Capital Markets day in March.

“Meanwhile, this leaves investors to pore over any number of weaknesses – margins under pressure, earnings per share suffering a precipitous drop, pre-tax profit down 57% and net debt up 23%.”

Among the mid-caps, Avation (LON:AVAP) flew 4% higher after the aircraft leasing company said its interim profits would set a new record.

Fund manager Intermediate Capital’s (LON:ICP) results, meanwhile, were well received as the shares nudged ahead 10%.

Proactive news headlines:

VR Education Holdings PLC (LON:VRE) is to launch its Titanic VR virtual reality experience on the PlayStation platform on November 22.

Table reservation app Bigdish PLC (LON:DISH) has received several informal approaches for its Asia-based business, prompting a strategic review of that operation. The outcome might mean substantially less capital is required than previously anticipated to roll-out its UK business.

Learning Technologies Group PLC (LON:LTG) has snapped up the remaining 70% of Watershed Systems shares which it didn’t already own for up to US$11.6mln. The digital learning group also set out its new long-term goals, targeting run-rate revenues of £200mln and run-rate EBIT of at least £55mln by the end of 2021.

Echo Energy PLC (LON:ECHO) told investors it expects to kick off a two-well stimulation programme in Argentina within the next three to four weeks. The company earlier this year drilled four wells across its onshore Argentina portfolio, within the Fracción C licence, two of which were seen as successful.

Ticketing services and queue-jumping software provider accesso Technology Group PLC (LON:ACSO) has expanded its relationship with Australia’s Village Roadshow Theme Parks, which is now taking more accesso services.

Alba Mineral Resources PLC (LON:ALBA) chairman George Frangeskides described the company as “very encouraged” following the release of the latest data out of the Horse Hill production testing campaign. A deluge of stats have indicated the so-called ‘Gatwick Gusher’ project’s Kimmeridge zones can be “commercially viable”, according to the project’s operator.

Avation PLC (LON:AVAP) provided an upbeat assessment of prospects as it said first-half revenues and earnings were growing strongly. In an update provided at the aircraft leasing company’s annual meeting, investors were told lease income for the six months to the end of December will be in the order of US$58mln, up 39% year on year.

Arix Biosciences PLC (LON:ARIX) has hailed the early-stage clinical trial success of an Australia-based pharma company in which it has a significant stake. Pharmaxis (ASX:PXS) is developing what’s called a LOXL2 inhibitor to treat fibrotic diseases such as non-alcoholic steatohepatitis (NASH) and idiopathic pulmonary fibrosis.

AFC Energy PLC (LON:AFC) said it has now concluded the majority of the engineering design to bring to market its first commercial fuel cell system.

Metal Tiger PLC (LON:MTR) has released the results of its first phase of drilling at the A1 Dome as it updated on the activity of its joint venture in the Kalahari Copper Belt in Botswana.

Chaarat Gold Holdings Limited (LON:CGH) has struck more gold at its Tulkubash project in the Kyrgyz Republic in the latest round of drilling. In a separate announcement, Chaarat confirmed it had secured funding of US$10mln with a previous note holder.

Live Company Group PLC (LON:LVCG) said it has received confirmation that the agreement between its US joint venture and Live Nation Entertainment Inc for the exclusive promotion of BRICKLIVE events throughout North America and Canada, had been signed.

Korea-focused gold mining junior Bluebird Merchant Ventures Ltd (LON:BMV) has raised US$380,000 from a private share issue at a premium to the market price. Colin Patterson, chief executive, has also agreed to swap US$750,000 of debt into shares.

Clinigen Group PLC (LON:CLIN), the global pharmaceutical and services company, has announced the appointment of  Professor Alan Boyd as a non-executive director with immediate effect. The firm pointed out that he is CEO of Boyd Consultants, a UK-based consultancy to the pharmaceutical and biotechnology industry.

Eland Oil & Gas PLC (LON:ELA), the oil & gas production and development company operating in West Africa with an initial focus on Nigeria, has announced the appointment, with immediate effect, of Stifel Nicolaus Europe as its joint corporate broker, alongside the company's new nominated adviser and joint broker, Peel Hunt.

Chagala Group Limited (LON:CGLO), the London-listed specialist services and facilities provider to the oil and gas industry in Kazakhstan, said it has received a notification that Eagle Resource Holdings Limited sold 1,163,330 ordinary shares in the company, representing 5.47% of the total voting rights at a price of US$1.5 per share on 22 October 2018. After this transaction, the firm added, Eagle Resource Holdings holds no direct or indirect interests over any shares or voting rights in the company.

APQ Global Limited (LON:APQ), the emerging markets growth company, said that as at the close of business on 31 October 2018, its unaudited book value per ordinary share was US$97.10, equivalent to 75.99p, including the accrual for a 1.5p  (1.9 US cents) dividend payable on 30 November 2018.

6.45am: Indifferent start predicted 

The FTSE 100 is set for a steady and almost indifferent start to Thursday’s dealing whilst the noise of Brexit continues to drown out most other market narratives.

Amid the torrent of Brexit news, commentary and opinion, the markets presently resemble the floating duck – apparently sitting still and silent on the water, whilst underneath paddling furiously.

As the British pound shows gains, spread betting and CFD firm IG Markets sees the FTSE 100 ups about 3 points on the open as it calls the index at 7,037 to 7,041.

Much is happening, in regards to the bigger picture economics, such as: Germany’s evident third-quarter economic contraction, Italy’s budgeting challenges and a variety of tensions between the United States and various international trading partners (most pertinent presently Trump’s ‘NAFTA’ deal could contentiously not find ratification in Congress).

In London, of course, it is mostly all about Brexit and Theresa May’s withdrawal deal, which she managed to get passed by her cabinet on Wednesday.

Whilst a timetable is in place, what comes next is somewhat uncertain.

“While she was able to achieve what she called collective approval from her cabinet to accept the deal, the gritted teeth consensus could well be tested in the coming days, and appeared to be reflected in her tired demeanour, almost as if to brace for the whirlwind that is about to come her way in the next few days, as various cabinet members come under pressure to resign,” said Michael Hewson, analyst at CMC Markets.

“The Prime Minister herself could well also find herself subject to a leadership challenge if reports of letters going into the 1922 committee, are anywhere close to being accurate and come to a total of 48.

“Having cleared this particular hurdle, the deal will now have to go to a special EU summit, later this month, before being put before the House of Commons in early December when the real fun is likely to begin, as the 585-page agreement is put before MP’s to vote on.”

On Wall Street, the Dow Jones shed 205 points or 0.81% to finish Wednesday’s session at 25,080 whilst the S&P 500 was off 0.76% and the Nasdaq was down 0.76% with the benchmarks ending the day’s trading at 2,701 and 7,136 respectively.

In Asia, Japan’s Nikkei was losing 0.2% changing hands at 21,803 but Hong Kong’s Hang Seng climbed more than 1% to 25,950. The Shanghai Composite similarly moved 1.3% higher to 2,667.

Around the markets:

  • Pound: US$1.3019, up 0.21%
  • Gold: US$1,213, up 0.48%
  • Crude Oil: US$66.33, up 0.31%
  • Bitcoin: US$5,541, down 11.8%

City Headlines:

  • Uber loss tops $1bn ahead of planned IPO next year – BBC News
  • Victoria’s Secret chief executive Jan Singer resigns – Financial Times
  • House of Fraser to shut four stores after failure to lower rents – Sky News
  • Lloyds agrees settlement with HBOS whistleblower – Financial Times
  • IMF's Lagarde says central banks could issue digital money – BBC News
  • Coinbase to shutdown Bitcoin Cash (BCH) trading ahead of hard fork – FX Street

Significant announcements due on Thursday:

Interims: Royal Mail Group PLC (LON:RMG), Mediclinic International PLC (LON:MDC), Dart Group PLC (LON:DTG), Norcros PLC (LON:NXR), Urban Logistics REIT PLC (LON:SHED)

Trading updates: Bovis Homes Group PLC (LON:BVS), Close Brothers Group PLC (LON:CBG), Safestore Holdings PLC (LON:SAFE)

AGMs: Avation PLC (LON:AVAP)

Ex-dividends to chop 16.2 points off FTSE 100 index: J Sainsbury PLC (LON:SBRY), Marks & Spencer Group PLC (LON:MKS), Royal Dutch Shell PLC A and B shares (LON:RDSA) (LON:RDSB), GlaxoSmithKline PLC (LON:GSK), Bunzl PLC (LON:BNZL), Scottish Mortgage Investment Trust PLC (LON:SMT)

Economic data: UK retail sales; US weekly jobless claims; US retail sales, US import/export prices; Philly Fed manufacturing index; Empire State manufacturing index

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