FTSE closes 73.25 points higher at 6,880.19
Theresa May faces vote of confidence Wednesday evening
Pound advances 1.3% to $1.26
The Footsie ended higher Wednesday, boosted in the afternoon by speculation that UK Prime Minister Theresa May will survive a no-confidence vote by her party and supported by strong gains on Wall Street over US-China trade talk optimism.
At the close, the FTSE 100 index was 73.25 points higher at 6,880.19, not far from the session peak of 6,902.19 and well above the early low of 6,806.94.
On Wall Street, the Dow Jones Industrial Average was up 393.87 to 24,764.11 after a series of developments and comments from US and Chinese officials boosted expectations that a trade deal could be reached between the two countries in coming months.
The main focus in the Square Mile, though, was on the ongoing Brexit deal saga, which on Wednesday morning bought news that the required 48 Tory MPs had written letters requesting a vote of no-confidence in May, the ruling party’s leader.
Sentiment over the outcome of that vote, expected Wednesday evening, ebbed and flowed throughout the day. Commentators, however, were moving toward the possibility that she will receive the required backing of more than half the Tory party’s MPs. Such a result would allay the fear of any leadership contest for at least another 12 months and allow May to keep pursuing the Brexit deal compromise required to obtain full parliamentary approval.
So far, according to BBC research, 174 Tory MPs have publicly said they will vote for May, with 34 against.
Strategists at RBC Capital commented: “Bookmakers’ odds see a decent chance of her surviving the challenge, which would imply that she cannot be challenged as party leader again over the coming 12 months. We doubt that she would step down voluntarily in case she wins by a small margin, only."
They added: “If she loses the vote, a leadership contest could be a time-consuming affair and with the arithmetic of Parliament not changing, we do not see how the Brexit process could be salvaged in the short run."
It looks more and more likely that the Article 50 process governing exit from the European Union will need to be extended, according to RBC.
3.30pm: Theresa May's future hangs in the balance
According to the political editor of The Sun, James Forsyth, some MPs want May to leave after Brexit:
Spoken to 3 MPs I have long had down as ‘no confidence’ swing votes—one minister, one former and one backbencher—and all say they are voting May. But, interestingly, all want her to go soon after March 29— James Forsyth (@JGForsyth) 12 December 2018
3.00pm: Most Tory MPs back Theresa May ahead of confidence vote
According to the BBC, a majority of Tory MPs have publicly said they will back Theresa May in a vote of confidence in her leadership.
The vote starts at 6pm and will run for two hours in a secret ballot.
The BBC said so far 174 Tory MPs have publicly said they will vote for May with 34 publicly against. She needs the votes of 158 MPs to remain prime minister.
Labour’s policies would be devastating to businesses and working families across our country.— Theresa May (@theresa_may) 12 December 2018
By contrast, under this Government wages are growing, unemployment is falling and we are delivering a Brexit deal that is good for our economy.#PMQs pic.twitter.com/YkvbGgHC6B
Daiwa Capital Markets said: "The result, however, is still hardly likely to represent a ringing endorsement for the PM, with her victory more than anything reflecting the lack of a credible unifying candidate to replace her and the late and delicate stage in the Brexit process.
"Indeed, even though the result will mean that she cannot be challenged from within her own party for another 12 months, the total number of votes against her this evening might still signal a notable lack of authority in Parliament.
"Her victory will also not materially alter the balance of opinion on Brexit within the House of Commons.
"However, most notably perhaps, it will highlight that there is no majority for a no-deal Brexit, given that the bulk of those Tory MPs who will vote against May are likely to come from the Hard-Brexit wing of the party (the ‘extremists’ as Chancellor Hammond put it this morning)."
At the Prime Minister's Questions earlier today, May faced repeated calls from Labour MPs for her to quit or hold another EU referendum.
Labour leader Jeremy Corbyn said: "The time for dithering and delay is over. The prime minister has negotiated her deal. She has told us it is the best and only deal available.
"There can be no more excuses, no more running away. Put it before Parliament and let's have the vote."
May said Labour’s policies would be "devastating to businesses and working families across our country".
2.30pm: US stocks open higher
US stocks have opened higher amid investors weighed inflation data and showed optimism for a US-China trade deal.
The Dow Jones Industrial Average gained 279 points to 24,649, the S&P 500 rose 32 points to 2,669 and the Nasdaq added 96 points to 7,127.
President Donald Trump told Reuters that he was willing to intervene in the Justice Department's case against an executive of Chinese company Huawei if it would help pave the way for the trade deal with China.
Meanwhile, The Wall Street Journal reported that China was planning policy changes aimed at increasing access to its markets for foreign companies.
In economic data, US inflation slowed to 2.2% year-on-year growth in November from 2.5% in October, closer to the Federal Reserve's 2% target.
2.00pm: US inflation growth slows
US inflation slowed to an annual rate of 2.2% in November from 2.5% the previous month, as expected, the Labor Department has revealed. However, core inflation, which strips out volatile food and energy costs, accelerated to 2.2% from 2.1%
On a month-on-month basis, headline inflation was flat after a 0.3% rise in October and core inflation remained at 0.2%.
The data comes ahead of the Federal Reserve's interest rate decision next Wednesday.
ING Economics commented: "With core inflation set to break above 2.5% year-on-year next year and the economy likely to experience solid, if somewhat slower growth than in 2018, the arguments for interest rate increases from the Federal Reserve will remain strong.
“President Trump will not like it, but we fully expect a 25bp rate hike at the 19 December FOMC meeting. We are currently forecasting three further 25bp rate hikes next year, but this is subject to downside risks given escalating trade fears."
1.45pm: Stay tuned to ITV?
Watch ITV...(not the channel)— Neil Wilson (@marketsneil) December 12, 2018
1.30pm: Time to buy up UK stocks?
1.10pm: US stocks set for hot start
US stocks are set to jump at the opening bell in New York amid a strong burst of optimism around the possibility of a permanent US-China trade deal being struck.
Stocks had closed mostly lower Tuesday in a volatile session that saw the key indexes weave in and out of positive territory.
More optimistic sentiment appears to be spreading through the market Wednesday after President Donald Trump told Reuters he would intervene in the Justice Department's case against a top executive at Chinese telecoms giant Huawei if it would help serve national security interests or help US-China trade talks.
CNBC also reported that Trump said talks between Washington and Beijing were ongoing and confirmed the president “would not raise tariffs on Chinese imports until he was sure about a comprehensive trade agreement”.
The Dow Jones Industrial Average is seen opening 159 points higher at 24,581. Optimism around trade has lifted shares of Caterpillar Inc (NYSE:CAT) and Boeing (NYSE:BA) by at least 1% before the bell.
The broader S&P 500 is seen 0.7% higher at the open to 2,659.00, while the tech-heavy Nasdaq is also expected to climb.
12.20pm: Equity markets buoyed by China import duty cuts
Despite Theresa May’s future hanging in the balance, global equity markets are doing well generally today, boosted by news out of China that it is planning to cut tariffs on US-made cars to 15%.
Over summer, China whacked a 40% import duty on US cars in retaliation to taxes brought in by President Trump.
According to various reports, Chinese officials have proposed to cut that down to 15% in what is being seen by the markets as a thawing of relations between the two superpowers.
Only yesterday, Trump said he had had “very productive conversations” with his Chinese counterparts.
Very productive conversations going on with China! Watch for some important announcements!— Donald J. Trump (@realDonaldTrump) December 11, 2018
Alongside a fall in sterling, that has sent the FTSE 100 soaring by 72.0 points to 6,879.0.
Shares in the Ladbrokes and Coral owner are up 6.6% to 685p, making it the best gainer on the Footsie.
Engine maker Rolls-Royce Holdings PLC (LON:RR.) is also flying high, up 4.5% to 816.2p after telling investors full-year results will be at the upper end of expectations. The announcement was somewhat of a surprise given Rolls’ recent production issues with a couple of its engines.
Leading the fallers is Oilfield services firm Wood Group (John) PLC (LON:WG.), which is down 8.2% to 591.2p after warning that the recent volatility in oil prices might impact the pace of contract wins going forward.
J Sainsbury plc (LON:SBRY) was also being put back on the shelf after regulators rejected its pleas for an extension of the inquiry into its proposed £12bn merger with Asda. Shares have dropped 4.9% to 282p.
12pm: Are MPs really with May?
We told you earlier how lots of Tory MPs have been coming forward in support of Theresa May this morning, but will their words be reflected in their actions later on?
There's a big difference between what ministers are saying in public and what they are saying in private.— Steven Swinford (@Steven_Swinford) December 12, 2018
One who went out on the airwaves to bat for the PM this morning just told me: 'It's the endgame'
11.40am: No extra time for Sainsbury’s-Asda merger review
Sainsbury’s argued that the current timetable did not give the companies or the CMA enough time to provide and consider all the evidence given the “unprecedented scale and complexity” of the case.
The supermarkets asked the CMA for an additional 11 working days over the Christmas period to respond to “a large amount of material recently provided to us”.
The CMA has rejected the application, saying: “If we gave the companies the extra time they are now asking for, it would put our ability to complete the investigation by the required deadline at very serious risk."
It added: "As with all of our merger reviews, we construct our timetable to ensure that everyone has the chance to have their say, including customers, the companies involved and suppliers."
11.10am: £150mln wiped from value of Dixons
Shares in Dixons Carphone Plc (LON:DC.) plunged in early trading Wednesday after it slashed its interim dividend amid a swing to a loss in the first half.
The FTSE 250 electronics retailer reported a pre-tax loss of £440mln for the period compared to a £51mln profit a year ago despite revenues climbing to £4.89bn from £4.87bn.
The swing to a loss was mainly down to the firm booking non-headline charges of £490mln relating to non-cash impairments and goodwill.
The company has been struggling in recent months as slow mobile phone sales contributed to the closure on around 92 of its stores, while the share price has lost around 30% of its value this year following a string of profit warnings.
As a result, the group slashed its interim dividend to 2.25p per share from 3.5p a year ago, a decrease of about 36%. Shares dropped 8.6% to 138p.
Dixons Carphone boss Alex Baldock says @bbc5live there are no plans to close more stores or cut more jobs than those previously announced.— Sean Farrington (@seanfarrington) December 12, 2018
This despite the £440m loss after the poor performance of its Carphone Warehouse business.
10.45am: Tory MPs seem to be siding with PM
According to reports, at least 100 Conservative MPs have come out and publicly expressed support for Theresa May ahead of this evening’s vote.
Here are some tweets from a few of those:
I will support the Prime Minister @theresa_may tonight. This is a totally inappropriate time to have a contest. The country expects us to provide stability not damaging division.— Dr Liam Fox MP (@LiamFox) December 12, 2018
Any colleague who believes changing our leader during the negotiations is in our country's interest should think again. I will be supporting the Prime Minister tonight.— Stephen Hammond MP (@S_Hammond) December 12, 2018
I am giving my full support to @theresa_may who has always put the national interest first. We need to honour the outcome of the referendum and support the PM to deliver Brexit on 29 March 2019.— Alun Cairns (@AlunCairns) December 12, 2018
I fully back our Prime Minister. We have the right Leader of our Party, we have a duty to deliver for our country & I hope all my colleagues will join me & support @theresa_may to deliver for UK.— Brandon Lewis (@BrandonLewis) December 12, 2018
10.35am: David Cameron chips in
I hope Conservative MPs will back the PM in the vote today. We need no distractions from seeking the best outcome with our neighbours, friends and partners in the EU.— David Cameron (@David_Cameron) December 12, 2018
10.20am: ‘Pound in holding pattern for time being’
Sterling is still hovering just above US$1.25, a slight recovery from where it was a few hours ago when it dipped below that handle.
Some analysts reckon cable will stay in a holding pattern until the result of the vote is known later on this evening.
"Why is GBP not falling now? From now until the outcome of the vote (6-8pm) the balance between these two scenarios means that GBP doesn't collapse until the outcome of the vote."— Katie Martin (@katie_martin_fx) December 12, 2018
10.05am: Vote outcome due 'just after 8pm'
9.55am: SuperDry gets a soaking
Away from politics, profits at SuperDry PLC (LON:SDRY) halved in the fashion brand’s first half. The company said the recent weather has been too mild for its liking, meaning it has been unable to shift its winter jackets and coats.
SuperDry took an £11mln weather-related hit in November and warned of a similar impact this month if trading and weather conditions don’t improve.
Given the poor performance so far, the group warned full-year profits would likely slide to between £55-70mln – well below the £97mln it generated last time around. The retailer is also looking at closing some of its stores. Shares are down by a third to 400p.
I’d have to agree with Paddy; any given morning at Waterloo in autumn / winter rush-hour you’ll see hundreds of middle-aged male City clones sporting their SuperDry membership garments. It’s like the brand has clung on to its initial market without appealing to a new generation.— Tom Quinn (@TomTheProducer1) December 12, 2018
9.35am: Bookies reckon May will survive
A fair few Tory MPs have pledged to support Theresa May in the vote of no confidence later on today, and the bookies reckon the PM should have enough backing to win the vote
Or at least that's what the punters are betting on...
90% of money staked so far today has been for May to WIN no-confidence vote.— Ladbrokes Politics (@LadPolitics) December 12, 2018
9.15am: 'Country's future at risk'
"A change of leadership will put our country's future at risk" - UK PM Theresa May says leadership election could delay or stop #Brexit— BBC News (UK) (@BBCNews) December 12, 2018
Follow live updates: https://t.co/JOLFZdXHmI pic.twitter.com/bQAd8MAteh
9.05am: ‘May must lose’
“May surely must lose, but you never know in politics,” opines Markets.com analyst Neil Wilson.
“This is make or break for the Brexiters - if May holds on then she will be leader for another year and they will be left without few avenues.
It must be said she has a remarkable capacity to keep fighting. Victory for May does not mean that her deal would then get through Parliament of course, leaving UK politics in a kind of limbo that would require some other action (a General Election or second referendum) to break the deadlock.
“Huge instability will remain whatever the result of the confidence vote.”
8.50am: Pound rocked by vote of no confidence
Theresa May is to face a vote of no confidence later today after 48 Conservative MPs submitted letters to say they no longer supported her.
MPs have been unhappy at the Brexit deal May has reached with the EU, so they have sent her back to try to renegotiate.
The vote, which is expected between 6-8pm this evening, has rocked the already volatile pound, with cable briefly slipping below US$1.25, although it has since recovered some of those losses to sit at US$1.253.
Sterling’s weakness has helped the FTSE 100 to edge higher though, as it boosts the blue-chips’ overseas earnings when converted back into pounds. It also makes UK exporters’ goods cheaper to foreign buyers.
The FTSE 100 is up 29.5 points to 6,836.5 in early deals on Wednesday, led by Rolls-Royce Holdings PLC (LON:RR.) , which has gained 2.5% to 799.8p after telling investors full-year results will be at the upper end of expectations.
Oilfield services firm Wood Group (John) PLC (LON:WG.) was the biggest faller, down 7.3% to 597p after warning that the recent volatility in oil prices might impact the pace of contract wins going forward.
J Sainsbury plc (LON:SBRY) was also being put back on the shelf after confirming it will seek a judicial review of the CMA’s investigation into its proposed £12bn merger with Asda. Shares dropped 3.3% to 286.8p.
Proactive news headlines:
Taptica International Limited (LON:TAP) is to launch a share buyback programme for an aggregate value of up to US$10mln as cash generation of its business continues to be strong. The group said the buyback programme will commence on 12 December 2018 and will continue until 28 February 2019, or when the company enters a closed period.
Seeing Machines Limited (LON:SEE) shares surged in early trading Wednesday after it partnered up with L3 Commercial Aviation, a provider of pilot training solutions, to develop eye-tracking capabilities for flight simulators. Big Pic in August.
Avacta Group PLC (LON:AVCT) has appointed a chief medical officer who will oversee the development of the life sciences group’s Affimer technology. Dr Jose Saro is joining the business from the Roche Innovation Center, Zurich, where he focused on immuno-oncology and the development of products that work in combination to treat illnesses.
Mkango Resources Ltd (LON:MKA, CVE:MKA) told investors that it has secured a licence extension for exploration in the Phalombe. The government of Malawi has given the company another two years under its current exploration phase, with the latest arrangement now running to January 2021.
Solo Oil PLC (LON:SOLO) has agreed to sell its 30% in UK licence PEDL331, located on the Isle of Wight, which hosts the undeveloped Arreton oil discovery. UK Oil & Gas Investments will pay £350,000 to acquire the stake, to take its overall ownership of the project to 95%.
Capital Drilling Ltd (LON:CAPD) has extended its contract with Anglo Gold Ashanti for the Geita mine, in Tanzania. The AIM-quoted mining services contractor will continue underground exploration and grade control drilling, under a sub-contract to a five year master agreement which currently runs to December 2020. It has operated at the Geita mine since 2006.
Ariana Resources PLC (LON:AAU) has announced that a 1,000 metre diamond drilling programme is due to commence imminently at its wholly-owned Kizilcukur Gold Project in Turkey. The company said that drilling to be focused on the planned Zeki Pit area, with the aim of improving the classification of JORC resources to the Measured and Indicated categories.
Kibo Energy PLC (LON:KIBO) has renewed and expanded its Memorandum of Understanding (MOU) with Mozambican state-owned electric utility, Electricidade de Mocambique (EDM) to advance the financing, construction and operation of the Benga Independent Power Project in Mozambique. The multi-asset, Africa focused energy company said EDM is committing to assist and co-operate towards the successful development of Benga in Mozambique.
Horizonte Minerals Plc (LON:HZM) has filed the NI 43-101 feasibility study of its Araguaia ferronickel project in Brazil on SEDAR. Results from the FS were first announced at the end of October and showed that over a 28-year mine life Araguaia will generate US$1.6bn in cash flows.
African Battery Metals PLC (LON:ABM) said it intends to approach all of its existing creditors and suppliers with a view to negotiating a settlement of all of the company's existing liabilities on equal terms, in order to give the group the time to seek other solutions for the continuation of its trade.
Ceres Power Holdings PLC (LON: CWR) confirmed that, further to its announcement on 4 December, 16,879,964 new ordinary shares have been allotted to Weichai Power after it exercised its warrant at a price of 164.5p per share investing a further £27.8mln in addition to its previous £20.3mln investment. The group said this increases Weichai’s shareholding in Ceres Power from just under 10% to 20%.
Diversified Gas & Oil PLC (LON:DGOC), the US based gas and oil producer, announced that Cenkos Securities has been appointed as the Company's Nominated Adviser with immediate effect. The appointment follows the completion of the acquisition of the Nominated Adviser and Corporate Broking business of Smith & Williamson by Cenkos.
Circle Property PLC (LON:CRC), the specialist regional UK office investment and development company, also announced that Cenkos Securities has been appointed as its Nominated Adviser and Broker with immediate effect.
Tekcapital PLC (LON:TEK), the UK intellectual property (IP) investment group focused on creating marketplace value from university technology, will be delivering a webinar on commercialising university IP with the Creativity and Innovation Center 4.0 of the Universidad Tecnológica de Querétaro on December 14th, 2018 at 1:00 PM CST.
6.45am: Footsie to open higher
The FTSE 100 index is expected to push higher on Wednesday, extending Tuesday’s gains reflecting strength in Asian markets as China made some conciliatory moves in its trade war with US.
Spread betting firm IG expects the blue-chip index to open around 50 points higher at 6,857 having added 85.40 points on Tuesday to close at 6,806.94
Overnight on Wall Street, the Dow Jones Industrials Average was weaker, ending 53 points lower at 24,370 as investors over economic growth and whether the Federal Reserve will hike US interest rates, as expected, next week.
But the mood was much brighter today in Asia, Japan’s Nikkei 225 index jumping 2% higher and Hong Kong’s Hang Seng gaining 1.6% after China reportedly agreed to cut tariffs on US cars – from 40% to 15% - in a gesture aimed at de-escalating the trade war between the world’s two largest economies.
Craig Erlam, senior market analyst at Oanda commented: “While the details of the cut are not yet known, the move reverses the tariff hike in July in response to those imposed by the US, which is hopefully a sign of more unwinding to come.
“It’s too early to be optimistic though as tensions remain high, with the arrest of Huawei CFO Meng Wanzhou further complicating the relationship, although Trump has suggested he could intervene, which makes the timing of the arrest all the more suspicious.”
On currency markets, the pound remained cautious against both the US dollar and the euro as Brexit deal uncertainty continued to dominate with prime minister Theresa May facing questions in the House today as she carries on meetings with EU leaders to try and sweeten the ‘backstop’ issue.
US nicotine crackdown to overshadow BAT’s results
On the corporate front, British American Tobacco plc (LON:BATS) will issue a trading update on Wednesday having seen its share price almost halve over the past year on concerns about stricter regulation and with margins taking a hit as more people switch to e-cigarettes.
The tobacco industry has been rocked by new restrictions the US government is planning to put on nicotine products.
Last month the US Food and Drugs Administration announced measures to prevent minors from using flavoured nicotine products and is considering a ban on menthol cigarettes.
In a trading update in October, BAT lowered its annual revenue target for cigarette alternatives, blaming a flat performance in Japan and a product recall of its Vuse Vibe power units in the US earlier this year due to malfunctioning batteries.
It said it expected revenue from next-generation products, which include e-cigarettes and tobacco-heating devices, of £900mln this year, down from a previous target of £1bn.
The company, which owns Lucky Strike and Dunhill cigarettes, also warned that currency fluctuations would drag on its adjusted EPS growth by 7% if rates remained unchanged.
Tough times for Dixons Carphone
On the second line, as Christmas fast approaches, updates from retailers will also be eyed closely on Wednesday.
Electricals stores group Dixons Carphone Plc (LON:DC.) has lost more than fifth of its value so far this year and its first-half numbers could make for grim reading.
The FTSE 250-listed firm’s like-for-like sales were flat in the first quarter, but those figures were flattered by the FIFA World Cup.
Dixons full-year profit before tax is still expected to be around £300mln, and investors will want to see proof that that’s likely to be the case with the interims.
Colder weather to help SuperDry
Co-founder Julian Dunkerton left in March after deciding a “change of strategy” was needed, although he has since threatened a comeback in light of the weak trading, which contributed to profit warning last month.
In a note on Monday, City broker Liberum slashed its price target for SuperDry to 700p from 900p and cut its estimates, with its pre-tax profit forecasts shopped by 30% so far this year and it reckons there is scope for more cuts as well.
Liberum’s analysts reckon SuperDry’s new strategy “is clearly not delivering” and called for a “strategic rethink” to get the company back to where it should be.
Significant events expect on Wednesday:
Economic data: US CPI
Around the markets:
- Sterling: US$1.2502, up0.1%
- Gold: US$1,245.30, an ounce, up 3.4%
- Brent crude: US$60.97 a barrel, up 0.8%
- Financial Times: China will cut tariffs on imported American cars from 40% to 15%, in a sign of a cooling in the trade war between the world’s two largest economies.
- Financial Times: UK Prime Minister Theresa May is facing the renewed threat of a leadership coup, after she postponed a crunch Commons vote on her Brexit deal in the face of an impending defeat.
- Financial Times: Verizon has written off nearly US$5bn from its struggling division Oath, which was assembled through the costly acquisition of AOL and Yahoo to create an online advertising rival to Facebook and Google.
- The Guardian: Google’s chief executive, Sundar Pichai, testified before the House judiciary committee on Tuesday Morning, where he refused to rule out launching a censored search engine in China.
- Daily Mail: Hedge funds and other short-sellers likely made almost £2mln on Monday when Interserve’s share price plunged 53%; speculators have made an estimated £68 million betting against the struggling government contractor so far this year.
- The Times: The global mining giant Anglo American shares climbed 5.5% after it announced that production should grow by more than expected this year and would rise again next year.
- The Times: Pepkor Europe, which runs Poundland in Britain and the Pepco and Dealz brands in Europe, said that revenues had risen by 12.9% in the fourth quarter to 30 September, defying conditions on the high street.
- The Guardian: Poor figures from John Lewis, and a slowdown at Tesco and Sainsbury’s has suggested the uncertain political climate is taking its toll on consumer confidence this Christmas.
- Daily Mail: The upmarket shoe and handbag retailer, Russell & Bromley, posted a 55.7% fall in profits to £6.2 million in the year to the end of December.
- The Daily Telegraph: Transport for London expects to miss out on as much as £600mln in revenues on the back of its delayed Crossrail project.
- The Times: Ministers are taking risks by handing so much government business to only a few large strategic suppliers, according to a new report by the Institute for Government.
- The Times: The UK government and Sir John Kingman, the chairman of Legal & General and a former Treasury mandarin, are under increasing pressure to publish documents relating to his investigation into the audit watchdog.
- The Times: The biggest companies in Britain paid a combined £84bn in tax last year, an increase of more than £1bn on the previous year, according to PWC.