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Market ReportFTSE 100

FTSE 100 closes in the red as resource stocks come off the boil

After hitting a six-month high on Tuesday afternoon, London's blue-chips took a step back on Wednesday

mining truck
The CMA is due to give its verdict on the tie-up tomorrow (Thursday)
  • FTSE 100 closes in red

  • Anglo American downgraded by JP Morgan

  • US shares down at time of writing

  • Government borrowing falls

 

FTSE 100 closed in the red Wednesday as US stocks also lost ground  as in London big resource stocks came off the boil after gains in the sector yesterday.

The UK premier shares index finished down around 51 points at 7,471.

The FTSE 250 was up though. The mid-cap cousin of Footsie added over 85 points to finish at 19,993.

Anglo American (LON:AAL) was among the top five laggards, shedding 3.9% to 2,080.5p after JP Morgan downgraded the miner's shares  to 'neutral' from 'buy'. BP (LON:BP.) also lost 2.11% to 570.20p.

David Madden, analyst at CMC Markets, noted: "The FTSE 100 reached another six month high yesterday, and it was the mining and oil sectors that helped it reach that multi-month high, and today we are seeing a reversal of that today."

Elsewhere in Europe, the German DAX was up around 77 points, while the French CAC 40 shed around 15 points.

On Wall Street, the Dow Jones Industrial Average is down around six points at the time of writing.

 

15.40pm: Boeing scraps 2019 guidance

Boeing Co (NYSE:BA) has scrapped its outlook for 2019 after the grounding of its 737 MAX range of aircraft in March sent costs soaring.

The aircraft maker reported a 21% drop in earnings in its results for the first quarter, while the grounding of its bestselling aircraft and a stoppage of deliveries racked up US$1bn in extra costs. Revenues dipped 2% to US$22.92bn, lower than analysts had predicted.

The company has also cut production of the 737 MAX to 42 aircraft each month from 52 previously and halted its share buybacks, adding that it would issue new earnings forecasts when it had more clarity around the issues facing the aircraft model and the potential costs of fixing them.

Boeing’s problems began when a litany of countries began grounding the aircraft following two fatal crashes less than six months apart in Ethiopia and Indonesia.

Shares in the plane maker rose 1.5% to US$379.67 in early deals in New York.

15.20pm: Slow start in New York

US stocks were relatively flat at the open Wednesday a day after the Nasdaq and S&P 500 hit all-time closing highs.

The major indices all traded slightly below the flatline after another buys morning of earnings season. Caterpillar Inc (NYSE:CAT) was the biggest laggard among the blue chips, while Sirius XM (NASDAQ:SIRI) was a stumbling block for the Nasdaq after each company posted quarterly results before the bell.

Investors are looking ahead for signals from the tech sector as Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT) each report after the close.

So far, almost 130 S&P 500 companies have reported first quarter results, and 78% of them beat their expectations, according to data from Refinitiv.

The Dow slipped 0.2%, 46 points, to 26,610.2. The Nasdaq decreased 0.1% to 8,110.1, and the S&P 500 dropped 0.1% to 2,930.3.

3pm: A quick check on the markets…

With an hour or so until the market closes here in London, the FTSE 100 is down 64.9 points, or 0.9%, to 7,458.2.

The blue-chips have been in the red from the off today having hit six-month highs on Tuesday, and they haven’t been helped by a slow start across the pond.

De Beers owner Anglo American PLC (LON:AAL) is the biggest faller, down 4% to 2,077p after being downgraded by analysts at heavyweight investment bank JP Morgan.

Miners on the whole are struggling, with analysts citing concerns over the economy in China – the world’s largest consumer of raw materials.

Supermarket J Sainsbury PLC (LON:SBRY) is also in the red, dropping 1.7% to 226.4p ahead of the CMA’s upcoming judgement on its £10bn tie-up with Asda.

A couple of brokers said today that they don’t expect the deal to get the thumbs-up and that it could dent Sainsbury’s share price.

Going the other way is Land Securities Group PLC (LON:LAND), the owner of the Bluewater shopping centre in Kent, which is up 2.6% to 931.9p on the back of an upgrade from Deutsche Bank.

Associated British Foods plc (LON:ABF) has headed higher too, despite posting a 15% fall in first-half profits.

Investors seemed to take heart from another stellar performance from its cheap fashion brand Primark, which continues to outperform its high street peers.

Down on AIM, boohoo Group PLC (LON:BOO) is up almost 8% to 233.4p after full-year profits jumped by more than a third, driven by strong performances from its PrettyLittleThing and Nasty Gal businesses.

2.30pm: Barclays in focus on Thursday

Barclays PLC (LON:BARC) will on Thursday fire the starting gun on the first quarter earnings season for UK banks.

Investors will have a keen eye on net interest margins (NIM), costs and bad loans across the sector.

UBS expect Barclays to swing to a pre-tax profit of £1.43bn in the first quarter from a £236mln loss last year when the bank had to fork out US$2bn to settle a lawsuit in the US over the sale of mortgage-backed securities.

Total revenue is expected to rise to £5.38bn from £5.36bn. Costs are projected to rise to £3.50bn from £3.36bn.

“We expect NIM below 320 basis points (bps) in 1Q19 and attention on volume growth and competitor (especially HSBC) behaviour,” UBS said.

Barclays' emphasis on mortgage lending alone should see margins fall in the year on mix, in our view.”

Barclays will need to show shareholders that is on track to turn around the investment bank amid pressure from activist investor Edward Bramson.

UBS predicts pre-tax profit at the investment bank will drop to £688mln in the first quarter from £1.17bn last year.

2pm: Loungers raises £83mln ahead of next week’s AIM IPO

Café-bar operator Loungers PLC has raised £83.3mln ahead of its planned float on London’s junior market next Monday (29 April).

Selling shareholders, which include two of the founders and private equity house Lion Capital, will trouser just shy of £22mln of that, with the rest going to the company.

Bosses plan to use the injection to pay down debt and fund their ambitious growth plans, which could see the current estate of 150 sites treble over the coming years.

Loungers raised the cash through the sale of shares at 200p apiece, valuing it at £185mln – some way shy of the £250mln some analysts had thought it would fetch.

“Today is a significant milestone in Loungers' journey as it has long been our ambition to list the company on the public markets,” said chief executive Nick Collins.

1.30pm: Aviva’s UK insurance boss departs

Aviva PLC (LON:AV.) has said the head of its UK insurance business, Andy Briggs is leaving the company, just weeks after missing out on the top job at the blue-chip insurer.

The FTSE 100-listed group said Briggs – who joined Aviva in April 2015 to lead its enlarged UK Life business following the takeover of Friends Life where he served as group chief executive - will remain with the insurer until October 23 to support an orderly transition.

Aviva said Briggs would be granted 'good leaver' status and therefore be eligible both for a pro-rated bonus in respect of the 2019 financial year and to retain awards applicable under its Long-Term Incentive Plan, due to vest in March 2020, March 2021 and March 2022.

Angela Darlington, currently Aviva's group chief risk officer, will become interim chief executive of UK Insurance, subject to regulatory approval.

1pm: IXICO secures significant contracts with two new clients

12.30pm: Quiet start expected in New York

Wall Street shares are seen starting in fairly lacklustre fashion on Wednesday after new highs yesterday as European indices are mixed and big company earnings continue to be a focus.

Today, Facebook (NASDAQ:FB) will be the latest tech giant to report after social media group Snap Inc (NASDAQ:SNAP) revealed it had added 4mln users and revenue soared. Twitter (NASDAQ:TWTR) topped Wall Street expectations on Tuesday.

The Dow Jones Industrial Average closed ahead by around 145 points yesterday at 26,656; the Nasdaq added around 105 at 8,120. The S&P 500 gained nearly 26 points at 2,933.

In futures trade this morning, the Dow Jones is up 31 points at the time of writing; the Nasdaq futures is up half a point and the S&P 500 is near flat. 

In macro news, more talks are expected to start next week between the United States and China on trade as reportedly the two are nearing some kind of deal, which is bolstering investor sentiment.

Elsewhere, the US Energy Information Administration will publish a report on oil stockpiles later this morning.

Connor Campbell, financial analyst at London-based spreadbetter Spreadex, said: "Missing out on the all-time highs struck by the S&P and Nasdaq last night, the Dow Jones is nevertheless on its way to matching the record peak struck in early October 2018.

“It’ll have to do better than the currently forecast flat open, however, if it is to make up the 200 or so points needed to close the gap.”

12.05pm: CMA ‘set to block Asda-Sainsbury’s merger’

Two heavyweight investment banks have both said today the UK regulators will block the proposed merger of Sainsbury PLC (LON:SBRY) and Walmart Inc's (NYSE:WMT) Asda.

The Competition and Markets Authority is expected to pass judgment on the £10bn tie-up later this week.

But, like most in the City, Jefferies and JP Morgan think the CMA will pour cold water over the deal.

JP Morgan said a complete block is “significant more likely” than regulators requesting remedies, although even that option could force Sainsbury’s and Asda to walk away from the merger.

Jefferies agreed, stating: “In reality, we struggle to assume anything beyond a 20% chance of a drastic rethink by the CMA.”

“In addition, a recourse by the two grocers to a judicial review is not necessarily a given, and will need to reflect the balance of probability of success and the lengthy timetable that such an action would imply.”

11.35am: Anglo American leads FTSE lower

The FTSE 100 has eased back from the six-month highs it reached on Tuesday afternoon.

The index of blue-chip shares is down 22.7 points, or 0.3%, to 7,500.3 in late-morning trading.

Anglo American PLC (LON:AAL) is the biggest faller, down 2.3% to 2,115p after being downgraded by analysts at heavyweight investment bank JP Morgan.

The mining sector as a whole is struggling more generally, with analysts citing concerns over the economy in China – the world’s largest consumer of raw materials.

Oil stocks have also fallen back this morning, with giants BP PLC (LON:BP.) (down 1.4% to 574.3p)  and Royal Dutch Shell PLC (LON:RDSB) (down 0.7% to 2,524p) following oil prices lower.

Going the other way is Land Securities Group PLC (LON:LAND), the owner of the Bluewater shopping centre in Kent, which is up 2.6% to 931.9p on the back of an upgrade from Deutsche Bank.

Associated British Foods plc (LON:ABF) is also on the up following the release of its half-year results.

Profits slipped 15% due to a write down of its Allied Bakeries business following the loss of a key contract, but investors were buoyed by the performance of Primark – ABF’s star asset and all anyone seems to care about..!

The no-frills retailer saw half-year profits surge by 25% as sales in the core UK business continued to rise. Looking ahead, bosses said customers’ reaction not the new spring/summer range had been “encouraging”.

11am: Primark and Boohoo show retailers how it’s done

Much has been made of the high street’s troubles, but Associated British Food PLC’s (LON:ABF) Primark and Boohoo Group PLC (LON:BOO) are showing that retail is far from dead.

Primark, which is ABF’s star asset, has continually outperformed the market with its no-frills offer, and it posted a 25% leap in profits in the six months ended 2 March.

Like-for-like sales in its core UK market grew 0.6% – an impressive feat in the current climate – and margins also improved significantly as bosses cut the number of sales and markdowns.

As for online clothes seller Boohoo, it reported a 38% rise in pre-tax profits last year, driven by continued strong growth in its PrettyLittleThing and nasty Gal businesses.

The two share something in common: John Lyttle. Lyttle is Boohoo’s new boss, having joined from Primark, where he was chief operating officer, last month.

10.40am: Bank of England looking for new governor

The Bank of England is looking for a new governor to take over from Mark Carney when he steps aside next January.

Current deputy governor Ben Broadbent, chief economist Andy Haldane and Santander UK’s chair Shriti Vadera have all been mooted as possible replacements.

But could you do it? Here’s the official advert for the role…

10.20am: Primark owners to pocket £52mln dividend

The Weston family is to pocket another £50mln from its Associated British Foods plc (LON:ABF) cash cow after the Primark owner upped its half-year pay-out to shareholders.

Through their Wittington Investments vehicle, relatives of AB Foods’ founder, Garfield Weston, own 431.5mln shares in the £20bn FTSE 100 firm, or 54.5%.

On Tuesday, AB Foods increased its interim dividend by 3% to 12.05p a share, meaning the Westons will receive £52mln when the divi is paid out in July.

Some of the money will go to the Garfield Weston Foundation, although a chunk will go to the family members themselves.

The higher pay-out comes despite a 15% dive in group pre-tax profits to £515mln (H1 17/18: £603mln) in the six months ended 2 March. Revenue edged 1% higher to £7.53bn (H1 17/18: £7.42bn).

ABF shares rose 2% to 2,557p on Wednesday morning.

10am: Footsie steps back from six-month highs

“Having last night hit a six-month high, the FTSE 100 took a small step back on Wednesday. Key detractors were mining, oil and insurance companies,” explains AJ Bell investment director Russ Mould.

“Asian shares were also weak amid chatter that investors had started to worry about the Chinese government slowing the pace of monetary and fiscal support following a stronger-than-expected first quarter for economic growth.”

Oil giants BP PLC (LON:BP.) and Royal Dutch Shell PLC (LON:RDSB) have followed oil prices lower, while the miners are under pressure amid concerns in China – the world’s largest consumer of raw materials.

9.35am: Government borrowing falls to 17-year low

The government borrowed £24.7bn in the last financial year, according to the latest official data, the lowest amount for 17 years.

The figure was £17.2bn less than what it borrowed in the previous financial year, although it was still £1.9bn more than what the Office of Budget Responsibility had targeted.

Borrowing was equivalent to 1.2% of GDP, down from 10% at the height of the financial crisis.

The ONS’s figures showed tax receipts continued to grow strongly in March, but higher government spending accounted for the wider-than-expected deficit, mostly down to the purchases of goods and services.

8.45am: Weak start for Footsie

The FTSE succumbed to a bout of mild profit-taking after a run that has seen the blue-chip index advance 4.5% in the last month.

Miners were on offer early on as the Footsie fell 21 points to 7,502.38 with Anglo American (LON:AAL) and BHP (LON:BHP) off 1.7% and 1% respectively amid continued worries about Chinese economic policy.

There was also some nervousness among investors in Barclays (LON:BARC) as the shares drifted ahead of Thursday’s quarterlies.

Associated British Foods (LON:ABF) held steady with the stellar performance of the company Primark retail arm seemingly priced into the current stock valuation. Next (LON:NXT) was a beneficiary with a 1% rise early on.

The sentiment behind Centamin (LON:CEY), meanwhile, was positive after it reported better-than-expected gold production from its mine in Egypt.

Among the tiddlers Tekcapital (LON:TEK), Shield Therapeutics (LON:STX), Westminster Group (LON:WSG) and IXICO (LON:IXI) were strongly higher on news flow.

After hours Wednesday, the market is braced for earnings from Facebook (NASDAQ:FB) and Tesla (NASDAQ:TSLA), with the market braced for a car crash set of quarterlies from the latter.

“It looks being a complete write-off as we have already been prepared for a bad set of numbers,” said Neil Wilson, of Markets.com, sticking with the motoring clichés.

“Some very ugly delivery figures reported earlier in April means are investors are braced for a very disappointing set of financials.

“We’re also very much eyeing where margins are heading. We also know that the drop in US tax credits was always going to make this one of the toughest quarters for Tesla in some time.”

Proactive news headlines:

Tekcapital PLC’s (LON:TEK) shares surged on Wednesday morning after its portfolio company, Belluscura, has raised £500,730 in a crowdfunding round.

Westminster Group PLC (LON:WSG) said its Technology division has been awarded a new US$3.48mln contract for the provision of advanced container screening solutions to two separate ports in an Asian country.

Switzerland’s medical authorities have given approval for Shield Therapeutics PLC’s (LSE:STX) Feraccru iron deficiency drug to be given to all adults with iron deficiency. Following the decision by the Swiss Agency for Therapeutic Products, the company will be able to market the drug to any adult whether or not they have been diagnosed with anaemia.

IXICO PLC (LON:IXI) shares jumped in early deals on Wednesday after it signed two contracts with new biopharmaceutical clients to help tackle rare neurological diseases.

MaxCyte Inc (LON:MXCT) is looking ahead to a “pivotal year” as demand for its cell engineering technology booms. Revenues swelled by 19% year-on-year to US$16.7mln last year (2017: US$14.0mln), driven by deals with the likes of CRISPR Therapeutics and Gilead-owned Kite to use its Flow Electroporation software.

OptiBiotix Health PLC (LON:OPTI) has launched its SlimBiome Medical weight loss product in the UK market. The company, which develops compounds to help tackle obesity, high cholesterol and diabetes, said SlimBiome would be available to buy from its website in boxes of 30 single-dose sachets from 29 April.

Sunrise Resources PLC (LON:SRES) said the latest tests at its CS Pozzolan-Perlite project in Nevada show promise for production of premium-value super-coarse horticultural grades of perlite. The recently completed tests were aimed at the production and expansion of super-coarse horticultural grades of perlite from the project. Sunrise said the tests produced coarse expanded perlite with acceptable yields.

Taptica PLC (LON:TAP) shares were weak on Wednesday on news of a secondary placing of shares, representing in aggregate about 10.6% of its issued share capital, to which the company is not a party and will not receive any proceeds.

Diversified Gas & Oil PLC (LON:DGOC) revealed that the borrowing base available under its US$1.5bn loans facility has been increased by 31% to US$950mln from US$725mln following the enlargement of its bank syndicate. The firm said its bank syndicate, led by KeyBank National Association, has increased from twelve to fourteen banks and now includes Deutsche National Bank and BBVA Compass.

Crossword Cybersecurity Plc (LON:CCS) said it has received notices exercising options to acquire 166 ordinary shares at a price of 190p each and 166 ordinary shares at a price of 280p each.

Red Rock Resources PLC (LON:RRR) announced yesterday that it has raised £323,750 by way of a placing of 63,480,391 new ordinary shares at a price of 0.51p each with 1 for 2 warrants exercisable at a price of 0.75 pence per share for twenty-four months. Andrew Bell, Red Rock’s chairman, commented: "The Placing ensures that the Company can manage its cash flow prudently while driving an increased tempo of exploration in the Congo as the scale of the opportunity there becomes more apparent.”

6.45am: FTSE 100 set to open lower

The FTSE 100 is expected to open lower on Wednesday morning as markets cooled a little despite a strong earnings performance from large US firms.

Spread-betting firm IG expects the FTSE 100 to open 13 points lower after closing up 63 points on Tuesday near a seven month high at 7,523.

Predictions of the lower open were despite a strong ongoing performance for earnings from major firms in the US, with more heavy hitters including Amazon Inc (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), and Tesla Inc (NASDAQ:TSLA) due later this week.

Jasper Lawler, head of research at London Capital Group, said that 80% of firms had beaten expectations so far despite the market “bracing itself for a pretty poor outpouring of numbers”.

Solid earnings drove record finishes in the US on Tuesday, with the S&P 500 0.9% higher at 2,933, boosted by a strong showing from Twitter Inc (NYSE:TWTR) while Nasdaq closed 1.3% higher at 8,120. The Dow meanwhile closed 0.6% higher at 26,656.

“There is a lot of positivity that has pushed US equities to these levels”, Lawler said, although added that traders would be looking to the US GDP figures, due on Friday, to support the gains.

In Asia today, the strong performance on Wall Street initially drove gains, although the rally ran out of steam alter in the day with the Japanese Nikkei 225 0.3% lower at 22,190 while Hong Kong’s Hang Seng was down 0.6% at 29,783.

On the currency markets, the pound was fairly flat against the dollar at US$1.293, still below the now-psychologically important level of US$1.3 as traders kept a close eye on any signs of progress in Brexit talks between the Conservatives and Labour, as well as potential candidates to replace Theresa May.

Primark owner AB Foods to take results spotlight

Associated British Food PLC (LON:ABF) put its investors on edge at the back-end of 2018 when it warned that its seemingly infallible star asset, Primark, had endured a “challenging” November.

Thankfully trading picked up over Christmas and ABF said in February that profits at the no-frills clothes retailer will be “well ahead” of last year when it reports its half-year results on Wednesday.

Given that it accounts for more than 60% of the business, Primark’s performance is all-important, especially with the sugar division continuing to struggle amid falling prices in the EU.

The largest Primark in the world, complete with hair salon and café, opened in Birmingham at the beginning of April, so investors and analysts will be keen to see how that is getting on.

Away from gloom-defying Primark, ABF’s grocery and ingredients division, which includes the Twinings and Ryvita brands, should also show top- and bottom-line growth.

Significant announcements expected for Wednesday April 24:

Trading updates: Croda International PLC (LON:CRDA), CRH PLC (LON:CRH)

Interims: Associated British Foods plc (LON:ABF), AB Dynamics PLC (LON:ABDP)

Finals: Boohoo.com PLC (LON:BOO), MaxCyte PLC (LON:MXCT), Mi-Pay Group PLC (LON:MPAY), Petropavlovsk PLC (LON:POG), PureTech Health PLC (LON:PRTC), WANdisco PLC (LON:WAND)

AGMs: Shanta Gold PLC (LON:SHG)

Economic data: UK trade in goods; UK public sector finances; German IFO business climate index

Around the market:

  • Sterling: US$1.293, down 0.03%
  • Brent crude: US$73.53 a barrel, down 0.5%
  • Gold: US$1,269.85 an ounce, up 0.04%
  • Bitcoin: US$5,590.22, up 1.5%

City headlines:

  • Hedge funds have turned optimistic on the pound’s prospects as the UK economy, dogged by Brexit fears, has proved to be more resilient than many expected – Financial Times
  • Oil prices rose to highs not seen since November after the United States vowed to end sanctions waivers that have allowed countries to keep buying Iranian crude – Times
  • British employers are their most worried about the economy since the 2016 Brexit referendum, but they also plan to hire extra staff, according to a survey that showed the surprising strength of the jobs market – Reuters
  • Four of the UK’s largest real estate investment trusts are heavily exposed to struggling retailers and CVAs, the rising insolvency trend which has become synonymous with the decline of the high street, UBS has warned - FT
  • Theresa May has allowed Huawei to help build Britain's new 5G network defying security warnings from the US and some of her most senior ministers – Telegraph
  • Twitter shares have surged 16% after the social networking company's profits tripled to £147 million – Daily Mail
  • Procter & Gamble reported its strongest quarterly sales growth in nearly eight years yesterday – Times
  • Coca-Cola boosted revenues and met forecasts in the first three months of the year helped by Brexit stockpiling and acquisition of Costa Coffee – Telegraph
  • SoftBank founder Masayoshi Son lost more than $130 million in a personal bet on bitcoin - FT

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