FTSE 100 closes higher as Wall Street shares mixed; optimism over trade talks fades – Proactive Investors UK

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FTSE 100 closes higher as Wall Street shares mixed; optimism over trade talks fades – Proactive Investors UK
  • FTSE 100 index closes ahead

  • Wall Street shares mixed

  • Rathbone Brothers comes up short with assets under management figure

FTSE 100 closed higher, having been lower earlier, but gains were muted as some of the optimism surrounding US-China trade relations evaporated.

The UK blue-chip index finished around 36 points higher at 6,942, while FTSE 250  added nearly 22 points at 18,435.

On Wall Street, the Dow Jones Industrial Average is ahead by just 18 points at the time of writing, but the Nasdaq is down nearly two points.

David Madden, analyst at CMC Markets UK, said: ” The lack of additional news in relation to the trade talks has encouraged traders to unwind some long positions, dealers are eager to find out the final details of the negotiations.

“Beijing revealed underwhelming CPI and PPI figures overnight, and that underlines diminishing demand in the second-largest economy in the world.”

Among the risers, and in a beleaguered supermarket sector, in the wake of the festive period, Tesco (LON:TSCO) shares added 2.17% on the day to 216.40p as it outperformed its ‘Big Four’ rivals.

The group said UK Christmas sales rose by 2.2%, and like-for-like sales in the UK and Ireland including Booker Group increased by 1.9%.

The supermarket behemoth said it was ‘confident’ in its outlook, showing that CEO Dave Lewis’ turnaround plan was working.

2.45pm: Wall Street opens lower

The Footsie continues to muddle through, not taking much notice of a soft start on Wall Street.

The FTSE 100 was down 13 at 6,894. In the USA, the Dow Jones industrial average was down 147 points (0.6%) at 23,732 and the broader-based S&P 500 was off 18.5 points (0.9%) at 2,566.5.

Among the mid-caps, Greggs plc (LON:GRG) continued to sell like hotcakes after yesterday’s upbeat trading statement, helped by UBS lifting its target price to 1,500p from 1,400p. The shares were up 52p at 1,511p.

Sticking with the food theme (and mid-caps), Hilton Food PLC (LON:HFG) rose 1.9% to 974p following its trading update.

The food packing business said it had performed in line with expectations in 2018 and that its trading outlook remains positive.

Fund manager Rathbone Brothers PLC (LON:RAT) was one of the big mid-cap losers after its trading update for the fourth quarter disappointed.

The final quarter of 2018 reflected weaker investment markets, the company said. Assets under management at the end of December totalled £44.1bn, up 12.8% year-on-year but below the expectations of some brokers, such as Shore Capital, which had pencilled in £46.5bn/

The shares were down 6.4% at 2,324p, which Shore thought was a little overdone; it stuck with its ‘hold’ recommendation but hinted that its fair value estimate of 2,520p might be cut.

12.15pm: Sterling loses ground to the greenback

The FTSE 100 clawed its way back above 6,900, helped by the weakness of sterling as the Brexit situation remains unpredictably fluid.

The value of the pound against the US dollar was down half a cent at US$1.2735, which was good news for the many big dollar earners among the Footsie’s constituents, although the blue-chip index was still in the red at 6,904, down 3 points.

“Global equities took a time-out overnight, ending a four-day rally as investor optimism over a possible easing in Sino-US trade tensions faded and concerns around global economic growth returned,” said Dean Popplewell at Oanda.

“Capital markets were probably too optimistic that some concessions would be announced at the end of three-day trade talks this week between the world’s two largest economies – investors seem to prefer to wait for concrete details in the negotiations before mapping out the next leg of investments,” he added.

On a day when oil prices fell back, there was additional woe for the two big players in the sector as Barclays cut its price targets for Royal Dutch Shell (LON:RDSB) and BP PLC (LON:BP.).

The former was unchanged at 2,935p; Barclays’ new price target is 3,250p, down from 3,300p. BP was down 1.2p at 521.7p after Barclays trimmed its price target to 700p from 705p.

In other broker action, fashion firm Burberry PLC (LON:BRBY) was attacked on two fronts.

Berenberg cut its price target to 1,920p from 2,270p and downgrade Burberry to ‘hold’ from ‘buy’ while UBS cut its price target to 1,900p from 2,000p. Shares in Burberry were the worst performers among Footsie stocks (except for BHP, which was trading ex-div) at 1,733.5, down 3.2%.

11.00am: Retailers hog the stage

Early losses have been pared and the Footsie now stands little changed on the day.

The FTSE 100 was down 10 at 6,897.

Blue-chip retailers were among those defying the trend after another busy morning of trading updates from the retail sector while utilities such as Centrica PLC (LON:CNA), SSE plc (LON:SSE) and United Utilities Group PLC (LON:UU.) were also wanted.

The mid-cap FTSE 250 was also little changed – down 7 at 18,407, despite retailers Halfords Group PLC (LON:HFD) and Card Factory PLC (LON:CARD) both sporting double-digit percentage falls.

READ Card Factory slides as it reports flat YTD sales and predicts “another difficult year” for 2020

“Sentiment in the UK was also harmed by the latest bloody dispatches from the retail sector front-line. John Lewis may have to axe its staff bonus for the first time in decades, M&S suffered a far worse than expected 2.2% drop in Q3 like-for-likes, Debenhams saw comparable sales plunge 5.7%, Halfords was forced to issue a profit warning, and Card Factory bemoaned a ‘challenging’ holiday period,” said Connor Campbell of Spreadex, possibly while evoking the Ghost of Christmas Future.

“Only Tesco appeared to avoid a Grinch-pleasing Xmas, beating estimates with a 2.6% jump in UK and Ireland like-for-likes over the festive season,” he added.

All of which is enough to drive a person to drink, which would suit pUBS operator Mitchells & Butlers PLC (LON:MAB) just fine.

The shares sit atop the FTSE 250 leader-board with a 6% rise after the group reported a strong Christmas trading period.

“Christmas was clearly good but trading is tough. Discounting is getting worse and costs are rising. It is to be hoped that M&B may have turned the corner but it may be doing so just as the market becomes somewhat more challenging. There is no real guidance as to the dividend or indeed whether there will be a dividend this year (or next) at all,” commented Mark Brumby at Langton Capital, which specialises in the retail, pUBS and restaurants sector.

“However, the group is optically cheap and, though operating is not easy, it is pulling what levers it can,” Brumby concluded.

9.30am: BRC retail sales monitor confirms worst Christmas in 10 years for retailers

It’s never too early, apparently, to look across the pond for a market pointer and the portents are not good.

Futures markets suggest the US indices will open lower, bringing an end to a four-day winning run.

The FTSE 100 was down 32 points at 6,875, with mining giant BHP Group PLC (LON:BHP), leading the retreat. The stock, which is trading ex-dividend as from today, was down 5.8% at 1,609.8p.

Luxury items pedlar Burberry Group PLC (LON:BRBY) was down 3.0% on concerns over slowing growth in the Chinese economy.

Elsewhere in the retail sector, the Christmas period trading updates are coming thick and fast, and have been, as Daiwa Capital Markets observed, a mixed bag.

“Reports from major retailers have painted a mixed picture of activity on the High Street over the festive period. While a number of major retailers announced disappointing Christmas sales results, this morning’s report from Tesco was more positive, showing the UK’s largest supermarket chain increased its Christmas like-for-like sales by 2.2%Y/Y while John Lewis department store sales were up a respectable 1% during the seven weeks to 5 January. But overall High Street activity appears weak,” Daiwa said.

“Today’s Retail Sales Monitor survey from the BRC [British Retail Consortium], an industry body, suggested that December results were the weakest in ten years, with sales flat on a total basis, and down 0.7%Y/Y on a like-for-like basis.

“Looking through the monthly volatility, total sales growth remained positive, but eased from 0.8%3M/Y to 0.5%3M/Y, with food sales still up 0.6%3M/Y but – in a further sign that households are cutting back on non-essentials – non-food sales down 1.2%3M/Y. If we ignore the spring results which were distorted by the timing of Easter, the weak pace of sales was last seen around the Brexit referendum in mid-2016. With no shortage of risks to the UK economic outlook, and Brexit uncertainty acute, there are plenty of reasons for consumers to remain cautious over coming months and quarters,” Daiwa suggested.

Higher wage growth might eventually provide some encouragement to spend a little extra, Daiwa conceded, but “that is unlikely to give much more breathing space for many struggling retailers who are fighting to maintain profits”.

Well-received results from Tesco PLC (LON:TSCO) have lifted the supermarket sector. Tesco was up 2.3% while J Sainsbury plc (LON:SBRY) was up even more at 2.4%, while Wm Morrison Supermarkets PLC (LON:MRW) advanced 1.5%.

The market struggled to get the measure of the update from Marks & Sparks; the shares were up 5.5p at 283.2p, having fallen as low as 272.7p at one point.

“Trading numbers from M&S won’t surprise anyone, but neither will they bring any cheer. Sales are falling in both the food and clothing & home divisions thanks to the well-documented decline in high street footfall. A strong performance from M&S online and a reduction in the amount of stock cleared at knock-down prices are bright spots in an otherwise dreary picture,” suggested Laith Khalaf at Hargreaves Lansdown.

“Until recently declining sales in the clothing and home division had been offset by strong performance from the M&S food business, but now that’s gone into reverse too. As well as traditional rivals like Tesco and Sainsbury, M&S Food is up against a new breed of online competitors such as Hello Fresh, Deliveroo and Just Eat. These providers present a particular threat to M&S seeing as many of its customers are buying a quick meal for that night, rather than a full weekly shop.

“M&S management recognise the issues facing the business and are taking steps to address them but it looks like a long road to recovery, and on the way, M&S has to fend off competitive pressures and hope Brexit doesn’t deliver a hefty blow to UK consumers. The share price already reflects a weak and uncertain outlook for M&S, but investors still need strong nerves and a willingness to see things get worse before they get better,” he added.

8.35am: Early falls for Footsie

The market opened 34 points lower at 6,872.79 on a not-so-super Thursday for the retailers.

Only Tesco (LON:TSCO) appeared to escape the carnage with a 2.6% rise in festive like-for-like revenues.

On the high street, Marks & Spencer (LON:MKS) took a sales hit on both food and clothing; Debenhams (LON:DEB) saw its underlying performance recede another 5.7%, while hapless Halfords (LON:HFD) sounded the earnings alarm.

John Lewis, the bellwether for the sector, may have to axe staff bonuses for the first time in recent memory and poor old Card Factory (LON:CARD) is expecting its cost base to rise with the introduction of the national living wage.

No surprises then that Tesco led the FTSE 100 leader board with a 1.5% gain, dragging rival Sainsbury (LON:SBRY) with it.

M&S, meanwhile, receded 1.5%. The general consensus suggested the figures were poor, but they could have a lot worse.

“So far not a significant sign of improvement but against a tough backdrop and in the depths of a turnaround it’s too early to write it off. Marks has been here before and come out fine,” said Neil Wilson, an analyst at Markets.com.

Almost a quarter was wiped from the value of Halfords.

Proactive news headlines:

hVIVO PLC (LON:HVO) shares blew higher on Thursday morning after US regulators found that its flu vaccine did achieve its primary endpoint in last year’s mid-stage clinical trial.

i3 Energy PLC  (LON:i3E) shares advanced as it signed a letter of intent for a multi-well drill programme that’s intended to take the Liberator field to the cusp of production.  At the same time, the ambitious North Sea oiler told investors that its received proposals regarding offtake terms for Liberator’s future production, and, provided an update about its ongoing project financing work.

Obtala Ltd (LON:OBT) has announced today a series of deals that it expects to positively impact the forestry company’s balance sheet and underlying business structure. It has agreed to sell its Tanzanian agricultural business for US$2.5mln, it is to receive £7mln of investments from a fund managed by Lombard Odier Asset Management, and, it is to take full ownership of its currently 75% owned Montara Continental sUBSidiary.

StatPro Group PLC (LON:SOG) has signed a contract with a UK investment manager to convert from its StatPro Seven to StatPro Revolution service in a deal worth a minimum of £1.45mln.

SigmaRoc PLC (LON:SRC) has acquired the Foelfach quarry in Carmarthenshire, South Wales, and appointed a new managing director following its general meeting on 27 December.

Belvoir Lettings PLC (LON:BLV), the UK’s largest property franchise, exceeded its 2018 target for assisted acquisitions by its franchisees. The lettings agent said beefing up the assisted acquisitions programme is a core part of its growth strategy.

InnovaDerma PLC (LON:IDP) said revisions to its direct to consumer strategy have begun to bear fruit in recent weeks. The group, which sells beauty and personal care products such as the globally successful Skinny Tan line, has faced headwinds on Facebook, which has begun prioritising personal engagement over businesses and brands.

Nigeria focused Eland Oil & Gas PLC (LON:ELA) told investors that the Gbetiokun-3 well has encountered oil-bearing reservoirs across multiple horizons and it will be completed as a producer. Eland, in a statement, confirmed the completion of the drilling of the appraisal and development well.

Employee benefits provider Personal Group PLC (LON:PGH) said results for the year just ended are expected to be broadly in line with market expectations.

Aminex PLC (LON: AEX) has announced the appointment of Linda Beal as an independent non-executive director of the company with immediate effect. It said  Beal is a Chartered Accountant and has over 30 years’ experience with PwC including over 16 years as a partner, during which time she led services to various international resources groups and advised on many transactions. The group also announced the appointment with immediate effect of GMP FirstEnergy, who will act as a joint corporate broker to the company alongside Davy, Aminex’s sponsor, and Shore Capital.

Summit Therapeutics (LON: SUMM) (NASDAQ:SMMT) announced that the subscription to raise US$25mln, as approved by shareholders at the company’s general meeting on 4 January 2019, has completed. It said the subscription shares, comprising 78,125,000 new ordinary shares represented by 15,625,000 American Depositary Shares, were admitted to AIM today.

6.45am: FTSE 100 to start in reverse gear

London’s FTSE 100 looks set to start Thursday on the back foot after US politics, refreshed thoughts on inflation, and weak Chinese stats put the brakes on the equities rally.

CFD firm IG Markets sees the FTSE 100 down 34 points, calling the index at 6,881 to 6,885 with less than an hour until the open.

Wednesday saw the UK index at a month’s high and over in New York it was also a strong day for traders, until an evidently acrimonious end to talks between president Donald Trump and counterpart Nancy Pelosi, leaving further uncertainty over any deal to reopen the government.

The Dow Jones still managed to finish Wednesday up 91 points or 0.39% higher at 23,879 while the S&P 500 gained 0.41% to 2,584 and the Nasdaq added 0.87% to 6,957.

Federal Reserve meeting minutes and Chinese economic stats (sharp declines seen in CPI and PPI measures for December) also added to the negative outlook for the start of Thursday’s trading.

“The modest pullback is likely to see markets in Europe open slightly lower this morning, with the declining inflationary outlook reinforced this morning by sharp declines in both China CPI and PPI for December which came in at 1.9% and 0.9% respectively. What was most noticeable was the plunge in factory gate prices or PPI, from 2.7% to 0.9%,” said Michael Hewson, an analyst at CMC Markets.

This would suggest the risk that China might once again start to export a deflationary impulse across the rest of the global economy, given that trends in PPI tend to manifest themselves in the headline CPI numbers a few months later.

The analyst added: “Last nights Fed minutes showed that some members were a little reluctant to pull the trigger on a rate rise last month given the lack of inflationary pressure.”

In Asia, Japan’s Nikkei was down 263 points or 1.29% trading at 20,163 and Hong Kong’s Hang Seng was only slightly in the red at 26,444, while the Shanghai Composite was 0.4% lower at 2,533.

Significant events expected on Thursday:

Trading update: Tesco PLC (LON:TSCO), Marks & Spencer PLC (LON:MKS), Debenhams PLC (AGM) (LON:DEB), DFS Furniture Plc (LON:DFS), Card Factory PLC (LON:CARD), Premier Oil PLC (LON:PMO), InnovaDerma PLC (LON:IDP)

Ex-dividends will knock 6.6 points off FTSE 100 index: GlaxoSmithKline PLC (LON:GSK), BHP Group PLC (LON:BHP)

Around the markets:

  • Pound: US$1.2786, down 0.02%
  • Gold: US$1,295, up 0.46%
  • Brent crude: US$60.84, up 3.48%
  • Bitcoin: US$3,790, down 5.32%

City Headlines:

  • Jaguar Land Rover may cut up to 5,000 jobs – The Guardian
  • Worst Christmas for a decade for retailers says the British Retail Consortium – Sky News
  • Sainsbury’s sales show need for Asda deal – Financial Times
  • Rolls Royce hits record sales driven by new Phantom – BBC News
  • Fed arguments build for caution on rate rises – Financial Times

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