FTSE 100 closes in red
Strikes hit Ryanair profits
Royal Mail issues profit warning; shares tank
FTSE 100 closed in the red, unlike European counterparts, as Royal Mail Group (LON:RMG) took a hammering Monday.
The UK blue-chip index closed down around 14 points at 7,495 as the stronger pound weighed on the dollar-earning constituents.
The FTSE 250, however, more domestically focused, added over 94 points at 20,401.
In Europe, the CAC 40 in France added around 13 points , while the German DAX is up around 92 points.
Top loser on Footsie was Royal Mail, which posted a sharp 17.95% plunge at 391.40p, after a profit warning.
The group said trading conditions in the UK were challenging and that its letters volumes had fallen sharply.
The postal group said on Monday that its letter volumes, especially marketing mail, had been impacted by ongoing structural decline, business uncertainty and General Data Protection Regulations (GDPR).
"Royal Mail has seen a share price collapse which makes it a prime candidate for relegation from the FTSE 100 next time a reshuffle takes place in December," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"Letters have been on the wane for many years, but have been given a further nudge towards obsolescence thanks to recent data protection regulations, known as GDPR, which have reduced the number of marketing communications hitting letter boxes."
3.45pm: Royal Mail drags down Footsie
The FTSE 100 is down 21.1 points, or 0.3%, to 7,489.0 shortly before market close in London.
A stronger pound, which makes the blue-chips’ overseas earning worth less when converted back, is partly to blame. Sterling has been up for most of the day after a surprise jump in September manufacturing output.
Easyjet PLC (LON:EZJ) (down 6.6% to 1,227p) and International Consolidated Airlines Group PLC (LON:IAG) (down 1.9% to 647.7p) were hit hard by a profit warning from fellow airline Ryanair PLC (LON:RYA), which itself is down 12.5% to €11.48.
Housebuilders have also been a drag today, following reports over the weekend that the government will look to increase stamp duty for foreign homebuyers.
Rentokil Initial PLC (LON:RTO) looks like it will take top spot today after it agreed to buy MITIE Group PLC’s (LON:MTO) pest control division and also entered into a preferred supplier agreement. Shares are up 2.2% to 325.2p.
3.10pm: Trade deal boosts Wall Street
US stocks in New York have opened higher after the US and Canada finally agreed a deal to replace the North American Free Trade Agreement (Nafta).
The Dow Jones Industrial Average is up 241 points, or 0.9%, to 26,700 in early deals across the Pond, while the Nasdaq has gained56.9 points, or 0.7%, to 8,103.3. The broader S&P 500 index has risen 19.5 points, or 0.7%, to 2,933.5.
2.55pm: Schroders to vote against Unilever’s proposed move
Jessica Ground, global head of stewardship at Schroders, told the BBC: “We understand the company’s desire for simplification but we do not believe this is the right decision for Unilever plc shareholders.”
“In addition, our clients will be forced sellers of Unilever plc as a result of it exiting the FTSE UK Indices. We will be voting against the resolution at the upcoming EGM.”
Schroders isn’t the first to say it will vote against Unilever’s plan, last month Aviva said it wouldn’t be backing the move either.
2.35pm: Selfridges delivers another record profit
Department store chains may have fallen on hard times, but Selfridges has bucked the trend by delivering a record profit for the fifth year in a row.
Operating profit rose £1mln to £181mln in the year to February 3 on the back of an 11.5% increase in sales to more than £1.75mln.
A £300mln revamp of the London Oxford Street store helped attract customers. The refurbishment included a redesign and expansion of the site with a triple-height entrance on Duke Street that links the 1909 building with its 1930s extension.
Luxury department store rival, Harrods, reported strong earnings last week with pre-tax profit rising 9% to nearly £216mln and sales rising 23% to £2bn.
2.05pm: Just Group CFO departs
The financial services firm said David Richardson, deputy chief executive and managing director of the UK division, has been appointed as interim CFO. A search for a permanent successor is underway.
Share fell 9% to 80.5p on Monday, meaning they have more than halved so far in 2018.
In early September, the company said it would delay issuing an interim dividend due to the threat to its finances from proposed changes around lifetime mortgages even though first-half profits jumped.
Rules put out for consultation in July by UK regulators would require the FTSE 250-listed firm and its rivals to set aside more capital to protect against the risks posed by lifetime - or equity release - mortgages, which enable home-owners to borrow against the value of their property, a loan which is paid back when they die.
Just Group said it would defer dividends until it had a better clarity on its capital position under the proposed rules.
1.35pm: Losses widen at Deliveroo
Pre-tax losses at Deliveroo widened to £184.7mln last year, despite revenue more than doubling as the takeaway delivery group invested £100mln back into the business.
However, Deliveroo pointed out that revenue growth of 116% was steeper than the rise in net losses, meaning underlying profit margins are on the way up.
The news comes at a time when the company, founded by Americans Will Shu and Greg Orlowski in London, is reportedly attracting interest from Uber as the latter tries to break Just Eat’s stranglehold in the UK.
Propel breaker: @Deliveroo has reported sales grew 116% to £277m for the year ending 31 December 2017 while loss before tax increased to £184.7m following a year of major investments. it is now working with 50,000 restaurants globally— Paul Charity (@PaulCharity1) October 1, 2018
12.45pm: Housebuilders hit by Tory plans
The FTSE 100’s muted start to the week has continued into the afternoon session, with the index of blue-chip shares edging 6.2 points or 0.1% higher to 7,516.0.
Housebuilders were among the big fallers after the government announced plans to introduce a levy on foreign homebuyers.
We're increasing stamp duty for people and companies buying UK property from abroad and not paying tax in the UK. Currently foreign buyers can purchase homes in the UK as easily as people who live here but there is evidence this is inflating house prices. https://t.co/A7CnvJFTSO— CCHQ Press Office (@CCHQPress) September 30, 2018
Rentokil Initial PLC (LON:RTO) is still up towards the top of the leaderboard after it agreed to buy MITIE Group PLC’s (LON:MTO) pest control division and also entered into a preferred supplier agreement. Shares were up 2.2% to 325.2p in early afternoon trading.
12.15pm: Trade agreement to boost US stocks
US stocks are set to start the month on a very strong footing as traders react to the news that the US and Canada struck a trade deal to replace Nafta.
Negotiators had a deadline of midnight last night to reach the agreement - called the United States-Mexico-Canada Agreement – which will replace the near-25-year-old Nafta pact.
Details of the revised terms haven’t been made public yet, but it is expected to contain key provisions on Canada's dairy industry and car exports to the US.
The Dow Jones Industrial Average index is called 207 points higher at 26,666, the tech-heavy Nasdaq is expected to open 53.8 points in the black at 7,682.7, while the broader S&P 500 is set to rise 17.8 points to 2,931.8.
Congratulations to Mexico and Canada!— Donald J. Trump (@realDonaldTrump) October 1, 2018
11.45am: Aldi sales surpass £10bn
German discount supermarket Aldi plans to open 130 new stores in Britain after the UK and Ireland division delivered its first increase in annual operating profit for four years.
The company said the expansion would create 5,000 new jobs in the UK and puts it on track to reach its target of 1,000 stores by 2020. Aldi currently has about 775 stores in the UK.
In the year to 31 December 2017, Aldi’s UK and Ireland arm posted a 26% increase in operating profit to £265.9mln, up from £221.3mln the previous year. Sales grew 16.4% to £10.18bn as customer numbers rose by 1.1 million to 15.8 million.
11.25am: Pound strengthens on manufacturing data
British manufacturers enjoyed stronger growth in September on the back of new business wins, rebuilding inventories and efforts to clear backlogs of work.
The IHS Markit/CIPS purchasing managers' index (PMI) rose to 53.8 last month, from 53 in August. Anything above 50 indicates expansion and the PMI has remained above that for 26 months now.
“September saw a mild improvement in the performance of the UK manufacturing sector,” said IHS Markit’s Rob Dobson.
“Domestic market demand strengthened, while increased orders from North America and Europe helped new export business stage a modest recovery from August's contraction. Business confidence also rose to a three-month high.”
IHS Markit PMI™ (@IHSMarkitPMI) September 19, 2018
However, he added: "Despite these causes for short-term optimism, conditions in manufacturing are still relatively lacklustre overall."
The news strengthened the pound slightly, with sterling rising 0.2% versus the dollar to US$1.305, and 0.1% against the euro to €1.123.
11am: Which bracket do you fall into
The Tory Party Conference in Birmingham has entered its second day. As with all party conferences, there is likely to be a lot of media attention, but who really cares what is said? Not many, according to YouGov.
Many of your timelines will be #CPC18 dominated, but here's your reminder that just 3% of Brits pay a lot of attention to party conference coverage, and 72% pay little to nonehttps://t.co/NZbruhNlXZ pic.twitter.com/N1SNymxirQ— YouGov (@YouGov) October 1, 2018
10.45am: Rentokil tops Footsie risers
As part of the £40mln acquisition, the two have entered into a preferred supplier agreement, which will see Rentokil provide a range of services, including pest control, to Mitie’s customers.
The news sent the stock to the top of the FTSE 100, up 2.9% to 327.6p.
Close behind was United Utilities PLC (LON:UU.), which is still benefitting from a positive trading update last week when it said it was trading in line with expectations.
Shares were up by almost 3% to 726p in mid-morning trading on Monday.
Chilean copper miner also headed higher, up 1.6% to 868.4p, after it was upgraded to a ‘buy’ by analysts at Bank of America Merrill Lynch.
Ryanair, which is based in Dublin meaning it can’t command a spot on the FTSE 100, is down 8.9% to €11.94.
CEO Michael O’Leary blamed the recent strikes and rising fuel costs as he warned profits would be between €1.1-€1.2bn this year – 12% lower than the previous forecast.
Overall it has been a quiet start for the blue-chip index, which is currently up 12.8 pointsor 0.16% to 7,522.9. It had opened in the red earlier on Monday.
10.15am: Rio Tinto to pump US$1.55bn into Pilbara region
In conjunction with Mitsui and Nippon Steel & Sumitomo Metal, Rio, which has a 53% stake in the joint venture, will invest to develop the Mesa B, C and H deposits at Robe Valley, and deposits C and D at the existing West Angelas operation.
These investments enable Rio Tinto to sustain production of the Pilbara Blend, the world's most recognised brand of iron ore, and its Robe Valley lump and fines products, which are highly valued by long-term customers. Read more here.
9.50am: Aston Martin valuation slips ahead of IPO
Aston Martin Lagonda Global Holdings PLC has screwed down the pricing range for its mid-week London IPO with the top end of pricing trimmed down.
A narrowed pricing range is now set at 1,850p to 2,000p, from 1,750p to 2,250p. It sees the luxury car maker’s market valuation slip below the £5bn mark (the original range pitched the valuation between £4.02bn and £5.07bn).
The books are now covered for the public share sale ahead of Wednesday’s float.
Aston Martin narrows IPO pricing range to 1850-2000p, from from 1750-2250p; £4.2-4.5bn valuation is a bit tight for FTSE100 inclusion— Mike van Dulken (@Accendo_Mike) October 1, 2018
9.25am: More downgrades on the way for Ryanair?
“There isn’t the usual commentary you would normally expect from someone in his [CEO Michael O’Leary’s] situation. Instead, you’ve got the straight-talking boss telling the facts as they are, plus a warning that he can’t rule out a further downgrade to earnings guidance.
“In a nutshell, strikes are disrupting its business and making individuals less confident over using Ryanair in the future in case their flights are also delayed or cancelled. Costs are going up, prices are coming down as a result of weaker forward bookings and now it has a surplus of winter cabin crew after cutting some flights.
“The stock market clearly thinks Ryanair’s problems are negative for other parts of the airline sector, given how EasyJet’s share price fell by nearly 6% on Monday morning and British Airways’ owner International Consolidated Airlines down by 2%.”
8.50am: Sluggish start
The FTSE 100 made a sluggish start to the new trading month, edging 10 points lower to 7,500.37.
This followed a lacklustre end to proceedings in Asia and came ahead of a potentially politically tumultuous week here in the UK with the Tory Party conference now in full swing.
The annual beano is could be make or break for the Prime Minister and her Brexit blue-print with her replacements all jostling for attention from Conservative members and the wider voting public.
Analyst said the political fall-out from the conference could hit market sentiment if Theresa May fails to fully galvanise the party behind her.
The stock fell 8.2%, dragging easyJet (LON:EZJ) and British Airways owner IAG (LON:IAG) down its slipstream – they fell 5.2% and 4% respectively. The former was also hit with a downgrade to ‘underperform’ by the number crunchers at Bernstein.
Melrose (LON:MLRO) was an early riser too following a weekend report it planned around £6bn-worth of disposals, including its air conditioning operation.
6.33am: Dull session ahead
The FTSE 100 looks set to open the session 16 points lower at 7,494.20, taking its cue from a muted Monday in Asia.
The only bright spot was Japan, which raced to a 27-year high as the weaker yen pushed its exporters higher.
The NAFTA trade deal between the US and Canada barely registered.
Foreign news is likely to have an impact on the heavily resource-orientated Footsie.
For disappointing export data from China, which shows the American tariffs are taking their toll, is expected to hit the miners, which are heavily weighted to the fortunes of the world’s second-largest economy.
Tory argy bargy
Added to the mix, the Tory party conference gets into full swing. The annual set-piece has now descended to a beauty parade – if one can call it that – of potential replacements for Prime Minister Theresa May, whose Chequers Brexit plan is under attack from both the ‘leave’ and ‘remain’ camps.
Boris Johnson got his retaliation in first with his Sunday Times interview, setting the scene for a turbulent week of in-fighting, which is unlikely to be helpful to market sentiment.
“So far, the Eurosceptic tone from the speeches has not impacted negatively on the pound overnight,” said Michael Hewson, stocks guru at CMC Markets.
“However, sterling’s resilience will depend largely on whether May looks capable of seeing her deal through.”
Around the markets
- Pound worth US$1.3029
- Gold changing hands for US$1,192.50 an ounce, down US$3.70
- Brent crude costs US$82.30 a barrel, up 47 cents
Proactive news headlines
Chesnara Plc (LON:CSN) senior independent director Mike Evans is stepping down with immediate effect to become chairman of Prudential PLC’s (LON:PRU) UK and Europe division. Jane Dale, a non-executive of the life assurance and pensions consolidator since May 2016, will succeed Evans.
Argo Blockchain PLC (LON:ARB) has reported a ten-fold increase in sales of its cryptocurrency mining packages in the first significant ramp-up of revenues since its initial public offering (IPO) in August.
European Metals Holdings LTD (LON:EMH) has secured permits to drill 13 new holes at the Cinovec project in the Czech Republic as part of an ongoing definitive feasibility study.
Arc Minerals Ltd (LON:ARCM) has raised £2mln (US$2.6mln) at a premium to fund exploration and development work at its Kalaba copper-cobalt project in Zambia.
Base Resources LTD (LON:BSE)(ASX:BSE) will repay the outstanding balance of the US$215 million debt incurred during the construction of its Kwale mineral sands project in Kenya within the next ten days.
Rockfire Resources Plc (LON:ROCK) has been granted a 38 square kilometre permit surrounding Newmont’s Mt Leyshon gold mine. The grant of the New Leyshon permit means that Rockfire now has permitted ground immediately contiguous to Mt Leyshon on three sides.
Oil & gas producer Range Resources Limited (LON:RRL, ASX:RRS) saw revenues rise substantially in the year to the end of June from the year before.
Kore Potash PLC (LON:KP2) has appointed St James's Corporate Services Limited, a secretarial and corporate administration services provider, as interim joint company secretary from today, joining. current joint company secretary, Henko Vos.
Rosslyn Data Technologies PLC (LON:RDT) expects to report a profit in 2018/19 in what the big data technology expects to be a “breakthrough year”. The provider of a leading cloud-based enterprise data analytics platform said on Monday it continued to see strong demand for data analytics after winning several contracts with large, global companies in the year to the end of April.
I3 Energy Plc (LON:I3E) is working towards what chief executive Neill Carson expects will be “an eventful 2019”.
Bezant Resources plc (LON:BZT) has given investors further insight in regards to its Mankayan copper-gold project, in the Philippines, with a new 3D model showing a representation of the proposed underground mine.
Europa Metals Ltd (LON:EUZ, ASX:EUZ) is moving in a more positive direction, declared chairman Colin Bird in the company’s annual results statement.
Canada and US negotiators reach Nafta deal - new trilateral pact to be called the United States Mexico Canada Agreement
City minister vows to defend London - Jon Glen is intent on keeping the UK as a global hub for financial services
Paris set to triumph as post-Brexit trading hub - banks and asset managers steer their EU operations from London to French capital
Jack Ma gives up ownership of Alibaba’s legal structures – but founder will remain as a shareholder and permanent member of partnership
Husky Energy in US$5bn bid for rival MEG - takeover attempt sets up battle between Asian investors in Canadian oil sands
Tesla shares are expected to rebound today after Elon Musk was forced to stand down as chairman in a boardroom shake-up at the electric carmaker
Aston Martin is hoping that its stock market flotation on Wednesday will value it at close to £5bn after reports of strong demand from international shareholders
Selfridges has defied the high street downturn with a £300 million revamp of its famous store pushing profits to a record for the fifth consecutive year
IMF makes call to ‘reinvigorate’ trade in face of economic war between US and China
Silverstone race circuit seeking £13m of funding after auditors KPMG warned of a 'material uncertainty' over its future
Sainsbury's plans push into UK beauty market
Energy firms demand billions from UK taxpayer for mini reactors
Netflix sued by easyJet founder in trademark dispute