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FTSE 100 closes in red but off earlier lows as trade deal hopes glimmer

The UK index of leading shares finished around 20 points in the red, at 7,213 on the day

Ashtead Group -
FTSE 100 fell on the day as trade fears and UK growth figures weighed
  • FTSE 100 index closes down 20 pts
  • Sterling holds firm on election boost hopes
  • UK GDP flat for three months in a row

5.15pm: FTSE closes down

FTSE 100 index closed lower on Tuesday, but a bloodier sell-off of shares was avoided thanks to hopes that a trade deal between the US and China could materialise.

The UK index of leading shares finished around 20 points in the red, at 7,213 on the day.

News that Washington DC and Beijing are haggling about farming produce has given traders some hope the US won’t slap on new tariffs on Chinese imports at the weekend, noted David Madden, analyst at CMC Markets.

Meanwhile, Chris Beauchamp, at IG, added: "Hopes of a trade deal have, yet again, ridden to the rescue of markets, with US indices edging higher in early trading."

He noted that the prospect of a trade deal, or, in another way, a delay of the prospective 15 December tariffs, would certainly provide the necessary bullish headlines to generate the beginnings of a sustained rally.

Midcap FTSE 250 dropped around 141 points at 20,781 as Brexit fears swirled in the UK ahead of Thursday's general election.

On Wall Street, the Dow Jones Industrial Average lost around six points at 27,902, while the S&P 500 added around two points to stand at 3,137.

3.40pm: Wall Street rebounds

The FTSE 100 cut its losses as Wall Street bounced back.

The London index recovered from its earlier 77-point loss to a drop of 17 points at 7,216 following the US indices edging into the green.

The Dow gained 11 points to 27,920, the Nasdaq rose 22 points to 8,644 and the S&P 500 inched up 5 points to 3,140 even though Washington was shaken by the announcement of formal charges against Donald Trump, who is now the fourth US president facing impeachment.

Democrats in the House of Representatives accused the billionaire of abusing power and obstructing Congress, with a vote expected next week.

If the Democrat-led House goes ahead, the trial is likely to begin in January.

It was a busy day for American markets following talks on delaying the US-China tariffs on US$156bn worth of goods set for next Sunday.

“Though it is not the agreement the markets are so desperate for, a can-kick is better than nothing,” Connor Campbell, financial analyst at Spreadex, said in a note.

“Even if it does come with the knowledge that we have been here before, and it has only ever ended with the eventual imposition of the delayed tariffs,” he added.
On this side of the Atlantic Ocean, the pound remains unphased, up 0.28% to US$1.3277, with Thursday’s general election the main focus.

2.45pm: Wall Street opens in the red over Trump impeachment news

Wall Street opened in the red after news on Trump’s impeachment outweighed the optimism over delayed US-China tariffs.

The London index lost 39 points to 7,194, while US indices were not doing much better.

The Dow shed 57 points to 27,858, the S&P 500 was down 4 points to 3,132 and the Nasdaq was broadly flat at 8,619.

2pm: Wall Street turns to green

The FTSE 100 clawed back most of its losses after lunch but still remained in the red, while US stocks are aiming to show the old country how it is done as Wall Street futures turned in the green.

The expected gains may be to potential delays in the tariffs scheduled for 15 December as part of the US-China trade row, according to reports by The Wall Street Journal.

Back in the UK, the blue-chip index is now down just 20 points, a quarter of its worst losses from the morning, at 7,213.

Among the risers, Ocado Group PLC (LON:OCDO) was upgraded by Berenberg to ‘buy’ from 'hold' after doubling its target price ahead of the online grocer's fourth-quarter results, due on Thursday.

The bank said online grocery is “at a tipping point”, highlighting Amazon’s acquisition of Whole Foods Market (WFM) in the US, which it says has acted as a catalyst.

Analysts noted that the shares have suffered from “unjustified concerns” about the firm's joint venture with Marks and Spencer Group PLC (LON:MKS).

M&S was also upgraded by RBC Capital Markets stock to ‘outperform’ from ‘sector perform’, a day after Goldman Sachs double-upgraded the retailer to 'buy' from 'sell' for the first time in nearly a decade.

12.20pm: Wall Street to open in the red

The FTSE 100 remained underwater at noon on Tuesday and stocks on the other side of the pond are likely to mirror the trend when they open later.

The blue-chip index lost 73 points to 7,160, while the Dow Jones is expected to shed 104 points to 27,798 after Wall Street’s opening bell.

The pound kept enjoying the wild ride, up 0.25% to US$1.3174.

Rolls-Royce Holding PLC (LON:RR) was under pressure after director Bradley Singer resigned from the board, dipping 3% to 700.4p at noon.

The departure hit the stock as Singer is the chief operating officer of activist investor ValueAct Capital, the largest shareholder of the engine maker with 9.35% stake.

When Singer joined the board, chairman Ian Davis said he would remain on it if ValueAct kept a significant share, Reuters reported, although analysts say the news do not change ValueAct’s investment in the company.

Not far behind, Morrisons Supermarkets (LON:MRW) is in the red on the back of industry data from Kantar showing that sales at the supermarket retailer fell 2.9% in recent weeks.

11am: FTSE trims some losses 

The Footsie regained a modicum of momentum in the late morning, even though sterling firmed up to a new seven-month high.

The big-caps index was still firmly in the red, down 71 points to 7,163, but with several stocks coming off their lows, including some defensive names.

Pharma giants GlaxoSmithKline (LON:GSK) moved back into the green AstraZeneca (LON:AZN) cut its losses, while Hikma Pharmaceuticals (LON:HIK) was one of the few other blue chips in the green.

Top riser on the day is Ocado (LON:OCDO), a day ahead of its quarterly update, along with Russian steel basher Evraz (LON:EVR), a daily yo-yo stock.

Looking back at the £5.2bn trade deficit published earlier, economists say this was a result of a short-term surge in imports, sparked by uncertainty over the long-gone Halloween Brexit deadline.

The volume of goods imports jumped by 9.8% month-to-month, returning to the first quarter’s artificially high level, while it seemed that some international firms also stockpiled British goods.

“This uncertainty will linger next year, when negotiations over the trade deal will be ongoing, if the Conservatives win a majority on Thursday,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said in a note.

“Renewed sterling weakness next year, if trade talks become fractious, won’t help to soften the blow materially, given that a lower pound would raise producers’ costs. So in our base case which assumes a Conservative government, we expect net trade to continue to dampen GDP growth next year,” he added.

9.55: UK economic growth remains flat

The Footsie continued its descent as the latest batch of data painted a fairly negative picture of the UK economy.

The blue-chip index lost 94 points to 7,140, although it had a relatively muted reaction than usual as the figures come only two days before the elections.

The pound was steady, up 0.1% to US$1.3154, relatively unphased as the key event of the day will be the MRP poll from YouGov out tonight at 10pm.

In the three months to October, GDP was flat, construction and production output dipped, the UK trade deficit widened while services output provided some respite with a small increase.

“After two consecutive monthly contractions a reading of 0.0% does signal some improvement, but this should hardly be celebrated and it is becoming abundantly clear that economic growth has essentially ground to a halt,” David Cheetam, chief market analyst at XTB, said in a note.

“After a return to growth in Q3 following the contraction in Q2 a technical recession will be avoided for now, even if the fourth quarter delivers a negative reading, but on the whole this is reflective of an economy that is barely keeping its head above water,” he added.

Production output slipped 0.7%, with all divisions (manufacturing, mining and quarrying, electricity and gas) below zero, while construction had better luck losing 0.3% with some gains in new work offsetting a fall in repair and maintenance.

The trade deficit widened by £2.3bn to £7.2bn as imports grew faster than exports, while some joy came from the services output, up 0.2%.

9.20am: FTSE slip 'a mystery'

The FTSE 100 took a plunge on Tuesday morning for reasons beyond some number-crunchers, while the pound remained fairly quiet.

The blue-chip index lost 77 points or 1% to 7,156 while sterling gained 0.2% to US$1.3168.

“It is perhaps hard to pinpoint an exact reason for that decline – beyond what the week has so far been missing, i.e. the announcement of a ‘phase one’ agreement between the US and China,” Connor Campbell, financial analyst at Spreadex, said in a note.

“With the latter set to impose tariffs on another $156 billion in goods from the later this Sunday, the lack of a deal is only going to become more of an issue as the week goes on. Tuesday’s losses may well be a sign of that already.”

8.30am: Footsie falls back

The FTSE 100 got off to a weak start on Tuesday ahead of key economic data that could fuel further worries the UK is headed for a Brexit-induced recession.

The index of UK blue-chip stocks opened 23 points lower at 7,211.38

Analysts are predicting monthly gross domestic product will have risen by 0.1%, giving a rolling three month GDP reading of the same figure.

But it’s a tightrope act. And with industrial and manufacturing production and trade data for October alsodue, Tuesday will be a day for reading the economic runes.

With the election race entering the home stretch, there are also some in the Square Mile fretting about a hung parliament, or worse still, from the City’s perspective at least, a minority Jeremy Corbyn-led Labour administration.

Certainly, Tory PM Boris Johnson’s poll lead appears to be narrowing, both the two main candidates continue to lobby hard for votes, particularly in the marginal ‘swing’ constituencies.

Turning to the stock market, the latest update from US-focused plant hire group Ashtead (LON:AHT) failed to pass muster as the shares were marked down 4% early on.

By contrast, FTSE 250 tech firm Computacenter (LON:CCC) was lifted 8% after its trading update exceeded hopes.

Among the small-caps, the day’s big loser was Futura Medical, whose shares halved in value after what can best be described as a nuanced read-out from a phase III clinical trial of its erectile dysfunction gel.

Proactive news headlines:

SDX Energy PLC (LON:SDX) told investors that the South Disouq gas field has now achieved its targeted stabilised plateau production rate, of 50mln cubic feet per day, three months earlier than initially expected. Gas has now been flowing to the South Disouq central processing facility since 7 November 2019.

Erris Resources PLC (LON:ERIS) has entered into an option agreement with GreenOre Gold PLC relating to the acquisition of 80% of the Loch Tay gold and associated base metals project in Perthshire, Scotland. The project area comprises 237 square kilometres of highly prospective ground within the Grampian gold belt.

G3 Exploration Ltd. (LON:G3R) said that, as announced on 2 December, the Cayman Court will hear both the application from the company and the one from the Nordic Bond Trustee on 11 December. Until the decision of the Cayman Court is received, the company added, it has withdrawn its application for suspension from the FCA and will evaluate such an application based on the outcome of the Cayman Court decision. The group expects to provide an update following the Court’s decision.

Immotion Group PLC (LON:IMMO) has appointed the former managing director of Sony Computer Entertainment Europe to head up its virtual reality (VR) experience creation arm, Immotion Studios. Ian Hetherington, whose prior experience at Sony included overseeing the launch of the Japanese firm’s PlayStation console in Europe, will replace outgoing creative director Ian Liddell, who is leaving the firm to pursue other opportunities.

S&U PLC’s (LON:SUS) trading has remained in line with expectations despite what the firm says is a slowing economy and “political vacillation” in the UK ahead of Thursday’s general election. In a trading update for the period to 9 December from 1 August, the lender, which specialises in motor finance and property bridging, said trading at its Advantage motor finance business was “proving robust”, with new deal advances up 11% to £127mln since the start of its current financial year while Advantage also hit a record of 63.500 customers.

NQ Minerals PLC (NEX:NQMI)(OTCQB:NQMLF) has contracted a second, high capacity mining dredge to augment its mining operations at the Hellyer project in Tasmania. The second dredge has a capacity to move 100 tonnes of ore per hour, and is likely to be on-site and operational at Hellyer by year end.

Asiamet Resources Ltd (LON:ARS) has said it is unaware of any operational or corporate reason for a large price movement that took place on 9 December. The company also took the opportunity to highlight some of the progress it’s made during 2019. In particular, the BKM copper project in Indonesia now boasts an ore reserve of 21.1mln tonnes grading 0.6% copper in the proven category, and 30.4mln tonnes grading 0.5% copper in the probably category.

Ashley House PLC (LON:ASH) has beefed up the management of its F1 building business with the appointment of Paul Williamson as head of its modular division. Williamson was previously managing director at Nu Build, the modular construction arm of Swan Housing for whom it provided affordable housing.

Futura Medical PLC (LON:FUM) believes it has found a "simpler route to regulatory approval” following a surprising read-out from the phase III clinical trial of its erectile dysfunction gel. These were nuanced results. For while MED2005 showed strong efficacy, excellent safety, rapid speed of onset, the placebo had a “highly statistically significant” impact on the men in the control group of the experiment. Normally, a placebo is a sugar pill, liquid or gel with no medical benefit whatsoever. However, in the Futura FM57 clinical assessment, researchers used DermaSys, developed by the company to deliver the active ingredient glyceryl trinitrate, or GTN for short.

Falcon Oil & Gas Ltd (LON:FOG) (CVE:FO) told investors that horizontal drilling has now begun in the Kyalla 117 N2-1H appraisal well at the Beetaloo project, in Australia’s Northern Territory. In a statement, the explorer said that some 1,000 to 2,000 metres of horizontal drilling will now be completed. Thereafter, the horizontal section will be fracture stimulated and production tested. At the same time, the company noted the evaluation of findings from the vertical well section, with three source rock reservoir sections identified within the Kyalla shale formation.

Eco Atlantic Oil & Gas Ltd (LON:ECO, CVE:EOG) has confirmed that alongside its joint venture partners it is moving the Orinduik block into the next exploration phase, as determined by the licence agreement. The ‘first renewal period’ will officially begin on 14 January 2020 and it will run for three years, at which point the partners can move into the ‘second renewal period’.

The Norman Broadbent Group PLC (LON:NBB) has entered into a partnership with UN Women UK, the UK arm of the UN agency for gender equality, to support the vision of a more equal, inclusive world both in the workplace, and in communities across the globe. In a statement, the London-listed Professional Services firm said it is the first leadership advisory firm in the world to partner with UN Women UK.

Diversified Gas & Oil PLC (LON:DGOC), the US based owner and operator of natural gas, natural gas liquids, oil wells and midstream assets, announced that its board has declared an interim dividend of 3.50 cents per share in respect of the third quarter to the period ended 30 September 2019, up from the 3.30 cents paid for the same period in 2018.

Motif Bio PLC (LON:MTFB) (NASDAQ:MTFB) said that in furtherance of the previously announced voluntary de-listing from the NASDAQ Capital Market for its American Depository Shares (ADS's), the company has filed Form 25 with the US Securities and Exchange Commission and expects that the last trading day will be on or about 16 December 2019.

6.50am: Flat start predicted 

The FTSE 100 looks like it is not going to give City traders much of a wake-up on Tuesday, with another tight rangebound day’s trading expected as major events lie later in the week.

London’s blue chip benchmark was being tipped by spread-betters for a minuscule 4-point gain ahead of the open, having the previous day lost almost 6 points to 7,233.90.

Overnight, Wall Street never really got going either, with all major indices finishing in the red.

“The week has a packed schedule as there are central bank meetings, a general election, in addition to a tariff deadline, but yesterday was far from exciting,” said David Madden at CMC Markets.

The Dow Jones closed down 105 points or 0.4% at 27,909.6, with the broader S&P 500 down 0.3% and the tech-laden Nasdaq Composite falling 0.4%.  

As well as the general election and the Federal Reserve and ECB meetings later in the week, there is also Donald Trump’s pledge to slap tariffs on more than $150bn-worth of Chinese imports on 15 December hanging over the global economy.

The will-they-won’t-they question is circulating around the markets, added Madden: “The US-China trade situation is likely to be the biggest event of the week. In recent weeks, the language has been largely hopeful but nothing is a done deal.”

UK growth in focus

Tuesday will see some key economic data released, with UK gross domestic product (GDP) growth figures from the Office for National Statistics due mid-morning along with industrial and manufacturing production and trade data for October.

Some of the numbers are expected to mark a small upward turn, with analysts eyeing a monthly improvement in industrial production, with an improved rise in the larger services sector.

The consensus forecast is for GDP to bounce back with 0.1% monthly growth after a fall of the same amount in September, which would leave three-month on three-month growth also at 0.1%.

In UK corporate news, the biggest company on the agenda is US-focused equipment hire firm Ashtead Group PLC’s (LON:AHT).

Shares in the company, which rents out equipment from diggers and cranes to pumps and heating equipment, have been flying close to year-highs of 2,462p recently, as investors have shut their eyes to worrying signs of an industry slowdown in the US.

Manufacturing sector data in the US has been falling recently, and what’s more, the latest figures from the US commerce department revealed a drop of 0.8% in construction spending in October, which suggests tougher times for Ashtead, since 90% of its sales come from its US-based Sunbelt operation.

Back in September, Ashtead’s overall revenues rose 17% but statutory profit before tax was up only 8%, the slowest rate of improvement since early 2017. In the first quarter of the current year, organic rental revenues were up 12%, softening from 15% in the second half of last year.

Last year’s second-quarter, against which this year’s will be compared, got a US$15-20mln boost from higher-margin clean-up work created by Hurricane Florence in US.

Significant announcements expected on Tuesday:

Trading announcements: Ashtead Group PLC (LON:AHT), S & U PLC (LON:SUS)

Finals: Driver Group PLC (LON:DRV), Nexus Infrastructure PLC (LON:NEXS), Oxford Biodynamics PLC (LON:OBD), RWS Holdings PLC (LON:RWS)

Interims: Begbies Traynor Group PLC (LON:BEG), Mind Gym PLC (LON:MIND), Photo-Me International PLC (LON:PHTM)

AGMs: Ashley House PLC (LON:ASH), Bellway PLC (LON:BWY), Upland Resources Limited (LON:UPL)

Economic data: UK GDP reading, UK industrial production, UK manufacturing, UK construction orders, UK balance of trade

Around the markets:

Sterling: US$1.3159, up 0.1%

Gold: US$1,466.70 an ounce, up 0.1%

Brent crude: US$64.24 a barrel, flat

City headlines:

Financial Times

  • President Trump is putting pressure on Tokyo to choose a US fighter jet over the rival BAE Systems as Japan looking at the UK company to develop an alternative to its F-2 aircraft.
  • Morgan Stanley is to cut 1,500 jobs worldwide, with year-end reductions falling heaviest on technology and operations staff.
  • US financier Todd Boehly tabled an offer for Chelsea Football Club but it fell short of £3bn valuation sought by owner Roman Abramovich.

The TImes

  • Boris Johnson has cast doubt on two big infrastructure projects, saying that he still wanted to lie down in front of the bulldozers at Heathrow and that the case for HS2, the new north-south high-speed railway line, deserved scrutiny.
  • The Hong Kong-based owners of the “Cheesegrater” and the “Walkie Talkie” skyscrapers are among a group of landlords behind a pilot scheme to create a business improvement district that will seek to transform the City of London into a “24/7” economy and leisure destination while retaining its status as a global financial centre.

Guardian

  • Drax Group PLC (LON:DRX), once labelled western Europe’s biggest polluter, is planning to become the world’s first carbon-negative business within 10 years.
  • Amazon is suing the Pentagon after Donald Trump’s “improper pressure” and behind-the-scenes attacks harmed its chances of winning a $10bn cloud computing contract with the Pentagon, which was awarded to Microsoft in October.
  • Employers in Britain have “hit the pause button” on job hiring, according to the Manpower survey that shows demand for new workers has tumbled to a seven-year low.

Telegraph

  • Colombian billionaire Jaime Gilinski Bacal has become the biggest investor in Metro Bank - fuelling speculation of a possible takeover bid. 
  • Business leaders raised concerns that the prime minister has promised to pull up the drawbridge for vital lower skilled workers as part of his final pre-election push. 
  • British science is to be handed a major boost from a US property developer preparing to plough up to $500m (£380m) into building new laboratories across the country.

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