FTSE 100 knocking on the door of 7,400; Dow Jones hits new intra-day high

  • FTSE 100 index up 27 points

  • Dow Jones rises 32 points to 27,494

  • Broker upgrade fails to energise Micro Focus

2.45pm: Dow Jones hits all-time intra-day high

Although the Dow Jones did not open as high as had been expected an hour or so earlier, it still hit a new intra-day high.

The 30-share index was up 32 points (0.1%) at 27,494. The S&P 500 climbed 11 points to 3,078.

Back in the UK, the FTSE 100 was taking another run at 7,400; it is currently three points short at 7,397, up 27 points (0.4%) at 7,396.

Fashion firm Next PLC (LON:NXT) was doing its bit to nudge the top-shares index to 7,400, rising 0.1% to 6,556p but shareholders might have expected a bit more enthusiasm for the stock after UBS cranked up its price target to 7,200p from 6,300p.

Among the mid-caps, shareholders of Micro Focus International plc (LON:MCRO) had even more reason to feel disgruntled as the shares retreated to 1,023.8p from 1,030p overnight despite Goldman Sachs upgrading the stock to neutral from sell.

The same broker made the same upgrade to oilfield support services group John Wood Group PLC (LON:WG.), and the share price surged 3.1% to 377.6p.

1.20pm: Market marks time

Little is happening in London in the lunchtime trading session, with traders not especially moved by the prospect of a firm start on Wall Street.

The FTSE 100 is within spitting distance of 7,400 but seems disinclined to expectorate, hovering around 7,390, up 21 points (0.3%) on the day.

In the US, spread betting quotes suggest the Dow Jones will open around 60 points higher than last night's close of 27,462 while the broader-based S&P 500 is expected to open at around 3,084, up 6 points.

Traders stateside are waiting for US ISM non-manufacturing data.

“This print is always significant as the US economy is arguably the most service-driven economy of all the major economies and therefore the ISM is very valuable in gauging the economic health of the US,” said Adam Seagrave, the head of global sales trading at Saxo Markets.

“An estimate of 53.5 leaves the potential for a small surprise to the upside and a number that would be a significant beat on the prior month. This would continue to fuel the current risk-on sentiment that has already taken hold of markets following the rumoured US roll-back of Chinese tariffs this morning,” he added.

12.15pm: Sterling's recovery dampens enthusiasm for blue-chips

The FTSE 100 is slowly relinquishing earlier gains as the pound makes a recovery against the dollar on forex markets.

The blue-chips index was up 20 points (0.3%) at 7,390, some 12 points below its high point for the day.

Sterling was up by around a quarter of a cent against the US dollar at US$1.2907 – a rise that does not play well with many of the big dollar earners in the Footsie.

The mid-cap FTSE 250, whose constituents are less likely to be fussed about a recovery in the value of sterling, trimmed earlier losses to around 13 points (0.1%) at 20,236.

Of the mid-cap companies that have made announcements today, engineering group Weir Group PLC (LON:WEIR) has fared the best, despite issuing a mild profit warning.

The shares were up 2.1% following the investors' conference call that followed this morning's interim management statement.

“Having previously guided to the bottom of its original £55-95mln range for FY19 [full-year 2019] O&G [oil & gas] profits, Weir is now guiding profits to be well below that; we estimate £30-35mln so that's a 40% downgrade to O&G profits with consensus currently at £54mln,” said Liberum Capital Markets, which stuck to its 'hold' rating and 1,450p price target.

Today, we have released our Interim Management Statement for Q3 2019.

— The Weir Group (@weirgroup) November 5, 2019

11.15am: The Footsie moves into consolidation mode

The Footsie has largely traded sideways at its highest level since the release of the UK services activity data for October.

Londons index of big-cap shares was up 24 points (0.3%) at 7,394, after the Purchasing Managers Index (PMI) survey returned a slightly higher-than-expected reading of 50.0, up from 49.5 in September.

The market consensus forecast had been for a reading of 49.7.

“Under normal circumstances such a slight up-tick would be seen as inconsequential; however, against a backdrop of arguably the most acute political uncertainty since the English Civil War, such a level of confidence in the service sector, the UK's biggest economic engine, is a cause for significant optimism,” said Andy Scott of REL Capital, hitting the hyperbole button really hard.

Samuel Tombs, as befits his name, took a less excitable view of the data. The chief UK economist at Pantheon Macroeconomics opined that Markit's survey is best seen currently as a barometer of business confidence, rather than as a reliable guide to growth in gross domestic product.

“The services PMI averaged 50.5 in Q3 [the third quarter] and was consistent on past form with a modest quarter-on-quarter fall in services sector output of about 0.2% but we know from official data up to August that services output likely rose at a solid 0.4% rate. This divergence partly reflects the fact that the PMI excludes output in the distribution and public sectors, which rose at year-over-year rates of 1.8% and 1.5%, respectively, in August,” Tombs said.

“The PMI also is excessively sensitive to firms general concerns about political risks; it has been consistently too downbeat relative to the official data since it became clear in Q4 2018 that MPs would not ratify the first Withdrawal Agreement.

“Notwithstanding these limitations, the services PMI shows that the PMs new Brexit deal has received a lukewarm reception from firms,” Tombs said.

If the services sector is showing scepticism about the new Brexit deal, the motor trade seems to be even more pessimistic.

New car sales were 6.7% lower in October than they were in October 2018, which marked the seventh year-on-year decline in the last eight months.

Private new car sales fell 13.2% from a year earlier while fleet sales were flat, the Society of Motor Manufacturers and Traders (SMMT) revealed.

“The SMMT reported that new car sales fell 6.7% year-on-year to 143,251 vehicles in October. This marked a return to the weakened year-on-year performance in new sales that has largely dogged the car sector this year after Septembers gain of 1.3% had marked the first increase since February,” said Howard Archer, the chief economic advisor to the EY ITEM Club.

“However, it would be misleading to consider Septembers rise as an improved performance and it must be put into perspective. The 1.3% rise came from an exceptionally low base as new car sales had plunged 20.5% year-on-year in September 2018 when they were hit hard by a shortage of new cars available for sale caused by manufacturers struggling to deal with the implementation of new emissions rules. Indeed, Septembers sales of 343,255 vehicles had been the second weakest performance for the month (after 2018) since 2011.

“Consequently, new car sales were down 2.9% year-on-year over the first 10 months of 2019 at 2,005,522 vehicles,” he added.

The grim news must have been widely expected as constituents of the car dealing sector were all over the shop, with Marshall Motor Holdings Plc (LON:MMH) down 0.7%, BCA Marketplace PLC (LON:BCA) and Inchcape PLC (LON:INCH) both down 0.1%, Pendragon PLC (LON:PDG) up 0.6% and Lookers PLC (LON:LOOK) unchanged.

9.45am: Service PMI hits par in October

The UK service sector registered no change in output in October from September, according to IHS Markit / CIPS.

The Purchasing Managers Index (PMI) survey returned a reading of 50.0, the level that marks the crossover point between expansion and contraction of activity, and was up from Septembers level of 49.5.

Service providers reported lower intakes of new business for the second month running in October, IHS Markit said.

New work has now declined seven times in the first ten months of 2019, the market research group noted. The rate of contraction in the latest period was the fastest since April, but modest overall, it added.

Companies continued to link lower new work to uncertainty surrounding Brexit.

The ongoing decline signalled by the three surveys leaves the main PMI gauge of output deep in territory that would normally be associated with looser policy from the Bank of England, suggesting a greater likelihood of the next move in interest rates being a cut. #BOE 10/

— Chris Williamson (@WilliamsonChris) November 5, 2019

"The UK PMI surveys collectively indicated a further overall decline in private sector output in October. Contractions have now been recorded in four of the past five months, marking the worst spell since 2009 during the global financial crisis,” said Chris Williamson, the chief business economist at IHS Markit.

"The seasonally adjusted IHS Markit/CIPS all-sector Output Index rose from 48.8 in September to 49.5 in October, signalling a weaker rate of contraction, but the volume of new business fell at a pace similar to that seen in September.

"The October reading is historically consistent with GDP [gross domestic product] declining at a quarterly rate of 0.1%, similar to the pace of contraction in GDP signalled by the surveys in the third quarter. While official data may indicate more robust growth in the third quarter, the PMI warns that some of this could merely reflect a pay-back from a steeper decline than signalled by the surveys in the second quarter and that the underlying business trend remains one of stagnation at best," Williamson concluded.

The FTSE 100, which had been loitering around the 7,400 level prior to the release of the PMI data, showed little reaction, easing back to 7,394, up 24 points (0.3%) on the day.

9.25am: Footsie fired up by positive response to AB Foods' update

Primark owner Associated British Foods PLC (LON:ABF) led the Footsie higher on Tuesday morning.

The top-shares index was up 25 points (0.3%) at 7,394, after an indifferent start, with the performance galvanised by a positive response to the full-year results from AB Foods.

The conglomerate's shares rose 5.4% to 2,371p as it hailed a “resilient performance” in the year just ended.

“Shares have risen … as the numbers are slightly better than expectations but also because the 2020 outlook seems more positive than before. This is down to sugar prices in the EU recovering, while Primark looks set to benefit from lower cost of goods and overheads while still expanding floor space. At the same time, the group says its well prepared for the various forms of Brexit outcomes and does still expect a slight margin compression for the whole year chiefly due to currency movements,” reported Helal Miah, an investment analyst at The Share Centre, which has a 'hold' recommendation on the shares.

It's Bonfire Night in the UK today so it is an appropriate day for ciggies maker Imperial Brands PLC (LON:IMB) to issue its full-year figures.

The shares edged 1.1% higher to 1,756p after the company said it would reduce its investment in vaping products for at least the coming year as it reported a decline in underlying earnings.

“Its been a terrible year for Imperial Brands as it suffered from intense competition, political backlash, regulatory uncertainty and market concerns about the health risks from vaping,” said Russ Mould, the investment director at AJ Bell.

“Vaping and other next generation products were meant to be the future for Imperial Brands but growth has been slower than expected. Thats forced investors to question the future earnings potential of the business.

Imperial Brands has used the word resilient nine times in its full-year results as if to try and convince the market that its business hasnt fallen over as a result of recent problems.

“Sadly it is going to take a lot more than reassuring words to win back the markets favour,” Mould suggested.

Our FY19 results presentation starts at 9am GMT. The slides are available to view on our website now: #ImperialBrands $IMB

Imperial Brands PLC (@ImperialBrands) November 5, 2019

8.40am: Damp squib

The FTSE 100 index failed to spark ahead of Bonfire Night as trade optimism gave way to lingering recessionary fears.

Those worries may be further exacerbated in less than an hour when we receive the latest UK purchasing managers data, which is likely to lay bare the service sectors struggles.

The expected reading of below 50 would keep Britains main driver of growth firmly in contraction mode. Analysts are expecting the mildest of improvements, from 49.5 to 49.6 month-on-month.

The blue-chip index opened just 5 points to the good at 7,375.12, unmoved by Wall Streets record close on Monday.

The mornings big mover was Associated British Foods (LON:ABF), which saw a better than expected third-quarter boost from its grocery and Primark clothing divisions. The FTSE 100-listed stock advanced 4.5%.

With Sino-American trade hopes rising, the miners were also on the march, led by Glencore (LON:GLEN), which was up 1.9%.

6.40am: No great fireworks

The FTSE 100 index should extend gains on Tuesday morning, but no great fireworks are expected ahead of Bonfire Night.

Londons blue-chip benchmark is seen climbing around 30 points at the open, or around 0.4% according to FTSE futures, to add to the 67 points a day earlier that saw a move higher along with most global equity indices on global trade optimism.

The pound slid below the 1.29 mark against the US dollar at the start of the week and could be moved by todays services industry PMI survey that comes after manufacturing surprised on the upside.

Analysts have pencilled in a reading of 49.6 for the services PMI today, which suggests the sector remains below the level which distinguishes expansion from contraction.

Overnight, US indices continued to push to new highs as Wall Street picked up on US-China trade optimism.

The Dow Jones closed 115 points or 0.4% higher at 27,462.11, while the broader S&P 500 added 0.4% and the tech-heavy Nasdaq rose 0.6%.

US commerce secretary Wilbur Ross said that the US government will “very shortly” issue licences to US firms seeking to do business with Chinas tech giant Huawei, thawing a previous area of tension.

There were also reports that as part of this “phase” of a trade deal, China wanted December's and September's tariffs to be taken off the table, with the White House said to be debating whether to remove some existing tariffs as a concession to seal a partial deal and Ross also saying it was possible that tariffs might not be levied on EU vehicle imports.

These comments were understandably welcomed by investors around the world, said market analyst David Madden at CMC Markets.

“The update did a lot to ease dealers nerves about a possible trade spat between the US and the EU,” said Madden.

“During the course of Trumps trade dispute with China, he suggested he could turn up the heat on Brussels, but remarks yesterday helped chip away at some of those fears.”

Led by the automotive sector, Europe's STOXX 600 jumped 1% to its highest level since August 2015.

Clothes and train tickets

A few big names are putting out results and trading updates on Tuesday, including final numbers from Associated British Foods PLC (LON:ABF), but no real fireworks are seen here as the Primark owner is presumed to have said it all in its September pre-close update.

The conglomerate said year-end net cash would be around £900mln, with the anticipated decline in the sugar division offsetting strong profits brought in by the grocery section and Primark.

Investors seem to believe the group has been sinking like many other UK competitors, as the fast-fashion branch, which brought in two-thirds of ABFs total profits last year, reported a 2% decline in like-for-like sales in the half-year results.

The outlook statement should be the most interesting bit ahead of the key festive season

Over at Trainline PLC (LON:TRN), shareholders will hope to find the rail tickets company on track meet its expected “low to mid 20% range” revenue growth for the full year, when it reports its third set of results as a listed company on Tuesday.

Ticket sales continue to shift online and the use of electronic tickets rises, which boosted its UK consumer revenues 34% in the six months to 31 August.

Floated at 350p in May, the shares put on a small head of steam but have dropped off since September, when the online ticket seller said it expected UK sales to be “significantly lower” in the sRead More – Source