FTSE 100 pare losses; FTSE 250 laid low by Royal Mail’s woes

  • FTSE tumbles 32 points
  • FTSE 250 tumbles 118 points
  • Royal Mail leads the mid-cap fallers after "a mixed bag of numbers"

After a good run this morning sterling has come off the top against the greenback, thus enticing some buyers back into the UK equity market.

Nevertheless, the FTSE 100 remains 32 points (0.4%) in the hole at 7,231 but it is, at least, about 34 points above its intra-day low.

One pound sterling currently buys US$1.2947, almost a quarter of a cent more than it did last night.

The FTSE 250, generally considered to be less of a hostage to the movement of the UK currency, is actually showing a bigger fall than its blue-chip counterpart, with the index down 118 points (0.6%) at 20,358.

Much of the blame for the mid-cap indexs underperformance can be laid at the door of Royal Mail PLC (LON:RMG), which was down by around one-sixth after it said there was a “a significant increase in the risk of industrial action taking place” over the Christmas period.

“Royal Mail has again delivered a mixed bag of numbers, as the increasing pressure of a letters market in terminal decline continues to bite,” said Richard Hunter, the head of markets at interactive investor.

Royal Mail: best UK revenue performance in five years but transformation behind schedule via @Post_and_Parcel

— Pat Fallon #GTTO #JC4PM2019 ✊???? (@PaddyFallon) November 21, 2019

“The group admits that its transformation plan is behind schedule. Yet the reduction in the letters and cards market, largely offset by the explosion of parcel deliveries arising from online shopping, is hardly a new phenomenon. The fact that the addressed letters part of the business is expected to decline at a higher rate of between 7% and 9% this year is proof it were needed that Royal Mails business mix needs to change rapidly,” Hunter suggested.

Also getting it in the neck after a trading update was Rotork PLC (LON:ROR), the flow control and instrumentation specialist.

The shares were off 4.1% at 321.6p after it noted that a “slightly greater than usual proportion of recent orders are not for delivery until next year”, as a result of which sales growth this year is expected to be a bit lower than previously expected.

10.00am: Rumour of a delay to US-Sino trade deal hits miners

Stock market bulls were on the run this morning as patience over the US-China trade talks wears thin.

The FTSE 100 was down 52 points (0.7%) at 7,210.

Speaking about the US-Sino trade talks, Connor Campbell of Spreadex noted, “A Reuters report suggested any phase one agreement may be pushed into 2020 – not least because Beijing and Washington remain split on a number of key topics, including the rolling back of tariffs and the treatment of Hong Kong. That latter issue was further put under the spotlight as the House of Representatives passed legislation designed to protect the rights of protestors in the region.”

“At the same time on Wednesday night you had Vice Premier Liu He claim in a dinner speech he was cautiously optimistic about a deal, countering the rumours of Chinese pessimism that appeared on Monday but even then that statement was muddied by reports that Liu told an attendee he was confused by the US demands.

“Attempting to put out some fires, Chinas commerce ministry spokesman Gao Feng said on Thursday the country would strive for a deal; however, this talk fell on deaf ears, investors losing patience with the lack of action,” Campbell added.

Unsurprisingly, given the mood music emerging from China, steel-maker Evraz PLC (LON:EVR) and the mining giants were out of favour but all posted losses that were not as severe as those suffered by Johnson Matthey PLC (LON:JMAT), which was down 6.7% at 3,000p.

The speciality chemicals group reported better-than-expected first-half profits but rejigged full-year guidance and saw net debt much higher than expected.

Weve released our financial results for the half year ended 30th September 2019.
✅ Operating performance in line with expectations
✅ Ongoing investment for the longer term
✅ Confidence in delivering our strategy
Read more:

— Johnson Matthey (@Johnson_Matthey) November 21, 2019

Interims from Severn Trent PLC (LON:SVT) sent the water companys shares down the drain.

The share price ebbed 60p to 2,277p after it reported a 9.7% fall in underlying basic earnings per share in the six months to the end of September.

8.45am: Trade talks fatigue hits the Footsie

World equity markets have become a barometer for trade negotiations – and they appear to wax and wane on any comments (good, bad or indifferent) from the US president.

The FTSE100, taking the US and Asia for its cue, opened firmly in negative territory after Donald Trump threatened to escalate hostilities with China unless the latter sat down and agreed a bi-lateral international commerce agreement.

Hong Kong, down 1.6%, was the worst hit of the major international exchanges with violence in the territory continuing to erode confidence.

Liquidity (the number of shares being traded) appears to be an issue.

Opinion was split over the cause. Some believe it the Alibaba IPO, set to raise £10bn via Hong Kong, could be acting as a depressant. The theory goes traders are holding back funds to invest.

Others suspect the explanation is more obvious (and potentially more worrying); overseas investors are pulling cash out of the market with clashes between protestors and police showing no signs of abating.

Closer to home, British American Tobacco (LON:BATS) was up 5% and topping the Footsie leader board after it was revealed the US investment management giant, The Capital Group of Companies, had increased its stake in the company to above 11%.

This comes in the wake of a poor run for the cigarette firms amid worries over the potentially harmful effects of vaping.

British Gas owner Centrica (LON:CNA) wasnt far behind. It shares were buoyed 4.4% by a reassuring trading statement that confirmed it is on track to hit full-year earnings forecasts.

6.20am: FTSE 100 set to start on the back foot

The FTSE 100 is set to start Thursday in negative territory as Trumps Chinese tit-for-tat continued to erode global investor sentiments.

CFD and spreadbetting firm IG Markets sees the blue chip benchmark down about 27 points, making a price of 7,235 to 7,238.

It comes as global indices have been lit in red amid the seemingly endless trade dispute between Trumps America and China.

“President Trump said he would impose even higher tariffs on imports from China if a deal isnt brokered. The announcement reopened up old trade worries, which triggered traders to cut their equity positions,” said David Madden, analyst at CMC Markets.

“The US-China trade spat has been rumbling on for over one year, and traders are used to the back and forth. Recently we have seen some European equity markets at multi-year highs, and a number of US indices hit record highs, so Trumps remarks acted as an excuse to unwind some positions.”

US stocks finished Wednesdays session on the back foot. On Wall Street, the Dow Jones dropped 112 points or 0.4% to close at 27,821.

The S&P 500 similarly gave up 0.38%, ending the day at 3,108, while the Nasdaq moved 0.51% lower to 8,526.

In Asia, Japans Nikkei slipped 96 points or 0.42% to trade at 23,057 while Hong Kongs Hang Seng dropped lower, losing 437 points or 1.62% to 26,448. The Shanghai Composite index was down 0.46% at 2,897.

Around the markets

  • Pound: US$1.2928, up 0.03%
  • Gold: US$1,470 per ounce, down 0.17%
  • Brent crude: US$62.18 per barrel, up 2.04%
  • Bitcoin: US$8,097, down 0.13%

Significant announcements expected

Interims: Royal Mail Group PLC (LON:RMG), Severn Trent PLC (LON:SVT), Charles Stanley Group PLC (LON:CAY), CMC Markets Plc (LON:CMCX), CountrysiRead More – Source