Britain

FTSE 100 closes firmly in red as trade fears spook markets

  • FTSE 100 index closes 127 points down
  • US stocks lower
  • Sterling higher as construction PMI beats expectations

5pm : FTSE 100 slumps on trade worries

FTSE 100 index closed in the red on Tuesday and Wall Street shares also slumped as markets reacted strongly to yet more trade woes.

The UK's index of leading shares closed down over 127 points at 7,158, while FTSE 250 also tanked around 199 points.

"Once again its been an intervention by President Trump thats upset the applecart, when in an impromptu question and answer session with journalists he held open the prospect that there would be no US, China trade deal, until after the US elections next year," said Michael Hewson, chief market analyst at CMC Markets.

"This insouciance about the prospect of putting off any deal has completely upended market expectations that we were potentially millimetres away from a deal, and also flies in the face of the optimism that has seen markets rally strongly over the last few weeks."

On Wall Street, the Dow Jones Industrial Average shed over 390 points at 27,392, while the broader based S&P 500 shed around 36 points at 3,077. Financial stocks were under pressure and the 10-year Treasury bond yield headed towards the biggest decline in over three years.

4pm: FTSE 100 down to worst level since October

The Footsie can only hope to get this day over and done with, as it marks its worst performance in six weeks.

The index had lost 131 points or 1.81% to 7,154 as it headed to the closing bell, having earlier hit lows not seen for six weeks.

Meanwhile, the pound kept going strong inching up 0.44% to US$1.2998, as the latest Kantar poll suggests the Conservatives are not losing ground.

It is only day-one for President Trump in London, where he is attending the NATO summit, but he has already scared off the markets with a laidback approach over the incumbent US-China deal deadline.

“In some ways, I think its better to wait until after the election if you want to know the truth. But Im not going to say that, I just think that,” he said, although he did mention Beijing wants the deal now.

Down for the fourth day in succession, the FTSE has borne the brunt of todays selling, said Michael Hewson, chief market analyst at CMC Markets, hindered by virtue of the fact that it is more heavily weighted to US dollar earners than its European cousins.

“The prospect of increased tariff tensions, a stronger pound and a weak commodity prices has also combined to send it to its lowest levels since mid-October,” Hewson said.

2.45pm: Trump and strong pound keep bashing the FTSE

US stocks opened lower and the FTSE 100 index headed for an after-lunch nosedive as the woes over a delayed US-China trade deal ramped up, not helped by the strong pound performance.

The blue chips have lost a whopping 147 points or 2% to 7,139, pressured by the pound enjoying the 0.42% upward ride to US$1.2996.

That means the FTSE is suffering more than its peers, as in comparison the Dow Jones index lost 235 points or 0.8% to 27,557 after the Wall Street opening bell.

The S&P 500 and the Nasdaq Composite were hit as well, losing 33 points or 1% and 113 points or 1.03% respectively.

The markets are fearing a new round of tariffs is round the corner, with the pre-Xmas deadline for a trade deal now seeming unrealistic.

According to analysts, they would be a major problem for everyone, and it would feel like erasing all the improvement made so far in the delicate relationship between Washington and Beijing.

However, a mere statement from either party confirming talks are still underway would push for a rebound, as markets are notoriously sensitive to trade news.

“The lack of urgency implied by Trumps comment does not mean that they are not still working on a deal,” Connor Campbell, financial analyst at Spreadex, told Proactive, however.

Evraz (LON:EVZ) is the biggest faller on the Footsie, leading a phalanx of commodities-related stocks lower, including the index's oil heavyweights, Shell (LON:RDSB) and BP (LON:BP.)

12.15pm: Trump sees US-China trade deal "after election"

The FTSE 100 index was firmly in the red around midday, dropping 85 points or 1.2% to 7,201 on expectations for fresh falls on Wall Street today as President Trump continued on the offensive in his ongoing global trade battles.

The market seems to feel the 15 December 2019 date for a US-China trade deal is likely to be pushed back, as Trump might as well wait until next year, or even after the November 2020 presidential election.

Fresh off Air Force One in London, where he is attending a NATO meeting, Trump said he had “no deadline” to reach a China trade deal yet and added that “in some ways I like the idea of waiting until after the election”.

Trump's comments came during a meeting with the NATO Secretary-General Jens Stoltenberg on Tuesday morning.

“Combined with the barrage of tariff threats on the EU, the comments can be taken as a sign that the White House has no qualms about levying further tariffs and is happy about using trade as an economic, political and diplomatic weapon,” Neil Wilson, chief market analyst at Markets.com commented in a note.

Markets need to reprice, Wison added, although nothing is set in stone and a rebound is only “a tweet away”, but "we can be almost certain it will not be seen in 2019".

Meanwhile, on currency markets, the pound kept up its forward momentum, rising 0.4% to US$1.2994 helped by another better-than-expected UK purchasing managers' index – this time from the construction sector.

However, Rabobank analysts noted that the ongoing sterling wave depends on upcoming political events, and said it is not all puppy dogs and rainbows from now on.

The Dutch bank's analysts see potential for the pound to reach the US$1.32 ballpark if Boris Johnson is returned as prime minister after December 12, but those gains are unlikely to hold if the UK crashes out of the EU with no deal.

Assuming the Brexit Withdrawal Agreement is passed through parliament and the UK leaves the EU on January 31, trade talks will start and the Tories believe they will be wrapped up in a few months.

However, EU chief negotiator Michel Barnier was reported to have said they will take between two and three years, clashing with the end of transition period coming on December 2020.

If the government does not ask for an extension, which UK cabinet member Michael Gove recently stated, the pound is set to dive towards the US$1.15 area as a result of a no-deal.

11.00am: FTSE 100 dragged lower by global giants

Analysts say President Trumps comments from last night are still reverberating around the City and hitting global firms such as BHP Group PLC (LON:BHP) and Reckitt Benckiser Group PLC (LON:RB).

The commodity giant and the consumer goods company both lost 3% to 1,675p and 5,876p respectively and the renewed trade tensions are partly to blame, analysts say.

Meanwhile, the pound was being supported by political polling.

The latest polls suggest there will be a Tory government with a stronger majority as of next Friday, with Boris Johnson's party gaining an extra point from last week to 44% support, while Labours voters remain unchanged at 32%.

“The FTSE 100 stands out this morning, but for the wrong reasons, remaining firmly in the red while markets on the continent move higher,” said Chris Beauchamp, chief market analyst at IG.

The blue chip index has kept descending as the morning has progressed, losing 8 points or 1.19% to 7,199, with BHP joined by fellow mining heavyweights Glencore (LON:GLEN), Antofagasta (LON:ANTO) and Anglo American (LON:AAL) near the bottom of the pile.

Not helping matters, the pound is up 0.3% at US$1.2984, hitting the overseas focused index, with Pearson (LON:PSON) and BAE Systems (LON:BA.) prime examples.

9.45am: PMI construction index better than expected

London's blue-chip stocks extended their losses mid-morning as the pound got some relief from above-forecast UK construction data.

The IHS Markit construction purchasing managers index (PMI) for October performed better than expected against rather grim forecasts, coming in at 45.3 for November compared to 44.2 in October. On Monday, Markit's manufacturing PMI also beat forecasts.

The construction PMI outdid the markets bleak expectations of 44.0, however, it remains well below the stable 50.0 mark as political uncertainty restrains potential customers from commissioning new work.

The not-as-bad-as-expected news lifted the pound 0.25% against the US dollar, to US$1.2974, which helped push the FTSE 100 down 47.79 points or 0.64% to 7,239.23.

8.35am: Dull start for Footsie

The FTSE 100 index was subdued in early morning trade as a bounce-back following a 60-point fall yesterday failed to materialise. Sentiment remains a little shaky after the US president opened trade hostilities on multiple new fronts on Monday.

In opening deals, the UK index of blue-chips was 4 points lower at 7,282.23

“Equity markets took a dive on Monday as Donald Trump upped the stakes in the trade war and broadened his field of fire to include allies in Europe and South America,” said Neil Wilson, senior analyst at Markets.com.

“After the heavy losses, bulls are trying to rally the troops but sentiment is pretty shaky after taking such a bruising,” he added.

Topping the Footsie risers list was Rightmove (LON:RMV) after Wall Street investment bank Goldman Sachs turned less bearish on the stock, moving its recommendation to neutral from sell. The stock was bid up 2.5% in early deals.

On the flipside, the miners were on offer after Trumps latest trade tirade, with Anglo American (LON:AAL) leading the lemming leap.

Among the mid-caps, Serco (LON:SRP) was in demand after JP Morgan Cazenove upped its recommendation on the public services group to overweight. The shares nudged 2% higher.

Proactive news headlines:

Genedrive PLCs (LON:GDR) shares surged on Tuesday as the company achieved “high clinical accuracy” in a recent trial of its screening test designed to reduce the risk of antibiotic-induced hearing loss in infants. The diagnostics firm said the test had achieved a diagnostic sensitivity of 100% and a specificity of 100% across 303 samples and was unaffected by common bacteria and interfering substances that may be found in a patient.

Collagen Solutions PLC (LON:COS) said it was investing in "people, capabilities and technology” as it delivered its third consecutive half of double-digit top-line growth. Presenting its interim results, it explained it had been affected by capacity constraints within the collagen manufacturing operation. It was also held back by the timing of delivery of development contract milestones. Against this backdrop, the biomaterials specialist grew revenues by 14% to £2.23mln in the six months ended September 30. Tissue sales more than doubled.

Arc Minerals Limited said it has acquired a further 5% interest in Zaco Limited from Mumena Mushinge, a non-executive director of Arc, for a total cash consideration of US$37,500, increasing Arc's interest in Zaco to 52.5% from 47.5%. Nick von Schirnding, Arcs executive chairman stated "I am very pleased that we have increased our stake in Zaco to 52.5% giving us a controlling interest in this exciting prospect, which contains a number of anomalies which we are drilling."

Centerra Gold has terminated its strategic alliance with Erris Resources PLC (LON:ERIS) after almost four years. The partners had been in a joint venture on exploration ground in Sweden owned by Erris. "Erris Resources is grateful for the consulting and exploration partnership with Centerra Gold over the past four years, which from our experience is a typical duration for such joint ventures,” said Erris chief executive Anton du Plessis.

BB Healthcare Trust PLC (LON:BBH) said it aims to target a dividend each financial year equal to 3.5% of its Net Asset Value as at the last day of the Company's preceding financial year. For the financial year ended 30 November 2019, the company paid an interim dividend of 2.425p per ordinary share in August 2019 and in due course is intending to propose a final dividend of 2.425p per ordinary share. For the financial year ending 30 November 2020, the target total dividend will be 5.0p per ordinary share, and the firm intends to declare an interim dividend of 2.5p per share, and a final dividend of 2.5p per share for the financial year ending 30 November 2020.

KRM22 PLC (LON:KRM) the technology and software investment company that focuses on risk management for capital markets, today announced the appointment of Steve Sparke as a non-executive director of the company. The group said Sparke will replace Matt Reed, its independent non-executive director, who is stepping down with immediate effect to focus on other business commitments. KRM22 noted that Sparke has over 30 years' experience in the Exchange Traded Derivatives and Commodity industry and was recently COO of Marex Spectron.

ADES International Holding PLC (LON:ADES) said it was notified on 2 December 2019 that its CEO, Dr. Mohamed Farouk Abdelkhalek purchased 600 of the company's ordinary shares at average price of US$ 12.283 each. Following this transaction, the group noted that Abdelkhalek has direct and indirect beneficial interests in 2,075,619 shares representing 4.75 % of the company's issued share capital.

ImmuPharma PLC (LON:IMM), a specialist drug discovery and development company, announced that Dr Tim Franklin, its commercial advisor, will be presenting at the Biotech Showcase 2020, to be held between 13-15 January 2020, at the Hilton, San Francisco Union Square. Commenting on the event, Dimitri Dimitrou, ImmuPharma CEO said: "We are delighted that Dr Franklin, who was an integral part of the ImmuPharma team involved in the Avion negotiations, will be representing ImmuPharma and presenting at this prestigious Biotech Showcase. This will be a great opportunity to refocus the industry's and investors' minds on the significant potential within ImmuPharma's pipeline."

6.45am: FTSE 100 expected rebound

The FTSE 100 is tipped to rebound higher on Tuesday morning, a day after European stocks had their worst session in two months on the back on the back of Donald Trumps new tariff tirade.

Londons blue chip index is seen rising 10 points to 7,296 by spread-betters, following a 60-point fall the day before.

Overnight, Wall Street joined in the blood-letting, with a 268-point or 1% dive for the Dow Jones to 27,783.04.

The US Presidents unexpected announcement that he would be reintroducing steel and aluminium tariffs on Brazil and Argentina seemed to be the trigger, followed by a blast from commerce secretary Wilbur Ross that tariffs will be increased on China if there is no deal by 15 December.

The S&P 500 fell 0.9% and the Nasdaq Composite tumbled 1.1% lower.

Washington is also threatening to increase tariffs on the EU following a World Trade Organisation ruling against EU claims that all illegal subsidies had been removed.

The White House also proposed a 100% tariffs on French goods in retaliation for France's proposals to target US technology companies in the form of a digital tax.

“This sudden new belligerence from the US appears to have caught markets on the hop,” said Michael Hewson at CMC Markets.

“The big question now is whether the US really means what it says, or whether this will be just another occasion when the US talks tough, only to back away at the last minute. If history is any guide the Europeans are likely to find US crosshairs start to move increasingly their way, the closer to next years US election we get,” he added.

Asian markets are mixed as they play catch-up, with the Shangai Composite up 0.1% but most others in the red, such as a 0.6% decline for Japans Nikkei 225 and a 0.2% dip for Hong Kongs Hang Seng.

On the data front, later in the morning there will be the latest UK construction purchasing managers index report from IHS Markit, which is predicted to dip to 44.0 from Octobers 44.2. A day earlier, the UK manufacturing PMI was not quite as bad as forecast.

Any beat would be rather a blue note as the numbers are mostly down to bleak forecasts, with both sectors hunched under the cloud of current economic and political uncertainty.

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