UK Politics

FTSE 100 closes flat as traders fret ahead of interim US-China trade deal

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  • FTSE 100 closes nearly five points ahead
  • US benchmarks mixed
  • Traders await details of first phase US-China trade deal

5pm: FTSE 100 closes ahead – just

FTSE 100 index closed a shade higher on Tuesday, while Wall Street was mixed as investor jitters limited gains ahead of tomorrow's US-China trade deal.

The UK's premier share index finished nearly five points ahead at 7,622. The FTSE 250 added around 39 points at 21,756.

"European and US markets have been largely flat today, with the prospect of a US-China trade deal clearly doing little to drive markets higher," said Joshua Mahony, senior market analyst at online trader IG.

"With much of the phase one deal factored into market prices, we are instead seeing some hesitancy come into play as traders wonder whether any eventual deal would really live up to expectations," he added.

On Wall Street, the Dow Jones Industrial Index added 119 points at 28,026, but the S&P 500 shed 1.69. Against the US dollar, the pound added 0.21% to US$1.3016.

3.20pm: Footsie's paint is nearly dry …

As it has been for much of the day, the Footsie is little changed.

The index of leading shares was up 3 points (0.0%) at 7,621.

US blue-chips, meanwhile, are similarly mixed with the Dow up 13 points (0.1%) and the S&P 500 off 6 points (0.2%) at 3,282, after the US consumer price index (CPI) increased a tad less than expected in December.

The US CPI rose 0.2%, versus expectations of a 0.3% rise, taking the inflation rate to 2.3% from 2.1% in November, representing its highest level since October 2018.

Core CPI inflation, which excludes food and energy prices, rose 0.1% in December, versus a consensus forecast of +0.2%, leaving the annual inflation rate unchanged at 2.3%.

“Inflation is likely to remain modest in the intermediate term,” predicted Berenberg Capital Markets.

“Nominal GDP growth has moderated to around 4% from 6% in mid-2018 so firms have less flexibility to raise product prices, which influences wage-setting behaviour. Moreover, key survey-based measures of inflation expectations are at or near historical lows, and market-based measures of inflation expectations remain low despite recent increases,” the German bank added.

2.20pm: JP Morgan shines as US results season kicks off

Results season has kicked off in the US, with banking giant JP Morgan boosting sentiment with fourth-quarter earnings that topped expectations.

As a result, the Dow Jones industrial average is now expected to open slightly higher, at around 28,926, up 19 points from last nights close. The broader-based S&P 500 is still expected to open in the red at 3,286, down a couple of points on last nights close.

“JP Morgan kicked off earnings season with a bang! Expectations were for the banks to have a decent start after we saw the yield curve uninvert itself in early September, which will broadly help net interest income for all the banks,” said Edward Moya at Oanda.

“JP Morgan posted a stunning FICC [fixed income, currencies and commodities] trading gain, over a billion dollars higher than analysts expectation,” he added.

In the UK, no blue-chip stock has been able to provide a similar lift to sentiment although a trading update from Taylor Wimpey PLC (LON:TW.), up 2.7%, gave a leg-up to the housebuilding sector.

The FTSE 100 was up 10 points (0.1%) at 7,628.

1.20pm: Footsie unchanged; US indices expected to be similarly sclerotic

While paint continues to dry in the London stock market it looks like the lull is set to catch on in the US today.

Spread betting quotes suggest that after hitting new highs again yesterday, the Dow Jones and S&P 500 will pull back a little at the outset.

The Dow is expected to open at around 28,903, down 4 points, and the S&P is tipped to shed a couple of points to start the day ay 3,286.

“Heading into the US session open the major indices are flat. Some probing going on but nothing sustained. You can characterise todays session as indecisive, lacking direction as we await the details of the US-China trade deal,” said Neil Wilson of markets.com.

He can say that again …

In London, the FTSE 100 is unchanged at 7,618.

12.30pm: Blue-chips remain mixed

The Monty Python phrase “up and down like the Assyrian Empire” comes to mind when describing the Footsies movements today.

At one point the Footsie made it above 7,650 but it has now ebbed to 7,613, down 4 points on the day, reflecting a relatively stable day for the pound against the US dollar.

“Having broken below the GBP/USD 1.30 level yesterday, cable dipped as far as 1.2950 this morning before pushing back to 1.30. Despite this bounce, we see risk that unless forthcoming UK economic data releases surprise to the upside, cable could soon set its sights on the post-election low close to 1.2905,” suggested Rabobank.

The FTSE 250, less preoccupied with the ups and downs of sterling on the forex markets, remains in positive territory, up 37 points (0.2%) at 21,754, despite a poorly-received trading update from Elementis plc (LON:ELM).

Shares in the speciality chemicals company tumbled 21p to 143.7p after it lowered full-year profits guidance for 2019 following a “somewhat subdued” final quarter.

UK RNS today #4 –

Elementis – 'Our overall performance in 2019 has been negatively impacted by a challenging market backdrop as the more cyclically exposed parts of the portfolio like Chromium and Energy have deteriorated through H2'

— Chris Bailey (@Financial_Orbit) January 14, 2020

11.30am: Housebuilders lead the rally

Whichever direction the Footsie moves – it is currently heading north – it seems disinclined to travel far.

Helped by demand for housebuilders, the top-shares index was up 12 points (0.2%) at 7,629.

Taylor Wimpey PLC (LON:TW.) was up 2.4% at 206.9p after its trading statement, dragging sector peers Persimmon PLC (LON:PSN) and Berkeley Group Holdings PLC (LON:BKG) up with them; the former is up 1.1% and the latter is 0.6% higher.

“A record order book shows that demand for housing in the UK remains strong but higher costs, the lingering effects of the freehold scandal and renewed investment in build quality mean that Taylor Wimpey expects its operating margin to fall in 2019,” said Russ Mould, AJ Bells investment director.

“That pattern fits with the analysts consensus forecast of a very low single-digit percentage improvement in profits for 2019 and the market expects similarly modest progress in 2020,” he added.

9.55am: FTSE 250 is where the action is

Londons blue-chips are to use a well-worn phrase, seeking direction, with traders reluctant to take positions ahead of the signing of the US-China trade agreement.

After opening modestly higher, the FTSE 100 is now 7 points (0.1%) lower at 7,610, despite yo-yo stock NMC Health PLC (LON:NMC) enjoying one of its up days; the stock was the top Footsie riser with a 4.2% gain.

Overnight, the US Treasury said it no longer regards China as a currency manipulator, this removing a categorisation that has been in force since August 2019.

“Intensive trade and currency negotiations between the US and China over the last few months resulted in a Phase One agreement that requires structural reforms and other changes to Chinas economic and trade regime in several key areas, including currency and foreign exchange issues. In this agreement, China has made enforceable commitments to refrain from competitive devaluation and not target its exchange rate for competitive purposes. China has also agreed to publish relevant data related to exchange rates and external balances,” the US Treasurys biannual “Macroeconomic and foreign exchange policies of major trading partners of the United States” report stated.

With activity among blue-chip stocks resembling a 1970s match between Arsenal and Middlesbrough, it was left to the mid-caps to provide some 1990s-style Liverpool versus Newcastle United action.

Grafton Group PLC (LON:GFTU) and Games Workshop PLC (LON:GAW) both found favour with the market, rising 7% after a trading update and half-year report respectively.

Grafton Group has begun the year on a high,” declared David OBrien, an equity analyst at Irish investment banking firm, Goodbody.

“The group has reported a solid end to the year following top-line UK trends deteriorating in September and October 2019 and critically trends deteriorated no further in November and December.

“We can see very good cost control in the UK, driving efficiency and delivering productivity gains, which demonstrates managements agile response to market conditions.

“The non-UK business also did better than forecast and indicates solid top-line recovery. Overall, Graftons update should be very comforting for the sector,” OBrien said.

Games Workshop, meanwhile, “has cracked the model for getting people to visit its stores and its website,” according to Russ Mould at AJ Bell.

“Now it is trying to sweat its intellectual property which suggests that more attention will be paid to royalty income in the future as a measure of its success,” he added.

8.35am: Cautious progress

The FTSE 100 index made a hesitant start on Tuesday with sentiment clouded by uncertainty over what the much-ballyhooed US-China phase 1 trade deal will entail.

In opening trade, the UK blue-chip index was up 6 points (0.1%) at 7,624.

“A phase one deal is ready to be signed, were just not that sure whats in it. Sentiment turned risk-on after the US said it will remove China from its list of currency manipulators. US-Iran tensions simmer but have taken a back seat. Europe is off to a tentative start though after a mixed bag overnight in Asia,” summarised Neil Wilson, the senior markets analyst at markets.com.

On the corporate front, Taylor Wimpey PLC (LON:TW.) got the housebuilding sectors update season off to an uneventful start; the shares were unchanged so far after this mornings trading statement.

“The UK housing market showed signs of stability throughout 2019, despite the political and economic headwinds, while Taylor Wimpey had previously left itself much to do in the second half of the year to get back on track. This appears to have been achieved, with a record order book of around £2.2 billion representing an increase year-on-year of 22%,” said Richard Hunter, the head of markets at interactive investor.

“The reduction of 4.5% in build cost inflation was another tailwind, while the operating profit margin of 19.6% is perfectly adequate, even though it has dipped from a previous 21.6%,” he added.

Proactive news headlines:

Savannah Resources PLC (LON:SAV) told investors that the Mozambique government has issued a mining licence for the 9228C area, which is the third and final licence for the Mutamba heavy mineral sands project. The project, which is being advanced in partnership with mining major Rio Tinto plc (LON:RIO), spans some 11,807 hectares and is now covered by a mining licence thats valid until September 2044, with a possible 25-year extension.

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