FTSE 100 closes convincingly higher as Brexit worries send pound plunging
- FTSE 100 closes 138 points higher
- US & Canadian markets are closed today
- Sterling tanks on forex markets
5pm: FTSE romps home to close 2.4% higher
FTSE 100 index closed firmly higher and heading back towards the 6,000 mark on Monday as the weaker pound boosted the index.
Britain's index of leading shares finished the first day of the trading week up around 138 points, or 2.39%, at 5,937. US markets are closed for Labor Day.
The pound plunged 0.92% against the US dollar as traders feared the UK and the EU might not strike a Brexit deal as negotiations start up again this week.
"Yesterday, Prime Minister Johnson said that if a free trade deal has not been agreed upon by 15 October, it would be time to walk away from the trade talks and peruse a basic WTO style trading relationship with the EU, which would commence in 2021," analyst at CMC Markets David Madden said.
In the oil markets, US and UK benchmark crude fell to two-month lows as signs are growing that global demand is further weakening.
4.05pm: Sterling wonders whether it packed its parachute
The FTSE 100 index was sitting pretty, entering the final half-hour of trading.
The index was up 141 points (2.4%) at 5,940, in no small part to forex traders taking sterling out into the street and kicking it around like a punctured football.
Sterlings dip today comes as little surprise amid the ratcheting up of tensions between the EU and the UK over Brexit. Boris Johnsons government is now plaNNing new legislation which would over-ride significant parts of the withdrawal agreement. Although its being called a standby plan, the proposals indicate that if there is no deal reached a border would effectively be re-imposed between the Republic and Northern Ireland as goods moving in both directions could be subject to checks and tariffs. That has prompted concerns there could be retaliatory measures imposed between Dover and Calais. As a consequence there has been a bit of a sell-off in sterling today,” observed SusaNNah Streeter at Hargreaves Lansdown.
“Against the euro, sterling had reached its highest level since May at the end of last week, but Fridays disappointing PMI data on the UK construction sectors has also put pressure on the pound, as it indicates the UKs coronavirus recovery is still fragile,” she noted.
ING Economics said sterling is set for a “reality check” on the foreign exchange markets.
“The Brexit heat is back on and sterling is, in our view, unprepared. We estimate that there is no risk premia priced into the currency, while speculative positioning is neutral. Both should facilitate GBP's downside this month as negative headline news likely gains traction. We target EUR/GBP 0.9100,” ING said.
“The theatrics surrounding talks were always going to increase as the de-facto October deadline approached, and threats of walking away were always a possibility,” ING noted, broaching the hitherto unheard of possibility <ahem> that Boris Johnson might have a duplicitous streak.
Whatever happened to the “oven-ready” deal?
Live scenes as Boris Johnson returns to his oven-ready Brexit deal: pic.twitter.com/N26IXsV5E3
— Have I Got News For You (@haveigotnews) September 7, 2020
3.00pm: No US markets? No worries!
The FTSE 100 continues to do splendidly well without any guidance from US markets, which are closed today.
Londons index was up 126 points (2.2%) at 5,925, while the FTSE 250 was up 306 points (1.8%) at 17,661.
Among the mid-caps, Dechra Pharmaceuticals PLC (LON:DPH) was in rude health after its full-year results made the market sit up and beg for the shares.
The veterinary products provider jumped 8.3% to 3,344p after it bumped up the full-year dividend by 8.5% to 34.29p. Underlying earnings (EBITDA) edged up 3.9% (or 3.7% on a constant currency basis) to £142.5mln in the year to the end of June from £137.2mln the year before.
Liberum remains unconvinced of the shares appeal however and has restated its “sell” recommendation.
“In terms of outlook, the company has said initial trading is encouraging, but there is a degree of uncertainty related to COVID and the impact this may have on demand and wholesaler stock levels. In summary a solid H2 [second half] and the company is confident in its new product potential (eg Akston, Trisolfen). However, at 33x next years earnings we believe the prospects are more than reflected in the valuation,” it said.
Liberums price target for Dechra is 2,700p.
1.25pm: Triple-digit rise achieved
By Jove, the Footsie has done it. Managed a triple-digit rise, I mean.
All it took was the collapse of the pound against the US dollar to encourage Londons index of leading shares above the 5,900 level to 5,914 – up 115 points (2.0%).
British Airways owner International Consolidated Airlines SA (LON:IAG) was missing out on things, with a 1.9% fall to 215.2p after a spike in coronavirus cases in the UK on Sunday.
Official figures show the UK has recorded 2,988 new daily cases of covid-19 compared with 1,813 yesterday
— Sky News Breaking (@SkyNewsBreak) September 6, 2020
The trend does not bode well for a relaxation of travel restrictions.
Sector peer and FTSE 250 constituent easyJet PLC (LON:EZJ) was down 0.3%.
UK Covid-19 cases per 1,000 tests on the rise https://t.co/LynHoUMfNx
— A K D#StandUp4Brexit(Watching Brief) (@alastairdick) September 7, 2020
11.45am: No labouring on Labo[u]r Day
It is Labour Day (or Labor Day if you prefer) in the USA today but European markets are far from labouring, especially the UK.
Helped by a wilting exchange rate – the pound has lost one and a third cents (or one and one-third of a cent as our septic cousins would say) against the US dollar in a single morning – the FTSE 100 is up 88 points (1.5%) at 5,887.
“It is possible that dealers in Europe feel comfortable about buying back into equities because they know their US counterparts are on holiday today. Towards the end of last week, the negative moves witnessed in Europe were driven by US tech stocks, so todays moves are likely to be an accurate reflection of sentiment in Europe,” speculated CMCs David Madden.
“The mood on this side of the Atlantic is surprisingly upbeat given the rise in uncertainty surrounding the UK-EU trade talks, as the British are willing to walk away from the table from mid-October if a free trade agreement hasnt been agreed upon,” he noted.
According to Patrick Moonen at NN Investment Partners, global equity valuations are now at a 20-year high following the continued upward momentum seen in August.
“The drop in equity risk premium is linked to the reduction in downside tail risks achieved by monetary and fiscal authorities,” Moonen said, cramming in a surprisingly large amount of jargon into a 21-word sentence.
“There is a loose positive correlation between the trend in money supply and equity valuations, but central banks alone caNNot keep pushing markets higher. Continued and sizeable fiscal support is necessary to sustain the upward trend,” he continued.
“It is therefore essential for lawmakers in the US to deliver the fourth stimulus package. The political climate is not conducive to a quick compromise, with campaigning for the November election already having begun and given the very polarised political landscape; however, like the market, we believe that policymakers will eventually strike a deal that prolongs the recovery and supports markets,” Moonen concluded.
10.30am: ANNual house price growth at highest level since late 2016
The Halifax House Price Index rose 1.6% in August from Julys level, after rising 1.7% in July.
The aNNual increase in house price accelerated to 5.2% from Julys 3.8%, hitting its highest level since the fag-end of 2016.
“House prices were up 1.3% in the three months to August compared to the three months to May, after falls of 0.2% in the three months to July and 0.9% in the three months to June,” reported Howard Archer of the EY ITEM Club.
“Housing market activity may well see a further pick-up in the near term providing some support to prices, as a result of the raising of the Stamp Duty threshold, along with the further release of some pent-up activity following the easing of lockdown restrictions. The easing of lockdown restrictions affecting the housing market has occurred later in Wales, Scotland and Northern Ireland than in England, so there may be some catching up there. This could result in house prices firming modestly over the next few months,” Archer said.
“Nevertheless, the EY ITEM Club suspects the current marked pick-up in activity and firming of prices will prove unsustainable before long, with the upside for the housing market being limited by challenging fundamentals for consumers,” he added.
Ross Counsell, a director at regulated property buyers, Good Move, said buyers are clearly taking “full advantage of the stamp duty holiday”.
“Todays statistics do showcase a better indicator of market health which should reassure both sellers and buyers in the UK; however, continued growth is reliant on how the wider economy performs over the coming months and how fast an economic recovery were likely to see over the long-term,” Counsell said.
Following four months of decline, the latest #HalifaxHPI???? shows average house prices in July experienced their greatest month on month increase this year.
— Halifax Bank News (@HalifaxBankNews) August 7, 2020
The FTSE 100 was up 76 points (1.3%) at 5,875.
9.30am: Sterling's Brexit-inspired slump goes down well (except with the banks)
Sterling has lost half a cent against the US dollar and that, as usual, is like catnip to fans of UK blue-chips.
The FTSE 100 was up 69 points (1.2%) at 5,868.
Sterling took a tumble after the Financial Times reported the UK government is plaNNing new legislation was working on legislation to override parts of the Brexit withdrawal agreement, including the Northern Ireland protocol – the fudged agreement that effectively makes the Irish Sea a customs border.
“That act of aggression arrived alongside a fresh ultimatum, with Johnson claiming Britain will walk away from the table for good if a deal isnt reached by October 15th. One final twist of the knife came as Johnson stated no deal was actually a good outcome,” said CoNNor Campbell at Spreadex.
“It is another example of the government actively chasing a no-deal Brexit, despite their pre-election claims of an oven-ready agreement, and could pose a serious threat to sterlings recent gains in the coming weeks,” Campbell speculated.
Brussels nursing a sore head today as expectations -already v low- now plummet ahead of round 8 of EU-UK trade talks this week. Some in EU suspect U.K. is deliberately trying to torpedo talks. Others hope the PM is preparing to compromise. My thoughts:???????? https://t.co/6UNiDCR7x6
— katya adler (@BBCkatyaadler) September 7, 2020
Scottish Mortgage Trust PLC (LON:SMT) was leading the Footsies charge but not because of sterlings weakness; the investment trust is seen as a good way for UK investors to invest in a basket of glamorous US technology stocks and the shares have been hit hard by the recent reverses on the tech-heavy NASDAQ.
The shares have clawed back some of last weeks losses, rising 4.4% to 886p, even though futures markets suggest that were NASDAQ trading today – it wont be as it is a national holiday in the US – it would be in the red.
Banks were among the few stocks not welcoming the Brexit-inspired bashing of sterling. NatWest Group PLC (LON:NWG) was down 2.0% at 105.7p; Lloyds Banking Group PLC (LON:LLOY) was off 1.2% at 26.63p; HSBC Holdings PLC (LON:HSBA) was 0.9% lower at 318.9p and Barclays PLC (LON:BARC) was more or less unchanged.
8.35am: Makes a change from coronavirus
The FTSE 100 started on the front foot on Monday ahead of what could be a make-or-break week for negotiations with the EU over the terms of Britains exit from the union.
The UK blue-chip index advanced 50 points at the open to 5,848.50.
Over the weekend, chief negotiator David Frost said the UK wouldnt become a “client state” of Europe – the clear inference being that he is willing to walk away without a deal.
Ahead of Michel Barniers arrival in London on Tuesday, the Financial Times reported that Number 10 was preparing to re-draft key parts of the Brexit withdrawal agreement. This, the paper said, risked the collapse of trade negotiations with Brussels.
On the markets, Asias main bourses started the trading week in subdued fashion, perhaps feeling a prolonged hangover from Wall Streets bout of the collywobbles on Friday.
Closer to home, Associated British Foods (LON:ABF) opened 6% higher after its Primark retail chain returned to form after the coronavirus lockdown and the company reported a larger than expected cash pile.
On the FTSE 250, Future PLCs shift to digital publishing was behind an increase in year-end forecasts. The stock advanced 9.6% in early trade.
Proactive news headlines:
Chariot Oil & Gas Limited (LON:CHAR) has aNNounced a significant increase in resources at the Anchois gas project, offshore Morocco. Total remaining recoverable gas resources now exceed 1 trillion cubic feet, after increasing 148%. The new resource, estimate by consultant Netherland Sewell & Associates, comprises 361bn cubic feet of contingent resources for development and a further 690bn cubic feet of prospective resources. Moreover, the company has highlighted three low-risk prospective targets – C, M and O sands – that can be drilled at low cost.
Belvoir Group PLC (LON:BLV) has said it is confident of meeting full-year expectations and has reinstated its progressive dividend policy. The UKs largest property franchise said results for the first half of 2020 were in line with the expectations management had before the coronavirus (COVID-19) crisis hit Britain. The business was inevitably hit by the lockdown restrictions introduced in March but since constraints were eased in May, the group said it has seen property sales and financial services activities running at record levels in terms of instructions, sales agreed and written mortgages. Despite the disruption caused by COVID-19, Belvoir saw revenue in the first half of 2020 rise by 8% to £9.77mln from £9.05mln the year before, and profit before tax jump 17% to £3.16mln from £2.70mln.
Blackbird PLC (LON:BIRD) has reported record revenues in the first half of its current financial year as the company said the acceleration in its business has continued despite lockdowns caused by the coronavirus (COVID-19) pandemic. For the six months ended June 30, 2020, the cloud video editing specialist reported revenues of £714,000, up 49% year-on-year, while the firms underlying (EBITDA) loss narrowed 30% to £714,000. The firm highlighted numerous developments during the period, including US TV network A+E doubling the volume of video edited using Blackbirds platform for the next year, while the group also contracted with Liverpool FC and Arsenal FC to deliver remote working solutions.
Frontier IP Group PLC (LON:FIPP) said it has appointed Mark Rosten, the former senior vice president development of mobile payments group Bango PLC (LON:BGO), as its new software commercialisation director. The IP investment firm said Rosten led the delivery of Bangos largest product innovation project during his time at the company, while he has also held roles such as EU director of product development at healthcare technology group GHX Europe. In his role at Frontier, Rosten will be focused on identifying opportunities and driving forward software development and projects across the groups portfolio.
United Oil & Gas PLC (LON:UOG), the growing oil and gas company with a portfolio of production, development, exploration and appraisal assets, has announced the appointment of Ms Iman Hill as an independent non-executive director with effect from Monday, September 7, 2020. The group noted that Hill is an experienced oil industry leader with over 30 years' experience in delivering successful exploration and production projects at global companies such as Shell, BP, BG Group. She has extensive experience in Egypt, the Mediterranean, the North Sea and South America, working in both onshore and offshore projects. Hill most recently served as chief operating officer with Energean. Prior to joining Energean, Iman worked with Dana Gas where she variously led operations as technical director, general manager UAE and country president for Egypt. Before this, she was vice president of Production and Development at Sasol.
Bushveld Minerals Limiteds (LON:BMN) vanadium venture with Invinity is advancing, via the creation of a new vehicle, Vanadium Electrolyte Rental Limited (VERL), which has already entered into its first deal. VERL has inked a contract with EDF Energy subsidiary Pivot Power which sees the joint venture company provide electrolyte for Pivot's five megawatt-hour flow battery, at the Energy Superhub in Oxford.
Red Rock Resources PLC (LON:RRR) has entered into an option agreement involving former gold and silver mining and exploration assets at Zlata Bana, Slovakia. The vendors of the assets are Lubomir Konkol and his associated parties including Zdarboh n.o, a non-profit company. The assets include a licence covering an area which contains old gold mines and a number of mineral-bearing veins mapped at surface, as well as land and buildings. Red Rock has paid €10,000 paid for a due diligence period that will last to September 21, 2020. It has also made a payment of €23,000 in order to acquire a 50% interest in the Zlata Bana licence, covering an area of approximately 12 square kilometres.
Pembridge Resources PLC (LON:PERE) has turned in a loss for the six months to end-June 2020, of just under US$9mln, as copper operations at the companys partially-owned Minto mine in Canada adjusted to the coronavirus crisis. As of June 30, 2020, the company had US$5.5mln in cash reserves. It's six-month operating loss rang in at US$7mln. During the period Minto produced 13,795 wet metric tonnes of concentrate, and sent its first shipment to Japan.
EQTEC PLC (LON:EQT), the gasification technology solutions company, has said it is to develop a waste management project in Southport in partnership with a local firm. The company has paid Rotunda Group £100,000 for the exclusive option to buy the project within the next 12 months, with the £100,000 to be deducted from the purchase price if EQTEC pulls the trigger on the deal. The exclusivity period can be extended, subject to mutual agreement. EQTEC will be responsible for contributing 100% of the development costs before financial close on the project is achieved; these costs are currently estimated at around £500,000.
Vast Resources PLC (LON:VAST) has released a detailed cashflow forecast and production schedule now that confirmatory drilling has been completed at the Baita Plai project in Romania. By the second quarter of 2021, the company plans to be producing over 2,000 tonnes of concentrate per quarter. By the third quarter, it will be generating net revenue of over US$5mln per quarter. Vast already has 150 tonnes of prepared copper concentrate that will form part of the first sales to Mercuria which is now expected to be delivered in October.
Panther Metals PLC (LON:PALM) told investors it has sourced key existing data covering its Annaburroo gold project, in Australias Northern Territory. "The geophysical data processing and interpretation has confirmed the presence of several extensive structural zones which appear to control the distribution of known gold mineralisation,” Darren Hazelwood, Panther chief executive said in a statement. Contractor Core Geophysics has been engaged to review and interpret the data, update imagery, and make recommendations for future work. The company, meanwhile, has identified several major structures and linear features within the same north-east trend as the prospective Annaburroo Dome, which spans some 8.5 kilometres by 4 kilometres.
Open Orphan PLC (LON:ORPH) has said its hVIVO subsidiary will present safety and pathogenicity results from respiratory syncytial virus (RSV) model for older adults at a leading conference this week. RSV causes mild, cold-like symptoms in adults, but can be more pernicious among the elderly. The hVIVO model “enables the exploration of RSV vaccine-induced immune responses and efficacy in the context of potential immune senescence [deterioration]” among the 60-75-year-old group. It also allows the potential identification of correlates of protection from RSV infection and disease in one of the vaccine's target populations, the company added. The results will be presented to the European Respiratory Society Congress taking place online. hVIVOs slot starts at 9.30am on Wednesday (September 9).
Kodal Minerals PLC (LON:KOD) has been informed that all the shares issued under the equity sharing agreement with Riverfort Global and YA II have now been sold. As a result Kodal has received total cash proceeds of £654,000. An additional £100,000 has also come in from the exercise of warrants. There are no further payments to be made or received or shares to be issued pursuant to the equity sharing agreement. The success of the agreement is in part due to Kodals strong recent share price.