FTSE dips 6 points to 7,375
Pound falters against euro and dollar
Eurozone PMI composite data beats expectations
WPP shares on the back foot after weak first half sales
11.50am: UK companies set to be hit hard by Brexit next year, survey shows
Profit growth at the UK’s largest companies is expected to fall next year as some put plans on hold or shift operations to other parts of the EU due to Brexit, a study has found.
The survey of projections compiled by for the Financial Times said profit at Britain’s biggest companies is expected to rise by 7.2% in 2018, compared to the estimated 19% this year.
“The currency is a kneejerk reaction that mathematically comes through,” Nick Nelson, head of European equity strategy at UBS, told the FT. “Years two, three and beyond there’s more uncertainty.”
Meanwhile, Prime Minister Theresa May said the Supreme Court would be the ultimate arbiter of law in the UK after Brexit.
Her remarks came after a government paper said “direct jurisdiction” of the European Court of Justice will stop after Brexit but did not rule out that the EU court would maintain its authority during a transitional period after the formal withdrawal.
11.25am: It’s all about Jackson Hole
There are few catalysts to drive markets today with traders looking ahead to the Jackson Hole Symposium, which kicks off on Thursday for three days, according to Oanda’s Craig Erlam.
“The event will see both Federal Reserve Chair Janet Yellen and ECB President Mario Draghi speak on Friday, which will be of keen interest to traders,” he said.
“Both central banks are expected to be very active between now and year-end and Jackson Hole is the perfect platform to lay the foundation for upcoming policy moves. Whether they will or not remains to be seen.”
But Erlam said since Draghi steered clear of commenting on upcoming policy decision in his speech today, he may decide to do the same at Jackson Hole.
“The ECB is clearly very concerned about the recent appreciation in the euro – despite an insistence that it does not concern itself with such matters – and recent “misinterpretations” by traders to Draghi’s comments will likely mean he steers clear once again.”
Draghi and Yellen will both speak at the event on Friday.
10.30am: ECB’s Mario Draghi gives nothing away in speech
European Central Bank President Mario Draghi has remained tight-lipped on monetary policy in the eurzone during a speech ahead of the Jackson Hole gathering of central bankers, which begins on Thursday.
Speaking at a conference in Lindau, Germany, Draghi said adjustments to monetary policy are “never easy” but made no reference to how the bank might change policy to respond to improving economic data across the eurozone.
Speech Mario Draghi: The interdependence of research and policymaking https://t.co/JlGFR3W8GX
— ECB (@ecb) 23 August 2017
Markets are now looking ahead to his appearance at Jackson Hole but reports have suggested he is unlikely to say much about policy then either.
9.50am: Eurozone PMI sends pound to new eight-year low against the euro
The euro has rebounded after data showed the manufacturing sector in the eurozone expanded further in August. Markit’s purchasing managers’ index rose to 57.4 from 56.6 in July, beating market forecasts of 56.3 and ahead of the 50 level that separates an expansion in sector activity from a contraction.
The services PMI fell to 54.9 from 55.4, compared to expectations of 55.4. The compositie index, which combines services and manufacturing, rose to to 55.8 from 55.7, exceeding the 55.5 estimated by analysts.
ING Research economist, Bert Colijn, said: “Manufacturing PMIs in the Eurozone have been buoyant for quite some time now, but industrial production has failed to improve from its modest growth trend of recent years. As most indicators point to further recovery of manufacturing activity, we do expect to see some improvements in growth for the months ahead.
The pound is down 0.43% against the euro at €1.0853, a new eight-year low.
Sterling is also weaker against the dollar, falling 0.19% to US$1.2798.
The dip in pound saw the FTSE 100 recover slightly, rising 9 points to 7,390.87.
8.55am: FTSE opens in the red
The FTSE 100 reverted to ‘summer mode’ Wednesday as it drifted eight points lower at the open to 7,373.82 with market participants counting down to the Bank Holiday break.
“The UK index has been unable to substantially break through, and hold above, 7,400 in almost a fortnight, investors struggling to justify such a climb when macro-nightmares like the tensions between the US and North Korea are still unresolved,” said Connor Campbell, markets analyst at .
The leading faller of the day was Sir Martin Sorrell’s WPP after the advertising behemoth was forced to slash growth forecasts for a second time as first-half sales went into reverse gear.
Analysts said the group, whose shares fell 11%, is facing its worst year in a decade as customers cut their spending with the company.
Not so much a dead cat bounce as a dead cat – that’s the best description of PLC (), which saw two-thirds of its value wiped out Tuesday following a catastrophic profit warning Tuesday.
After that sort of drop, the savvy (or brave) investors would normally weigh in, deeming the stock oversold leading to a bounce in the stock.
That didn’t happen today with the brokers taking out the red pens leading to a raft of brutal downgrades, leaving Provvy shares 4% lower.
Proactive news headlines:
() has struck a new third party funding deal to support its new drilling at the East Denver project in the Niobara shale, Colorado. A number of the precise details were not disclosed, nonetheless HNR told investors that the new arrangement was with a “leading oilfield services company, with global operations and listed on the New York Stock Exchange”.
() said it made a “very strong” start to the year after free cash flow and royalty income surged in the first half. The mining royalty business reported a 300% jump in free cash flow to £18.9mln in the six months ended 30 June, compared to the same period a year earlier, including an impact of the Denison financing arrangement of £3.3bn.
() said phase one of the pre-feasibility study (PFS) of the Mutamba Mineral Sands Project in Mozambique is now underway. The company has appointed mineral sands expert TZMI to carry out the work, which will include a gap analysis, options review, project planning and budget finalisation for stage-two.
Premier African Minerals Limited () has increased its holding in a company developing an Ethiopian potash project worth US$2.8bn. Premier’s deal may on the face of it look modest – it has acquired a 1% stake in Circum Minerals for US$1.36mln. But it says it now has a “meaningful” 5.2% interest in the company.
() said that its recent placing raised gross proceeds of £80mln for the company and, following this, it expects completion of the acquisition of GE Healthcare Dharmacon, Inc. to occur on 31 August 2017.
() has said its chief executive Gervaise Heddle has again increased his holding in the company, acquiring a further 500,000 ordinary shares today at a price of 0.55p each. Following the acquisition, Heddle is now beneficially interested in 4,250,000 ordinary shares in Greatland Gold, representing 0.21% of the issued share capital. Yesterday Greatland said Heddle had acquired a further 750,000 ordinary shares at a price of 0.545p each.
6.55am: FTSE 100 seen lower
The FTSE 100 is expected to retreat in early trading today following mixed showings overnight on Wall Street and in Asia, with the Dow Jones leaping nearly 200 points but other global markets fairly flat seeking fresh direction.
Spread betting firm CMC Markets expects the FTSE 100 index to open around 11 points lower at 7,370, having rallied nearly 63 points higher yesterday.
Michael Hewson chief market analyst at CMC Markets UK said: “Another day of strong gains in metals prices along with a recovering US dollar and diminishing concerns over geopolitical risks served to combine to return a day of strong gains for both European and US equity markets yesterday, with the Dow posting its best one day gain since April on chatter that the Trump administration might be able to make some progress on the thorny issue of tax reform.”
But he added: “Sadly we’ve seen this movie quite a few times this year with the hope that US politicians may well be poised to move forward with a program of tax reform, and for those hopes to subsequently turn to dust.”
Hewson said the focus today ahead of this week’s Jackson Hole symposium will be the latest flash PMI reports for August from Germany and France, as well as a speech by ECB President Mario Draghi in Germany, with investors looking for clues as to his thinking about what the European Central Bank might do with respect to the current bond buying program, as we head into year end.
WPP numbers eyed
There will be little on the corporate front to excite today, but results from advertising giant WPP PLC () will be eyed, with the firm often seen as a proxy for the global economy.
“These results will provide a valuable insight into trading and operational developments at a time when confidence in the outlook for advertising spend appears to be faltering,” said Shore Capital.
“Our more cautious mind-set also reflects comments from senior advertising industry players suggesting that the trend for brands to review agency relationships on a more frequent basis is here to stay and that marketing executives are currently exhibiting a more reticent and short-term approach to committing their budgets,” the broker said.
WPP’s half-year revenue is expected to be in the region of £7.5bn while analysts have pencilled in 45.7p for earnings per share, and 22p for the dividend.
Significant events expected on Wednesday August 23:
Interims: (), PLC (), Group PLC (), (), PLC (Q1) (), WPP PLC ()
Around the markets:
Sterling: US$1.2803, down 0.16%
Gold: US$1,285.10 an ounce, unchanged
Brent crude: US$47.66 a barrel, down 0.4%
Openreach in talks with BT’s rivals – The Times
Premier Oil sells stake in Western Europe’s biggest onshore oilfield – Financial Times
Glencore may lay off 4,700 Zambian workers in power dispute – Financial Times
Tui Boss warns Brexit could take 10 years – City AM
Balfour Beatty made preferred bidder by EDF Energy for Hinkley point power station – Daily
CEO Michael O’Leary ees interest in snapping up bust German rival – Daily Mail
Energy supplier Ovo hires No 10 aide who backed price cap – The Times
Chief expected to step down after cost overruns – Financial Times
Ford plugs in to China’s electric car market with joint venture – Daily Telegraph
Chinese car firm Great Wall cools talk over its interest in Fiat Chrysler deal – City AM
US probes Bayer’s US$66bn bid to buy – Daily Telegraph
Goldman Sachs CEO slams state of the US in solar eclipse tweet – The Independent
Village Voice print edition falls silent – Financial Times
Septwolves snaps up Chinese rights to Karl Lagerfeld brand for US$48mln – Financial Times
Solar panel capacity to overtake nuclear energy next year in historic landmark – The Independent
should close cheap funding scheme for retail banks, says economist Simon Ward – The Times
FC Barcelona sues Neymar for €8.5mln over PSG transfer – Financial Times