FTSE 100 fagged out as US Food and Drug Administration targets nicotine levels in cigarettes



  • FTSE 100 falls 75 points



  • Sterling rallies versus dollar after dull US data



  • Tobacco companies sold off after FDA announces plans to cut nicotine levels in cigarettes



  • BT Group weak after results reveal further Italy charges


The Footsie rallied in the last half hour of trading but still ended the day with heavy losses.


The FTSE 100 closed at 7,368, down 75 points.


Tobacco companies got hammered as the US Food and Drug Administration said it will force companies to cut nicotine levels in cigarettes to non-addictive levels.


“It’s hard to overstate what this could mean for the companies affected: non-addictive levels of nicotine would likely mean a lot fewer smokers and of those people who do still light up, smoking a lot less. This will blow a hole in their earnings and forces a fundamental re-evaluation of earnings,” suggested Neil Wilson at ETX Capital.


Michael van Dulken of rival forex trading platform operator Accendo Markets was less apocalyptic in his assessment, saying the share price dives of (LON:VATS) – down 6.8% – and PLC () – down 3.8% – may have been an over-reaction.


“Firstly, this is a plan to start a public dialogue focused on protecting children and reducing tobacco related disease and death.


“Secondly, the fine print suggests balancing regulation of existing products with encouraging innovation for future less harmful options.


“Thirdly, there may be exemptions and delayed implementation of existing rules that offers some relief.


“Fourthly, it may require input from other bodies,” van Dulken said.


 


His last observation might be the most pertinent: “Lastly, never underestimate the lobbying power of the mighty tobacco industry.”


3.45pm: International stocks hit by dollar falls


The Footsie rally proved short-lived, with the index dropping back to session lows in late trading, despite Wall Street’s declines remaining less than feared, with dollar earners hit by a rebound in sterling as the US currency fell in reaction to slightly dull data. 


With around three-quarters of hour of trading to go in London, the FTSE 100 index had dropped by over 90 points to 7,354, just easing off the day’s low of 7,345.45.


On Wall Street, after hitting fresh record highs again yesterday, the blue chip Dow Jones was only down around 10 points at 21,785, although the tech-laden Nasdaq Composite was still off  27 points weighed by a near 4% drop from internet giant Inc ().


On currency markets, the pound extended its gains versus the dollar to 0.3% at US$1.3106 after further dull US data.


The final reading of the University of Michigan’s consumer sentiment survey for July was lifted to 93.4 from a prelnary 93.1, but that was still a decline from June’s level of 95.1.


Earlier US GDP growth annualised of 2.6% in the second quarter of 2017, although more than double the 1.2% pace in the first quarter – which was revised down from 1.4% – still missed forecasts for a 2.7% increase.


3.00pm: Footsie off lows as US falls less than feared


The FTSE 100 index came off its lows in late afternoon trading but remained weaker late afternoon as the opening decline on Wall Street proved less than feared despite fresh falls by tech stocks and a slightly below par rebound in US second quarter GDP.


With around an hour and a half of trading to go in London, the UK benchmark index was down about 37 points at 7,405, above the day’s low of 7,382.65, but below the peak of 7,443.01.


After half an hour of trading on Wall Street, having hit fresh record highs again yesterday, the blue chip Dow Jones was down around 30 points at 21,761, while the tech-laden Nasdaq Composite shed 25 points weighed by a 3.7% drop by internet giant Amaxon.com Inc () after a results disappointment overnight.


On currency markets, the pound held modest gains versus the US dollar, up 0.2% at 0.1% at US$1.3084, but remained lower against a firmer euro, down 0.3% at €1.1158.


US GDP growth was an annualised 2.6% in the second quarter of 2017, more than double the 1.2% pace in the first quarter – which was revised down from 1.4% – but still below forecasts for a 2.7% increase.


Marc Ostwald, global strategist at ADM Investor Services International said: “As ever the final profile for Q2 GDP may still be substantially different, as the revisions to 2014 to 2016 GDP  that accompanied this report underscore.


“However this can be termed to have been a surprise free report, and leaves thin summer markets to focus on month end flows, and then the usual pre-US payrolls vigil next week, with many doubtless disappointed that this again failed to incite any volatility.”


In London, FTSE 250-listed pubs and restaurants group PLC () saw its shares drop over 10% to 241.3p following an 18% rally after a bullish trading update yesterday.


Meanwhile PLC () shed 4.5% at 640.5p after the online food delivery group was downgraded to ‘equal-weight’ from ‘overweight’ by Capital after half-year results yesterday.


And AIM-listed musical instruments retailer Gear4music Holdings PLC () saw its shares drop 12.8% to 715p after it reminded investors that this trading year would be more weighted towards the second half.in an AGM update today.


1.50pm: US GDP rebound slightly disappoints


The Footsie stayed weak in early afternoon trading after US second quarter GDP showed a slightly lower rebound than expected, with Wall Street still seen starting lower weighed by pressure on US technology stocks.


The FTSE 100 index was around 51 points lower at 7,392, just off the session low of 7,382.65, and well below the day’s peak of 7,443.01.


On currency markets, sterling rallied higher versus the US dollar after the GDP date, adding 0.2% at US$1.3096, but remained lower against a firmer euro, off 0.3% at €1.1158.


US GDP growth was an annualised 2.6% rate in the second quarter of 2017, more than double the 1.2% pace in the first quarter, which was revised down from 1.4%, but still below forecasts for a 2.7% increase.


The strong growth rebound suggested that the early 2017 slowdown largely reflected seasonal quirks such as poor weather and late tax refunds.


Commenting on the data, James Knightley, chief international economist at ING, said: “Overall, the headline growth rate is respectable rather than great, but to be fair the breakdown is a slightly better mix than hoped.


“However, given the Fed story is more about inflation right now this is unlikely to sway sentiment in any meaningful way.”


12.45pm: Attention switches to US open


The FTSE 100 remained depressed at lunchtime as attention shifted to the restart across the Atlantic, with US tech stocks seen under pressure again after Inc () saw its earnings disappoint overnight, while US GDP growth data will also be key.


The UK blue chip index was down around 44 points at 7,398, holding off the session low of 7,382.65, but well below the day’s peak of 7,443.01.


On currency markets, the pound remained lower against a firmer euro, down 0.1% at €1.1177, and turned flat versus the US dollar at US$1.3093 ahead of the US data.


Joshua Mahony, market analyst at IG, said: “Traders will be keeping a close eye on the latest US GDP reading in the afternoon, with markets expecting to see a marked improvement on the disappointing first quarter figure of 1.4%.


“Improvements across a number of recent economic data points are likely to see that figure rise somewhat, with a big jump in personal consumption (2.8% from 1.1%) one of the key drivers of these heightened expectations.


“With the Fed having been in focus this week, there will be significant attention paid to today’s core personal consumption expenditure (PCE) figure, which is expected to tumble from 2.0% to around 0.8%.”


He also noted: “While US firms have been enjoying an outstanding earnings season thus far, UK-listed firms haven’t had it all their own way with disappointments from the likes of and BT proving a drag on the FTSE 100 this morning.”


Shares in  () remained one of the worst blue chip performer after a big fall in its headline pretax profits, losing 2.3% at 7.5p, but that was above the morning lows.


On the second line, PLC () was a big FTSE 250 faller, down 5% at 239p after the manufacturer of industrial flow control equipment’s chief executive, Peter France resigned from his position after the board agreed to a change at the top in an effort to return to higher growth and better margin levels “in what is likely to be a generally lower growth macro environment”.


But ceramic materials manufacturer () was a strong FTSE 250 gainer, up 6.,7% to 298.6p after its first half profit soared as it booked a substantial gain from disposals.


The group’s pretax profit in the first six months of the year rose to £92.3mln from just £46.2mln a year earlier.


10.50am: Consumer sentiment up in eurozone


Although the latest UK consumer confidence reading disappointed overnight, the July eurozone economic sentiment index released this morning was surprisingly upbeat, rising for a third consecutive month to a new 10-year high, against expectations of a fall.


The European Commission said the sentiment indicator for the 19-country currency bloc rose to 111.2 last month, up from 111.1 in June and 109.2 in May, driven up by more optm in the services sector. The average forecast was for a decline to 110.8 in July.


Dennis de Jong, managing director at UFX.com, said: “While the UK wrestles with its lowest levels of consumer confidence since the Brexit vote, things are far rosier on the continent.


“The latest reading suggests that spending is at healthy levels in the eurozone despite the heightened political and economic uncertainty.”


He added: “With the first quarter of the year proving to be a challenge for the eurozone following UK and French general elections, spirits haven’t been dampened in the aftermath and consumers refuse to be unfazed by tricky economic conditions.”


On currency markets, sterling was lower against a firmer euro after the data, losing 0.1% at €1.1178, but the pound stayed higher versus the US dollar, up 0.2% at US$1.3087. 


The FTSE 100 index remained weak, shedding around 51 points at 7,392, easing off the day’s low of 7,382.65, having only reached a peak of 7,443.01.


10.15am: Results still main focus


The Footsie extended its falls as the morning session progressed, dragged back by some mixed blue chip corporate news, and falls from US technology stocks after earnings from internet giant Amazon Inc () disappointed overnight.


Around mid morning, the FTSE 100 index was down about 54 points at 7,388, just off the day’s low of 7,382.65, having only reached a peak of 7,443.01.


Telecoms  giant  () remained the biggest blue chips faller in London, down 3.9% to 303.95p as headline profits fell following further charges for the Italian accounting scandal earlier this year.


George Salmon, equity analyst at said: “The accounting scandal in Italy has led to another £225m of nasties turning up in first quarter numbers, to add to the £530m the group originally set aside back in January.


“In addition to this, misdemeanours at Openreach mean a total of £340m is to be paid in fines and compensation, and another £300m is needed to cover the cost of restructuring a number of divisions, including Global Services. All the while the c. £16bn pension and debt pile looms over the group.”


“However,” the analyst added, “it’s probably unfair to paint an entirely gloomy picture. BT has shaken off demands to fully separate the higher-margin Openreach division, and assuming there aren’t any more skeletons in the closet, the cash flows from EE and the growing Consumer division are potentially attractive.


“Nonetheless, with BT fighting battles on several fronts, one could be forgiven for waiting for the dust to settle.”


The day’s two other blue chips results went in the opposite different direction, with lender PLC () managing to rally after its early falls, up 0.5% at 1.1p, while PLC () shares added 0.2% at 595p.


Yesterday’s massive batch of FTSE 100 results also continued to direct attention, with drinks giant  () the biggest blue chip gainer, up 1.9% to 2,453p with Capital raising its price target today.


Meanwhile, drugs firm PLC () rallied 1.1% higher to 4,371.5p after big falls yesterday as cancer trial disappointments weighed against its latest results, despite broker downgrades.


And oil major PLC () also rose post-Thursday’s results – with its B shares up 0.7% at 2,125p. 


Away from the blue chips,  () was a good gainer, up nearly 6% to 22.25p after it revealed that its flagship eSports tournament will be broadcast on BBC Three this summer.


READ: Gfinity’s Elite Series tournament to be broadcast by BBC Three


The eSports promoter and events group said the online channel of the national broadcaster will show games and exclusive short-form content from the Gfinity Elite Series tournament. It is the BBC’s first contact of its kind for eSports.


And cancer-focused biotech  () saw its shares add 4.8% at 2.18p after it inked what it hopes will be the first of many licensing agreements for its products.


The deal is with Bangladeshi group Mystic Pharmaceuticals Lted, which will get access to ValiRx’s patented technology, including pre-clinical products, to further develop them for the benefit of ValiRx for five years.


8.45am: Weak start for Footsie


The FTSE 100 index dropped back in early trading, reflecting falls by Asian markets despite record overnight highs on Wall Street, unsettled by an after-hours profit drop from internet giant Amazon Inc () and post-results falls by  () and PLC (). 


In opening deals, the UK blue chip index was around 30 points lower at 7,412, having shed 9.31 points yesterday after a volatile session.


Overnight on Wall Street, the Dow Jones closed at another record high, up 85.54 points at 21,796.55, but US technology stocks put in a late slide and Amazon shares shed around 3% in after-hours trading.


READ: Amazon’s second quarter profits plunge on costly expansion


David Morrison, senior market strategist at SpreadCo said: “If the current pull-back in the US tech sector proves to be nothing more than a short-lived bout of profit-taking then it won’t take long for dip-buyers to pile back in.”


He added: “Bullish investors can cite evidence of a solid US economic recovery, together with a Fed unwilling to tighten monetary policy due to low inflation as the perfect environment for a strong market performance over this summer. But we’re well overdue a decent downside correction which could occur if today’s sell-off gathers momentum.”


After yesterday’s mega-batch of blue chip results, another trio of FTSE 100 earnings provided the early focus today.


BT Group was a big faller, losing 2% at 309.6p after the telecoms giant reported a big drop in headline first quarter profits after a further charge related to its Italian accounting scandal, although a fall in underlying earnings was much as expected.


READ: BT Group posts big drop in headline profits after further Italy charge, but underlying fall as expected


Meanwhile, shed 1.2% to 208.6p as a 13% increase in its first half profits to £2.3bn failed to impress, with its total income falling 1% to £10.8bn.


READ: Barclays achieves 13% increase in first half profits as it completes restructuring


The results were soured somewhat by the news that , like PLC () yesterday, had to set aside a further £700mln to cover PPI compensation claims.


But British Airways-owner PLC () was a strong FTSE 100 gainer, up 3% to 612.5p after it said it expects its 2017 operating profit to show double-digit percentage growth.


READ: British Airways-owner IAG bullish on full-year after reporting strong second quarter


The forecast came as the airlines group reported strong second quarter growth despite a massive IT power outage which grounded some BA flights over a May bank holiday weekend.


Proactive news headlines:


Myanmar-focused MySQUAR () has confirmed it is working on a placing to raise funds to set up a mobile payments platform. A mobile payments platform within Myanmar would involve the creation of digital wallet services, a mobile payment application for processing peer-to-peer (P2P) and person-to-merchant (P2M) transactions.


Satellite Solutions Worldwide Group PLC () has added a fixed broadband arm to its business with the acquisition of Quickline in Lincolnshire. Already one of the UK’s largest suppliers of wireless broadband packages to remote and inaccessible areas, the acquisition will make it the only supplier of both alternatives in the country.


() told investors that strong momentum has continued for its Guardian SaaS fleet services unit. The company said it has booked more new multi-year contracts, with further bookings of A$13mln taking the tally of total contract value to over A$29mln at the end of the financial year (June 30).


’s () flagship eSports tournament will be broadcast on BBC Three this summer. In a statement, the eSports promoter and events group revealed that BBC Three, the online channel of the national broadcaster will show games and exclusive short-form content from the Gfinity Elite Series tournament.


Lted (ASX:WLF, ) interim managing director Richard Lucas told investors that the UK miner is heading into a pivotal time. The company, in a statement, said that the processing plant turnaround plan is starting to deliver improvements in production – with the plant treating 7% more ore in the three months ended June 30, and concentrate output was up 15%.


() has inked a licensing deal with Bangladeshi group Mystic Pharmaceuticals Lted, which will give the latter access to ValiRx’s patented technology, including pre-clinical products, to further develop them for the benefit of ValiRx for five years.


() shares ticked higher as it reported on a strong second quarter operationally and expects output to continue to increase from its mines in Romania and Zimbabwe.


() told investors it had completed a programme of six holes at the Toral project in Spain, which all returned visually identified lead-zinc intersections. The work has led to the firm better understanding the structure of the deposit and it has now kicked off scoping and comparative studies as it begins the journey towards a pre-feasibility study, as well as efforts to expand the resource.


Amur Minerals PLC () reckons it has added another three years of production at its giant Kun-Manie project in Russia – as it unveiled favourable drilling results from the Kubuk deposit. The results are from work between June 30 and July 21 this year, which aimed to drill gaps between the Kubuk and Ikenskoe/Sobolevsky (IKEN) targets, and to upgrade their existing resources to the more certain ‘indicated’ category.


6.45am: Early falls predicted


The Footsie is expected to open lower at the end of a busy week following mixed performances overnight on Wall Street and in Asia, with another batch of UK blue chip results the main focus after yesterday’s swathe of numbers.


Spread betting firm expects the FTSE 100 index to open around 40 points lower at 7,402, having shed 9.31 points yesterday.


Overnight on Wall Street, the Dow Jones closed at another record high, up 85.54 points at 21,796.55, but US technology stocks put in a late slide and after-hours internet giant Amazon Inc () saw its shares fall 3% after it reported a 77% drop in profits, unsettling Asian markets.


UK data released overnight showed that consumer morale took another dent last month with GfK’s UK consumer confidence falling to a reading of -12 in July, down from -10 in June, a one-year low, strengthening expectations the Bank of England will again leave interest rates unchanged at next week’s policy meeting.


On the corporate front, with over 10% of the UK benchmark index having reported results yesterday, there is a slowing in the newsflow today, although numbers from three big blue chip firms are on the agenda.


A first-quarter trading update from telecoms giant  () will be the main focus on as investors look for some reassurance after poor full-year results in May, having got some relief on the regulatory front earlier this week.


Back in May, the FTSE 100-listed company reported a 19% drop in full-year pretax profits and forecast current year earnings would be slightly lower.


READ: BT shares gain after Ofcom forced to revisit rules on broadband market


The group also said its dividend this year would be less than the 10% previously stated, so any update on the likely payout should be of particular interest to investors.


The latest figures come two days after the Competition Appeals Tribunal quashed rules set by regulator Ofcom last year for a new market in so-called ‘dark fibre’.


The rules were set in place to improve competition and challenge BT Openreach’s dominance over the lucrative market of leased lines.


However, BT will no longer be required to launch a dark fibre product in October after the CAT ruled that Ofcom made an error in its definitions of the business market.


Legacy issues key for


UK lender PLC () continues the sector’s second quarter results season, although the actual numbers will likely be overshadowed by legacy issues like those of PLC () on Thursday.


READ: Lloyds reports biggest half-year profit in eight years but shares drop as PPI storm rages on


Last week, it emerged that and four of its former top executives will appear in court on 9 January 2019 to begin a trial on charges of conspiracy to commit fraud over deals made with Qatar as part of its £12bn emergency fundraising in 2008.


In terms of its financial performance, the lender made a good start to the year with its first quarter profit smashing expectations, and this should have continued.


And () will also post half-year numbers after reporting a record first-half performance in May, with the second-quarter having seen a major IT systems error ground flights over a bank holiday weekend and the British Airways-owner still embroiled in strike action.


Proactive news headlines: 


Myanmar-focused MySQUAR () has confirmed it is working on a placing to raise funds to set up a mobile payments platform. A mobile payments platform within Myanmar would involve the creation of digital wallet services, a mobile payment application for processing peer-to-peer (P2P) and person-to-merchant (P2M) transactions.


Satellite Solutions Worldwide Group PLC () has added a fixed broadband arm to its business with the acquisition of Quickline in Lincolnshire. Already one of the UK’s largest suppliers of wireless broadband packages to remote and inaccessible areas, the acquisition will make it the only supplier of both alternatives in the country. 


() told investors that strong momentum has continued for its Guardian SaaS fleet services unit. The company said it has booked more new multi-year contracts, with further bookings of A$13mln taking the tally of total contract value to over A$29mln at the end of the financial year (June 30). 


’s () flagship eSports tournament will be broadcast on BBC Three this summer. In a statement, the eSports promoter and events group revealed that BBC Three, the online channel of the national broadcaster will show games and exclusive short-form content from the Gfinity Elite Series tournament. 


Lted (ASX:WLF, ) interim managing director Richard Lucas told investors that the UK miner is heading into a pivotal time. The company, in a statement, said that the processing plant turnaround plan is starting to deliver improvements in production – with the plant treating 7% more ore in the three months ended June 30, and concentrate output was up 15%.  


 () has inked a licensing deal with Bangladeshi group Mystic Pharmaceuticals Lted, which will give the latter access to ValiRx’s patented technology, including pre-clinical products,  to further develop them for the benefit of ValiRx for five years. 


() shares ticked higher as it reported on a strong second quarter operationally and expects output to continue to increase from its mines in Romania and Zimbabwe. 


() told investors it had completed a programme of six holes at the Toral project in Spain, which all returned visually identified lead-zinc intersections. The work has led to the firm better understanding the structure of the deposit and it has now kicked off scoping and comparative studies as it begins the journey towards a pre-feasibility study, as well as efforts to expand the resource. 


Amur Minerals PLC () reckons it has added another three years of production at its giant Kun-Manie project in Russia – as it unveiled favourable drilling results from the Kubuk deposit. 


The results are from work between June 30 and July 21 this year, which aimed to drill gaps between the Kubuk and Ikenskoe/Sobolevsky (IKEN) targets, and to upgrade their existing resources to the more certain ‘indicated’ category. 


Significant events expected on Friday July 28


Interims:  (Q1) (), PLC (), Group PLC (), PLC (), PLC (), PLC (), PLC (), PLC (), (), Rightmove PLC (), UBM PLC ()


Finals: Clipper Logistics PLC (LON:CLG)


Trading updates: Gear4Music Holdings PLC (), PLC (), PLC ()


Around the markets:


  • Sterling: US$1.3141, up 0.2%

  • Gold: US$1,249 an ounce, unchanged

  • Brent crude: US$48.92 a barrel, down 0.2%


City Headlines:


  • swoops on shares as activists sell out – Daily Telegraph

  • MailOnline’s advertising revenues increase by £6mln as online spending offset a decline in print – Daily Mail

  • Amazon sticks with investment plans despite blow to profits – Financial Times

  • excluded by FTSE Russell over voting rights – The Times

  • SpaceX’s new fundraising sees valuation near US$21bn – Financial Times

  • Richard Branson cedes control of Virgin Atlantic – The Guardian

  • London’s Walkie Talkie building sold for record-breaking £1.3bn – The Guardian

  • London wins backing for Saudi Aramco flotation – The Times

  • UK households could face ‘considerable and unpredictable’ fluctuations in food prices, says IFS – The independent

  • Pension savers owed £26mln as HMRC overcharges thousands accessing pots – Daily Mail

  • First UK commercial fracking well set to be drilled near Blackpool – Financial Times

  • Two million to get ultrafast full-fibre broadband as Soros-backed Hyperoptic borrows £100mln putting pressure on BT Group and – Daily Telegraph

  • China Eastern buying 10% stake as part of airline JVs’ rejig – Reuters

  • Porsche ordered to recall thousands of cars over emissions cheating – The independent

  • Total ready to make acquisitions and invest while assets still cheap – Financial Times

  • Future of A380 superjumbo in doubt after Airbus cuts production – Financial Times

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