FTSE 100 in freefall as airlines, IMF downgrade and pound’s rebound all weigh



  • FTSE 100 down 77 points to 7,376



  • Airlines slump as price war hits



  • IMF downgrades UK and US 2017 growth forecasts



  • Sterling rallying against dollar and euro


 


At what point does a fall become a slump? Wherever that line is, the FTSE 100 must be pretty close to crossing it.


The blue chip index is currently down by 77 points, or 1%, to 7,376, with a number of factors going against the Footsie this morning.


Most obvious among them is the downgrade to UK economic growth forecasts from the International Monetary Fund.


The IMF previously thought that the UK economy would grow by 2% in 2017, but it has now lowered that to 1.7% on the back of post-Brexit uncertainties and a slower-than-expected start to the year.


Next up is the strengthening pound, which makes earnings generated in foreign currencies worth less when converted back into sterling.


The pound is currently rallying back against both the dollar and the euro, to US$1.304 (+0.35%) and €1.119 (+0.5%) respectively.


That means that there are only a handful of blue chips in the black this morning, with almost none of them worth writing home about.


On the flip slide, there are plenty of losers. The airlines continue to weigh on the index, with increased competition forcing the likes of easyJet PLC () (down 2.7% to £12.76) and British Airways owners PLC () (down 2.5% to 575.3p) to lower their fares, which never pleases investors.


Subprime lender  PLC () was the biggest faller though, down 4.5% to £22.26 with investors nervous ahead of tomorrow’s interim results.


 


10am…Reckitt reaction


“Growth should pick up in the second half as the group launches a wave of new products, ranging from probiotic chocolates to disinfectant wipes,” said fund manager Steve Clayton.


“Growth in the emerging markets should continue to drive the business, especially once the impact of the Indian sales tax has waned.


“Trading may be tough currently, but the dividend increase speaks volumes about how the group sees its future.”


 


9.45am…Reckitt heads lower as it downgrades full-year revenue guidance


Group PLC () was on the way down this morning after confirming that it was lowering its full year revenue guidance after a cyber-attack disrupted operations.


The consumer goods giant said it was reducing its annual net revenue target to 2% from 3% as it reported a 2% decline in like-for-like revenue in the second quarter.


Reckitt had already warned earlier this month that the so-called ‘Petya’ ransomware attack could cost an estimated £100m in full year revenue.


Still, adjusted profits in the second quarter rose 16% to £1.19bn when measured at actual exchange rates or 1% at constant exchange rates.


That wasn’t enough to keep investors on board though, with the share price heading 1.2% lower to £77.90.


 


9.15am…List of IMF forecasts


In case you were wondering, here is a list of the IMF’s revised forecasts:


 


9am…Airlines, IMF downgrade weighs on Footsie


The FTSE 100’s sell-off on Friday afternoon has continued into this week, with the blue chips dragged lower by airlines (once again), as well as the International Monetary Fund (IMF) downgrading its economic growth forecasts for both the US and UK this year.


Currently, the Footsie is down 38 points to 7,415, which means it has lost more than 100 points in the past six trading hours.


Price war hurting airliners


As was the case for much of last week, easyJet PLC () and British Airways owner PLC () were among the top blue chip fallers.


Many investors are concerned that airlines will be forced to lower their ticket prices as competition in the sectors heats up, which could impact revenues and profitability.


Those fears reared their heads again today as PLC () boss Michael O’Leary said he expects “the pricing environment to remain very competitive”.


The low cost carrier is predicting fares to fall by 5% in the six months to September and by another 8% in the six months to March 2018.


That prompted another sell-off in airline stocks. easyJet was the worst hit (down 3.1% to £12.72) on the FTSE 100, followed closely by IAG (down 2.6% to 575p). also gave up 4.7% on the back of its update to trade at €17.25.


IMF downgrade weighs


More generally, the blue chips were hurt by a downgrade from the IMF. The organisation originally thought that the UK economy would grow by 2% this year, but it’s lowered that to 1.7%.


The IMF said “weaker-than-expected activity” in the first three months of 2017, coupled with some post-Brexit risks, was to blame for the chop.


Germany, France and Spain were among a handful of European countries to have their forecasts moved higher, although the US, like the UK, was downgraded.


British American Tobacco top riser


Despite the gloomy start, there were some admittedly gains to be had this morning. Supermarket () was one of a small number to be in the black, edging 0.2% higher to 250p.


() topped the blue chips though, up 1% to £55.21 as it nears the completion of its US$47bn takeover of Reynolds. That deal, which will create the world’s largest tobacco group, is expected to go through on Thursday.


 


7am…FTSE 100 to open huge earnings week on back foot


FTSE 100 is set for a dull start ahead of a week that sees an torrent of big company results and trading updates.


Financial spread bet firms see Footsie shedding upwards of five points fro Friday’s close of 7,452 when trading gets going.


UK blue chips to report over the next five days include , , GlaxomithKline, Astra Zeneca, IAG,


US markets, too, face a deluge of corporate news and how good or bad these are will set the tone. Wall Street was cautious on Friday with the Dow Jones Industrial Average shedding 31 points to 21,508. The S&P 500 and Nasdaq was also off a little.


Asian markets were mixed with gains in Hong Kong and Shanghai, but a moderately heavy fall in Tokyo. 


 


Headlines


Bakkavor looks to serve up £1.5 billion float – One of the biggest suppliers of ready meals to Marks & Spencer and Waitrose is exploring plans for a stock market float that could value it at up to £1.5 billion. (The Times)


State pension age changes to cost 7mln people £10,000 each, analysis reveals – More than seven million people in their 30s and 40s will lose out by £10,000 each under government plans to increase the state pension age earlier than planned. (Independent)


Bond funds attract US$355bn in first five months of 2017 – Investors piled more than US$355bn into bond funds in the first five months of 2017. (Financial Times)


Profit warnings dip as economy defies gloomiest forecasts – Profit warnings have fallen to the lowest level in seven years as British companies confound the current economic gloom. (The Telegraph)


o2 renews sponsorship of Academy music venues – o2 has renewed its sponsorship of music venues across Britain in a deal thought to be worth about £70mln over the next decade. (The Guardian)


Injuries cost Premier League football clubs £177mln last season – The cost of football injuries has rocketed over the last year, costing Premier League clubs an eye-watering £177mln. (City AM)


 


Significant events expected:


Trading updates: ()


Interims: (Q2) PLC (LON: RB), (Q1) Holdings PLC (),  PLC (), (), SThree PLC (), WH Ireland Group PLC ()


Finals: Tungsten Corp. (), ()

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