FTSE 100 closes down 5 at 7,319
the top performer in London
Shire sunk by defection of its chief financial officer
The FTSE 100 made a half-hearted late effort to wipe out the day’s losses and almost succeeded.
The top-shares index closed at 7,319, down 5 points on the day, having briefly dipped blow 7,300 to an intra-day low of 7,297.
“Tensions surrounding North Korea are still running high, and this week we could see them ratchet up as the US and South Korea will commence their annual 10-day military exercise,” noted David Madden, a market analyst at CMC Markets.
“The North Korean regime are always upset by it, and I would be surprised if we didn’t have some sort of angry reaction from Pyongyang,” Madden cheerfully predicted.
If things were sedate among the top-liners, there was at least some excitement to be had among the small caps, where MBL Group PLC () soared 48% to 17.63p on the release of full-year results.
The up-for-sale distributor and wholesaler said both its trading divisions were profitable at the operating level. Exceptional costs of £693,000 meant the group made a loss after tax of £158,000 versus a profit in 2015/16 of £75,000.
Interims from Spectra Systems Corporation (), a supplier of authentication technology for bank notes, prompted a 23% mark-up in the share price to 92.5p.
The group raised full-year expectations on the back of unexpectedly high sales of its phosphour products.
3.50pm … No help from Wall Street
Wall Street singularly failed to lift the mood here in London as it opened just as it closed last week – in negative territory.
The FTSE 100, which has traded in a narrow band, was off 14 points at 7,310.35 at 4pm.
“The markets remained in a bad mood this Monday, investors unwilling to indulge in any positivity before they get a feel for the big events littered across the rest of the week,” said Connor Campbell, financial analyst at .
“There wasn’t exactly anything new to prompt this negative display from the US markets – but nor does there need to be.
“America is engulfed two major storylines at the moment: one, the US/North Korea tensions, seemingly set to ramp up again as the former pushed ahead with military exercises in South Korea; and two, the ongoing chaos of Trump’s domestic agenda, with Steve Bannon the latest high profile casualty of the orange one’s loyalty-free tenure.
“Both of these situations are serious enough that their ongoing existence – one threatening global stability, the other indefinitely delaying Trump’s tax and infrastructure plans – is enough to cast a cloud over the markets.”
The big UK faller of the afternoon was (), which nudged almost 4% lower after it announced the departure of its chief financial officer.
Jeff Poulton is leaving at a crucial juncture for the FTSE 100 pharma group as it continues the process of integrating the US biotech Baxalta, which it bought last year for US$32bn
2.45pm … Wall Street open
Blue-chips got the week off to a soft start, with the metaphorical tumble-weed blowing across Wall Street now that results season has ended.
There is not much in the way of macroeconomic data to occupy traders either, most of whom probably regard the prospect of today’s solar eclipse as a welcome distraction.
The Dow Jones average was down 54 points at 21,620 after half an hour or so of trading, while the broader-based S&P 500 was down 6 at 2,420.
“It’s been a very quiet start to trading on Monday in what is expected to be a slow couple of days, with traders eyeing up the Jackson Hole event later in the week,” opined Craig Erlam, at forex trading platform operator Oanda.
“With both Mario Draghi and Janet Yellen scheduled to appear on Friday, traders are keen to get more insight into the plans of the two central banks, both of which are now pursuing less accommodative monetary policy. The Fed began its tightening cycle almost two years ago now and next month they’re expected to announce plans to start winding down its balance sheet which currently stands at close to $4.5 trillion,” he added.
“The political situation at home is providing another distraction for Donald Trump, who will be wanting to put the events of the last week behind him. There had been a lot of speculation that Trump was about to lose Gary Cohn in the aftermath of the events in Charlottesville and his response to them. Instead it was Steve Bannon that departed, a move that some have touted as being a positive for the President’s agenda. Whether he will be the final casualty for now is yet to be seen but as ever, Trump will remain very much in the spotlight,” Erlam concluded.
1.58pm … Bankers on a ‘jolly’, banks on the block
The ‘jolly’ for central bankers at the Jackson Hole mountain resort in Wyoming is being viewed with trepidation by those City folk trading financial stocks.
It’s thought the get-together (which starts Thursday) could herald the beginning of the end to easy money.
This may help explain the pre-emptive markdown of shares in PLC (), PLC () and the Footsie’s biggest casualty, ().
Provident, down 2.8%, has another pressing problem in that it has become the focus of short-sellers in the wake of July’s profit warning.
A report in the Times suggests AQR, Systematica and Lansdowne Partners are stalking the accident prone specialist lender.
That said, with just 3.7% of its stock on loan, it is way down the list of those companies between the cross-hairs of the hedge funds.
PLC () has the dubious distinction of being the most shorted stock (with almost 23% of its shares on loan), followed by () and Wood Group (LON:WG).
At 1.50pm, the FTSE 100 was off just over two points at 7,321.56.
12.01pm … school for scoundrels
At journalists’ college (yes that is a thing) we were taught to report what was happening rather than what wasn’t. Sensible. But what do you do when the absolutely nothing is taking place and even the commentators have given up the ghost?
Here’s a flavour of what I mean from your man Connor Campbell at : “There really wasn’t a lot to talk about this morning, with nothing of note to disrupt the market’s losses.”
Well, you tell it like it is. The last week in August is traditionally one of the slowest of the trading year. Volumes are lacklustre and markets tend to be directionless.
Underlining this, at midday FTSE 100 was flat as a pancake at 7,324.7.
The merger of Rathbones () with Smith & Williamson didn’t exactly set the City alight with excitement, while the big deal of the day was Gallic in flavour with Total bidding US$7.4bn for the North Sea oil assets of the Danish conglomerate Maersk.
Perhaps things will liven up when the US and its increasingly accident prone President (oops there goes another senior advisor) Donald Trump wake up.
The Guardian, probably similarly lacking in any grist, is currently punting Gary Cohn, the Whitehouse economic advisor and former Goldman Sachs president, as the frontrunner to succeed Janet Yellen as chair of the Federal Reserve.
Pretty soon Trump will have an inner circle made up of blood relatives and a couple of rats rescued from the traps around the edges of the Oval Office. Hail to the chief!
10.49am … where is everybody?
It feels a little like the daytime inhabitants of the Mile have packed up and gone home.
Trading volumes are thin, leaving the FTSE 100 to drift 9 points to 7,314.77.
Now here’s a talking point flagged up by Hussein Sayed, chief strategist at FXTM, we’ve been batting back and forth here in the Proactive Dungeon.
The conversation has centred around the movement of the CBOE volatility index, known as the VIX, or the fear index.
Around a fortnight ago the reading dropped to around nine, a record low. In other words the trading world was happy with its lot.
“The declines were a result of steady equity markets, low trading volumes and optimism that the markets were heading higher,” observes Sayed.
This has all changed in the past two weeks, with the ‘fear index’ rallying to 17.28 – an 81% spike in the four days from August 8-11 as the tensions between Washington and Pyongyang ratcheted up.
The VIX is now back below 15, but if Trump continues to burn through senior staff at his current rate (chief strategist Steve Bannon was the latest to receive the order of the boot) then expect it tick higher.
“Politics have clearly taken the front seat and another shock will likely lead to a further sell-off in equities,” says Sayed.
“Some investors might see the recent fall in prices as an opportunity to buy the dips, but given that valuations are still very high compared to historical averages, many will hold off until seeing meaningful fiscal policy change.
“Trump’s administration will be tested as we get closer to hitting the US debt ceiling.”
8.49am … subdued start
The FTSE 100 got off to a subdued start with the index of blue-chip shares off 12 points at 7,311.58, mirroring the performance of Asian markets overnight.
The mining stocks were in demand early on with () leading the way with a 1.4% rise.
BP () and () were given a boost as Capital provided its assessment of the sector; it rates both stocks ‘overweight’.
The investment bank told investors: “We see the next 12 months as a critical period for the oil and gas industry and one that should see companies getting back to covering dividends and reducing debt organically.”
The big corporate news of the day was provided by money manager Rathbones () and Smith & Williamson, which confirmed plans for a £2bn all-share merger.
Proactive news headlines:
()(CVE:RAB) has boosted EBITDA in the second quarter of 2017 to US$1.2mln from a US$1.5mln loss the previous quarter. Production costs fell as the company continued to mine into new areas of the Lower Footwall Zone at the Ming mine. The copper price was also stronger during the quarter.
() has boosted its ownership of the Jangama mineral sands project in Mozambique to 100%, via an all-share transaction. The company remains in joint venture with over the wider Mutamba project.
() is raising £900,000 to carry exploration work at the Ferensola gold project in Sierra Leone, well into 2018. A maiden resource at the Samana Hill portion is expected shortly.
An extended trial of Group PLC’s () waste-to-power system has returned some encouraging results. Its G3-UHt unit used a feedstock of tyre crumb as part of the extended trial at the Energy Centre of Thornton Science in Cheshire.
(), the energy storage and clean fuel company, has welcomed the launch of the Hydrogen for Transport Programme (HTP). HTP will provide up to £23mln to increase the uptake of hydrogen fuel cell vehicles and grow the UK hydrogen refuelling infrastructure.
Formula 1 is finally tapping into the growing eSports market and it has chosen () as its official partner to help deliver its upcoming ESports Series. Gfinity’s job will be to use its experience and market-leading technology to deliver a successful and seamless tournament that will help to grow F1’s popularity among its younger fan base.
Graphene-based products maker () has hired textiles industry veteran Luca Provolo as its new head of sales. Provolo will help to oversee Directa’s transition from the R&D stage to the commercialisation and sales phase when he takes up his new job at the start of September.
() chairman Anthony Balme has told investors he is excited by the company’s strong position, as the natural resources sector is showing “notable signs of a recovery”. The AIM-quoted mining group is set to benefit from an uplift in commodities prices, he added.
() has landed a mining licence in Botswana, allowing it to advance the Lesedi coalbed methane gas project. It marks a transition for the project, into the development phase from exploration and appraisal.
() told investors it had agreed a new funding deal with institutional investors, arranged by RiverFort Global Capital. It sees new shares being issued at a price of 0.7p each.
6.45am … Jackson Hole meeting eyed
The FTSE 100 is expected to open its weekly account in the red, taking its cue from Asia’s main markets.
The index of blue chip shares will fall 27 points at the start of trade to 7,296.98, according to London’s spread betting firms.
The week’s big news is likely to be generated by the annual meeting of central bankers at the Jackson Hole resort in Wyoming, which kicks off on Thursday.
According to the Guardian, pressure is mounting to bring to an end the fiscal stimulus packages used to rescue ailing world economies during and after a financial crisis.
“After a decade of low-interest rates and bond buying, a process known as quantitative easing, the Jackson Hole summit could be a platform to convince markets they can safely wean the world off cheap money,” the paper.
Michael Hewson, analyst at CMC, doesn’t expect the European Central Bank to add much to the debate with sources close to President Mario Draghi insisting he won’t comment on monetary policy when he speaks later this week.
“This reticence to comment may have something to do with the fact that there appears to be some concern on the governing council about an overshoot to the upside for the euro, particularly given the recent weakness of the US dollar,” CMC’s Hewson.
Back here in the UK, the final week of August seems likely to be a fairly busy one for scheduled news from Britain’s big companies. There are updates from miner BHP Billiton, housebuilder and troubled construction group .
Pound worth US$1.286
Brent crude down 2 cents at US$57.20 a barrel
Gold off 70 cents at US$1,290.90 an ounce.
The pace of global dividend growth grew in the second quarter of 2017, thanks to the more evenly spread economic growth and a revival in banking sector payouts following years of stress tests that have eroded profitability – FT.
is gate-crashing Warren Buffett’s deal to buy US transmission company Oncor, reaching an agreement worth US$9.45bn – FT.
Asset managers Union Investment, Erste and Acadian, have banned investments in German carmakers from some of their funds, after an investigation of alleged industry collusion was announced – FT.
The European Central Bank may have little choice but to wind down its €2trln bond-buying programme next year — whether eurozone inflation picks up, or not – FT.
Snap backer to invest millions in currency unicorn Transferwise – Times.
Two out of three bosses at the UK’s biggest companies have not been trained in how to deal with a cyberattack – Times.
Fat cats get less of cream as FTSE 100 Chiefs’ pay falls – Times.
The Government is preparing to water down plans to curb excessive Executive pay, amid fears of gridlock in parliament and claims that current legislation is “working well” – Telegraph.
The Financial Times has reported a small profit for its first year under Japanese ownership, following its debt-fuelled £844mln takeover by the publisher Nikkei – Daily Telegraph.
Pension cold-calling ban to include texts and emails in effort to tackle fraud – Guardian.
US retailer Walmart plans to use drones to deliver its goods – Daily Mail.
Usain Bolt to open Jamaican takeaway chain – Daily Mail.
UK firms set for dividend record this year thanks to a bounceback in the mining sector – Daily Mail.
Wealth manager has confirmed it is in exclusive talks with smaller financial services provider Smith & Williamson over a possible all-share merger – Daily Mail.