FTSE 100 sharply lower; US stocks tipped to follow suit



  • FTSE 100 down 67 points to 7,386



  • BP and Shell lower as oil prices fall



  • IMF downgrades UK and US 2017 growth forecasts



  • Sterling rallying against dollar and euro


 


It’s been a bad day so far for the FTSE 100 with a number of issues setting it back.


The blue chip index is off the day’s lows but it’s still 67 points, or 0.9%, down on Friday’s close at 7,386.


Part of the problem is that there has been almost nothing of any note trying to drag the index higher. () was making strides in early deals but that run has since petered out.


Airliners fly low again


By contrast there have been plenty of fallers. Airliners easyJet PLC () (down 3.7% to £12.64) and PLC () (down 3.2% to 571p) are among the worst hit as they continue to suffer from the ongoing price war in the industry.


Investors have recently been concerned by the prospect of lower fares, and 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 also weighed on Ryanair PLC () shares which dipped 3% to €17.55.


top faller


Elsewhere, the likes of BP PLC () (down 0.8% to 441.5p) and PLC () (down 1% to £20.75) have also been weighing on the FTSE 100 as oil prices retreat slightly.


Towards the end of last week, a barrel of Brent crude was going for just shy of US$50, but that has fallen to less than US$48.50 today.


() enjoyed a decent run last week, buoyed by the better-than-expected UK retails data; but it has given up some of those so far today after shedding 3.1% to sit at £37.07.


Provident Financial PLC () has been the biggest faller though, down 4.7% to £22.54 with investors seemingly nervous ahead of tomorrow’s interim results.


IMF downgrades UK growth forecasts


More generally, the blue chips have been hurt by a downgrade from the IMF. The organisation originally thought that the UK economy would grow by 2% this year, but it has now 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.


Sterling rallies


The strengthening pound has also weighed heavy on a lot of the blue chips, as it makes earnings generated in foreign currencies – as many of the big companies do – worth less when converted back into sterling.


The pound is currently rallying back against both the dollar and the euro, to US$1.304 (+0.33%) and €1.119 (+0.5%) respectively.


US stocks to take cue from UK


After a mixed week for US stocks last week, the markets across the pond are tipped to open this week in negative territory.


The Dow Jones is seen as opening 29 points in the red at 21,552, while spread bet firms reckon the tech-heavy Nasdaq Composite will be 9 points lower at 5,912.


As for the S&P 500, that index is seen as opening 3 points down at 2,469.4.


 


12.10pm… ‘launches Alitalia takeover bid’


Speaking of takeover offers, Ryanair PLC () has made a “non-binding offer” for Italian airline Alitalia according to BBC journalist Jonty Bloom…


 


11.50am…B&M shares on the rise amid Asda takeover reports


Shares in discount retailer B&M European Value Retail () are on a little run so far today; buoyed by reports that Asda, the UK division of Wal-Mart Stores Inc (), is considering a takeover.


Over the weekend, The Sunday Times said Asda was in the early stages of preparing a £4.4bn offer for the discounter in a bid to reduce its reliance on food sales.


The paper added that any deal would also give the supermarket another outlet for its popular George clothing range.


The stock is up 3.2% to 351p so far this morning, although that still values at it significantly less than what Asda is rumoured to be willing to pay indicating that investors aren’t convinced an offer will be forthcoming.


 


11.40am…‘More than 2,500 products have shrunk in past five years’


We’ve all long suspected that this has been the case, but the Office for National Statistics has today confirmed that many everyday products have been shrinking in recent years.


‘Shrinkflation’ – where manufacturers reduce the size and weight of their goods but keep the price the same – has affected everything from chocolate bars to loo roll to sausages.


Andrex toilet roll used to be 240 sheets but is now made up of just 221 (an 8% reduction), while McVities Dark Chocolate Digestives were 332g but are now just 300g (a 10% reduction).


There was some good news though; apparently 614 products in the stidy grew in size between 2012 and 2017.


Most manufacturers have blamed the need to resize their products on rising raw material costs, the ONS noted.


 


11.15am…FTSE 250 in the red as well


It’s not just the blue chips on the FTSE 100 that are having a bad day. The FTSE 250 is also down 0.8% – led lower by gold miner PLC () whose Tanzanian woes just won’t go away.


After it posted a disappointing set of interims on Friday, hit by the ongoing dispute with the Tanzanian government, reports over the weekend suggested that the under-pressure group is facing a lawsuit from relatives of workers who died at its North Mara mine.


The potentially expensive claim adds to Acacia’s problems in the East African country, from where it has been unable to ship or sell any of the gold or copper from its mines since the beginning of March.


The Tanzanian government has imposed the export ban, claiming that Acacia owes royalties on undeclared shipments. Shares dropped another 9% to 212p this morning. 


 


10.45am…Too early to call it a slump?


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.


Proactive news headlines


() has completed the recruitment of patients for its phase IIb study of its blood thickening agent six months ahead of schedule.  The trial of PeproStat, which is used to staunch bleeding during surgery, is expected to report top line data in the fourth quarter of 2017.


Drug developer e-Therapeutics plc (LON: ETX) has unveiled the results of its strategic review under new chief executive Ray Barlow. Following the review, the company plans to invest in its network-driven drug discovery (NDD) platform in creating new drugs, while continuing to control costs.


NetScientific plc () said its portfolio company, ProAxsis, has secured a £57,390 grant for its ProteaseTag technology. The grant will support the ProteaseTag technology, which enables the measurement of active protease biomarkers of disease, through a project called “Development of technology to support the advance of new protease therapeutics”.


(LON: HAYT) said it is “poised for growth” as it has entered the 2018 financial year with a record order book, significant investments and a proposed merger with (). The engineering services company’s order book stood at £49.8mln at 31 March, compared to £36.1mln last year following a strong order intake in the second half of 2017.


(LON: STI) said today that Crusader Resources has published an updated Borborema Mineral resource estimate and ore reserve as part of the requirements of its merger. Crusader has two advanced gold projects in Brazil, Borborema and Juruena.


() announced today that David Tang has resigned as managing director for personal reasons. Tang has also stepped down as president of CNMIM, the company’s largest shareholder.


() has accelerated its move into the North American market with the US$2.7mln acquisition of eSports services provider CEVO Inc.


(), the digital tech company focused on neuroscience, has further expanded its pilot of the Assessa progressive multifocal leukoencephalopathy (PML) platform, which includes US  biotech giant ().


() told investors it is advancing a landmark fuel-cell project in Surrey, signing a deal with Dunsfold Ltd. The company has signed a term-sheet for a front end engineering and design (FEED) for the project, which will be a micro-grid utilising hydrocarbon fuel cells capable of powering 2,500 homes.


() told investors it has agreed a US$10mln funding deal with a Romania focussed corporate finance and investment firm. It supports the group’s working capital and allows the group to expand its operations in Romania, where it has the Manaila polymetallic mine and the Baita Plai mine.


Plc () boss Paul Atherley has welcomed the progress at the Salamanca mine development, in Spain, which, in his words, is bringing the company closer to becoming one of the top ten uranium producers globally.


Indian power firm () told investors it has brought online some 53 megawatts of solar capacity in Punjab and Telangana. The company added that it also has some 65 megawatts of additional wind power capacity, with its overall installed capacity amounting to 1,119 megawatts.


() is looking forward to a 50% increase in production in the current quarter thanks to the drill-bit. In an update ahead of half-year results, the company said production from the Opuama field in Nigeria in the first six months of 2017 amounted to 954,728 barrels of crude, which breaks down to 429,627 barrels net to Eland.


() chairman Michael Rowan said he is looking forward to a highly active period as the company advances its ABS and Timberlands ventures.


AIM-quoted RNA therapy specialist Silence Therapeutics Plc () has bolstered its patent protections in the United States. The new US patent, ref 9,695,423, provides further protection for Silence’s innovative chemical modification technology. BP March


Internet domain specialist CentralNic Group PLC () has re-appointed Don Baladasan as its chief financial officer, sending its share price up by over a quarter. Baladsan held the post between 2010 and 2014, a period that covered CentralNic’s listing in 2013, before leaving to raise money for a number of AIM-listed companies.


() has filled in another gap in its network through a tie-up with South Africa–based LaserNet Group, which delivers OTT services across Africa. The memorandum of understanding outlines terms for Falcon to supply its Q-Flow powered OTT platform Quiptel to LaserNet, which will offer integrated OOT services to telecoms groups and mobile operators and provide hosted streaming services to independent content owners.


() is confident that the 2017’s full year results will be in line with market expectations. “Trading in the first half of the year has been positive as we start to see the benefits of our “Nasstar 10-19” programme come through,” said the cloud computing group.


Stem cell storage specialist PLC (LON:WIDE) is to launch a new synthetic bone graft in the UK that will be used initially in tooth fillings.


 () said today the development of its Ugur gold deposit in Western Azerbaijan was on track for first production in the fourth quarter of 2017. Drilling and assaying of samples from Uguar, located 3km from the company’s processing facilities at its Gedabek licence, have been completed. 


 


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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