FTSE 100 slides as pound rises

The pound climbed back above $1.27 but the FTSE 100 share index was on track for its third week of losses in a row.

Shortly after midday the FTSE 100 was down 29.88 points at 7,409.41.

Meanwhile sterling rose 0.4% against the dollar to $1.2732, and climbed 0.2% against the euro to 1.1401 euros.

The FTSE 100 often falls when the pound rises because many firms in the index operate abroad. A stronger pound means overseas earnings are worth less when changed back into sterling.

Comments from brokers were behind some of the bigger share movements. BAE Systems fell 1.8% after JP Morgan cut its rating on the company to “neutral”.

Broadcasting company ITV was the biggest riser in the FTSE 100, up 2.3%, as Morgan Stanley raised its rating to “overweight”.

In the FTSE 250, shares in Domino’s Pizza fell 3.5% after analysts at Berenberg cut their rating on the company to “hold”.

FTSE 100 falls as oil remains under pressure

At the close, the FTSE 100 index was down 8.5 points, or 0.11%, at 7,439.29.

Shares in Royal Dutch Shell and rival BP closed slightly up after struggling earlier in the day as oil traded above $45 a barrel.

On Wednesday, the price of Brent crude oil had fallen to $44.35 a barrel, its lowest since November, although it recovered to $45.61 on Thursday.

Oil prices have been dragged lower by excess supplies on the global market, despite the efforts of the Opec producers’ cartel to limit output in order to push prices higher.

Pharmaceuticals firm Shire was the top riser in the FTSE 100, up 3.7%, after the European Medicines Agency validated its marketing authorisation application for Veyvondi, which treats an inherited bleeding disorder called von Willebrand disease.

Outside the FTSE 100, shares in Imagination Technologies jumped 16% after the company put itself up for sale.

Imagination is in dispute with its largest customer, Apple, after the US tech giant announced earlier this year that it planned to stop using Imagination’s technology in its products.

On the currency markets, the pound slipped 0.1% against the dollar to $1.2658 and was up 0.08% against the euro at 1.1355 euros.

The Rally In FTSE 100 Is Running Out Of Steam

After last week’s general election it would appear that it’s business as usual for the government. An alliance with the DUP has not yet been confirmed, negotiations are still underway. The best outcome for the markets is an alliance between the Tories and the DUP, this would bring stability to the markets. If negotiations fail or if Theresa May resigns we will see more volatility in the pound and the FTSE.

So far the decline in the pound has been limited, which is a surprise because currency analysts predicted a larger drop. This explains why the FTSE did not rally to new highs on Friday. Longer term I expect the pound to decline as the idea of having a coalition government with the DUP increases the uncertainty of a soft Brexit

The FTSE did rally on Friday and now the pattern has become unclear, simply because there are two ways to interpret the pattern; If the decline to Friday’s low at 7449.7 is wave (i) of a five-wave decline, the decline will resume after a bounce to 7570. This scenario assumes that the bull market ended at 7599. If however the FTSE rallies above 7599 we will have an alternate pattern which is a fifth wave in a larger rally in which case the rally could end near 7650.

 

FTSE losses limited by sterling softness

London stocks finished lower against a backdrop of falling equities in the US and Europe, with a softer sterling helping limit some losses as investors continue to evaluate the new UK political landscape in the cold, hard light of day.

This was as Moody’s warned the impact of the UK’s hung parliament was “credit negative” and PM Theresa May made ready to this evening meet with Tory backbenchers angered by the election result.

The FTSE 100 ended down 0.21% to 7,511.87, and the FTSE 250 closed down 0.44% to 19,682.70. Sterling was weaker on the dollar and euro, while gold, silver and copper prices abated and those for crude oil improved.

In the US, the Dow Jones, S&P 500 and Nasdaq Composite were down, with Friday’s tech sell-off continuing and hurting Europe. The Euro Stoxx 50, Cac 40 and Dax were heavily down.

“The market has managed to pullback most of the losses it incurred in the morning session,” said David Madden, market analyst at CMC Markets UK.

Madden said the move had more to do with a weaker pound than a sudden change in optimism regarding the British economy.

He and other pundits reckoned the outcome to PM May’s snap ballot still hung over the market, and would likely continue to do so until clarity on the UK’s political future was available.

The Tories were due to meet the Democratic Unionist Party tomorrow to discuss the possibility of forming a minority government with the supply and confidence of the Northern Irish party.

Jasper Lawler, senior market analyst at London Capital Group, said a drop in the value of sterling and the relatively threadbare technology sector helped stabilise the FTSE 100.

“While there’s no sign of panic, political uncertainty created by the election left little room for any British company shares to shine,” he said.

A survey from the Institute of Directors added to the downbeat mood as it showed business confidence plunged in the wake of Thursday’s general election and subsequent hung parliament.

In addition, investors were digesting data from Visa which showed that UK consumer spending fell 0.8% in May, marking its first year-on-year drop since September 2013.

Meanwhile, most analysts commented on the overall bearish sentiment pervading the market, and in relation to Brexit where talk was centering on the potential for a so-called ‘soft’ Brexit.

Neil Wilson, senior market analyst at ETX Capital, said: “As Moody’s points out there is a chance of a softer Brexit but we must also think there is a heightened risk of a cliff-edge exit from the EU.”

Brexit talks were due to start next Monday, and it was understood MPs would be urging May to adopt a more pragmatic approach to the UK’s divorce proceedings with the EU.

On the corporate front, notable numbers of mining companies, utility stocks and financial outfits tended lower on the FTSE 100, with commercial property salient among a small group of blue-chip gainers.

Software and information technology business Micro Focus International was hurt by weakness in the US technology sector. Precious metals miner Fresnillo retreated as gold prices declined.

Rio Tinto was on the back foot after Glencore offered to buy its interest in Coal & Allied Industries for $2.55bn in cash plus a coal price-linked royalty.

Tesco was gaining ahead of its first-quarter trading statement on Friday, as Deutsche Bank said it expected a solid UK like-for-like and improving international trends.

Oil giants Shell and BP gushed higher as oil prices advanced, after out-of-favour Qatar affirmed it would continue with its share of Opec oil production cuts.

Technology sell-off weighs on FTSE

British shares fell on Monday as a technology sell-off spread across Europe, while contractor Mitie (L:MTO) jumped after forecasting a recovery in its fortunes.

Britain’s FTSE 100 (FTSE) closed down 0.2 percent, with investors dumping tech and other cyclical stocks, which feature heavily on the blue-chip index, and heading into defensive sectors.

Software company Micro Focus (L:MCRO) and accounting platform provider Sage Group (L:SGE) were among the biggest blue-chip fallers, taken down by a pan-European tech sector (SX8P) which marked its worst day since the post-Brexit sell-off a year ago.

Anti-virus provider Sophos (L:SOPH), which had been a top gainer after a ransomware virus spread across the world, fell 5.8 percent on the mid-cap index.

Polar Capital Technology Trust (L:PCT) fell 4 percent on the mid-caps, while Allianz’s technology investment trust (L:ATT) was down 2.3 percent among small caps.

The declines came after a sharp tech sector sell-off on Wall street on Friday – Apple shares (NASDAQ:AAPL) had their worst day in more than a year as Goldman Sachs (NYSE:GS) put out a note urging caution across the sector.

“Overvaluations of technology companies today resemble previous investment manias,” said Fergus Shaw, fund manager at Cerno Capital.

“The fact that even successful businesses can become caught in a mania is evident in the case of Vodafone when its shares peaked at over 4 pounds in 2000, but are just 2 pounds today.”

“During this initial tech boom, Sage shares also hit a high at 8 pounds, yet despite the increased profits and dividends since, the share price is now 6.70 pounds. ”

Tech stocks aside, the decline took down a mixed bag of stocks, reflecting a downbeat day across European benchmarks, with the STOXX 600 (STOXX) down 0.9 percent.

Brokers’ greater caution on cyclicals, advocating a move towards more defensive sectors, was reflected in the FTSE‘s moves.

Miners Antofagasta (L:ANTO) and Fresnillo (L:FRES) were some of the biggest fallers while defensive stocks BT (L:BT) and Vodafone (L:VOD) gained.

A rare bright spot was the energy sector, with oil firms Royal Dutch Shell (L:RDSa) and BP (L:BP) up as oil prices rose, with traders betting the crude market has bottomed.

Mitie (L:MTO) hit a more than a one year high, up 13.5 percent after the contractor swung to a full-year operating loss after restating its accounts. Its cost-cutting programme and outlook were well received by investors.

“Completed accounting review is providing Mitie with a base from which to build after a tumultuous 12 months,” said Stifel analysts, praising the 45 million pound cost efficiency programme Mitie launched.

Liberum upped the stock from “sell” to “hold”.

Meanwhile, shares in Acacia Mining (L:ACAA) dropped 13 percent after Tanzanian media reported a government investigation team had accused the company of operating in the country illegally.

FTSE flirts with record as sterling boosts; Inmarsat rises

Britain’s major share index climbed on Thursday, flirting with its record high level as a weaker sterling gave large multinationals a leg up, while Inmarsat rose on merger speculation.

The FTSE 100 (FTSE) was up 0.4 percent by 0900 GMT, with consumer staples and industrials stocks providing the top boosts to send it hovering near its highest intra-day level of 7,586.45 points hit on Wednesday.

London-listed multi-national firms, which dominate the index, benefit when sterling weakens. Pressure on the currency has been increasing over the past week as some opinion polls point to a tighter-than-expected race in next week’s election.

The latest poll published by the Times late on Wednesday had May leading by just 3 points ahead of the opposition Labour party.

Mid-caps lagged the larger stocks slightly, up 0.2 percent.

“We have seen a relative underperformance of domestic focused UK equities as political risk increases alongside the perceived uncertainty of the Brexit outcome,” said Edward Park, investment director at Brooks Macdonald.

But Inmarsat (L:ISA) gained 5.4 percent on the day, leading the way among European satellite companies, with France’s SES (PA:SESFd) and Eutelsat (PA:ETL) also fuelled by speculation they could be takeover targets after sources said Softbank would let its planned $14 billion merger between OneWeb and Intelsat collapse.

While the large-caps were ahead on the day, UBS Wealth Management warned the boost to the FTSE 100 from the weak pound could be turning stale.

“The UK equity market’s tailwind from the weak pound is fading, and as we lap the currency low point during the second and third quarters of this year, the market will no longer receive a boost from currency effects,” said deputy head of the UK investment office Caroline Simmons.

Gains among large-caps were broad-based and broker calls helped some specific stocks stand out.

Private equity firm 3I Group (L:III) led large-cap gains, up 3.2 percent after Barcalys raised its price target on the stock, saying a trading update from Action management, which accounts for 30 percent of 3I’s portfolio, was reassuring and the group was confident on cash generation.

Mediclinic (L:MDCM) however sank 3.3 percent, the top FTSE faller, after both Credit Suisse (SIX:CSGN) and Bank of America (NYSE:BAC) Merrill Lynch cut their rating on the private health-care provider.

Meanwhile bus and rail company FirstGroup (L:FGP) fell 5.7 percent after a 23 percent profit jump was overshadowed by its warning of a mixed trading outlook.

Challenger bank Aldermore (L:ALD) fell 3 percent after Exane cut it to “underperform”, citing slowing loan growth and an uptick in impairments.

Business support services firm G4S (L:GFS) and real estate investment trust Segro (L:SGRO) were confirmed as the latest additions to the blue-chip index, with changes effective on June 16.

Intu Properties (L:INTUP) and Hikma Pharmaceuticals (L:HIK) were set to be demoted from the large-caps to the mid-cap index, as part of a quarterly review reshuffling stocks based on their relative size.

 

FTSE heads back toward record, banks a drag on European stocks

Strength in bluechip exporters helped the UK’s benchmark index inch back towards an all-time high on Thursday and outperform broader European markets where weakness in banks weighed.

Euro zone stocks rose 0.2 percent. The FTSE 100, meanwhile, was up 0.5 percent, just shy of a record high it hit in the previous session.

UK-listed multi-national firms, which dominate the benchmark index, are big beneficiaries of sterling weakness. The pound has been under pressure over the past week as some opinion polls point to a tighter-than-expected race in next week’s general election.

Firms such AstraZeneca and Rolls Royce (LON:RR), which get most of their revenues from outside the UK, were up more than 1.5 percent on Thursday.

Shares of Spanish bank Banco Popular fell more than 8 percent, the worst performers on the day, after one of Europe’s top bank watchdogs warned European Union officials that the bank may need to be wound down if it fails to find a buyer.

Among the larger banks, Deutsche Bank (DE:DBKGn) and Credit Agricole (PA:CAGR) fell about 1 percent. Overnight, U.S. bellwethers JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) both warned of weak trading revenues in the second quarter which pulled banking stocks sharply lower on Wall Street.

Shares of BT Group (LON:BT) fell about 1 percent following a downgrade at Morgan Stanley (NYSE:MS) which raised concerns over the company’s cash flows.

On the flipside, shares of online car retailer Auto Trader were the best performers on the STOXX 600 after Barclays (LON:BARC) upgraded the stock to an “overweight.” Shares jumped 6.4 percent to a record high.

Satellite group Inmarsat (LON:ISA) rose 5.8 percent with traders attributing gains to reports than Japan’s Softbank was in talks with the firm on a possible tie-up.

 

FTSE posts best month of the year as sterling swings

The FTSE 100 ended its strongest month of the year on a quiet note on Wednesday as a choppy day for sterling, thanks to an increasingly cloudy picture painted by polls about next week’s general election, gave investors little reason to chase the rally.

The UK bluechip index, dominated by dividend-paying exporters whose profits benefit from a weak local currency, hit a record high earlier in the session but lost those gains to finish the day slightly lower.

Those moves closely tracked sterling which was knocked around by various polls that pointed to a range of possible outcomes — from a hung parliament to a solid Theresa May-led Conservative win.

“You really can’t run a portfolio around poll results,” said Eric Moore, a portfolio manager at Miton Group, who added he had not changed his portfolio much and remained wary of UK consumer stocks.

“If there is a hung parliament you’ve got to be quite worried for the pound and the UK 10-year yield on gilts,” Moore warned.

A poll from YouGov published overnight on the distribution of seats after the June 8 vote pointed to a loss of 20 seats for Prime Minister Theresa May’s Conservative party that would leave her short of an overall majority in a parliament where she lacks potential coalition partners.

Other projections still show May would win soundly though the YouGov poll was the latest hit to markets which just two weeks ago were pricing in a Conservative landslide.

The sharpest swings, as has been the case since last year’s Brexit referendum, were on sterling which hit an almost six-week low in morning trade only to bounce back later in the session.

Political uncertainty has had less of a direct impact on the FTSE 100 which posted a 4.5 percent gain in May, its best monthly showing this year.

Those gains were driven largely by strength in shares of big multinational companies such as British American Tobacco (LON:BATS), Diageo (LON:DGE) and HSBC, which generate the majority of their revenue outside the UK.

They rose again on Wednesday though their gains were not enough to offset weakness in mining companies that suffered from a slump in the price of iron ore.

Commodity-related stocks, usually also beneficiaries from a weak pound, suffered as a supply glut and selling by Chinese speculators spurred the sharpest rout in iron prices this year.

Bellwethers Glencore (LON:GLEN), Rio Tinto (LON:RIO) and BHP Billiton (LON:BLT) fell more than 2 percent.

Elsewhere, shares of payment processor Worldpay fell 1.5 percent after Barclays (LON:BARC) downgraded the stock to “neutral,” adding it expected the company was likely to miss certain growth targets.

Among mid-caps, online food delivery service Just Eat (LON:JE) rose 3 percent to a record high as local broker Peel Hunt started coverage on the stock with a “buy” rating. Just Eat shares are now up more than 150 percent since their listing.