UK Edition
FTSE 100 gains tail off during afternoon as oil prices fall into negative territory
Market report
Provident Financial shares continued to feel the impact of last week’s profit warning with RBC Capital Markets downgrading it from outperform to sector perform.
The FTSE 100 doorstep lender was one of the few stocks in the financial sector to end the day in negative territory as banking shares were among the top performers on the index following the Italian bank bail-out agreed over the weekend. Provident saw its shares drop by a further 41p or 1.7pc to £23.99.
RBC analyst Peter K. Lenardos said that, while there were still positives for the bank, “the loss of management credibility” caused by a misfiring revamp and “the considerable execution risk that remains” forced the downgrade. The company said that it now expected adjusted profits in its consumer credit division to nearly halve to £60m this year.
He added that last week’s profit warning, which caused shares to plummet by over 18pc, was a “self-inflicted wound” and that it will take “several quarters for management to rebuild credibility and assure the market”.
Shares in RBS and HSBC led the sector higher, rising by 4.2p to 249.8p and 8.2p to 688.9p respectively.
Elsewhere on the FTSE 100, Whitbread shares were buoyed by a positive note from Morgan Stanley and HSBC maintaining its "buy" rating for the Premier Inn and Costa Coffee owner. Following a field trip to the company’s hotels in London, Morgan Stanley analyst Jamie Rollo said demand had “very quickly returned to normal with no real impact on trading” after a brief dip following recent terrorist attacks. He added that the “expansion plans seem on track” and that Premier Inn was confident of hitting its 85,000-room target by 2020. Shares ended the day 86p higher at £40.45.
A “fat finger” was blamed for the price of gold dropping to a six-week low in morning trading, dragging shares in miners specialising in the precious metal down with it. The yellow metal pared losses but still ended the London session down, and shares in Mexico-based miner Fresnillo closed down 50p at £15.55. Fellow miner Randgold fared better, ending the day down 115p at £70 while FTSE 250 constituent Acacia Mining shed 2.8p to 299.1p.
On AIM, shares in former tech star Blur Group dropped a further 11.1pc - or 0.4p - to 3p. Its value collapsed on Friday when the company revealed it was running out of cash and may fall into administration.
Finally, Touchstone Exploration, a Canadian based oil and gas company focused on Trinidad and Tobago, started trading AIM. The company, which is already listed in Toronto, raised £1.45m through a placing of 20 million new shares at 7.25p apiece to help fund its ambition to become the largest onshore producer in the twin-island state. Its shares ended up 8.7pc at 7.88p.
Summary
Round up
- Banking shares were among the best performers in the UK and Europe after the £14.9bn bailout of two Italian banks.
- Brent crude started the day well, boosting energy stocks, but dropped back below $46 per barrel in the afternoon.
- The pound is still up against the dollar as disappointing data on durable goods orders in the United States keeps it in positive territory.
European stock markets at close of play:
FTSE 100: 7,447 (+0.31pc)
FTSE 250: 19,684 (0.00pc)
Euro Stoxx 50: 3,562 (+0.51pc)
DAX: 12,771 (+0.29pc)
CAC 40: 5296(+0.56pc)
FTSE 100 Risers
Whitbread (+2.17pc)
IAG (+2.09pc)
RBS (+1.71pc)
TUI (+1.50pc)
easyJet (+1.42pc)
FTSE 100 Fallers
Fresnillo (-3.12pc)
Antofagasta (-3.72pc)
Provident (-1.68pc)
Randgold (-1.22pc)
Rolls-Royce (-1.22pc)
Exchange rates
GBP/USD: 1.2729 (+0.08pc pc)
GBP/EUR: 1.1367 (+0.09pc)
FTSE 100 struggles during the afternoon
Chris Beauchamp, IG chief economist, commented on today's trading, which is finishing poorly: "Once again the summer malaise appears to be getting the better of equity markets, with gains being surrendered as London heads towards the close, with a disappointing US durable goods figure not helping matters.
"Unsurprisingly, financial names are in high demand in London following the Italian banking news, which is helping to keep the FTSE 100 in positive territory. But it is clear that for now investors are none too keen on pushing global markets higher. It could be a long summer."
Financial service shares are still outperforming the index but gains in other sectors have tailed off throughout the afternoon. The miners are now a drag on the FTSE 100 with Fresnillo now the worst performer on the whole index. It is now 3.18pc down just before trading finishes in London.
US stock markets open mixed as economic data disappoints
US stock markets have been open for nearly an hour and a half now and paint a mixed picture after a positive start to trading. The continued recovery in technology stocks drove the Nasdaq index early on but shares quickly dropped to leave it in negative territory. The financial sector has echoed its European counterparts and is the top performing sector on the Dow Jones Industrial so far.
The index's two energy stocks, Chevron and ExxonMobil, are both down after the rebound in oil prices over the weekend lost momentum over lunchtime in Europe. Brent is currently at $45.18 per barrel while the U.S. benchmark WTI, which has lost ground following the opening bell in New York, is down to $42.75 per barrel. Energy stocks on the FTSE 100 have just slipped in negative territory for the first time today.
Disappointing data from the United States, which showed a 1.1pc drop in durable goods orders, a far worse drop than anticipated, is holding back the dollar against the pound. Against the euro it remains flat.
US stock markets
Dow Jones: 21,388 (-0.02pc)
S&P 500: 2,441 (+0.13pc)
Nasdaq: 6,238 (-0.43pc)
Business confidence rises to record high in Germany
As mentioned this morning, the main economics data released today was the Ifo Business Climate Index from Germany, which beat market expectations. The survey showed that business confidence there hit a record high in June as the index rose to 115.1 from 114.6 in May. It was expected to fall to 114.4 and, despite early gains, the pound is now flat against the euro.
Josh Mahony, an analyst at IG, commented: " The German economy appears to be in rude health, if today’s record Ifo business climate figure is anything to go by.
"According to Ifo, German businesses are ‘jubilant’, and it is clear that investors feel the same way, with the record high reading sparking a sharp move higher for the DAX, while gold immediately shed 1.4%."
Sirius Real Estate posts 34pc increase in profits
Property company Sirius Real Estate's full-year results were one of the few corporate updates due today and the release showed that it saw a 34pc increase in profits driven by a boom in the German office space market.
The company, which owns and operates business parks, offices and industrial complexes across Germany, said pre-tax profits for the 12 months to March 31 were €76.4m (£67m), up from just under €57.1m a year previously. It also increased its dividend by 32pc to 2.92 cents per share.
Despite opening this morning 1.27pc up, it's now down 0.25pc to 59p.
Mediclinic only healthcare stock in FTSE 100 not in positive territory
Healthcare stocks are among the biggest risers on the FTSE 100 today as the Republican-controlled Congress attempts to reform the Affordable Care Act. AstraZeneca shares have benefited the most, seeing a 1.45pc increase, as the sector hopes reform will mean further deregulation. However, Bloomberg is reporting that the reform is lacking the support of some Republican moderates.
Mediclinic is the only stock in the sector currently down after Investec downgraded it from buy to hold. Its share price fell by 0.92pc, or 7p, to 750.00p.
Lunchtime summary
- DUP deal to prop up Theresa May's government pushes pound up after brief drop, now flat against the dollar.
- Brent crude gains pared after price nudges over $46 per barrel in the morning. Energy stocks still up despite the weakening price.
- Banking stocks in the UK and Europe are up after the Italian government pledged $14.9bn to save two of its banks. Italian bank Intesa has seen its share price increase the most from the news.
Currencies
GBP/USD: 1.2723 (+0.05pc)
GBP/EUR: 1.1386 (+0.25pc)
Stock markets
FTSE 100: 7,475.10 (+0.69pc)
FTSE 250: 1,9744.05 (+0.30pc)
Euro Stoxx 50: 3,579.90 (+1.02pc)
CAC 40: 5,323.44 (+1.09pc)
DAX: 12,837.68 (+0.82pc)
More reaction from the Italian bank bailout
"The Italian banking situation has long been a background concern for its European peers, the issue every now and again bubbling to the surface to spook the markets. The bailout, then, has been greeted with relief by the sector as a whole, even if it has sparked anger from more than a few MEPs, especially in Germany," said Spreadex analyst Connor Campbell.
Pound rises after confirmation of DUP deal
The confirmation that the DUP has signed a 'confidence and supply' agreement with the government has sent the pound back into positive territory against the dollar. After making early gains against the greenback the pound did briefly drop but is now 0.15pc up. Investor reaction will likely be shaped by the details behind the deal, little of which have been released. Arlene Foster, has, however, said that propping up Theresa May's government will mean an extra £1bn in funding for Northern Ireland and added that there will be no changes to the state pension triple lock or winter fuel payments.
Crude's momentum begins to slow
Brent crude's momentum is slowing as its price dips back below the $46 per barrel mark. It's still 3pc ahead of the ten-month low it hit last Wednesday production increased in Nigeria and Libya. JP Morgan now believes that the price will drop below $50 per barrel next year and is more pessimistic on the price for the remainder of 2017. Prices have dropped on the back of stocks data that showed the overhang in supply is proving difficult to budge.
Pound falls after making early gains
After making gains overnight and during the morning, the pound is now down against the dollar. The internationally-focused FTSE 100 has been boosted by the fall, now 53.1 points up, 0.72pc up, at 7,477.22.
Going back to how the week's political news may affect the markets, Sun Global Investments chief executive has said that making chancellor Phillip Hammond prime minister could help the markets despite the instability it would cause.
A deal between Theresa May's administration and the DUP is now expected to be finalised by lunchtime. What concessions the government will have made to the Northern Irish unionist party will likely drive a lot of the markets movement this week.
Nestle shares soar after hedge fund reveals stake
Shares in food and drink conglomerate Nestle have hit a record high this morning after being targeted by activist investor Daniel Loeb and his hedge fund Third Point. The hedge fund revealed that it has taken a 1.3pc stake in the company and has proposed selling the company's stake in L'Oreal and increasing debt to boost profit margins. Its share price has risen by 4.45pc during the morning, hitting a peak of 86.00 Swiss francs.
UK banks among FTSE 100 risers
UK banks are also up following the Italian bank bailout. Barclays shares have risen the most out of the five banks featured on the FTSE 100, seeing a 2.08pc rise in its share price.
MUFJ analyst Darek Halpenny said investor confidence is unlikely to be impacted too much as it was still "unclear whether the template used here over the weekend is something that could be replicated on a wider scale".
European bank shares up after Italy bailout
European banking stocks are among the top performers on the Euro Stoxx 50 after the news that Italy will commit £14.9bn to bailout Banca Popolare di Vicenza and Veneto Banca.
Shares in Italian banking group Intesa rose by 3.52pc during morning trading following the news. BBVA and Societe Generale saw 1.62pc and 1.57pc rises respectively.
Bloomberg said in their report:
The intervention at Banca Popolare di Vicenza and Veneto Banca includes state support for Intesa Sanpaolo to acquire their good assets for a token amount, finance minister Pier Carlo Padoan said on Sunday after an emergency cabinet meeting in Rome. Milan-based Intesa can initially tap about €5.2bn to take on some assets without hurting capital ratios, Mr Padoan said. The European Commission said it approved the plan.
Pound starts week well ahead of outcome of DUP deal
Although the pound has started the week well, it could face turbulence later on in the week with Mark Carney scheduled to speak on Wednesday and the outcome of the government's negotiations with the DUP due.
"As the week goes on any signs as to whether or not the Prime Minister will be able to gather the required DUP votes to ensure she stays in power is going to be the main driver of trading for the pound," said Spreadex analyst Connor Campbell.
He added:
The UK’s post-election political uncertainty potentially comes to a head this week, with the parliamentary vote on the Queen’s speech, and therefore May’s ability to form a government, likely coming on Thursday.
On Wednesday, the pound is also likely to react to the ECB Central Bank forum where Bank of England governor Mark Carney and ECB president Mario Draghi are due to speak. It will be Mr Carney's first speech since the Bank of England's chief economist Andy Haldane said that he would likely back an interest rate rise later this year to head off the threat of inflation.
Pound during morning trading:
GBP/USD: £1.2744
GBP/EUR: £1.1392
Co-op Bank no longer up for sale as rescue plan deal draws closer
The Co-op Bank has said it is no longer up for sale as it hopes a rescue plan with its hedge fund owners is near.
The troubled lender, which has previously said that it needs an injection of £750m to plug a capital shortfall, put itself up for sale in February as it sought to avoid being wound down by the regulator.
In an update on its discussions with its owners, the bank said: “Given the advanced nature of the proposal [to rescue the bank], the board has decided to discontinue the formal sale process under the Takeover Code. The bank is, therefore, no longer in an ‘offer period’ for the purposes of the Takeover Code.”
Crude oil gains help FTSE 100 open up after longest run of weekly losses in a year last week
Good Morning and welcome to our live markets coverage.
Brent crude has nudged over the $46 per barrel mark despite data showing that shale drilling in the United States continued to increase. Oil has climbed for the third day in a row after entering a bear market last week.
This has helped the FTSE 100 open up after recording the longest run of weekly losses in a year.
Asian markets have now closed with oil gains also helping stocks there end higher. Energy companies helped offset drops in financial shares in Japan and a continued recovery in technology stocks also helped the Nikkei close slightly up.
NKY: +0.10pc
HSI: +0.68pc
SHZ300:+1.25pc
Previewing the action in Europe, Accendo Markets analyst Mike Van Dulken cautioned that the stronger pound could hinder the FTSE 100 while a weak euro may help the blue chip Dax in Germany outperform its UK counterpart.
Mike Van Dulken, Accendo Markets analyst:
A positive opening call comes courtesy of a positive session in Asia to start the new trading week and oil recovering more of last week’s lost ground, although we caution that Crude prices have yet to convince that they can overcome their falling channels of the last month.
The pound is up against the dollar and euro as DUP leader Arlene Foster continues negotiations in London over supporting Theresa May's government.
On the corporate side, we have full-year results from business park operator Sirius Real Estate but little else scheduled. There is also not much going on in the economics calendar with the IFO Business Climate Index in Germany the most anticipated release of the day.