FTSE 100 slips in early trade as hopes for Brexit deal this week "dashed"
09:15 15 Oct 2018
"With higher oil prices owing to Saudi Arabian tensions and a weaker Brexit hit pound, the FTSE was managing to buck the trend of its European peers. FTSE futures are pointing to a higher start," said Jasper Lawler, at LCG.
The FTSE 100 struggled early Monday, with cyclical stocks under pressure as investors looked for what’s next for the embattled Brexit process.
The FTSE 100 was down 4.75 points at 6,991.16, pushing the index further into correction territory as the index has lost more than 10% from its record close of 7,877.45 notched on May 22.
Attention is back on Brexit negotiations after hopes that a deal could be hammered out this week fizzled. UK and EU officials are still stuck on key issues, including how to resolve the question of a hard border in Northern Ireland. UK Brexit Secretary Dominic Raab travelled to Brussels over the weekend to discuss Brexit terms with the EU’s lead negotiator, Michel Barnier.
"Any hopes that a draft Brexit deal might be reached at this week’s EU summit were dashed yesterday after Brexit Secretary Dominic Raab flew into and out of Brussels empty-handed on Sunday," said Michael Hewson, chief market analyst at CMC Markets.
"It would appear that for all of last week’s optimism that we might see a framework of a deal in the coming days, the weekend breakdown suggests that this week’s EU meeting is unlikely to make any further progress. For all the willingness to arrive at a deal the UK government’s problems would appear to be much closer to home, in the form of selling any sort of compromise on the future customs relationship as well as a solution to the Irish border domestically," he said.
Sterling on Monday was buying around $1.3114, down from the $1.3200 handle seen Friday.
Cyclical shares were among Monday's biggest decliners, with investors holding questions about the future of trading in goods between the UK and the EU. Last week, cyclicals were hurt in part after the International Monetary Fund cut its global growth outlook. Shares of Melrose Industries PLC (LON:MRO), the turnaround specialist that bought engineering group GKN this year, fell 2%, and equipment rental company Ashtead Group PLC (LON:AHT) fell 1.9%. Aerospace and defense contractor BAE Systems PLC (LON:BA) declined 1.8%.
In UK trade, Superdry PLC (LON
DRY) shares sank 20% to 811p after the clothing retailer issued a profit warning as unusually hot weather reduced demand for colder-weather items such as jackets.
READ: Superdry warns hot weather, FX costs will hurt full-year results
On the upside, shares of Purplebricks Group PLC (LON:PURP) rose 3.2% to 225p after the online estate agent said it’s entering the European market for the first time through a joint venture with Axel Springer that is buying a stake in German online estate agent, Homeday.
READ: Purplebricks enters German real estate market through €25.4mln joint venture
6.38am Quiet start expected
London is set for a quiet start to the week as investors await the latest developments in the Brexit negotiations.
After sliding 11 points on Friday to close at 6,996, the FTSE 100 was expected to just about regain the 7,000 level at the outset. Attention is likely to be focused more on the foreign exchange markets this morning rather than equities, with sterling under pressure.
Friday saw US markets bounce back from what had been a tough week, with the Dow rising 287 to 25,400 and the S&P 500 soaring 39 to 2,767.
In Asian markets, approaching the close of business, Japan’s Nikkei 225 was 362 points in the hole at 22,333 while Hong Kong’s Hang Seng index was trading at 25,524, down 278 points.
“Asian markets traded lower overnight despite a rebound in global equities at the end of last week. Concerns over higher US borrowing costs were the catalyst for last week’s heavy sell-off; however, there were plenty of other risk factors which were also dampening sentiment. Those risk factors, including US- Sino trade tensions, Brexit, Italy’s Budget proposal and now increased political tensions between the US and Saudi Arabia, are set to keep pressure on risk appetite this week,” predicted Jasper Lawler, at LCG.
From a corporate news flow perspective, London is set for a quiet day with the best the corporate calendar compilers can come up with being the annual general meeting of Pires Investments, a real estate investment trust valued at less than £1mln.
On the economic front, US retail sales will provide a bit of interest this afternoon.
Significant announcements expected
AGMs: Pires Investments PLC (LON:PIRI)
Economic data: US retail sales; Empire State manufacturing survey
Around the markets
Sterling: US$1.3113, down 0.29 cents
10-year gilt: yielding 1.496%, down 4.36 basis points
Gold: US$1,226.30 an ounce, up US$4.30
Brent crude: US$81.42 a barrel, up 99 cents
Bitcoin: US$6,325.45, up US$75.88.
The mining license in Botswana held by Cradle Arc Plc (LON:CRA) over 28.5 square kilometres of ground including the Thakadu open pit and Makala underground deposit has now been extended by the Ministry of Mineral Resources until 2020.
Hurricane Energy Plc’s (LON:HUR) Lancaster field development has seen another key milestone as the Aoka Mizu FPSO vessel has now departed Dubai, where it was upgraded in dry-dock.
HemoGenyx Pharmaceuticals PLC’s (LON:HEMO) Immugenyx subsidiary is teaming up with US pharma giant Johnson & Johnson to find a new treatment for lupus.
Corero Network Security PLC (LON:CNS) is to receive a US$2mln investment from US internet hardware giant US Juniper Networks.
Oil and gas producer Columbus Energy Resources PLC (LON:CERP) intends to raise around £2.5mln by placing shares at 3.5p a pop.
Galileo Resources PLC (LON:GLR) has completed a second phase of drilling at the Star Zinc project in Zambia. Preliminary results from four of the drill holes show intersections of high grade mineralisation running at between 14% and 26% zinc, and over good widths.
A growing adoption of its medical imaging technology helped IXICO Plc’s (LON:IXI) top-line surge last year.
Kavango Resources Plc (LON:KAV) has completed the first phase of its airborne electromagnetic geophysical survey at the KSZ project in southwest Botswana. The survey has identified 26 conductive anomalies across 2,000 line kilometres in the Hukuntsi area of the KSZ project.
Providence Resources PLC (LON:PVR) has had encouraging reports concerning frontier exploration licence (FEL) 6/14 situated some 260 kilometres off the south-west coast of Ireland.
Lucyd, a portfolio company of investment company Tekcapital PLC (LON:TEK), has formed a reseller partnership with a Brazilian optical retailer and bagged its first order.
Ariana Resources plc (LON:AAU) produced a record 7,588 ounces of gold in the third quarter of 2018, up significantly from the 7,171 ounces produced in the second quarter.
Berkeley Energia Ltd (LON:BKY) chief executive Paul Atherley has told investors that the company remains “firmly committed” to developing its Spanish uranium mine, though, he said that continuing investment would depend upon the company receiving approvals to start construction.
Echo Energy Plc (LON:ECHO) told investors that it has confirmed that its third Argentinian well will be suitable for mechanical stimulation, and, it will now move on to the next stage in operations.
Active Energy Group PLC (LON:AEG) has inked a joint venture agreement with an American renewable energy group, with power plants in the states of North Carolina and Georgia.
Block Energy Plc (LON:BLOCK) has kicked off a programme of well work-overs at the Norio oil field, in the Republic of Georgia, where it intends to scale up production rapidly before the end of this year.
Premier African Mineral PLC (LON:PREM) has been notified that a decision over the ownership structure of the RHA tungsten mine in Zimbabwe will not come until the end of the month.
Ulster-based gold explorer Galantas Gold Corporation PLC (LON:GAL CVE:GAL) has appointed corporate finance specialist Róisín Magee to its board.
Bacanora Lithium PLC (LON:BCN) remains confident it will receive funding to buld the Sonora mine in Mexico.
Greatland Gold plc (LON:GGP) has appointed former Rio Tinto (LON:RIO) copper mining executive Clive Latcham as a non-executive director with immediate effect.
Britain needs to start implementing plans for a no-deal Brexit within weeks, ministers have been told, as last-ditch talks in Brussels between Britain and the EU broke up.
The biggest housebuilders are facing renewed pressure to cap executive bonuses after Sir Vince Cable, the former business secretary, urged companies to stop counting Help to Buy homes when calculating the pay rewards of their bosses.
The company that owns Patisserie Valerie is considering taking legal action against its auditors Grant Thornton for their alleged failure to spot a £40 million black hole.
The Daily Telegraph
Saudi Arabia has threatened to use its economic might in retaliation against any US action following the disappearance of journalist Jamal Khashoggi.
Brian Bickell, chief executive of Carnaby Street owner Shaftesbury, has backed calls for higher taxes on online retailers.
The Treasury has asked high street banks to assess their exposure to at-risk sectors and companies if a “no-deal” Brexit leads to a cash crunch for UK plc.
Leading economic forecaster EY Item Club has warned that the British economy is heading for its worst year in almost a decade amid the growing risks from no-deal Brexit.
Carmignac, a French asset manager, has become the first investor to disclose a short position in Aston Martin, just a week after the sports car maker's IPO.
Digital music giant Spotify has been booking three-quarters of its revenue to an entity in Sweden, allowing it to pay just £891,425 a year in UK tax.