FTSE 100 closes up 32 points
UK jobs report mixed
JD Sports and Galliford Try rally
5.10pm: Footsie closes higher
FTSE 100 closed higher as markets were optimistic about expected central banks’ monetary easing measures due in the next few weeks while sterling slipped back a little after recent gains.
The Footsie closed up 32.14 points at 7,267.95, just shy of the day’s peak of 7,270.50. The mid-cap FTSE 250 also gained ground, adding 60.41 points at 19,738.86.
“Trading started out on a negative note, but indices broadly pushed higher throughout the session,” noted David Madden, analyst at CMC Markets.
He highlighted the European Central Bank’s latest interest rate decision, due on Thursday, amid speculation about a cut.
“The Fed cut rates in June, and there is talk they will cut again next week, so the ECB might be tempted to get out in front of them and loosen monetary policy first. Seeing as the ECB are tipped to go down the path of an interest rate cut, stocks are likely to be buoyant between now and the announcement,” he added.
Among the movers in London, shares in JD Sports jumped 8.8% higher to 688.20p a day after the retailer reported an increase in pre-tax profit for the 26 weeks to August 3 to £129.9mln from £121.9mln as revenues jumped to £2.7bn from £1.8bn.
The sportswear stores group also issued an optimistic statement, saying it expects full-year profit to be at the upper end of expectations, despite uncertainty caused by Brexit.
3.50pm: Gold price seen beating record
Gold prices could top US$2,000 an ounce in the next two years, according to analysts at Citigroup, beating the record of US$1,921.17 set in 2011.
Citi said rising risks of a global recession and the likelihood that the Federal Reserve will reduce US interest rates to zero would support demand for gold, which is considered a safe-haven investment.
“From a birds-eye view, low(er) for longer nominal and real interest rates, escalating global recession risks – exacerbated by US-China trade tensions – heightened geopolitical rifts amid rich equity and credit market valuations, coupled with strong central bank and investor buying activity, are all combining to buttress a bullish gold market environment,” the bank’s analysts said in a note
3.10pm: Boris Johnson’s resignation most likely Brexit outcome, says JP Morgan
JP Morgan thinks Boris Johnson will most likely resign as prime minister to let someone else make a request to the European Union to delay Brexit again.
The investment bank sees three main options facing Johnson after a law came into effect requiring him to ask the EU for an extension to the 31 October Brexit deadline if no deal is agreed before October 19.
“The only options we regard as ultimately viable are for the PM to present a deal to the (House of) Commons and secure approval for it, resign and let someone else make the extension request as PM, or back away from his stated position,” JPMorgan’s Malcolm Barr said in a note to clients.
“At this point, our view is that resignation is the most likely of these three,” Barr said.
2.40pm: US stocks move lower
US stocks have opened slightly lower as investors exercised caution ahead of US-China trade talks and the European Central Bank’s policy meeting later this week.
The Dow Jones Industrial Average dropped 80 points to 26,756, the S&P 500 fell 19 points to 2,959 and the Nasdaq declined 76 points to 8,012.
The ECB is expected to unveil fresh stimulus measures on Thursday to spur economic growth and raise inflation.
Meanwhile, the US and China have agreed to restart trade talks next month.
In London, the FTSE 100 has reversed gear to fall 13 points to 7,222 as the pound has strengthened a tad.
Sterling is up 0.19% to US$1.2369 and up 0.28% versus the euro to €1.1207 following news that 50 or more Labour MPs could be ready to back a compromise Brexit agreement to avoid Britain crashing out the EU without a deal.
1.20pm: Superdry shares hit by broker downgrade
Superdry PLC (LON:SDRY) shares are down nearly 6% to 393p after analysts at Investec said the company needs a more radical restructuring to turn around its performance.
Earlier this year founder Julian Dunkerton won a months-long battle with former management to return to the board to help what he described as a “catastrophic decline” in the share price over the past couple of years.
Investec analysts said Superdry has lost its appeal with young people since at least 2016 and will require a bigger overhaul than the one currently planned to get things back on track. The analysts cut their rating to “sell” and lowered their price target to 370p.
“Superdry may look like a recovery story, but a deep dive into historic financials shows multiple negative trends across divisions and regions which suggest its brand/strategic issues date back further than the last 18 months,” it said in a research note.
“This is a major restructuring story, not a two- to three-year brand reinvigoration story.”
12.50pm: Barclays up after soothing fears over dividend risk
Barclays has become the latest bank to announce a big hit from complaints about mis-sold payment protection insurance (PPI).
The lender said it expects to set aside a further £1.2bn to £1.6bn in the third quarter to cover PPI claims after a last-minute surge in complaints ahead of the 29 August deadline.
Barclays recognised provisions of £9.6bn, of which £9.2bn had been used, for PPI redress in its first-half results.
Lloyds Banking Group PLC (LON:LLOY), Royal Bank of Scotland Group PLC (LON:RBS) and Virgin Money owner CYBG PLC (LON:CYBG) have made similar announcement about the impact of PPI complaints in the past week.
However, shares in Barclays are up 4.9% to 147.94p as the bank said it still expects to meet its common tier equity 1 capital ratio target for the year-end of 13%.
Jefferies said this provides “some degree of confidence around a progressive dividend in 2019”.
“Our 2019 estimate is for 8p of dividend per share in the second half, resulting in a CET1 ratio of 13.1%,” it said.
The investment bank added: “In our opinion, share buy backs are likely a FY 2020 phenomenon at best (our estimates & valuation do not incorporate buybacks).”
Jefferies maintained a ‘buy’ rating on the stock but cut its target price to 209p from 280p.
11.50am: Boris Johnson refuses to request Brexit extension
Prime Minister Boris Johnson said he would refuse to ask the EU for an extension to Brexit if he is unable to secure a deal by 19 October despite a new law requiring him to do so.
A bill seeking to block a no-deal Brexit passed into law on Monday after receiving assent from Queen Elizabeth. The law will force the prime minister to seek a three-month extension to the 31 October Brexit deadline unless parliament has approved a deal or consented by 19 October to leave the European Union without one.
Johnson hopes to secure a new deal at an EU Summit on October 17 and October 18.
“This government will press on with negotiating a deal, while preparing to leave without one,” Johnson said.
“I will go to that crucial summit on October the 17th and no matter how many devices this parliament invents to tie my hands, I will strive to get an agreement in the national interest … This government will not delay Brexit any further.”
Parliament has now been suspended until October 14. Last month the Queen approved Johnson’s request to prorogue parliament, which the prime minister had hoped would allow him to push through his bid to leave the EU with or without a deal.
Currency traders don’t seem fazed by the latest news, trading broadly flat against the dollar at US$1.2336 and the euro at €1.1170.
10.50am: 888 and BT Group shares tank
Pre-tax profit in the six months to the end of June fell to US$22.2mln from US$60.1mln a year ago, due to higher costs related to Brexit preparations and an increase in online gaming taxes.
Revenue edged up 2% to US$277.3mln.
The firm has set up a server in Ireland and has obtained a licence for Malta as a part of its Brexit preparations.
Peel Hunt has maintained its ‘buy’ rating and target price of 200p on the shares, saying overall numbers were in line with expectations and there is “plenty about which to be optimistic”.
Another big faller is FTSE 100 telecoms firm BT Group PLC (LON:BT), which has seen its shares drop 2.3% to 165p.
UBS, which met BT’s new chief executive Philip Jansen, said the company acknowledged “significant uncertainties remain and until there is visibility, we think it will be difficult for the share price to re-rate in the near-term”.
UK labour market report ‘troubling’, says analyst
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, reckons the drop in the unemployment rate in the quarter to July distracts from an “otherwise troubling labour market report”.
“Employment was only 31K—0.1%—higher in the three months to July than in the previous three months, well below the 89K average increase seen since the Brexit vote in 2016,” he pointed out.
“Employee numbers rose by a trivial 6K, with the self-employed and workers in government-supported training programmes accounting for the remainder of the overall increase.
“In addition, separate workforce jobs data—derived from employers, rather than households—show that employment also rose by a mere 31K in the second quarter, with nearly all of those jobs created in the public sector.
“Meanwhile, the downturn in vacancies has gathered momentum, down 23K on a three-month-on-three-month basis and 75K on a year-over-year basis in August, the steepest fall since October 2009.”
Tombs said Brexit uncertainty has sapped employers’ enthusiasm for hiring new workers while sharply rising unit labour costs has also played a part.
He added that the pick up in the headline rate of wage growth was not accompanied by any improvement in productivity.
9.40am: UK employment rises less than expected
UK employers added fewer jobs than expected in the three months to July but the unemployment rate fell and wage growth beat analysts’ forecasts, the Office for National Statistics has revealed.
Employment rose by 31,000 in the period, compared to estimates for an additional 55,000 jobs, while the unemployment rate unexpectedly fell to 3.8% from 3.9%.
Average weekly earnings gained 4% against the forecast for a rise of 3.7%. Real wages, which takes into account inflation, were up 2.1%.
But the ONS pointed out that real wages are still lower than before the 2008/09 financial crisis.
— Office for National Statistics (@ONS) September 10, 2019
There were about 812,000 vacancies in the UK, 23,000 fewer than for the previous quarter.
8.40am: FTSE 100 on the retreat
The FTSE 100 began the day on the back foot with London traders taking a cue from Asia’s main markets, which ended the session lower after China’s factory gate prices receded.
“The fear is not just that it signals weakness in domestic and overseas demand, but that China is exporting deflation by cutting prices and making it even harder for central banks like the ECB to achieve their inflation goals. Could be a tough session in Europe,” said Neil Wilson, analyst at Markets.com.
The UK blue-chip index fell 28 points to 7,208.30 – defying early predictions of a plus-50 point decline.
On the forex market, the pound nudged above US$1.23 following the proroguing of parliament, which effectively puts on ice the No Deal Brexit debate for around a month.
Following the late-night drama in the Commons, talk has turned to whether Boris Johnson may be quietly trying to garner a behind the scenes deal with Europe with his options running out at home.
Leading the FTSE 100 was sports fashion retailer JD Sports (LON:JD.), whose latest trading update was greeted with a 4.3% jump in the share price.
Proactive news headlines:
Futura Medical PLC (LON:FUM) has agreed a joint venture with cannabis firm CBDerma Technology Limited to develop a skin-friendly cannabidiol (CBD) formulation. The joint venture will explore combining CBD with Futura’s DermaSys drug delivery system for the treatment of such symptoms as pain relief.
Savannah Resources PLC (LON:SAV) has been conditionally awarded new mining concessions for the Mutamba project in Mozambique. The project is described as “one of the most significant undeveloped heavy mineral sands deposits in the world” and the new concessions span some 280 square kilometres.
Solo Oil PLC (LON:SOLO) told investors that it has exited its Nigerian marginal fields venture. The company has agreed to sell its 20% interest in Burj Petroleum Africa which previously applied for undeveloped Nigerian assets back in 2014. The stake is being sold for a nominal £1 to another shareholder in Burj.
ReNeuron Group PLC (AIM: RENE) said it remained in negotiations with potential partners for all of its key programmes. The company was providing an update on progress ahead of its annual meeting on Tuesday.
6.45am: FTSE 100 to start in reverse gear
The FTSE 100 is expected to start slightly lower on Tuesday after a mixed session on Wall Street.
London’s blue chip share index was being called five points lower at 7,226 by punters using IG’s platform, following a 52-point drop the day before.
Overnight Boris Johnson lost another vote, this one was his proposal to hold an early general election, the fifth loss in the House of Commons of his first five votes as Prime Minister.
Instead, parliament has been suspended and it will reopen in mid-October. Downing Street must either get a majority of MPs to back a no-deal Brexit by 19 October, or he will be forced to seek an extension from the EU.
The FTSE 100 is being hit by the continued recovery of the pound, which weighs on the earnings of many internationally focused companies. Sterling stands currently at $1.2339.
“The 20-day negative correlation between the sterling and the FTSE has jumped up to 70% last month, as the pound tanked on no-deal Brexit worries,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group.
“Although the negative correlation tends to ease with improved sterling, the FTSE could challenge the 7200p mark, the 200-day moving average, on further pound recovery and mixed risk appetite across the global equity markets.”
UK wages seen cooling
At 9.30am the Office for National Statistics will publish unemployment and earnings data for the three months to end-July, with the former expected to remain at 3.9%, while earnings excluding bonuses are expected to cool to 3.8%.
Economists at RBC Capital Markets said it expects employment growth to “remain positive” in the three months to the end of July and the unemployment rate to stay at 3.9%.
“However, the key focus will be on wages,” it said, expecting pay growth excluding bonuses slipping back a little this month, “but that shouldn’t detract too much from the bigger picture, which is that pay growth remains firm overall”.
RBC added: “In addition, that pay growth supporting domestically generated inflation is the main reason that the MPC can remain on hold as it awaits clarity on Brexit.”
Traders are also looking ahead to Thursday’s European Central Bank meeting, where there is some speculation about the possibility of a loosening of monetary policy.
JD Sports looking fit for purpose
JD has tapped into the booming market for ‘athleisurewear’ – where people wear jogging bottoms and tracksuits casually rather than for sports – which has insulated it from some of the challenges faced by other bricks-and-mortar retailers.
Its expansion into the US with the £400mln acquisition of Finish Line has also helped and is the main reason why the City is expecting a big jump in sales and profits in the opening six months of 2019.
Shore Capital is forecasting a 41% rise in first-half revenue to £2.6bn, while underlying earnings are pencilled in at £158mln – 28% higher than what JD recorded in the same period last year.
“We look for an update on the international plans of the company, together with the trading performance of the US stores, in particular the six stores that have been converted from Finish Line to the JD fascia. We also look for an update on the on-going CMA inquiry into Footasylum,” said Shore Cap in a note to clients.
Slowdown worries hover over Ashtead
However, with recent trends showing shrinking US construction spending likely to impact the utilisation of the company’s fleet, margins could come under pressure and also knock pricing.
The firm’s UK business is also unlikely to provide any bright spots will Brexit uncertainty continuing to weigh on building activity.
With this in mind, investors will likely be looking for any signs that revenues and margins are starting to struggle, as more stress will add pressure to a balance sheet that already sees net debt rising to the upper end of its target range.
Savings and satisfaction key for Bovis
A half year trading statement showed sales rates and completions were going in the right direction for Bovis Homes Group PLC (LON:BVS), while a trend towards lucrative locations is underpinning selling prices.
However, investors will likely expect more progress when the group reports its interims on Tuesday, with more cost savings and higher-margin land purchases eyed as the key drivers.
Customer satisfaction ratings will also be in focus after the firm faced a public backlash in 2017 and 2018 over the quality of some of its houses, although recently it seems to have got its act together with scores moving towards a five-star rating.
“Focus will likely be on an update in trading environment in H2 and progress towards mid-term targets,” UBS said.
The latest guidance from Bovis was for 4,000 completions per year in the mid-term, with at least 23.5% of gross margin.
888 numbers in focus
The group said “strong momentum” had continued in its global markets, with revenue growth in its Sport and Casino arms of 29% and 13%, plus 18% growth for its UK market as the Casino business is transformed to a mass-market proposition from the previous reliance on VIPs.
This offset a flat performance in Bingo and a 28% decline in the Poker division.
Bosses were “very encouraged” by the 20% increase in first time depositors in the period, a “key indicator” of its growth prospects.
Significant announcements expecetd on Tuesday September 10:
Finals: Litigation Capital Management Ltd (LON:LIT)
Interims: 888 Holdings PLC (LON:888), Anexo Group Plc (LON:ANX), Ashtead Group PLC (LON:AHT), Bovis Homes Group PLC (LON:BVS), Cairn Energy PLC (LON:CNE), Concurrent Technologies PLC (LON:CNE), Ekf Diagnostics Holding PLC (LON:EKF), Good Energy Group Plc (LON:GOOD), Gulf Keystone Petroleum Ltd (LON:GOOD), Harworth Group PLC (LON:HWG), Hilton Foods Group PLC (LON:HFG), IP Group Plc (LON:IPO), JD Sports Fashion PLC (LON:JD.), Midwich Group Plc (LON:MIDW), Nucleus Financial Group PLC (LON:NUC), Petropavlovsk PLC (LON:POG), Regional REIT Ltd (LON:RGL), Sanne Group PLC (LON:SNN), Team17 Group PLC(LON:TM17), SimplyBiz Group PLC (LON:SBIZ), TP Group PLC (LON:TPG), Trinity Exploration & Production PLC (LON:TRIN), Vectura Group PLC(LON:VEC)
Economic data: UK unemployment and average earnings