FTSE 100 ends down 11 points
Sterling off lows as Juncker says Brexit deal possible
Thomas Cook slumps as it faces collapse
5.10pm: Footsie closes in red
The FTSE 100 index reversed into the close on Friday to finish lower, having seen gains earlier in the session, as signs of hope for a Brexit deal lifted the pound off its lows and investors moved to the sidelines ahead of the weekend.
The internationally-focused UK blue chip index finished 11.50 points lower at 7,344.92; over the week the benchmark shed 0.3%.
However the more domestically-focused FTSE 250 index added almost 80 points on hopes that a Brexit deal for the UK may be forthcoming following comments from European Commission president Jean-Claude Juncker – the mid-cap index closed the day up 79.94 points at 20,169.40.
On Wall Street, US blue chips were higher amid reports that President Donald Trump was exempting hundreds of Chinese products from tariffs. The Dow Jones Industrial Average was about 60 points higher at 27,164 around London’s close.
CMC Markets’ analyst David Madden noted: “The US-China trade story continues to be at forefront of traders’ minds as discussion took place yesterday. Neither side wants to be seen as very eager to reach a deal, but the fact that talks took place is a positive step.”
He added: “Traders are cautiously optimistic about the trading relationship between the two largest economies in the world, but some dealers would like to see further progress made before committing to additional buying of equities.”
The big corporate story of the day in London came from travel giant Thomas Cook (LON:TCG), shares in which nosedived 22.8% to 3.45p as it emerged the firm was on the brink of collapse.
3pm: US stocks higher
US stocks are trading higher in early deals amid reports that President Donald Trump was exempting hundreds of Chinese products from tariffs.
The Dow Jones Industrial Average rose 46 points to 27,140, the S&P 500 gained 7 points to 3,014 and the Nasdaq increased 9 points to 8,194.
Trump is to exempt Chinese products from tariffs including Christmas tree lights, pet supplies and plastic straws, Politico reported citing documents from the US Trade Representative.
Meanwhile, Washington and Beijing delegates meet for a second day to prepare for tariff talks next month
In other news, Richard Clarida, the Federal Reserve Board of Governors Vice-Chair, said the central bank’s rate cut this week was an insurance against the downside risk to the outlook.
“The US economy is in a good place but there are some risks,” Clarida added. “The FOMC will take decisions meeting by meeting.”
2.00pm: StatPro jumps, Keller slumps
Alain Michaelis will cease to be a director of a company from 30 September, by mutual agreement with the board. The role of the chief executive officer will be assumed on an interim basis by Mike Speakman, the company’s chief financial officer (CFO).
Another big faller is eve Sleep PLC (LON:EVE), which resumed trading today after ending merger talks with Sima Sleep Ltd and warning that trading has been “more challenging than expected due to an uncertain economic outlook and continuing low levels of consumer confidence”. Its shares are down 32%
Going the other way, StatPro Group PLC (LON:SOG) shares are up 52% after revealing it will go private after accepting a takeover bid from US-based software firm Confluence Technologies valuing the firm at £161.1mln.
1.00pm: Unions ask government to support Thomas Cook
Unions are calling on the government to step in to prevent Thomas Cook from collapsing.
Travel workers union TSSA said Thomas Cook must be rescued “no matter what”.
“This is not just about the threat of losing jobs and an iconic brand from our high streets but the fact that if Thomas Cook goes under, we will be left with just one major travel operator – Tui – controlling the mass market,” said Manuel Cortes, general secretary of TSSA.
“That would be in no-one’s interests – a lack of competition will always lead to a hike in prices. If need be the government must step in to ensure Thomas Cook’s survival.”
Pilots union Balpa criticised Thomas Cook’s lenders for demanding the travel group find an extra £200mln before approving a rescue deal.
“These same banks were bailed out by the taxpayer to the tune of £65bn and RBS is majority owned by the state,” said the union’s general secretary, Brian Strutton.
“It is appalling that banks that owe their very existence to handouts from the British taxpayer, show no allegiance to a great British company, Thomas Cook, when it needs help. This puts 9,000 good quality UK jobs needlessly at risk and puts an iconic British brand in jeopardy.
“The government has a say in this, owning one of the key banks and still with huge influence over the other. RBS and Lloyd’s should be told by the Prime Minister to support Thomas Cook.”
12.00pm: Banks withdraw support for Thomas Cook rescue deal after non-lender partner walks
Sky News correspondent Paul Kelso has tweeted about it, citing bank sources.
Development in Thomas Cook stand-off with banks. Bank sources indicate RBS & other lenders only withdrew support for £900m rescue plan, and demanded additional £200m in cash reserves, after another party to the deal – not a bank – withdrew its support in recent days
— Paul Kelso (@pkelso) September 20, 2019
RBS statement: “As one of a number of lenders, RBS, has provided considerable support to Thomas Cook over many years and continues to work with all parties in order to try and find a resolution to the funding and liquidity shortfall at Thomas Cook.”
— Paul Kelso (@pkelso) September 20, 2019
Prospect of Thomas Cook collapse uncomfortable for government. Aside from role of state-owned lenders, there’s the prospect of hundreds of thousands of Brits stranded abroad, with CAA scrambling at taxpayer expense to bring them home. Not quite the desired image of global Britain
— Paul Kelso (@pkelso) September 20, 2019
Shares in Thomas Cook are now down 18% to 3.6p.
Deutsche Bank is “not as excited” over Brexit
Deutsche Bank is “not as excited” as the rest of the market after European Commission president Jean-Claude Juncker said he thinks a Brexit deal is possible.
“So lots of excitement and positive mood music on Brexit over the last 24 hours but we are NOT as excited,” it said.
The German investment bank pointed out that Juncker said he open to getting rid of the Irish backstop but only if Boris Johnson came up with a viable alternative and this has been the EU’s position for a long time.
It also highlighted the fact that Brexit secretary Barclay said on Thursday that the UK cannot offer up an alternative to the backstop by the 31 October deadline and should be pushed out to the transition period.
Deutsche Bank added: “ALL the reputable Brexit journalists in Brussels are reporting the opposite in terms of optimism.
“Bruno Waterfield just now calls the mood ‘dark’ and that Juncker mood music meant to increase pressure on UK side to deliver but not signifying change in EU stance. Peter Foster similarly pessimistic.”
The bank said Irish commentary remains “very pessimistic” with Tanaiste Simon Coveney saying the EU and the UK were not yet close to a Brexit deal that resolved the Irish border issue.
Coveney told BBC radio that Boris Johnson’s visit to Dublin was a success and thinks the prime minister convinced his Irish counterpart that he was serious about trying to find a deal.
However, he added: “But I think we need to be honest with people and say that we’re not close to that deal right now. But there is an intent I think by all sides to try and find a landing zone that everybody can live with here.”
The pound is now flat against the dollar and the euro at US$1.2522 and €1.336 respectively.
11.00am: Housebuilders boosted by Brexit deal optimism
Optimism about a Brexit deal has given FTSE 100 housebuilders a much-needed boost this morning following declines earlier this week.
A government report criticising the Help to Buy programme and weak house price data from the ONS hit the shares earlier this week.
But news that European Commission president Jean-Claude Juncker has said he thinks a Brexit deal is possible has seen housebuilders’ shares stage a recovery today.
Juncker said on Thursday that he was ready to scrap the controversial Irish backstop if Boris Johnson came up with a viable alternative to avert a hard border between Northern Ireland and Ireland.
10.00am: Pound rises on Brexit deal hopes
The pound has strengthened after European Commission President Jean-Claude Juncker told Sky News he thinks the EU and the UK could reach Brexit deal.
He said a no-deal Brexit would have “catastrophic consequences” and is doing “everything to get a deal”.
Sterling is trading against the dollar at US$1.2575 — its highest level since mid-July. Against the euro, the pound is sitting at €1.1345.
9.00am: Thomas Cook facing collapse
Thomas Cook’s shares have taken another hit this morning after saying it needs to find an extra £200mln to secure a rescue deal.
The company confirmed press speculation that it is seeking the extra funds, on top of an already agreed £900mln injection of fresh capital, and that it would provide updates “in due course”.
In reaction, its shares dropped 17% to 3.7p each.
The extra £200mln is being pushed by a consortium of banks, including Royal Bank of Scotland Group PLC (LON:RBS) and Lloyds Banking Group PLC (LON:LLOY), to ensure Thomas Cook can keep itself afloat over the winter season when holiday bookings are usually lower.
Thomas Cook could fall into administration this weekend if it fails to find the funds, leaving customers who have booked holidays with the company stranded abroad. Worried customers have been contacting the company to make sure their packaged holidays and flights will still go ahead.
The group has been reassuring these customers over social media.
Hi Sarah, the proposals have no impact on customers who have booked a flight with Thomas Cook or who are planning to book with us in the future. ^Alex
— Thomas Cook Cares (@ThomasCookCares) September 20, 2019
8.40am: FTSE 100 starts on the back foot
The week looks set to end on a bum note after the FTSE 100 opened 21 points lower at 7,335.28.
Economic worries, following the OECD’s downgraded forecasts, appears to have unsettled the markets.
The America-China trade war and Brexit were cited as the inter-governmental group cut its 2019 growth projection to 2.9% from 3.2% – the slowest pace of expansion in a decade.
“These challenges were no better illustrated yesterday when the European Central Bank launched its first tranche of three-year loans at zero rates and below, and which fell well short of expectations. Instead of the €20bn to €100bn of loans that was expected the princely sum of €3.4bn found its way out of the door,” said Michael Hewson, analyst at CMC Markets.
“There may have been any number of reasons for the lack of demand, but if no-one wants to invest or borrow money, no amount of cheap cash will compel them to do so. This is the problem Europe faces at the moment.
“Quite simply firms will not commit to large scale investment decisions when there is no certainty about business conditions at a time when the US may want to turn its attention to Europe where tariffs are concerned, China is slowing down, and Brexit is unresolved.”
On the market, Next (LON:NXT) rebounded 2.7% after Thursday’s bout of profit-taking.
Rolls-Royce (LON:RR.), down 3%, led the fallers after it admitted to more setbacks with its problematic Trent 1000 jet engine.
Proactive news headlines
Hurricane Energy Plc’s (LON:HUR) half yearly results on Friday were the company’s first set of financials to include revenue. The May start-up of the Lancaster field’s early production system (EPS) was a landmark moment for the company, which has since seen output ramp-up with rates at the end of the period running ahead of guidance.
Midatech Pharma PLC (LON: MTPH; NASDAQ:MTP) said it has received the regulatory green light for a trial that may eventually pave the way for its long-acting drug to be administered by patients at home.
Sunrise Resources PLC (LON:SRES) remains on track to have a permit in place its CS perlite and pozzolan mine in Nevada by the end of the year. There is a growing market for perlite in the US, driven in part by increased use by cannabis growers.
Oncimmune Holdings PLC (LON:ONC) has secured an €8.5mln credit facility that will allow it “drive commercial adoption” of its lung cancer diagnostic, of which it will be able to immediately draw down €5mln.
Pembridge Resources PLC (LON:PERE) has appointed non-executive director Gati Al-Jebouri as its new chief executive and chairman as it grows from a special-purpose vehicle into an operating company. He replaces David Linsley and Francis McAllister, who have stepped down as chief executive and chairman respectively.
6.45am: FTSE 100 set to start in reverse gear
London’s leading shares look set to give back all of yesterday’s gains after the OECD issued a warning on global economic growth.
Spread betting quotes suggest the FTSE 100, which yesterday rose 42 points to close at 7,356, will open at around 7,317, down 39 points.
The OECD cut its projections of economic growth to 2.9% in 2019 and 3% in 2020; if the forecasts prove accurate, those growth rates would be the weakest since 2009 and the days of the credit crunch.
In May, when it issued its previous forecasts, the OECD had been expecting growth to top 3%.
US markets were mixed yesterday with the S&P 500 barely changed and the Dow Jones down 52 points at 27,095.
This morning in Asia, Japan’s Nikkei 225 was trading 58 points higher at 22,102 but in Hong Kong, further civil unrest hit sentiment and the Hang Seng index was down 25 points at 26,444.
“Anti-China protests in Hong Kong took a toll on the city’s businesses, and the HK case was brought to the attention of the US lawmakers, which now discuss a yearly review of the situation in Hong Kong when it comes to the ‘special status’ of the city. Meanwhile, geopolitical tensions between the US and Iran escalate, as Iran threatens of an ‘all-out war’ if Saudi or the US strike on the country as a response to the Aramco drone attacks,” commented Ipek Ozkardeskaya at London Capital Group.
On the corporate news scene, it is looking as if it will be a quiet day for trading updates, with a report from banking and wealth management business Investec plc (LON:INVP) likely to be the highlight.
Investors will be keen to see how the company’s simplification programme is proceeding.
Significant announcements expected today
Royal Bank of Scotland and its other banks are demanding an extra £200 million of funding from Thomas Cook, increasing the risk of the travel company going bust.
Large investment banks have so far relocated out of Britain fewer than 1,000 jobs despite Brexit exodus fears.
A no-deal Brexit would push the UK into recession next year and drag down the rest of the European Union, the Organisation for Economic Co-operation and Development has warned.
Diageo said it expected organic net sales growth for the year “toward the mid-point” of the target range of 4% to 6%, with operating profit growing by about 6%.
IG Group reported revenue of £129.1 million in the three months to the end of August, recovering from a clampdown on betting on financial markets, as volatile stock markets boosted trading.
Microsoft has nominated Emma Walmsley, the chief executive of Glaxosmithkline, to its board of directors.
Royal Mail has been found guilty of price-fixing in the parcels market.
The Daily Telegraph
The European Commission President Jean-Claude Juncker has said the EU can agree a new Brexit deal by 31 October as it emerged Boris Johnson wants a “take it or leave it” offer from Brussels.
Eurozone banks have shunned the cheap new loans offered by the European Central Bank to boost growth.
Rising pay packets failed to spur shopping last month as online retail sales suffered a hangover from a bumper July in their biggest drop of the year.
Saga said it had held “constructive” conversations with activist investor Elliott as it battles a tough travel market.
Next registered disappointing sales of its new autumn clothing ranges due to the recent warm weather.
Debenhams is to press ahead with a rescue plan involving the closure of more than 20 stores after fighting off a Sports Direct-backed legal challenge.
Airbus has forecast that the number of commercial aircraft in operation will more than double in the next 20 years.