• FTSE 100 index finishes around 20 ahead
  • US stocks reach new highs
  • UK inflation hits three-year low

5.05pm FTSE 100 index closes to the good

FTSE 100 index finished ahead as US stocks pushed on to new highs but it was a muted day of trading in London.

Britain’s blue chip index closed positively, propped up by defensive stocks, and finished at 7,642, up by around 20 points.

But the FTSE 250 fared less well, shedding nearly 43 points at 21,713.

It comes amid a drop in UK inflation, sparking talk of an interest rate cut by the Bank of England at the end of the month.

Elsewhere, the interim US-China trade deal remains the focus with the agreement due to be signed in the next few hours.

“While the deal will almost certainly help the US economy through increased Chinese demand, the decision the retain tariffs on Chinese imports does highlight a continued ‘America first’ deal which seeks to benefit US growth at the expense of global prosperity,” noted Joshua Mahony,  senior market analyst at online trader IG Index.

“For those global exporters who had been hoping for a deal that kick-starts global trade, we are now looking at an environment where tariffs are likely to remain in place for the entirety of 2020,” he added.

On Wall Street, the Dow Jones Industrial Average added over 160 points at 29,100.  The  S&P 500  added nearly 15 points at 3,298.

3.30pm: IAG hits out at UK government over Flybe rescue

The owner of British Airways, International Consolidated Airlines Group SA (LON:IAG), has complained to the European Union about the UK government’s support for ailing regional airline Flybe, calling on the bloc to investigate whether the action violates its rules on state aid.

Willie Walsh, IAG’s chief executive, said a support plan, which was reported to have involved the deferred payment of a tax bill and a possible loan from the government, amounted to “blatant misuse of public funds”. And will prevent airlines from competing on a level playing field.

There is, however, speculation that IAG’s displeasure with Flybe’s potential bailout is connected to its old rival airline Virgin Atlantic, the ultimate owner of Flybe, as part of a feud dating back almost 20 years in which the two firms have traded insults, engaged in price wars, and questioned regulators over each other’s acquisitions.

IAG’s shares were 1.2% lower at 639p in late-afternoon trading, while the FTSE 100 was flat at 7,622.

2.40pm: Wall Street opens in the green

Despite expectations of a slower start, US markets managed to move into positive territory shortly after the opening bell in New York on Wednesday despite a lacklustre reception for the US-China trade deal.

The Dow Jones Industrial Average was 0.16% higher at 28,984 in the first minutes of trading, while the S&P 500 climbed 0.19% to 3,289 and the Nasdaq rose 0.27% to 9,275.

Back in London, the positive start for the US seemed to have done little to move the FTSE 100, which was up 2 points at 7,624 shortly before 2.45pm.

2.00pm: FTSE 100 reverses course as US-China trade deal falls flat with investors

The FTSE 100 slipped was stagnant in mid-afternoon trading as traders did not seem best pleased with the finer details of the US-China ‘phase one’ trade deal.

Investors seemed to take issue with the fact that the US will maintain existing tariffs on Chinese goods until after November’s elections, while thornier issues such as intellectual property have been earmarked for a ‘phase two’ deal further down the line.

Markets reacted with muted disappointment, with the FTSE 100 effectively flat at 7,621 at 2pm.

Away from trade, the US producer price index, which reflects the wholesale cost of goods and services, rose slightly in December by 0.1%, suggesting that the core of the US economy was seeing little risk of inflation building up.

The cost of goods rose 0.3% during the month, mostly down to higher petrol prices, while services costs, usually the more volatile segment, were unchanged.

The pipeline for the economy also showed little sign of rising inflation, with the cost of raw materials and partly finished goods falling 7.3% and 1.7% over the past year.

The lacklustre inflation is likely to provide more cover for the Federal Reserve to keep interest rates low and support slower US economic growth.

12.25pm: Wall Street to start lower ahead of US-China trade pact signing

The US markets look set for a lacklustre start on Wednesday as investors once again decided to keep their powder dry until the details of the US-China trade deal make their appearance at a signing ceremony later today.

Traders are likely to be on the look out for any specific details on tariff changes between the world’s two largest economies, as well as any benefits the Chinese have managed to extract from the Trump administration as recent disclosures have mostly highlighted benefits for the US.

“The finer details of the deal are expected to be made public later, so in the meantime, volatility is expected to be low. A huge amount of good news has already been factored into the equity markets, so it is understandable that things are quiet ahead of the agreement being made official. It was reported yesterday the tariffs will remain in place for at least 10 months after the signing of the deal, so US-China relations might settle down”, said CMC Markets’ David Madden.

Back in London, the FTSE 100 was 14 points higher at 7,636 in lunchtime trading.

11.35am: FTSE 100 sluggish in late-morning as traders await US-China trade deal reveal

As the morning portion of Wednesday’s session drew to a close, traders seemed content to sit on their hands and await more details around the ‘phase one’ trade deal between the US and China, with the FTSE 100 up just 7 points at 7,629 shortly after 11.30am.

“The big day has arrived and investors are, well, not quite sure what to do and whether there’s actually much cause for excitement yet… We’ve been waiting for the signing ceremony for so long but there is a worry that, despite details of the deal being largely concealed, what we are hearing is a little underwhelming and may be already priced in, maybe even too much”, said OANDA’s Craig Erlam.

“Of course, there’s going to be lots of fanfare around the event itself, but the actual substance of the deal may not be what people hope. Of course, all we’re relying on here is various reports and subtle comments but this looks far from the comprehensive deal Trump was initially seeking going into the election.”

“The various reports also appear to heavily favour the US which begs the question, what exactly does China get out of this? Either there’s a lot more to be revealed or commitments on purchases and intellectual property etc, could be a little loose. Traders may also be disappointed by [US Treasury secretary Steven] Mnuchin’s claim that there’s no agreement on future tariff easing”, he added.

On the markets, online grocery firm Ocado Group PLC (LON:OCDO) was the biggest blue-chip riser in late-morning, up 2.8% at 1,339.5p, while insurer Prudential PLC (LON:PRU) was sitting at the bottom of the pile, falling 2.1% to 1,423.5p.

Meanwhile, the unexpectedly low UK inflation data had failed to spark any meaningful movement in sterling, which was essentially flat against the dollar at US$1.3021.

10.30am: Likelihood of BoE rate cut now over 60%, say analysts

The chances of a January interest rate cut by the Bank of England have now reached around 60% compared to around 50% yesterday in the wake of the UK inflation data, according to some analysts.

“Inflation was a fair bit weaker than expected in December and this will offer the necessary cover for the Bank of England to cut interest rates this month. I feel this may persuade a couple more on the MPC to cut now, to get ahead of the curve and not allow softer data to fester”, said Markets.com’s Neil Wilson.

“Coming off the back of those weaker GDP and industrial production numbers, it does not look as though the economy was firing on all cylinders at the tail end of last year. While there may well be a Boris Bounce in the offing, I rather think the die is cast in favour of a rate cut”, he added.

Meanwhile, Olivier Konzeoue, FX sales trader at Saxo Markets, said a January rate cut will put putting “further pressure” on the pound, particularly if the UK economy fails to “bounce” in the first quarter of 2020.

However, Argentex FX strategist John Goldie warned that it was “dangerous to take the early-year UK data at face value – as they are backward looking and from a time of greater uncertainty in the face of No Deal risk and a General Election”.

With this in mind, he argued that the central bank could have a valid reason to hold fire until its next meeting in mid-March as this will allow the country to advance beyond the Brexit deadline and compile “another couple months’ data”.

Looking ahead, Share Centre research analyst Joe Healey said the “deciding factor” for a January rate cut could be the UK’s flash PMIs, which are due on 24 January.

“Overall, I think these figures show the realisation that Brexit is not over and how growth is likely to remain sluggish moving forward until a clearer picture is presented. Businesses are still clouded by uncertainty and it is safe to say, if we continue to see no signs of a bounce, the question of a rate cut will shift from ‘if’ to ‘when’”, Healey said.

The FTSE 100 was 13 points higher at 7,635 shortly before 10.30am.  

9.50am: UK inflation unexpectedly slows to three-year low in December

Inflation in the UK has slowed unexpectedly in December, raising the possibility that the Bank of England could cut interest rates later this month.

The UK consumer price index (CPI) came in at 1.3% for the month, a three-year low and down from 1.5% in November.

The drop seemed to have confounded the expectations of most analysts, with RBC having predicted an increase to 1.6% while ING had forecast that inflation would have stayed put at 1.5%.

The decline was attributed to hotels slashing prices over the period as well as prices in women’s clothing falling more than expected.

“A relatively mediocre Christmas trading period may go some way to explain why inflation is still languishing below its two percent target. In fact, retail footfall is said to have dropped by 2.5% throughout December, highlighting the challenging environment”, said Robert Alster, head of investment services at Close Brothers Asset Management.

“These figures back up outgoing Bank of England Governor Mark Carney’s suggestion that there is clear headroom to cut interest rates to stimulate the economy if required. However, with Brexit-linked uncertainty improving and wage growth outstripping inflation, CPI could soon creep closer to target. This might make a rate cut more unpalatable”, he added.

The pound was 0.19% lower at US$1.2995 against the dollar in the wake of the data, however, the FTSE 100 had inched 18 points higher to 7,641 shortly before 10am.

8.30am: Cautious progress

The FTSE 100 index defied expectations to open its account in positive territory on Wednesday, although, that said, it was a quiet start with traders keeping their powder dry ahead of UK inflation data later in the morning that could help shape the narrative around a potential Bank of England interest rate cut later this month.

Additionally, there were a few nerves as the US and China readied to sign the long-awaited phase-one trade deal, a move towards normalising relations between the world’s two largest economic powers.

After 30 minutes of trading, the index of blue-chip stocks was 8 points to the good at 7,630.66. 

“The US-China trade deal is like watching a live show in the theatre of the absurd,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank

“The Trump administration revealed a detail that nobody expected just before the signature of the phase-one trade deal today: the tariff cuts will not take effect before the US election in November.

“This means that the US tariffs will continue weighing on Chinese exports for almost an additional year, while the emerging market giant will certainly be asked to deliver on its promise to buy massive amounts of US farm goods and manufactured products immediately. The risk here is that the double-standard agreement could provide a weak basis for the future negotiations, impair the benefits, or even spoil the deal.”

Heading the list of blue-chip fallers was Royal Bank of Scotland (LON:RBS), down 1.6% amid the UK rate cut fears, and with reports of a downgrade in rating from fellow lender Barclay’s investment banking arm.

Meanwhile, housebuilders Persimmon (LON:PSN) and Vistry Group PLC (LON:VTY) – formerly Bovis Homes – saw their 2019 trading updates greeted with a collective ‘meh’. The stocks were off 2.8% and 1.1% respectively.

Dropping down to the FTSE 250, a robust production update provided support for Hochschild Mining Plc (LON:HOCH), which led the midcap index with a 3% gain.

Among the tiddlers, Erris Resources PLC (LON:ERRIS) was the standout gainer early on with a 23% advance after due diligence work ‘copper-bottomed’ the potential of the Loch Tay Gold Project in Scotland.

Proactive news headlines:

Erris Resources PLC (LON:ERIS) is set to kick off work to take the Loch Tay Gold Project to an inferred resource of 250,000 ounces of the yellow metal having concluded due diligence work on the project. In doing this it will earn an 80% share of the Scots prospect, which is around 27 miles from the permitted Cononish mine, owned by ScotGold Resources Ltd. (LON:SGZ) that also sits on the Grampian gold belt.

Franchise Brands PLC’s (LON:FRAN) results for 2019 will show significant growth over the previous year and at least match market expectations for £40.6mln of sales and underlying profits of £5.2mln. Drain maintenance group Metro Rod led the improvement with 14% higher sales compared with 10% growth a year earlier, while recent acquisition Willow Pumps has integrated well and broadened the range Metro Rod can offer. Trading in 2020 had also started well, the AIM-listed group said.

88 Energy Ltd (LON:88E) has told investors that the preparation for the Charlie-1 well is “progressing to plan” with spudding expected soon. In a statement, he Alaska-focused explorer said that ice road construction is underway and its base layer is presently about 25%. A permit to drill has been submitted, with approval expected in January.

Immotion Group PLC (LON:IMMO) has confirmed the installation of 93 of its virtual reality (VR) headsets in the first quarter of 2020 after signing contracts with a number of attractions and venues. The firm, which specialises in ‘out of home’ VR experiences, said it has signed contacts in the past week with the London Eye, four aquariums and a European zoo and has agreed terms with a further nine aquariums and five entertainment sites.

Amryt Pharma PLC (LON:AMYT) will have a significant presence at a London conference for physicians and companies involved in treating a skin condition. It will provide information on AP101, its phase III drug for the condition epidermolysis bullosa (EB) on January 21. On the same day, Amryt scientist Dr Lara Cutlar has been invited by the event organisers to present a talk on non-viral gene therapy delivery mechanisms.

Tower Resources PLC (LON:TRP) told investors that Cameroon authorities have communicated that the government has decided to approve the company’s application to extend the initial exploration period for the Thali licence. Previously the initial exploration period had an expiration date of 15 September 2019, and, last year the company requested a twelve-month extension.

Amur Minerals Corporation (LON:AMC) told investors that it has now completed the baseline environmental assessment (BLEA) for the Kun Manie nickel-copper project. The document has now been filed and approved by the necessary Russian Federation agencies, it added.

Quadrise Fuels International PLC (LON:QFI) has unveiled plans to reshuffle its board as it continues a transition towards commercialisation. The specialist fuel firm said that from 1 February, current chief operating officer Jason Miles will become chief executive, while head of projects Mark Whittle will take over as COO.

Avation PLC (LON:AVAP) the commercial passenger aircraft leasing company, told investors that, further to its announcement on 9 January 2020, it has delivered the second of two Airbus A321 aircraft to Vietjet Air under a long term operating lease. In a statement, the firm said the aircraft – which are being transitioned from a prior operator – has completed calendar airframe maintenance checks, been configured for operations by VietJet Air and has been put into Vietjet Air livery. 

genedrive PLC (LON:GDR), the near-patient molecular diagnostics company, has announced that it will release its interim results for the six months ended 31 December 2019 on Tuesday, 4 February 2020.

6.45am: Footsie set for quiet start 

The FTSE 100 is expected to open on the back foot on Wednesday as traders remained cautious ahead of the signing of a ‘phase one’ US-China trade deal and inflation details from the UK.

Spread-better IG expects the FTSE 100 to open around 11 points lower after ending Tuesday’s session up 5 points at 7,622.

While a trade deal between China and the US may provide some relief for markets, there are lingering concerns that the agreement may be the best investors will get for a while.

“This of course means that the for all the optimism that the conclusion of a phase one deal, would mean that progress would begin on a phase two agreement was somewhat misplaced. The realisation that progress on this wouldn’t happen until after this year’s US Presidential election on November 3rd was not particularly well received”, said Michael Hewson at CMC Markets UK.

“While on the one hand, the risk of further escalations has now gone and is to be welcomed, tariffs are still higher now than they were two years ago, and in the short term are unlikely to come down, meaning that as far as China and the US is concerned, this is as good as it gets, until well into 2021”, he added.

The realisation that tariffs may not be lowered soon made for a mixed session on Wall Street on Tuesday, with the Dow closing 0.1% higher at 28,939 while the S&P 500 finished 0.15% lower at 3,283 and the Nasdaq fell 0.24% to 9,251.

Similar jitters sent Asian markets lower on Wednesday, with the Japanese Nikkei 225 sliding 0.45% while Hong Kong’s Hang Seng dropped 0.42%.

UK inflation in focus

Back in the UK, the latest batch of inflation data will be watched closely to help gauge that state of the economy and, more importantly, the possibility of interest rate cuts from the Bank of England.

Economists are split over whether UK consumer price inflation will remain at the 1.5% for the three months to December as seen in November and October.

Analysts at RBC Capital Markets, for one, forecast inflation will have picked up to 1.6% and will average around 1.7% for the first quarter of 2020, while those at Pantheon Macroeconomics and ING see it remaining at 1.5% for the fourth quarter of 2019 but picking up to 1.8% and 1.9% respectively in the new year, while all expect CPI to drop sharply in the middle of the current year to reflect regulatory price changes in energy and water.

The inflation data could provide some catalysts for the pound, which is currently up 0.09% at US$1.3031 against the dollar.

Significant announcements expected on Wednesday:

Finals: Provident Financial PLC (LON:PFG)

Trading announcements: Ashmore Group PLC (LON:ASHM), Diploma PLC (LON:DPLM), Hochschild Mining Plc (LON:HOC), Persimmon PLC (LON:PSN),​​​​​​ Revolution Bars Group (LON:RBG), Ten Entertainment Group PLC (LON:TEG), Tullow Oil PLC (LON:TLW), Vistry Group PLC (LON:VTY)

Interims: Knights Group Holdings PLC (LON:KGH)

Economic data: UK inflation, US Empire State manufacturing index, US Beige Book

Around the markets:

Sterling: US$1.3031, up 0.09%

Brent crude: US$64.37 a barrel, down 0.19%

Gold: US$1,551.70 an ounce, up 0.6%

Bitcoin: US$8,650.36, up 1.75%

City headlines:

Flybe has been rescued from collapse after the UK government reached a bailout deal for Europe’s largest regional airline – Financial Times

Boeing lost orders last year for the first time in three decades, as the 737 Max crisis impacted the company’s reputation and finances – Guardian

BlackRock has warned company bosses to get to grips with climate change and sustainability or it may move to vote them off the board at their next shareholder meeting – Times

Greg Jensen, co-chief investment officer of Bridgewater Associates, the world’s largest hedge fund, says gold could surge to a record high above US$2,000 an ounce as central banks embrace higher inflation and political uncertainties increase – FT

UK technology start-ups attracted more than £10 billion for the first time last year as investment climbed 44% despite turmoil over Brexit – Telegraph