London close: Pound strength caps gains in Footsie
London's top-flight index was dragged lower by continued strength in Sterling at the end of the week, albeit only marginally, amid building expectations for rate cut across the Pond, even as Wall Street's main market gauges nudged higher into record territory.
The pound found a bid even after Monetary Policy Committee member, Gertjan Vlieghe, told an audience at Thomson Reuters that Bank Rate might be cut by nearly 75 basis points in case of a 'no deal' Brexit, although in his opinion if the UK did clinch a deal with Brussels then it might rise to 1.75% by 2021.
For their part, in a research note sent to clients, strategists at Bank of America-Merrill Lynch said a hard Brexit was not their base case - "but it was close".
What BofA-ML was expecting as a base case were two cuts in Bank Rate, starting from November.
By the end of trading, the FTSE 100 had drifted lower by 0.05% or 3.85 points to 7,505.97 while cable had added 0.33% to 1.25613. For the week, the Footsie was 47.17 points lower.
Regarding the outlook for global equities, BofA-ML said they remained in a 'contrarian' stance, anticipating that stocks and credit would overshoot over coming months, giving way to a "big" top in asset prices in the back half of 2019 as the bond bubble popped and the impotence of central banks' policies became apparent.
Overseas, US stocks were setting modestly higher records as Fed fund futures shifted to price-in an 80% chance of three Fed hikes by year-end, although caution ahead of the second quarter corporate reporting season appeared to be dampening sentiment.
Chinese import data for June pointing to continued weakness in the Asian giant's domestic economy also acted as a drag on share prices.
Customs data revealed the year-on-year rate of contraction in Chinese imports easing from -8.5% for May to -7.3%, but that was still worse than the -4.5% drop that economists had penciled-in.
Ahead of those figures, Singapore's highly-dependent export driven economy was reported to have shrunk at an annualised 3.4% quarter-on-quarter pace (consensus: +0.5%) in the second quarter of 2019.
As an aside, the data out of Singapore was in stark contrast with numbers out the day before showing that Irish GDP bounded ahead at a 2.4% pace in the first three months of 2019 following an expansion of 8.2% in 2018.
On a more positive note, US and Eurozone officials are making positive sounding noises around trade talks between the two blocs, with the US Trading Representative having reportedly said that it was in the interest of both to avoid an escalation.
M&A in focus: China's Fosun looking to take stake in Thomas Cook unit, WPP offloads to sell 60% of Kantar
British travel firm Thomas Cook announced on Friday that it was in "advanced discussions" with Chinese conglomerate Fosun regarding a £750m capital injection and the break-up of the group. The Chinese group's plan would see it take a controlling stake in Thomas Cook's tour operating business and a large interest in its embattled airline. A significant amount of Thomas Cook's external debt would also be converted into equity, lighting its debt burden.
WPP said it planned to sell 60% of its Kantar market-research business to US private equity company Bain Capital, valuing Kantar at $4bn. The advertising giant said it would retain around 60% of net proceeds to reduce debt, with the balance, around $1.2bn returned to shareholders.
Global fund management group Ashmore saw its assets under management jump again during the fourth quarter of its trading year, albeit by less than expected by some analysts and with maket performance accounting for a larger proportion of the improvement than anticipated. AuM grew by $6.5bn, which was a tad short of the $6.9bn that analysts at UBS had penciled-in and the split between net inflows and market performance was less positive than anticipated.
Hiscox on Friday said the insurance market continued to deteriorate after 2018 catastrophes, as it forecast first-half pre-tax profits of $150m - $170m (£119m - £135m). The market was hit by events such as typhoon Jebi in Japan and hurricane Michael in Florida. Hiscox said the impact of reserve strengthening needed for those catastrophes would be around $40m.
Sales, marketing and support group DCC on the other hand said it had traded in line with expectations in the first quarter, with “good growth” in group operating profit, driven by acquisitions completed in the prior year. “DCC's profits are significantly weighted towards the second half of its financial year. At what is still a very early stage in the financial year, the group reiterates its belief that the year ending 31 March 2020 will be another year of profit growth and development,” the company said in a trading statement.
Cloud networking and cybersecurity services provider Sophos Group updated the market on its trading in the first quarter on Friday, reporting a 3% improvement on revenue year-on-year to $180.2m, or 7% at constant currency. The FTSE 250 company said it saw “strong” subscription revenue growth of 10% at constant currency in the three month period ended 30 June, which was offset by a reduction in hardware revenue of 11%.
FTSE 100 - Risers
Persimmon (PSN) 1,989.50p 4.55%
Smith (DS) (SMDS) 367.00p 3.23%
Burberry Group (BRBY) 2,000.00p 2.74%
Smurfit Kappa Group (SKG) 2,610.00p 2.68%
Mondi (MNDI) 1,774.00p 2.66%
BAE Systems (BA.) 504.60p 2.29%
Ferguson (FERG) 5,802.00p 2.11%
Barratt Developments (BDEV) 626.20p 2.05%
RSA Insurance Group (RSA) 590.80p 1.86%
Taylor Wimpey (TW.) 163.95p 1.83%
FTSE 100 - Fallers
Just Eat (JE.) 612.00p -2.36%
Hiscox Limited (DI) (HSX) 1,707.00p -2.12%
DCC (DCC) 6,854.40p -1.47%
Diageo (DGE) 3,391.00p -1.27%
Scottish Mortgage Inv Trust (SMT) 550.50p -1.17%
Auto Trader Group (AUTO) 551.40p -1.01%
United Utilities Group (UU.) 777.80p -0.99%
Severn Trent (SVT) 2,045.00p -0.97%
Aveva Group (AVV) 3,946.00p -0.95%
Associated British Foods (ABF) 2,338.00p -0.93%
FTSE 250 - Risers
Sirius Minerals (SXX) 16.77p 5.54%
Sophos Group (SOPH) 435.00p 5.40%
Grafton Group Units (GFTU) 789.24p 4.48%
Ascential (ASCL) 375.60p 4.33%
Dixons Carphone (DC.) 120.80p 4.18%
Daejan Holdings (DJAN) 5,750.00p 3.98%
Syncona Limited NPV (SYNC) 238.50p 3.70%
Crest Nicholson Holdings (CRST) 368.00p 3.43%
Vivo Energy (VVO) 129.20p 2.70%
Bovis Homes Group (BVS) 1,067.00p 2.50%
FTSE 250 - Fallers
Funding Circle Holdings (FCH) 122.40p -4.68%
IP Group (IPO) 70.00p -3.04%
Acacia Mining (ACA) 179.30p -2.71%
Pagegroup (PAGE) 415.00p -2.35%
TI Fluid Systems (TIFS) 190.80p -2.25%
Ted Baker (TED) 835.50p -1.82%
Drax Group (DRX) 280.20p -1.75%
Computacenter (CCC) 1,327.00p -1.26%
National Express Group (NEX) 401.60p -1.18%
Convatec Group (CTEC) 145.00p -1.16%