FTSE 100 falls 26 points
Sirius Minerals slumps after ditching bond issue
Boris Johnson goes to court over parliament’s suspension
Oil prices have fallen more than 6% after a report said Saudi Arabia’s oil production would return to normal levels faster than expected after a drone attack.
Brent crude futures declined 6.6% to US$64.73 per barrel and West Texas Intermediate futures dropped 6.3% to US$59.17 per barrel.
Prices jumped on Monday after an attack on Saudi oil facilities at the weekend.
According to Reuters, Saudi is close to restoring 70% of output lost due to the attacks, adding that the impact on exports has been “minimal” thanks to ample storage.
3.15pm: Burberry shares rise as it unveils new range at London Fashion Week
Burberry Group plc (LON:BURB) shares are up almost 2% as the British designer received good reviews for its new range at London Fashion Week.
Fashion critics said the summer 2020 collection from creative director Riccardo Tisci had “global appeal”.
Tisci, who has helped lead Burberry’s strategy towards becoming more upmarket, used Burberry’s Victorian roots as inspiration for the range.
2.50pm: US stocks start lower
US stocks have started on the back foot as investors continue to fret over an attack on oil processing facilities in Saudi Arabia.
The Dow Jones Industrial Average fell 80 points to 27,002, the S&P 500 dropped 3 points to 2,995 and the Nasdaq shed 1 point to 8,152.
A drone attack in Saudi Arabia at the weekend caused the biggest single-day disruption in the crude oil market in its history and sparked concerns of military conflict.
2.20pm FTSE 100 slips as pound recovers
The Footsie slipped into the red over the lunchtime trading session, as traders eyed a soft start on Wall Street.
The FTSE 100 was down 7 points (0.1%) at 7,315, with the index moving almost inversely to sterling, which tended higher in the lunchtime session.
Against the US dollar, the pound was more or less unchanged, while against the euro it was around one-third of a cent lower at EUR1,1263.
12.45pm: Roof falling in on housebuilders
Housebuilders’ shares are under the cosh after a government report said the Help to Buy programme has gone on for too long.
The House of Commons’ Public Accounts Committee (PAC), a government body, said in a report: “Help to Buy was originally intended as a short-lived scheme, but will now last for 10 years and consume over 8 times its original budget, yet the value achieved from its extension is uncertain.”
Help to Buy is a government scheme that provides first-time home buyers with a five-year interest free loan. While the scheme has helped get people on the housing ladder, it has been criticised for inflating house prices.
PAC said there needs to be an alternative housing initiative after Help to Buy ends in 2023, otherwise housebuilders could cut back the supply of new homes.
“The new scheme from 2021 provides an opportunity to target the money more effectively, but (the Ministry of Housing, Communities & Local Government) has not yet fully thought out how it will do this,” it said.
12.00pm: US stocks seen lower as markets await Fed’s rate decision
US stocks are seen starting a touch lower following the weekend’s drone attacks on oil facilities in Saudi Arabia.
Dow Jones Industrial Average futures fell 47 points to 27.036, S&P 500 futures dropped 3 points to 2,998 and Nasdaq futures declined 13 points to 7,865.
Joshua Mahony, senior market analyst at IG, said the impact of the attacks in Saudi Arabia has seen the prospect of military conflict ramping up again.
“While relations seemed to have calmed after the Iranian attack on a US drone in June, Saudi Arabia could seek to take retaliatory action if this attack was proven to come from Iran,” he said.
He said markets are starting to shift their focus towards tomorrow’s US monetary policy decision with the Federal Reserve widely expected to cut interest rates. The meeting follows last week’s move by the European Central Bank to launch fresh stimulus measures.
“Markets fully expect a rate cut tomorrow, with the prospect of higher oil prices pointing towards further economic weakness given the drain on consumer spending and business margins,” Mahony said.
“However, with the ECB now embarking on an open-ended quantitative easing programme, the comparative between the two sides could see the dollar rally if the Federal Open Market Committee continue to point towards a short-lived period of easing from the Fed. “
11.20am: Saudi Aramco tells some customers of delays after drone attack
Saudi Aramco has reportedly notified some of its customers about delays to crude deliveries in October following drone attacks on its facilities at the weekend.
According to Bloomberg, the Saudi Arabian oil and gas firm told at least four customers about supply delays ranging from a few days to weeks. However, the company has assured them they will still receive their full contracted volumes.
Reuters reported that PetroChina is among the customers told about a delay. Its loadings of light crude oil for October will be pushed back by about 10 days, said a senior Chinese state oil source with knowledge of the matter.
The latest news follows reports Saudi Arabian officials are discussing delaying Aramco’s initial public offering after the attacks on the group’s largest oil facilities.
The drone attack in Saudi Arabia pushed oil prices higher on Monday due to the expectation that it would hurt supply. Prices have now reversed those gains with Brent crude futures down 1.6% to US$67.9 per barrel and West Texas Intermediate futures down 1.6% to US$61.8 per barrel.
10.40am: FTSE recovers as pound falls on Brexit concerns
The FTSE 100 has recovered slightly since opening bell as the pound has weakened on renewed Brexit concerns.
A Supreme Court hearing on whether Boris Johnson broke the law by suspending parliament for five weeks ahead of the 31 October Brexit deadline is now underway.
Lady Hale, the president of the supreme court, said it is a difficult case because senior judges in England and Scotland have reached different conclusions.
Ahead of the hearing, the prime minister refused to rule out suspending parliament again in an interview with the BBC on Monday.
Meanwhile, talks between Johnson and Jean-Claude Juncker have shown little progress, meaning the prime minister may have to ask the EU for another Brexit extension.
Amid the heightened uncertainty, the pound is down 0.29% versus the dollar at US$1.2395. Against the euro, sterling is down 0.29% at EUR1.1255.
9.40am: French Connection slumps amid ongoing sale talks
The company announced it is extending a strategic review as it continues discussions over the future of the business following six years of losses.
In the first half, pre-tax losses narrowed to GBP4.7mln from GBP15.1mln a year ago even as revenue fell 12% to GBP51mln due to store closures and a shift in the timing of wholesale shipments.
“We initially expected this strategic review (including the formal sale process) to conclude during the first half of 2019, but as announced on 28 June, given the active ongoing discussions, we extended this process to now,” the firm said.
“Discussions are still ongoing with a number of parties.”
8.20am: London stocks see red
The FTSE 100 opened in the red, tracking declines in Asia, as markets were still reeling after a weekend attack on Saudi Arabian oil facilities.
Traders were also exercising caution ahead of a Supreme Court trial over whether Boris Johnson broke the law when he suspended parliament ahead of Brexit day.
London’s top-tier index fell 15 points to 7,305 shortly after the opening bell.
On the company front, Sirius Minerals PLC (LON:SXX) shares plunged 30% after revealing that its North Yorkshire mine development project has stalled due to pre-Brexit bond market uncertainty and the failure to secure financial support from Boris Johnson’s government. The miner said it does not believe the proposed US$500mln bond issue can be issued in the current market conditions.
Going the other way, shares in BP PLC (LON:BP. and Royal Dutch Shell PLC (LON:RDSB) both rose about 1% as oil prices spiked on the back of the attack on Saudi oil facilities. President Donald Trump said it “looks” like Iran was behind the attack.
The Saudi government said the attack was an “unprecedented act of aggression and sabotage” but did not point blame at Iran.
Proactive news headlines
Arc Minerals Ltd (LON:ARCM) said infill soil sampling at two new target areas in Zambia has confirmed a larger mineralised system.
Bluejay Mining PLC (LON:JAY) has lodged its application to mine the Dundas ilmenite project in Greenland.
Primary Health Properties PLC (LON:PHP) has raised EUR70mln through a loan note issue. The investor in modern primary healthcare facilities in the UK and Ireland said the new senior secured notes have been issued with an interest rate of 1.509% and have a term of 12 years.
7.10am: FTSE 100 to open lower
The FTSE 100 is tipped to continue falling on Tuesday as markets remain nervy following the drone attack on Saudi Arabian oil facilities.
Tuesday also sees the Supreme Court trial kick off to consider whether Boris Johnson broke the law by proroguing parliament for five weeks ahead of Britain’s scheduled exit from the EU.
London’s blue chip index was being called 31 points lower to around 7314 by spread betters in the City, following a day when it lost just over 46 points or 0.6%.
US and Asian stocks have suffered too, while oil prices remain elevated.
The Dow Jones lost almost 143 points or 0.5% overnight to 27,076.82, but the broader S&P and the tech-heavy the Nasdaq were both down only 0.3%.
President Donald Trump said it “looks” like Iran was behind the attack, but his comments implied there was no military response planned soon.
Trump will also be watching the Federal Reserve as policymakers start their two-day meeting today.
The President has been putting pressure on Fed chief Jerome Powell to make a significant cut to interest rates, but there is no news due on Tuesday and little top-tier macro data.
What will gain plenty of interest and could move the pound, is the Supreme Court trial, which is being livestreamed from Parliament Square as Britain’s most senior judges will hear cases brought by MPs and activists against Johnson’s suspension of parliament.
The affair kicks off at 10.30 am but is not expected to conclude before Thursday afternoon at the earliest.
The pound is down 0.2% against the dollar in early trade to 1.2408.
Ocado marked by fires
At its interim results in July, the company lowered its full-year earnings guidance by GBP25mn after making a pre-tax loss of GBP43mln the first half following a fire at Ocado’s Andover warehouse in February.
In August, the group suffered its second fire for the year, this time at its warehouse in Erith, which could have dented sales in the third quarter.
Ocado uses robots to move around groceries stored at its warehouses for its own online delivery service and other supermarkets it counts as clients including Morrison Supermarkets PLC (LON:MRW).
The group has been increasingly shifting its attention away from its retail operations towards deals with other supermarkets through its solutions business amid tough competition in the grocery sector.
While the solutions business will be the main area of focus in its upcoming trading update, the performance of the retail arm will also be assessed given that it makes up the bulk of revenues.
Significant announcements expected for Tuesday September 17:
Interims: Aquis Exchange PLC (LON:AQX), Bango PLC (LON:BGO), Central Asia Metals Ltd (LON:CAML), JTC PLC (LON:JTC), Kape Technology PLC (LON:KAPE), KRM22 PLC (LON:KRM), Nahl Group PLC (LON:NAH), Personal Group PLC (LON:PGH), Smart Metering PLC (LON:SMS), Uniphar PLC (LON:UPR)
Economic data: US industrial and manufacturing production, US NAHB Housing Market Index, Eurozone ZEW Survey of economic sentiment