FTSE 100 closes around 19 points lower
US blue chips only modestly higher
Insurers and lenders hit by collapse of Thomas Cook
5.15pm: Dull start to the week
The FTSE 100 index closed lower on Monday unsettled by the collapse into administration of travel firm Thomas Cook Group PLC (LON:TCG), with Wall Street only modestly higher as US/China trade war concerns remain a drag.
By the close, the UK blue chip index was down 18.84 points, or almost 0.3% at 7,326.08. The mood was gloomier for the mid-cap FTSE 250 index, which dropped 125 points, or 0.6% to 20.043, weighed by the Thomas Cook failure.
On Wall Street, around London’s close, the Dow Jones industrials Average was about 22 points, or 0.1% higher at 26,958, with the broader S&P 500 index and tech-laden Nasdaq Composite also both about 0.1% firmer.
David Madden, market analyst at CMC Markets UK, commented: “The major equity indices are a little in the red as traders are concerned about the US-China trade situation.
“Last week, trade delegates from both sides had talks that were ‘productive’, but the Chinese delegates left the US sooner than originally planned, hence why traders are mildly worried about the situation.
“The trade dispute has been going on for over one year, plus it has been the catalyst for some of the major sell-offs in recent months, so it is clearly important to traders.”
4pm: Rally runs out of steam
The Footsie’s half-hearted rally was starting to run out of steam in the final hour of trading.
London’s index of heavyweight shares was down 22 points (0.3%) at 7,323, with NMC Healthcare PLC (LON:NMC), the private healthcare operator in the Gulf Cooperation Council states, the worst performer, down 7% at 2,706p.
The shares have been on a tremendous run since the middle of August, rising from around 1,800p but the revival seems to have hit the buffers over the last week.
Insurance companies, looking at the fall-out from the collapse of travel firm Thomas Cook Group PLC (LON:TCG) were out of favour, with RSA Insurance Group PLC (LON:RSA) down 2.9% at 523.2p and Prudential PLC (LON:PRU) off 2.3% at 1,432.5p.
Lenders Lloyds Banking Group PLC (LON:LLOY) and Royal Bank of Scotland Group PLC (LON:RBS) did not come out of the sorry affair smelling of roses, either; the former was down 2/6% at 54.06p and the latter was 2.3% lower at 208.5p.
“Thomas Cook has collapsed. Shares are worthless. A great, great pity. One wonders how culpable the banks who at the last gap tried to squeeze TC for another GBP200m are in this collapse. Could the refinancing have worked? We’ll never know for sure. For certain Fosun wasn’t prepared to pay a penny more,” said Neil Wilson at markets.com, referring to Fosun, the Chinese backer of Thomas Cook.
Airline operators might also be expected to celebrate the removal of a lot of capacity from the sector, although British Airways owner IAG (LON:IAG) was down 1.0% at 472.9p and Wizz Air Holdings PLC (LON:WIZZ) surrendered 1.8% at 3,517p.
Jet2 airlines owner Dart was the best performer of the trio, rising 5.5% to 892p; easyJet climbed 4.1% to 1,100.5p and Ryanair rose 1.3% to 10.09p.
3.00pm: Slow fight-back continues
US markets have opened lower but that did not stop Footsie continuing its slow recovery, as sterling continues to struggle on foreign exchange markets.
The FTSE 100 was down 17 points (0.2%) at 7,328, as sterling fell half a cent to US$1.2421 as traders wait for the Supreme Court’s decision on whether Boris Johnson was playing fast and loose when he asked the Queen to pro-rogue parliament.
An update for all those eagerly awaiting decision of ?@UKSupremeCourt? in #CherryCase & #Miller2. We hope to have more information on likely timing at lunchtime. Meantime here’s an explainer. #Prorogationcase #Brexit #StopTheCoup https://t.co/IScQE5rR61
— Joanna Cherry QC MP (@joannaccherry) September 23, 2019
In the US, the Dow Jones was down 24 points (0.1%) at 26,911 while the S&P 500 was barely changed at 2,992.
Controversial litigation financier Burford Capital Limited (LON:BUR) was 5.1% higher at 851.5p after it said it has published on its web site a briefing of the company’s investment fair value and return computations.
The hedge fund Muddy Water has, among others, been very vocal about what it saw as Burford’s “Enron-esque mark-to-model accounting”.
Also on the up was Mkango Resources Ltd (LON:MKA, CVE:MKA) after it revealed it is buying a stake in a company that has developed a technology to recycle rare earth magnets.
The shares headed (magnetic) north to 7p, up 9.4%.
1.20pm: Gradual recovery continues
London’s blue-chips are slowly recovering from the blow inflicted by the eurozone PMIs but remain lower on balance.
The FTSE 100 was down 32 points (0.4%) at 7,313.
Stateside, the Dow Jones index was expected to edge up 24 points to 26,884 at the outset while the S&P 500 was tipped to open little changed.
On the foreign exchange markets, sterling is down by four-tenths of a cent against the greenback, which is normally like catnip for blue-chip bulls but not today.
Risk-averse investors are, as usual, taking refuge in gold, which was up by just over US$10 to US$1,525.40 an ounce in lunchtime trading as the trade stand-off between the US and China drags on.
James Knightley, the chief international economist at ING, asks rhetorically who is winning the trade war and concludes that both countries look set to remain losers.
“The US deficits with Mexico and the EU look likely to hit new highs in 2019 while the deficits with Canada and the ‘rest of the world’ are on course to widen out versus 2018. This hints at some substitution of Chinese goods imports for imports from other countries,” Knightley suggested, having acknowledged that the US goods deficit with China has shrunk 11% for January-July 2019 versus the same period in 2018.
11.50am: Eurozone PMIs still weighing on sentiment
After the mid-morning jolt of underwhelming purchasing managers’ index data from the eurozone, the Footsie has been licking its wounds.
London’s index of large-cap shares was down 43 points (0.6%) at 7,301.
The shares shed 4.2% at 187.7p after the finance director, Humphrey Singer, announced his intention to check out once a successor has been found.
Drugs giant AstraZeneca PLC (LON:AZN), up 0.6% at 7,210p, defied the trend after it announced that Qtrilmet modified-release tablets have been recommended for marketing authorisation in the European Union for the treatment of adults with type-2 diabetes.
Yarns and fibres maker Low & Bonar PLC (LON:LWB) sneaked out a trading update after the market closed last Friday, which is usually a bad sign; on this occasion, however, the news was good as the company announced it had agreed to a 15.5p per share cash offer from German company Freudenberg.
The shares virtually doubled to 14.05p.
10.50am: Eurozone PMIs prompt a round of selling
Despite the pound taking a bath against the US dollar, the Footsie has headed south after underwhelming macroeconomic data from the eurozone.
The FTSE 100 was down 43 points (0.6%) at 7,302.
“Risk aversion has seized investors this morning, a sharp contrast to the bullishness of last week,” said Chris Beauchamp, the chief market analyst at IG.
“A number of factors have aligned to drive equities lower; options expiry last week removed the cushion of bullish activity that prevented serious downside for shares, while the second half of September is usually one of the toughest periods of the year for equities. Throw in a shocking set of eurozone PMIs [purchasing manager indices], even worse than expected, and a bunch of equity markets that have rallied hard over the past month and we have a recipe for some selling,” Beauchamp suggested.
The composite PMI in the eurozone fell to 50.4 in September from 51.9 in August, which was below the consensus forecast of 52.0.
“Not the finish to Q3 that we had been hoping for,” was Pantheon Macroeconomics’ verdict.
“The composite index was driven lower by weakness in both key sectors. The manufacturing PMI fell to 45.6, from 47.0 last month, and the services PMI also slipped, to 52.0 from 53.5 in August. New orders growth weakened across the board, driving a contraction in the private sector as a whole for the first time since 2013. Output rose, but this was primarily due to firms eating into existing work backlogs, which fell for a ninth month running. Markit is in no doubt about the key story: A key development in recent months has been the broadening-out of the deterioration beyond manufacturing.” the forecasting unit added.
“We take this point, though we would simply point out that the services PMI through Q3 as a whole was 52.9, a trivial 0.2pp [percentage points] down from its value in Q2, and still higher than its average values in Q4 and Q1. We concede that today’s data add fuel to the idea that a recession in manufacturing is now about to drag the economy as a whole down, but we need a bit more evidence to make this our base case,” Pantheon continued.
“Meanwhile for markets, the key story also is that policymakers are much more likely to respond with force, both fiscal and monetary, than to sit idle. How effective this ‘put’ is is very difficult to say, but it’s there,” it added.
The big story of the morning remains the collapse of travel firm Thomas Cook, which has proved a boon to rival TUI AG (LON:TUI) – up 7% at 899p – but a cause for concern for insurance companies, such as RSA Insurance Group PLC (LON:RSA) and Prudential PLC (LON:PRU); the former was down 3.1% at 522.2p and the latter was off 2.3% at 1,433p.
8.40am: US-China trade stand-off dampens sentiment
As expected, the FTSE 100 made a slow start to proceedings as a down day for Asia’s main markets held the blue-chip index back.
Colouring sentiment was another spat between the US and China in its long-running trade wrangle.
This time it concerned agriculture rather than manufacturing exports as trade delegation from the People’s Republic cancelled Montana farm trip and wrapped up the latest round of talks early.
In New York, Boris Johnson is expected to use the United Nations General Assembly as the backdrop for talks aimed at securing a Brexit trade deal.
There was no doubting the big market news – the failure of Thomas Cook (LON:TCG) after last gasp rescue talks failed.
“The growing popularity of the pick and mix type of travel that allows consumers to book their holiday packages separately as well as new kids on the block like AirBnB, has seen the travel industry change beyond all recognition in the past decade, as consumers book travel, accommodation, and car hire independently,” said Michael Hewson of CMC Markets.
“It’s not just been Thomas Cook that has fallen victim to overcapacity in the sector, with the collapse of a host of airlines in the past few years, with the most profile casualty being Monarch a couple of years ago.”
- TUI AG (LON:TUI) jumped 8% in early trade with Thomas Cook’s demise taking a huge and unpredictable competitor out of the market.
- easyJet (LON:EZJ) and Ryanair (LON:RYA) also enjoyed “relief rallies” as their shares flew 5% and 2.9% higher respectively.
- Ocado (LON:OCDO) fell 1.5% following the flurry of weekend reports that focused on corporate espionage accusations levelled in court documents at a rival.
Proactive news headlines
Mkango Resources Ltd (LON:MKA, TSX:MKA) is buying a stake in a company that has developed a technology to recycle rare earth magnets, which it hopes to employ at its Songwe Hill project in Malawi.
Iodine producer Iofina PLC (LON:IOF) notched up record half-year revenues in the first six months of 2019, with revenue up 29% to US$14.53mln and underlying earnings (EBITDA) soaring 172% to US$1.97mln.
Premier African Minerals Limited (LON:PREM) chairman Michael Foster has stepped down as the group edges closer to manganese miner MNH Holdings.
MTI Wireless Edge Ltd (LON:MWE) has won a US$1mln contract to supply military antennas to an unnamed European customer over the next 15 months.
Kosmos Energy Ltd (LON:KOS, NYSE:KOS) has revealed successful results from the Yakaar-2 appraisal well, offshore Senegal, which has confirmed “world-class” gas resources.
Metal Tiger Plc (LON:MTR) chief executive Michael McNeilly has described himself “delighted” as 59.81% investee Kalahari Metals Limited (KML) landed approval for its environmental management plan for the Kitlanya projects in Botswana.
Union Jack Oil PLC (LON:UJO) executive chair David Bramhill highlighted “significant progress” across its three key projects – West Newton, Biscathorpe and Wressle – as the onshore oiler released its half-yearly results.
Redx Pharma (LON:REDX) will deliver a poster presentation at the European Respiratory Society International Congress 2019 in Madrid, Spain on 28 September-2 October 2019. The poster relates to RXC006, the company’s potential treatment for the orphan disease, idiopathic pulmonary fibrosis (IPF), which is being prepared for clinical trials during the second half of next year.
Caledonia Mining Corp PLC (LON:CMCL, NYSE:) has appointed mining industry veteran Nick Clarke as an independent non-executive director with immediate effect.
6.30am: FTSE set to make subdued start
The FTSE 100 looks set to get off to a flat start with traders fretting over the direction of travel for America-China trade talks.
The same worries left Asia’s main markets stuck in reverse gear as the debate moved its focus from manufacturing exports to agriculture.
“The reason for the late falls was renewed concerns over progress on US, China trade after Chinese officials abruptly cancelled a trip to Montana and Nebraska for talks over farming, though the failure to overcome the previous peaks in July may well have also prompted some end of week profit taking,” said Michael Hewson of CMC Markets.
Boris Johnson, meanwhile, is expected to use a meeting of the general assembly of the United Nations in New York this week to resume behind-the-scenes negotiations to secure a Brexit trade deal.
The day’s big corporate news undoubtedly be Thomas Cook (LON:TCG), which went bust overnight after last gasp negotiations to save the business failed.
The tour operator’s collapse has left over 200,000 holidaymakers stranded, with some facing a two-week wait to be repatriated in a government-led effort.
Around the markets:
Pound US$1.2469 (flat)
Gold US$1,522.40 an ounce, up US$5.20
Brent crude up 70 cents a barrel at US$64.98
Significant events expected on Monday:
Interims: ASA International Group PLC (LON:ASAI), Brady PLC (LON:BRY), Deltex Medical PLC (LON:DEMG, Destiny Pharma plc (LON:DEST), Faron Pharmaceuticals Oy PLC (LON:FARN), Gama Aviation PLC (LON:GMAA), Independent Oil & Gas PLC (LON:IOG), Instem PLC (LON:INS), Keystone Law Group PLC (LON:KEYS), Microsaic PLC (LON:MSYS)
Trading statement: Northgate PLC (LON:NTG)
Economic data: European and US PMI surveys
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