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FTSE 100 slides 33 points -
Retail sales surprisingly strong in June -
US stocks set to open in the red
11.30am: US stocks expected to open lower
London’s leading shares remain dull ahead of what is expected to be a weak start on Wall Street.
The FTSE 100 was down 33 points (0.4%) at 7,502, having fallen below the 7,500 level at one point, all the way down to 7,483.
There was some surprisingly upbeat news from the retail sector, which has helped the likes of supermarket group PLC (), DIY specialist PLC () and Primark owner () defy the trend and notch up gains of between 0.8% and 1%.
“Retail sales were markedly stronger-than-expected in June as volumes rose 1.0% month-on-month. This was a much better performance than had been indicated by soft June surveys from the CBI and the British Retail Consortium and followed month-on-month declines in both May (0.5%) and April (0.3%),” commented Howard Archer, the chief economic advisor to the EY ITEM Club.
“Non-food sales led the way in June with volumes rising 1.7% month-on-month in June with a decent gain in sales of textiles, clothing and footwear (1.2%) which was helped by sales and also reflected a bounce-back after a marked fall the previous month. Sales of household goods rose 1.9%,” he added.
“Consumers have clearly been more resilient than most other sectors of the economy and have seemingly largely brushed off Brexit concerns – no doubt helped by the overall improvement in their spending power since mid-2018 as well as record-high employment,” Archer suggested.
On the US front, Axi Trader mouthpiece James Hughes notes that economic data is relatively thin on the ground but earnings season continues to accelerate.
“Honeywell International and are two of the stand-outs for the day ahead and with both having meaningful exposure to overseas economies too, again there’s the potential for this to provide further guidance over the state of US trade relationships. The DOW may have given back a couple of hundred points this week, but given the generally effervescent state of the market, this is unlikely to prove much cause for concern yet,” Hughes said.
“Ahead of the open, the market is calling the DOW to open down 54 at 27166 and the S&P down 9 at 2975,” he added.
Turning to corporate news, market makers moved the share price of PLC 0.3% lower to 2,196.5p after the mining giant issued a second-quarter production update that revealed demand for diamonds remains flaccid.
“Diamonds are not turning out to be investors’ best friends at this year,” said Fiona Cincotta at City Index.
“Weaker demand for the precious gems and disruptions created by a transition to underground mining at a key pit in South Africa have triggered a disappointing production downgrade at De Beers,” she added.
“Much of Anglo American’s longer-term prospects hinge on demand from big commodities importers like the US and China. Today’s diamond downgrade shows that trade tensions between the world’s two biggest economies are really starting to bite,” Cincotta opined.
9.45am: Trade talks fears hamstring the Footsie
Press reports that trade talks between the US and China have hit the buffers sent markets into reverse on Thursday.
The FTSE 100 was down 34 points (0.5%) at 7,501, with sentiment not helped by sterling recovering almost half a cent against the US dollar.
“Wednesday night’s Dow decline, and the subsequent losses in the Asian session led to a duff start from the European indices,” noted Connor Campbell at .
“The catalyst for all this was a report from the Wall Street Journal claiming that the US-China trade talks had stalled due to the tech-elephant in the room: Huawei. The White House are trying to figure out how to handle Beijing’s demands regarding de-black listing the smartphone maker, apparently, the key reason why there has been so little movement since the latest truce was announced in Osaka. This WSJ update comes not long after Donald Trump claimed there was ‘a long way to go as far as tariffs’, highlighting the $325 billion in Chinese goods yet to be effected,” Campbell added.
With investors feeling a tad nervous, defensive stocks such as utilities and cigarettes makers are in demand.
() was 1.6% higher at 1,171.5p after a trading update while PLC () climbed 1.7% to 2,039p after the water industry regulator, Ofwat, published new information on its PR19 assessments including its draft determination for Severn’s Welsh business, Hafren Dyfrdwy.
There was some cheery news for retailers at the Office for National Statistics reported a 1.0% increase in monthly retail sales volumes in June; economists had been expecting a fall of around 0.3%.
The news did not stop investors baling out of (), the online fashion flogger, after it issued a profit warning.
READ ASOS predicts 70% plunge in annual profits as teething troubles with new warehouses persist
Shares in ASOS were down 13% at 2,379p.
Elsewhere on AIM, (), the company focused on marble quarrying and processing in Kosovo and the Balkans region, has suspended operations in its Malesheva quarry in Kosovo pending a resolution to a dispute.
The shares crumbled 14% to 5.875p.
8.15am: London takes its cue from Wall Street
The FTSE 100 took its cue from Wall Street and Asia’s main stock markets, opening 37 points lower at 7,498.22 amid renewed trade fears.
On Tuesday President Trump showed China the stick by saying the US could still implement tariffs on US$325bn of imports from the People’s Republic.
Traders will have half an eye on UK retail sales later this morning, with economists predicting a 0.2% drop in activity in June compared with 0.5% in May.
“Judging by updates from UK retailers, the consumer climate seems fragile, and workers might be keen to save rather than spend,” said David Madden, analyst at CMC Markets.
Defensive stocks such as British American Tobacco () and () topped the Footsie with rises of 1.1% and 1% respectively.
However, it was fair to say the mood was lacklustre.
There was a little more action among the second-tier players with EI Group () jumping 38% after the pub chain agreed to be bought by Slug and Lettuce owner Stonegate for £3bn including debt.
easyJet () flew 3.8% higher in the vapour trails of its third-quarter trading update, which wasn’t as catastrophic as bearish analysts were predicting.
Around the markets: Pound worth US$1.2455 (up 0.18%); gold US$1,421.80, down US$1.50 an ounce; Brent crude US$63.62, down 4 cents a barrel
Proactive news headlines
() has received the assay results from the two holes drilled at the Ditau Camp prospect in Botswana.
() chairman Ian Gilham has invested £10,000 of his own money into the diagnostic devices maker.
() told investors that its chairman Patrick Cheetham has increased his shareholding in the company, buying 31.5mln shares.
() has signed a distribution agreement with BioEnergiser that will see its SlimBiome Medical weight loss supplements sold online in the UK.
PLC () nudged up exposure to risk assets during the second quarter but said its portfolio was still “fairly defensive” and left it on track to meet its target annual dividend yield of 6.0%.
PLC () has dropped its Pomar licence in Portugal to focus solely on the Cononish mine in the Trossachs.
() said it expects 2019 results to be “at least in line with current expectations” as it registered growth right across the business.
Minds + Machines Group Limited () has announced plans for a £1mln share buyback alongside “healthy” growth in its first half.
Tanzania-focused miner Shanta Gold PLC () is comfortably on track to hit its guidance of 80-84,000oz this year says Eric Zurrin chief executive.
() has appointed Alexandra Nethercott-Parkes, a client director of Langham Hall Fund Management and former assistant vice president of ’s corporate services division, as an independent non-executive director.
Thursday’s main corporate news
Trading updates: Royal Mail Group PLC (); PLC (), (), easyJet PLC (), Thomas Cook PLC (), eve sleep PLC (), (LON:CRY); Hilton Food Group PLC ()
Finals: (), SDI Group PLC ()
Interims: PLC (), Aubioboom Group PLC ()
FTSE 100 ex-dividends: None
Economic data: UK retail sales; US weekly jobless; US Philadelphia Fed manufacturing index
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