- FTSE 100 index closed down 47 points
- NMC Health leads the index lower
- Hargreaves Lansdown off the pace despite price target hike
5pm: FTSE 100 closes in negative territory
FTSE 100 index closed in negative territory on the first day of the new trading week as US-Iran tensions ramped up and the pound firmed.
The UK's blue-chip benchmark index finished around 47 points down, or 0.62%, to 7,575, having been as high as 7,622 within the session.
The FTSE 250 closed down over 226 points at 21,761.
"The rhetoric from both sides has been upped, which has prompted traders to dump equities," said David Madden, at CMC Markets.
"The Iranian regime has suggested it will carry out an attack on US interests as a payback for the killing of one of its military commanders in Iraq last week. President Trump has warned Iran that any military response will bring about further US attacks."
On Wall Street, stocks were generally lower. The Dow Jones Industrial Average dropped around 66 points at 28,568. But the Nasdaq gained ground, up around 11 at 9,032.
Meanwhile, sterling has gone higher against the US dollar, up 0.61% to US$1.3160 after better than forecast UK service sector data last month (December) as the decisive general election result and more clarity over the Brexit process booted business optimism.
3.00pm: FTSE pares losses
US markets opened lower albeit not as severely so as expected.
After half an hour or so of trading the Dow Jones average was down 125 points (0.4%) at 28.510 and the S&P 500 was off 8 points (0.3%) at 3,227.
Back in Blighty, NMC Health PLC (LON:NMC) – down 4.7% – was leading the Footsie lower after it announced the members of the committee that would be overseeing the independent review of the companys accounting practices.
The FTSE 100 was down 51 points (0.7%) at 7,571.
1.45pm: US indices to fall sharply
US benchmarks are set to start the week on the back foot, as investors continue to fret over worsening relations between the US and Iran.
Spread betting quotes indicate the Dow Jones, which shed 234 points on Friday, will give up another 182 points to open at around 28,452, while the S&P 500, which surrendered 23 points to close at 3,235 on Friday is expected to give back another 19 points at the outset.
Gold continues to be the asset class of choice today, with the price up 1.4% at US$1,574.30 an ounce, although oil is also rising fast, with Brent crude climbing to US$69/59 from US$68.60 overnight.
“Gold initially traded higher throughout the Christmas holiday. A move known as the Santa Rally by markets that we can observe each year due to an increased demand for obvious reasons combined with thin liquidity in FX during the year-end season. The escalation of tensions in the Middle East has since sent gold to a seven-year high, as markets seek refuge in a traditional … haven in times of uncertainty,” said Olivier Konzeoue, a foreign exchange trader at Saxo Markets.
In the UK, the FTSE 100 now has 10 constituents that are in positive territory, with the index now down 67 points at 7,556.
Oil giants BP and Shell are among those profiting, thanks to the strength of the oil price, while retailer Next PLC (LON:NXT), up 0.4% at 6,966p, is getting some love after last weeks sparkling trading update, despite the stock being downgraded by SocGen to sell from hold.
11.50am: Investors flock to gold
For the last two hours or so the FTSE 100 has been moving sideways, waiting for more developments in the Middle East.
Londons index of leading shares has been in the 7,540 – 7,550 groove for much of the morning and is currently loitering around 7,544, down 79 points (1.0%) on the day.
As Connor Campbell noted, “investors [are] processing the ongoing aftermath of the assassination of Iranian general Qassem Suleimani”.
According to Rabobank, “the subsequent news flow has only served to further weigh on risk appetite with Trump tweeting that the US had identified 52 sites in Iran that would be targeted in the event of a retaliation and that it could act in a disproportionate manner in such an instance, Iran announcing that it no longer considers itself bound by the 2015 nuclear deal and that its targets in response to the killing would include Israeli military bases while the Iraqi parliament called for US forces to leave its territory (this prompting Trump to respond that sanctions could be imposed were this to happen while local Iranian backed militia announced the US would be considered an occupying force if it were not to comply)”.
Not surprisingly, as tensions rise funds are being switched to gold, long regarded as a haven – or “safe haven” as those who dont know what a haven is would term it – for risk-averse investors.
On the futures markets, gold for February delivery was up US$28.60 (1.8%) to US$1,581 an ounce.
10.30am: New car registrations rise in December
Private new car registrations rose 0.1% from a year earlier in December.
This represented a decent end to a year in which the average year-on-decline each month was 3.2%.
Total registrations, including fleet and business sales, rose 3.4% in December.
“Car sales were pummelled last year by subdued consumer confidence, a near-4% increase in new car prices and uncertainty about the future regulation of diesel cars. The downward trend also was amplified after new testing procedures—the Real Driving Emissions tests—were introduced in September,” observed Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“After seasonal adjustment, we estimate that car sales fell 6.4% quarter-on-quarter in Q4, subtracting 0.16pp [percentage points] from growth in households spending and 0.10pp from growth in GDP. Car sales, however, should stabilise this year,” Tombs predicted.
“Admittedly, any recovery in demand will be constrained by a declining flow of people coming to the end of PCP finance deals, which typically last three years; registrations were 10% lower in 2017 than in 2016. But consumer confidence should recover, now that the immediate threat of a no-deal Brexit has been lifted; indeed, the -11 level of GfKs composite index of consumer confidence in early December exceeded its prior 12-month average, -13. In addition, the recovery in sterling to €1.17 should help to bear down on future price increases, while the recent fall in unsecured borrowing rates will help to lower total costs too,” he continued.
“Meanwhile, clarity regarding the future taxation of diesel vehicles could emerge in the Budget in February, following the Conservatives landslide win,” Tombs predicted.
Tombs also weighed in on the latest UK Markit/CIPS Services Survey, where the purchasing managers index (PMI) reading came in at 50, which marks the crossover point between expansion and contraction.
“Business optimism recovered to its highest level since September, and firms returned to increasing their staffing levels, with the employment index rising to 51.1, from 50.1. Crucially, the vast majority—about 85%—of responses to Markits survey were received before the general election on December 12, implying that firms that submitted results too late for the flash reading were much more upbeat than the rest,” Tombs opined.
“Admittedly, its unclear whether the recovery in the PMI simply reflects an improvement in sentiment, or a genuine pick-up in activity. The PMI was misleadingly downbeat throughout 2019, with output in the services sector rising despite the business activity index repeatedly pointing to a downturn, so its recovery might just reflect this gap narrowing. For now, though, the survey data are starting to move in the right direction, significantly weakening the case for the MPC to cut Bank Rate over the coming months,” he concluded.
The FTSE 100 was down 77 points (1.0%) at 7,545.
9.45am: UK services sector stabilises in December
The IHS Markit/CIPS UK services purchasing managers index (PMI) for December stabilised in December, helped by a rebound in new work.
The seasonally adjusted PMI business activity Index registered 50.0 in December, up from 49.3 during November, and the previous 'flash' estimate for December of 49.0.
A value of 50 represents a balance between those survey respondents seeing an increase in activity and those seeing a decline.
"Service companies widely commented on delayed spending decisions and a headwind to sales from domestic political uncertainty in the run-up to the general election. With manufacturing and construction output also subdued in December, the latest PMI surveys collectively signal an overall stagnation of the UK economy at the end of 2019,” said Tim Moore at IHS Markit.
"However, the latest UK service sector figures are an improvement on those seen in November and strike a slightly more positive tone than the earlier 'flash' PMI for December.
“The final IHS Markit/CIPS UK Services data includes survey responses from after the election, unlike the earlier flash estimate.
"It is notable that the forward-looking business expectations index is now the highest since September 2018 and comfortably above its 'flash' reading for December. The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape," he added.
Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), said a marginally less volatile picture emerged in December.
“The sector was rescued by a small uplift in new orders for the first time since August, elevating it out of its doldrums, but only just. European customers were less convinced, experiencing ongoing Brexit nerves, and were unwilling to take out their wallets,” Brock said.
The FTSE 100 was down 77 points (1.0%) at 7,545, weighed down by a resurgent sterling on foreign exchange markets.
8.45am: Weak start to the week
The FTSE 100 saw red as it opened the week sharply lower amid worries the powder keg ignited by Americas assassination of Irans military leader Qasem Soleimani could explode into a far more serious international conflagration.
The index of blue-chips opened 47 points lower at 7,575.61
“The big uncertainties right now for crude [oil] centre on the Iranian response to the killing and on that front we should expect some kind of response. Will Tehran target US bases?” asked Neil Wilson, analyst at Markets.com.
“It could focus more on shipping in the Strait of Hormuz, but we have already seen attacks on a US base in Kenya killing three and rockets fired into the Green Zone in Baghdad. Iran does not need to use conventional military forces to respond and indeed so far it has not delivered a conventional military response despite all the chest-thumping. It does not want to give the US further excuses to bomb it to the ground with an overt reply.”
Among the blue-chip fallers, British Airways owner IAG (LON:IAG) and easyJet (LON:EZJ) were grounded amid worries over soaring fuel bills, a large part of both companies overheads. Share prices of the respective companies were down 2.4% and 2.3% respectively.
Meanwhile, grocer Morrisons (LON:MRW) fell 2.8% as it suffered a bout of the jitters on the eve of its post-Christmas update, hit too by reports of a downgrade in rating from BofA Merrill Lynch.
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