Relief swept across Lloyd’s of London insurers exposed to the trail of destruction left by Hurricane Irma yesterday as the worst-case scenario in the US was averted.
Investors feared that the one-two punch of Hurricane Harvey and Hurricane Irma would severely dent the pockets of UK insurers, sending the sector’s shares sliding, but Irma took a less chaotic path and weakened in strength over the weekend.
Barclays analyst Ivan Bokhmat said that in terms of insurance costs the “shift west away from downtown Miami likely prevents the worse case scenario” with catastrophe modeling firm AIR Worldwide estimating insured losses from the hurricane of up to $65bn, considerably less than the $150bn predictions mooted by analysts prior to it reaching Florida.
The two hurricanes combined will still “be a major event for the industry and will erode catastrophe budgets across the reinsurance industry”, Peel Hunt warned clients, however.
Lancashire Holdings, which was singled out by analysts as one of the most exposed UK stocks, rebounded 63p to 674p, a 10.3pc jump, while less exposed Beazley and Hiscox climbed 19.2p to 470.2p and 41p to £12.65, respectively.
Elsewhere, pharma giant AstraZeneca jumped 100p to £48.90 after unveiling data from two successful lung cancer drug trials over the weekend. The first trial, Pacific, used the same Imfinzi drug which caused shares to crash over 15pc in July but its use in a less advanced form of lung cancer in this trial proved more fruitful.
Yesterday’s rally now leaves it just 4.4pc short of its value just before MYSTIC trial results disappointed earlier this summer with Liberum commenting that the data beat “already high expectations”.
The pound shrugged off pre-match nerves on the currency markets ahead of key UK economics data due later this week to stop the FTSE 100 keeping up with its counterparts in Paris and Frankfurt.
North Korea failing to mark its founding day with a fresh nuclear test and the waning strength of Hurricane Irma helped lift the gloomy mood on stock markets with the UK’s blue-chip index closing 35.99 points higher at 7413.59.
On the FTSE 250, Petra Diamonds plummeted 5.1p to 84.85p after a package of the company’s diamonds was seized by the Tanzanian Government and it suspended operations at its mine there.
The prospect of further hostilities between the authorities in the East African country and foreign companies dragged down gold producer Acacia Mining, another firm that has faced the heavy hand of the Tanzanian Government.
Acacia, which slipped 9p to 183p yesterday, has been in a bitter dispute with local authorities since Tanzania banned exporting gold and copper ore in March, sending its shares crashing 66pc in just over six months.
Finally on the junior AIM market, smart home innovator LightwaveRF popped 3.3p to 28.8p after securing a minimum £2m worth of orders in the first year of a distribution agreement with Deta Electrical.
Markets wrap: Risk appetite returns to stock markets; insurers jump on lower hurricane costs
North Korea's nuclear no-show and the worst of Hurricane Irma passing brought risk appetite back to global stock markets today but the FTSE 100 lagged its stronger peers on the Continent and across the Atlantic, finishing just 0.5pc higher.
Insurers jumped higher as the hurricane causing chaos across the Caribbean proved less destructive in the US than initially feared with Lancashire Holdings, one of the most exposed stocks in London, soaring over 10pc on the FTSE 250. Investors piled back into insurance stocks as the less destructive path taken by the hurricane slashed estimated costs for the Lloyd's of London firms.
Elsewhere, Associated British Foods finished the biggest loser on the FTSE 100, retreating 5pc, despite its Primark business enjoying strong sales growth in this morning's update amid a grim consumer backdrop while previous metal miners Randgold Resources and Fresnillo dipped as gold prices came off last week's highs.
On the currency markets, the pound showed no pre-match nerves ahead of inflation data due tomorrow but has pared its morning gains against the dollar, trading close to flat territory at $1.3177.
IG chief market analyst Chris Beauchamp commented:
"Today’s price action marks a step change from a week ago, when fears of conflict on the Korean peninsula drove equities lower. Now normal service has apparently resumed, with triple digit gains on the Dow and the Dax.
"The FTSE is making heavy going of it, however, as sterling continues to gain ground versus the US dollar. The pound shows little nervousness so far ahead of a big week for UK data, and even the prospect of voting on the government’s EU withdrawal bill has not deterred the buyers."
Dual effect of waning North Korea and Hurricane Irma fears lifts markets' moods
The dual effect of just fireworks being the most explosive part of North Korea's founding date celebrations on Saturday and Hurricane Irma weakening means equity traders' computers are all lighting up green this afternoon.
David Madden said this on the return to risk-on mode:
"The lack of hostilities in relation to North Korea and the downgrading of Hurricane Irma to a category one storm has prompted traders to buy back into the market. North Korea celebrated the founding of the state over the weekend, and investors were worried the event could have prompted Pyongyang to mark the occasion by testing a missile. Seeing as the North Korean regime didn’t show off its military might over the weekend, traders were encouraged to take on more risk.
"The timing of Hurricane Irma wasn’t great seeing as it quickly followed the tropical storm Harvey. Irma was downgraded to a tropical storm, and even though it has caused a considerable amount of destruction, it hasn’t been as bad the markets were expecting. This also added to the bullish sentiment today, since the cost of the clean-up will be less than expected."
Petra Diamonds shares plunge as it closes mine after Tanzanian diamond seizure
Petra Diamonds has become the latest miner to fall foul of the Tanzanian government as a parcel of diamonds worth tens of millions of pounds was seized and blocked from export.
The mining company’s share price plunged as much as 28pc in early trading as it stopped operations at the Williamson mine following the seizure of the 72,000-carat parcel.
The move follows criticism of the mining industry by Tanzania president John Magufuli, who has accused companies of not giving the government a fair share of profits. Mr Magufuli last week ordered a review of the Petra contract.
It comes after an export ban on gold and copper ore last week prompted mining giant Acacia Mining to slow down its operations in its flagship Tanzanian mine.
Bitcoin steadies the ship after 7pc plummet
Cryptocurrency Bitcoin has steadied the ship today after shedding 7pc of its value on Friday on reports that Chinese authorities are planning to shut down local digital currency exchanges.
Its exchange rate with the dollar reached $5000 early this month but fears of tightening regulation in China has knocked its price back down to around $4250.
The cryptocurrency's value has risen by an incredible 320pc just this year from $1000 but remains in flat territory today. Does this have bubble written all over it?
China's three biggest bitcoin exchanges, said Monday that they hadn’t received any regulatory notices concerning bans on bitcoin trading— zerohedge (@zerohedge) September 11, 2017
Warning: Brexit could land business with £4bn a year customs bill without transitional deal
British businesses that export to Europe could collectively face a multi-billion pound Brexit bill if the UK and the European Union are unable to agree a transitional customs deal, a think-tank has warned.
The Institute for Government (IFG) says that should the UK leave the EU without a negotiated agreement on customs, controls at borders "could be introduced overnight”.
It calculates that there are 180,000 business - most of them SMEs - trading with Europe who will need to make customs declarations following Brexit, landing them with a combined bill of at least £4bn in the first year alone.
Dow Jones rallies into positive territory; Petra Diamonds plummets on Tanzania dispute
The global relief rally has extended into the US session with the Dow Jones opening 0.8pc higher as Hurricane Irma and North Korea fears subside.
Travelers Companies, an insurance firm, has followed its peers in Europe and jumped over 5pc on the index as concerns over the impact of Hurricane Irma on the sector fade.
Meanwhile back in Europe, the FTSE 100 has given up some of its morning gains with the handful of stocks that started the day in the red steadily growing.
On the FTSE 250, Tanzania's latest hostilities with foreign mining companies have pulled down Petra Diamonds and Acacia Mining. Petra Diamonds shares have shed nearly 9pc of their value today after the Government seized a package of diamonds it said had been undervalued, leading to the company suspending operations at its mine there.
Google appeals against record monopoly abuse fine
Google has launched an appeal against the European Commission's record £2.2bn monopoly abuse fine, it has been confirmed in the last half hour.
As reported in The Sunday Telegraph, the company will extend the seven-year dispute between the company and the EU over allegations that it exploited the dominance of its search engine to push its own online shopping service.
Q&A | Why is Google being fined?
Pink flamingos boost Primark sales and ABF forecasts
Shoppers flocked to Primark stores over the summer to snap up pink flamingo pool inflatables alongside their holiday wardrobe essentials, helping to boost parent group Associated British Food's full-year forecasts.
John Bason, ABF finance boss, said that the huge demand for its ornithological-inspired inflatables was one of the suprise big-sellers which helped the high street retailer smash its sales predictions for the summer and avoid heavy discounting.
The trend for over the top swimming accessories has been driven by celebrities such as Taylor Swift and Kourtney Kardashian and fuelled by social media posers. During the summer Primark was selling £9 flamingo inflatables as well as blow-up unicorns and £1 doughtnut-shaped floating cupholders.
Shares fell by 3pc this morning following the results.
Economics preview: Trio of UK macro releases will dominate sentiment this week
With no economics data for the markets to pore over today, let's have a quick look at the key trio of macro releases due later this week.
Tomorrow inflation is expected to pick-up to 2.8pc, tightening the squeeze on households, while on Wednesday wage growth figures will show whether the gap between pay and rising prices in the UK has continued to widen again.
A day later we'll get the latest interest rate decision from the Bank of England on a 'Super Thursday' that might not quite live up to its name.
The markets are currently pricing in just a 5.1pc chance of a hike in Thursday's meeting with patchy economics figures and cooling inflation in the last few months diminishing the clamour for a rise.
Are the markets underestimating the chance of a hike?
ETX analyst Neil Wilson gave this prediction for Thursday's decision:
"The MPC is all but certain to leave everything well alone, with interest rates to be held at 0.25% and the size of the asset purchase programme unaltered at £435bn. At present there are simply too many unknowns for the Bank to hike to rates. However policymakers are likely to continue to stress that their tolerance for above- target inflation is not unlimited and that the market is underestimating their willingness to act.
"The vote is expected to be 7-2 in favour of leaving rates unchanged, with confirmed hawks Ian McCafferty and Michael Saunders likely to vote for a hike. Andy Haldane is probably the only real unknown but the chief economist is, on balance, just seen voting for the status quo."
Facebook hit with €1.2m fine in Spain for breaking privacy laws
Facebook has been hit with a €1.2m (£1.1m) fine in Spain after the country's data watchdog found it broke privacy laws.
The social network breached laws designed to protect citizens' information and privacy on three occasions, according to the Spanish authorities.
The regulator found Facebook had failed to inform users how their data would be used as it hoovered up the details of millions of people in Spain.
It said Facebook had failed to educate users on how their personal information - including ideology, sex, religious beliefs, personal interests and browsing habits - would be used for advertising. It added that Facebook had illegally tracked visitors to its pages who had not signed up to the social network using cookies.
Lunchtime update: Risk appetite rises on the markets as North Korea tensions fade
North Korea's nuclear no-show over the weekend has lifted the mood on global stock markets this morning with the FTSE 100 rebounding back into positive territory.
The pound rising to over $1.32 against the dollar ahead of a big week of UK economics data couldn't dampen spirits in London with insurers enjoying a relief rally as the fears of eye-watering costs from Hurricane Irma recede.
ABF has retreated despite its Primark business enjoying strong sales growth while pharma giant AstraZeneca has jumped towards the top of the blue-chip index after positive lung cancer drug trials.
Accendo Markets analyst Mike Van Dulken said this on today's play:
"Traders have started the new week hungry for risk, pushing equities and base metals higher on reduced concerns about North Korea and Hurricane Irma (although both very much still in play) and supportive China inflation data. As usual, bullishness has proved detrimental to safe havens like Gold, Bonds and the Yen & Swiss Franc.
"The German DAX outperforms thank to a EUR/USD pullback from Friday's highs benefiting the index in general while Insurers/financials welcome a, thus far, less destructive Floridian path for Hurricane Irma. The UK FTSE 100 is higher, albeit to a lesser degree, and despite a strong GBP ahead of Thursday’s BoE policy update."
Tesco deducted £3.4m from charity plastic bag sales last year for admin costs
Tesco has been criticised for deducting millions of pounds from charity donations generated by the plastic bag tax in order to cover "administration costs".
New government data shows that Britain's biggest supermarket sold 637m carrier bags in the year to March 2017, raising almost £32m in proceeds.
But it withdrew £3.4m of this to cover the “cost of administering donations”, equivalent to more than 10pc of the total.
The government figures show that no other major supermarket – including Asda, Sainsbury's, Morrisons and Waitrose – made any such deductions from plastic bag sales, and instead passed on all proceeds to charities.
Pound pushes over $1.32 ahead of hectic week of economics data
The pound has risen to a six-week high against the dollar, just over $1.32, ahead of a crucial week of economics data for the UK.
Key inflation data is due tomorrow and on Wednesday we'll find out if wage growth has eased the pressure on households suffering from rising prices.
Stronger economics figures last week have helped to lift the pound from its August lows, according to MUFG currency analyst Lee Hardman.
"With growth in manufacturing output expanding solidly by 0.5% in July, there is some encouragement that the sharp improvement in business confidence driven in part by the weaker pound and stronger global growth is beginning to feed through into hard economic data.
"At this stage we still believe it is best to treat the recent improvement in UK economic data flow with caution.
Plenty of tests are coming up for the currency, however.
In addition to the inflation and wage data, we have Bank of England 'Super Thursday' later this week and the Repeal Bill vote in parliament later today.
North Korea 'an unlikely source of bullish sentiment' on stock markets
On the markets no North Korea news is good news.
The rogue state's unexpectedly quiet weekend has prompted a strong rally on European stock markets this morning with the FTSE 100 now 0.7pc up and the DAX in Germany enjoying a 1.1pc rise.
Investors were worried that the country's founding day on Saturday would be marked by another show of military muscle but it passed uneventfully.
The lack of any major economics releases means that Kim Jong-Un is the "unlikely source of bullish sentiment" on global stock markets, according to IG market analyst Joshua Mahony.
"Markets have started the week in a positive fashion, with risk assets firmly in the driving seat at the expense of the commonly perceived havens such as gold, treasuries, and the yen.
"The FTSE has utilised this morning’s bullish sentiment to build on the strong end to last week, rising to levels seen almost a week ago. It has been notable that the FTSE has held up well despite a surging pound and a significant degree of geopolitical risk associated with North Korea."
With the UN Security Council due to meet later today over whether to implement oil sanctions on the rogue state, a renewed flare-up in tensions seems only round the corner, however.
Asian equity markets have rebounded overnight as North Korea’s founding day passed without a missile test.— Arjun K Lakhanpal (@Arjun_lakhanpal) September 11, 2017
Could Hurricane Irma actually benefit US GDP?
While Hurricane Irma will undoubtedly have a short-term impact on the economy in Florida, the rebuilding process could actually support growth figures in the future, some analysts have suggested this morning.
The hurricane season will pull down third quarter GDP figures but a boost to the US construction industry will lift GDP figures in the final quarter of 2017 and first quarter of next year, according to head of investment at Interactive Investor Rebecca O'Keeffe.
"Rebuilding and reconstruction are likely to be a central theme over coming weeks with the DIY and construction industries likely to be beneficiaries. Demand for new automobiles could be affected substantially by their growing susceptibility to damage from floodwater.
"Oil and oil product markets remain volatile as the knock-on effects of both Harvey and Irma may affect demand and supply for some time to come. Florida is also a key supplier of agricultural produce to the US and wider market, not least orange-juice."
Offshore wind to power £17.5bn investment boom as costs halve
The UK’s offshore wind sector could power a £17.5bn investment inthe UK economy over the next four years after faster than expected cost-cutting slashed subsidies for the technology by half.
The Government’s latest auction for support contracts, released this morning, shows that offshore wind costs have halved in the last five years to under £58 for every megawatt-hour of electricity produced, even lower than the estimates given by experts in the run-up to the results.
The lower costs mean more wind farms will be able to apply for the £294m funding pot, bringing an investment surge of £17.5bn into the UK. The boom is even greater than the £11bn predicted by Renewable UK as recently as last week.
“We knew today’s results would be impressive, but these are astounding," said Hugh McNeal, chief executive of Renewable UK.
"Record-breaking cost reductions like the ones achieved by offshore wind are unprecedented for large energy infrastructure."
Insurers rebound as Hurricane Irma payout fears recede
Hopes that the damage caused by Hurricane Irma will be less severe than expected has lifted the Lloyd's of London insurers heavily exposed to events in the US this morning.
European insurers retreated last week on fears of huge payouts in the aftermath of the two hurricanes that have left a trail of destruction in the Caribbean and southern US.
The damages could, however, come in at less than $50bn compared to a previous estimate of around $192bn, according to LCG analyst Ipek Ozkardeskaya.
On the FTSE 250, Lancashire Holdings and Beazley have jumped 7.5pc and 5.7pc, respectively, while the Stoxx 600 insurance index, which tracks the performance of all the large insurance companies in Europe, has enjoyed its best day since April, rising 2pc.
AstraZeneca jumps to the top of FTSE 100 on positive drug trials
Pharma giant AstraZeneca leads the blue-chip stocks in London this morning after reporting positive results from two phase III lung cancer drug trials.
The Flaura Tagrisso and Pacific trials data beat "already high expectations", commented Liberum analyst Roger Franklin.
"The Flaura Tagrisso data delivered almost exactly what was expected at progression-free survival but with the kicker of positive early overall survival trends. More importantly, in Pacific, the magnitude of the progression-free survival benefit over placebo was truly impressive "
Rebound of #ASTRAZeneca from end-July 5mth lows continues, +2.4%. Drug that saw setback in advanced cancer shows promising stage 3 data ^KO— City Index (@CityIndex) September 11, 2017
AstraZeneca's shares crashed 15pc in July following poor results in its MYSTIC lung cancer drug trial. However, it has slowly clawed back value since and today's 1.9pc rise leaves it just 4.6pc short of its share price just before the MYSTIC trials disappointed.
Its chief executive Pascal Soriot was rumoured to be on the verge of jumping ship to rival Teva earlier this summer but the Israeli company finally filled its vacancy this morning with Kaare Schultz from H. Lundbeck A/S.
Carillion confirms departure of finance boss amid string of management changes
Troubled support services firm Carillion has confirmed the departure of its finance director as it announces a string of changes to its management team.
It was reported over the weekend that finance boss Zafar Khan was due to step down from the business, which has lost almost £800m from its market capitalisation in recent weeks.
In a statement to the stock market, Carillion said Mr Khan had left the company with immediate effect.
He has been replaced by Emma Mercer, who has previously served as finance director of Carillion's UK construction business, as well as chief financial officer and senior vice president of Carillion Canada.
Carillion shares have fallen 4.3pc this morning.
ABF dips despite lifting its outlook on strong Primark performance
Associated British Foods is the biggest laggard on the FTSE 100 this morning, dipping 2.1pc, despite lifting its full-year guidance as sales and margins improve at its key Primark business.
ABF said that the discount fashion retailer will enjoy a 13pc rise in sales on a constant currency basis despite the bleak consumer backdrop.
The company is "well ahead of last year", according to Hargreaves Lansdown analyst George Salmon.
He added on what the results mean for the rest of the struggling high street:
"The UK has been singled out as performing particularly strongly, which would normally have positive read-across for the rest of the clothing sector. However, this probably isn’t the case this time.
"We feel Primark’s good domestic performance is more a sign the UK consumer is tightening the purse strings and moving down the value chain as inflation outstrips wage growth."
North Korea nuclear no-show lifts sentiment on the markets
North Korea's nuclear no-show over the weekend has lifted the mood on European stock markets this morning with all the major indices rebounding after a gloomy week of trading last week.
There were fears that the rogue state would conduct its latest round of tests on Saturday, the nation's founding day, with tensions rising on the UN Security Council over whether to ban the country's oil imports.
Gold has been pulled off its 13-week high, bringing down shares in FTSE 100 precious metal miners Fresnillo and Randgold Resources, while safe haven the Japanese yen is the biggest laggard on the currency markets, slipping 0.5pc against the dollar.
The mood has also been helped by Hurricane Irma's strength waning, according to Accendo Markets analyst Mike Van Dulken.
"This helpful combo has seen a return of risk appetite and corresponding fall in demand for safe havens. Equities and base metals thus called higher at the expense of Gold, Silver, bonds, the Japanese Yen and Swiss Franc."
Agenda: Rising risk appetite pulls up European stock markets
Welcome to our live markets coverage.
Rising risk appetite on the markets has lifted the FTSE 100 back into positive territory this morning with pharma giant AstraZeneca leading the index after jumping just under 3pc on successful lung cancer drug trial results.
Four negative sessions last week pulled the UK's blue-chip index lower but the mood on European stock markets has improved over the weekend with the DAX and CAC 40 enjoying strong rebounds.
Gold's retreat this morning as risk-on mood returns to the markets has wounded precious metal miners Randgold Resources and Fresnillo while ABF has nudged down despite raising its full-year outlook thanks to strong results in its Primark business.
Asia stocks start the week higher in risk-on mood w/ Yen weaker, Treasury ylds rising as Irma weakens & UN to vote on oil embargo of N Korea pic.twitter.com/tZAHHjmUAB— Holger Zschaepitz (@Schuldensuehner) September 11, 2017
The economics calendar has a very light look to it but any wobbles in passing the Repeal Bill in parliament later today could stoke some movement on currency markets.
With inflation and wage growth data due in the coming days, you couldn't blame traders for sitting on their hands until they get hold of this week's highlight economics figures. This morning, the pound has held onto its six-week high against the dollar from Friday, trading flat at $1.3190.
Interim results: Restore, Luceco, Deltex Medical Group, EKF Diagnostics Holdings, Cloudcall Group, John Laing Infrastructure Fund, XLMedia, Pennant International Group, Crossrider
Full-year results: Abcam, K3 Capital Group, 1pm
Trading statement: Associated British Foods
AGM: Real Estate Credit Investments, CH Bailey, Empyrean Energy