FTSE 100 tumbles following Trump's promise of 'fire and fury' against North Korea; US stocks sell-off continues
Geopolitical chest-beating between the US and North Korea sent investors scurrying out of equities in favour of safe-haven assets such as bonds and gold yesterday.
European blue-chip stock indices fell after waking up to US president Donald Trump’s promise of “fire and fury” against the rogue Asian state, the CAC 40 in France slipping most, 1.4pc, as the attack on soldiers on the edges of Paris weakened investor sentiment further.
A stagnant pound neither helped nor hindered the FTSE 100, which avoided the worst of the sell-off on the Continent to close 44.67 points lower at 7498.06, a 0.6pc retreat, while the DAX in Germany fell 1.1pc.
Investors dumped riskier equities and poured money into safe havens with government bond yields falling, the price of gold rallying to a six-week high and the Swiss franc and Japanese yen enjoying strong gains.
Financial and healthcare stocks suffered most on the FTSE 100, pulled down by their large international exposure. HSBC slipped 5.3p to 764.2p while GlaxoSmithKline and Shire slid 25.5p to £15.09 and 92p to £39.45, respectively.
There were some winners from the escalating tensions, however, with defence specialist BAE Systems climbing 7p to 582.5p, buoyed by the prospect of increased military spending across the pond, and gold producers Randgold Resources and Fresnillo pushing up 200p to £73.80 and 72p to £15.44, respectively, as precious metal prices rose.
Elsewhere, Sky weakened 8p to 953.5p as doubts resurfaced over Rupert Murdoch and 21st Century Fox’s takeover plans of the broadcaster after culture secretary Karen Bradley asked media watchdog Ofcom to look into the £11.7bn bid again.
Prudential slumped 44p to £18.42 as fears mounted ahead of its interim results that the pensions giant is on the verge of breaking apart while telecoms giant Vodafone edged up 0.5p to 225.95p after Bank of America Merrill Lynch upgraded the stock to “buy”.
On the FTSE 250, troubled gold producer Acacia Mining surged 13.6p to 189.9p after broker RBC Capital Markets decided that its 67pc nosedive since the Tanzanian government introduced a ban on gold and copper concentrate exports had helped the stock roughly settle on a fair valuation.
Upgrading to “sector perform”, the broker argued that there were multiple outcomes that would be mutually beneficial for both parties and that Tanzania forcing Acacia shareholders towards international arbitration would be self-damaging for the African country’s economy.
Finally, Ladbrokes Coral dived 6.6p to 121.5p after its private equity backers sold off stakes in the bookie.
Markets wrap: North Korea tensions dominate investor sentiment
Escalating tensions on the Korean peninsular have dominated investor sentiment in Europe today with the CAC 40 in France plunging 1.4pc and the DAX diving 1.1pc.
The FTSE 100 escaped the worst of the global sell-off but still weakened 0.6pc. Financial and healthcare stocks with large international exposures suffered most with HSBC, GlaxoSmithKline and Shire all weighing heavily on the blue-chip index. US stocks have opened lower but much of the share price reaction to the North Korea threat is already priced in from yesterday's session.
Investors flocked to safe havens following Donald Trump's promise of "fire and fury" against the rogue Asian state with gold rallying to a six-week high and the Japanese yen and Swiss franc dominating on the currency markets. With little domestic news to move the pound, a quiet day for sterling has seen it edge up 0.1pc on the dollar, trading just below $1.29.
IG's market analyst Josh Mahony reviewed today's action on the markets:
"European stocks have stabilised after this morning’s fear-fuelled deterioration in response to heightened fears of a US-North Korea conflict. Although the stock markets have regained some ground, concerns clearly remain over the potential of conflict."
FTSE 100
Sky shares fall as key investor considers withdrawing support for Fox takeover
Investor jitters over Fox's £11.7bn takeover of Sky have pushed the British broadcaster down 1.1pc today.
Fears that the deal may fall apart have resurfaced after culture secretary Karen Bradley asked media watchdog Ofcom to look into Rupert Murdoch and Fox's bid again.
Reuters is also reporting this afternoon that hedge fund manager and Sky shareholder Crispin Odey could withdraw his support for the deal.
Oil price falls despite US stocks decline
Brent crude has dipped this afternoon and is heading towards flat territory for the session following the US Energy Information Administration's latest stocks data.
The price has fallen to $52.24 per barrel despite the closely watched figures showing that crude inventories fell by 6.5m barrels last week.
David Madden at CMC Markets explains why prices still fell:
"WTI and Brent Crude oil initially jolted higher after the Energy Information Agency reported that oil inventories dropped by 6.45 million barrels, and traders were expecting a decline of only 2.5 million barrels.
"The report showed that gasoline inventories increased by 3.42 million barrels, while analysts were anticipating a drop of 1.5 million barrels. Oil edged lower after the increase in gasoline stockpiles prompted traders to sell the energy."
Tech firm Telit's shares dive on probe into boss's alleged links to historic fraud
The boss of Aim-listed ‘internet of things’ company Telit Communications has taken a leave of absence from the company amid allegations he is wanted for a 25-year-old fraud in Boston.
Independent solicitors have been drafted in by the company to review the allegations - made in Italian newspaper il Fatto Quotidiano yesterday - against its chief executive Oozi Cats.
In a statement to investors, Telit said the board had agreed to Mr Cats’ own request for time off while lawyers investigate the claims. Telit’s finance director Yosi Fair will run the firm in the meantime.
Shares in Telit dived almost a third to trade around £1.27 at lunchtime on the news. The company’s stock had already taken a bath this week on disappointing interim numbers on Monday, sending shares down 42pc.
Read Iain Withers' full report here
Alistair Darling warns against ‘complacency’ 10 years on from financial crisis
Britain risks becoming complacent 10 years on from the credit crunch, as measures to stop a repeat of the crash appear almost complete and City veterans with experience of the crisis retire, former Chancellor Alistair Darling has warned.
Lord Darling also said there was a chance the economy could be blindsided by a crisis emerging from an unexpected quarter, just as the credit crunch took experts by surprise.
“The next crisis will probably come from somewhere it wasn’t really expected, from causes that haven’t yet been identified. And of course in a few years when institutional memories start to fade and the people around have all gone and retired, then that is when the risk reoccurs,” he said, speaking to the BBC.
“You always have to be vigilant. The lesson from 10 years ago is something that can start as apparently a small ripple in the water can become mountainous seas very quickly.”
Read Tim Wallace's full report here
Poor earnings in the US also weighing on indices
Although there has been a broad-based decline on stock markets stateside, it appears that quite a lot of the damage over in the US is down to company specific losses.
The worst performing index across the pond, the Nasdaq, has been weakened most by online travel company Priceline's shares tumbling 7.7pc on earnings falling short of expectations and pharma firm Mylan dropping 5pc after it announced delays on key new drug launches.
Rio Tinto’s sale of coal mines hits a snag after hedge fund objects
The sale of Rio Tinto’s Australian coal mines may have hit a snag after a minority shareholder in Yancoal, the buyer of the operation, declared its opposition to the deal.
Senrigan Capital, a hedge fund based in Hong Kong, has complained to the Australian Takeover Panel that Yancoal’s plans to fund the $2.69bn (£2bn) purchase by raising $2.35bn in a rights issue was “prejudicial” to the interests of minority shareholders, who could find their stakes diluted out of existence if they are unwilling to subscribe for more shares.
The equity raise, which will involve the issuing of 23.6 new shares for every one currently held, was “unnecessarily highly dilutive and ‘value shifting’”, Senrigan told the Takeover Panel, adding: “[It] does not allow existing minority shareholders a reasonable and equal opportunity to participate.”
Read Jon Yeomans' full report here
US markets open lower but much of the share price reaction already priced in
US indices have opened in the red but still can't match the losses in Europe. The Dow Jones and S&P 500 have shed 0.3pc and 0.4pc, respectively, while the Nasdaq has slumped 0.75pc.
It should be noted that US stocks had already slipped in yesterday's session stateside so a lot of the share price reaction to the escalating tensions is already priced in, hence the smaller losses across the pond.
Bond yields fall on North Korea tensions
Government bond yields have fallen sharply today as investors search for safe haven assets.
The yield on a 10-year UK gilt has fallen to a six-week low, 1.10pc, following the escalation on the Korean peninsular. US stock markets are opening in a couple of minutes.
Could pay rises be around the corner? Bank detects signs of life in wage growth
Pay could be starting to pick up as a shortage of workers forces companies to shell out more for their staff.
Businesses in both the manufacturing and services sectors intend to hire more workers, but the very low unemployment rate means it is hard to find the right staff.
Now the Bank of England’s agents, who study economic conditions across the UK, might be seeing hints that wages are rising as companies seek the employees they need.
The impact so far is only modest, but could raise hopes of a more sustained rise in pay.
Read Tim Wallace's full report here
Donald Trump responds to North Korea tensions on Twitter; US productivity rises in Q2
My first order as President was to renovate and modernize our nuclear arsenal. It is now far stronger and more powerful than ever before....
— Donald J. Trump (@realDonaldTrump) August 9, 2017
...Hopefully we will never have to use this power, but there will never be a time that we are not the most powerful nation in the world!
— Donald J. Trump (@realDonaldTrump) August 9, 2017
Mr Trump is awake and tweeting! I honestly can't decide if this is more or less inflammatory than "fire and fury" but there is little change on the markets.
It's under an hour to go before US markets open and one would expect US indices to follow their European peers firmly into the red this afternoon. The major US indices did slump last night as tensions began to rise but nowhere near to the extent of the losses seen in Europe today.
Sentiment stateside will be lifted a touch by productivity figures in the US coming in ahead of expectations. Preliminary second quarter productivity rose to 0.9pc in the US, after softening to 0.6pc the previous quarter.
US non-farm productivity beats in Q2; unit labor costs on the soft side but Q1 sees large upward revision #USDpic.twitter.com/teGduPwWu9
— Sigma Squawk (@SigmaSquawk) August 9, 2017
10 years on from the financial crisis
It's 10 years since the first cracks of the financial crisis began to show at French bank BNP Paribas.
Mihir Kapadia, chief executive at Sun Global Investments, believes that we are "once again seeing sharply rising risks and increasing complacency as the memories of the crisis fades".
Some have pointed to recent low volatility as a sign that the levee is about to break once again.
Here's what Richard Turnill, BlackRock’s global chief investment strategist, had to say about the concerns:
"Low vol by itself does not equate to complacency, in our view. The key question is whether it spurs build-ups of systemic vulnerabilities. We do not see systemic risk as high but are on watch for any stealth leverage build-up.
The popularity of leveraged equity vol selling as a strategy to generate income may help suppress the VIX, a measure of expected volfor the S&P 500 that hit an all-time low in July. It could also lead to sharper unwinds.
"More broadly, we are seeing risks in pockets of credit but not in the broader market. We believe post-crisis financial regulation and periodic bursts of anxiety have kept asset froth in check. Combined with our view that the US cycle has room to run, we believe this environment helps foster risk-taking."
G4S shares sink despite signs of improvement
Shares in G4S sunk to a three-month low on Wednesday morning despite indications that the company’s plan to revitalise the business is beginning to bear fruit.
The share price was down as much as 6.65pc during the morning, to 308.6p, its lowest price since the beginning of May.
Investors seem to have been spooked by limited growth in the firm’s emerging markets businesses in the first half of the year, despite overall performance improving.
Ashley Almanza, chief executive of G4S, attributed the slowing growth to investment elsewhere in the company. “We’ve launched new products and services in developed markets, which have found strong favour in those markets, and has driven growth,” he said.
Read Rhiannon Bury's full report here
G4S
FTSE 100 companies with large international exposures suffer most
The heavy losses suffered by financials, pharma firms and miners on the FTSE 100 today have been caused by their larger international exposure and worsened by the pound's advance on the dollar, according to Accendo Markets head of research Mike Van Dulken.
Sterling is easing off its mid-morning highs against the greenback, however, which might mitigate some of the losses this afternoon. It's currently flat against the dollar and trading at $1.2986.
Defence and aerospace firm BAE Systems is one of the rare beneficiaries on the markets today from the escalating tension between the US and North Korea. Its shares have climbed 6.5p to 582p, a 1.1pc rise, as the prospect of increased military spending across the pond entices investors.
City Index analyst Kathleen Brooks believes we can expect a similar effect over in the US:
"We would expect US defence companies to also fair well on Wednesday with Lockheed Martin, Boeing and Northrup Gruman potential gainers from the escalating geopolitical situation with North Korea."
See, it's not all bad news.
The 10 rarest and most valuable British coins in circulation
The 10 rarest and most valuable British coins in circulation
With the threat of nuclear obliteration weighing on markets today, here's something a little lighter for your lunchtime. Sophie Christie has complied a list of the rarest British coins in circulation including one explaining the offside rule!
Lunchtime update: Investor fears over North Korea tensions dominate the markets
US president Donald Trump's promise of "fire and fury" against North Korea has spooked investors in Europe this morning with all the major indices suffering heavy losses.
The CAC 40 has tumbled most, dropping 1.7pc, with sentiment in France also weakened by six French soldiers being injured after a car rammed into them on the outskirts of Paris in what the local mayor has described as a "deliberate act".
The escalation in tensions on the Korean peninsular has seen investors move money out of riskier assets with safe haven gold jumping in price to lift the UK's precious metal producers on the FTSE 100 today.
On the currency markets, the pound has touched back over $1.30 against the dollar, which has had a reasonably robust morning considering recent events. The Japanese yen and Swiss franc are also enjoying strong gains based on their safe haven appeal.
Here's the current state of play in Europe:
FTSE 100: -0.80pc
DAX: -1.25pc
CAC 40: -1.65pc
IBEX: -1.45pc
Rural broadband upgrades to add less than £2 per year to bills
A scheme to ensure rural Britons can get a decent broadband service will add less than £2 a year to broadband bills, according to telecoms regulators.
Ofcom said it will allow BT's network subsidiary, Openreach, to recover the costs of the necessary network upgrades for 1.4 million homes and businesses by increasing the wholesale cost of broadband everywhere.
Rivals have claimed the annual bill per broadband line could be as much as £20, but Ofcom revealed the cost will be less than a tenth of that figure. The regulator said it will cost just 39p next year, followed by £1.19 in 2019 and then £1.93 in 2020.
BT has offered to cover the upfront costs of between £450m and £600m in exchange for such price increases across the market.
Read Christopher Williams' full report here
FTSE 250 suffers sharp falls but Acacia Mining rebounds over 12pc
Although more domestically-focused, the FTSE 250 hasn't been immune to the geopolitical standoff over in Asia hitting investor sentiment this morning. It has echoed its bigger brother's falls, dropping around 0.8pc.
There are some bright spots on the mid-cap index, however. Recent perennial struggler Acacia Mining has surged 12.5pc, lifted by gold's advances and a broker upgrade from RBC Capital Markets. Pets at Home has also jumped on an upgrade, rising 3.6pc, while gold producer Hochschild Mining has climbed 3pc.
While much of gold's rise in the last 24 hours can be attributed to investors moving into safer assets as tensions rise on the Korean Peninsular, it appears that a report showing a doubling of gold imports to India might have also helped prices.
Here's the key figures from Bloomberg's report:
Inbound purchases rose to 53.4 metric tons last month from 22 tons a year earlier, said the person, who didn’t wish to be identified because the data isn’t public. Sequentially, imports of the metal fell from 72 tons in June. Total imports during January to July jumped more than 2 1/2 times to 625.5 tons, according to data compiled by Bloomberg.
Summer slumber broken by North Korea tension
The confrontation between North Korea and the US has woken markets up from their summer slumber and injected some volatility into proceedings this morning.
Trading volumes came in at paltry levels for the first few days of the week and the FTSE 100 had even drifted close to a record close yesterday helped by the lack of news to upset the apple cart.
European markets going into risk-off mode has been exacerbated by the attack in Paris this morning, according to IG market analyst Josh Mahony. The local mayor has said that the car ramming into soliders at a barracks just outside of Paris was "without doubt a deliberate act" and the CAC 40 is the worst performing blue-chip index in Europe this morning, falling by 1.6pc.
Mr Mahony added on the stock markets' wobble over North Korea:
"Coming in a week which has been largely devoid of economic data, it is likely that geopolitical concerns will represent the main drivers of volatility going forward.
"With European, US and Asian markets all suffering heavily in anticipation of a potential conflict in Asia, it is worthwhile noting that we have heard similar posturing between Trump and Kim Jong-Un before. There is a big difference between words and actions."
Swiss franc, yen jump on North Korea tension https://t.co/Enr0AXurUu via @marketspic.twitter.com/nHpMsUJXOP
— Forward Guidance (@ecoeurope) August 9, 2017
Premier Foods appoints former Travelodge chairman
Premier Foods has appointed former Travelodge chairman and one-time WH Smith finance boss Keith Hamill as its new chair.
Mr Hamill, who currently serves as a non-executive director of easyJet and luggage manufacturer Samsonite, will take over in November, replacing current chairman David Beever.
He has also been chairman of Tullett Prebon, Moss Bros, Collins Stewart, Go and Avant Homes.
“Keith’s background in consumer-facing businesses in addition to his breadth of experience as a chairman will be invaluable as we continue to focus on our strategic objectives,” said senior independent non-executive director Ian Krieger.
The Mr Kipling maker revealed last month that sales had fallen by more than 3pc in the first quarter as it suffered a slowdown in its grocery business.
Read Sam Dean's full report here
North Korea reaction: Markets are reacting not panicking
Although in recent years tensions between the US and North Korea have dissipated as quickly as they have escalated, losses aren't easing on European stock markets.
The FTSE 100 is now 0.7pc down for the session with the DAX and CAC weakening 1pc and 1.2pc, respectively. Financials are having the biggest wobble on the UK's benchmark index while broker notes released this morning are pulling down medical supplier ConvaTec but helping Vodafone stay in positive territory.
Nitesh Shah, commodities strategist at ETF Securities explains how markets are reacting not panicking:
"We believe continued sabre-rattling between the two nuclear powers could take gold prices higher still. There is genuine concern, hence the fall in the dollar and the rise in VIX [measure of expected volatility, also known as the fear index].
"As ever with Trump it’s unclear how quickly the rest of the US machinery will calm him, so rises are not yet huge."
Chinese inflation softens but North Korea issue dominates markets
Although the North Korea issue dominates investor sentiment on the markets this morning, it is worth mentioning that Chinese CPI inflation data weakened in July to 1.4pc, missing estimates of 1.5pc, while PPI inflation remained unchanged at 5.5pc.
The figures are closely watched by analysts as a possible warning sign that economic growth may be softening in the Asian powerhouse.
Pantheon Macro sees the CPI figure rising in the remainder of the year:
"If producer price inflation is holding up as we think, then the pressure to pass this on to consumers will become acute.
"But increases in residence costs, which amount to around a quarter of the CPI basket, likely will ease off as the property downturn takes hold. On balance, this should leave CPI inflation on a moderate uptrend in the second half."
Worldpay agrees £9.3bn tie-up with Vantiv
Worldpay, Britain’s largest payments processor, has finally agreed the terms for a tie-up with US rival Vantiv that was revealed more than a month ago.
Vantiv’s takeover offer of £9.3bn has been accepted by Worldpay after the British company was granted a last-minute extension to talks earlier this week.
The companies said the deal created a combined group worth more than £22bn, with Worldpay shareholders owning 43pc.
The combined company, which will keep the Worldpay name, will have its global headquarters in Cincinnati and its international headquarters in London.
“The growth of eCommerce and the way consumers expect to transact is increasing complexity for businesses around the world,” said Worldpay chief executive Philip Jansen.
Read Sam Dean's full report here
G4S and Legal & General fall on the FTSE 100 index following interim results
A broad-based decline has pushed the FTSE 100 down into the red this morning but corporate results have prompted some of the biggest losses.
Security firm G4S has fallen 4.7pc following its interim results with Jefferies commenting that organic revenue growth had "slowed considerably". Insurer Legal & General has dropped 1.7pc despite reporting a 27pc jump in operating profit and hiking its dividend.
All it takes is one unexpected comment from #Trump to wake the markets up from summer holiday season. #Trump#Korea#FireandFurry
— Jameel_FXTM (@Jameel_FXTM) August 9, 2017
Precious metal miners Fresnillo and Randgold Resources are the top risers after gold rallied by just under 1pc to $1268.25 per ounce in response to escalating geopolitical tensions.
Spreadex analyst Connor Campbell can't see the prevailing momentum shifting considerably on the markets today:
"It’s hard to see anything coming about to challenge the story’s market dominance this Wednesday.
"The economic calendar is once again empty – if anything the one piece of data, the overnight drop in Chinese inflation, is contributing to the losses – and the Trump/North Korea issue is only going to continue to generate headlines as the day goes on.
"The best that can happen is that, well, nothing else happens, though with the big-mouthed and brainless US president that might be too much to ask."
In response to the threat of nuclear war, this is what matters:
S. Korea’s Finance Ministry Closely Monitoring Markets: Official— zerohedge (@zerohedge) August 9, 2017
FTSE 100 outperforming European stocks; Nikkei index in Tokyo hardest hit
Despite shedding 0.4pc this morning, the FTSE 100 is actually outperforming its European counterparts as investors move to safer assets.
The move came after North Korea said that it was examining a plan to attack the US island of Guam in the Pacific, prompting the markets' move out of riskier assets such as equities.
Understandably given its proximity to the Korean peninsular and the yen's rise, the Nikkei 225 in Japan has taken the biggest knock from the escalation in tensions so far, falling 1.29pc overnight.
ETX Capital Neil Wilson, however, expects normal service to resume soon:
"Riskier assets have quickly found bid again and stocks may therefore recover pretty sharpish if this proves no more than a temporary war of words.
"Indeed overall the risk-off moves are not enormous for the time being, but we await developments."
Agenda: Escalating tensions on the Korean peninsular hit the markets
Welcome to our live markets coverage.
US president Donald Trump's promise of "fire and fury like the world has never seen" saw investors flock to safe havens overnight with stocks in Asia and the US weakening as a result.
Investors' aversion to riskier assets meant that the Dow Jones index snapped a 10-day winning streak with gold, the Swiss franc and the Japanese yen all advancing.
After flirting with a record all-time high following the pound's drop yesterday afternoon, the FTSE 100 has followed its American and Asian counterparts and slumped into the red early on.
Only a handful of stocks, namely the big gold producers, have started the day in positive territory.
Global stocks slide as risk-off takes hold on the escalation of tensions on the Korean peninsula. Yen, Bonds and Gold rise on de-risk move. pic.twitter.com/GVkmtS6uTh
— Holger Zschaepitz (@Schuldensuehner) August 9, 2017
There's not much on the economics agenda to move currency markets today but the pound has touched back over $1.30 against the dollar this morning.
It's a quieter day regarding corporate results too with the highlight being G4S' revenue rise confirming that the world's largest security firm's turnaround remains on course. Nonetheless, it's the biggest faller on the blue-chip index this morning, dropping 3.5pc early on.
Interim results: G4S, Riverstone Energy, Legal & General Group, Spirax-Sarco Engineering, Stock Spirits Group, Hastings Group Holdings
Economics: Federal budget balance (US) Preliminary non-farm productivity (US)
