5th Sep 2018 16:59
LONDON (Alliance News) - The FTSE 100 fell to its lowest level in four months on Wednesday after a sell-off in emerging markets, a buoyant pound and trade concerns across the globe. Turkey's inflation rate hit a 15-year high in August, fueled by a collapse in the lira while Argentina is facing an emergency to slash spending and save the national currency.Furthermore, South Africa slipped into a recession for the first time since 2009, driven by weak performance in the agricultural sector.South Africa's flagship Top 40 index closed down 1.7% in Johannesburg. Fears have emerged that a sell-off in Turkey and Argentina could spread to other countries such as Russia, South Africa, Mexico and Indonesia."Whilst Turkey and Argentina started out as the weakest links in the emerging markets space, investors have been shaken and are broadly looking to reduce their exposure with investors questioning which economies are most vulnerable and where is spill over likely," said City Index analyst Fiona Cincotta.In addition, reports US President Donald Trump intends to impose tariffs on another USD200 billion worth of Chinese imports as soon as a public comment period ends on Thursday also contributed to selling pressure.The FTSE 100 index closed down 1.0%, or 74.58 points, at 7,383.28. The large cap index fell to an intraday low of 7,357.98 in afternoon trade - its lowest level since late April. The FTSE 250 ended down 0.8%, or 160.14 points, at 20388.47, and the AIM All-Share closed down 0.5%, or 5.83 points, at 1,101.80.The Cboe UK 100 closed down 1.0% at 12,508.90, the Cboe UK 250 closed down 0.6% at 18,499.74, and the Cboe UK Small Companies closed down 0.2% at 12,236.32.In Paris the CAC 40 ended down 1.3%, while the DAX 30 in Frankfurt ended down 1.2%. "European markets have fallen throughout the day, with key levels being breached as the session pushes towards its end, with trade war fears knocking Europe and a stronger pound taking a chunk out of the FTSE 100. It looks like we may have another breakthrough in Brexit talks, according to press reports regarding a softening of Germany's position," said IG chief market analyst Chris Beauchamp.The pound, which fell to a 2-week low against the greenback of USD1.2786 in early trade, spiked after Bloomberg reported that the UK and Germany are preparing to drop key Brexit demands, paving the way to a deal in the coming months.Berlin is ready to accept a less detailed agreement on Britain's future trade ties with the EU in an effort to get a Brexit deal done, according to Bloomberg.Sterling was higher against the dollar quoted at USD1.2903 at the London equities close, compared to USD1.2823 at the close Tuesday. The pound had taken a severe hammering in recent weeks following comments from a number of MPs and key figures.Trade Secretary Liam Fox has talked up the chances of the UK leaving the EU without an agreement, having changed his mind since last year when he claimed a deal would be the "easiest in human history".Bank of England Governor Mark Carney also warned about the increased likelihood of the UK exiting out without a deal.On the London Stock Exchange, Royal Bank of Scotland ended among the best blue chip performers, up 1.7% after the state-backed lender said it is planning to close 54 RBS branches in England and Wales at the beginning of the next year, resulting in 258 redundancies.The bank said it has conducted a review of its branch network in England and Wales and as a result will close some branches.The review of its branch network took place as a "consequence" of the planned divestment of RBS branches in England and Wales to become a standalone "challenger bank" as Williams & Glyn no longer taking place. RBS said the "size and shape" of its branch network "will be stable until at least 2020". Barratt Developments closed up 1.1% after the housebuilder retained a confident outlook following a record rise in annual profit. The company's pretax profit rose 9.2% to GBP835.5 million in the year to the end of June from GBP765.1 million reported a year earlier, as revenue grew by 4.8% to GBP4.87 billion from GBP4.65 billion.Barratt declared a final dividend of 17.9 pence per share and a special dividend of 17.3p, bringing the total payout to 43.8p, up 5.0% from 41.7p.Berkeley Group closed up 1.15% after the housebuilder said current trading and a strong financial position has allowed it to reaffirm its pretax profit guidance of "at least" GBP3.38 billion for the 2016 to 2021 five-year period. For the two year to April 2019, Berkeley expected to record pretax profit of GBP1.58 billion. In 2018 financial year alone, the company has recorded pretax profit of GBP934.9 million."Pricing has remained robust as there is demand for good quality, well located homes that enhance communities and meet the local housing need," Berkeley said.At the other end of the large cap index, WPP ended as the worst performer, down 4.3% as the advertising giant extended losses from Tuesday. WPP closed down 6.6% on Tuesday after it expressed concerns about underperforming operations in its key US market.The euro was up at USD1.1619 at the European equities close, against USD1.1554 late Tuesday. In economic news from the continent, final data from IHS Markit showed that the euro area private sector expanded slightly more than initially estimated in August.The composite output index rose to 54.5 in August from July's 54.3. The score was marginally above the flash estimate of 54.4.Stocks in New York were lower at the London equities close amid tensions between the US and Canada as the neighbours' trade talks restarted on Wednesday. The DJIA was down 0.1%, the S&P 500 index down 0.4% and the Nasdaq Composite down 1.3%.A report from Reuters said Canadian Prime Minister Justin Trudeau indicated Canada will not bend on key demands regarding NAFTA in talks with the US."There are a number of things we absolutely must see in a renegotiated NAFTA," Trudeau told reporters on Tuesday.Having failed to reach an agreement last week, the US and Canada now have a deadline of October 1 to present a text to US Congress in order for Canada to form the North American triumvirate after the Trump administration signed a deal with Mexico at the end of August. Canada's Foreign Affairs Minister Chrystia Freeland is meeting her opposite number Robert Lighthizer in Washington in a bid to find an agreement. The aim to reach a deal by December 1 so that Congress can give its seal of approval to a revised NAFTA deal before the new president of Mexico takes office.In trade-related economic news, the Commerce Department released a report showing the US trade deficit widened in the month of July.The Commerce Department said the trade deficit widened to USD50.10 billion in July from a revised USD45.70 billion in June.Economists had expected the deficit to widen to USD50.10 billion from the USD46.30 billion originally reported for the previous month.Brent oil was lower quoted at USD77.29 a barrel at the London equities close from USD78.30 at the close Tuesday. Oil prices were higher on Tuesday after fears over potential supply shortages from Iran due to US sanctions and supply disruptions in the US as a result of tropical storm Gordon.However, oil dipped after the storm did not reach hurricane status."Chinese demand fears may be a factor finally exerting downward pressure on oil prices. In recent months, metal prices have tanked mainly on concerns over slower demand from China. In part, this is because of the dollar's strength, weighing heavily on emerging market currencies, including the yuan, which in turn has pushed up the costs of all dollar-denominated commodities," said Forex.com analyst Fawad Razaqzada.Gold was up quoted at USD1,196.77 an ounce at the London equities close against USD1,191.88 late Tuesday.The economic events calendar on Thursday has Germany factory orders data at 0700 BST and US ADP private payrolls numbers at 1315 BST which prelude the all-important nonfarm payrolls figures on FridayThe UK corporate calendar on Thursday has full year results from transport company Go-Ahead Group and half year results from industrial turnaround specialist Melrose Industries and housebuilder Bovis Homes. There are also first quarter results from mobile phone and electrical goods retailer Dixons Carphone and August traffic statistics from budget airline easyJet.Related Shares:
RBS.LBarratt DevelopmentsWPP