FTSE Lower with Mixed Signals

The FTSE closed the week barely changed at 0.14% or 7,268.33 after the threat of Syria strikes came and went and trade tensions with China eased, at least for the time being. Instead focus shifted back on earnings, particularly on the strong performance from US banks.

Both the DJIA and S&P pared down early gains to start trading lower towards the London close hit by a surprise decline in the shares of the top three banks which released their results Friday: JPMorgan, Wells Fargo and Citigroup, all of which were sold off despite reporting better than expected profits.  

The indexes were also affected by news that a key US consumer sentiment index slipped to a three-month low. The University of Michigan index declined to 97.8, below expectations of 101, with a third of the respondents attributing the lower sentiment to the US-China tensions and the planned US import tariffs on steel and aluminium. But this data comes after a record decline in US jobless claims and rising wages, which, put together, still indicate a solid state in the US economy.

Among major news Friday is the London Stock Exchange’s decision to appoint former Goldman Sachs banker David Schwimmer as its new chief executive. 49-year old Schwimmer will start in his new position on August 1.

Sage group shares plunge after surprise warning

Software provider Sage group lead the day’s fallers with its shares declining 8.84% to 612.50. After its first half results came in below expectations the company warned it would not meet its full-year sales target because of execution issues and weak subscription sales. Sage, a major supplier of accounting and payroll software to millions of small businesses, has been trying to migrate clients from packaged software to cloud-based subscriptions but said that UK, North Europe and the Middle East subscription sales have been weak. A lot of its growth over the last few years has come through acquisitions, such as the California-based provider of cloud solutions Intacct. Sage now estimates that its revenue will grow only 7% for the full year rather than the previously expected 8%.

Rolls Royce share prices recover from day’s low caused by inspection news

Rolls-Royce shares also traded lower but off the day’s deepest lows triggered by news that the firm will have to spend more money this year because of additional inspections of its problematic Trent 1000 engines. Shares traded down 1.36% at 869.30 towards the end of the day having fallen to 860 in early activity. The positive impact came from news that the company, together with Boeing, plans to invest £26.5 million in Reaction Engines Limited, a UK company which is developing a revolutionary aerospace engine. REL says that the engine will make hypersonic travel around the Earth possible.

Rolls-Royce’s share price was unaffected by news that UK’s largest car maker Jaguar LandRover, owned by Tata Motors, will reduce the number of cars it produces at its to factories in England loosing 1,000 jobs in the process. Jaguar Landrover blamed the decision on a fall in sales caused by Brexit-induced uncertainty and confusion over diesel policy. The decision will affect the plants in Solihull and Castle Bromwich.

Britain and EU will start Brexit talks next week

Britain and the EU are about to embark on talks about their future relationship following Brexit. With only a year to go before Britain and Europe formally divorce they have yet to define to what degree Britain will still be able or will want to access the EU customs union and the single market. Discussions on this will start on Monday and Tuesday while the future trade relationship will be discussed from Wednesday.

Watch out for the sterling/euro exchange rate as the talks unfold, which will particularly affect companies with significant exports into the Eurozone. The pound was a touch stronger against the dollar Friday at $1.4250 and against the euro at €1.564.