28th Aug 2019 16:50
(Alliance News) - London's FTSE 100 powered ahead of its European counterparts on Wednesday after the pound fell following news UK parliament will be suspended.
"The UK government's decision to suspend parliament means the Brexit process is likely to go down to the wire. 'No deal' has become more likely, although we still narrowly think a no-confidence vote, which leads to an Article 50 extension and early elections, remains the most probable scenario," commented ING.
Oil majors also helped to boost the blue-chip index, with the price of Brent improving and BP ending among the top performers after agreeing to sell its Alaskan operations.
The FTSE 100 index closed up 25.13 points, or 0.4%, at 7,114.71. The FTSE 250 ended down 114.46 points, or 0.6%, at 19,221.42, and the AIM All-Share closed down 1.41 points, or 0.2% at 868.78.
The Cboe UK 100 ended up 0.6% at 12,085.80, the Cboe UK 250 closed down 0.7% at 17,115.19, and the Cboe Small Companies ended down 0.3% at 10,860.34.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.4%, while the DAX 30 in Frankfurt slipped 0.3%.
"After two days of gains markets in Europe have slipped back, weighed down by uncertainty as to where the next political or economic catalyst for a move is likely to come from. Against such an uncertain outlook for trade, geopolitics and concerns about an economic slowdown it is clear that investors are becoming much more risk averse," said Michael Hewson, chief market analyst at CMC Markets.
However, he continued: "The FTSE 100 has outperformed largely due to a slightly weaker pound which has slipped back after UK Prime Minister announced that he was dissolving parliament in order to set a new legislative agenda."
Prime Minister Boris Johnson will temporarily close down the House of Commons from the second week of September until October 14 when there will be a Queen's Speech to open a new session of parliament.
The Queen approved the order on Wednesday afternoon to prorogue parliament no earlier than September 9 and no later than September 12, until October 14.
Opposition leaders have written to the monarch in protest and Commons Speaker John Bercow said the move was a "constitutional outrage" designed to stop parliament debating Brexit.
The prime minister said it was "completely untrue" to suggest that Brexit was the reason for his decision, insisting that he needed a Queen's Speech to set out a "very exciting agenda" of domestic policy. Labour leader Jeremy Corbyn accused Johnson of a "smash-and-grab on our democracy in order to force through a no-deal exit from the EU".
The pound was quoted at USD1.2233 at the London equities close Wednesday, compared to USD1.2290 at the close on Tuesday.
Joshua Mahony, senior market analyst at IG, commented: "With fears growing over the possibility of a no-deal Brexit, it comes as no surprise to see the more UK-centred elements of the FTSE 100 losing ground. Chief amongst the losers have been the housebuilders, with the prospect of an economic decline likely to stall investment and thus dent demand for properties."
Berkeley closed down 4.1%, Taylor Wimpey down 3.1% and Barratt down 2.8%.
Helping to offset these falls was oil major BP, closing up 2.7% after late Tuesday saying it will divest its Alaskan assets.
BP will sell its Alaskan operations to Hilcorp Alaska, an affiliate of Houston-headquartered Hilcorp Energy Co, for USD5.6 billion.
BP began working in Alaska in 1959, and its net production from the state in 2019 is expected to average almost 74,000 barrels a day. Hilcorp, meanwhile, has been operating in Alaska since 2012 and is the largest private oil and gas operator in the state.
Of the USD5.6 billion consideration, USD4.0 billion is payable "near-term" and USD1.6 billion through an earnout thereafter.
BP also benefited as the price of oil rose on Wednesday. Brent oil was quoted at USD60.62 a barrel at the London equities close Wednesday, up from USD58.66 late Tuesday.
Fellow oil major Royal Dutch Shell ended up, with 'A' shares gaining 1.7% and 'B' shares 1.5%.
In other commodities, gold was quoted at USD1,536.29 an ounce at the London equities close Wednesday, down from USD1,541.80 at the close on Tuesday.
Stocks in New York were in the green at the London equities close, with the Dow Jones up 0.5%, the S&P 500 index rising 0.3%, and the Nasdaq Composite slightly higher.
Shares in Hewlett Packard Enterprise were up 3.5% in New York after raising its annual guidance.
For the full year to October 31, HPE raised diluted net non-GAAP earnings per share forecasts to between USD1.72 and USD1.76 after accounting for around USD1.07 per share in one-off costs. This was up from the USD1.62 and USD1.72 range predicted at its second-quarter results.
This came as HPE swung to USD830 million pretax profit in the nine months to July 31 from a USD308 million pretax loss the year prior. This was despite revenue falling 4.3% to USD21.92 billion from USD22.91 billion the year before.
Back in London, baker Greggs ended as the best mid-cap performer, up 4.9%, after UBS raised the vegan sausage roll maker to Buy from Neutral.
WH Smith closed down 1.9%. The retailer said its annual results should be in line with forecasts.
In the financial year ending on Saturday, the FTSE-250-listed retailer said its High Street business, which sells books, magazines and stationery, performed according to forecasts. The unit is expected to have made GBP9.0 million in cost savings in financial 2019.
The WH Smith Travel unit, which has outposts in train stations and airports, "performed strongly with good sales across all channels" and gross margin in line with forecasts, the company said.
Elsewhere on the Main Market, Thomas Cook shares shed 17%.
The travel agent has agreed a GBP450 million injection of cash from its largest shareholder Fosun Tourism Group. Thomas Cook confirmed the "significant" new capital investment and proposed reorganisation, which will keep the venerable holiday firm in business but will leave shareholders with little.
Thomas Cook said its current intention is to maintain the company's London listing but the proposed recapitalisation could result in Thomas Cook cancelling its listing. Thomas Cook currently only has a market capitalisation of GBP91.4 million.
So far this year, Thom Cook shares have dived 81%.
In the UK corporate calendar on Thursday, there are third quarter results from retailer McColl's Retail Group and annual earnings from recruitment firm Hays.
In Thursday's economic calendar, there is French GDP at 0745 BST and eurozone consumer confidence at 1000 BST, followed by German inflation at 1300 BST. At 1330 BST, there is US GDP with personal consumption expenditures due at the same time.
The euro stood at USD1.1083 at the European equities close Wednesday, against USD1.1090 at the same time on Tuesday.
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RDSA.LRDSB.LBPWh SmithBerkeley GroupThomas CookBarratt DevelopmentsTaylor Wimpey