27th Aug 2019 16:56
(Alliance News) - London stocks failed to rise in step with European peers on Tuesday, with the FTSE 100 hampered by a firmer pound on hopes of a legislative no-deal Brexit block.
British American Tobacco ended as the worst blue-chip performer, meanwhile, on news that US peers Philip Morris International and Altria are exploring a tie-up.
The FTSE 100 index closed down 5.40 points, or 0.1%, at 7,089.58. The FTSE 250 ended up 99.75 points, or 0.5%, at 19,335.88, and the AIM All-Share closed down 0.79, or 0.1%, at 870.63.
The Cboe UK 100 ended down 0.4% at 12,009.51, the Cboe UK 250 closed up 0.4% at 17,228.75, and the Cboe Small Companies ended down 0.1% at 10,895.28.
In European equities on Tuesday, the CAC 40 in Paris ended up 0.4%, while the DAX 30 in Frankfurt also closed 0.4% higher.
"European markets, after a subdued start, have managed to build on the gains of yesterday, as investors try and gauge the reliability of the more positive mood in the wake of the sharp falls at the end of last week," said Michael Hewson, chief market analyst at CMC Markets.
This improved mood came as US President Donald Trump said trade negotiators would "very shortly" resume trade talks with China in what he described as a breakthrough in the two economic superpowers' trade war.
"China called last night..., said let's get back to the table. So we'll be getting back to the table," Trump told reporters at the G7 summit in Biarritz.
Just last Friday, Trump sharply raised tariffs on all Chinese imports after Beijing hiked its own levies.
However, the FTSE 100 failed to capitalise on this move higher.
"The FTSE 100 is lagging its mainland European peers today, as increased optimism over the possibility of averting a no-deal Brexit drove the pound higher," explained Joshua Mahony, senior market analyst at IG.
The pound was quoted at USD1.2290 at the London equities close Tuesday, up compared to USD1.2274 at the close on Friday.
UK Prime Minister Boris Johnson has a parliamentary battle on his hands after opposition leaders united around a plan to stop a no-deal Brexit.
The prime minister has repeatedly promised that the UK will leave the EU on October 31, with or without a deal. But after cross-party talks led by Labour's Jeremy Corbyn, a co-ordinated effort to thwart Johnson's plans has been promised.
The leaders agreed to prioritise a legislative approach, although a joint statement said they also considered the possibility of a confidence motion. The focus on legislation suggests Corbyn will not immediately push ahead with a move to oust Johnson in a vote of no confidence.
Meanwhile, the euro stood at USD1.1090 at the European equities close Tuesday, lower against USD1.1125 at the same time on Friday.
Destatis confirmed Germany's gross domestic product in the second quarter of 2019 shrank 0.1% on the first quarter. This is in contrast to the 0.4% quarter-on-quarter growth reported in the first quarter.
The second quarter figure was in line with the initial GDP estimate given in mid-August.
On a year prior, there was no growth at all in the German economy in the second quarter. This is in contrast to the 0.8% year-on-year growth recorded in the first quarter of 2019.
"After ten years of strong economic growth, a stagnation or even a technical recession at this juncture is not yet a reason to panic," said Carsten Brzeski, an economist at ING.
"However, a further escalation of the trade conflict and global uncertainty combined with no fiscal stimulus at all, is currently probably the worst of all nightmares for the German economy," Brzeski added.
Stocks in New York were in the red at the London equities close, with the Dow Jones, S&P 500 index and the Nasdaq Composite all 0.1% lower.
In US company news, shares in Altria were up 6.4% and Philip Morris International down 9.6% after the two confirmed merger talks.
If the all-stock merger of equals goes through, the combined company could be worth in excess of USD200 billion.
Philip Morris International was an operating company of Altria until its spin-off in March 2008. Philip Morris International operates outside the US while Philip Morris USA, which is a subsidiary of Altria, owns and operates Philip Morris brands in the US.
Philip Morris's cigarette brands include Malboro, Benson & Hedges and Virginia Slims. Altria also holds a 35% stake in e-cigarette firm JUUL Labs, as well as owning Black & Mild cigars.
In London, Lucky Strike owner British American Tobacco - which is heavily exposed to the US - sank 4.1% on the news.
Of the GBP24.5 billion in sales British American Tobacco reported for 2018, GBP9.5 billion of this came from the US, with Europe & North Africa the next biggest contributor with GBP6.0 billion in sales.
Among other fallers in the FTSE 100 on Tuesday was Ferguson, ending down 1.6% after Bank of America Merrill Lynch cut its rating on the plumbing and heating products firm to Underperform from Neutral.
In the FTSE 250, IWG ended up 3.6% after Sky News over the weekend reported the office workspace provider is planning to spin off its US business.
Sky News said IWG's Chief Executive Mark Dixon is in talks with investment banks about creating a standalone business to rival WeWork - which recently listed in New York - targeting a valuation of around USD50 billion.
Elsewhere on the Main Market, Carpetright shares finished up 9.1% after its major shareholder Meditor European Master Fund agreed to purchase the lending facilities of the retailer.
Meditor - which held a 30% stake in Carpetright as of late May - agreed to buy the GBP40.7 million revolving credit facility from the current providers, NatWest and AIB, whilst also retaining the current terms of the facility.
Carpetright emphasised that the participation of Meditor in the facilities held by the firm were at an "arms-length" to the company. Consequently, Meditor did not seek any assurances from Carpetright and did not propose any board representation or structural changes at the company.
In commodities on Tuesday, Brent oil was quoted at USD58.66 a barrel at the London equities close, largely unchanged from USD58.81 late Friday.
Gold was quoted at USD1,541.80 an ounce at the London equities close Tuesday, higher compared to USD1,525.07 at the close on Friday.
In the corporate calendar on Wednesday, there are trading statements from engineer Diploma and retailer WH Smith.
In the economic calendar on Wednesday, the British Retail Consortium's Shop Price index is at 0001 BST, while Germany's Gfk consumer confidence survey is at 0700 BST. Irish retail sales are due at 1100 BST.
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