6th Sep 2019 09:03
(Alliance News) - It was a flat start in London on Friday as the FTSE indices continued to battle against an improving pound amid buoyed market sentiment on the news the US and China could be meeting in near future to resolve their escalating trade war.
The FTSE 100 was flat, just 2.04 points lower, at 7,269.11 early Friday. The FTSE 250 was also flat, 4.77 points higher at 19,654.33, while the AIM All-Share was down 0.1% at 879.20.
The Cboe UK 100 index was marginally higher at 12,323.32. The Cboe UK 250 was flat at 17,511.76, and the Cboe UK Small Companies was down 0.2% at 10,822.51.
"It's all looking a little flat as we head into the European open on Friday, as positive trade developments quickly fade and traders await the US jobs data," said Oanda's Craig Erlam.
He continued: "Investors were quite clearly buoyed on Thursday by a phone call between the US and China that appeared to lay the foundations for an early October meeting in Washington. Whether the meeting actually takes place or resolves anything is anyone's guess but investors are clinging to any hope of bringing this trade war to an end."
Chinese Vice Premier Liu He spoke to US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin by phone Thursday morning, a commerce ministry statement said, and agreed to "work together and take practical actions to create favourable conditions for consultations".
In the US on Thursday, the Dow Jones Industrial Average closed up 1.4%, the S&P 500 up 1.3% and the Nasdaq Composite up 1.8%. In Paris, the CAC 40 ended up 1.1%, while the DAX 30 in Frankfurt added 0.9%.
In Asia on Friday, the upward trend continued, with the Japanese Nikkei 225 index closing up 0.4%. In China, the Shanghai Composite ended 0.5% higher, and the Hang Seng index in Hong Kong was up 0.4%.
Sterling was quoted at USD1.2310 early Friday, lower compared to USD1.2323 at the London equities close on Thursday. The pound was seen as high as USD1.2343 early Friday morning. Earlier this week, the pound had traded below the USD1.20 mark, not seen since 1985.
CMC Markets' Michael Hewson said: "The pound has continued to make decent gains over the past few days particularly against the euro where it hit its highest levels against the single currency since 25th July, as well as it hitting one month highs against the US dollar.
"While the weakness of the US dollar is part of the story here, it also appears that recent political events have encouraged markets in the belief that a 'no deal' Brexit is much less likely. This seems a little premature in the current febrile political environment."
Indices in mainland Europe were faring better on Friday, with the CAC 40 in Paris adding 0.9% and but the DAX 30 was flat, however, following two consecutive days of touch economic data.
German industrial production slumped again in July, Destatis showed, though the rate of decline slowed slightly.
Industrial production in July fell 4.2% on a year before and slipped 0.6% on the previous month.
This compares to June's 4.7% year-on-year fall and 1.2% monthly fall. The June figures were revised, positively, from 5.2% and 1.5% falls respectively previously reported.
July's production in industry, excluding energy and construction, fell 0.8% year-on-year, with intermediate goods down 0.7% and capital goods falling 1.2%.
Consumer goods output did rise, however, by 0.6%. Energy production fell 0.3%, but construction rose 0.2%.
On Thursday, Destatis revealed a 5.6% yearly fall, and 2.7% monthly fall, in July manufacturing new orders, while on Monday Germany registered the worst manufacturing performance in the eurozone for August.
On the London Stock Exchange, Berkeley was 1.6% higher after the housebuilder said conditions in London and the south east of England have remained "robust" in the first four months of the company's current financial year.
Berkeley Group said the conditions are consistent with its previous financial year. For the 12 months to April 30, the FTSE 100 listed company had posted a pretax profit of GBP775.2 million, down 21% year-on-year.
The homebuilder noted pricing has remained "stable", with forward sales still above GBP1.8 billion.
"There is good underlying demand for new homes built to a high quality that are well located and properly priced to meet the local housing need, supported by good availability of mortgages. The wider market remains constrained by high transaction costs and the uncertainty in the macro political and economic environment," Berkeley added.
Fellow housebuilder Barratt Developments was also an early riser, up 1.8%, after Bank of America upgraded the stock to Buy from Neutral.
At the other end of the blue chip index, a series of rate cuts sent United Utilities, Diageo, RBS and Lloyds lower.
United Utilites, down 1.0%, was cut to Sector Perform from Outperform by RBC. Societe Generale re-initiated Diageo with a Sell rating, sending the drinks maker 0.9% lower. Investment bank Deutsche Bank cut London-listed peers RBS, down 1.1%, and Lloyds, down 0.5%, to Hold from Buy.
In the midcap index, Weir Group was up 1.4% after the engineer won a GBP100 million contract to work on the Iron Bridge magnetite iron ore project in Western Australia's Pilbara region.
The Iron Bridge project is a joint venture between Fortescue Metals Group and Formosa. Weir, which provides engineering to the mining, infrastructure, and oil & gas industries, will be carrying out energy saving services at the mine.
The aim is to reduce energy consumption and wet tailings waste by over 30% compared to traditional mining technologies, Weir said.
Iron Bridge is scheduled to start producing in 2022, with an output of around 22 million wet tonnes of ore a year once fully operational. The overall investment in the project stands at USD2.6 billion.
Dunelm gained 1.9% following HSBC upgrading the stock to Hold from Reduce.
At the other end of the FTSE 250, SIG was the worst performer, shedding 5.2%, after reporting a sharp drop in first half pretax profit on a marked deterioration in construction activity in the UK and a number of indicators are pointing towards further weakening of macro-economic backdrop, particularly in UK and Germany.
The building materials company, however, added that ongoing business transformation and normal seasonality pattern will lead to a stronger second half, despite increasing political and macro-economic uncertainty.
SIG, which supplies insulation and interiors products, posted pretax profit of GBP5.2 million for the six months to June 30, down 73% from GBP19.6 million profit in the year ago period.
The pretax profit drop was primarily due to GBP22.1 million in exceptional charges including impairment charges, profits and losses on sale or closure of non-core businesses, costs attributable to non-core businesses and other items.
Stripping out exceptional charges, first half pretax profit jumped 20% to GBP30.0 million from GBP25.1 million year-on-year.
First half reported revenue was down 7.9% to GBP1.27 billion from GBP1.38 billion. Revenue, excluding divested businesses, fell 5.1% to GBP1.26 billion from GBP1.34 billion.
The revenue drop was blamed upon a 3.8% decline in like-for-like revenue over the period, including an adverse 0.6% currency movement and a 0.7% impact from fewer working days.
Elsewhere, Randall & Quilter was up 9.0% in London's junior market after seeing its interim profit and investment return jump on the back of its Global Re acquisition.
In the six months to June 30, the non-life legacy insurance investor's pretax profit jumped to GBP33.1 million from GBP5.5 million the year before. Total income tripled to GBP16 million from GBP5.4 million.
The company's investment return in the first half doubled to 2.3% from 1.2% the year before.
Randall & Quilter's gross written premiums from continuing operations increased 43% to GBP226.1 million from GBP157.6 million the year before.
"I am pleased to report a set of results reflecting both an outstanding financial performance and continuing delivery against our strategy," said Executive Chair Ken Randall.
He continued: "The group has achieved more than a four fold increase in pre- tax profits for continuing operations compared to the same period in 2018. As expected these excellent results reflect the completion of Legacy deals that were carried over from 2018 - notably the acquisition of Global US Holdings and its subsidiary Global Reinsurance Corp of America and retro-active reinsurance of Schools Association for Excess Risk."
Focus will turn to the US nonfarm payrolls later Friday. Late Thursday, payroll processor ADP showed private sector employment in the US increased more than forecast in August.
ADP said 195,000 jobs were added in August, beating forecasts for a reading of 149,000. July's reading was revised down to 142,000 from the initially reported 156,000 jobs.
"The US posted some broadly positive economic reports yesterday, and that added to the bullish move on Wall Street," commented CMC Markets analyst David Madden.
The readings come ahead of the closely watched US nonfarm payroll report on Friday, which could give the most significant measure to date of the health of the economy.
The report is expected to show that the US has added 158,000 new jobs in August, in line with July's 164,000 jobs. The unemployment rate is expected to hold steady at 3.7%.
Elsewhere in the economic events calendar on Friday, there is eurozone GDP at 1000 BST. In addition, US Federal Reserve Chair Jerome Powell will speak on Economic Outlook & Monetary Policy at the University of Zurich at 1730 BST.
Related Shares:
SIGLloydsBerkeley GroupRBS.LBarratt DevelopmentsDiageoDunelmWeir GroupRQIH.LUnited Utilities