4th Sep 2019 08:50
(Alliance News) - London stocks opened higher on Wednesday while the pound continued to strengthen after MPs in Westminster defeated the government in a crunch Brexit vote, which could see UK Prime Minister Boris Johnson push for a snap election as early as this evening.
The FTSE 100 was 49.93 points, or 0.7%, higher at 7,318.12 early Wednesday. The FTSE 250 was 111.95 points higher, or 0.6%, at 19,576.09, while the AIM All-Share was up 0.2% at 875.50.
The Cboe UK 100 index was 0.8% higher at 12,410.17. The Cboe UK 250 was 0.6% higher , at 17,405.81, and the Cboe UK Small Companies was flat at 10,841.43.
UK members of Parliament defeated the government last night in a crunch vote on Brexit which could block the prime minister from taking the UK out of the EU without a deal next month.
Tory rebels defied the whip to join opposition MPs in supporting a bid to take control of the Commons agenda and pass legislation which would prevent a no-deal Brexit on October 31. MPs voted by 328 votes to 301, a majority of 27.
The move would require the prime minister to seek a delay to Brexit until January 31 2020 if no agreement has been reached, and MPs have not approved a no-deal withdrawal.
If that passes, UK Prime Minister Boris Johnson said on Tuesday night that he would table a motion for a snap election under the Fixed-Term Parliaments Act, which could be put to a vote on Wednesday.
However, Labour indicated that they would not back the move – which would require the support of two-thirds of MPs – until chances of a no-deal Brexit were taken off the table.
"Anyone hoping that this week will bring more clarity might well be disappointed," said Commerzbank analyst Antje Praefcke.
"The market does not really know what to make of all this uncertainty. It is caught between hope and trepidation so that sterling is holding up quite well. I can nonetheless only repeat: the risk of a no deal Brexit remains in place and hedging the side that is most painful continues to make sense," said Praefcke.
Sterling was quoted at USD1.2143 early Wednesday, up from USD1.2082 at the London equities close on Tuesday.
In mainland Europe, the CAC 40 was up 0.9% and the DAX 30 1.0% higher in opening trade.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.1%. In China, the Shanghai Composite finished up 0.9%, while the Hang Seng index in Hong Kong was surging 3.4% in late trade.
Stocks in Hong Kong were boosted after the Financial Times reported Chief Executive Carrie Lam is set to withdraw the extradition bill which has led to months of increasingly violent protests in the region. Lam will meet pro-Beijing lawmakers this afternoon, according to two people familiar with the matter, where it is believed she will announce the decision to scrap the bill entirely, according to the newspaper.
Protests began in June against the now-suspended legislative bill that would have allowed for criminal extradition to mainland China. In recent days, police have fired tear gas and water cannon at petrol bomb-throwing protesters.
In economic data, the expansion of the service sector in China accelerated in August as new orders growth pushed firms to hire more staff, indicating a "slight improvement" in the sector and helping boost overall private sector growth.
The Caixin China general services purchasing managers' index rose to 52.1 points in August from 51.6 in July. Any reading above 50 represents expansion as opposed to contraction in the sector.
The Caixin China composite PMI rose to 51.6 points in August from 50.9 in July. This was a further improvement on the 50.6 points recorded in June and represented the highest print since April. The composite print combines the services sector PMI and the manufacturing index released on Monday, which rose to 50.4 points in August from 49.9 in July.
To come in Wednesday's economic calendar are services PMIs from France, Germany, the eurozone and the UK at 0850 BST, 0855 BST, 0900 BST and 0930 BST respectively.
At 1000 BST, there are eurozone retail sales while the US trade balance is at 1330 BST, with a composite PMI reading at 1445 BST.
In addition, the results of the latest UK index review will be announced after the market close, based on Tuesday's closing prices, with high-street stalwart Marks & Spencer looking set for a demotion to the FTSE 250.
M&S, having closed down 1.5% on Tuesday, was trading 3.0% higher on Wednesday ahead of the announcement.
Elsewhere in the FTSE 100, Barratt Developments was the worst performer in early trade, down 2.3% despite reporting a rise in annual profit on stronger margins.
Revenue for the year to June 30 fell 2.3% to GBP4.76 billion, but pretax profit rose 8.9% to GBP909.8 million as the firm's operating margin strengthened to 18.9% from 17.7%.
Barratt lifted its payout to 46.4p from 43.8p the year before, representing a 5.9% rise.
Barratt Chief Executive David Thomas called the year "outstanding" as the firm delivered both a strong operational and financial performance.
"Whilst there is increased economic and political uncertainty, we begin the new financial year with a strong forward order book, balance sheet and cash position which we believe provides us with the resilience and flexibility to react to potential changes in the operating environment in FY20 and beyond," said Thomas.
In the FTSE 250, Dunelm was up 3.2% after its special dividend made a return.
Revenue for the year to June 29 came in at GBP1.10 billion, up 4.8% year-on-year. Meanwhile, pretax profit jumped 35% to GBP125.9 million. The leap in profit was attributed to higher sales and improved gross margins, which rose 160 basis points to 49.6%.
Total like-for-like sales rose strongly, up 11%, with in-store sales up 7.7% and dunelm.com seeing a 35% rise.
Dunelm declared a final dividend of 20.5p, bringing the full-year dividend to 28.0, up 5.7% year-on-year. In addition, Dunelm proposed a special dividend of 32.0p, bringing the total payout for the year to 60.0p.
Dunelm did not pay a special dividend last year. Dunelm last paid a special dividend at the time of its interim results in its 2016 financial year.
"Recent trading performance has continued to be strong, reflecting both weak comparatives in the prior year and continued market share growth. However, we remain cautious about the full year outlook due to increased Brexit uncertainty and specifically the impact it may have on consumer spending as we enter our peak period," said Chief Executive Nick Wilkinson.
Avast shares fell 3.3% to 373.20 pence after shareholder Sybil Holdings sold its entire stake in the cybersecurity firm at 367p per share, making GBP443.7 million gross from the sale.
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Marks & SpencerBarratt DevelopmentsDunelmAVST.L