13th Dec 2019 07:41
(Alliance News) - The twin news of a resounding Tory victory in the UK general election and an imminent US-China trade deal were set to boost stocks in London at the open Friday, following strong gains in Asia.
However, a strong pound was likely to hold back the FTSE 100 index, with its constituents of overseas earners.
"Stocks and other risk assets rallied this morning [Friday] on news the US and China have landed a 'phase one' deal," said analysts at Danske Bank.
"US sources close to the negotiations reported that the tariff hike planned for Sunday is off the table and that the US has offered to cut existing tariff rates by up to 50% in exchange for Chinese agricultural purchases in the order of USD50 billion and increased protection of intellectual property rights.
"We expect some official announcements from both China and the US soon to confirm this deal. If confirmed, we believe this is good news as it means the two sides can move on to phase two. We still see a 50-50 probability a phase-two deal can be reached next year. Asian markets jumped overnight," Danske continued.
IG futures indicate the FTSE 100 index of large-cap shares is to open 13.5 points higher at 7,300.50. The blue-chip index closed up 70.75 points, or 1.0%, at 7,287.00 on Thursday.
Mid-cap and smaller UK stocks were expected to perform better on Friday.
In Asia, the Japanese Nikkei 225 index closed 2.6% higher on Friday. In China, the Shanghai Composite ended up 1.8%, while the Hang Seng index in Hong Kong is 2.3% higher.
The Dow Jones Industrial Average closed 0.8% higher, the S&P 500 0.9% higher, and the Nasdaq Composite 0.7% on Thursday.
Wall Street closed at record highs on Thursday with reports the US and China were ready to strike a trade deal, and a tweet from US President Donald Trump claiming an agreement was "VERY close".
Trump's tweet came after US media, including the New York Times and Bloomberg, reported the president had met with his top economic advisers Thursday afternoon to discuss arrangements ahead of a key deadline in the two countries' trade war.
The US was scheduled to impose new tariffs on USD160 billion worth of Chinese goods if an agreement was not met by Sunday.
"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" Trump tweeted minutes after the start of trading in New York on Thursday.
UK Prime Minister Boris Johnson has hailed a political "earthquake" which saw Labour support crumble in its heartlands in the face of a Tory landslide.
Johnson was set to visit the Queen at Buckingham Palace with a comfortable majority after gambling on a snap election and winning big.
In his victory speech after retaining his own seat, he claimed a "powerful new mandate to get Brexit done" as his party headed for its biggest Commons majority since the Thatcher era.
Johnson later told jubilant aides in Conservative HQ: "We must understand now what an earthquake we have created.
"The way in which we have changed the political map of this country.
"We have to grapple with the consequences of that, we have to change our own party, we have to rise to the level of events, we must, we just answer the challenge that the British people have given us."
The Tory landslide prompted Jeremy Corbyn to announce he will not lead Labour into another election after his party suffered humiliation.
Trump has congratulated Johnson on his "great win" in the election, and said the UK and US would be free to strike a "massive" new trade deal after Brexit.
The US president said the agreement had the potential to be "far bigger and more lucrative" than any deal which could have been made with the EU.
The pound was quoted at USD1.3432 early Friday, up 2.3% from USD1.3127 at the London close Thursday.
"It's been a long night but not necessarily one of too many surprises, with results closely reflecting what the exit polls told us at 10pm on Thursday," said Craig Erlam, senior market analyst at Oanda.
"If that wasn't clear, just take a look at the pound which was tucked up in bed shortly after the exit poll while the rest of us stayed the course, on the off-chance British politics had one more surprise in store for us. On this occasion, the biggest surprise is the election has gone as all the polls predicted. In fact, the Conservatives are on course to get an even greater majority than expected and at no point through the course of the night has that looked in doubt," Erlam continued.
"Whatever you think of the result, it's clear this result partially lifts the cloud of uncertainty that's held back the currency and the economy for so long. As the old adage goes, the markets hate uncertainty. As we know, they're not too fond of Brexit either, but that's a discussion for another day," he added.
In a quiet day for UK corporate news, FTSE 250 gold miner Centamin appointed Chief Financial Officer Ross Jerrard as interim chief executive, following the departure of current boss Andrew Pardey, who will remain as an advisor until October next year.
The search for a permanent CEO is going well, Centamin said, with interviews now underway.
Centamin also has appointed Jim Rutherford as a non-executive director & deputy non-executive chair from the start of 2020. He replaces Gordon Edward Haslam, who will step down at the 2020 annual general meeting, when Rutherford will replace him in the role of chair.
Bowling alley chain owner Hollywood Bowl reported a "strong" financial year, with the company's outlook remaining solid.
Revenue in the 12 months to September rose 7.8% to GBP129.9 million, with pretax profit climbing 15% to GBP27.6 million. Like-for-like revenue growth was 5.5%, accelerating from 1.8% growth in the prior year.
Hollywood Bowl is paying a final dividend of 5.16 pence per share, as well as a special dividend of 4.50p, compared to a special payout of 4.33p the year before. These, alongside the interim dividend, take the year's total to 11.93p, up 13% year-on-year.
Chief Executive Stephen Burns said he was "delighted" with "another year" of strong growth, and he said the company has made a solid start to its new financial year.
Hurricane Energy has guided for revenue of USD165 million for 2019, and total production of 3.1 million barrels of oil, equivalent to 13,300 barrels per day. It produced no revenue in 2018, as the Lancaster field only came into production during this year.
Hurricane said the early production system at Lancaster is performing strongly, and the licence containing the field has also been extended for five years.
Looking to 2020, Hurricane has maintained guidance for production to be around 20,000 barrels of oil per day, though this excludes planned operational downtime.
The company is also lining up drilling programmes at on both Lancaster and the Greater Warwick Area. However, at Warwick, it will not be able to drill before June, and a rig will remain idle costing the firm USD10 million. Hurricane said it is looking at other options for the rig in that time.
A relatively empty economic calendar on Friday has US retail sales at 1330 GMT.
By George Collard; [email protected]
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