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Alliance News

LONDON MARKET CLOSE: FTSE 100 Slips From 7,000 As Oil Stocks Weigh

Fri, 11th Jan 2019 17:18

LONDON (Alliance News) - Stocks in London ended mixed on Friday, with the FTSE 100 retreating from the 7,000 mark amid a stronger pound, as a drop in heavyweight oil stocks offset gains from housebuilders.

The FTSE 100 index closed down 24.69 points, or 0.4%, at 6,918.18, having hit an intraday high of 7,000.91 in early trade. This was the first time the blue chip index breached the 7,000 mark since early December. The large cap index ended the week 1.2% higher.

The FTSE 250 ended up 106.69 points, or 0.6%, at 18,542.31, ending the week up 4.2%. The AIM All-Share closed up 2.47 points, or 0.3%, at 910.20, ending the week up 4.1%.

The Cboe UK 100 ended down 0.2% at 11,739.34, the Cboe UK 250 closed up 0.7% at 16,575.41, and the Cboe Small Companies ended up 0.4% at 11,190.65.

In Paris the CAC 40 ended down 0.5%, and the DAX 30 in Frankfurt ended down 0.3%.

"Stock markets in Europe are in the red [at] the close. They were given a boost during the week after the US-China trade talks ended on a positive note, but the lack of additional detail in relation to the update has encouraged some dealers to trim their positions ahead of the weekend. In London, oil stocks like BP and Royal Dutch Shell are weighing on the FTSE 100, due to the correction in the oil market," said David Madden, market analyst at CMC Markets.

On the London Stock Exchange, UK housebuilders ended in the green following a sector note from Merrill Lynch which said negative risks surrounding Brexit are priced in valuations and investors should focus on attractive dividends on offer.

Taylor Wimpey ended as the best performer, up 4.8% after Merrill Lynch double upgraded the High Wycombe-headquartered firm to Buy from Underperform.

The US bank said Taylor Wimpey is now "almost a pure UK house builder", and has a low-risk strategy to grow volumes modestly, while investing in the land bank. Moreover, the yield is very attractive and the dividend robust.

Persimmon closed up 4.3% after also being double upgraded to Buy from Underperform.

"Persimmon's track record of being the only UK house builder that traded through the early 1990s UK housing recession as continuously profitable, as well as its current land bank and net cash position, make this the most defensive The dividend yield is very attractive and robust," Merril Lynch said.

Barratt Developments ended in third spot on the FTSE 100, up 2.9% after Merrill Lynch raised the UK's largest housebuilder to Neutral from Underperform saying it has been trading strongly and is making progress its internal margin improvement targets.

At the other end of the large cap index, oil majors ended in the red tracking spot oil prices lower.

BP closed down 1.1% and Royal Dutch Shell 'A' and 'B' shares ended down 1.2%.

Brent oil was down quoted at USD60.65 a barrel at the equities close from USD61.33 at the close Thursday, as its rally ran out of steam. The North Sea benchmark had been on an eight day winning streak.

In the FTSE 250, Stobart Group ended as the best performer, up 7.2% after the support services firm said that it is part of a consortium buying UK regional airline Flybe almost a year after it pulled out of an attempted takeover of the struggling Exeter-based carrier.

Flybe accepted a 1 pence per share offer that values Flybe at GBP2.2 million, with the airline's shares ending down 77% at 3.75p giving it a total market value of GBP8.1 million.

On Thursday, Flybe's market capitalisation had stood at GBP35.5 million. Flybe listed on the London Main Market in December 2010 at a share price of 295p.

Stobart is buying Flybe as part of a joint venture called Connect Air alongside Virgin Atlantic and DLP Holdings. DLP is owned by funds managed by Cyrus Capital Partners. DLP will own 40% of Connect, and Stobart and Virgin 30% each.

At the other end of the midcap index, UDG Healthcare ended as the worst performer, down 7.7% after Jefferies cut the healthcare services company to Hold from Buy over concerns around its underlying growth.

The pound was higher quoted at USD1.2835 at the London equities close, compared to USD1.2775 at the close Thursday.

In domestic political news, Foreign Secretary Jeremy Hunt has warned of "Brexit paralysis" if Member of Parliament vote down Theresa May's Withdrawal Agreement next week, potentially meaning the UK does not leave the EU at all.

The MP for South West Surrey warned that failure to deliver Brexit would be "incredibly damaging" for the UK and something the country would regret for "many, many generations".

Hunt appealed to MPs who have spent months fighting for their "number one top favourite outcome" to come together behind a Withdrawal Agreement which is "not perfect" but "broadly delivers Brexit".

"As the UK hurtles towards Tuesday's 'meaningful vote', the signs of a shift in position become clearer. Time is fast running out, but with so much still to be done an extension to Article 50 becomes vital. Cable continues to trade as if an extension is very much on the cards, underscoring the point that markets would still very much prefer to forget the whole thing ever happened in the first place," said IG chief market analyst Chris Beauchamp.

The euro was marginally lower at USD1.1470 at the European equities close, against USD1.1520 late Thursday.

Stocks in New York were lower at the London equities close following five straight days of gains.

The DJIA was down 0.4%, the S&P 500 index down 0.5% and the Nasdaq Composite down 0.6%.

Profit taking was contributing to declines on Wall Street, with traders cashing in on gains seen over the five-session winning streak.

Concerns about the ongoing government shutdown and worries about whether a potential trade deal between the US and China can be reached were also weighing on markets.

Meanwhile, a partial US government shutdown appeared likely on Friday to become the longest ever in US history as it reached day 21, tying a record.

There was no sign of a breakthrough to end the stalemate, which has caused the closure of museums and parks and the furlough of several hundred thousand federal government employees. Friday was the first day without pay for many of the employees.

If the shutdown extends into Saturday, it will be longer than the 1995-96 shutdown, until now the longest in US history.

On the economic front, the Labor Department released a report showing a slight drop in consumer prices in the month of December.

The Labor Department said its consumer price index slipped by 0.1% in December after coming in unchanged in November. The slight drop in consumer prices matched economist estimates.

The report said the annual rate of consume price growth slowed to 1.9% in December from 2.2% in November, while the annual rate of core consumer price growth was unchanged at 2.2%.

"The US economy does face more economic headwinds this year, but the strength in the jobs market provides strong underpinning while the 68 cent/gallon plunge in gasoline prices is an annualised USD100 billion boost to household cashflows. As such, we expect consumer demand to remain firm this year and that gives businesses the pricing power to pass on higher costs," analysts at ING sad.

Gold was flat quoted at USD1,289.55 an ounce at the London equities close against USD1,289.75 late Thursday.

"As we approach the end of the week, gold is trading slightly off its best levels thanks in part to a rebound for the US dollar and the recent recovery in stock prices reducing the appeal of the safe-haven commodity. The metal is still up for the fourth consecutive month, so its struggle to go further higher this week should come as no surprise. Clearly some profit-taking should be expected [but] it is far too early to suggest that gold has peaked," said Forex.com analyst Fawad Razaqzada.

In a light economic events calendar on Monday there is trade data from China at 0200 GMT. In addition, financial markets in Japan are closed for the Coming Of Age Day holiday.

The UK corporate calendar on Monday has trading statements from veterinary products maker Dechra Pharmaceuticals, recruiter PageGroup and sportswear retailer JD Sports Fashion.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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