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London midday: Stocks rise as pound falls on wider UK trade deficit

Wed, 11th Jan 2017 11:09

(ShareCast News) - London stocks rose on Wednesday as traders weighed mixed UK data and looked ahead to speeches by Bank of England Governor Mark Carney and US President-elect Donald Trump.

By noon, the FTSE 100 had recovered earlier losses and edged up 0.1% to 7,282.72 points.

The pound fell 0.25% against the dollar to $1.2146 after official data showed the UK trade deficit widened markedly in November due to a surge in imports.

The overall trade deficit grew 2.6bn to 4.2bn by the end of November, the Office for National Statistics said, as a 3.3bn increase in imports was only partially offset by a 0.7bn increase in exports.

"Today's trade balance release has walked back most of the deficit contraction seen last month, and as a result sterling reaction shows investors becoming increasingly worried about the likelihood of a 'hard Brexit'," said Manuel Ortiz-Olave, market analyst at Monex Europe.

"The goods trade balance has become one of the most important indicators to watch after the referendum given the trade deficit the UK will have to reduce once it leaves the EU. A significant increase in imports in November counters the traditional economic belief that a weaker currency would automatically boost exports."

Offsetting worries about Brexit slightly, The Guardian reported that cabinet ministers have privately conceded that they are likely to lose a legal case on Brexit in the Supreme Court.

The government is said to believe that seven of the 11 judges will uphold the High Court's demand that Prime Minister Theresa May get the consent of MPs and peers before triggering Article 50, which kicks off the formal Brexit process.

Elsewhere, the ONS also revealed that UK industrial production rebounded but that construction output unexpectedly fell in November.

Seasonally adjusted construction output declined 0.2% on the previous month, extending the 0.6% fall in October when the market had expected a bounce back of 0.2%.

UK industrial production also rose by a surprising 2.1% in November compared to October and 2.0% versus the same month last year, which was more than double the respective consensus forecast and reversed the falls from the preceding month.

Manufacturing production was up 1.3% month-on-month, beating the consensus estimate of 0.50% and a turnaround from the revised 1% decline from the previous month.

Still to come, the BoE's Carney is set to testify before the Treasury Committee at 1415 GMT, which some analysts said could lead to more volatility for the pound.

Ahead of his 20 January inauguration date, Trump's news conference in New York will be in focus at 1600 GMT as it marks his first major speech since he was elected president on 8 November.

"Wall Street may turn to Trump for further clarity this evening on how his fiscal policies could boost US economic growth," said FXTM research analyst Lukman Otunuga.

"With Donald Trump already labelled as a renowned market shaker, market participants should keep diligent and be prepared to expect the unexpected."

In company news, J Sainsbury rallied after it said third quarter like-for-like grocery sales were only just positive but last year's acquisition of Argos helped lift the group as online sales proved a decisive factor over the key festive period. Total group sales for the 15 weeks to 7 January rose 0.8%, with group LFL sales up 1.0%. Supermarket LFLs edged up 0.1% but Argos LFLs climbed 4%.

Thomas Cook and TUI slumped after Credit Suisse downgraded its rating on the travel stocks to 'neutral from 'outperform' and to 'underperform' from 'neutral', respectively. The broker cited worries about the outlook for the UK and German markets.

BT Group got a lift as Morgan Stanley upgraded its stance on the stock to 'overweight' from 'equalweight' and bumped up the price target to 490p from 450p.

Housebuilder Taylor Wimpey nudged down after saying UK home completions increased 4% to 13,881 in the year to the end of December and that profit for 2016 would be at the upper end of market consensus.

Estate agency Foxtons tumbled as it revealed that profits for 2016 had almost halved as it endured subdued sales volumes in the capital through most of the year, which it warned could worsen in 2017.

Cobham tanked as it posted group trading profit below guidance for the year ended 31 December and said it was not recommending a final dividend.

Recruiter PageGroup gained ground as it posted a rise in fourth-quarter gross profit and said it expects operating profit for 2016 to be towards the top end of the range of market forecasts.

Market Movers

FTSE 100 (UKX) 7,284.05 0.12%

FTSE 250 (MCX) 18,394.75 -0.10%

techMARK (TASX) 3,443.35 -0.19%

FTSE 100 - Risers

Dixons Carphone (DC.) 357.00p 3.60%

Sainsbury (J) (SBRY) 267.00p 3.17%

BT Group (BT.A) 399.70p 3.10%

Anglo American (AAL) 1,267.00p 2.38%

Vodafone Group (VOD) 214.45p 2.00%

Smiths Group (SMIN) 1,509.00p 1.75%

International Consolidated Airlines Group SA (CDI) (IAG) 485.00p 1.29%

BHP Billiton (BLT) 1,418.00p 1.29%

Antofagasta (ANTO) 731.50p 1.18%

Rio Tinto (RIO) 3,329.00p 1.08%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 1,142.00p -4.11%

Babcock International Group (BAB) 928.50p -2.52%

Direct Line Insurance Group (DLG) 349.90p -1.99%

Capita (CPI) 509.50p -1.74%

Royal Bank of Scotland Group (RBS) 223.00p -1.59%

Fresnillo (FRES) 1,410.00p -1.54%

Smurfit Kappa Group (SKG) 2,074.00p -1.38%

Taylor Wimpey (TW.) 172.60p -1.32%

Tesco (TSCO) 210.20p -1.31%

Hikma Pharmaceuticals (HIK) 1,902.00p -1.30%

FTSE 250 - Risers

Spectris (SXS) 2,491.00p 4.40%

Evraz (EVR) 217.50p 4.32%

Pagegroup (PAGE) 407.30p 3.64%

Debenhams (DEB) 54.40p 3.23%

Ted Baker (TED) 2,721.00p 2.72%

Centamin (DI) (CEY) 147.10p 2.51%

Spirax-Sarco Engineering (SPX) 4,388.00p 2.48%

Cranswick (CWK) 2,412.00p 2.46%

AO World (AO.) 185.60p 2.43%

Greencore Group (GNC) 244.50p 2.26%

FTSE 250 - Fallers

Cobham (COB) 138.60p -15.80%

Thomas Cook Group (TCG) 84.40p -4.58%

Tullow Oil (TLW) 312.30p -3.22%

Bodycote (BOY) 625.00p -2.95%

Acacia Mining (ACA) 403.80p -2.60%

Virgin Money Holdings (UK) (VM.) 321.90p -2.45%

UBM (UBM) 729.50p -2.28%

Stagecoach Group (SGC) 215.20p -2.27%

Berkeley Group Holdings (The) (BKG) 2,887.00p -2.10%

Ladbrokes Coral Group (LCL) 120.30p -1.72%

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