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(Alliance News) - London stock prices opened higher on Thursday, as tensions between the US and Iran cooled, with airlines among the gainers on the resulting lower oil price.
Elsewhere in London, Tesco shares edged up as its UK operations saw some growth over the Christmas period, while Marks & Spencer shares sank as its clothing unit continued to struggle.
The FTSE 100 index was up 33.26 points, 0.4%, at 7,608.19 early Thursday. The mid-cap FTSE 250 index was up 47.55 points, or 0.2%, at 21,699.47. The AIM All-Share index was up 0.4% at 962.03.
The Cboe UK 100 index was up 0.5% at 12,889.67. The Cboe 250 was flat at 19,596.03, and the Cboe Small Companies flat at 12,442.64.
In mainland Europe, the CAC 40 in Paris was up 0.6% while the DAX 30 in Frankfurt was 1.2% higher early Thursday.
"Markets are brushing aside fears of a major escalation in US-Iranian conflict after President Trump's comments yesterday evening. For markets, everything really is awesome. Strong gains for equity indices, higher bond yields and cheaper oil greet European markets as they open. The Japanese yen is the biggest FX loser, and gold prices are lower," said Kit Jucke, strategist at Societe Generale.
Fears of a larger conflict between the US and Iran eased on Wednesday following an address from US President Donald Trump in which he called for peace.
While he promised to immediately impose "punishing" new economic sanctions against Iran, Trump welcomed signs that Iran "appears to be standing down" in the tit-for-tat confrontation, signalling that the US did not plan a new military riposte.
Trump closed his remarks by addressing Iranians directly, saying that he was "ready to embrace peace with all who seek it".
However, the US president, facing both an impeachment trial in Congress and a tough re-election in November, also touted his decision to order the killing of top Iranian general Qasem Soleimani last Friday – the operation that prompted Tehran's missile strike.
Foreign Minister Mohammad Javad Zarif seemed to indicate that Iran was satisfied for now. "Iran took and concluded proportionate measures in self-defense," Zarif said on Twitter.
Safe-haven asset gold lost some of its recent gains. The precious metal was quoted at USD1,546.55 an ounce early Thursday, down from USD1,573.70 at the London equities close on Wednesday.
Brent oil also slipped, quoted at USD65.40 a barrel early Thursday, soft against USD65.80 at the London equities close on Wednesday. The US-Iran tensions had caused Brent to surge to over USD70 earlier in the week.
This helped airlines on hopes of lower fuel costs. Wizz Air was up 1.4%, easyJet was up 1.4% and Ryanair up 1.2%.
British Airways parent International Consolidated Airlines, up 1.0%, on Thursday said Willie Walsh will step down as chief executive and from the board on March 26, retiring at the end of June. Luis Gallego, who is currently head of IAG's Iberia airline, will succeed him as the head of IAG.
Walsh initially joined Aer Lingus as a cadet pilot in 1979. Since then, his roles have included leading Aer Lingus between 2001 and 2005, and heading British Airways between 2005 and 2011. He became CEO of IAG at the start of 2011 after engineering BA's merger with Iberia. Under Walsh, IAG later bought Aer Lingus.
Elsewhere in the FTSE 100, Tesco was up 1.6% after reporting growth in UK sales over the Christmas period, though overall group sales fell.
Third quarter total sales - covering the 13 weeks to November 23 - were down 1.4%, with like-for-like sales down 0.9%. Over Christmas - or the 6 weeks to January 4 - total sales were down 1.7% and like-for-likes 0.8% lower, though UK like-for-like sales were up 0.1%.
Together, total sales were down 1.5% over the 19 week period, and like-for-like sales down 0.9%.
Dragging sales down in the period was central Europe, with total sales down 14% in the 19 weeks and like-for-like sales 10% lower. The UK & Ireland saw a 0.2% rise in total sales, up 0.4% like-for-like, while wholesaler Booker reported 4.1% like-for-like growth.
"Tesco remains a slowly unfolding story of redemption. The core heartbeat of Tesco – the UK business – is now getting stronger in terms of its operational and cashflow performance, thanks in no small part to the addition of Booker, its wholesale operation, and the direction of Charles Wilson," said John Moore, senior investment manager at Brewin Dolphin.
Fellow UK retailer Marks & Spencer reported improved momentum in the third quarter, though said "disappointing one-off issues" held the retailer back from delivering a stronger result.
The stock, recently demoted to the FTSE 250 from FTSE 100, was down 7.4% in early trade.
Total group sales were down 0.7% in the 12 weeks to December 28, with International down 2.3% and the UK down 0.6%. Like-for-like sales in the UK, though, edged up 0.2%.
Among UK divisions, Food sales rose 1.5%, or 1.4% like-for-like, while Clothing & Home sales were down 3.7%, or 1.7% lower like-for-like.
The Food business maintained its first-half momentum with positive like-for-like revenue and further improvement in volumes, while Clothing & Home saw an improved run-rate with signs of continuing recovery in core Womenswear.
M&S held its annual guidance, though noted that gross margins are expected to be around the lower end of guidance but largely offset by its cost reduction programme.
"We delivered an improved performance in Q3 across both main businesses. The Food business continued to outperform the market and Clothing and Home had a strong start to the quarter, albeit this was followed by a challenging trading environment in the lead up to Christmas," said Chief Executive Steve Rowe.
"As we drive a faster pace of change, disappointing one-off issues - notably waste and supply chain in the Food business, the shape of buy in Menswear and performance in our Gifting categories - held us back from delivering a stronger result," he continued. "However, the changes we made earlier in the year in Clothing have arrested the worst of the issues of the first six months and we are progressively building a much stronger team for the future."
Mitchells & Butlers, up 4.9%, reported a strong festive period performance on Thursday, with food in particular doing well.
The company, which is based in Birmingham, owns pub and restaurant chains such as O'Neill's, Harvester, and Toby Carvery.
In the seven weeks to January 4, Mitchells & Butlers achieved 3.5% like-for-like sales growth. Food was 4.0% higher, and drink 2.7% higher. For the seven weeks to November 16, like-for-like sales growth came in at 1.4%. Food like-for-like sales grew by 1.7%, and drink by 0.7%.
Card Factory shares slumped 17% in early trade. The greeting cards retailer said the Christmas trading period was "challenging" as it trimmed its financial outlook.
Sales for the eleven months to December 31 were up 3.6%, though like-for-like sales fell 0.6%.
Card Factory said adjusted underlying earnings before interest, tax, depreciation and amortisation is now expected to be around GBP81.0 million to GBP83.0 million for the current financial year. Underlying Ebitda in the previous financial year amounted to GBP89.4 million.
Looking further out, the company said issues such as declining high street footfall and high cost inflation are expected to continue.
"To date there has been significant success in mitigating in large part the Ebitda impact of these external factors through a combination of offer improvements and business efficiencies. These efforts will continue, but the opportunity for efficiencies within the current business model is finite," said Card Factory.
The net hit from this is expected to be GBP5 million to GBP10 million in the 2021 financial year.
Recognising the long-term nature of these issues, management has been undertaking a review of strategy, Card Factory said. While this is not yet complete, the board is "confident that it will yield a number of attractive medium term growth opportunities across both new and existing channels, albeit there may be a requirement for additional strategic investment in FY21 to support this future growth."
Meanwhile, Card Factory said it remains committed to its dividend policy but not does anticipate a special payout for the 2021 financial year. The level of ordinary dividend in 2021 will be reviewed, the company added
The economic events calendar on Thursday has the eurozone unemployment rate at 1000 GMT.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 2.3%. In China, the Shanghai Composite ended up 0.9%, while the Hang Seng index in Hong Kong closed up 1.7%.
In data overnight, Chinese consumer inflation stabilised at an eight-year high in December as the rise in the cost of pork slowed after authorities dipped into the nation's reserves to battle the impact of African swine fever.
The CPI came in at 4.5% last month, the same as November and slightly below the 4.7% economist forecast in a survey by Bloomberg News.
Meanwhile, Chinese Vice Premier Liu He will travel to Washington on Monday to sign the so-called phase one trade deal with the US, the commerce ministry said Thursday.
Liu, China's top negotiator in the trade war, will be in the US capital from Monday to Wednesday, the ministry said, a week after US President Donald Trump said the agreement would be signed on January 15.
In forex, sterling was quoted at USD1.3105 early Thursday, higher than USD1.3088 at the London equities close on Wednesday.
The euro was quoted at USD1.1111 early Thursday, flat on USD1.1114. Against the yen, the dollar was quoted at JPY109.31, up from JPY108.70 late Wednesday in London.
By Lucy Heming; lucyheming@alliancenews.com
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