easyJet Share News (EZJ)

LONDON (Alliance News) - Stocks in London were mixed on Tuesday at midday, with a lower pound supporting gains by the FTSE 100, after the Supreme Court ruled the UK government cannot invoke Article 50 to start the process of leaving the EU without getting approval from Parliament but does not need to consult the devolved Scottish assembly.

Miners were among the best FTSE 100 index performers, led by Anglo American and Rio Tinto, while BT Group and easyJet were the biggest blue-chip decliners. The telecoms firm announced increased provisions regarding accounting errors in its Italian business, while the low-cost airline was suffering from a cautious guidance on fuel prices and sterling weakness.

With its dollar-earning constituents benefiting from a weak pound, FTSE 100 index was up 0.3%, or 18.96 points, at 7,170.14 at midday. The FTSE 250 of mostly UK domestic mid-caps was down 0.3% at 18,070.90, and the AIM All-Share was flat at 873.83.

The BATS UK 100 index was up 0.3% at 12,114.18, the BATS 250 was down 0.3% at 16,431.15, and the BATS Small Companies was flat at 10,920.55.

Supreme Court justices ruled, by a majority of eight to three, that UK Prime Minister Theresa May cannot lawfully bypass MPs and peers by using the royal prerogative to trigger Article 50 of the Lisbon Treaty and start the two-year process of negotiating the UK's divorce from its EU partners.

The highest court in the land rejected an appeal by ministers against a High Court judgement blocking their decision to begin Britain's exit from the European Union without Parliament having a say. The UK government will do "all that is necessary" to implement the Supreme Court ruling, Attorney General Jeremy Wright said after the decision was announced.

The pound remained volatile during the announcement and fell after the judges said they unanimously rejected an argument that devolved administrations in Scotland, Wales and Northern Ireland must be consulted before Article 50 is triggered.

Sterling had stood at USD1.2514 prior to the decision, having touched a low of USD1.2435 and a high of USD1.2533 during the announcement. The UK currency was quoted at USD1.2438 at midday, compared to USD1.2483 at the London equities close on Monday.

"We have seen the initial move for sterling mainly towards the upside but as the dust settled, we have seen the sterling giving up all those gains. This is mainly because the market believes that Brexit will move forward now. The pound was pricing in regionalized government being consulted, and the Supreme Court has said that they do not need to be involved," said Naeem Aslam, chief market analyst at Think Markets.

Separately, data from the Office for National Statistics showed that the UK budget deficit narrowed at the end of the year. Public sector net borrowing, excluding public sector banks, decreased by GBP0.4 billion from prior year to GBP6.9 billion in December. The expected level of budget deficit was GBP6.7 billion.

Against the euro, the pound was quoted at EUR1.1591, only a tad lower against EUR1.1619 on Monday at the London equities close. Meanwhile, the single currency was flat against the dollar, quoted at USD1.0730 at midday compared to USD1.0735 late Monday.

Flash survey data from IHS Markit showed that the eurozone private sector continued to maintain a robust pace of expansion in January. The services Purchasing Managers' Index dropped slightly to 53.6 in January from 53.7 in December, compared to economists expectations of 53.8.

The eurozone manufacturing PMI rose to 55.1 in January from 54.9 a month ago, above the expected score of 54.8. Meanwhile, the composite output index fell slightly to 54.3 in January from 54.4 in December. Economists had expected the index to rise to 54.5. Any reading above 50 indicates expansion in the sector.

The CAC 40 index in Paris was up 0.1% and the DAX 30 in Frankfurt was 0.3% higher.

Stocks in New York were called for a flat to higher open on Tuesday, with the Dow 30 index and the Nasdaq Composite both seen up 0.1%, while the S&P 500 was pointed flat.

In the US economic calendar, preliminary Markit manufacturing PMI for the US is at 1445 GMT. Existing US home sales are at 1500 GMT and API weekly crude oil stocks at 2130 GMT.

Back in London, Anglo American shares were up 5.9%. The miner said its De Beers diamond unit saw good demand in its first sales cycle of 2017. De Beers generated sales of USD720.0 million in the sales cycle, well ahead of the USD545.0 million generated in the first sales cycle of 2016 and of the USD422.0 million reported for the tenth and final cycle of 2016.

Fellow FTSE 100-listed peer Rio Tinto was 4.6% higher. The Anglo-Australian miner said it has agreed to sell its Coal & Allied Industries business to Yancoal Australia for up to USD2.45 billion. Coal & Allied is the holding company for Rio Tinto's thermal coal business in the Hunter Valley region of New South Wales in Australia. Yancoal is an Australia-listed coal miner which is 78%-owned by China's Yanzhou Coal Mining Co.

The FTSE 350 Mining sector index was up 3.7%, the best performer within sector indices. BHP Billiton, up 4.5%, is scheduled to publish a production report at 2130 GMT.

BT Group was down 18%, limiting the FTSE 100's gains. It increased the expected provisions it will have to book from accounting errors in its Italian business, warning the changes will hit its results for the current financial year to the end of March.

BT had disclosed in October that an internal probe had found accounting errors in its Italian operation, and it said at the time it would have to write down around GBP145.0 million on its balance sheet as a result of the problems. The probe into the issue is now broadly done, BT said, and it will have to increase the writedown to GBP530.0 million from the GBP145.0 million previously announced.

BT added to the warning on the Italian business with a bleak outlook on its UK public sector business, saying this will hit adjusted earnings for the division in the fourth quarter of its financial year.

easyJet was 8.7% lower. The budget carrier reported growth in revenue in the first quarter of its financial year, as it said consumer demand remained strong despite the terrorist attack at a Christmas market in Berlin in December. Despite this, the group announced a bigger-than-expected hit to profit resulting from the depreciation of sterling following the UK's vote to leave the European Union.

Dixons Carphone was another decliner, down 5.0%. The electricals and mobile phone retailer said group revenue in the ten weeks ended January 7 grew by 8% year-on-year, with 4% growth in the UK & Ireland, 15% in the Nordics, 24% in Southern Europe and 38% in the business-to-business arm Connected World Services.

On a like-for-like basis, sales rose by 4% overall, with a 6% rise in the UK & Ireland and a 5% increase in Southern Europe, but a 1% decline in the Nordics.

In the FTSE 250, PZ Cussons was down 8.6% after the personal care and home products maker reported a fall in profit in the first half of its financial year as it continues to suffer from tough trading conditions in Africa. Nevertheless, it said full-year trading will meet expectations as it plans to launch new products in the second half.

By Daniel Ruiz; danielruiz@alliancenews.com

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