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(Alliance News) - Stocks in London were on the rise Monday, getting the week off to a positive start, with mining stock benefitting from Warren Buffet's sizeable investment in the world's largest gold miner, Barrick Gold.
"UK-listed stocks are outperforming their mainland European and US counterparts today, despite ongoing questions around the economic recovery and Brexit negotiations," IG Senior Market Analyst Joshua Mahony said.
The FTSE 100 index closed up 37.40 points, or 0.6%, at 6,127.44 Monday. The mid-cap FTSE 250 index added 36.26 points, or 0.2%, to close at 17,771.88. The AIM All-Share index closed up 1.2% at 959.56.
The Cboe UK 100 index closed up 0.7% at 611.05. The Cboe 250 ended 0.1% higher at 15,182.68, and the Cboe Small Companies closed up 0.5% at 9,660.56.
In mainland Europe, the CAC 40 index in Paris closed up 0.2, while the DAX 30 in Frankfurt advanced 0.2%.
Mahony continued: "Sharp gains in EUR GBP highlight the benefit of a weaker pound for the FTSE 100, with internationally-focused firms seeing the value of their earnings rise as the pound falls. Chinese moves to implement further stimulus overnight have helped the commodity-focused FTSE 100 outperform, with the prospect of further economic expansion likely to raise demand for companies such as Anglo American, Rio Tinto, and Glencore."
Anglo gained 2.8%, Rio 1.7% and Glencore 1.9%.
In the FTSE 100, Mexican gold and silver miner Fresnillo gained 2.3% and Russian miner Polymetal International added 2.9%.
Gold miners were higher on Monday following a substantial investment by Warren Buffet into one of the world's largest gold miners.
The Oracle of Omaha's Berkshire Hathaway acquired 21 million shares in Canada's Barrick Gold, in a deal worth USD563 million, according to a quarterly US Securities & Exchange Commission filing released on Friday. The purchase represents 1.2% of Barrick's shares outstanding.
The move caught the eye of investors as Buffet has been a long-standing sceptic of investing in the precious metal.
Barrick shares were up 12% in New York.
IG's Mahony commented: "Elsewhere, precious metals are in the light once again, with gold and silver on the rise after Warren Buffet took the historic step of investing heavily in gold (through Barrick Gold) despite his previous disdain for the metal as an investment. While Buffett has been publicly confident of an economic recovery, the decision to ditch airlines and banks in favour of gold says a lot about exactly where he sees outperformance in an environment of seemingly endless monetary expansion."
Gold was quoted at USD1,984.00 an ounce at Monday's close in London, up from USD1,945.10 an ounce Friday evening. Bullion is up 29% so far in 2020 amid dollar weakness and safe-haven allure during the coronavirus crisis.
ThinkMarkets analyst Fawad Razaqzada commented: "Gold has started the new week on the front-foot. But following last week's sharp sell-off, it remains to be seen whether gold will be able to rise back towards its all-time highs again, or whether there will be more pain for the bulls.
"Gold's USD210 drop from its record high to its low last week came as bond yields surged from their historically low levels, slightly eroding the appeal of the noninterest-bearing precious metals. The sell-off was made worse because of technical selling as stop loss orders of leveraged longs were tripped, causing a snowball effect."
Back in London, Persimmon added 3.1%, the best performer in the FTSE 100, after Davy raised the blue chip housebuilder to Neutral from Underperform. Persimmon is scheduled to release half-year results Tuesday.
The UK housing market enjoyed its busiest month in over 10 years, listings site Rightmove said in its monthly tracker, bucking the trend of the summer period being a slow one for the sector.
In August, the average asking price fell 0.2% monthly to GBP319,497, though this still represented a 4.6% annual climb. Rightmove noted the number of sales agreed during the month surged to the highest level since its index began over 10 years ago.
Rightmove closed 1.6% higher.
Burberry gained 1.9% after Jefferies upgraded the luxury fashon designer to Hold from Underperform saying it sees limited downside to Burberry's shares going forward and expects market share losses to ease.
Burberry in July reported a painful first-quarter, with around 500 jobs being cut in the UK and globally. The company is axing office space and making cuts across stores outside the UK after lockdown measures sent sales tumbling.
Jefferies analyst Flavio Cereda said Burberry tends to perform better in its "cluster" of Chinese regions than in many other of its geographical territories. The analyst thinks its brand profile in China has been hurt by years of poor distribution and weak price discipline.
Cereda thinks Burberry's big push on digital to reclaim lost market share is significant and works particularly well with its core Chinese following, but less well in Europe and the US.
The pound was quoted at USD1.3096 at Monday's equities close in London, down from USD1.3104 on Friday evening.
CMC Markets analyst David Madden said: "The dip in the pound has given a lift to AstraZeneca, British American Tobacco and Diageo - they all derive a large portion of their revenue from outside the UK, so a slide in sterling helps the groups."
Astra gained 2.4%, BAT 1.9% and Diageo 1.2%.
Also Monday, Gordon's gin maker Diageo said it has reached an agreement to buy the Aviation American gin brand for up to USD610 million, as part of the distiller's plan to expand into "super-premium" gin segment in the US.
Diageo, which also makes Johnny Walker whisky and Guinness, has agreed to buy Aviation Gin and New York-based wine and spirits distributor Davos Brands, which has a majority ownership in the Aviation American gin brand.
Hollywood actor Ryan Reynolds will retain an ongoing ownership interest in Aviation American gin brand, Diageo said. Deadpool star Reynolds acquired a stake in the brand from Davos Brands in February 2018.
As part of the agreement, London-based Diageo is also buying other brands in the Davos Brands' portfolio consisting of Astral tequila, Sombra mezcal and TYKU sake.
The total consideration of USD610 million includes an initial payment of USD335 million and a further potential consideration of up to USD275 million based on the performance of Aviation American gin over a 10-year period.
At the other end of the large-cap index, British Airways parent International Consolidated Airlines was the worst performer, down 5.3%, having closed down 4.8% on Friday.
The UK government's decision to impose a 14-day self-isolation quarantine on travellers from France due to rising numbers of coronavirus cases in the country came into effect over the weekend.
The quarantine conditions also apply to travellers returning to or visiting the UK from the Netherlands, Monaco, Malta, Turks & Caicos and Aruba.
In addition, over the weekend Germany declared nearly all of Spain, including the tourist island of Mallorca, a coronavirus risk region following a spike in cases. Spain has seen a surge in new infections since it lifted its three-month lockdown measures in June.
The move dealt a blow to hopes for a swift recovery in tourism after months of lockdown to stop the spread of the virus all but wiped out this year's high season for tourism in Europe.
Anglo-German travel operator Tui lost 5.1%.
CMC's Madden said: "European equity benchmarks are broadly higher even though the headlines have been a touch on the negative side. Concerns persist in relation to the pandemic, both in terms of the infection rate, and the fear of tougher restrictions being imposed again. US-China trade talks were due to take place at the weekend but they were cancelled, and no replacement date has been set. This isn't a major upset to their relations but it adds to the sour sentiment that has been building between the two countries for a while."
As a result, stocks in New York were mixed the London equities close on Monday. The DJIA was down 0.2%, the S&P 500 index was 0.4% higher, and the Nasdaq Composite was up 0.8%.
The euro was priced at USD1.1867, up from USD1.1832. Against the yen, the dollar was quoted at JPY106.00 in London, soft from JPY106.48.
In commodities, Brent oil was trading at USD45.04 a barrel at the close Monday, up from USD44.70 a barrel Friday evening in London.
A quiet economics calendar on Tuesday has US housing starts data at 1330 BST.
Dutch financial services firm ING commented: "The highlight of a quiet week may be the next round of Brexit talks which take place in Brussels tomorrow. The latest headlines on this topic warn that there may be delays to financial equivalence discussions, meaning possible delays for UK banks in securing pan EU market access rights. There is still much uncertainty here and despite the Bank of England's Andy Haldane talking up UK recovery prospects, we still prefer EURGBP to be heading to the 0.91/92 area into September."
The UK corporate calendar has blue chip miner BHP issuing full-year results, while oil & gas services firm John Wood Group and Kazakhstan-focused miner Kaz Minerals will release half-year results.
By Paul McGowan; paulmcgowan@alliancenews.com
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