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(Alliance News) - Stocks in London reversed early losses at midday on Tuesday with housebuilders leading the blue-chip risers as investors shrugged off continued political tensions between the US and China.
In London, the blue-chip FTSE 100 index was up 17.38 points, or 0.3%, at 6,144.82. The mid-cap FTSE 250 index was up 73.86 points, or 0.4%, at 17,845.50. The AIM All-Share index was up 5.26 points, or 0.6% at 964.82.
The Cboe UK 100 index was up 0.1% at 611.69. The Cboe 250 was up 0.4% at 15,256.68, and the Cboe Small Companies was up 0.2% at 9,675.65.
In mainland Europe, the CAC 40 index in Paris was up 0.4%, while the DAX 30 in Frankfurt was 0.5% higher.
On the London Stock Exchange, Persimmon was the best blue-chip performer, up 4.5% after the housebuilder reported green shoots of recovery for the second half, despite reporting a drop in profit.
For the six months to the end of June, pretax profit dropped by 43% to GBP292.4 million from GBP509.3 million a year before, as revenue declined by 32% to GBP1.19 billion from GBP1.75 billion.
This was due to completions falling by 35% year-on-year to 4,900 homes from 7,584 a year before, even as the average selling price increased to GBP225,066 from GBP216,942.
The group said its owned and consented land bank as at June 30, fell to 89,232 plots from 95,086 plots the prior year; however its forward sales position increased to GBP2.48 billion from GBP2.05 billion.
Persimmon declared a "modest" interim dividend of 40 pence per share, down 80% from 235p the prior year.
Looking ahead, the housebuilder said its short-term outlook is robust and expects to deliver 45% of its anticipated new home legal completions for the second half. It added that it has had an "excellent start" to the second half with a 49% year-on-year increase in average weekly private sales rates per site since the start of July.
"The recovery in the UK housing market since lockdown eased has been remarkable. A mixture of pent-up demand and, for those with the means, an aspiration to add to living space or find a place with room for a home office after the experience of being stuck indoors for weeks on end will have supported the rebound," noted AJ Bell's Russ Mould.
Fellow housebuilders Barratt Developments, Taylor Wimpey and Berkeley Group were up 2.0%, 1.7% and 1.5% respectively.
Gold miners Fresnillo and Polymetal International were up 2.6% and 0.5% respectively.
The price of gold rose back above the USD2,000 mark, as the dollar weakened. The precious metal was quoted at USD2,006.07 an ounce Tuesday midday, up sharply from USD1,984.00 an ounce at Monday's equities close in London.
"Gold got a lift from Warren Buffett's bet on the metal, and a weaker dollar this morning has sent prices racing back to USD2,000 after clearing the retracement resistance around USD1,980. Gold has further to go longer term, but there is yet still a risk of a second corrective move lower within the bull market," said Markets.com analyst Neil Wilson.
At the other end of London large-cap index, BHP Group was down 1.7%. The Anglo-Australian miner lowered its annual dividend, as earnings declined on lower prices and provisions for the closure and rehabilitation of mines, as a result of Covid-19.
For the year to the end of June, pretax profit dropped by 10% to USD13.51 billion from USD15.05 billion the year before, as revenue declined by 4.3% to USD42.39 billion from USD44.29 billion. BHP's revenue performance came in short of company-compiled expectations, which stood at USD43.07 billion.
Profit from operations decreased by 11% to USD14.42 billion from USD16.11 billion the prior year, while underlying earnings before interest, tax, depreciation and amortisation slipped by 5% to USD22.07 billion from USD23.16 billion.
Underlying Ebitda was just ahead of consensus expectations, which had the figure at USD22.01 billion. BHP said its performance was hurt by lower prices, particularly in coal, copper and petroleum, lower volumes including a decline in copper grades and petroleum fields, and a rise in the closure and rehabilitation provisions for closed mines.
BHP declared an annual dividend of 120 US cents, down 10% from 130 cents the year before. Analysts had expected BHP to declare an annual dividend of 123 cents.
"BHP's dividend cut, despite prices for its main metals holding up, was unalloyed bad news for shareholders. Its profits were dragged lower by plunging oil and coal prices. With dividend cover already so low, a cut was hard to avoid and will save BHP around GBP800 million in 2020 alone," commented Link Group's Kit Atkinson.
In the FTSE 250, Marks & Spencer was down 4.5% after the high street stalwart said total sales in its hard-hit clothing and home arm plunged 30% in the eight weeks since shops reopened, with store sales tumbling 48%, while online sales rose 39%.
M&S said sales were improving but that it was "clear that there has been a material shift in trade".
In addition, M&S announced that around 7,000 jobs are being axed as part of an effort to streamline the business, as the retail sector grapples with the coronavirus crisis.
The retailer expects a "significant" number of roles will be cut through voluntary departures and early retirement while it said it will also create some jobs through investing further in online warehousing and its new ambient food warehouse.
"Sharpening the workforce and throwing weight behind the online business makes sense, the question now is whether M&S's digital dawn is simply breaking too late," commented Hargreaves Lansdown analysts.
The dollar was down against major counterparts as new cases of the coronavirus in the US remain stubbornly high. In addition, fears a new economic stimulus agreement in the US will not be reached and concerns over US and China's tempestuous relationship have heaped pressure on the buck.
The pound was quoted at USD1.3178 at midday on Tuesday, up from USD1.3096 at Monday's equities close in London.
The euro was priced at USD1.1903, up sharply from USD1.1867. Against the yen, the greenback was quoted at JPY105.55 in London, down from JPY106.00.
"The dollar is extending its broad-based bearish momentum. The Federal Reserve's Empire State manufacturing index slump yesterday came in stark contrast with encouraging signs from the US housing market (which should be confirmed by housing starts figures today), while the mix of geopolitical tensions (US-China spat and protests in Belarus) are still failing to offer support to the dollar as most safe-haven flows are being absorbed by the Japanese yen," said analysts at ING.
On the political front, UK investors will be keeping a close eye on the resumption of Brexit negotiations on Tuesday, as Michel Barnier, the EU's chief negotiator meets UK counterpart David Frost for the seventh round of talks.
The main areas of discussion include fisheries' rights and the UK financial sector's access to the European Union markets, as the two sides try to secure a deal before the end of the year.
"We see a non-negligible risk of markets starting to price back in a no-deal outcome, considering the effective early-October deadline for reaching an agreement is approaching and the two sides are set to deal with new spikes of Covid-19 contagion. Our base case remains for a deal to be ultimately reached, but we expect the over-complacent GBP (which is now also less protected to the downside given positioning has moved to neutral) to face increasing Brexit-related stress in the coming weeks, making it a possible key laggard in the G10 space," ING analysts noted.
Elsewhere in commodities, Brent oil was trading at USD45.27 a barrel on Tuesday midday, up slightly from USD45.04 at the London equities close Monday.
New York was pointed to a higher open as investors looked past the fresh tensions between the US and China over Huawei.
The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.3%, based on futures trading.
Shares in Home Depot will be in focus after the home improvement retailer reported a considerable rise in profit for the first half of its financial year, with sales growing on both increased customer transactions and larger average ticket sizes.
The stock was up 2.9% in pre-market trade Tuesday.
Still to come in the US earnings calendar, Asda-owner Walmart will report second-quarter earnings before the opening bell in New York.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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