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LONDON (Alliance News) - Stocks in London were higher Wednesday morning, as investors regained some confidence in equities, with financial stocks such as banks and insurers leading the gainers, recovering from the severe losses suffered after the UK referendum on European Union membership.
The FTSE 100 was up 1.7%, or 99.13 points, at 6,239.52. The mid-cap FTSE 250 was adding 1.1% at 15,679.28, and the AIM All-Share was up 0.3% at 690.81.
Lenders Royal Bank of Scotland, up 4.1%, Barclays, up 3.6%, and Lloyds Banking Group, up 2.4%, were among the best blue-chip performers, alongside insurers Prudential, up 4.0%, and Old Mutual, up 3.2%.
This was despite ratings agency Moody's Investors Service downgrading its outlook on the UK banking sector and its ratings on 12 banks and building societies following the UK vote to leave the EU. Moody's said it changed its outlook on the UK banking system to Negative from Stable, following on from the referendum outcome and subsequent downgrade by the ratings agency to its outlook for the UK Aa1 government bond rating.
Within the changes, Moody's downgraded eight banks and building societies to Negative from Stable. This covers Barclays, HSBC Bank, Santander UK, Coventry Building Society, Leeds Building Society, Nationwide Building Society, Nottingham Building Society and TSB Bank.
Outside financial stocks, Merlin Entertainments was among the best performers in the FTSE 100, up 3.2%. Barclays said late Tuesday the theme park and attractions operator is one of the bank's preferred long-term picks following the UK's vote to leave the EU, saying that Merlin should be resilient to the shock to consumer confidence.
Barclays analyst Vicki Stern said consumer confidence weakness on the back of the Brexit vote will impact Merlin less than many other discretionary names. Furthermore, the fall in sterling should be a net positive for the company as it will encourage more leisure travel to London and potentially less outbound travel from the UK.
Telecommunications giant Vodafone Group said it is considering moving its headquarters out of the UK following the EU vote. The company noted that it gained many benefits from the UK's EU membership, including the bloc's free movement of people and the benefits of a single legal framework throughout Europe.
The company said it isn't yet possible to gauge how these positive attributes of EU membership would be affected after the UK leaves the EU, a process that could take two years or more, making it impossible "to draw any firm conclusions regarding the long-term location for the headquarters of the group".
Vodafone is based in Newbury, Berkshire, west of London, and employs more than 13,000 people across the UK. The stock was up 1.9%.
Shares in distribution and outsourcing group Bunzl were up 1.9% after it said trading in the first half of 2016 has been in line with its expectations as it made two new acquisitions. Revenue for the first half of 2016 is set to be up by around 9.0%, driven largely by acquisitions the company has made. Stripping out the acquisition contributions, underlying revenue is seen broadly flat year-on-year.
Bunzl continued on its acquisition drive on Wednesday with a deal to buy The Classic Printed Bag Co, based in Christchurch, England. The UK-listed group also said it has acquired Polaris Chemicals SPRL, a cleaning and hygiene supplies distributor based near Brussels, Belgium. No financial details on the two acquisitions were provided. The company has acquired five businesses so far this year for a total of around GBP80.0 million, it said.
In the FTSE 250, Shawbrook Group was the biggest gainer, up 22%. Shares in the lender were recovering from a 14% decline on Tuesday after it said trading has been in line with its expectations in 2016 so far, but it will book a GBP9.0 million impairment charge due to irregularities uncovered in its Asset Finance unit.
Sophos was up 7.2% after the network security services provider said trading has remained strong, and it anticipates billings in the first quarter of its financial year will outpace its expectations. Sophos said like-for-like billings growth in the quarter to the end of June is anticipated to be 20% to 23% year-on-year, boosted by a material contract with an existing customer.
Brammer shares were down 41%, after the industrial maintenance, repair and overhauls products distributor said sales have slowed significantly and issued a profit warning for the first half, while saying it may skip its interim dividend.
In Europe, the CAC 40 in Paris was up 1.3% and the DAX 30 in Frankfurt was up 1.1%.
In Asia, the Japanese Nikkei 225 index ended up 1.6%, while in China, the Shanghai Composite added 0.7%. The Hang Seng index in Hong Kong continues up 0.9%.
In the economic calendar Wednesday, UK mortgage approvals and consumer credit data are at 0930 BST. Eurozone consumer confidence is at 1000 BST. Germany's inflation is at 1300 BST. In the US, personal spending data are at 1330 BST, while pending homes sales are at 1500 BST. The EIA crude oil stocks change data are at 1530 BST.
Already released, UK house price growth accelerated more than expected in June, data from the Nationwide Building Society showed. House prices climbed 5.1% annually, following a 4.7% rise in May. Economists had forecast prices to grow 4.9%. This was also the fastest growth in three months. At the same time, monthly growth in house prices held steady at 0.2%. Prices were expected to remain flat in June.
German consumer optimism improved unexpectedly in July, survey data from market research group GfK showed Wednesday. The forward-looking consumer sentiment index rose to 10.1 from 9.8 in June. It was forecast to remain unchanged from the June reading. However, Gfk noted the survey was carried out before the UK referendum.
By Daniel Ruiz; danielruiz@alliancenews.com
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