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LONDON MARKET CLOSE: Cautious Trade With US-China, UK Election Eyed

Mon, 9th Dec 2019 16:52

(Alliance News) - The FTSE 100 dipped ever-so-slightly on Monday as traders were hesitant with a packed week looming large, the days ahead including the UK general election, a US-China tariff deadline and some central bank meetings.

The FTSE 100 index closed down 5.76 points, or 0.1%, at 7,233.90. The FTSE 250 ended down 10.39 points, or 0.5%, at 20,922.64, and the AIM All-Share closed down 2.88 points, or 0.3%, at 905.51.

The Cboe UK 100 ended down 0.2% at 12,256.23, the Cboe UK 250 closed down 0.1% at 18,837.11, and the Cboe Small Companies ended 0.1% lower at 11,406.48.

In European equities on Monday, the CAC 40 in Paris ended down 0.6%, while the DAX 30 in Frankfurt shed 0.5%.

Stocks in New York were in the red at the London equities close, with the Dow Jones down 0.2%, the S&P 500 index down 0.1%, and the Nasdaq Composite flat.

"It has been a mixed day for most indices, with equities not entirely able to follow up on Friday's strong gains. Anyone looking at trying to get a decent pre-Christmas rally going will have to contend with trade war headlines, with attention now fixed on 15 December and the imposition of the next round of US tariffs on China," said Chris Beauchamp, chief market analyst at IG.

Also vying for attention this week are interest rate decisions from the US Federal Reserve and European Central Bank, as well as a general election in the UK.

And with polling day in the UK looming, the final days of campaigning are in full swing.

UK Prime Minister Boris Johnson is hoping to regain the Conservative majority lost by his predecessor Theresa May in the last election, just two years ago, while Labour leader Corbyn is aiming to upset the odds and usher in the first Labour government for nine years.

Hanging over the election is the issue of Britain's departure from the EU, which will be thrown into doubt altogether should Johnson fail to achieve a majority.

Corbyn has spent the campaign lagging in the polls, and has yet to show signs of mounting the late surge that he achieved in 2017, which stripped then prime-minister Theresa May of her majority.

Polls released on Saturday showed the Conservatives with an average lead of 10%. Pollsters believe that Johnson needs to be more than six points clear of Labour on Thursday to secure a majority.

With expectations of a Conservative victory this week, the pound firmed up on Monday.

The pound was quoted at USD1.3154 at the London equities close, compared to USD1.3105 at the close on Friday.

Other currencies also posted gains against the dollar at the start of the week.

The euro stood at USD1.1070 at the European equities close Monday, against USD1.1045 at the same time on Friday. Against the yen, the dollar was trading at JPY108.59, compared to JPY108.71 late Friday.

"USD was a touch lower after Friday's gains when the nonfarm payrolls report for November showed the number of jobs added to the economy easily exceeded expectations at 266K versus consensus forecast of 180K. The lack of further gains suggests investors don't expect the jobs report to materially change the Fed's assessment on interest rates outlook, at the FOMC's meeting later on in the week," said Fawad Razaqzada, analyst at Forex.com.

In commodities, Brent oil was quoted at USD64.20 a barrel at the London equities close Monday from USD64.15 late Friday.

"Oil is consolidating after the rally seen last week. OPEC's meeting brought a relative strong will of cutting production from the lobby, with a subsequent reaction to the price," said Carlo Alberto De Casa, chief analyst at ActivTrades.

Gold was quoted at USD1,460.80 an ounce at the London equities close Monday against USD1,459.85 at the close on Friday, clawing back some lost ground after a strong US jobs report on Friday.

In London on Monday, Tesco ended the session as the FTSE 100's best performer, up 4.7%.

Shares in the supermarket rose after confirming the potential sale of its Asian business, though noted a review of options remains in the early stages.

Tesco, which has operations in both Thailand and Malaysia in the region, said the review of the business began after receiving "inbound interest" from potential buyers. The statement from the UK's largest supermarket came after the Times earlier on Monday had reported the company is mulling a potential sale worth up to USD9 billion.

Meanwhile, chemicals firm Croda closed down 0.8% after Barclays cut the stock to Equal Weight from Overweight.

In the FTSE 250, Senior ended 7.0% higher after the engineer confirmed speculation regarding a review of its Aerostructures business, but said that there can be no certainty over any transaction for the business following the review.

The Rickmansworth, Hertfordshire-based company added that the Aerostructures review is in line with Senior's policy to review its portfolio and evaluate all its operating businesses in terms of their strategic fit within the group.

Ending at the bottom of the mid-caps, by quite some distance, was Tullow Oil.

The oil & gas firm sank 72% after suspending its dividend, resetting its future production guidance, and saying that Chief Executive Officer Paul McDade and Exploration Director Angus McCoss have resigned with immediate effect by mutual agreement.

Following underperformance from its main oil producing assets - the TEN and Jubilee fields in Ghana - Tullow said it needs to reset its forward-looking guidance. For 2020, group production is forecast to average between 70,000 and 80,000 barrels of oil per day and group production for the following three years is expected to average around 70,000 barrels per day.

Further, in 2020, the company expects to generate underlying free cash flow of at least USD150 million at USD60 a barrel after a capital investment of USD350 million. Considering the level of expected free cash flow, Tullow has decided to suspend its dividend.

Elsewhere in London, shares in Amigo ended 10% higher amid a slew of board and management changes, with both its chair and chief executive departing to make way for the return of the company's founder and majority shareholder.

Guarantor loans company Amigo said Richmond Group intends to exercise its right to appoint non-executive directors as part of the relationship agreement between the two firms.

James Benamor, founder and previous CEO of Amigo, has been appointed as a non-independent non-executive director with immediate effect at Richmond's request. Benamor holds a 61% stake in Amigo via Richmond. In addition, Kelly Black, part of the team that founded Amigo and head of Measurement & Improvement at Richmond, has been appointed by Richmond as a non-independent, non-executive director at Amigo.

Stephan Wilcke, Amigo's chair, has said he will not seek re-election at the firm's next annual general meeting in 2020. This decision was made in light of the Richmond appointments as Wilcke feels it to be "more appropriate" that Amigo is led by a new chair. Hamish Paton has also resigned as chief executive, subject to his 12 month notice period.

In the UK corporate calendar on Tuesday, there are interim results from equipment rental firm Ashtead, luxury retailer Watches of Switzerland, and an investor update from miner Anglo American.

In the economic calendar on Tuesday, there is Chinese inflation at 0130 GMT and a UK gross domestic product reading at 0930 GMT. The eurozone ZEW economist sentiment survey is at 1000 GMT, with a survey for Germany also due at the same time.

In the US, the two-day US Federal Open Market Committee kicks off on Tuesday, with an interest rate decision due on Thursday.

In the UK, the latest grocery share figures from Kantar for the 12 weeks to December 1 will be released at 0800 GMT.

By Lucy Heming; lucyheming@alliancenews.com

London Market Close is available to subscribers as an email newsletter. Contact info@alliancenews.com  

Copyright 2019 Alliance News Limited. All Rights Reserved.

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