(Alliance News) - London shares ended mixed on Wednesday as a sharp rise in the pound dented the FTSE 100, while European stocks fell after the US relaunched a major trade offensive against Europe.
The internationally-exposed FTSE 100 index closed down 38.78 points, or 0.5%, at 7571.92.
The domestically-focused FTSE 250 ended up 17.75 points, or 0.1%, at 21,762.98, and the AIM All-Share closed up 6.06 points, or 0.6%, at 968.16.
The Cboe UK 100 ended down 0.6% at 12,616.95, while the Cboe UK 250 closed up 0.1% at 19,628.21. The Cboe Small Companies ended up 0.4% at 12,445.79.
"Sterling's strength has hit the FTSE 100. The push higher in the pound has dented the London benchmark as the international nature of the index means a more expensive pound impacts revenues from overseas. Traders are now factoring in a roughly 50% possibility of an interest rate cut from the Bank of England this month, but keep in mind the probability was roughly 70% recently. A better-than-expected update from the CBI helped the pound, and in turn hurt the FTSE 100," said CMC Markets analyst David Madden.
Meanwhile, US President Donald Trump warned Europe that the US would protect its interests, on the second day of his stay at the Davos economic forum.
His interventions took the focus off climate change which had dominated the first day of event, where Trump lashed out at the "prophets of doom" who say that the world is in crisis over global warming.
"The EU is tougher to deal with than anybody. They've taken advantage of our country for many years." Trump told Fox Business News on the sidelines of the World Economic Forum in Davos.
"Ultimately, it will be very easy because if we can't make a deal, we'll have to put 25% tariffs on their cars," he added.
In Paris the CAC 40 ended down 06.%, while the DAX 30 in Frankfurt ended down 0.3%. The DAX had set a record high of 13,640.05 in early trade.
"The threat of car tariff from Trump is nothing new, they have been lingering over European manufacturers. However, Trump has repeatedly delayed applying then. The broad feeling is that now that phase one is agreed with China, Trump will now turn is attention firmly towards the EU," said City Index analyst Fiona Cincotta.
"The slowdown in the EU economy is showing signs of bottoming out, although the German manufacturing sector is still not showing signs of rebounding. A full-blown trade dispute with the US would kick the EU economy whilst its down with potentially dire consequences," Cincotta added.
On the London Stock Exchange, Berkeley Group ended the best performer, up 4.4% after the housebuilder said it intends to increase its returns to shareholders by GBP455 million over the next two years, to total GBP1 billion over the period.
Sage Group closed up 3.9% after the Newcastle-headquartered accounting software provider achieved recurring revenue of GBP410 million in the three months to December, 11% higher than the year before. This, it said, was underpinned by software subscription growth of 25% to GBP286 million.
Recurring revenue growth was "principally" driven by the North America and Northern Europe segments, Sage continued, with strong momentum in its financial year ended September continuing. North America recurring revenue was up 12% to GBP154 million, and Northern Europe rose 15% to GBP93 million.
London Stock Exchange Group closed up 3.6%. European Commission competition authorities could give the green light to the acquisition of Refinitv by LSEG by the summer, Raffaele Jerusalmi, an LSEG board member and chief executive of Borsa Italiana, said on Tuesday.
"It is a process that is underway, and if it has not been done, it will be shortly. I believe the time for the first authorities assessments will be roughly around the summer," he added during an event in Milan, according to Reuters.
Jerusalmi said LSEG has no plan to sell the Milan stock exchange following the acquisition of Refinitiv. "For now, absolutely not, because it is considered a strategic asset, so there is no will to deprive itself of Borsa Italiana," he said.
At the other end of the large cap index, TUI ended the worst performer, down 5.5% after Stifel cut the Anglo-German travel operator to Hold from Buy.
J Sainsbury closed down 2.1% after the supermarket chain said Mike Coupe will retire from his role as chief executive officer at the end of May. Coupe, who has served as CEO for almost six years, will be succeeded by Retail & Operations Director Simon Roberts, who will start his new role from June 1.
The pound was quoted at USD1.3137 at the London equities close, up from USD1.3045 at the close Tuesday, after figures showed confidence among Britain's manufacturers increased faster in the least three months than at any other point on records.
The Confederation of British Industry found that firms were 23% more likely to be positive about the period to January, up from a 44% lead for doom-mongers in October. It is the biggest swing since 1958 when the CBI's survey of 300 manufacturing firms began.
"The rebound in the main balances of the CBI Industrial Trends Survey in January offers further evidence that sentiment has taken an upward turn after the general election. This should help to convince the MPC not loosen monetary policy. Meanwhile, with public borrowing looking like it will come in below the OBR's forecast this year, the Chancellor will have a little room to loosen fiscal policy further," said analysts at Capital Economics.
The euro stood at USD1.1073 at the European equities close, lower than USD1.1096 late Tuesday, ahead of the European Central Bank's interest rate decision on Thursday.
The ECB Governing Council meets in Frankfurt, announcing its latest policy decision at 1245 GMT on Thursday. This will be followed by a press conference with President Christine Lagarde at 1330 GMT.
The focus of what is likely to be a largely uneventful ECB meeting will be the start of the bank's strategy review, according to experts.
Analysts at ING said: "Waiting for more guidance on growth and inflation developments, the highlight of this week's meeting should be the announcement of the official start of the strategy review. A lot has been said and speculated, both by market participants and ECB officials. Now, with all changes in the ECB's Executive Board behind us, it is time to set out some parameters like, for example, scope and timing of the review.
"Lagarde already gave some ideas at the December meeting, also stating that in her view the review should be concluded before the end of the year. In this regard, decisions to include external parties, be it academics, politicians, 'ordinary people' or other interest groups would have a clear impact on the length of the process, making the deadline of end-2020 more ambitious than it currently sounds. We still think that eventually, a new definition (of 'around 2%') would institutionalise symmetry while at the same time provide maximum flexibility; more than any point range would offer."
Against the yen, the dollar was trading at JPY109.90, flat from JPY109.95 late Tuesday.
Stocks in New York were higher at the London equities close on a busy day on the earnings front.
The DJIA was up 0.4%, the S&P 500 index up 0.5% and the Nasdaq Composite up 0.7%.
IBM led the Dow after the iconic technology company on Tuesday recorded a rise in income in the final quarter of 2019 on the back of a sharp rise in cloud software revenue.
In the three months to December 31, International Business Machines recorded net income of USD3.67 billion, almost double the USD1.95 billion recorded in the same period the year before.
Basic earnings per share jumped to USD4.11 from USD2.17.
Chief Executive Ginni Rometty said the result "positions us for sustained revenue growth in 2020" led by the company's cloud computing businesses.
The stock was up 3.6% on Wall Street.
United Airlines Holdings on Tuesday said it has achieved its earnings guidance a year ahead of schedule following strong growth in passenger numbers and income in 2019.
The Chicago-based carrier reported total operating revenue in the three months to the end of 2019 of USD10.89 billion, up 3.8% from USD10.49 billion a year earlier. For all of 2019, operating revenue climbed by 4.7% to USD43.26 billion year-on-year.
As a result, pretax income surged by 53% in the fourth quarter to USD844 million and by 48% in 2019 to USD3.91 billion.
The stock was down 0.7% in New York.
Consumer goods firm Johnson & Johnson on Wednesday reported a rise in sales for 2019, even as earnings for the year slightly declined.
For the annual period, sales rose by 0.6% to USD82.06 billion from USD81.58 billion the year before. Net earnings declined by 1.2% to USD15.12 billion from USD15.30 billion, however diluted earnings per share edged up by 0.4% to USD5.63.
On an adjusted basis, Johnson & Johnson's net earnings rose by 4.5% to USD23.31 billion and earnings per share by 6.1% to USD8.68.
The stock was down 1.0% on Wall Street.
Brent oil was quoted at USD63.14 a barrel at the London equities close, sharply lower than USD64.72 at the close Tuesday.
The impact of a new coronavirus outbreak in China on the oil market is difficult to assess, Goldman Sachs said, but history suggests demand may fall.
The virus, which originated in the central Chinese city of Wuhan, has so far killed nine people and infected hundreds. It has since spread to the likes of the US, Japan, and South Korea.
Goldman Sachs said the situation is still very uncertain, but the SARS outbreak could be a guide to how the oil market may fare if the new virus spreads. The impact on oil demand will, the bank continued, depend on how quickly and where it spreads, how contagious it is, and the mortality rate.
Gold was quoted at USD1,557.45 an ounce at the London equities close, flat from USD1,557.30 late Tuesday.
The UK corporate calendar on Thursday has annual production results from miners Anglo American and Polymetal International. There are also trading statements from IT services provider Computacenter, Daily Mail newspaper publisher Daily Mail & General Trust and from online fashion retailer ASOS.
In addition, the World Economic Forum continues in Davos, Switzerland, on Thursday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
Berkeley Group (BKG)
Sage Group (SGE)
TUI AG (TUI)
Sainsbury's (SBRY)