LONDON MARKET CLOSE: FTSE 100 Subdued On Eve Of UK General Election

(Alliance News) - Stocks in London ended mostly lower on Wednesday with a firm pound erasing gains in the FTSE 100, as Britons get set to cast their votes in Thursday's general election.

The FTSE 100 index closed up 2.49 points at 7,216.25. The large cap index had touched an intraday high of 7,250.67 in early trade.

The FTSE 250 ended down 133.98 points, or 0.6%, at 20,647.11, and the AIM All-Share closed down 5.00 points, or 0.6%, at 895.77.

The Cboe UK 100 ended flat at 12,232.30, the Cboe UK 250 closed down 0.8% at 18,589.36 and the Cboe Small Companies ended 0.2% lower at 11,387.70.

In Paris the CAC 40 ended up 0.2%, while the DAX 30 in Frankfurt ended up 0.6%.

So far in 2019, the UK's flagship equities index is up 7.2%, significantly underperforming European counterparts. France's CAC 40 and Germany's DAX 30 are both up 24% so far this year.

Analysts at Capital Economics said: "We doubt that UK equities would continue to underperform in the event of a Conservative majority at the general election held on Thursday. That is because we think that the positive effects from reduced uncertainty surrounding Brexit and higher economic growth would outweigh the negative effects for UK multinationals from an even stronger sterling exchange rate.

"In our view, the rise in sterling has been a key factor explaining the recent underperformance of UK equities. While MSCI's indices of mid- and large-cap equities for the US, Japan and the eurozone have increased since October 29, its index for the UK has fallen by nearly 1.5%."

The pound was quoted at USD1.3177 at the London equities close, flat on USD1.3176 at the close Tuesday, recovering from earlier losses after a closely watched YouGov poll pointed to the Conservative Party's lead narrowing.

UK Prime Minister Boris Johnson's final day of campaigning saw him travel across the country before concluding with a rally for Tory activists.

When asked earlier about the narrowing polls, Johnson replied to broadcasters: "This could not be more critical, it could not be tighter - I just say to everybody the risk is very real that we could tomorrow be going into another hung parliament."

IG Group's Josh Mahony said: "Overnight sterling weakness has been largely negated this afternoon, with the pound regaining ground despite sharp losses in response to a surprise tightening in the final MRP election poll. With the UK electorate heading to the polls tomorrow, the fears of a hung parliament scenario appear to be a very real possibility. The lack of follow through on early selling is perhaps a reflection of the fact that the YouGov poll remains an outlier, the final Opinium poll highlighting a 12-percentage point lead for Johnson."

On the London Stock Exchange, Mexican gold miner Fresnillo ended the best blue chip performer, up 4.9% tracking spot gold prices higher.

Gold was quoted at USD1,471.82 an ounce at the London equities close, up from USD1,463.59 late Tuesday.

Fellow gold miner Polymetal International ended up 1.7%.

At the other end of the large cap index, JD Sports Fashion ended the worst performer, down 8.5% at 734.86 pence after its largest shareholder Pentland Group cut its stake in the sportswear retailer.

Brand management firm Pentland sold 24.0 million shares in the retailer, representing a 2.5% stake, at 740 pence each, in a deal valued at GBP177.6 million. JD will not receive any proceeds from the sale.

The shares were offered by way of an accelerated bookbuild to international institutional investors. Following the sale, Pentland will continue to be JD's major shareholder, with a stake of 55%.

TUI closed down 1.0% after the Anglo-German travel company said the grounding of its Boeing 737 MAX planes hurt annual profit.

The company said its pretax earnings for the year to the end of September declined by 28% to EUR691 million from EUR966 million a year earlier, despite revenue growing by 2.5% to EUR18.93 billion from EUR18.47 billion. On a constant currency basis, revenue rose by 2.7%.

TUI explained that its earnings were hurt by EUR293 million cost from the grounding of the Boeing 737 MAX aircraft.

The euro stood at USD1.1088 at the European equities close, marginally lower from USD1.1095 a day before, ahead of the European Central Bank's interest rate decision on Thursday.

The meeting will be the first under the reign of new President Christine Lagarde who is faced with problems of sluggish economic growth and inflation well below the ECB's target of below, but close to, 2.0%.

The central bank is widely expected to keep monetary policy unchanged.

"No change is expected, and the broad economic assessment is unlikely to materially change. We expect Lagarde to bring stylistic changes to the ECB more than a change in the activist course Draghi paved. She may draw more for her senior team and give them more limelight," said Bannockburn Global Forex's Marc Chandler.

"The review of the ECB's monetary policy thrust may change the wording around the 2% inflation target, but most importantly will be addressing the dissents. Without formal recognition, those that disagree with the ECB seem compelled to take their case to the media. Other central banks find a way to give the dissents space, and this seems to be the direction the ECB will move," Chandler added.

Unlike her predecessor Mario Draghi, former IMF head Lagarde is not an economist and has little direct monetary policy experience.

Lagarde's Thursday press conference will also be closely watched by investors to see if she has mastered the subtle communication skills of a central bank chief.

"Of course, the advent of a new ECB President introduces some uncertainty. Lagarde will likely choose to do a few things differently. At first, she will probably strive to rebuild a consensus instead of pushing controversial decisions through the Governing Council - as Draghi tended to do in his last few years as president. As the Governing Council is largely comfortable with the current stance, Lagarde will focus on the strategy review rather than on changing the ECB's guidance or policy," said analysts at Berenberg.

Against the yen, the dollar was trading at JPY108.68, flat from JPY108.70 late Tuesday.

Stocks in New York were mostly higher at the London equities close ahead of the US Federal Reserve's interest rate decision at 1900 GMT, followed by a press conference by Chair Jerome Powell.

The DJIA was down 0.1%, but the S&P 500 index was up 0.2% and the Nasdaq Composite up 0.3%.

The Fed resumed its final policy meeting of 2019 on Wednesday, with markets strongly expecting the central bank to leave interest rates unchanged.

After cutting rates three times in 2019, policymakers have said they are now pausing to watch how the world's largest economy performs.

On the economic front, US consumer price growth beat expectations in November, according to the Department of Labor's Bureau of Labor Statistics.

The consumer price index rose 0.3% month-on-month in November, slower than the 0.4% recorded in October, but ahead of consensus of a 0.2% rise.

Annually, prices rose 2.1%, also beating expectations for an advance of 2.0% and accelerating from the previous month's 1.8% growth.

"A rise in energy prices pushed headline CPI inflation up to a one-year high last month, but the stability of core inflation suggests that underlying price pressures remain subdued. In that environment, we expect the Fed to remain on the side-lines for a lot longer than the FOMC meeting concluding later today," said analysts at Capital Economics.

Brent oil was quoted at USD63.02 a barrel at the London equities close, down from USD64.34 at the close Tuesday.

Elsewhere, Saudi Aramco's shares surged on their debut on the domestic stock exchange, becoming the world's biggest listed company worth USD1.88 trillion after a record-breaking IPO.

The oil company had priced the initial public offering at 32 riyals per share, around USD8.53, raising USD25.6 billion and narrowly eclipsing Alibaba's IPO of 2014 to become the world's largest.

Aramco shares climbed the maximum permitted 10% to 35.2 riyals just seconds after the opening bell on Riyadh's Tadawul exchange and stayed there until trading stopped.

That gives Aramco a market valuation of USD1.88 trillion, making it the world's most valuable company as it closes in on the USD2 trillion price tag coveted by de facto ruler Crown Prince Mohammed bin Salman.

The economic events calendar on Thursday has inflation readings from Germany at 0700 GMT, eurozone industrial production at 1000 GMT and US producer prices at 1330 GMT.

The UK corporate calendar on Thursday has interim results from online estate agent Purplebicks Group, fashion retailer Superdry and mobile phone and electrical goods retailer Dixons Carphone. There are also trading statements from online grocer Ocado and outsourcer Serco.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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