LONDON MARKET CLOSE: FTSE Outperforms As Pound Dips After UK GDP Data

(Alliance News) - The FTSE 100 outpaced European peers on Monday as the pound fell on heightened speculation of a Bank of England rate cut following some downbeat UK economic data.

The FTSE 100 index closed up 29.75 points, or 0.4%, at 7,617.60. The FTSE 250 ended up 150.09 points, or 0.7%, at 21,716.76, and the AIM All-Share closed up 4.74 points, or 0.5%, at 966.39.

The Cboe UK 100 ended up 0.2% at 12,892.63, the Cboe UK 250 closed up 0.5% at 19,583.65, and the Cboe Small Companies ended up 0.5% at 12,457.30.

In European equities on Monday, the CAC 40 in Paris ended flat, while the DAX 30 in Frankfurt dipped 0.2%.

"After a wild start to the year, everything is starting to settle down again in the markets with investors this week eyeing a long-awaited signing ceremony in Washington," said Craig Erlam at Oanda.

After nearly two years of escalating conflict, US President Donald Trump and top Chinese trade envoy Liu He are due to sign a "phase one" agreement on Wednesday.

Trump has said that negotiations on the next phase will begin promptly, but signing a phase two agreement might have to wait until after the 2020 presidential elections in November.

Details of the deal are scant. Some critics have claimed it amounts to a strategic retreat for the US, which cancelled some tariffs and reduced others in return for Chinese pledges to increase purchases of US exports by USD200 billion over two years, including farm goods in particular.

Oanda's Erlam added: "A deal is a deal and it leaves us in a better place than we would have been had there not been one and more tariffs imposed in December. We've already had that bounce in the markets though and for that to be bettered, there'll need to be a few surprises on Wednesday. Otherwise we're going to need to rely on the economy and that hasn't been giving us an awful lot of good news recently."

Stocks in New York were in the green at the London equities close, with the Dow Jones up 0.2%, the S&P 500 index up 0.4%, and the Nasdaq Composite up 0.6%.

In London, the overseas earnings-heavy FTSE 100 outperformed peers in Europe after the pound slipped as speculation of a Bank of England rate cut grew.

The pound was quoted at USD1.2989 at the London equities close Monday, down compared to USD1.3061 at the close on Friday.

"Already two members, Saunders and Haskel, have voted (twice) for an immediate cut and now Tenreyro, Vlieghe and Carney have said that if things stay weak then they will also vote to cut. Ordinarily, that would provide sufficient evidence to change our rate call from no change to a cut at the next meeting on 30 January, especially after today's weak GDP data," said SocGen.

Gross domestic product slipped 0.3% month-on-month in November, undershooting consensus which, according to FXStreet, had pencilled in a flat reading for the month. This followed 0.1% growth in October.

In the rolling three months to November, UK GDP grew 0.1% sequentially, half the growth rate seen in the August-to-October period.

However, SocGen analyst Brian Hilliard continued, with Boris Johnson winning the UK general election and the country set to leave the EU a day after the BoE's next interest rate decision, there should still be no change in policy on January 30.

"The decision is becoming a very close call. We will keep you posted," Hilliard added.

Elsewhere in forex, the euro stood at USD1.1144 at the European equities close Monday, against USD1.1112 at the same time on Friday. Against the yen, the dollar was trading at JPY109.89 compared to JPY109.60 late Friday.

In commodities, Brent oil was quoted at USD64.24 a barrel at the London equities close Monday from USD65.40 late Friday. Gold was quoted at USD1,551.79 an ounce at the London equities close Monday against USD1,559.30 at the close on Friday.

On the London Stock Exchange, housebuilder Taylor Wimpey closed up 2.6% after Peel Hunt raised the FTSE 100 constituent to Add from Hold.

British Gas parent Centrica was boosted by a ratings upgrade as well, the stock was up 1.5% after UBS raised the energy supplier to Buy from Neutral.

Other utilities firms were also higher, with Severn Trent closing up 2.6% and United Utilities finishing 2.5% higher.

"Utility stocks were in demand following reports of takeover interest in recycling firm Viridor, owned by Pennon," said Russ Mould, investment director at AJ Bell.

Pennon closed up 6.6%.

Elsewhere in the FTSE 250, Spirent rallied 14% after the telecommunications network testing and analytics firm said it expects full-year profit to exceed market expectations.

Spirent said it was able to secure a number of "important" contract wins in the final three months of 2019, resulting in 2019 total group revenue rising by 5.5% versus the year before to USD503 million. The company also expects its adjusted operating profit to be between USD91 million and USD93 million - which would represent a rise of between 18% and 21% on the USD77.1 million reported the year before.

Ferrexpo finished 8.0% higher as the iron ore pellet producer said higher commodity prices offset a rise in production costs during 2019.

This, the company said, allowed it to continue generating "strong" margins during the year. Prices rose 16% in 2019, compared to a cash cost of production increase of 12%, to USD48 per tonne.

Pellet output from Ferrexpo's own ore in 2019 was broadly flat at 10.5 million tonnes, with production of higher-quality pellets up 3% to 10.1 million tonnes. Sales volumes rose marginally, by 1.0%, to 10.3 million tonnes.

Savills ended up 7.6%. The estate agent boosted guidance, saying its annual performance will be at the upper end of expectations.

Despite political uncertainty, the UK business performed "excellently" in both commercial and residential markets, Savills said. The Asia Pacific business performed slightly below expectations as a result of political unrest. Significant growth in North America helped improve profit, pushing overall performance up.

Just Group shed 7.8% after Credit Suisse cut the retirement insurer to Underperform from Neutral.

Stobart Group closed down 5.8% after Sky News reported regional airline Flybe, of which Stobart is a part owner, is at risk of collapse.

Last February, the airline was bought by a consortium led by Virgin Atlantic following poor financial results. Connect Airways, which consists of Virgin Atlantic, Stobart Air and Cyrus Capital, paid GBP2.2 million for Flybe's assets and operations.

Sky News reported that Flybe has been holding talks with the Department for Business, Energy & Industrial Strategy and the Department for Transport on whether the UK government could provide or facilitate any emergency financing to the company.

A Flybe spokeswoman said: "Flybe continues to focus on providing great service and connectivity for our customers, to ensure that they can continue to travel as planned. We don't comment on rumour or speculation."

In the UK corporate calendar on Tuesday, there are trading statements from housebuilder Taylor Wimpey, online clothing retailer boohoo and recruitment firm PageGroup. Games Workshop releases its interim results.

In the economic calendar, Chinese trade data is out at 0700 GMT and US inflation is at 1330 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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