LONDON MARKET CLOSE: London Stocks Rise With Theresa May Set For No 10

LONDON (Alliance News) - London stocks closed firmly higher on Monday as an early recovery rally for shares hit hardest by the volatility that followed the UK's vote to leave the European Union was buoyed further after UK Home Secretary Theresa May was left as the only contender in the race to lead the Conservative Party and will therefore become the new prime minister on Wednesday.

David Cameron, who May will replace as Prime Minister, said on Monday afternoon he will resign after Prime Minister's Questions, meaning May will be installed at Number 10 by Wednesday evening.

Andrea Leadsom, who had been set to challenge May for the leadership, pulled out of the race just after midday on Tuesday. Leadsom said her backing amongst Tory MPs was not "sufficient support to lead a strong and stable government" and said she would support May. In the MPs' ballot held to whittle the race down to two, May won 199 votes from Tory MPs, compared to 84 for Leadsom.

Just prior to Leadsom's exit on Monday, May had launched her national campaign for the leadership in Birmingham, presenting herself as the candidate of unity and experience who will "make a success" of Brexit. She also sought to reassure eurosceptics she would not seek to overturn the election result by keeping the UK in the EU, repeating her previous declaration that "Brexit means Brexit".

No such certainty could be seen in the opposition camp, with Angela Eagle on Monday launching a bid to oust Labour Party leader Jeremy Corbyn. Corbyn has faced consistent challenges in recent weeks, including a series of shadow cabinet resignations, calls for him to follow suit, and a vote of no confidence, which has led up to former shadow business secretary Eagle's direct challenge to remove him.

But the clear path and support for May to become prime minister offered a salve to markets which have been plagued by uncertainty since the Brexit vote was announced.

"Theresa May is clearly the market's preferred choice for Britain's top job," said Connor Campbell, financial analyst at Spreadex.

"May's lack of interest in rushing to activate Article 50 and her relatively less contentious relationship with the EU when compared to her (now long gone) rivals, as well as the general cheer at the mere fact of the UK once again having a PM, is arguably responsible for the rise from the FTSE and pound," he added.

Michael Hewson, chief market analyst at CMC Markets, noted the FTSE 250 had particularly benefited from the rise following Leadsom's exit from the race, hitting the highest levels since its plunge following the referendum on June 23.

Hewson also said much has been made of the FTSE 100's outperformance against the FTSE 250 in recent weeks, but he noted the FTSE 250 is only down 10% against the record levels hit just over a year ago, "a fairly decent performance given all the uncertainty about the UK's economic future."

The FTSE 100 closed up 1.4%, or 92.22 points, at 6,682.86. The FTSE 250, though, did get an even greater bounce, closing up 3.2%, or 522.16 points, at 16,699.91. The AIM All-Share closed up 1.4%, or 9.86 points, at 715.4.

The pound was trading at USD1.2985 at the London close on Monday, up on USD1.2957 at the close on Friday having made gains over the course of Monday, particularly following Leadsom's exit. The euro was trading at USD1.1043 at the London close, compared to USD1.1039.

There was a similar degree of buoyancy in European markets, with the CAC 40 in Paris closing up 1.8% and the DAX in Frankfurt up 2.1%.

The roster of the best performers in the blue-chip index was once more dominated by companies which had been battered and bruised in the wake of the Brexit vote. Housebuilders Berkeley Group Holdings, up 8.0%, Barratt Developments, up 7.4%, Taylor Wimpey, up 7.3%, and Persimmon, up 7.0%, were all among the best performers, as was builders' merchant Travis Perkins, up 7.8%.

A similar picture emerged in the FTSE 250, where the risers list was populated by housebuilders and property developers. That group was topped by CLS Holdings, a property firm, which closed up 21%. On Monday morning, the company said it had spent EUR49.5 million on two properties in Germany, in Dusseldorf and Hamburg respectively.

Miners also made big gains, spurred on by hopes of monetary policy easing in Japan and also in China following the weaker-than-expected inflation figures the country posted over the weekend, according to CMC Markets' Hewson. Data from China's National Bureau of Statistics showed Chinese consumer prices rose 1.9% year-on-year in June. This slowed from the 2.0% growth seen in May and remains below the 3.0% target set by the government, but was a touch ahead of the 1.8% consensus forecast.

Anglo American, up 8.6%, Glencore, up 5.5%, and Fresnillo, up 6.1%, were among the best performers in the FTSE 100, while Hochschild Mining rose 12% and Kaz Minerals rose 9.7% in the FTSE 250.

Gold was trading at USD1,358.46 at the London close on Monday, against USD1,351.45 at Friday's close. Brent oil was trading at USD46.58, compared to USD46.59 at the same point on Friday.

Elsewhere amongst the blue-chips, luxury fashion and accessories retailer Burberry Group ended up 2.0% after it undertook a major reshuffle at its helm, moving Chief Executive Christopher Bailey to a new role and appointing a new CEO in his place.

Bailey, who had been CEO and chief creative officer previously, has faced scrutiny both over his lack of experience for the CEO job and the pressures caused by his dual role. Bailey will move to the role of president and chief creative officer.

He will be replaced by Marco Gobbetti, the chairman and CEO of French luxury brand Celine, as Burberry's new CEO. Burberry also appointed Julie Brown as chief operating and financial officer. She joins Burberry from Smith & Nephew, the UK-listed medical devices maker.

Current COO John Smith said he would leave the business in June, while incumbent CFO Carol Fairweather resigned on Monday.

Rolls-Royce Holdings, the civil aerospace and defence engineer, sat among the worst performers, down 1.5%. The group said it had agreed a EUR720.0 million deal to acquire the 53.1% stake of Spanish aerospace components manufacturer Industria de Turbo Propulsores it does not already own. Rolls-Royce said the deal would boost its position on key civil and defence aerospace programmes, particularly as regards aftermarket sales.

Collagen Solutions, which develops and manufactures collagen components for use in regenerative medicine, medical devices and in vitro diagnostics, rose 33%. The company reported a narrowed loss for the year to the end of March and said it had seen a "positive start" to its current financial year.

In the US, the Dow 30 was up 0.6% at the London close, while the S&P 500 was up 0.5% and the Nasdaq Composite was up 0.8%.

On Monday, the S&P 500 hit a record intraday high, boosted by the strong US jobs report on Friday which came in well ahead of economist expectations. The start of the US earnings season will also kick off after the close on Monday with aluminium company Alcoa.

On the economic agenda Tuesday, the British Retail Consortium's Retail Sales Monitor report will come overnight, with consumer price indices following from Germany at 0700 BST, before Redbook retail sales data in the US comes at 1355 BST.

In the corporate calendar Tuesday, online fashion retailer ASOS issues third quarter results, while recruiter PageGroup, and housebuilder and construction company Galliford Try issue trading statements. Events company ITE Group, oil and gas operator Premier Oil, retail property investor NewRiver Retail, and specialty pharmaceutical firm Alliance Pharma all issue trading statements.

By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance

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