LONDON MARKET CLOSE: Markets Rejoice As Hong Kong Tensions Ease

(Alliance News) - Stocks in London ended higher on Wednesday, joining a global rally after the leader of Hong Kong spiked an extradition bill which had sparked violent protests.

Bowing to protestors, Hong Kong Chief Executive Carrie Lam formally withdrew a bill aimed to allow the extradition of criminal suspects to mainland China.

The proposal had sparked demonstrations that investors feared could prompt a major crackdown from Beijing.

The protest movement has also renewed calls for democratic elections, in scenes reminiscent of 2014's democracy protests, as the Beijing-approved government has largely been perceived as ineffective and broken.

The FTSE 100 index closed up 43.07 points, or 0.6%, at 7,311.26. The internationally-exposed index hit an intraday high of 7,334.55 in early trade.

The FTSE 250 ended up 154.97 points, or 0.8%, at 19,619.11, and the AIM All-Share closed up 4.48 points, or 0.5%, at 878.01.

The Cboe UK 100 ended up 0.7% at 12,400.17, the Cboe UK 250 closed up 0.9% at 17,459.80, and the Cboe Small Companies ended flat at 10,840.97.

In Paris the CAC 40 ended up 1.2%, while the DAX 30 in Frankfurt ended 1.0% higher.

Stocks in New York were higher at the London equities close. The DJIA was up 0.7%, the S&P 500 index up 0.8%, and the Nasdaq Composite up 0.9%.

"Investors are hopeful the Hong Kong situation has been defused, although a response from the protestors is not yet forthcoming. But the potential removal of a significant geopolitical flashpoint is undeniably benign for risk appetite, and may see Asian markets extend their gains in the second half of this week. We have yet to see conclusive signs the indices, particularly in the US, have broken out of their August range, and until this happens the situation remains vulnerable to another outbreak of trade wars," said IG Group analyst Chris Beauchamp.

On the London Stock Exchange, China-exposed stocks were higher ended among the blue chip risers amid the easing of tensions in Hong Kong.

Prudential closed up 3.6%, Standard Chartered up 3.0%, Burberry Group up 1.7%, and HSBC up 1.8%.

At the other end of the large cap index, Barratt Developments ended the worst performer, down 4.4%.

The housebuilder said annual profit climbed due to successful "margin initiatives". Barratt posted a GBP909.8 million pretax profit for the financial year ended June 30, up 8.9%, just shy of the company's guidance of GBP910 million provided in July.

This was attributed to "margin initiatives, a strong close to the year and additional contribution from joint ventures".

Revenue fell 2.3% to GBP4.76 billion, below company-compiled consensus of 16 analysts, which forecast revenue of GBP4.83 billion. The company said it has "strong total forward sales", standing at 12,911 homes on Sunday last week, up from 12,648 homes a year prior. This represents a value of GBP3.00 billion, down slightly from GBP3.05 billion a year before.

"All-in-all, Barratt is doing well with the options available. But the question remains how the strong progress can be maintained if the housing market malaise spreads beyond London. And that's a factor outside of Barratt's control," said Hargreaves Lansdown's George Salmon.

Meanwhile, after the market close Wednesday FTSE Russell will announce the latest index review changes, with high street stalwart Marks & Spencer set to be demoted from the FTSE 100 for the first time since the FTSE's inception in 1984.

Drugmaker Hikma Pharmaceuticals looks set to be promoted from the FTSE 250, for the fourth time.

M&S shares closed up 3.4%, the second best blue chip performer.

The pound was quoted at USD1.2193 at the London equities close, up from USD1.2082 close Tuesday.

"In quite the reversal from Tuesday's 34-year lows, and brushing off a poor services PMI, Parliament's attempts to avert a no-deal Brexit have put a spring in the step of the pound. This comes despite the still present threat of a general election shows just how desperate the currency is to avoid Britain crashing out of the EU without an agreement in place - some uncertainties, after all, are more palatable than others," said Spreadex analyst Connor Campbell.

On the political front, Downing Street has rejected suggestions Boris Johnson will resign as prime minister to trigger a general election in a bid to block efforts to delay Brexit.

The prime minister has hinted Jeremy Corbyn is running scared from the ballot box after the Labour leader made clear he would not back a poll until a no-deal exit was taken off the table.

MPs are considering a backbench Bill to delay Brexit in order to prevent a no-deal withdrawal from the EU on October 31, after Johnson was defeated in his first Commons vote as prime minister on Tuesday night.

They are then expected to vote on triggering an early general election - which without Labour support is unlikely to reach the required two-thirds majority in the Commons.

A Downing Street spokesman said the PM will not resign to force the country to head to the polls if the government loses the Commons vote, telling a Westminster briefing: "He's not going to step down. He wants an election."

At his first Prime Minister's Questions, Johnson called it a "surrender bill" which would "wreck any chance of the talks" to achieve a new deal with Brussels.

The prime minister has insisted he will not ask for a delay beyond October 31 and has called for a snap election - something that will need the support of Labour MPs to ensure the required two-thirds majority in the Commons.

Analysts at Citigroup said: "The Johnson government could find itself stymied on its first day in Parliament, rebel Conservative and opposition MPs look set to try and seize control of tomorrow's parliamentary order paper to pass legislation blocking no-deal on October 31. The legislation reportedly would require the government to seek an extension of Article 50 until January 31, 2020 (or whatever the EU will offer) if the government fails to bring a Brexit deal through Parliament by October 19.

"If the rebels win tonight, a snap election becomes likely, but not inevitable: the rebellion could fail at later stages; or the government may ignore or legally challenge the outcome. Negotiations with the EU may continue, even if the likelihood of concessions would be low, given that the government would have effectively lost its majority."

Meanwhile, the UK was a step closer to falling into a recession on Wednesday as the latest economic data for the all-important services sector came in lower than expected.

Services, which account for four fifths of the country's GDP, were subdued in August, as the IHS Markit/CIPS UK Services Purchasing Managers' Index registered 50.6 in August, down from 51.4 in July. The index has posted above the 50.0 no-change mark for five consecutive months, but the latest reading represented the lowest since June and was well below the long-run average of 54.9.

The PMI surveys so far are indicating the UK economy will contract 0.1% in the third quarter, said Markit's Chris Williamson.

The euro stood at USD1.1027 at the European equities close, up from USD1.0963 late Tuesday.

Eurozone private sector growth remained sluggish in August, though showing an improvement on the earlier flash reading, as service sector growth continued to offset manufacturing weakness, according to survey data released.

The IHS Markit eurozone composite purchasing managers' index edged up to 51.9 points in August from 51.5 points in July. The final August print also represented an improvement on the flash reading of 51.8 points. The growth in August was driven by the services sector.

The eurozone services PMI in August read 53.5 points, up from 53.2 in July, and ahead of the 53.4 flash estimate for August.

Brent oil was quoted at USD60.50 a barrel at the London equities close, sharply higher than USD57.64 at the close Tuesday, rebounding as tensions in Hong Kong eased.

Gold was quoted at USD1,546.70 an ounce at the London equities close, flat against USD1,547.67 late Tuesday.

The economic events calendar on Thursday has German factory orders at 0700 BST and US services PMI at 1445 BST.

The UK corporate calendar on Thursday has annual results from transport operator Go-ahead Group, housebuilder Redrow and household goods maker McBride. There are also interim results from industrial turnaround specialist Melrose Industries and equipment rental firm HSS Hire.

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