LONDON MARKET CLOSE: Muted Session As Signing Of US-China Deal Awaited

Tue, 14th Jan 2020 16:53

(Alliance News) - London stocks just about ended in the green on Tuesday amid a subdued session, with markets looking towards the signing of a 'phase one' trade deal between the US and China.

It was a broadly impressive start to US earnings season with both JPMorgan and Citigroup posting substantial rises in fourth quarter income, while Wells Fargo disappointed.

The FTSE 100 index closed up 4.75 points, or 0.1%, at 7,622.35. The FTSE 250 ended up 39.29 points, or 0.2%, at 21,756.05, and the AIM All-Share closed up 3.35 points, or 0.4%, at 969.74.

The Cboe UK 100 ended up 0.2% at 12,923.22, the Cboe UK 250 closed up 0.4% at 19,669.25, and the Cboe Small Companies ended up 0.3% at 12,496.18.

In European equities on Tuesday, the CAC 40 in Paris ended up 0.1%, while the DAX 30 in Frankfurt closed flat.

"It wasn't the most exciting session, the markets unmoved by the impending rubber-stamping of the much sought after US-China trade deal. After drifting into the red at the start of the day, the Western indices instead opted for an insipid shade of a green following the US open," said Connor Campbell at Spreadex.

"The pound saw a similar shift to the indices, re-crossing USD1.30 against the dollar while pushing back above EUR1.169 against the euro," he added. "The currency is still, however, in a New Year slump as the realities of Brexit, the UK's economic issues and a potential rate cut all playing on sterling's mind."

The pound was quoted at USD1.3003 at the London equities close Tuesday, compared to USD1.2989 at the close on Monday.

Elsewhere in forex, the euro stood at USD1.1127 at the European equities close Tuesday, against USD1.1144 at the same time on Monday. Against the yen, the dollar was trading at JPY110.07 compared to JPY109.89 late Monday.

Stocks in New York were mixed at the London equities close, with the Dow Jones up 0.3%, the S&P 500 index down 0.1%, and the Nasdaq Composite down 0.2%.

Shares in JPMorgan Chase & Co were up 2.1% on Wall Street after the bank kicked off earnings season with a sharp rise in fourth quarter net income.

In the three months to December 31, the US investment banking giant recorded net income of USD8.52 billion, up 21% on the USD7.07 billion seen the year earlier. Revenue in the fourth quarter was 9.0% higher at USD29.21 billion compared to USD26.80 billion the year before.

Chair & Chief Executive Jamie Dimon said: "JPMorgan Chase produced strong results in the fourth quarter of 2019, capping off a solid year for the firm where we achieved many records, including record revenue and net income."

Citigroup also impressed, the stock up 2.2%. The bank reported a significant increase in fourth quarter income as both of the company's units saw strong growth in the period - boosted by credit cards and fixed income markets.

Shares in Wells Fargo, however, slipped 4.1% after it reported a drop in quarterly income for the final three months of 2019, as the lender's net interest margin took a hit in a difficult year.

Bank of America and Goldman Sachs will follow up with their own fourth quarter results on Wednesday.

In the wake of the largely solid US earnings, gold was quoted at USD1,542.80 an ounce at the London equities close Tuesday against USD1,551.79 at the close on Monday.

"Gold prices are getting dragged down as trade tensions have eased in the short-term and as US earnings season gets off to a great start. The banks are painting a picture that the US consumer remains strong and that should support fresh record highs with US stocks," said Edward Moya, senior market analyst at Oanda.

Elsewhere in the commodity space, Brent oil was quoted at USD64.70 a barrel at the London equities close Tuesday from USD64.24 late Monday.

In London, housebuilder Taylor Wimpey closed up 4.0% after the blue-chip stock ended 2019 with a record order book.

In a trading statement for 2019, the company said the housing market remained stable throughout the past year, albeit with more challenging conditions in London and the south east of England and at higher price points.

Total house completions in 2019 increased by 5% to 15,719, including joint ventures, compared to 14,933 in 2018. The company said it ended 2019 with a record total order book valued at GBP2.17 billion, compared to GBP1.78 billion a year ago.

Taylor Wimpey's update helped to lift the housing sector, with Persimmon - due to release a trading update on Wednesday - closing up 2.3% and Barratt Developments up 1.7%.

Towards the other end of the index were Mondi and WPP, closing down 2.6% and 2.2% respectively. Paper and packaging firm Mondi was cut to Neutral from Buy by Bank of America, while the bank also downgraded advertising giant WPP to Underperform from Neutral.

Elementis slumped 14% to end at the bottom of the FTSE 250. For 2019, the specialty chemicals firm expects adjusted operating profit to be between USD122 million to USD124 million, a 6.8% to 8.2% decline from GBP133 million in 2018.

The Personal Care segment had a mixed end to the year, as a solid performance in cosmetics offset competitive pressures in AP Actives. The Energy unit performed weaker due to a slowdown in North American drilling activity, Elementis said, as did the Chromium segment as a result of a weak demand environment and lower market prices.

However, Coatings performed well as demand conditions remains in line with expectations, it said, and Talc was buoyed by solid demand for industrial talc and new business.

Gold miner Centamin closed down 7.2% after suitor Endeavour Mining said it does not intend to make a firm takeover offer for the FTSE 250 constituent.

Endeavour said Centamin has not sought an extension to the offer deadline of Tuesday. Given the lack of information received, Endeavour said, it has now decided against bidding for Centamin.

Endeavour in December had proposed a deal in which Centamin shareholders would get 0.0846 of an Endeavour share per Centamin share held, giving Centamin's shareholders a 47% stake in a combined company. The proposal valued Centamin at GBP1.47 billion.

boohoo shares advanced 5.0% after the fast fashion retailer raised its annual guidance.

In a trading statement for the four months ended December 31, the online clothing retailer said revenue increased by 44% to GBP473.7 million from GBP328.2 million a year ago. As a result, boohoo said it now expects revenue growth for financial year to February 29 to be 40% to 42%, ahead of its previous guidance of 33% to 38%.

Lekoil slumped 71% after the Nigerian oil firm confirmed it was duped by fake investors.

The company at the start of January said it had agreed a USD184.0 million loan with the Qatar Investment Authority to fund drilling and development at the Ogo field off the coast of Nigeria.

However, Lekoil said representatives from the QIA had questioned the validity of the loan agreement. It also confirmed it had paid USD600,000 to Seawave Investment which acted as an introducer to those "purporting to be the QIA".

After the London market close on Monday, in another statement, Lekoil then confirmed the loan seems to have been agreed with people "who have constructed a complex facade in order to masquerade as representatives of the QIA". Lekoil said it conducted due diligence on both the people offering the loan as well as introducer Seawave.

In the UK corporate calendar on Wednesday there is a trading update from housebuilder Persimmon as well as subprime lender Provident Financial and oil & gas firm Tullow Oil. There are full-year results from gold miner Hochschild Mining and third quarter results from emerging markets-focused investment manager Ashmore Group.

In the economic calendar on Wednesday, there is German annual GDP at 0700 GMT and UK inflation at 0930 GMT, with eurozone trade and industrial production at 1000 GMT. US producer prices are at 1330 GMT.

And, after, nearly two years of tit-for-tat tariffs Washington and Beijing are set to sign a "phase one" trade deal on Wednesday.

The agreement staves off some punitive tariffs on Chinese goods and ends China's practice of forcing or pressuring some US companies to transfer their technologies to Chinese companies, according to the US trade representative. China will also purchase billions of dollars in US agricultural products, energy and manufactured goods.

By Lucy Heming; lucyheming@alliancenews.com