LONDON MARKET CLOSE: Stocks Down As Trump Speech Disappoints Investors

(Alliance News) - Stocks in London ended lower on Wednesday after US President Donald Trump left investors hanging over prospects for progress in trade talks with China.

In a speech on Tuesday, Trump hailed a strong US economy and said a trade deal was close, but also warned that he could ramp up tariffs if things did not go his way.

Global equities have been gaining strength on optimism the economic superpowers will unveil a "phase one" deal as the first part of a wider agreement that could support economies worldwide. But with a planned signing ceremony between Trump and Xi Jinping seemingly pushed back to December and scant news of fresh developments, investor optimism waned.

"We're close. A significant phase one trade deal with China could happen, it could happen soon," Trump said at the Economic Club of New York.

But he then warned: "If we don't make a deal, we're going to substantially raise those tariffs".

The UK large-cap index closed down 14.23 points, or 0.2%, at 7,351.21. The FTSE 250 ended down 137.39 points, or 0.7%, at 20,289.78, and the AIM All-Share closed down 4.20 points, or 0.5% at 885.99.

The Cboe UK 100 index finished down 0.3% at 12,466.39. The Cboe UK 250 closed down 0.8% at 18,213.35 and the Cboe UK Small Companies ended down 0.2% at 11,261.73.

In Paris the CAC 40 index ended down 0.2%, while the DAX 30 in Frankfurt ended down 0.4%.

"The mood in the markets today is one of disappointment in the wake of the update from President Trump yesterday. Dealers were hoping for clarity in relation to trade, and many were expecting the US leader would defer making a decision on EU auto tariffs, but instead he boasted about his achievements. Mr Trump was pointing out that he had done a great job so far, and he laid the groundwork for the election next year," said CMC Markets analyst David Madden.

"The lack of trade talk yesterday, caused dealers to drop stocks as European markets have been strong recently. Without any progress with regards to trade, we could be in for sideways trading in the near-term," Madden added.

On the London Stock Exchange, Coca-Cola HBC ended the best performer, up 6.1% after the soft drinks bottler reported a "solid" quarterly performance despite adverse weather.

Reported revenue growth for the three months to September year-on-year was 5.0%, and excluding foreign exchange movements was 3.4%. Volumes rose 1.1%, though excluding the EUR260 million acquisition of Serbian biscuit and snacks maker Bambi, volumes were down 0.1%.

Coca-Cola HBC posted a 3.8% increase in revenue per unit case on a reported basis, and the figure was 2.3% excluding forex.

Smiths Group closed up 3.1% after the engineer said its annual expectations remain unchanged following double-digit revenue growth in the first quarter.

Smiths said revenue for the three months to the end of October was up 11% on an underlying basis, thanks to continued "good" growth in its John Crane division in both original equipment and aftermarket services. For the full year, the London-headquartered company said it expects year-on-year growth to be weighted towards the first half.

SSE closed up 2.5% after the energy company said it has made "encouraging" progress as it returned to profit for the first half of its financial year.

For the six months to September 30, SSE posted a pretax profit of GBP128.9 million from continuing operations, after a GBP284.6 million pretax loss a year before. Adjusted pretax profit rose 15% to GBP263.4 million.

The Perth, Scotland-based firm also increased earnings guidance for the full year ending March 2020.

Looking forward, the company has upped adjusted earnings per share guidance for the year to between 83p and 88p, from a previous range given in September of 80p to 85p.

At the other end of the large cap index, British Land ended the worst performer, down 3.3% after the property company reported a sharply widened loss amid a "challenging" retail environment and an unpredictable UK political backdrop.

The company's pretax loss for the six months to the end of September widened to GBP440 million from GBP42 million a year prior, as revenue sunk 34% to GBP328 million from GBP499 million.

The value of British Land's shopping centres, retail parks and stores dropped 10.7%, or GBP599 million, to GBP4.8 billion, after an 11.1% drop in the previous six months.

"A near-GBP600 million reduction in the value of British Land's portfolio illustrates the troubles still gripping the property sector. Unsurprisingly its high street assets slumped in value the most as retailers continue to struggle with weaker footfall. It is a terrible time to be a retail property investor with asset valuations still in decline and tenants asking for every bit of help they can get," said AJ Bell's Russ Mould.

In the FTSE 250, Tullow Oil was comfortably the worst performer, closing down 27% after the oil and gas company once again warned production will miss targets following continued operational problems in Ghana.

The Chiswick, London-based oil producer saw GBP791 million shaved off its total market value on Wednesday, with its market capitalisation having stood at GBP2.89 billion on Tuesday.

For 2019, Tullow sees production averaging 87,000 barrels of oil per day. In July, Tullow had warned production was likely to be between 89,000 barrels and 93,000 barrels, lower than the 90,000 barrels to 98,000 barrels initially guided.

The company said the lower than forecast production is mainly due to topside issues at the Jubilee field, which has constrained water injection and gas handling, as well as the suspension of a well at the TEN field. Both fields are off-shore Ghana, West Africa.

Stocks in New York were subdued at the London equities close, with the DJIA and S&P 500 index both flat and the Nasdaq Composite down 0.1%.

Selling pressure was limited after US Federal Reserve Chair Jerome Powell reiterated the central bank is likely to leave interest rates unchanged for the foreseeable future, having cut rates three times so far in 2019.

In prepared remarks before the Congressional Joint Economic Committee, Powell said rate cuts were designed to support continued growth "and to provide some insurance against ongoing risks."

After providing that stimulus, Powell said, "my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric two percent objective as most likely."

Analysts at Capital Economics said: "On balance, there is still a small chance of one final 25 basis points cut over the coming months if, as we expect, economic growth slows further - Powell also reiterated that risks to the outlook remain and that 'policy is not on a preset course'. But it now looks increasingly likely that the Fed will move to the side-lines for an extended period."

Powell's message would do little to appease Trump, who has continuously accused the Fed chief of incompetence and of undermining his efforts to supercharge the US economy.

Trump on Tuesday again accused the Fed of raising rates too quickly and cutting too slowly, even indicating he would like to see the kind of negative interest rates used in Europe and Japan, where economic growth has been persistently sluggish.

On the US economic front, annual inflation in rose faster than expected in October, according to figures released by the Bureau of Labor Statistics.

The consumer price index rose 1.8% year-on-year, faster than the 1.7% increase seen in September. Analyst consensus was for inflation to remain steady at 1.7%.

The pound was quoted at USD1.2840 at the London equities close, flat against USD1.2841 at the close Tuesday.

In domestic economic news, UK inflation slowed by more than expected in October to its slowest rate in three years, according to figures from the Office for National Statistics.

Annual consumer price inflation was 1.5% in October, slowing from 1.7% a month before and below consensus of 1.6%.

This was the lowest UK inflation rate recorded since November 2016, when it was 1.2%.

Commenting on the data, Phil Smeaton, chief investment officer at Sanlam UK said: "Inflation remains contained in the short term due to recent Sterling strength and weak economic growth as businesses patiently wait for political clarity before unleashing a pent up investment boom.

"Still the Bank of England needs to guard against complacency, as the country is at full employment despite subdued investment and the major political parties are seeking to spend their way to victory. This increases the risk that inflation turns meaningfully higher down the road."

The euro stood at USD1.1010 at the European equities close, flat against USD1.1011 a day before.

Against the yen, the dollar was trading at JPY108.74, down from JPY109.20 late Tuesday.

Brent oil was quoted at USD62.40 a barrel at the equities close, up from USD62.25 at the close Tuesday.

Gold was quoted at USD1,464.30 an ounce at the London equities close, up from USD1,452.00 late Tuesday.

The economic events calendar on Thursday has Germany GDP readings at 0700 GMT, UK retail sales at 0930 GMT and eurozone GDP data at 1000 GMT. In the afternoon, there are US producer prices at 1330 GMT.

The UK corporate calendar on Thursday has interim results from fashion house Burberry Group, private equity investor 3i Group, transport company FirstGroup and UK power infrastructure operator National Grid.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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