LONDON MARKET CLOSE: Trump Says US-China Trade Deal In "Final Throes"

(Alliance News) - Stocks in London ended higher on Wednesday on increased expectations China and the US would reach a preliminary trade deal after President Donald Trump said the talks were "in the final throes".

The FTSE 100 index closed up 26.64 points, or 0.4%, at 7,429.78. The FTSE 250 ended up 89.40 points, or 0.4%, at 20,954.32, and the AIM All-Share closed up 3.43 points, or 0.4%, at 919.06.

The Cboe UK 100 ended up 0.2% at 12,585.64, the Cboe UK 250 closed up 0.5% at 18,814.74, and the Cboe Small Companies ended up 0.9% at 11,411.35.

In Paris the CAC 40 ended down 0.1%, while the DAX 30 in Frankfurt ended up 0.4%.

"Traders are cautious not to get ahead of themselves too much as nothing is a done deal until everything is signed. The US are still scheduled to impose fresh tariffs on Chinese imports next month, but with the way things are going, we might have phase one of the trade deal signed by then ,and traders are buying stocks with that expectation," said CMC Markets analyst David Madden.

In the FTSE 100, British American Tobacco closed up 3.2% after the Dunhill and Lucky Strike cigarettes maker said it expects to report robust results in 2019, following a strong performance in the second half, particularly in the US.

In the US, the tobacco firm said it delivered good revenue on a constant currency basis, supported by pricing and reduced discounting. BAT continues to expect US industry volumes for 2019 to be down by 5.5%, while for 2020 it expects a drop in the range of 4% to 6%.

Overall, BAT said it expects to report a rise in adjusted operating profit for 2019 in the upper half of its 5% to 7% guidance range. Constant currency revenue for the year, meanwhile, is also expected to grow in the upper half of its guidance range, which is between 3% and 5%.

"BAT is notable for its significant emerging market exposure, especially in Latin America and Asia. But it's also got a strong position in the US, and that's a market with a surprising amount of growth potential, with plenty of room for BAT to push prices up, and grow margins. America is by far BAT's biggest region, so the ability to pump up margins here would have significant repercussions," said Hargreaves Lansdown analyst Nicholas Hyett.

Peer Imperial Brands closed up 2.4%.

At the other end of the large cap index, Rolls-Royce Holdings ended the worst performer, down 3.4% after Morgan Stanley cut the jet engine maker to Equal Weight from Overweight.

Compass Group closed down 2.0% after Liberum downgraded the contract caterer to Hold from Buy.

Chertsey, Surrey-based Compass on Tuesday said it plans to cut up to 4,000 jobs owing to a deteriorating European outlook and as it warned over Brexit's impact.

The pound was quoted at USD1.2872 at the London equities close, up from USD1.2845 at the close Tuesday, with the ruling Conservative Party continuing to enjoy a lead in opinion polls ahead of next month's general election.

"If the polls are correct and the Conservatives do end up winning the majority of the votes, then the UK will almost certainly leave the EU on January 31 after two extensions and three and a half years since the referendum which divided the nation. The UK will then enter a transition period and trade negotiations will commence. At last, there will be some certainty in so far as Brexit is concerned," said Forex.com analyst Fawad Razaqzada.

"Meanwhile, in the event of an election shock, it will most likely be the pound rather than the internationally-focused FTSE 100 that may show a negative reaction. In fact, a drop in the pound may even support the index as we have seen so many times in the past," Razaqzada added.

Ahead, there is the release of YouGov's closely watched multilevel regression and post-stratification poll at 2200 GMT.

The MRP takes all existing YouGov data from the past seven days and models a seat-by-seat outcome, as such it does not solely depend on a national sample to predict an outcome.

The reason why the MRP poll is so closely-watched is because it successfully pointed to a hung parliament in the 2017 general election, where then-Prime Minister Theresa May was widely expected to secure a majority.

"Sterling's bounce against the dollar over the past few hours has hit a wall at USD1.2890, and with a key YouGov poll released later tonight we might see GBP/USD continue to decline. YouGov's MRP poll was an accurate predictor of the 2017 result, had we but known it at the time, and inevitably tonight's release has been invested with similar importance", IG Group's Chris Beauchamp said.

"The past two days, which have been tough for Labour, will not be reflected in the poll, but it remains to be seen whether Jeremy Corbyn's interview last night will begin to be reflected in future polling," Beauchamp added.

The euro stood at USD1.1005 at the European equities close, marginally lower than USD1.1015 late Tuesday.

Against the yen, the dollar was trading at JPY109.26, up from JPY109.05 late Tuesday.

Stocks in New York were mixed at the London equities close, with the DJIA down 0.1%, but the S&P 500 index up 0.2% and the Nasdaq Composite up 0.4%.

Boeing was weighing on the Dow after its 777X aircraft suffered significant problems during testing overseen by US aviation inspectors, raising new questions about a key aircraft under development.

The aerospace giant remains under scrutiny over the 737 MAX, which remains grounded after two fatal crashes. The stock was down 1.1% in New York.

On the economic front, US gross domestic product for the third quarter was revised upwards on Wednesday, according to figures from the US Bureau of Economic Analysis.

US GDP growth was estimated at 2.1% on an annual basis for the three months to September 30, having previously been forecast at 1.9%. In the second quarter of 2019, the economy grew 2.0%.

In addition, the closely-watched government inflation gauge confirmed that US price pressures remain tame in October, for now easing any concerns about the Federal Reserve's round of interest rate cuts.

The personal consumption price index - the Fed's preferred measure - showed annual inflation remained a low 1.3% in October, the same as in September, according to the Commerce Department report.

Excluding volatile food and energy prices, the "core" PCE inflation index slowed slightly to 1.6% from 1.7% in the prior month, retreating back to its July level.

Brent oil was quoted at USD62.92 a barrel at the London equities close, down from USD63.77 at the close Tuesday, as investors look ahead to the upcoming Organization of the Petroleum Exporting Countries meeting.

"Oil firms are forecast by analysts to generate 17% of the FTSE 100's total profits and 20% of its dividends in 2020, so anyone with exposure to UK equities through a tracker fund or exchange-traded fund will have exposure to hydrocarbon producers, whether they are aware of it or not," said AJ Bell's Russ Mould.

OPEC will convene for the 177th time in Vienna, Austria on Thursday next week and investor attention will likely focus on any comments regarding production and time frame for production targets.

"Markets are expecting OPEC and ally Russia to extend their oil production curbs, but could be taken off guard should the cartel opt for deeper cuts. Currently the OPEC+ coalition have an agreement to reduce production by 1.2 million barrels a day. Most participants think that OPEC+ will agree to extend cuts through to June, the next Vienna meeting, or even by a full year," said Markets.com analyst Neil Wilson.

"Currently the deal is set to expire in March 2020 and it's generally accepted that OPEC members won't want to have to meet again before that date, making extension all but assured. The problem for OPEC is that while prices have recovered from the lows of Christmas 2018, there is yet not enough material uplift all members to consider that the cuts have really worked enough to their advantage," Wilson added.

Oil prices were lower on Thursday after the US Energy Information Administration reported a crude oil inventory increase of 1.6 million barrels for the week to November 22. Analysts had expected a decline of about 350,000 barrels.

Gold was quoted at USD1,455.35 an ounce at the London equities close, down from USD1,460.48 late Tuesday.

The economic events calendar on Thursday has inflation readings from Spain and Germany at 0800 GMT and 1300 GMT respectively. In addition, financial markets in the US will be closed on Thursday for the Thanksgiving holiday.

The UK corporate calendar on Thursday has annual results from challenger bank Virgin Money UK. There are also interim results from guarantor loans provider Amigo Holdings and first-quarter results from transport operator Go-Ahead Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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