LONDON MARKET CLOSE: Weak Pound Helps FTSE 100 Overcome NMC's Tumble

(Alliance News) - The FTSE 100 stood out in Europe on Tuesday as London's blue-chip index ended in the green, aided as the pound slipped from its post-election highs after fears of a no-deal Brexit resurfaced.

London's index of large caps managed to finish higher despite a sharp fall for NMC Health after a short seller alleged "rot" at the firm.

The FTSE 100 index closed up 6.23 points, or 0.1%, at 7,525.28. The FTSE 250 ended down 230.49 points, or 1.1%, at 21,690.20, and the AIM All-Share closed down 1.46 points, or 0.2%, at 927.99.

The Cboe UK 100 ended down 0.3% at 12,747.25, the Cboe UK 250 closed down 1.4% at 19,564.16, and the Cboe Small Companies ended up 0.7% at 11,890.59.

The pound was quoted at USD1.3137 at the London equities close Tuesday, compared to USD1.3329 at the close on Monday.

"The currency's eagerness for a Tory parliament that would 'get Brexit down' has started to curdle in the face of reports that Johnson and his newly minted Cabinet are intending to pass legislation that would make it illegal for the government to extend the transition period beyond the scheduled December 2020 endpoint. In other words, some version of a no deal Brexit is back on the table," said Connor Campbell at Spreadex.

Late on Thursday, sterling had reached just above the USD1.35 mark after the UK election exit poll predicted the Conservative party would win a sizeable majority in parliament.

However, the pound was hit after government sources said UK Prime Minister Boris Johnson is to legislate to prevent members of Parliament extending the Brexit transition period beyond the end of 2020.

Ministers are understood to have re-worked the Withdrawal Agreement Bill – due to come before the Commons this week – to "legally prohibit" any further extension.

Under current plans, the government intends to end Britain's EU membership on January 31, with an implementation to run to the end of 2020 while it negotiates a free trade agreement with Brussels.

However key EU figures – including chief negotiator Michel Barnier – have expressed scepticism a deal can be agreed in time, raising the fresh prospect of a no-deal break unless there is an extension.

Meanwhile, the pound received little support from data which showed UK earnings growth slowed in October.

The UK unemployment rate was estimated at 3.8% for the August to October period, 0.3 percentage points lower than a year ago and flat on the July to September period. Market consensus according to FXStreet had seen the rate edging up to 3.9%.

Pay growth, meanwhile, decelerated. Average earnings including bonuses, or total pay, grew 3.2% year-on-year in the three months to October, slower than the prior period's 3.7% rise and consensus of 3.4%.

Excluding bonuses, or regular pay, wages rose 3.5% in the three months, slowing slightly from 3.6% the previous period but above expectations of 3.4%.

In London, companies exposed to the US dollar, such as plumbing and heating firm Ferguson, oil majors and Scottish Mortgage Investment Trust, ended among the top performers as the pound weakened.

Ferguson - which intends to demerge its UK operations and become focused on North America - ended up 3.8%. Scottish Mortgage Investment Trust, with over 50% of its total assets North America, ended up 2.1%.

Royal Dutch Shell 'A' and 'B' shares closed up 3.1% and 2.5% respectively, while BP rose 2.3%.

Oil majors were also helped as the price of Brent rose. Brent oil was quoted at USD65.92 a barrel at the London equities close Tuesday, up from USD65.46 late Monday.

In other commodities, gold was quoted at USD1,476.00 an ounce at the London equities close Tuesday against USD1,473.50 at the close on Monday.

In European equities on Tuesday, the CAC 40 in Paris ended down 0.4%, while the DAX 30 in Frankfurt slipped 0.9%.

The euro stood at USD1.1152 at the European equities close Tuesday, up against USD1.1139 at the same time on Monday.

Against the yen, the dollar was trading at JPY109.52 compared to JPY109.65 late Monday.

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

There were impressive industrial production figures out the US in the afternoon, as the sector bounced back following the end of strikes at General Motors.

Industrial production was up 1.1% month-on-month in November, following a 0.9% fall in October and beating market consensus according to FXStreet of a 0.8% rise. Manufacturing output was up 1.1%, following a 0.7% fall the month before.

This was due to a bounceback in the output of motor vehicles and parts following the end of a strike at General Motors Co.

At the end of October, the 40-day strike came to an end after the United Auto Workers union agreed to pass a collective deal to end the longest automotive strike in the US in 50 years.

Despite the upbeat data, ING said the underlying story "remains one of a sector that is struggling due to weak global demand, a strong dollar and trade uncertainty".

Back on the London Stock Exchange and NMC Health finished, by some distance, as the worst performer in the FTSE 100.

The UAE-focused healthcare firm slumped 34% after Muddy Waters shorted the firm, raising "serious doubts" over the company's financial statements.

Short selling is an investment or trading strategy that speculates on the decline in a stock.

Muddy Waters said it has "serious doubts" about the healthcare firm's financial statements, including its asset values, cash balance, reported profits, and reported debt levels.

The short seller alleges NMC Health has mislead shareholders by "trying to give investors the (false) impression it does not engage in reverse factoring, and by understating (we believe intentionally) lease debt".

Muddy Waters concluded: "We are unsure how deep the rot at NMC goes, but we do not believe that its insiders or financials can be trusted."

NMC Health hit a three-year low of 1,450.00 pence during Tuesday's session.

Shares in Travelex owner Finablr, which was founded by Bavaguthu Raghuram Shetty, who also founded NMC Health, finished 10% lower. Shetty is chair of NMC Health and co-chair of Finablr, the latter only listing in London in May of this year.

Unilever shares slid 7.2% after the consumer goods firm said it now expects underlying sales growth in 2019 to fall short of guidance.

The Anglo-Dutch company had been guiding for underlying sales growth in the lower half of its 3% to 5% multi-year range. However, it now expects underlying sales "slightly below" this guidance.

However, the Marmite spread-maker said earnings, margin and cash are not expected to be impacted.

Meanwhile, Senior shares slumped 11% after the high-technology component manufacturer noted key client Boeing's announcement that it is suspending production of the troubled Boeing 737 MAX jet.

Senior said it continues to "work closely" with Boeing as the aerospace manufacturer seeks regulatory approval for returning its best-selling plane to the skies following a pair of fatal accidents.

"Senior will provide a further update on the potential implications to its 2020 performance once it has clarification from its customers," the company added.

Senior continued: "The board's expectations for the group's 2019 performance remains unchanged."

In a quiet corporate calendar on Wednesday, hotel operator Dalata Hotel Group will issue a trading statement.

In the economic calendar on Wednesday, there are German producer prices at 0700 GMT followed by the Ifo business climate index at 0900 GMT. In the UK, consumer price inflation is out at 0930 GMT and eurozone inflation due at 1000 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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