LONDON MARKET MIDDAY: FTSE Pushes Higher As Pound Slips After GDP Data

(Alliance News) - Stocks traded higher on Monday as markets look towards the long-awaited signing of a phase one US-China trade deal later this week.

London's blue-chip index was helped after the pound slipped on GDP data showing the UK economy shrank in November, fuelling speculation of an interest rate cut from the Bank of England.

The FTSE 100 index was up 29.52 points, or 0.4%, at 7,617.37 at midday. The FTSE 250 was up 211.28 points, or 1.0%, at 21,777.95, and the AIM All-Share was up 0.5% at 966.60.

The Cboe UK 100 was up 0.3% at 12,906.82, the Cboe UK 250 up 0.8% at 19,652.41, and the Cboe Small Companies up 0.1% at 12,416.47.

In European equities on Monday, the CAC 40 index in Paris was up 0.2%, while the DAX 30 in Frankfurt was flat.

"Equity market sentiment in Europe this morning is positive as traders are looking ahead to the signing of the first phase of the US-China trade deal on Wednesday. The largest economies in the world brokered phase one of the trade agreement at the back end of 2019, and it will be made official in two days' time," said David Madden at CMC Markets.

After nearly two years of escalating conflict, US President Donald Trump and top Chinese trade envoy Liu He are due to sign a "phase one" agreement on Wednesday.

Since the trade war started in the first half of 2018, talks between Washington and Beijing broke down acrimoniously more than once, creating doubts the economic powers would have the appetite to reach a "phase two" agreement.

Trump has said that negotiations on the next phase will begin promptly, but signing a phase two agreement might have to wait until after the 2020 presidential elections in November.

Details of the deal are scant. Some critics have claimed it amounts to a strategic retreat for the US, which cancelled some tariffs and reduced others in return for Chinese pledges to increase purchases of US exports by USD200 billion over two years, including farm goods in particular. US officials say the agreement will touch on other areas of Chinese trade practices that were the subject of US grievances, such as intellectual property, financial services, foreign exchange and dispute resolution.

Stocks in New York were seen opening the week in the green, with the Dow Jones seen up 0.4%, the S&P 500 index also called up 0.4%, and the Nasdaq Composite pointed 0.5% higher.

In forex, the pound was wobbly following data which showed the UK economy contracted in November.

Gross domestic product slipped 0.3% month-on-month in November, undershooting consensus which, according to FXStreet, had pencilled in a flat reading for the month. This followed 0.1% growth in October.

In the rolling three months to November, UK GDP grew 0.1% sequentially, half the growth rate seen in the August-to-October period.

"In normal times, the MPC would already have cut rates. But it held off to see if the general election produced a revival in sentiment. What really matters is what happens in the data for January. At the moment, we think the MPC may hold off from cutting rates, but it will be a close call," said Capital Economics.

This data comes after Bank of England Governor Mark Carney last week said a rebound in UK economic growth is not assured, and said the Monetary Policy Committee is engaged in a debate over near-term stimulus.

The BoE next announces its next interest rate decision on January 30, in Carney's last meeting as head of the central bank.

The pound was quoted at USD1.2975 at midday Monday, down from USD1.3061 at the close on Friday.

Elsewhere in forex, the euro stood at USD1.1119 at midday Monday, against USD1.1112 late Friday. Against the yen, the dollar was trading at JPY109.90 compared to JPY109.60 late Friday.

In commodities, Brent oil was quoted at USD64.84 a barrel midday Monday, down from USD65.40 late Friday. Gold was lower, quoted at USD1,551.04 an ounce against USD1,559.30 at the close on Friday.

In London, housebuilder Taylor Wimpey was up 2.2% after Peel Hunt raised the FTSE 100 listing to Add from Hold.

British Gas parent Centrica was boosted by a ratings upgrade as well, the stock up 1.5% after UBS raised the energy supplier to Buy from Neutral.

In the FTSE 250, Spirent surged 16% after the telecommunications network testing and analytics firm said it expects full-year profit to exceed market expectations.

Spirent said it was able to secure a number of "important" contract wins in the final three months of 2019, resulting in 2019 total group revenue rising by 5.5% versus the year before to USD503 million. The company also expects its adjusted operating profit to be between USD91 million and USD93 million - which would represent a rise of between 18% and 21% on the USD77.1 million reported the year before.

Savills was up 7.4%. The estate agent also boosted guidance, saying its annual performance will be at the upper end of expectations.

Despite political uncertainty, the UK business performed "excellently" in both commercial and residential markets, Savills said. The Asia Pacific business performed slightly below expectations as a result of political unrest. Significant growth in North America helped improve profit, pushing overall performance up.

Stobart Group was down 7.9% after Sky News reported regional airline Flybe, of which Stobart is a part owner, is at risk of collapse.

Last February, the airline was bought by a consortium led by Virgin Atlantic following poor financial results. Connect Airways, which consists of Virgin Atlantic, Stobart Air and Cyrus Capital, paid GBP2.2 million for Flybe's assets and operations.

Sky News reported that Flybe has been holding talks with the Department for Business, Energy & Industrial Strategy and the Department for Transport on whether the UK government could provide or facilitate any emergency financing to the company.

A Flybe spokeswoman said: "Flybe continues to focus on providing great service and connectivity for our customers, to ensure that they can continue to travel as planned. We don't comment on rumour or speculation."

By Lucy Heming; lucyheming@alliancenews.com

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