LONDON MARKET MIDDAY: Miners Lead Gains Following Record Highs In US

LONDON (Alliance News) - Shares in London were higher on Tuesday at midday, as investors reacted to the record closing levels set by US stock indices on Monday, with the heavyweight mining sector supporting the gains in the FTSE 100 index.

A rise in oil prices was proving beneficial for stocks as well, with crude boosted by optimism that OPEC members will agree to reduce output at their meeting in Vienna next week. Brent oil was nearing USD50 per barrel.

The FTSE 100 was up 1.0%, or 67.34 points, at 6,845.30. The FTSE 250 was 0.6% higher at 17,630.27 and the AIM All-Share up 0.4% at 817.42.

The BATS UK 100 index was up 1.1% at 11,572.96, the BATS 250 up 1.0% at 16,028.47, and the BATS Small Companies up 0.6% at 10,879.61.

In mainland Europe, the French CAC 40 was up 0.7% and the German DAX 30 up 0.5%.

IG chief market analyst Chris Beauchamp said the good performance of European stocks on Tuesday is partly due to the "buying frenzy" sparked by the news that US stocks indices had posted record closes on Monday.

On Monday, the Dow Industrials closed up 0.5% at 18,956.69, the S&P 500 index up 0.8% at 2,198.18, and the Nasdaq Composite up 0.9% at 5,369.86. All three were new record-high closing levels.

"The week before Thanksgiving is never a good time to be short, since those of a bearish disposition tend to suffer a fate akin to a roasted turkey," said Beauchamp.

The rally in New York was expected to continue on Tuesday, with the Dow and the S&P both called 0.3% higher and the Nasdaq 100 seen up 0.5%. US markets will close on Thursday for the Thanksgiving Day holiday.

London's FTSE 350 Mining sector index was up 3.3% midday Tuesday, with the five of the six best performers in the FTSE 100 being miners.

"Goldman Sachs's decision to turn into commodity bulls has bolstered the London mining community, aside from precious metals miners, with the investment bank remaining downbeat on the outlook for gold," said IG's Beauchamp.

The precious metal is far from its best levels of 2016, quoted at USD1,216.92 an ounce at midday, compared to USD1,212.32 an ounce at the London close on Monday. Gold reached its current 2016 high in July at USD1,375.01 an ounce.

Brent oil was quoted at USD49.63 a barrel at midday, extending the rally seen on Monday, when it stood at USD48.63 a barrel at the London equities close.

Oil prices added to their gains after Russian President Vladimir Putin said that his country was ready to freeze production at "today's level".

This comes amid market expectations that Organization of the Petroleum Exporting Countries members will reach a new agreement on output reduction later this month, this time including Iran. The country has refused so far to join major producers OPEC Saudi Arabia and non-OPEC Russia in making meaningful cuts in production.

OPEC members cut production in October after a long period of unrestrained output. The oil cartel is expected to discuss the details of the deal at a meeting in Vienna on November 30.

The UK budget deficit narrowed in October, the Office for National Statistics reported. Public sector net borrowing, excluding public sector banks, decreased by GBP1.6 billion from prior year to GBP4.8 billion in October.

The expected level of budget deficit was GBP6.0 billion. Of this GBP4.8 billion, GBP2.0 billion related to the cost of the "day-to-day" activities of the public sector and GBP2.8 billion related to the spending on infrastructure. During the current financial year-to-date period, government borrowing fell by GBP5.6 billion to GBP48.6 billion.

"While Chancellor Hammond would have welcomed this morning's improvement in the public finances, it is unlikely to be a sign of things to come in tomorrow's Autumn Statement. Borrowing has still not fallen to the extent the Office for Budget Responsibility expected in its March forecast," noted Capital Economics analyst Scott Bowman.

"The OBR expects receipts growth to be back-loaded this year. But even with an improvement towards the end of the year, borrowing should come in at almost GBP65 billion – well above the March forecast of GBP56 billion," noted Bowman.

The Autumn Statement will be delivered to Parliament by Chancellor of the Exchequer Philip Hammond at 1230 GMT on Wednesday.

The pound fell against the dollar after the data, quoted at USD1.2442 at midday, but was still essentially steady against the level of USD1.2466 at the London close on Monday.

Still in the economic calendar, US existing home sales are at 1500 GMT, and eurozone consumer confidence is also at 1500 GMT. The American Petroleum Institute's crude oil stocks are at 2130 GMT.

Elsewhere on the London Stock Exchange, Babcock International Group was 6.0% lower. The defence support services company said its organic revenue growth in the first half was slightly below its expectations, but it remains confident it will meet its forecasts for the full year as revenue and profit grew.

Compass Group was down 4.5%, despite the catering and support services company reporting growth in profit in its recently ended financial year and said its expectations for the new year are positive.

Numis said the group's underlying operating profit was in-line with its estimate, but analyst Wyn Ellis estimated organic growth in that measure slowed in the fourth quarter to around 4.0%, from 5.6% for the period between the first quarter and third quarter.

"With some evidence of slowdown in Q4, and Compass suggesting that 2017 growth will be second half weighted, we expect an unenthusiastic response from the market," Ellis said.

DIY retailer Kingfisher was down 2.3%, despite reporting growth in sales in the third quarter of its financial year. Investec, however, reiterated its Sell rating saying that the stock's valuation "is not compelling enough".

"A weak French market is likely to deteriorate in 2017 given the election and the UK is also likely to slow on our assumption of weakening consumer demand," noted Investec analyst Kate Calvert.

Education publisher Pearson, down 2.6%, was downgraded to Underperform from Neutral by Credit Suisse.

In the FTSE 250, BGEO Group was 11% higher. The holding company of the Bank of Georgia said it intends to make at least three special capital returns by the end of 2019 with a total value of at least 50% of the regular dividends from its banking business, and will seek to float its utility and energy business.

Engineer Rotork was up 10% after saying it expects its full-year revenue to be at the top end of market consensus thanks to a substantial tailwind from the weak pound.

On the flip side, Entertainment One was down 13%. The entertainment content provider, which owns the Peppa Pig children's TV franchise, reported a drop in profit in the first half of its financial year, as it also announced the resignation of its chief financial officer.

By Daniel Ruiz; danielruiz@alliancenews.com

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