LONDON MARKET MIDDAY: Pound Firms After Johnson's Supreme Court Blow

(Alliance News) - The FTSE 100 posted modest losses at midday on Tuesday while the pound firmed slightly after the UK Supreme Court ruled Boris Johnson's prorogation of parliament was unlawful.

The FTSE 100 index was down 7.21 points, or 0.1%, at 7,318.87 Tuesday midday. The FTSE 250 was down 64.40 points, or 0.3%, at 19,979.39. The AIM All-Share was down 0.1% at 884.37.

The Cboe UK 100 index was down 0.2% at 12,415.90. The Cboe UK 250 was down 0.2% at 17,887.04, and the Cboe UK Small Companies 0.1% lower at 10,931.89.

In mainland Europe, the CAC 40 in Paris was up 0.2% while the DAX 30 in Frankfurt was flat.

"Stocks in Europe have recovered a little from yesterday's declines after the dust has settled from the poor manufacturing figures from Germany. Questions still hang over the health of the eurozone economy, and seeing as stocks haven't rebounded that much today, it seems as if traders are still a little cautious," said David Madden at CMC Markets.

However, focus on Tuesday centred around the UK Supreme Court.

Speaker John Bercow said the House of Commons must convene "without delay" after the Supreme Court on Tuesday unanimously ruled that Boris Johnson's prorogation was unlawful.

The Supreme Court, after deciding that the issue was justiciable - meaning it is capable of challenge in the courts - concluded that the prime minister's advice to the Queen was unlawful and void. What happens next is now up to the Speaker of the House, the court said.

The Lady Hale, president of the Supreme Court, noted that this was "not a normal" prorogation, and that parliament has a right to a voice.

Bercow welcomed the court's judgement, and said he will now consult party leaders "as a matter of urgency". He added that the court has "vindicated" the right of parliament to meet at this "crucial time".

The pound was quoted at USD1.2455 at midday versus USD1.2440 late Monday.

"It's extremely difficult to say whether the ruling will be a game changer or nothing more than a headline maker but it will certainly ramp up the Brexit theatrics, just over five weeks ahead of the end of October deadline," said Craig Erlam at Oanda.

Erlam added: "What will come next is anyone's guess but I'll be very surprised if Johnson doesn't have another card up his sleeve. The Brexit soap opera is just getting started."

In the US, stocks are pointed to an upbeat start with the Dow Jones and S&P 500 both called up 0.3%, and the Nasdaq seen 0.4% higher.

In London, gains for TUI were unable to help the FTSE 100 edge into the green in midday trade.

The Anglo-German tour operator was up 3.9% as it reiterated its annual guidance for the financial year ending on Monday.

TUI acknowledged there has been continued weaker demand for the winter, with around one-third of its holiday programme sold, the same as a year before. However, trading in the Markets & Airlines division has been stronger since mid-August, in terms of both bookings and selling prices, meaning summer 2019 bookings are flat year-on-year.

"As articulated, the ongoing external challenges we have seen in financial 2019 are likely to persist into financial 2020. This coming year will see us focus on becoming more cost competitive, selectively grow our Holiday Experiences business and scale up our digital platforms in new markets and Destination Experiences," said TUI.

TUI has reiterated previous guidance of a 26% fall in annual underlying earnings before interest, taxes, and amortisation.

"Life has been hard for TUI in recent years with the company suffering from certain aircraft being grounded, overcapacity in the airline sector and the impact of Brexit uncertainty on consumer spending," said Russ Mould, investment director at AJ Bell. "Travel operator Thomas Cook going bust is therefore Christmas come early as far as TUI is concerned as it removes a major player from the sector."

Thomas Cook went into insolvency in the early hours of Monday, after talks with lenders and shareholders on Sunday failed to come up with crucial funding.

FTSE 100-listed TUI is preparing measures to support its customers booked on Thomas Cook flights, it said on Tuesday, offering replacement flights. TUI is currently assessing the financial impact this will have.

In the FTSE 250, AG Barr was up 5.8% despite the soft drinks maker reporting a fall in interim profit.

For the six months ended July 27, the Irn-Bru maker reported pretax profit of GBP13.9 million, down 23% from GBP18.2 million a year before. This was on revenue that dropped by 10% to GBP122.5 million from GBP136.9 million.

AG Barr's performance was hampered by one-off benefits in the same period the prior year, including a benefit from soft drink volumes in 2018 because of favourable weather, including a hot summer in the UK. In addition, the company noted challenges in its Rockstar energy drink and Rubicon juice drink ranges.

Card Factory was 2.5% higher after the retailer managed to eke out like-for-like sales growth in its first half.

Card Factory's like-for-like sales were up 1.5% on the year before for the six months to July 31, having declined 0.2% a year ago. Store like-for-like growth rose 1.2%, despite lower High Street footfall, with online sales surging 25%.

This helped the gift card retailer's revenue for the period climb 5.5% to GBP195.6 million, though pretax profit did decline 14% to GBP24.3 million. Underlying pretax profit slipped 7.9% to GBP22.0 million.

Profit was hurt by cost of sales rising well ahead of revenue, at just over 10%, as well as a slightly climb in finance expenses, as Card Factory increased stock levels in part due to Brexit contingency planning. Increase in the UK's national living wage also dented profit.

Metro Bank shares slumped 16% after postponing a debt issue due to "current market conditions".

The challenger bank said a "broad number" of investors showed interest in a maiden MREL issuance, which it needs to complete to meet EU rules. MREL stands for minimum requirement for own funds and eligible liabilities and relates to EU solvency legislation.

On Monday, the Financial Times had reported Metro Bank had been forced to withdraw a GBP200 million to GBP250 million bond offering, after only receiving orders for GBP175 million.

In Germany, Volkswagen was down 2.3% after German prosecutors charged the car maker's chief executive, Herbert Diess, former boss Martin Winterkorn and supervisory board chief Hans Dieter Poetsch with "market manipulation" relating to the car giant's "dieselgate" scandal.

The three are "accused of deliberately informing capital markets too late about the significant payment obligations in the billions arising from the so-called 'diesel scandal', thereby illegally influencing the share price," prosecutors in the north German city of Brunswick said in a statement.

By Lucy Heming; lucyheming@alliancenews.com

London Midday is available to subscribers as an email newsletter. Contact info@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.