LONDON MARKET MIDDAY: Rally Continues After China Cuts US Tariffs

(Alliance News) - London's FTSE 100 index were in the green on Thursday, after an olive branch on trade was extended by China to the US, putting European stocks on course for a fourth successive session of gains.

The FTSE 100 index was up 29.13 points, or 0.4%, at 7,511.61 Thursday midday, the index more than 3% higher since the week began.

The mid-cap FTSE 250 index was up 73.14 points, or 0.3%, at 21,593.14. The AIM All-Share index was up 0.1% at 961.96.

The Cboe UK 100 index was up 0.4% at 12,721.58. The Cboe 250 was up 0.2% at 19,453.41, and the Cboe Small Companies up 0.1% at 12,499.88.

In mainland Europe, the CAC 40 in Paris was up 0.6% while the DAX 30 in Frankfurt was 0.7% higher early afternoon on Thursday.

"Bullish momentum continues to carry equities higher this morning, although strength has begun to wane as investors prepare for tomorrow's [US] non-farm payroll report. US markets are back at record highs, while the DAX seems prepared to follow suit," said Chris Beauchamp, chief market analyst at IG.

The DAX was quoted at 13,563.78 on Thursday afternoon, within touching distance of its all-time high of 13,640.06.

"Having already gained over 3% this week the FTSE 100 is beginning to look a touch exhausted, especially now the flow of good news out of China seems to have eased off, but having steadied itself this week we should see further upside for global indices from here," said Beauchamp.

European stocks got a boost on Thursday following China's decision to halve punitive tariffs on USD75 billion in US imports from February 14, news which saw Asian stocks rally overnight. Hong Kong added 2.6%, while Shanghai closed up 1.7% and Tokyo 2.4%.

In the US on Thursday, Wall Street is pointed to a modestly higher start. The Dow Jones is seen up 0.3%, while the S&P 500 is pointed 0.2% higher and the Nasdaq seen up 0.3%.

In forex, sterling was quoted at USD1.2953 on Thursday, lower compared to USD1.2990 at the London equities close on Wednesday.

Against the yen, the dollar was quoted at JPY109.86 on Thursday, up from JPY109.70 on Wednesday.

The euro was soft, trading at USD1.0996 Thursday against USD1.1002 late Wednesday following some dire German data.

Month-on-month, German factory orders were down 2.1%, sharper than the 0.8% decline posted for November. On a year earlier, orders sank 8.7%, again steeper than the 6.0% fall seen in November.

Consensus, according to FXStreet, was for a monthly rise of 0.6%, and a year-on-year fall of 6.0%.

Domestic orders increased by 1.4% and foreign orders fell by 4.5% month-on-month, with new orders from the euro area slumping 14%.

In commodities, Brent oil was at USD55.44 a barrel Thursday, lower compared to USD55.86 late Wednesday.

Gold was higher, however, quoted at USD1,566.18 an ounce Thursday versus than USD1,557.60 on Wednesday.

"Gold prices remain resilient even though a risk-on approach is still dominating markets...The strength of the greenback and stock rallies, at least for now, are not supporting the gold price," explained Carlo Alberto De Casa, chief analyst at ActivTrades.

In London at midday, Compass was providing some support to the FTSE 100, the stock up 1.9%.

Ahead of its annual general meeting on Thursday, Compass reported that organic revenue climbed 5.3% in the three months to December 31.

In North America, where the company reported "strong levels of new business wins and good retention rates", organic revenue was 7.5% higher. In Europe, organic revenue was flat year-on-year, as anticipated. Compass said volumes softened during the quarter in the Business & Industry unit. It also cited a "less favourable" events calendar in Sports & Leisure.

Topping and tailing the FTSE 250 were insurer Beazley and postal operator Royal Mail.

Beazley was up 8.2% as it reported profit more than doubled in 2019, boosted by investment income.

In 2019, pretax profit surged to USD267.7 million from USD76.4 million. Gross premiums were 15% higher at USD3.00 billion from USD2.62 billion, with net premiums rising 11% to USD2.50 billion. Net investment income was six-times higher in 2019, at USD263.7 million, from USD41.1 million the year prior.

Revenue, which predominately includes net earned premiums and investment income, was 22% higher year-on-year at USD2.64 billion from USD2.16 billion.

Royal Mail sank 7.6% on a gloomy outlook for the year ahead, as it warned it will miss its productivity target for the current financial year.

Revenue was up 3.7% for the nine months to December 29, and 4.5% higher when working day-adjusted, the firm said.

In Royal Mail's UK parcels, international & letters unit, UKPIL, revenue was up 1.0%, led by parcels which saw revenue growth of 3.7% and volume growth of 3.0%. Letter volumes, meanwhile, sank 9% - excluding election-related material - and revenue fell 1.5%.

For the current financial year, Royal Mail said it expects productivity improvement of 1.5%, against its 2% target. All other guidance, including an adjusted operating profit between GBP300 million to GBP340 million, was confirmed.

Looking even further out, things appear "challenging". The third-quarter run rate for addressed letter volumes "has not shown the expected level of recovery", the postal operator said.

What's more, the "ongoing industrial relations environment" and economic uncertainty "increases the likelihood" that UKPIL will be loss-making in the upcoming 2021 financial year.

Russ Mould at AJ Bell said the UKPIL warning was "the cherry on top of a very unappetising cake".

"Ultimately Royal Mail has become as frustrating a company for investors as queuing up for hours on a Saturday morning to retrieve a parcel from the sorting office," he said.

Royal Mail floated in London in 2013 at a price of 330 pence per share. On Thursday, the stock was trading at 174.75p.

Elsewhere among the mid-caps, Ashmore Group rose 3.2% on a rise in assets under management in its first half.

In the six months to December 31, assets under management jumped 28% from a year earlier and 7.2% from June to USD98.4 billion. During the six months, the emerging markets asset manager achieved net flows of USD5.7 billion.

First half net revenue was 16% higher year-on-year at GBP176.8 million from GBP152.1 million, with pretax profit surging 42% to GBP132.4 million from GBP93.0 million.

Tate & Lyle was down 2.4% as the ingredients supplier left its full-year guidance unchanged following third-quarter growth in its food & beverage unit.

In the three months to December 31, Food & Beverage Solutions sales climbed year-on-year, with the Tate & Lyle reporting "solid growth" in North America, and the Europe, Middle East & Africa region.

Tate & Lyle affirmed that its expects earnings per share to grow in low-single digits, at constant currency. In financial 2019 , it reported basic earnings per share of 39.2 pence, and diluted EPS of 38.6p.

In addition, Investec double-downgraded the stock to Sell from Buy.

By Lucy Heming; lucyheming@alliancenews.com

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