LONDON MARKET MIDDAY: Stocks Stall On Latest US-China Deal Setback

Thu, 28th Nov 2019 11:54

(Alliance News) - With sentiment on Thursday knocked by resurgent tensions between the US and China over Hong Kong, the FTSE 100 traded lower at midday, also bogged down by ex-dividend stocks and some ratings downgrades.

The London large-cap index was down 27.75 points, or 0.4%, at 7,402.03 Thursday midday. The mid-cap measure was up 20.06 points, or 0.1%, at 20,974.38, and the AIM All-Share was 0.1% higher at 920.97.

The Cboe UK 100 index was down 0.3% at 12,544.51. The Cboe UK 250 was up 0.3% at 18,864.28, and the Cboe UK Small Companies was down 0.1% at 11,405.40.

In European equities, the CAC 40 index in Paris was down 0.2% and the DAX 30 in Frankfurt 0.4% lower in early afternoon trade.

"There was a little hit to risk sentiment overnight as Donald Trump finally signed the Hong Kong bill which features sanctions against officials deemed responsible for human rights abuses. Given the precarious nature of US-Chinese relations at the moment and a widespread hope amongst investors that a phase one trade deal will be signed shortly, this move has caused a little concern with equities pulling back after recent and bond yields falling," said David Cheetham at XTB.

"With the US celebrating Thanksgiving stock markets in New York are closed for the day and there's a good chance we get a fairly slow day's trade in other asset classes as many traders take the day off," he added.

In economic data, the European Commission showed business confidence in the eurozone remained subdued in November.

The Business Climate Indicator for the euro area was broadly unchanged, down 0.03 points to minus 0.23. FXStreet consensus had seen the indicator improving slightly to minus 0.14.

The euro was quoted at USD1.1004 on Thursday, broadly unchanged following the data and flat compared to USD1.1005 late Wednesday.

Against the yen, the dollar was quoted at JPY109.46, up versus JPY109.26.

The pound was higher, quoted at USD1.2925 Thursday, up from USD1.2872 at the London equities close on Wednesday.

The pound was boosted after a poll from market research firm YouGov signalled the Conservative party are likely to win a comfortable majority in next month's UK general election.

The constituency-by-constituency estimate by YouGov, published in The Times, indicates that if the election was held on Thursday, the Conservative Party would win 359 seats, 42 more than they took in 2017. It would also take 43% of the vote, and in number of seats this would be its best performance since 1987.

Labour, meanwhile, is set to lose 51 seats, falling from 262 seats in 2017 to 211 now, and taking 32% of the vote, a nine percentage point decrease. This would be the party's worst performance in seats won since 1983, YouGov said, adding that the opposition is on course to not take any new seats.

On the London Stock Exchange, ratings downgrades and ex-dividend stocks were weighing on the FTSE 100.

Vodafone, Severn Trent and Johnson Matthey were among the stocks to go ex-dividend on Thursday, and were down 3.8%, 2.4% and 1.7% respectively.

Meanwhile, Ashtead was down 2.7% after HSBC cut the equipment rental firm to Hold from Buy. Melrose Industries shed 1.5% after RBC removed the stock as one of its Top Picks.

Meanwhile, Ocado was the top blue-chip performer, up 1.7% as it unveiled plans for a mini automated warehouse.

The latest customer fulfilment centre, located in Bristol, will have a capacity for over 30,000 orders per week compared to 85,000 orders per week expected from Ocado's fifth customer fulfilment centre, which is currently being built at Purfleet, Essex.

The facility is being built in an existing warehouse, Ocado said, and is expected to go live at the end of 2020 or early 2021, bringing new capacity into operation significantly faster than for purpose-built standard-sized fulfilment centres.

Virgin Money was the standout performer in the FTSE 250, surging 22% despite skipping its dividend in the wake of PPI provisions.

Net interest income for the financial year to September 30 was GBP1.51 billion, nearly double the GBP851 million achieved the year before. The company's pretax loss deepened, however, to GBP232 million from GBP164 million.

"Our statutory result was significantly affected by additional PPI provisions, driven by the unprecedented surge in PPI information requests in August, along with anticipated Virgin Money acquisition-related costs," explained Chief Executive David Duffy.

Virgin Money said it was "frustrating" to take GBP385 million in additional PPI provisions for the fourth quarter as it looks to "close out this legacy issue". The dividend has been suspended for the recently-ended financial year in light of additional PPI provisions, and the board will "reconsider" dividends for the 2020 financial year.

Joe Healey, analyst at The Share Centre, commented: "The results were always going to display another tough year with PPI and restructuring costs expected to drag figures. Considering the uncertainty at the start of the year regarding the group's new integration into Virgin Money, these results do suggest good momentum moving forward and sets a relatively solid foundation for growth."

Elsewhere in London, Amigo Holdings was another riser as the stock rallied 16%.

In the six months to September 30, Amigo recorded pretax profit of GBP42.3 million, down 13% on the GBP48.4 million reported the year before. Profit was hurt by a 75% increase in total operating expenses, which grew to GBP40.7 million from GBP23.3 million.

Despite this profit fall, Amigo declared an interim dividend of 3.1 pence, more than 65% higher than last year's interim payout of 1.87p.

The economic events calendar on Thursday has German inflation at 1300 GMT. Markets in the US will be closed on Thursday for Thanksgiving, and will open on Friday for a half-day only as shoppers celebrate 'Black Friday'.

In commodities, gold was quoted at USD1,456.31 at midday, firm from USD1,455.35 at the London equities close on Wednesday as the safe haven asset stood its ground amid Thursday's risk-off mood.

Brent oil was quoted at USD62.96, flat compared to USD62.92 at the London equities close on Wednesday.

"With trading thinned by the US absence, conditions are ripe for a clear-out of long positioning if the weak sentiment continues. Energy markets have bought heavily into the trade deal, global recovery story. The reality is the US is pumping more oil than ever and OPEC+ is facing some hard choices at their December meeting," said Jeffrey Halley at Oanda.

By Lucy Heming; lucyheming@alliancenews.com

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