LONDON MARKET MIDDAY: Stocks Subdued As Market Awaits US-China Talks

(Alliance News) - Stocks started the week in a muted manner, continuing to digest last week's data releases, while looking ahead with some trepidation to the resumption of US-China trade talks.

The FTSE 100 index was up 10.79 points, or 0.2%, at 7,166.17 Monday midday. The FTSE 250 was down 61.25 points, or 0.3%, at 19,419.12 and the AIM All-Share was down 0.1% at 862.15.

The Cboe UK 100 index was up 0.2% at 12,152.91. The Cboe UK 250 was 0.3% lower at 17,322.15 and the Cboe UK Small Companies flat at 10,846.65.

"The beginning of this week's trading has started in a fairly subdued fashion ahead of this week's restart of US, China trade talks," said Michael Hewson, chief market analyst at CMC Markets.

The US and China are expected to resume high-level trade talks this week in Washington with Chinese Vice Premier Lie He due to lead a Chinese delegation.

"Hopes around these talks appear to already being tempered by reports that China is unwilling to offer too much in the way of concessions on issues like Chinese industrial policy, or government subsidies," he said. "This would suggest that the talks are likely to be focussed on a much more narrow set of issues."

And, on the data front at the start of the week, there has been "little in the way of respite" for the German economy, Hewson said.

Industrial orders in Europe's largest economy Germany fell back in August, official data showed Monday, adding to a picture of declining activity at vital manufacturing firms.

New contracts fell 0.6% compared with July, federal statistics authority Destatis said, disappointing analysts' predictions of a 0.6% increase. In a year-on-year comparison, orders were down 6.7% on August 2018's level.

In mainland Europe at midday, the CAC 40 in Paris was up 0.2% while the DAX 30 in Frankfurt was 0.3% higher.

Stocks in the US are on course for a lower start, with the Dow Jones, S&P 500 and the Nasdaq all called down 0.5%.

To come in the economic events calendar on Monday, US Federal Reserve Chair Jerome Powell will speak at 1800 BST.

Given the quiet start to the week data-wise, said Craig Erlam at Oanda, "much hangs on Jerome Powell's comments over the next few days". Powell will also be speaking on Tuesday and Wednesday.

This comes after a mixed monthly US jobs report on Friday, with nonfarm payroll employment rising less than expected but the unemployment rate improving.

Nonfarm payrolls advanced by 136,000 in September, down from August's reading of 168,000. August's reading had been upwardly revised from the 130,000 initially reported. The unemployment rate was 3.5%, down from 3.7% in August. The decline in September unemployment beat expectations, which was forecast to remain unchanged at 3.7%.

"Friday's labour market report was a mixed bag, with fewer jobs being added but unemployment falling to a 50-year low so it's not all bad. Still, the cold that the US has given to the rest of the world may be making its way back across the Atlantic," said Erlam.

One of the fallers in the FTSE 100 at midday was Carnival, down 1.9% after HSBC cut the cruise operator to Hold from Buy.

Housing stocks were slightly lower after data from Halifax in the morning showed house prices in the UK grew at their slowest rate in six and a half years in September.

Berkeley Group was down 0.9% and Taylor Wimpey down 0.8%, with property portal Rightmove 0.9% lower.

House prices for September were 1.1% higher than the same month a year before, with August having recorded 1.8% annual growth. On a monthly basis, house prices in September fell 0.4%, after a 0.3% month-on-month rise in August.

House prices averaged GBP232,574 in September, with August having been at GBP233,541.

Rooted to the bottom of the FTSE 250 was SIG, 13% lower after the building materials company issued a profit warning.

SIG said the weakening of trading has accelerated over recent weeks and political and economic uncertainty has continued to increase. As a result, SIG said it is now anticipating significantly lower underlying profitability than previous expectations for 2019 in both the specialist distribution and roofing merchanting businesses.

In 2018, SIG reported group underlying pretax profit of GBP72.7 million and revenue of GBP2.68 billion.

Separately on Monday, the firm said it has sold its Air Handling and Building Solutions units for around GBP236 million in total as part of a programme of selling non-core businesses.

"SIG has issued numerous profit warnings in the past few years as the UK construction market goes through a very difficult patch. Right-sizing its business now could be a sensible thing to do, particularly as it is managing to sell assets on decent valuation multiples," said Russ Mould, investment director at AJ Bell.

Building materials peers Grafton Group and Travis Perkins were down 3.9% and 3.3% respectively in a negative read-across from SIG's update.

Elsewhere on the London Stock Exchange, De La Rue shares were up 2.7% after the bank note printer said it has appointed Clive Vacher as chief executive officer with immediate effect.

De La Rue, which also provides product authentication services, said Vacher will be replacing Martin Sutherland, who has stood down from the chief executive officer role after five years since 2014. Vacher most recently was chief executive officer of Canadian high power semiconductor manufacturer Dynex Power.

By Lucy Heming; lucyheming@alliancenews.com

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