LONDON MARKET MIDDAY: Trade Cautious With Packed Week Ahead Eyed

(Alliance News) - With central bank meetings, a UK general election and a US-China tariff deadline all due later this week, trade on Monday was subdued.

The FTSE 100 index was down 7.60 points, or 0.1%, at 7,232.06. The FTSE 250 was down 79.46 points, or 0.4%, at 20,853.57, and the AIM All-Share was off 0.2% at 906.46.

The Cboe UK 100 was down 0.1% at 12,261.06, the Cboe UK 250 was down 0.3% at 18,791.49, and the Cboe Small Companies flat at 11,425.00.

In European equities on Monday, the CAC 40 in Paris was down 0.3%, while the DAX 30 in Frankfurt was 0.1% lower.

Stocks in New York were seen opening lower on Monday, with the Dow Jones, S&P 500 index and Nasdaq Composite all called down 0.1%.

"In many ways, investors have looked in holiday mode since Thanksgiving but the reality is that they've simply been waiting in anticipation of the next seven days. As is so often the case, we may be reflecting back on this a week from now as hugely anticlimactic, but there's certainly huge potential for the opposite to be true. It's going to be exciting," said Craig Erlam at Oanda.

The week ahead holds the UK general election, a deadline for the next raft of tariffs on China to be imposed by the US, and interest rate decisions from both the Federal Open Market Committee and the European Central Bank.

The pound was quoted at USD1.3170 at midday Monday as the UK election nears, compared to USD1.3105 at the close on Friday.

"With just three days until the UK election, the continued rise in sterling highlights a strengthening resolve over the prospect of a conservative majority on Thursday," said Joshua Mahony, senior market analyst at IG.

Britain's general election campaign enters its frenetic final stages on Monday, with Prime Minister Boris Johnson and Labour leader Jeremy Corbyn desperately seeking votes ahead of Thursday's crucial poll.

Johnson is hoping to regain the Conservative majority lost by his predecessor Theresa May in the last election, just two years ago, while Corbyn is aiming to upset the odds and usher in the first Labour government for nine years.

Polls released on Saturday showed the Conservatives with an average lead of 10%. Pollsters believe that Johnson needs to be more than six points clear of Labour on Thursday to secure a majority.

In other currencies, the euro stood at USD1.1074 at midday Monday, up against USD1.1045 at the same time on Friday.

Against the yen, the dollar was trading at JPY108.49, compared to JPY108.71 late Friday.

In commodities, Brent oil was quoted at USD63.84 a barrel midday Monday from USD64.15 late Friday.

"After last week's sharp rise in oil prices on expectation of another OPEC+ production cut, oil prices have slipped back after this weekend's weaker than expected China data. The increase in production cuts while an attempt by OPEC producers to bolster prices runs the risk of pushing up prices to the extent, they choke off demand in what is a global economy that, while showing some signs of a recovery still looks fragile," said Michael Hewson at CMC Markets.

Meanwhile, gold was quoted at USD1,463.09 an ounce against USD1,459.85 at the close on Friday. The precious metal was clawing back some lost ground following a strong US jobs report on Friday. Gold had closed around USD1,477.30 on Thursday.

In London, gains for Tesco were unable to lift the FTSE 100 into the green at midday.

The supermarket was up 5.0% after confirming the potential sale of its Asian business, though noted a review of options remains in the early stages.

Tesco, which has operations in both Thailand and Malaysia in the region, said the review of the business began after receiving "inbound interest" from potential buyers. The statement from the UK's largest supermarket came after the Times earlier on Monday had reported the company is mulling a potential sale worth up to USD9 billion.

Meanwhile, chemicals firm Croda was down 1.3% after Barclays cut the stock to Equal Weight from Overweight.

The FTSE 250 was under pressure as shares in Tullow Oil sank 59% following a dire update.

The oil and gas firm on Monday suspended its dividend, "reset" its future production guidance, and said that Chief Executive Officer Paul McDade and Exploration Director Angus McCoss have resigned with immediate effect by mutual agreement.

Following underperformance from its main oil producing assets - the TEN and Jubilee fields in Ghana - Tullow said it needs to reset its forward-looking guidance. For 2020, group production is forecast to average between 70,000 and 80,000 barrels of oil per day and group production for the following three years is expected to average around 70,000 barrels per day.

Further, in 2020, the company expects to generate underlying free cash flow of at least USD150 million at USD60 a barrel after a capital investment of USD350 million. Considering the level of expected free cash flow, Tullow has decided to suspend its dividend.

Senior was 5.6% higher after the engineer confirmed speculation regarding a review of its Aerostructures business, but said that there can be no certainty over any transaction for the business following the review.

The Rickmansworth, Hertfordshire-based company added that the Aerostructures review is in line with Senior's policy to review its portfolio and evaluate all its operating businesses in terms of their strategic fit within the group.

High street stalwart Marks & Spencer gained 3.7% after Goldman Sachs raised the retailer to Buy from Sell.

By Lucy Heming; lucyheming@alliancenews.com

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