LONDON MARKET OPEN: Ferguson-Wolseley Rises; Pound Falls Below USD1.20

(Alliance News) - Stock prices in London opened mixed on Tuesday, with Ferguson the best blue-chip performer after the company decided to split its UK and US operations, while the pound fell below USD1.20 amid Brexit turmoil.

The FTSE 100 was up 7.56 points at 7,289.50. The FTSE 250 was down 20.15 points, or 0.1%, at 19,461.40, and the AIM All-Share was up 0.2% at 875.44.

The Cboe UK 100 index was up 1.4% at 12,363.47. The Cboe UK 250 was up 0.6% at 17,339.37 and the Cboe UK Small Companies was up 0.5% at 10,906.83.

On the London Stock Exchange, Ferguson was the best blue-chip performer at the open, up 3.3%.

The plumbing and heating products supplier said it intends to demerge its UK operations, as Wolseley UK, and will evaluate a new listing structure for its businesses following a review.

Ferguson, which now generates the bulk of its revenue in the US, said upon completion, Wolseley UK will become an independent listed company serving residential and commercial trades people and customers.

The company formerly known as Wolseley said the new business will be able to focus exclusively on customers in the UK market, while the remaining Ferguson business will serve North America.

Ferguson said Wolseley UK will be an independently-listed business, adding that the board is considering the "most appropriate listing structure" for the group going forward. UK shareholders of Ferguson had become concerned last month amid reports the company was planning to move the listing of the entire company from London to New York.

GlaxoSmithKline was up 1.0% after Citigroup resumed coverage on the drugmaker with a Neutral rating.

At the other end of the large cap index, Berkeley Group was the worst performer, down 1.3% after Deutsche Bank restarted coverage on the housebuilder with a Sell rating.

Lloyds Banking Group was down 1.0% after the high street bank said it has acquired grocer Tesco's GBP3.7 billion UK residential mortgage portfolio.

Tesco shares were down 0.4%.

The deal will see 23,000 mortgage customers transfer to Halifax - a division of the Bank of Scotland, in turn a wholly owned subsidiary of Lloyds - from Tesco Personal Finance, which falls under Tesco Bank. Lloyds and Tesco expect the transfer of customers to begin at the end of September with the legal title change happening in March next year.

The purchase price, of about GBP3.8 billion, represents a 2.5% premium on gross book value. Lloyds will fund the acquisition from existing internal resources, noting the deal will have "minimal" impact on capital.

In the FTSE 250, Restaurant Group was the worst performer, down 6.5% after the restaurant operator reported a sharp swing to a half-year loss on a GBP100 million impairment charge for shutting 16 restaurants.

In the 26 weeks to June 30, the restaurant chain operator swung to a pretax loss of GBP87.7 million from a GBP12.2 million profit a year before.

Restaurant Group recorded GBP115.7 million in exceptional costs in the first half, compared to just GBP8.4 million a year before. In the first half, the company recognised GBP100 million in impairments in its Leisure unit, after closing 16 sites that were "structurally unattractive".

Restaurant Group declared an interim dividend of 2.1 pence, in line with its policy of paying a dividend covered two times by adjusted profit after tax. A year ago, the company paid an interim dividend of 6.8p.

easyJet was down 2.5% after Kepler Chevreaux downgraded the budget airline to Reduce from Hold.

The pound was quoted at USD1.1981 early Tuesday, sharply lower than USD1.2062 at the London equities close Monday, amid fears of a snap UK general election and a no-deal Brexit.

"Interestingly, this didn't give the FTSE 100 much of a lift. The UK index is sitting a smidge away from 7,300, a level it abandoned around a month ago; however, it might be feeling a bit uneasy itself given how precarious the political situation is right now," said Spreadex analyst Connor Campbell.

UK Prime Minister Boris Johnson faces a showdown in Parliament after he vowed to push for a snap general election if rebel MPs succeed in a bid to seize control of parliamentary proceedings.

Parliament returns on Tuesday after recess, with MPs looking to take control of Commons business to allow them to discuss proposed legislation to block a no-deal Brexit.

Addressing the nation outside Number 10, the prime minister insisted "I don't want an election, you don't want an election" but moments later a senior government source said any bid to "wreck" the UK's negotiating position would prompt a motion for an early election.

The source said Johnson would request a general election on October 14 if the move was successful. A motion for the snap poll would be tabled by the government which would require the support of two-thirds of MPs under the Fixed-term Parliaments Act.

But the source said the government's motion on an early general election would be published before MPs vote on Tuesday so MPs would know the consequences of voting against the government.

Commenting on the pound's slide OANDA analyst Craig Erlam said: "It does suggest traders are increasingly seeing no positive outcome in the near-term. In the best case we have the uncertainty of an extension, in the worst case we could be headed for no-deal or a Corbyn government, which markets appear to dislike."

In the economic calendar on Tuesday, UK's construction PMI is out at 0930 BST. In the US, there is a manufacturing PMI at 1445 BST and construction spending at 1500 BST.

The Japanese Nikkei 225 index closed flat. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index in Hong Kong is down 0.2%.

US financial markets will re-open on Tuesday after being closed for the Labor Day holiday on Monday.