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LONDON MARKET OPEN: Firm Pound Hinders FTSE; French Luxury Stocks Hit

Tue, 3rd Dec 2019 08:58

(Alliance News) - Stock prices in London opened mixed on Tuesday with a firm pound hindering the FTSE 100 index of overseas earners, while Centamin rose to the top of the FTSE 250 after becoming the object of a hostile takeover bid.

The pound was quoted at USD1.2972 Tuesday morning, up from USD1.2933 at the London equities close Monday.

The FTSE 100 was 17.30 points lower, or 0.2%, at 7,268.64. The FTSE 250 down 6.92 points at 20,693.29, but the AIM All-Share was up 1.72 points, or 0.1% at 913.28.

The Cboe UK 100 index down 0.1% at 12,330.93. The Cboe UK 250 was flat at 18,561.45, and the Cboe UK Small Companies was flat at 11,452.77.

In European equities, the CAC 40 index in Paris and the DAX 30 in Frankfurt were up 0.2% and 0.7% respectively.

The European market gains came despite the threat of new US trade tariffs.

The US is considering slapping additional tariffs on European products as part of the long-running feud between Washington and Brussels over subsidies to airplane manufacturers. "The US is initiating a process to assess increasing the tariff rates and subjecting additional European Union products to the tariffs," the US Trade Representative's office said.

The USTR announcement came after the World Trade Organization found that the EU had not taken "appropriate steps to remove the adverse effects" of its aid to Airbus.

The WTO previously declared European subsidies for Airbus illegal and then allowed the US to hit back with tariffs on EU imports to be able to recoup up to USD7.5 billion in damages.

The US also threatened to impose tariffs of up to 100% on USD2.4 billion in French goods in retaliation for a digital services tax it says is discriminatory.

French sparkling wine, yogurt and Roquefort cheese are on the list of goods that could be targeted as soon as mid-January after a report from the US Trade Representative's office found the tax penalizes American tech companies such as Alphabet's Google, Apple, Facebook and Amazon.com.

Airbus was up 0.1% in Paris early Tuesday, but luxury goods firms were lower. Hermes was down 1.6%, Gucci-owner Kering was down 1.4% and LVMH was down 1.5.%.

The Japanese Nikkei 225 index closed down 0.6%. In China, the Shanghai Composite ended up 0.3%, but the Hang Seng index in Hong Kong closed down 0.2%.

"Asia markets took their cues from yesterday's losses in Europe; however today's European session has been slightly more mixed, with the FTSE 100 lagging behind the rest of Europe, due to a slightly stronger pound acting as a drag on its main US dollar earners," said CMC Markets analyst Michael Hewson.

On the London Stock Exchange, Rightmove was the best blue-chip performer, up 2.8% after Goldman Sachs raised the property portal to Neutral from Sell.

Auto Trader Group was up 1.5% after UBS upgraded the automotive digital marketplace to Neutral from Sell.

Conversely, Ferguson was down 0.5%. The plumbing and heating products supplier reported a weaker performance in its UK market.

At group level, Ferguson recorded USD5.21 billion of revenue in the three months to October 31, up 5.3% on the USD4.95 billion seen the year before. But Ferguson's UK revenue dropped 2.2% to USD541 million, with trading profit down 17% to USD15 million.

The company said its UK demerger is progressing as planned, and is expected to be completed in 2020. Ferguson made no mention of whether it would transfer its stock listing to the US once the demerger is complete.

"The separation of the US and UK businesses makes strategic sense but will result in a rather different offering for investors. In the meantime, and given the recent price strength and some tough comparative quarters to follow, the shares are being seen as up with events. As such, the market consensus has recently slipped to a hold, albeit a strong one," said Interactive Investor's Richard Hunter.

In the FTSE 250, Centamin was the best performer, up 7.1% at 120.40 pence after the Egyptian gold miner became the object of a GBP1.47 billion takeover approach by Toronto-listed Endeavour Mining.

The all-share offer is on the basis of 0.0846 of a Endeavour share for each Centamin share, which Endeavour said represents a 13% premium to the FTSE 250 listing's closing price on Monday of 112.20 pence. At that closing price, Centamin had a market capitalisation of GBP1.30 billion.

Endeavour shareholders would own 52.9% of the combined company and Centamin holders 47.1%.

Endeavour said it approached the Centamin board back in October 2018 and again this year on November 11, but "meaningful engagement has still not been forthcoming", prompting the public announcement.

Cineworld Group was up 4.0% despite the multiplex chain warning that trading for the full year is expected to be slightly below management's expectations amid a weaker box office performance.

For the period January 1 to December 1, Cineworld said revenue was down 9.7%, with the box office performance - the money it makes from ticket admissions - down 13%.

In addition, Cineworld said the integration plans for US cinema operator Regal Entertainment have progressed well, and it announced an increase in synergies to USD190 million from USD150 million.

Serco was up 2.1% after JPMorgan raised the outsourcer to Overweight from Neutral.

The euro was quoted at USD1.1075, down from USD1.1086 late Monday. Against the yen, the dollar was trading at JPY109.16, up from JPY109.03 late Monday.

Brent oil was quoted at USD61.14 early Tuesday, down from USD61.44 late Monday.

In other commodities, gold was quoted at USD1,462.70 early Tuesday, flat from USD1,463.74 late Monday.

The economic events calendar on Tuesday has UK construction PMI data at 0930 GMT and eurozone producer prices at 1000 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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