LONDON MARKET OPEN: Stocks Lack Spark As Trade War Damps Sentiment

(Alliance News) - Stock prices in London opened Friday in negative territory, as investors await goods news from the drawn-out US-China trade talks.

Optimism was dimmed on Thursday after escalating tensions in Hong Kong.

US President Donald Trump's decision to sign a bill in support of pro-democracy protesters in the city and back their rights drew warnings of retaliation from Beijing and fuelled fears for negotiations on the mini trade deal that are reportedly in the final straight.

However, China has not detailed what its response to the Hong Kong law will be, and observers say it is unlikely to do anything to derail a tariffs agreement owing to its weakening economy.

Commerzbank commented: "Market sentiment is nonetheless likely to remain fragile, as China has already threatened retaliation measures in reaction to the bill being passed, while it remains unclear for now what shape these will take. That means there is still the risk of a set-back short term."

The London large-cap index was down 34.85 points, or 0.5%, at 7,382.94, early Friday. The mid-cap measure was down 60.37 points, or 0.3%, at 20,963.18, and the AIM All-Share was down 2.79 points at 921.02.

The Cboe UK 100 index was down 0.4% at 12,512.64. The Cboe UK 250 was down 0.2% at 18,857.40, and the Cboe UK Small Companies was up 0.2% at 11,429.43.

In European equities, the CAC 40 index in Paris and the DAX 30 in Frankfurt were both down 0.4% in early trade.

The German bank continued: "However, for now it can be assumed that Beijing too has an interest in not allowing the trade deal to fail. At least that would serve as an explanation for why the Chinese government has not yet announced any concrete measures but only summoned the US ambassador. That suggests that Beijing for now wants to follow the path of diplomacy, which is good news for the markets."

Adding to the tensions, Hong Kong police ended their two-week siege of a university campus that became a battleground with pro-democracy protesters, as activists vowed to hold fresh rallies and strikes in the coming days. Renewed calls to hit the streets came after Beijing and city leader Carrie Lam refused further political concessions despite a landslide victory for pro-democracy parties in local elections last weekend.

In Asia on Friday, the Japanese Nikkei 225 index closed down 0.5%. In China, the Shanghai Composite closed down 0.6%, while the Hang Seng index in Hong Kong is 2.0% lower.

Financial markets in the US were closed on Thursday for the Thanksgiving holiday and will reopen on Friday for a half-day session.

In London, online grocer Ocado is the big winner in the morning session, up 14%, after signing a deal for its delivery platform in Japan.

Ocado's Smart Platform will now be used in Japan by Aeon. The Japanese company has 21,000 food stores across 14 countries but will be opening a new online business, with help from Ocado.

The agreement will see the development of a national fulfilment network to serve the whole of the Japanese market, with expected sales capacity of around JPY600 billion by 2030, growing to approximately JPY1 trillion by 2035. The service is expected to go live in 2023.

Aeon will pay Ocado upfront fees upon signing and during the development phase, then ongoing fees linked to both sales achieved and installed capacity within each customer fulfilment centres and service criteria.

At the other end of the blue-chip index, St James's Place was the worst performer, shedding 4.7%, after US investment bank Goldman Sachs cut the wealth manager to Sell from Neutral.

HSBC was 0.9% lower after the lender agreed to refund customers after breaking a legal order.

The UK Competition & Markets Authority said HSBC failed to send customers text alerts before charging them for going into unarranged overdraft.

HSBC has been found to have broken the rule twice and has agreed to refund GBP8 million to 115,000 customers.

CMA said the refunds paid by the bank will cover all fees incurred by customers from going into unarranged overdrafts where they had not been warned beforehand by the required text alerts.

The breaches first occurred in February 2018, when the text alert rule came into effect, the regulator added.

In the midcaps, Investec was down 1.9% after it issued an update on its planned demerger and planned listing of its asset management business, which is to be renamed Ninety One.

Ninety One will be dual listed, in London and Johannesburg, and is expected to be complete in March 2020.

Transferring Investec Asset Management's assets into Ninety One is expected to have a positive impact on Investec's resulting CET1 ratio, of about 1.3% to 12.0%.

The banking group is expecting to incur a GBP56 million cost for the demerger but Investec "strongly" believes the move will simplify its business and improve its long term prospects.

Investec has committed to return on equity of between 12% and 16% for its Bank & Wealth business through 2022 compared to 10.7% in the six months to September 30.

Tullow Oil lost 2.4% after stockbroker Peel Hunt cut the stock to Add from Buy.

Elsewhere, estate agent Countrywide was a big gainer, up 17%, after agreeing to sell commercial real estate consultancy firm Lambert Smith Hampton for GBP38 million in cash.

Countrywide said the business was non-core, and the funds will be used for its business turnaround.

It also has agreed an amended credit facility with its lenders. Countrywide additionally announced on a share consolidation, but this first requires shareholder approval at its upcoming annual general meeting.

Countrywide is proposing a 50 for 1 consolidation. The company currently has 1.64 billion shares in issue.

Countrywide said the consolidation will improve its market liquidity, and reduce volatility and spread. "The group continues to make operational progress in its turnaround and confirms that it remains on course to deliver a full year result in line with the board's expectations," Countrywide added.

Magazine and digital publisher Reach was up 12%. It said trading has been "steady" over the last five months and in line with expectations, as sales declines slowed on the year prior on strong digital growth.

For the five months ended Sunday, like-for-like revenue fell 4.4% on the year prior after Print revenue fell 7.3% and Digital revenue grew 14%.

The London-based newspaper and magazine company said the results were an improvement on like-for-like figures for the same period in 2018, when revenue fell by 6.6%. This had included a steeper 8.2% fall in Print revenue and less buoyant Digital growth of 9.3%.

In currencies, sterling was quoted at USD1.2910 early Friday, down from USD1.2951 at the London equities close on Thursday.

The euro was quoted at USD1.1007 early Friday, up on USD1.1002 late Thursday. Against the yen, the dollar was quoted at JPY109.49, flat versus JPY109.50.

In commodities, gold was quoted at USD1,457.60 early Friday, higher on USD1,455.02 at the London equities close on Thursday.

Brent oil was quoted at USD63.12 early Friday, higher compared to USD62.72 at the London equities close on Thursday.

The economic events calendar on Friday has Germany unemployment data at 0855 GMT, UK mortgage approvals at 0930 GMT and eurozone inflation and jobless figures at 1000 GMT.

By Paul McGowan; paulmcgowan@alliancenews.com

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