LONDON MARKET OPEN: Stocks Mixed On Brexit Talks Worries

(Alliance News) - Stock prices in London were lacking direction on Friday morning, as Brexit talks are on the verge of collapse and the UK GDP data has done little to brighten the mood.

In London, the blue-chip FTSE 100 index was up 22.20 points, or 0.4%, at 6,025.52. The mid-cap FTSE 250 index up 9.05 points, or 0.1% at 17,583.00. The AIM All-Share index was down 0.1% at 954.21.

The Cboe UK 100 index was up 0.2% at 599.93. The Cboe 250 and Cboe Small Companies were both flat at 14,994.59 and 9,543.83, respectively.

In mainland Europe, the CAC 40 index in Paris was down 0.2%, while the DAX 30 in Frankfurt was down 0.3%.

"European stocks are struggling to shake of the bearish mood following another deep sell off in US tech," said City Index analyst Fiona Cincotta.

"The FTSE has additional concerns with the economic recovery slowing and as the prospect of messy divorce from the EU grows," added Cincotta.

The UK gross domestic product rebounded in July, following two consecutive quarterly falls, but has still only recovered just over half of the lost output caused by the coronavirus, the Office for National Statics said.

The ONS on Friday noted July's 6.6% growth marked the country's third consecutive monthly increase. In the first and second quarter, however, GDP shrank, on a quarterly basis, by 2.2% and 20%, respectively.

On an annual basis, UK gross domestic product fell 21% in the three months to June, having contracted 1.7% in the first quarter of 2020.

The second quarter contraction was the largest the UK had seen since 1955.

Monthly gross domestic product grew by 6.6% in July as lockdown measures continued to ease, following growth of 8.7% in June and 2.4% in May - which followed a record fall of 20.0% in April.

"While it has continued steadily on the path towards recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic," ONS Director of Economic Statistics Darren Morgan said.

July's monthly figure came in slightly behind market consensus, according to FXStreet, of 6.7% growth.

Sterling was quoted at USD1.2845 early Friday, lower than USD1.2877 at the London equities close on Thursday.

The euro traded at USD1.1842 on Friday, lower on USD1.1880 late Thursday. Against the yen, the dollar was quoted at JPY106.22, firm from JPY106.20.

Talks on a post-Brexit trade deal between the UK and the EU are hanging in the balance after Brussels demanded the UK abandon plans to override key elements of the Withdrawal Agreement.

At a stormy meeting in London on Thursday, the Cabinet Office Minister Michael Gove insisted the government "could not and would not" drop measures in legislation tabled earlier this week.

It prompted European Commission Vice President Maros Sefcovic to accuse the UK of an "extremely serious violation" of international law, putting the ongoing trade talks in jeopardy.

Meanwhile UK Prime Minister Boris Johnson is facing growing unrest among Tory MPs deeply unhappy at the threat to undermine Britain's traditional support for the international rule of law.

The row erupted as the latest round of trade talks – also taking place in London – ended on Thursday with both sides acknowledging that "significant differences" remain.

Johnson has set a deadline of October 15 for an agreement to be reached, otherwise he has said he will simply walk away from the negotiating table.

In the FTSE 100, Rolls-Royce was the best performer, up 1.3%, after Berenberg upped the engines manufacturer o Buy from Hold.

Anglo American was up 0.8% after reporting the value of rough diamond sales for De Beers' sixth and seventh sales cycles of 2020, amounting to USD116 million and USD320 million, respectively.

Owing to the restrictions on the movement of people and products in various jurisdictions around the globe, De Beers has continued to implement a more flexible approach to rough diamond sales during the sixth and seventh sales cycles, Anglo American said.

"Diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations, and manufacturers focused on meeting retail demand for polished diamonds," said De Beers Chief Executive Bruce Cleaver.

DS Smith was down 1.6% after Peel Hunt cut the packaging business to Add from Buy.

Among the mid-caps, Ashmore was down 0.9% as the emerging markets investment manager reported a slight rise in annual profit but a drop in assets under management due to the Covid-19 pandemic.

For the year to the end of June, the company's pretax profit increased 1% year-on-year to GBP221.5 million. Adjusted net revenue increased by 5% to GBP325.0 million when compared to the prior year, driven by 7% growth in net management fees.

The asset manager declared a dividend of 12.10 pence to give a 2% year-on-year increase in total payout to 16.90p.

Ashmore said assets under management declined by 9% to USD83.6 billion amid negative market performance reflecting the third-quarter impact of Covid-19 pandemic.

Ferrexpo was on the other side of the index, up 3.5%, after declaring a special interim payout of 6.6 US cents per share.

Royal Mail was up 3.5% as JPMorgan raised the postal services provider to Neutral from Underweight.

Travis Perkins and Essentra - which were up 3.2% and 2.4%, respectively - were also benefiting from rating increase from Jefferies. Both companies were upgraded to Buy from Hold.

In commodities, Brent oil was quoted at USD40.08 a barrel Friday morning, down from USD40.50 late Thursday. Gold was quoted at USD1,941.05 an ounce Friday morning, down from USD1,957.51 an ounce at the London equities close Thursday.

In Asia on Friday, the Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite closed up 0.8%, while the Hang Seng index in Hong Kong is up 0.8%.

In the US on Thursday, Wall Street ended in the red, with the Dow Jones Industrial Average ending down 1.5% and S&P 500 down 1.8%. The tech-heavy Nasdaq Composite closed 2.0% lower.

The economic events calendar on Friday there is US inflation figures at 1330 BST.

"US consumer price inflation could be one to watch in the context of the new Fed policy of allowing periods of higher inflation," said LCG analyst Jasper Lawler.

CPI is expected at 1.2% in August, up from 1% in July with core prices forecast to be up 1.6%.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

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