LONDON MARKET OPEN: Stocks Rise But Consumer Confidence Hit By Brexit

LONDON (Alliance News) - Stocks in London opened higher Friday, extending the positive finish on Thursday, but survey data from Gfk showed UK consumer confidence has slumped since the Brexit vote in late June.

Having been called slightly lower ahead of the open, the FTSE 100 index started the day up 0.2%, or 12.40 points, at 6,546.19. The FTSE 250 was up 0.3% at 15,946.48 and the AIM All-Share up 0.1% at 700.28.

In mainland Europe, the CAC 40 index in Paris was up 0.1% and the DAX 30 in Frankfurt was up 0.3%.

In Asia, the Japanese Nikkei 225 index ended down 1.1%. The Shanghai Composite closed down 1.0%, and the Hang Seng in Hong Kong is down 1.0%.

Early Friday, survey results from market research group GfK showed British consumer sentiment weakened notably in July following the Brexit vote.

The consumer confidence index fell to -9 in July from -1 in June. The survey was conducted between June 30 and July 5, after Britons voted to leave the EU.

Nearly 60% of 2,002 respondents forecast the general economic situation to worsen over the coming year, versus 46% in June. The proportion of people forecasting prices to rise surged to 33% from 13%.

Holger Schmieding, chief economist at Berenberg, noted that consumer confidence is only loosely related to actual spending. He is forecasting stagnation for the UK economy rather than a recession.

"But if concerns about commercial real estate spread to the residential market, possibly with expectations of house price declines to come, the risk of a genuine recession could loom very large," Schmieding added.

With relatively little in the way of corporate news, the biggest movers on the London market were driven mainly by broker rating changes.

Royal Bank of Scotland Group was down 1.0% at 157.30 pence, after US bank Goldman Sachs removed it from its Conviction Buy list and trimmed its price target to 235.00p from 265.00p.

Education group Pearson was down 1.2% after Societe Generale cut it to Hold from Buy, whilst life insurer Aviva was down 0.6% after being cut to Equal-Weight from Overweight by Barclays.

In the FTSE 250, car distributor and retailer Inchcape, up 6.2%, was benefiting from an upgrade to Buy from Hold by Berenberg. Multi-commodity miner Vedanta Resources was raised to Neutral from Underperfom by Merrill Lynch and traded up 5.7%.

In the AIM market, Kibo Mining shares were up 12% after the miner said it has further improved the economics of the Mbeya project in Tanzania.

Mbeya will consist of a coal mine that will feed into a power plant to generate power for the domestic market. Kibo is developing the mining element and the power plant in two separate phases, but they will both form part of the overall project.

The studies for the power plant have been completed and, following the publication of the study covering the mining operation on Friday, Kibo will now integrate the two to form one bankable feasibility study for the Mbeya project, which will mark a significant milestone for the company.

On Friday, the miner published the definitive feasibility study for the mining element of the operation which showed Kibo has managed to improve the return while lowering costs and funding requirements further.

Savannah Petroleum shares surged 35% to 32.0p after returning from suspension. Late Thursday, the company said it has raised USD40.0 million in a share placing in which 79.8 million shares were conditionally placed at 38 pence per share.

Savannah requested for its shares to be suspended in January this year after entering talks with another party that, if completed, would have led to a reverse takeover.

However, Savannah said it now plans to terminate those talks, after having completed a USD40.0 million share placing, providing the funds needed to develop its existing assets in the second half of 2016 and allowing the company's shares to resume trading on AIM.

The main event in the economic calendar is the US jobs report at 1330 BST. The May nonfarm payrolls number came in significantly below expectations at 38,000 net new jobs, and the market will be interested to see if this was just a blip. According to FXStreet, the consensus for June is for a significant rebound to an increase of 178,000 jobs.

Elsewhere in the economic calendar, UK trade balances are at 0930 BST. The Baker Hughes US oil rig count is issued after the London stock market close at 1800 BST, and US consumer credit is at 2000 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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