LONDON MARKET OPEN: Stocks Up Led By Tesco; Pound Holds Onto Gains

Thu, 23rd Jun 2016 07:35

LONDON (Alliance News) - Stocks in London were higher Thursday morning, with Tesco leading gainers after providing a positive trading update, as polling stations opened for the UK's referendum on European Union membership.

The FTSE 100 index was up 0.7%, or 46.59 points, at 6,307.78. The FTSE 250 was adding 0.7% at 17,158.70, while the AIM All-Share was up 0.1% at 723.00.

Stocks were adding to gains made on Wednesday, when the FTSE 100 rose 0.6% as investors seemed confident the Remain campaign will win the vote, whose result won't be known until the early morning hours on Friday.

The market seemed to ignore the Daily Telegraph's barometer, which is based on the average of the last six polls released, showing both Remain and Leave campaigns level-pegging at 50% apiece, taking out undecided voters.

Investor's confidence was given a boost on Wednesday night, after a ComRes opinion poll conducted for the Daily Mail newspaper and ITV television showed the Remain camp had a lead over Leave of 48% to 42%.

The telephone survey was conducted between June 17 and June 22. That represented an increase in the Remain camp's lead, as a previous ComRes poll for The Sun newspaper, published on June 14, had given it an advantage of just one point.

Sterling was quoted at USD1.4754 shortly after the London equities open, retaining the gains made in the run up to the EU vote. The currency stood at USD1.4712 at the London close Wednesday, having touched a high of USD1.4844, its highest level so far in 2016.

Among individual stocks, Tesco was the biggest blue-chip gainer, up 2.9%. The supermarket chain reported growth in like-for-like sales in the first quarter of its financial year, marking its second consecutive quarter of like-for-like growth, and announced that it is selling its Harris + Hoole coffee shop business to rival coffee house chain Caffe Nero.

Tesco said like-for-like sales in the 13 weeks ended May 28 grew by 0.9% year-on-year, with 0.3% growth in the UK and and 3.0% in the international business. The group said volume grew by 2.2% in the UK and by 2.7% internationally, while transactions rose by 1.7% in the UK and by 1.5% internationally. The launch of its 'farm' brands performed well in the UK, Tesco said, but price deflation did hit UK like-for-like sales by 0.7%.

The retailer did not provide any more details on the sale of its Harris + Hoole coffee shop business to Caffe Nero. On a call with journalists, Chief Financial Officer Alan Stewart said Tesco was not disclosing the financial details, but said the company is pleased with the sale price.

This comes after its recent sales of the Giraffe restaurant chain and Dobbies Garden Centres business in the last couple of weeks. Giraffe was sold to Boparan Restaurant Holdings for an undisclosed amount, while Dobbies was sold to an investor group led by Midlothian Capital Partners and Hattington Capital for GBP217 million.

Shares in Tesco's peers also were up, with J Sainsbury up 1.2% and Wm Morrison Supermarkets up 1.0%.

Miners were rising as well, with Glencore up 2.7%, while Antofagasta and Anglo American were both up 1.7%.

At the other end of the blue-chip index, BAE Systems was down 0.7%, the biggest decliner, after Berenberg downgraded the defence contractor to Hold from Buy.

In the FTSE 250, DS Smith was the best mid-cap performer up 4.8%. The recycled packaging company said its pretax profit for the year to the end of April was GBP201.0 million, up slightly from the GBP200.0 million it made a year earlier.

This was held back by exceptional charges of GBP79.0 million, up from GBP51.0 million a year earlier, as the group made five acquisitions and integrated those businesses over the course of the year. Stripping out this one-off effect, pretax profit rose to GBP280.0 million from GBP251.0 million. Revenue rose to GBP4.07 billion from GBP3.82 billion a year before, helped by 3.1% organic corrugated box volume growth and by the contribution from the acquisitions DS Smith made, which are performing ahead of expectations.

DS Smith also said Thursday it has agreed two further acquisitions. The group will buy Portuguese corrugated packaging company Gopaca and is acquiring UK-based Creo, a point-of-sale and display products specialist. Gopaca will boost the group's position in the Iberian market, DS Smith said, while Creo will build its presence in the UK retail and media markets. No financial details were disclosed for either deal.

Shares in defence, aerospace and satellite communications technology company Cobham were up 1.4% after it said it has secured a contract with aircraft manufacturer Airbus NV to supply the Inmarsat SB200 Evolution Service safety system.

The contract, which will see aircraft in Airbus's single aisle and long-range aircraft ranges fitted with the communications technology from 2018, could be worth around USD200.0 million, Cobham said, with the potential for additional revenue as demand for satellite communications capability on board aircraft increases. Inmarsat was up 1.0%.

In Asia on Thursday, the Japanese Nikkei 225 index added 1.1% despite Japan's manufacturing activity deteriorated for the fourth consecutive in June, the latest flash survey from Markit Economics showed.

The Markit/Nikkei Manufacturing Purchasing Managers' Index rose marginally to 47.8 in June from 47.7 in the previous month. However, any reading below 50 suggests contraction in the sector.

In China, the Shanghai Composite index fell 0.5%, while the Hang Seng index in Hong Kong is up 0.1%.

Still in the economic calendar Thursday, Markit manufacturing, services and composite PMI readings for the eurozone are at 0900 BST. In the US, initial and continuing jobless claims are at 1330 BST, while the Markit manufacturing PMI is at 1445 BST. US new home sales are at 1500 BST.

By Daniel Ruiz; danielruiz@alliancenews.com