LONDON MARKET OPEN: UK Election Poll-Hit Pound Helps FTSE 100 Higher

(Alliance News) - The mood was cautious early on Wednesday as a US-China tariff deadline looms, though the FTSE 100 index's overseas earners were boosted by a weaker pound.

Sterling was knocked overnight by a closely-watched poll signalling the Conservative party has a narrower than expected lead in the UK election.

The FTSE 100 index was up 27.18 points, or 0.4%, at 7,240.94 early Wednesday. The mid-cap FTSE 250 index was down 20.64 points, or 0.1%, at 20,760.45. The AIM All-Share index was 0.1% lower at 899.55.

The Cboe UK 100 index was up 0.4% at 12,276.12. The Cboe 250 was flat at 18,724.02, and the Cboe Small Companies down 0.1% at 11,384.04.

In mainland Europe, the CAC 40 in Paris was flat and the DAX 30 in Frankfurt up 0.2% in opening trade.

Markets are in "wait-and-see" mode ahead of Sunday's deadline for the latest raft of US tariffs on China, said Danske Bank.

A fresh round of levies on USD160 billion of Chinese exports to the US is due to be imposed on Sunday, and so far there has been no word from the White House on a possible postponement of that date.

A ray of hope on Tuesday came from a report in the Wall Street Journal, which said that US and Chinese officials were working on a deal to postpone a round of tariffs set to hit Chinese imports in five days. However, US President Donald Trump's top economics adviser Larry Kudlow warned that the measures remained in play for now, although he did say that Trump had struck a "constructive and optimistic tone" on China.

"We expect the tariffs will be postponed, as Trump cannot risk another period of escalation hurting the US economy ahead of the upcoming presidential election next year. That's of course assuming Trump is rational, and we cannot be certain until we see the tweet from Trump confirming it or a statement from the White House," said Danske Bank.

In Asia on Wednesday, Tokyo's Nikkei 225 index ended down 0.1%. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index in Hong Kong finished 0.8% higher.

Sterling was quoted at USD1.3115 early Wednesday, lower than USD1.3176 at the London equities close on Tuesday.

"Just before the UK election, it's getting interesting after all. According to a highly anticipated YouGov survey, which is taking into account smaller parties, the Tories' lead is more narrow than thought so far," said Thu Lan Nguyen at Commerzbank.

YouGov's MRP poll predicts the Conservatives are on course for a 28-seat majority – but the margin of error and unknown impact of tactical voting means a hung parliament is still a possibility. A 28-seat majority would be the best Tory result since Margaret Thatcher's showing in 1987 – but it is down from the sizeable 68-seat victory that the same style poll had been predicting only two weeks ago.

Chris Curtis, YouGov's political research manager, said: "The margins are extremely tight and small swings in a small number of seats, perhaps from tactical voting and a continuation of Labour's recent upward trend, means we can't currently rule out a hung parliament."

Commerzbank said: "If [the Conservatives] should even miss a majority in the end, this would be a particularly hard blow for sterling bulls. Because not only would the pound then need to give up all its gains of the past weeks, but also the Brexit suffering of recent years would continue indefinitely, that is: There would still be no majority for a Brexit solution in Parliament, which would either lead to a 'rolling EU membership' and continuing Brexit uncertainty, or in a 'political accident' at some point and a hard Brexit."

Elsewhere in the currency market, the euro was quoted at USD1.1084 early Wednesday, lower than USD1.1095 late Tuesday. Against the yen, the dollar was quoted at JPY108.71, flat versus JPY108.70.

In London early Wednesday, miners were higher on hopes that US tariffs on China will be avoided on Sunday. Anglo American was up 1.8%, Rio Tinto up 1.5% and BHP Group up 1.3%.

Stagecoach was 6.5% higher after reporting a "solid" half-year and making a number of board changes.

Revenue for the six months to October 26 was GBP800.2 million, down from GBP1.01 billion a year ago. However, pretax profit rose to GBP65.9 million from GBP48.9 million.

The fall in revenue reflected the end of the Virgin Trains East Coast franchise in June 2018 and the end of the East Midlands Trains franchise in August 2019. The profit rise, meanwhile, was due to a non-repeating cost of GBP24.2 million taken a year ago in relation to the equalisation of guaranteed minimum pension benefits.

Separately, Stagecoach unveiled some management changes, with Brian Souter to step down as chair at the end of the year but carry on as a non-executive director.

Ray O'Toole, a non-executive director, will be appointed as chair at the start of next year.

Deputy Chair & Senior Independent Director Will Whitehorn will support the chair transition and, as previously announced by Stagecoach, will step down from the board on June 30. At that point, reflecting the fact that an independent chair is in place, the role of deputy chair will be discontinued.

Souter co-founded Stagecoach and was its chief executive until 2013.

Souter said that "the time is right" to step down as chair. "My family and I continue to have a significant shareholding in Stagecoach, and I have every confidence in the management team, our strategy and the positive prospects of the business," he said.

In addition, Ann Gloag and Ewan Brown, both long-serving non-executive directors, will retire from the board at the end of 2019.

Tullow Oil was up 4.9%, continuing to climb following a dire start to the week. The stock gained 14% on Tuesday after slumping 72% on Monday on the suspension of its dividend, a "reset" of future production guidance, and the resignation of Chief Executive Officer Paul McDade.

M&C Saatchi was down 6.8% after a number of board members resigned late Tuesday, including Executive Director & Co-Founder Maurice Saatchi.

In addition, Non-Executive Directors Michael Dobbs, Michael Peat and Lorna Tilbian have all stepped down with immediate effect.

Last week, M&C Saatchi warned annual profit was set to be well below the prior year. This was the firm's second such warning in the quarter.

So far this year, the advertising agency has slumped 67%.

To come in the UK corporate calendar on Wednesday are annual results from TUI, expected around midday.

In the economic calendar on Wednesday, there are US consumer prices at 1330 GMT followed by the Federal Reserve's interest rate decision at 1900 GMT and a press conference with Fed Chair Jerome Powell at 1930 GMT.

"The messaging is most likely to be market-neutral with Powell set to reaffirm data dependency and the continued resilience of the US economy and consumer, which remains in a "good place". However, with November US CPI due earlier in the day, there could be hints from Powell that indicate upside inflation risks are worth talking about again – though, I wouldn't bet on it," said Bethel Loh at ThinkMarkets.

In commodities, gold was quoted at USD1,464.60 early Wednesday, firm on USD1,463.59 at the London equities close on Tuesday.

Brent oil was quoted at USD63.94 early Wednesday, down from USD64.34 at the London equities close on Tuesday.

By Lucy Heming; lucyheming@alliancenews.com

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