LONDON MARKET OPEN: US-China Caution; Hargreaves Rises And Mondi Falls

(Alliance News) - London stocks opened Thursday's session on a cautious note, with investors eyeing the latest round of trade talks between the US and China, though not much progress is expected.

Hargreaves Lansdown was the top blue-chip performer in early trade after reporting first-quarter growth, while Mondi slid to the bottom of the large-cap index after a fall in third-quarter earnings.

The FTSE 100 index was up 6.93 points, or 0.1%, at 7,173.43 early Thursday. The FTSE 250 was up 59.04 points, or 0.3%, at 19,230.64, and the AIM All-Share was flat at 856.40.

The Cboe UK 100 index was up 0.1% at 12,166.43. The Cboe UK 250 was 0.1% higher at 17,110.91 and the Cboe UK Small Companies flat at 10,781.70.

In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were up 0.3% and down 0.1% respectively in early trade.

Naeem Aslam at ThinkMarkets said the general stance among investors is "that they want to stay on the sideline" ahead of current trade talks.

The Chinese delegation headed by Vice Premier Liu He will meet with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday in a renewed attempt to end a trade war that threatens global economic growth.

Recent US decisions have damped hopes that these talks will lead to a positive outcome, however. These include Washington's decision to place visa restrictions on Chinese officials over accusations of human rights violations against minority Muslim Uighurs and to blacklist 28 Chinese organizations that the US says pose a risk to national security.

"The tit-for-tat behaviour has been going on for some time, and the hopes are that both countries would be able to hammer out an intern deal which perhaps draws a cease-fire line. We have used our words carefully because the cease-fire doesn’t mean the reversal of current tariffs which are weighing on both economies. If we see anything meaningful and constructive on this, then it would be a landslide victory for the officials of both countries," said Aslam.

In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite ended up 0.7%, while the Hang Seng index in Hong Kong is up 0.4% in late trade.

The economic events calendar on Thursday has UK industrial and manufacturing figures, along with a gross domestic product estimate for August, at 0930 BST and US inflation readings at 1330 BST.

Already released, Germany reported a smaller-than-expected trade surplus in August as exports shrunk on the month prior. The August print also disappointed the EUR19.1 billion surplus forecast by economists, according to FXStreet compiled data.

The surplus was held back by exports falling 1.8% on a calendar and seasonally adjusted basis to EUR109.2 billion compared to July, whilst imports rose 0.5% to EUR91.1 billion on the month prior.

Data from the Destatis on Thursday showed the calendar and seasonally adjusted the trade surplus in August stood at EUR18.1 billion, down from the EUR20.2 billion reported in July.

In UK politics, Britain and the EU on Wednesday agreed to hold last-ditch talks aimed at securing a Brexit deal with just days left to thrash out an agreement, as the two sides accuse each other of failing to compromise.

Brexit Secretary Steve Barclay will meet his EU counterpart Michel Barnier in Brussels in an attempt to break the impasse before an October 17-18 summit.

Barnier played down hopes of a breakthrough before EU leaders meet, even as he promised to work around the clock to the deadline. He said the EU could not accept Britain's proposals as they stand, arguing they would undermine peace and weaken the European single market.

The pound was quoted at USD1.2245 early Thursday, up on USD1.2222 late Wednesday.

In London's FTSE 100, fund supermarket Hargreaves Lansdown was the top performer, up 1.5% after reporting a rise in new business and clients in the first quarter.

The firm reported net new business of GBP1.7 billion in the three months to September 30, with net new clients of 35,000. Assets under administration at the period-end totalled GBP101.8 billion, up 3% on the June 30 figure.

Net figure for the quarter amounted to GBP128.1 million, up 6% year-on-year.

"I'm pleased to report a solid start to our financial year for client, net new business and revenue growth. We continue to focus on our strategy of delivering excellent service, information and value during these continued uncertain times for our clients," said Chief Executive Chris Hill.

Back in June, Hill "expressed his regret" for the "distress, uncertainty and inconvenience" caused by fund manager Neil Woodford freezing redemptions from his funds, which had been included in the Hargreaves Wealth 50 list.

Hill made no further comment on Woodford in his statement Thursday.

Mondi trailed at the bottom of the index, down 2.3% after it said underlying earnings for the third quarter of 2019 dropped due to softer demand in markets and lower prices for the group's key paper grades.

For the three months to the end of September, underlying earnings before interest, taxes, depreciation and amortisation dropped 18% to EUR383 million from EUR466 million the year before. Like-for-like sales volumes were, on average, slightly lower than the prior year due to lower industrial bags and uncoated fine paper volumes, despite growth in corrugated packaging.

Looking ahead, Mondi expects planned mill maintenance shuts to have an EUR150 million effect on underlying Ebitda for 2019 as a whole, up from a EUR110 million hit incurred the year before. In addition, the group said prices in the fourth quarter were marginally lower than in the third quarter.

Home furnishings retailer Dunelm was down 5.1% as it said trading was strong at the start of its first quarter, but conditions softened in September.

Like-for-like sales increased 6.4% in the first quarter, or the 13 weeks to September 28. Like-for-like store sales were up 2.9%, and online sales surged 35%. Total sales were up 7.5%, benefiting from new stores.

The beginning of the quarter was particularly strong, the firm said, reflecting continued market share gains and a weak comparative period last year. In September trading was mixed amid a softer homewares market.

Despite this recent market softness and increased political uncertainty, Dunelm backed its annual outlook.

"We are pleased with our performance in the first quarter, building on the strong growth delivered over the last year. Our customers continue to respond well to our specialist product and service offering and we are excited by the numerous opportunities ahead of us," said Chief Executive Nick Wilkinson.

Sabre Insurance, down 2.8%, said gross written premiums were lower in the first nine months of the year, as expected.

Sabre said gross written premiums were GBP152.9 million for the nine months to September, down from GBP162.6 million a year ago. Full-year premiums are expected to be 7% lower than 2018, in line with previous guidance.

Meanwhile, Sabre expects to deliver a combined ratio in 2019 slightly better than its "mid-70%'s" target.

"Our performance so far in this financial year has been in line with our expectations, and we remain confident that we will deliver a combined ratio slightly below our long-term target and an attractive dividend for the full year," said Chief Executive Geoff Carter.

The lower an insurer's combined ratio the more profitable its underwriting.

Retailer N Brown Group was up 5.0% as it swung to an interim profit despite revenue dipping.

Revenue in the half-year to August 31 was down 5.4% to GBP432.9 million, though N Brown swung to a pretax profit of GBP18.8 million from a GBP27.1 million loss a year ago. This was mainly because the firm booked a GBP65.4 million in exceptional costs a year ago, versus just GBP25.0 million in the recently ended period.

The Simply Be owner kept its dividend flat at 2.83p per share.

"The retail environment remains heavily promotional, but we are concentrating on continuing to improve our customer proposition and ensuring we operate as efficiently as possible, which has led to an increase of 4% in adjusted Ebitda for the period. We remain focussed on implementing our plans and the board's full year expectations are unchanged," said Chief Executive Steve Johnson.

By Lucy Heming; lucyheming@alliancenews.com

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