London close: Stocks finish week in the green, despite warnings around 'no deal' Brexit

Fri 14 Sep 2018

LONDON (SHARECAST) - (Sharecast News) - London stocks finished higher on Friday, recovering from the previous session's drop, with housebuilders paring their losses and helped by a positive start to trading on Wall Street.
The FTSE 100 was up 0.31% or 22.47 points to 7,304.04, while the pound was 0.28% lower against the dollar at 1.30721 but up by 0.21% versus the euro to 1.1235.

In a private Downing Street briefing on Thursday, BoE Governor Mark Carney warned ministers that a "no-deal" Brexit could see house prices crash by a third, according to reports.

Carney laid out three different scenarios the Bank believes could come to pass if Britain leaves the EU without a withdrawal agreement, with the worst-case scenario being Britain going into recession, with a further slump in the value of the pound and a 35% fall in house prices over three years.

This put pressure on housebuilding stocks early on Friday, but by the end of trading most of them had pared their losses.

In a speech at Ireland's central bank later in the morning, Carney said that Britain's largest banks are well prepared for a disorderly Brexit but that uncertainty about the economic outlook is holding back pay growth.

"The Bank of England is well-prepared for whatever path the economy takes, including a wide range of potential Brexit outcomes. We have used our stress test to ensure that the largest UK banks can continue to meet the needs of UK households and businesses even through a disorderly Brexit, however unlikely that may be," Carney said.

"Our job, after all, is not to hope for the best but to plan for the worst. The MPC will respond to any persistent change in the outlook to bring inflation sustainably back to 2% target while doing what it can to support jobs and activity. The appropriate policy response is not automatic and will depend on the balance of the effects on demand, supply, and the exchange rate."

Buoying UK shares, the latest readings on monthly US retail sales and industrial production published on Friday saw economists at Barclays Research bump-up their tracking estimate for third quarter US GDP growth by two tenths of a percentage point to 3.2%.

As far as trade relations are concerned, there had been some hope of progress in recent days after Chinese officials welcomed an invitation for new talks from US Treasury Secretary Steve Mnuchin.

However, a tweet from US President Trump on Thursday did little to assuage nerves, as he said: "The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?"

Indeed, after the close of markets in London, reports surfaced according to which Trump favoured moving ahead with placing tariffs on a further $200.0bn-worth of Chinese goods even as efforts to progress on trade talks moved forward.

Deutsche Bank said in a note that its economists expect a negotiated settlement between the US and China over the coming quarters, with only a minimal negative impact of tariffs on global GDP growth.

"We note that global PMI new export orders tend to move in line with overall global PMI new orders, which we expect to pick up, helped by improvements in euro area and China PMIs," DB said.

In corporate news, Shire was the standout gainer after Japan's Takeda Pharmaceuticals' acquisition of the London-listed company was approved by Chinese regulators.

Investec surged after saying interim profit should be ahead of last year and announcing plans to demerge and publicly list it asset management arm.

Russ Mould, investment director at AJ Bell, said Investec's plan to spin off the asset management arm looks sensible and should allow management more freedom to drive that business forward and not be constrained by having to follow the strategy of the current parent which is predominantly a specialist banking business.

"Unbundled companies have the freedom to be more entrepreneurial. From an investment perspective, demerged companies are often valued at a greater sum than when they were combined - which explains why Investec's share price jumped on the break-up announcement," he said.

"Separation can sometimes entice takeover interest should a predator have been interested in part of a company but was previously put off from making an offer as it didn't want to swallow the whole group."

Sirius Minerals rallied after it secured a new $250m funding deal with Australia's Hancock Prospecting that would help fund a polyhalite project in Yorkshire.

Close Brothers advanced as it announced the sale of its retail point of sale finance business, Close Brothers Retail Finance, to Swedish payment solutions group Klarna for an undisclosed sum.

JD Wetherspoon was in the red even as it reported profits slightly ahead of forecasts. The pub group's like-for-like-sales rose 5.0%, which was short of the 5.2% expected, but profit before tax rose 6.2% to 107.2m versus forecasts for nearer 106m.

AstraZeneca fell after it and its global biologics research and development arm MedImmune were given approval from the US Food and Drug Administration for a treatment for hairy cell leukaemia.

In broker note action, Safecharge was upgraded to 'overweight' by Barclays, while EnQuest was cut to 'equal-weight'. Whitbread was lifted to 'overweight' at JPMorgan.

Market Movers

FTSE 100 (UKX) 7,304.04 0.31%
FTSE 250 (MCX) 20,375.87 0.65%
techMARK (TASX) 3,472.23 0.61%

FTSE 100 - Risers

TUI AG Reg Shs (DI) (TUI) 1,377.00p 3.81%
Burberry Group (BRBY) 2,158.00p 3.36%
Rolls-Royce Holdings (RR.) 981.20p 2.74%
Reckitt Benckiser Group (RB.) 6,680.00p 2.67%
DCC (DCC) 7,115.00p 2.67%
Ashtead Group (AHT) 2,394.00p 2.57%
BAE Systems (BA.) 626.00p 2.49%
Anglo American (AAL) 1,545.00p 2.28%
Mondi (MNDI) 2,137.00p 2.20%
Shire Plc (SHP) 4,486.50p 2.20%

FTSE 100 - Fallers

SSE (SSE) 1,084.00p -3.21%
GVC Holdings (GVC) 1,031.00p -2.55%
Informa (INF) 734.60p -2.13%
Severn Trent (SVT) 1,884.00p -1.49%
United Utilities Group (UU.) 700.20p -1.13%
Morrison (Wm) Supermarkets (MRW) 257.40p -1.10%
Fresnillo (FRES) 786.80p -1.03%
Smurfit Kappa Group (SKG) 3,058.00p -0.97%
Paddy Power Betfair (PPB) 6,920.00p -0.93%
SEGRO (SGRO) 647.00p -0.92%

FTSE 250 - Risers

Investec (INVP) 528.60p 8.36%
Ferrexpo (FXPO) 155.75p 4.78%
Weir Group (WEIR) 1,652.00p 4.03%
Man Group (EMG) 176.90p 3.85%
BCA Marketplace (BCA) 218.50p 3.55%
Charter Court Financial Services Group (CCFS) 343.60p 3.49%
Ashmore Group (ASHM) 363.60p 3.35%
Sophos Group (SOPH) 517.50p 3.09%
Energean Oil & Gas (ENOG) 568.00p 2.90%
Crest Nicholson Holdings (CRST) 368.00p 2.79%

FTSE 250 - Fallers

Premier Oil (PMO) 120.90p -3.28%
Clarkson (CKN) 2,670.00p -2.73%
Contour Global (GLO) 203.60p -2.68%
Rank Group (RNK) 172.00p -2.60%
BBA Aviation (BBA) 288.80p -2.17%
Coats Group (COA) 84.00p -1.98%
Serco Group (SRP) 96.85p -1.73%
Equiniti Group (EQN) 250.00p -1.58%
Daejan Holdings (DJAN) 5,990.00p -1.34%
Wetherspoon (J.D.) (JDW) 1,263.00p -1.33%
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