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CATEGORY: MARKET REPORT - CLOSE

London close: Markets breathe sigh of relief after US midterms

Wed 07 Nov 2018

LONDON (SHARECAST) - (Sharecast News) - After US mid-term elections panned out pretty much as expected, London stocks extended gains as Wednesday's session wore on, as strength in the mining sector helped to offset disappointing updates from M&S, ITV and G4S, against the backdrop of another session of gains on Wall Street.
The FTSE 100 was up 1.09% to 7,117.28, alongside a gain of 0.54% to 19,147.22 for the second-tier index, while the pound was up 0.5% against the dollar at 1.31414 and by 0.03% versus the euro to 1.1466.

The mid-term election results in the US saw the Democrats wrest control of the House of Representatives while the Republicans tightened their grip on the Senate, both as expected.

Markets had treaded cautiously in the run-up to the ballot due to the impossibility of discarding the risk of unexpected surprises.

Potential political gridlock on Capitol Hill might result in a flatter US Treasury yield curve as markets priced-out the possibility of further fiscal stimulus in the near-term and a weaker dollar initially, said strategists at Bank of America-Merill Lynch.

Further out, it was possible that US Republicans and Democrats might reach a "compromise" on more fiscal stimulus, with the latter apparently making the case for more investment in infrastructure, BofA-ML added.

However, the investment bank's strategists believed US President Donald Trump's negotiating position vis-a-vis China may well have been weakened.

Back in the UK, the latest housing market survey from mortgage lender Halifax showed that annual price growth slowed to 1.5% in the three months to October from 2.5% in September, marking the slowest rate of growth since March 2013 and falling short of the 1.2% growth expected. On the month, house prices were up 0.7% in October following a 1.3% decline the month before, beating expectations for a 0.3% increase.

Halifax managing director Russell Galley said growth was still within Halifax's forecast annual range of between 0% and 3% for 2018 and that house prices continue to be supported by the fact that the supply of new homes and existing properties available for sale remains low.

"Further house price support comes from an already high and improving employment rate and historically low mortgage rates which are creating higher rates of relative affordability. We see this continuing to be the case over the coming months and we remain supportive of our 0-3% forecast range," Galley said.

Miners were the standout gainers, with Antofagasta, Anglo, Rio Tinto and Glencore benefiting from rising copper prices and a weaker greenback, which makes dollar-denominated commodities cheaper to buy for holders of other currencies.

Precious metals miner Fresnillo was the top gainer throughout most of the session as gold prices rose on the back of the softer dollar.

On the downside, ITV was the worst performer as the broadcaster warned that it has seen some softening in advertising revenues at the start of the fourth quarter due to Brexit uncertainty and now expects total advertising to be broadly flat over the full year.

Marks & Spencer followed close behind as the retailer reported sales down 3.1% in the first half of the year but higher underlying profits thanks to phasing of cost cuts. The retailer's food like-for-like sales fell 2.9% amid tough competition in the supermarket sector, while clothing and home sales shrank 1.1%.

There may well be a link between the two companies, said Russ Mould, investment director at AJ Bell, with ITV's warning ad revenues falling 3% in the fourth quarter, with the key month of December down by 6-8%.

"That suggests that major ad spenders are retrenching and one of those may be Marks & Spencer, whose Christmas marketing campaigns in the past have featured everyone from Paddington to Peter Kay," Mould added, noting that a drop in the retailer's day-to-day running costs included a 7.4m cut to marketing spend.

Housebuilder Persimmon was up as it announced that chief executive Jeff Fairburn will step down at the end of the year following outrage over his 110m pay package, while sector peer Redrow fell as it announced the retirement of chairman and founder Steve Morgan and said the London sales market remained subdued in the first 18 weeks of its trading year.

Pub group JD Wetherspoon slumped, taking rivals Greene King, Mitchells & Butlers and EI Group, down with it, after warning that rising wage costs will hit full year results profits.

Security software group Sophos tumbled 29% as its first-half revenues fell short of analysts' expectations and the company warned on billings and future growth.

Security services firm G4S also suffered heavy losses after a disappointing trading statement, with organic growth for the third quarter coming in at 2.5% versus expectations of around 4.5%.

In broker note action, British Land was cut to 'equalweight' by Barclays, while Hammerson was downgraded to 'underweight'. Royal Bank of Scotland was lifted to 'outperform' at Macquarie.

Market Movers

FTSE 100 7,117.28 +1.09%

FTSE 250 19,147.22 +0.54%

FTSE 100 - Risers

NMC Health (NMC) 3,500.00p +4.29%

Associated British Foods (ABF) 2,565.00p +4.27%

Melrose Industries (MRO) 174.00p +3.88%

Fresnillo (FRES) 902.00p +3.56%

CRH (CRH) 2,313.00p +3.40%

Ashtead Group (AHT) 1,948.00p +3.34%

International Consolidated Airlines Group SA (CDI) (IAG) 629.40p +3.01%

Centrica (CNA) 153.10p +2.55%

Scottish Mortgage Inv Trust (SMT) 491.90p +2.52%

British American Tobacco (BATS) 3,426.00p +2.48%

FTSE 100 - Fallers

ITV (ITV) 150.00p -2.76%

Royal Mail (RMG) 348.00p -1.42%

Direct Line Insurance Group (DLG) 318.60p -1.27%

GVC Holdings (GVC) 883.00p -0.95%

Compass Group (CPG) 1,519.50p -0.85%

BT Group (BT.A) 249.25p -0.70%

Smith (DS) (SMDS) 382.50p -0.68%

Coca-Cola HBC AG (CDI) (CCH) 2,260.00p -0.57%

Marks & Spencer Group (MKS) 300.90p -0.53%

Schroders (SDR) 2,587.00p -0.42%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 2,890.00p +8.36%

UDG Healthcare Public Limited Company (UDG) 677.50p +5.28%

Intermediate Capital Group (ICP) 951.00p +3.76%

Safestore Holdings (SAFE) 543.00p +3.63%

Auto Trader Group (AUTO) 439.10p +3.56%

Card Factory (CARD) 191.90p +3.51%

Just Group (JUST) 90.55p +3.49%

Cairn Energy (CNE) 208.00p +3.48%

Mediclinic International (MDC) 380.10p +3.29%

Coats Group (COA) 83.90p +3.07%

FTSE 250 - Fallers

Sophos Group (SOPH) 324.00p -29.04%

G4S (GFS) 178.15p -17.68%

Wetherspoon (J.D.) (JDW) 1,138.00p -13.20%

Contour Global (GLO) 173.30p -6.43%

NewRiver REIT (NRR) 241.50p -3.40%

William Hill (WMH) 194.25p -3.21%

Vivo Energy (VVO) 106.00p -3.13%

Bakkavor Group (BAKK) 143.40p -2.98%

Sports Direct International (SPD) 313.90p -2.88%

Redrow (RDW) 549.00p -2.83%

FTSE TechMARK - Risers

SDL (SDL) 508.00p +4.96%

Consort Medical (CSRT) 1,124.00p +2.18%

NCC Group (NCC) 199.30p +1.74%

Vectura Group (VEC) 71.40p +1.71%

Ricardo (RCDO) 716.00p +1.42%

KCOM Group (KCOM) 94.00p +0.97%

BATM Advanced Communications Ltd. (BVC) 41.80p +0.60%

Microgen (MCGN) 402.00p +0.50%

Xaar (XAR) 152.80p +0.39%

FTSE TechMARK - Fallers

Dialight (DIA) 362.00p -0.55%

XP Power Ltd. (DI) (XPP) 2,500.00p -0.40%

RM (RM.) 198.00p -0.25%
 
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