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London close: Bounce in stocks fizzles out amid latest trade headlines

By Alexander Bueso

Date: Wednesday 20 Jun 2018

London close: Bounce in stocks fizzles out amid latest trade headlines

(Sharecast News) - London stocks finished higher on Wednesday, but well off their best levels of the day, as investors put their concerns about the US-China trade spat to one side, at least for now.
The FTSE 100 was up by 0.31% or 23.55 points to 7,627.40, while the pound was 0.22% higher against the euro at 1.1392 and by another 0.19% to 1.3199 versus the dollar.

Nevertheless, the buying was punctuated by pullbacks as first Brussels and then China announced retaliatory trade tariffs on US goods.

Shortly before noon, the European Commission announced €2.8bn of rebalancing measures against exports from the US, triggering some selling, followed by reports that Beijing was set to announce a second round of counter tariffs against Washington, stoking more selling..

In the background meanwhile, Sterling gained even after the government saw off a challenge from Conservative party rebels who want to give MPs a "meaningful vote" in the event that Britain might leave the EU without a deal.

In the end, the chief Tory rebel, Dominic Grieve, backed down, fearful of undermining the government's negotiations with Brussels, although for some observers further showdowns in Parliament over coming months remained very likely.

This comes as a leaked draft of conclusions for next week's European Council called for "member states and all stakeholders to step up their work on preparedness at all levels for all outcomes" -- with other leaks from officials reported in the media that the talks are expected to fail.

Chris Beauchamp, chief market analyst at IG, said: "Early optimism in European stock markets faded somewhat during the afternoon, with a rare day in the green gradually diluted towards the end of the session. Wider market sentiment is still susceptible to escalating trade wars.

"China is expected to announce countermeasures after the US targeted another $200bn of Chinese goods. While today marked an hiatus from the widespread selling of late, there is little to suggest that sellers will not return before long. Not to be forgotten, the EU has also laid out $3.2 billion worth of US goods which will be targeted by a 25% tariff on Friday."

A survey from the CBI released late morning showed that UK manufacturing recovered in June, suggesting a turnaround for factory output after a slowdown earlier in 2018.

Manufacturing output rose at its fastest pace since December 2017 in the three months to June, according to the CBI's survey of 388 companies. Growth was broad-based with output expanding in 14 out of 17 sub-sectors, led by food, drink and tobacco and mechanical engineering. Order books revived to levels recorded at the end of 2017 and export orders were stable.

The CBI's industrial trends survey found 33% of manufacturers with order books above normal and 20% below normal giving a balance of +13 - a major improvement on May's balance of -3. In June 43% of businesses reported higher output and 13% said it was down. The balance of +29 was the strongest showing since December 2017 and a rebound from May's flat result.

The positive findings in June followed three months of gloomy surveys that resulted in output slowing to its weakest for more than two years in May. The run of weak surveys had raised concerns that manufacturing was suffering from slowing external demand and not short-term wintry weather.

On the corporate front, Glencore, Antofagasta and Rio Tinto were all in the green. Asia-oriented stocks such as miners and HSBC, said Artjom Hatsaturjants, analyst at Accendo Markets, "are heaving a sigh of relief that US-China reciprocal tit-for-tat tariff threats are a way off becoming tangible policy".

Ocado was the standout gainer as Peel Hunt hiked its price target on the stock to 1,700p from 610p and called it the "Microsoft of retail".

British Land rose after saying that 63% of the estimated rental value of properties were let or under offer across its total development pipeline, with 45% of ERV of committed developments across Broadgate in the City of London.

Legal & General ticked higher as it said it expects its asset management division to increase profit by up to 10% a year in normal markets.

LondonMetric Property nudged up after announcing the acquisition of ten single-let properties for £55m from the ACT Foundation.

Sports Direct edged lower after saying it had disposed of its stake in US sportswear retailer Finish Line and taken a further 8.6% interest in US brand management company Iconix Brand Group.

Sirius Minerals rallied after announcing a seven-year year supply deal which will see it sell POLY4, the fertilizer product from its Yorkshire mine, to Intercontinental Trade DMCC Dubai.

On the downside, housebuilder Berkeley Group was in the red despite upping its profit guidance after reporting a 15% increase in annual profit, as its outlook was cautious. Other housebuilders also retreated, with Barratt, Taylor Wimpey, Bovis, Redrow and Bellway weaker.

In broker note action, British American Tobacco and Imperial Brands were started at 'buy' by Liberum.

BT was upgraded to 'buy' at Jefferies, while Mediclinic was lifted to 'hold' at HSBC.

Wizz Air was boosted to 'outperform' by Davy, but it cut EasyJet to 'neutral'.

McCarthy & Stone was downgraded to 'hold' at Jefferies after the retirement housebuilder's profit warning on Tuesday, while SSE was cut to 'sector perform' by RBC Capital Markets and Auto Trader was pushed down to 'hold' at Canaccord.

Market Movers

FTSE 100 (UKX) 7,627.40 0.31%
FTSE 250 (MCX) 20,926.38 0.43%
techMARK (TASX) 3,552.41 0.46%

FTSE 100 - Risers

Ocado Group (OCDO) 1,001.50p 5.55%
Imperial Brands (IMB) 2,705.00p 3.20%
Sky (SKY) 1,380.00p 3.14%
BT Group (BT.A) 214.30p 2.71%
British American Tobacco (BATS) 3,779.00p 2.38%
Just Eat (JE.) 823.20p 2.06%
Smurfit Kappa Group (SKG) 3,092.00p 2.05%
Sainsbury (J) (SBRY) 316.80p 2.00%
Ashtead Group (AHT) 2,311.00p 1.94%
ITV (ITV) 173.15p 1.91%

FTSE 100 - Fallers

Berkeley Group Holdings (The) (BKG) 3,893.00p -5.90%
Royal Mail (RMG) 498.70p -2.67%
Next (NXT) 5,862.00p -2.17%
Barratt Developments (BDEV) 538.00p -1.54%
Hargreaves Lansdown (HL.) 1,983.00p -1.49%
Marks & Spencer Group (MKS) 293.60p -1.28%
BP (BP.) 564.40p -1.10%
3i Group (III) 935.00p -1.06%
Royal Dutch Shell 'A' (RDSA) 2,538.50p -0.90%
Kingfisher (KGF) 301.80p -0.89%

FTSE 250 - Risers

JD Sports Fashion (JD.) 428.10p 5.37%
Telecom Plus (TEP) 1,094.00p 4.21%
Premier Oil (PMO) 112.60p 3.87%
Contour Global (GLO) 224.00p 3.70%
Wizz Air Holdings (WIZZ) 3,769.00p 3.06%
Cineworld Group (CINE) 257.00p 2.80%
Coats Group (COA) 78.70p 2.61%
NewRiver REIT (NRR) 283.50p 2.53%
Entertainment One Limited (ETO) 367.00p 2.46%
Sophos Group (SOPH) 596.50p 2.40%

FTSE 250 - Fallers

Alfa Financial Software Holdings (ALFA) 180.00p -4.05%
Dixons Carphone (DC.) 190.75p -3.17%
McCarthy & Stone (MCS) 105.50p -2.50%
Safestore Holdings (SAFE) 535.00p -2.28%
Energean Oil & Gas (ENOG) 500.00p -1.57%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 325.00p -1.52%
Bellway (BWY) 3,182.00p -1.36%
Card Factory (CARD) 193.30p -1.23%
Ultra Electronics Holdings (ULE) 1,650.00p -1.20%
Equiniti Group (EQN) 249.00p -1.19%

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