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London close: Investors tread cautiously through geopolitical risks

By Alexander Bueso

Date: Monday 12 Aug 2019

London close: Investors tread cautiously through geopolitical risks

(Sharecast News) - London stocks finished lower on Monday with investor sentiment was dented by reports that Hong Kong airport had cancelled all flights after thousands of anti-government demonstrators descended on the building.
The FTSE 100 was 0.37% weaker at 7,226.72.

"It is easy to imagine a scenario where a clampdown on Hong Kong protests provokes a US protest or strong economic response, and then leads to a more worrying strategic confrontation between the powers," said IG's Chris Beauchamp.

"Such musings are likely overblown, but in the febrile atmosphere promoted by trade wars and the unpredictable nature of the US president, almost any scenario can be imagined."

In currency markets, the pound was up 0.35% against the US dollar at 1.20684 and 0.19% firmer versus the euro at 1.0762. Sterling fell as low at 1.2010 against the Greenback in Asian trade.

Beauchamp interpreted Monday's slight bounce in Sterling against the backdrop of the economic reports that were still due out over the remainder of the week in the UK, telling clients that any positive surprises might see the pound snap back - even if only for a time.

In terms of the outlook for stocks globally, strategists at JP Morgan led by Mislav Matejka said on Monday that "the current period of volatility will not last longer than what we have seen during the May pullback, especially as the [earnings yield-bond yield] gap is already close to the extremes seen at the worst point of the December selloff."

Nonetheless, Matejka and his team were anticipating a short-term pullback - possibly in the high single digits - that might last "perhaps a few weeks".

Their peers at Citi were also positive on US stocks, but cautioned that markets' expectations for corporate profits were likely to see another reset lower in a few months' time.

China worries still very much present

More broadly, Sino-US trade relations remained in focus after US President Trump said on Friday that he 'won't do business with Huawei' and suggested that the planned trade meeting for September might not take place.

It was later reported that Trump was only referring to the US government; nevertheless, after the closing bell on Wall Street, White House trade advisor Peter Navarro reportedly said that Washington would respond if China tried to offset the impact on its economy from tariffs by weakening the country's currency, the yuan.

In equity markets, Rolls-Royce was under the cosh following reports that small fragments of a Norwegian Boeing 787 Dreamliner - possibly from the engine - fell from the sky as the plane encountered technical trouble and had to make an emergency landing in Rome. The Boeing 787 Dreamliner uses Rolls-Royce's Trent 1000 turbofan engine.

Shipping services company Clarkson was in the red even as it posted a rise interim revenue and underlying profit despite challenging markets.

Acacia Mining was higher after announcing that it could now resume gold exports from its North Mara mine in Tanzania after receiving government clearance. The ban was introduced in 2017 to keep processing activities in Tanzania.

UDG Healthcare was down after being cut to 'sector perform' by RBC Capital Markets, while Ultra Electronics was knocked lower by a downgrade to 'hold' out of Berenberg.

Outside the FTSE 350, share of travel company Thomas Cook slumped after it said it is in talks with its creditors about a further £150m cash injection, on top of the £750m it is negotiating with Chinese shareholder Fosun. The company said existing shareholders are expected to be "significantly" diluted as part of the recapitalisation, which it expects to implement in early October.

On the upside, SSE gained as the energy company confirmed it is in talks over the possible sale of its energy services business to rival Ovo Group.

Tullow Oil shares rallied sharply after the oil and gas exploration group said it has made a "substantial and high value" oil discovery in Guyana. The shares got an added boost from an upgrade to 'buy' at Berenberg.

Hammerson gave up early gains on the back of an upgrade to 'outperform' at RBC Capital Markets, while Merlin Entertainments nudged up after an upgrade to 'hold' at HSBC.

Market Movers

FTSE 100 (UKX) 7,226.72 -0.37%
FTSE 250 (MCX) 18,913.00 -0.94%
techMARK (TASX) 3,824.52 -0.39%

FTSE 100 - Risers

Reckitt Benckiser Group (RB.) 6,142.00p 1.84%
SSE (SSE) 1,109.50p 1.37%
Just Eat (JE.) 800.40p 1.32%
Fresnillo (FRES) 687.60p 1.30%
Diageo (DGE) 3,424.00p 1.15%
Unilever (ULVR) 4,927.50p 1.09%
Smith & Nephew (SN.) 1,897.50p 0.80%
Halma (HLMA) 1,979.00p 0.79%
InterContinental Hotels Group (IHG) 5,383.00p 0.79%
Royal Dutch Shell 'B' (RDSB) 2,357.00p 0.77%

FTSE 100 - Fallers

NMC Health (NMC) 1,921.00p -5.04%
Rolls-Royce Holdings (RR.) 752.20p -3.49%
Schroders (SDR) 2,801.00p -3.15%
Burberry Group (BRBY) 2,154.00p -2.75%
Hargreaves Lansdown (HL.) 2,010.00p -2.71%
Melrose Industries (MRO) 169.25p -2.67%
British Land Company (BLND) 474.08p -2.15%
Associated British Foods (ABF) 2,336.00p -2.05%
Standard Chartered (STAN) 614.20p -1.95%
Micro Focus International (MCRO) 1,641.60p -1.85%

FTSE 250 - Risers

Tullow Oil (TLW) 214.50p 19.77%
Acacia Mining (ACA) 251.80p 2.69%
Contour Global (GLO) 169.80p 1.92%
Countryside Properties (CSP) 285.00p 1.57%
Hikma Pharmaceuticals (HIK) 1,982.00p 1.46%
Beazley (BEZ) 581.00p 1.40%
Polymetal International (POLY) 1,074.00p 1.27%
Daejan Holdings (DJAN) 5,630.00p 1.26%
Woodford Patient Capital Trust (WPCT) 44.75p 1.24%
Ultra Electronics Holdings (ULE) 2,174.00p 1.21%

FTSE 250 - Fallers

Sirius Minerals (SXX) 8.15p -11.99%
Clarkson (CKN) 2,315.00p -8.32%
Intu Properties (INTU) 34.19p -7.14%
RHI Magnesita N.V. (DI) (RHIM) 3,914.00p -5.96%
G4S (GFS) 174.45p -5.78%
CYBG (CYBG) 146.15p -5.47%
Ashmore Group (ASHM) 495.60p -4.60%
Provident Financial (PFG) 370.20p -4.09%
Bank of Georgia Group (BGEO) 1,335.00p -4.03%
Quilter (QLT) 130.60p -3.83%


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