LONDON MARKET MIDDAY: Housebuilders Rise As Firm Pound Hinders Gains

LONDON (Alliance News) - Stocks in London were slightly higher at midday on Friday with ...

Alliance News 11 January, 2019 | 12:06PM
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LONDON (Alliance News) - Stocks in London were slightly higher at midday on Friday with housebuilders in the green, as gains in the FTSE 100 were restricted by a firmer pound.

Earlier sentiment was given a boost after Federal Reserve Chair Jerome Powell on Thursday predicted no recession in 2019 and said the US central bank will be patient in determining when to hike interest rates.

The FTSE 100 at midday was up 2.23 points at 6,945.05, while the FTSE 250 was 47.48 points higher, or 0.3%, at 18,483.15. The AIM All-Share was up 0.4% at 911.67.

The Cboe UK 100 was up 0.4% at 11,809.12, while the Cboe UK 250 was 0.4% higher at 16,539.64 and the Cboe UK Small Companies up 0.2% at 11,171.17.

In mainland Europe, the CAC 40 in Paris was down 0.1%, while the DAX 30 in Frankfurt 0.1% lower.

"Stock markets in Europe are mixed as traders have yet to hear any further details about the US-China trade talks that concluded earlier in the week. European equity markets have enjoyed a good run in recent weeks, and now they appear to be taking a breather, and it feels like traders are waiting for fresh news in relation to the US-China situation before making their next move," said David Madden, market analyst at CMC Markets.

On the London Stock Exchange, housebuiders were leading the large cap index following a positive sector note from Bank of America Merrill Lynch.

Taylor Wimpey was the best blue chip performer, up 4.7% with Persimmon just behind, up 4.2% after BoAML raised the stocks to Buy from Underperform.

Barratt Developments was up 2.6% after BoAML raised the UK's biggest housebuilder to Neutral from Underperform.

At the other end of the large cap index, Sage Group was down 2.3% after UBS cut the accounting software provider to Sell from Neutral.

In the FTSE 250, Stobart Group was the best performer, up 7.7% after the support services firm said that it is part of a consortium buying UK regional airline Flybe almost a year after it pulled out of an attempted takeover of the struggling Exeter-based carrier.

Flybe accepted a 1 pence per share offer that values Flybe at GBP2.2 million, with the airline's shares down 60% at 3.07p at midday giving it a total market value of GBP6.4 million.

On Thursday, Flybe's market capitalisation had stood at GBP35.5 million. Flybe listed on the London Main Market in December 2010 at a share price of 295p.

Stobart is buying Flybe as part of a joint venture called Connect Air alongside Virgin Atlantic and DLP Holdings. DLP is owned by funds managed by Cyrus Capital Partners. DLP will own 40% of Connect, and Stobart and Virgin 30% each.

As part of the deal, Connect will provide a GBP20 million bridge loan for Flybe's operational requirements. Further, once the acquisition is completed, the partners will provide up to GBP80 million of further funding.

The pound was marginally higher quoted at USD1.2790 at midday, compared to USD1.2775 at the London equities close Thursday.

In economic news, the UK economy continued to cool in the three months to November as a "steep decline" in manufacturing activity dragged on growth amid increasing Brexit uncertainty.

Over the three months to November, GDP rose 0.3% compared with the previous quarter, according to the Office for National Statistics. Growth of 0.4% was recorded in the three months to October.

The ONS said the largest downward drag came from a fall in motor vehicle production of 4.3%.

In November alone, factory output fell 0.4%, the fifth consecutive month of decline, and the manufacturing sector's longest losing streak since the financial crisis in 2008.

The manufacturing sector has been hit by factory shutdowns - such as at Jaguar Land Rover - and weaker consumer demand for cars and declining diesel sales.

Head of national accounts at the ONS Rob Kent-Smith said: "Growth in the UK economy continued to slow in the three months to November 2018 after performing more strongly through the middle of the year."

Month on month, the UK economy grew by 0.2% in November, compared with growth of 0.1% in October.

The lacklustre figures come as Prime Minister Theresa May again attempts to gain parliamentary approval for her Brexit deal.

"A mixed set of data-points from the UK economy has done little to shift the dial on GBPUSD, with the pair in consolidation mode throughout much of the week. Ultimately traders are waiting on Tuesday's vote as the primary source of directional bias for the pound, with Theresa May expected to suffer a scolding defeat that will leave the UK in limbo once again," said IG Group's Josh Mahony.

Stocks in New York were set for a lower open ahead of US inflation data at 1330 GMT.

The DJIA, the S&P 500 index and the Nasdaq Composite were called down 0.1%.

Brent oil was higher quoted at USD61.95 a barrel at midday from USD61.33 at the London equities close Thursday. The North Sea benchmark hit an intraday high of USD62.51 a barrel in morning trade, leaving it on track for its tenth straight day of gains.

"Crude oil prices are going through a period of irrational exuberance as investors pin their hopes that the production cuts agreed by OPEC in December will start creating a tightness in the market in the first half of this year. Also, the perceived progress in the Sino-US talks is boosting optimism that China's economy will stop slowing down and that demand from the world's largest buyer of commodities will remain strong," said City Index analyst Fiona Cincotta.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Stobart Group Ltd 159.40 GBX -1.48 -
Taylor Wimpey PLC 174.05 GBX -0.26 -
Flybe Group PLC 1.36 -
Barratt Developments PLC 585.00 GBX -0.24 -
Persimmon PLC 2,129.00 GBX -0.42 -
Sage Group (The) PLC 680.80 GBX -0.70
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