LONDON MARKET CLOSE: FTSE Rises Amid Weak UK GDP Data, US-China Talks

LONDON (Alliance News) - London stocks finished firmly in positive territory on Monday, with ...

Alliance News 11 February, 2019 | 4:55PM
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LONDON (Alliance News) - London stocks finished firmly in positive territory on Monday, with US-China trade talks providing a boost to risk sentiment as the overseas earnings-heavy FTSE 100 also got a lift from a lower pound.

Sterling weakened after figures showed the UK economy contracted in December, and for 2018 as a whole gross domestic product grew at the slowest pace in nearly a decade.

The FTSE 100 index closed 57.93 points higher, or 0.8%, at 7,129.11.

"The UK index got some of its swagger back as the pound's initially nonchalant reaction to the day's truly dreadful data gradually darkened," said Spreadex analyst Connor Campbell.

The pound was quoted at USD1.2864 at the London equities close Monday, down compared to USD1.2937 at the close on Friday.

The economy grew just 0.2% in the final three months of 2018 on the quarter before, down 0.4% in the month of December alone. While this quarterly performance was in line with economist expectations, it was down from the 0.6% posted for the third quarter.

On a year-on-year basis, UK GDP grew 1.3% in the fourth quarter. This represented a slowdown in annual growth from 1.6% in the third quarter, and below analyst expectations for 1.4% growth.

For 2018 as a whole, the ONS said the UK economy grew by 1.4%, the weakest since 2009.

"Overall, these figures support the Bank of England's more downbeat view. But they also suggest there is plenty of scope for the economy to bounce-back once the Brexit uncertainty is removed," said Paul Dales, chief UK economist at Capital Economics.

If there is a Brexit deal, Capital Economics expects 2018 GDP growth of 1.4% could be followed by "something similar" in 2019 before a rise to around 2.2% in 2020.

The FTSE 250 ended up 178.90 points, or 1.0%, at 18,831.78, and the AIM All-Share closed up 0.47 of a point, or 0.1%, at 905.38.

The Cboe UK 100 ended up 0.8% at 12,115.48, the Cboe UK 250 closed up 0.8% at 16,813.63, and the Cboe Small Companies ended up 0.2% at 11,141.44.

In European equities on Monday, the CAC 40 in Paris ended up 1.1%, while the DAX 30 in Frankfurt ended 1.0% higher.

The euro stood at USD1.1283 at the European equities close Monday, lower compared to USD1.1328 at the same time on Friday.

"Stocks across Europe charged higher on Monday, shaking off last weeks' risk off tone. As US–Sino trade talks begin in Beijing we are once again seeing the markets adopt an all too familiar optimistic stance," said Fiona Cincotta, senior market analyst at City Index.

"The reality is that we are unlikely to see any big moves towards a deal this week," Cincotta continued. "With little solid evidence of progress, markets are pinning their hopes on the trade truce deadline of March 1 being extended."

A delegation from the US will travel to China later this week in a bid to resolve the ongoing trade dispute between Washington and Beijing.

The delegation led by US Treasury Secretary Steve Mnuchin and Trade Representative Robert Lighthizer will take part in two days of talks ahead of a March 1 deadline to resolve the trade dispute.

The talks will be preceded by deputy-level negotiations beginning on February 11, the White House said.

Among the big issues are US allegations of Chinese theft of intellectual property and market access for US companies.

Stocks in New York were mixed at the London equities close on Monday, with the Dow Jones down 0.1%, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.2%.

Gold was lower amid Monday's risk-on attitude, quoted at USD1,308.89 an ounce at the London equities close Monday against USD1,314.70 at the close on Friday.

In other commodities, Brent oil was quoted at USD61.26 a barrel at the London equities close Monday from USD61.72 late Friday.

Among the gainers in London, FTSE 100-listed TUI rebounded after last week's bruising losses.

TUI closed up 4.9% on Monday, having shed 19% on Thursday and a further 4.3% on Friday following a profit warning.

The travel operator now expects adjusted earnings before interest, taxes, depreciation and amortisation for its financial year ending in September to be broadly stable on the record performance in the prior year of EUR1.17 billion.

"Consequently, we are not reiterating our guidance of at least 10% [at a compound annual growth rate] in underlying Ebitda at constant currency for the three years to FY20," the company said late Wednesday.

Schroders closed up 2.6% and Lloyds Banking Group up 1.5% after the Financial Times reported the lender plans to hire more than 700 financial advisers to support its new wealth management partnership with fellow FTSE 100 constituent Schroders.

The newspaper said the hiring push could also signal a potential acquisition spree and sets up a "war for talent" against peers St James's Place and Rathbone Brothers.

Towards the bottom of the index was medical devices maker Smith & Nephew, closing down 3.0% after the FT reported the firm is in discussions to acquire US surgical instruments maker NuVasive, in a deal the newspaper said could be worth more than USD3 billion.

FTSE 250 constituent Metro Bank climbed 6.6% after Berenberg raised the stock to Hold from Sell.

At the end of January, Metro Bank fell 39% in one day alone after it disappointed analysts with its profit guidance for 2018 and indicated a rise in risk-weighted assets.

"While capital actions and a rebasing of targets may create further near-term pressure, we believe Metro's shares are now fairly valued," said Berenberg.

Online takeaway platform Just Eat finished 3.0% higher after shareholder Cat Rock Capital Management urged the FTSE 250-listed firm to start merger talks with "industry peers" and not repeat past mistakes by appointing industry outsiders in senior executive roles.

The US hedge fund, which owns around 1.7% stake in Just Eat, said in a letter to the company's board on Monday that a merger with a well-run industry peer would be a far better outcome for shareholders as opposed to relying on the board to choose a new chief executive, particularly given the board's poor track record of CEO selection.

"In the unlikely event of turkeys voting for Christmas and the board acquiescing to this demand, it remains to be seen just what leverage Cat Rock has. Its 1.7% stake does not carry much weight on its own and it will need to garner support from other major shareholders if it wants to force Just Eat's hand," commented Russ Mould, investment director at AJ Bell, on the demand to merge with an industry peer.

The letter comes following the departure of Peter Plumb as Just Eat's boss. The online takeaway platform in January said Plumb will step down with immediate effect and Chief Customer Officer Peter Duffy will be promoted to interim CEO, while a permanent replacement is sought.

In the UK corporate calendar on Tuesday there are first quarter results from travel operator TUI - which only last week issued a profit warning - while there are annual results from contracts-for-difference provider Plus500 and a trading statement from roadside rescue service AA.

In Tuesday's economic calendar, the Redbook index in the US is at 1355 GMT while API weekly crude oil stocks are at 2130 GMT.

By Lucy Heming;

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Smith & Nephew PLC 1,926.00 GBX 0.50
TUI AG 773.20 GBX -0.54 -
Metro Bank PLC 276.20 GBX -1.85 -
Schroders PLC 2,718.00 GBX -0.26 -
Lloyds Banking Group PLC 49.95 GBX 0.03
Just Eat PLC 772.80 GBX -1.20 -
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