LONDON MARKET CLOSE: Investors Turn Blind Eye To Huawei Blacklisting

LONDON (Alliance News) - Stocks in London ended higher on Thursday with risk appetite returning ...

Alliance News 16 May, 2019 | 5:03PM
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LONDON (Alliance News) - Stocks in London ended higher on Thursday with risk appetite returning to equity markets as investors shrugged off Huawei's blacklisting in the US.

In the latest developments, US President Donald Trump signed an executive order declaring a national emergency to protect US computer networks from attack by "foreign adversaries".

The US Commerce Department said it was adding the Chinese telecom giant Huawei Technologies Co and 70 affiliates to its "Entity List", which bans the Chinese company from buying components and technology from US firms without prior approval from the US government.

The decision would also make it difficult for Huawei to sell products for which it relied on parts from US suppliers.

The FTSE 100 index closed up 56.56 points, or 0.8%, at 7,353.51. The FTSE 250 ended up 160.88 points, or 0.8% at 19,530.65, and the AIM All-Share closed up 3.20 points, or 0.3%, at 960.92.

The Cboe UK 100 ended up 0.8% at 12,464.47, the Cboe UK 250 closed up 0.6% at 17,550.96, and the Cboe Small Companies ended up 0.2% at 11,793.14.

In Paris the CAC 40 ended up 1.4%, while the DAX 30 in Frankfurt ended up 1.7%.

"Global markets are on the rise today, as fears over a breakdown in trade talks between the US and China took a back foot. Interestingly today's gains have come despite the US decision to declare a state of emergency in a move that is seen to take aim at Chinese telecoms giant Huawei. While Chinese authorities are expected to retaliate, we are seeing limited repercussions," said IG Group's Josh Mahony.

In the FTSE 100, 3i Group closed up 3.2% after the private equity investor reported a sharp rise in annual net asset value, exceeding expectations, with a strong performance from both its private equity and infrastructure portfolios.

At March 31, 3i's net asset value per share stood at 815 pence compared to 724p the year prior, a 13% jump. According to company-compiled consensus - based on six analysts - net asset value per share was forecast to reach to 808p.

Anglo American closed up 3.0% after the miner said its off-shore diamond joint venture with the Namibian government gained approval.

Debmarine Namibia, a project held equally by Anglo American's De Beers diamond business and Namibia, has approved the construction of a new diamond recovery vessel. This will cost USD468 million, with Anglo American paying half, and will become the seventh in Debmarine's fleet. The new vessel will start producing from 2022, and could increase the joint venture's production capacity by 500,000 carats a year, or 35% above current levels.

At the other end of the large cap index, Burberry Group was the worst performer, down 5.9% after the fashion house reported weak sales growth in Asia, the retailer's biggest market.

In Asia, accounting for 41% of sales, revenue rose 2% to GBP1.10 billion with Europe Middle East & Africa also up 2%, to GBP958 million. The Americas region reported flat revenue at GBP612 million.

The luxury goods retailer, known for its checked print and trench coats, posted pretax profit of GBP440.6 million, up 6.8% from GBP412.6 million the year before.

Revenue met analysts expectations, coming in broadly flat at GBP2.72 billion from GBP2.73 billion, however adjusted operating profit lagged behind market consensus at GBP438 million, down 6% year-on-year from GBP467 million. Analysts had seen this registering at GBP442 million.

Utility stocks ended among the worst performers as Labour plots to take back control of the UK energy network from private shareholders should it return to power.

United Utilities closed down 3.7%, National Grid down 3.4%, Severn Trent down 3.0%, SSE down 1.9% and Centrica was down 1.1%.

Under the plans, Labour would create a National Energy Agency to replace the National Grid which would own and maintain the transmission infrastructure while overseeing targets for decarbonisation, and protect energy as a "human right".

"The party stated it would provide bonds in return for shares, but also said any compensation would be adjusted to take account of a number of factors including pension fund deficits, asset stripping since privatisation, stranded assets, the state of repair of assets and any state subsidies given to the energy companies since privatisation. That's a long list and suggests any compensation may be quite small if it amounts to anything at all," said the Share Centre.

National Grid, which operates the UK power network, said nationalisation was the "last thing" that was needed as the "enormous distraction, cost and complexity" of the proposals would distract from efforts to combat climate change.

National Grid reported a significant reduction in annual profit but expressed confidence in its future performance.

For the financial year ended March 31, the gas and electricity utility posted pretax profit down 31% to GBP1.84 billion from GBP2.66 billion. Revenue slipped 2.1% to GBP14.93 billion from GBP15.25 billion, while operating costs rose 2.6% to GBP12.06 billion from GBP11.75 billion.

In the FTSE 250, Genus closed up 14% as joint best performer after the animal genetics firm entered a strategic porcine collaboration with Chinese poultry breeder Beijing Capital Agribusiness Co.

Under the partnership, both companies will research, develop, register and market in China pigs that are resistant to the porcine reproductive and respiratory syndrome virus.

Within the collaboration that is expected to take several years, Genus will receive milestone cash payments in aggregate of USD20 million, all subject to certain conditions being fulfilled. There will also be USD120 million to USD160 million received for the formation of a new joint venture, as well as intellectual property royalties from the joint venture on the sales of resistant pigs.

Tied with Genus was Sophos Group, also up 14% after the cybersecurity firm revealed a swing to annual profit on the back of strong revenue growth, foreign exchange gains and lower costs.

For the financial year that ended in March, Sophos recorded pretax profit of USD53.6 million, compared with a USD41.0 million loss in financial 2018, on revenue of USD710.6 million and USD639.0 million, respectively. The rise in revenue was attributed to 16% year-on-year growth in subscription revenue to USD593.9 million from USD512.4 million.

Sophos declared a final dividend of 3.7 cents per share, an increase of 6% over the prior year. The total dividend for the year amounted to 5.2 cents versus 4.9 cents.

At the other end of the midcaps, Just Group closed down 7.6% after the life insurer said its retirement income sales in the first quarter fell sharply amid a "new regulatory regime" as it shuts its loss-making US operations.

Just Group's retirement income sales in the three months to March 31 decreased 59% to GBP184 million from GBP454 million the year before. Defined Benefit De-Risking sales were almost wiped out, decreasing to GBP26 million from GBP249 million. Guaranteed Income for Life sales decreased 23% to GBP145 million from GBP188 million. Lifetime mortgage loans advanced in the quarter decreased 47% to GBP79 million from GBP151 million.

As a result of the sharp drop in retirement income and lifetime mortgages, Just Group's total business sales in the period decreased 55% to GBP276 million from GBP617 million.

The pound was quoted at USD1.2788 at the London equities close, down from USD1.2866 at the close Wednesday, its lowest level since mid-February.

In political news, UK Prime Minister Theresa May has agreed to set a timetable for the election of her successor as leader, the chairman of the Conservative backbench 1922 Committee said.

Following the showdown with May and the 1922 executive at Westminster on Thursday, Graham Brady said he would meet the PM again in early in June to agree the details.

Brady said in a statement "The prime minister is determined to secure our departure from the EU and is devoting her efforts to securing the second reading of the Withdrawal Agreement Bill in the week commencing June 3 2019 and the passage of that Bill and the consequent departure of the UK from the EU by the summer."

Brady said the discussions with the prime minister were "frank", and confirmed the next meeting would take place regardless of whether the Withdrawal Agreement Bill passes second reading next month.

"Whichever side of the political divide you sit it is becoming increasingly clear that we appear to be in the dying embers of Theresa May's premiership and the pounds slide appears to be reflecting that as the fight begins to step into her shoes, from a proverbial alphabet soup of contenders, with Boris Johnson likely to be an early front runner," said CMC Markets analyst Michael Hewson.

The euro stood at USD1.1175 at the European equities close, down from USD1.1212 late Wednesday, as the dollar rose following positive economic data from the US.

Stocks in New York were sharply higher at the London equities close amid upbeat earnings and economic data, including report from the US Labor Department showing initial jobless claims dropped more than expected in the week ended May 11.

The DJIA was up 1.0%, the S&P 500 index up 1.2% and the Nasdaq Composite up 1.4%.

The report said initial jobless claims slid to 212,000, a decrease of 16,000 from the previous week's unrevised level of 228,000. Economists had expected jobless claims to dip to 220,000.

A separate report from the Commerce Department showed a substantial increase in new residential construction in the month of April.

The Commerce Department said housing starts surged up by 5.7% to an annual rate of 1.235 million in April after climbing by 1.7% to a revised rate of 1.168 million in March.

On the corporate front, Walmart hiked its first quarter dividend after profit and revenue grew amid strength in the retail giant's core US business.

Walmart shares were up 2.6% in New York.

For the three months ended March, pretax profit surged 83% to USD5.16 billion from USD2.82 billion the year prior on revenue which rose 1.1% to USD122.95 billion from USD121.63 billion the year before.

Walmart proposed a USD2.12 per share first quarter dividend, up 1.9% from USD2.08 the year prior.

On Wednesday, Walmart explained it was considering listing its UK supermarket chain Asda following the failure of an attempt to merge with domestic rival J Sainsbury, after competition regulators blocked the move in April.

Cisco Systems was up 6.9% after the San Jose, California-based networking-equipment maker reported third-quarter profit of USD3.04 billion or USD0.69 per share, compared to last year's profit of USD2.69 billion or USD0.56 per share.

Revenue for the quarter grew 6% to USD12.96 from USD12.46 billion last year. Analysts had a consensus revenue estimate of USD12.89 billion for the quarter.

Brent oil was quoted at USD73.14 a barrel at the London equities close, sharply higher than USD71.64 at the close Wednesday.

Oil prices rose for a third successive session due to increasing concerns about supply disruptions in the Middle East.

The US on Wednesday ordered all non-emergency government staff to leave Iraq immediately, and Germany and the Netherlands both suspended their military assistance programs in the country in the latest sign of tensions sweeping the Persian Gulf region.

Gold was quoted at USD1,287.60 at the London equities close, down from USD1,296.40 late Wednesday.

The economic events calendar on Friday has eurozone inflation readings at 1000 BST.

The UK corporate calendar on Friday has interim results from investment platform operator IntegraFin Holdings, accounting software provider Sage Group and budget airline easyJet.

By Arvind Bhunjun;

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
3i Ord 1,070.00 GBX 0.56
Genus PLC 2,532.00 GBX 1.04 -
Just Group PLC 38.86 GBX 7.94 -
Sophos Group PLC 395.50 GBX 0.38 -
National Grid PLC 857.70 GBX 0.79
United Utilities Group PLC 781.60 GBX -0.96
Burberry Group PLC 2,102.00 GBX 1.69
SSE PLC 1,107.00 GBX 0.27
Severn Trent PLC 2,007.00 GBX 0.80 -
Anglo American PLC 1,698.40 GBX 0.13
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