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LONDON MARKET MIDDAY: Trade Hopes Offset Pearson, Imperial Brands Drag

(Alliance News) - The FTSE 100 surged on Thursday on the back of US-China trade optimism, with ...

Alliance News 26 September, 2019 | 11:53AM
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(Alliance News) - The FTSE 100 surged on Thursday on the back of US-China trade optimism, with the blue-chip index managing to overcome some sizeable tumbles by Pearson, Imperial Brand and International Consolidated Airlines.

The FTSE 100 index was up 70.95 points, or 1.0%, at 7,360.94 Thursday midday. The FTSE 250 was up 83.67 points, or 0.4%, at 19,858.59. The AIM All-Share was down 0.2% at 872.77.

The Cboe UK 100 index was up 1.1% at 12,491.41. The Cboe UK 250 was up 0.3% at 17,745.11 and the Cboe UK Small Companies flat at 10,866.49.

"Trade hopes have buoyed markets over the past twenty-four hours, as investors hope that the US-Japan deal might provide a more amenable atmosphere for talks between the US and China. After wobbling on Tuesday, stock markets recovered their poise yesterday and have continued to do so today," said Chris Beauchamp, chief market analyst at IG.

"In particular the FTSE 100 has managed to shrug off profit warnings from IAG, Imperial Brands and Pearson, helped by a move higher that has encompassed a broad variety of sectors, not least those connected to China."

Those three stocks were bringing up the rear of the FTSE 100 at midday, with Pearson the worst performer, down a sharp 18%.

The educational publisher on Thursday warned that annual adjusted operating profit will be at the lower end of its guidance range due to weaker-than-expected trading in its US Higher Education Courseware business in key selling season.

Pearson said it anticipates revenue to stabilise in 2019, but adjusted operating profit to be at the bottom of its guidance range of GBP590 million to GBP640 million. Adjusted earnings per share also is predicted to be at the bottom of the guidance range of 57.5p to 63.0p.

Pearson said revenue from US Higher Education Courseware is down by around 10% in the first nine months of 2019, mainly due to significant acceleration of print attrition in the key trading season, with students returning to school turning away from print products more rapidly than anticipated.

Imperial Brands slid 11% after cutting its revenue guidance due to a challenging vaping and e-cigarette market in the US.

The tobacco firm now predicts net revenue growth for its financial year ending Monday next week will be 2%, slashing its previous 2.5% growth forecast, as several US local governments enact e-cigarette bans over serious health concerns and the US federal government threatens the same.

Although the overall Next-Generation Products business it set to grow revenue by approximately 50% in financial 2019, this is below previous expectations.

"Whilst this is disappointing for the current year, we believe that NGP provides a significant opportunity to deliver additive growth to complement our Tobacco business. We continue to refine our investment behind building a strong and profitable NGP business in a rapidly evolving market," said Imperial Brands.

International Consolidated Airlines dipped 3.3% after the British Airways parent warned strike action is expected to hit annual profit.

The FTSE 100-listed firm said the net financial impact of allowing customers to re-book flights or receive refunds due to pilot strikes has resulted in a EUR137 million hit with other "disruption events" at Heathrow costing the company a further EUR33 million.

At current fuel prices and currency exchange rates, IAG expects its 2019 operating profit before exceptional items to be EUR3.27 billion, 6.6% lower than the EUR3.49 billion pro-forma figure achieved in 2018. Previously, IAG had guided for profit in 2019 to be flat on the year before.

In mainland Europe, the CAC 40 in Paris was up 0.7%, while the DAX 30 in Frankfurt was up 0.5% in early afternoon trade.

In the US, the Dow Jones is pointed 0.2% higher while the Nasdaq and S&P 500 are both called up 0.1%.

Still to come in Thursday's corporate calendar, cruise line Carnival - listed in both London and New York - is expected to report third-quarter results at 1500 BST.

The economic events calendar on Thursday has US second-quarter GDP readings and quarterly personal consumption expenditure prices at 1330 BST.

In the UK, the pound continued to slide following a confrontational House of Commons session on Wednesday.

Sterling was quoted at USD1.2321 at midday, down from USD1.2360 at the London equities close on Wednesday. That morning, the pound had been trading up near USD1.2470.

John Bercow urged MPs on all sides to tackle the "toxic" political culture as the fallout from Prime Minister Boris Johnson's combative Commons performance continued.

There was uproar in the Commons as Johnson repeatedly berated MPs, rejected calls to temper his language and said the best way to honour murdered parliamentarian Jo Cox – an ardent Remainer – was to "get Brexit done".

Jeremy Corbyn will convene the latest meeting of opposition leaders in Parliament on Thursday to consider their next moves.

Back in London, IG Group Holdings was down 4.7% in the FTSE 250 as the online trading platform went ex-dividend, meaning new shareholders are not entitled to receive the firm's latest payout.

On AIM, Shore Capital shares were down 27% after the stockbroker said it intends to cancel its listing.

Shore said it plans to de-list from AIM because it believes the "considerable cost and management time" required to maintain its listing is "disproportionate to the benefits" of being a listed company.

"A lack of liquidity underpins what the board believes to be a mispricing of the company's equity, evidenced by the substantial discount to NAV at which the shares trade," added Shore.

Separately, Shore announced a decline in interim profit following reorganisation costs due to the company's acquisition of Stockdale Securities.

By Lucy Heming; lucyheming@alliancenews.com

London Midday is available to subscribers as an email newsletter. Contact info@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Pearson PLC 671.60 GBX -1.00
Shore Capital Group Ltd
IG Group Holdings PLC 662.40 GBX -0.72 -
Imperial Brands PLC 1,752.60 GBX 1.17
International Consolidated Airlines Group SA 548.60 GBX -1.58 -

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