LONDON MARKET MIDDAY: Chinese Data Helps Risk Sentiment; Oil Majors Up

(Alliance News) - The FTSE 100 was slightly higher at the start of the week as sentiment was ...

Alliance News 2 December, 2019 | 12:09PM
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(Alliance News) - The FTSE 100 was slightly higher at the start of the week as sentiment was boosted by Chinese manufacturing data overnight, with the blue-chip index also aided by gains for oil majors and miners.

The FTSE 100 index was up 4.58 points, or 0.1%, at 7,351.11 on Monday. The FTSE 250 was down 75.62 points, or 0.4%, at 20,736.98, and the AIM All-Share down 0.8% at 915.19.

The Cboe UK 100 was down 0.2% at 12,460.45, the Cboe UK 250 was down 0.6% at 18,628.63, and the Cboe Small Companies up 0.2% at 11,472.00.

In mainland Europe, the CAC 40 in Paris was flat, while the DAX 30 in Frankfurt was up 0.4% in early afternoon trade.

"Mostly better than expected manufacturing PMI readings for December, including in China, is providing the latest incentive for equity market bulls. Led by the Nikkei, which was aided by a weaker yen, major equity markets in Asia Pacific rallied and recouped most of the nearly 1% loss before the weekend," said Marc Chandler at Bannockburn Global Forex.

Overnight, Chinese manufacturing data was released, with November's PMI showing a modest improvement. The Caixin China general manufacturing purchasing managers' index rose to 51.8 in November from 51.7 in October, the fourth successive month the index has posted an increase.

Later in the morning was manufacturing figures from the eurozone, which showed output declined at a reduced rate in November.

The eurozone purchasing managers' index reading came in at 46.9 in November, an improvement from 45.9 in October, but still lagging below the 50.0 marker which separates expansion from contraction. It was the slowest rate of decline in three months, IHS noted.

In the UK, however, the manufacturing sector continued to slump. November's PMI fell to 48.9 from 49.6 in October, the reading now remaining below the neutral 50 mark for seven successive months.

The pound was quoted at US1.2910 at midday following the data, lower compared to USD1.2929 at the close on Friday.

The euro stood at USD1.1011, soft against USD1.1017 at the same time on Friday. Against the yen, the dollar was trading at JPY109.55, higher compared to JPY109.47 late Friday.

"Markets haven't looked beyond the Chinese data too much, and NZD, AUD and NOK lead cyclically-sensitive currencies higher, while the yen is the worst of the G10 currencies, with the yuan also weaker after US/Chinese trade talks stall in the wake of the US Bill supporting Hong Kong protesters," commented Kit Juckes at Societe Generale.

China suspended US warship visits and sanctioned American NGOs on Monday in retaliation for the passage of a bill backing pro-democracy protesters in Hong Kong.

The financial hub has been rocked by nearly six months of increasingly violent unrest demanding greater autonomy, which Beijing has frequently blamed on foreign influence.

Last week US President Donald Trump signed the Hong Kong Human Rights & Democracy Act, which requires the president to annually review the city's favourable trade status and threatens to revoke it if the semi-autonomous territory's freedoms are quashed.

"In response to the unreasonable behaviour of the US side, the Chinese government has decided to suspend reviewing the applications for US warships to go to Hong Kong for (rest and) recuperation as of today," foreign ministry spokeswoman Hua Chunying said at a regular press briefing.

In the US on Monday, stocks are pointed to a higher open, in step with Europe. The Dow Jones and S&P 500 are called up 0.4%, and the Nasdaq set to gain 0.3%.

In London, Glencore and Rio Tinto were among the risers in the FTSE 100 at the start of the week following some ratings upgrades.

RBC lifted Glencore to Outperform from Sector Perform, with the stock 1.6% higher at midday, while fellow miner Rio Tinto was raised to Sector Perform from Underperform, with shares 1.0% higher as a result.

Also advancing were London-listed oil majors ahead of an OPEC meeting this week. BP shares were up 1.3%, while Royal Dutch 'A' shares were 1.1% higher and 'B' shares up 1.3%.

Brent oil was quoted at USD62.06 Monday, up from USD61.18 late Friday.

The 177th biannual OPEC meeting takes place in Vienna, Austria, on Thursday. OPEC will decide on production policy for the first six months of 2020 at the meeting.

"With the gap between demand and supply expected to widen in 2020, the prospect of lower prices is clearly something that OPEC has to weigh up when they meet this week. However, with the US pumping freely, the question is whether the likes of Saudi Arabia are willing to surrender further market share in a bid to raise the market pricing for all," said Joshua Mahony, senior market analyst at IG.

"However, with the final Saudi Aramco IPO set to be decided, there is a good chance that we could see Saudi-led action to help bolster oil prices in a bid to boost the short-term windfall they achieve from this historical listing," he added.

In other commodities, gold was quoted at USD1,458.12 an ounce at midday against USD1,463.01 at the close on Friday, the safe haven asset slipping back amid Monday's risk-on attitude.

Blue-chip gold miner Fresnillo tracked the precious metal lower, shares down 3.5% at midday.

At the bottom of the FTSE 100 index, though, was online grocer Ocado, down 7.3% after launching an offering of approximately GBP500 million of guaranteed senior unsecured convertible bonds to fund capital expenditure for Ocado Solutions.

On Friday, Ocado announced the latest such agreement, helping Japanese grocer Aeon to develop its online business using the Ocado Smart Platform. The stock closed up 9.7% as a result on Friday.

The grocer also on Monday provided an update on its Ocado Retail business, saying it expects retail revenue growth of between 10% and 11%, with Ocado Zoom orders to slightly exceed retail revenue growth.

Elsewhere in London, Ted Baker shares shed 10% after the upmarket clothing retailer said it has overstated past stock by up to GBP25 million.

Based on preliminary analysis, the board thinks the overstatement - which will have no cash impact and will relate to prior years - will hit the value of inventory by GBP20 million to GBP25 million.

Still to come in the economic events calendar on Monday is Markit manufacturing PMI for the US at 1445 GMT and an ISM PMI at 1500 GMT.

By Lucy Heming; lucyheming@alliancenews.com

London Market 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
Rating
BP PLC 462.45 GBX -1.47
Glencore PLC 225.80 GBX -0.24
Fresnillo PLC 572.40 GBX -3.05 -
Ocado Group PLC 1,239.50 GBX 2.44 -
Ted Baker PLC 372.80 GBX 5.55 -
Royal Dutch Shell PLC B 2,135.50 GBX -1.41
Royal Dutch Shell PLC Class A 25.94 EUR -0.27 -
Rio Tinto PLC 4,320.50 GBX -0.66

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