LONDON MARKET OPEN: Gains As No-Deal Brexit Fears Ease; BAT Loses Puff

(Alliance News) - Stock prices in London opened higher on Wednesday with vaccine hopes and Brexit ...

Alliance News 9 December, 2020 | 9:03AM
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(Alliance News) - Stock prices in London opened higher on Wednesday with vaccine hopes and Brexit deal optimism lifting sentiment, while British American Tobacco's latest update disappointed investors.

The FTSE 100 index was up 15.93 points, or 0.2%, at 6,574.75. The mid-cap FTSE 250 index was up 71.82 points, or 0.4%, at 19,942.31. The AIM All-Share index was down 0.2% at 1,072.73.

The Cboe UK 100 index was up 0.2% at 655.05. The Cboe 250 was up 0.5% at 17,245.54. The Cboe Small Companies was up 0.1% at 11,512.00.

In mainland Europe, the CAC 40 in Paris was up 0.6%, while the DAX 30 in Frankfurt was up 0.3%.

In the FTSE 100, Tesco was up 2.0%. The UK's largest supermarket chain said conditions for the sale of its businesses in Thailand and Malaysia to CP Retail Development have been satisfied following the formal notice of approval from the Office of Trade Competition Commission in Thailand.

Combined with the approval received from the Ministry of Domestic Trade & Consumer Affairs in Malaysia in November, the green light from Thailand means there are no further conditions outstanding, Tesco said, and the disposal is expected to complete on or around December 18.

As previously announced, Tesco intends to return GBP5 billion of the proceeds to shareholders via a special dividend.

At the other end of the large cap list, gold miners Fresnillo and Polymetal International were the worst performers, down 1.7% and 1.2% respectively, tracking spot gold prices lower.

Gold was trading at USD1,860.28 an ounce Wednesday morning, down from USD1,869.75 late Tuesday.

British American Tobacco was down 1.1%. The Dunhill and Rothmans cigarette maker raised its revenue expectations, as the hit from Covid-19 has been less than first feared.

BAT said it was maintaining 2020 guidance as it seeks to transform its business, by switching to cigarette alternatives, or Reduced Risk Products. The company is investing more in its New Category business and now has around 13 million non-combustible product consumers.

For 2020, BAT expects constant currency adjusted revenue growth to be at the high end of the guided 1% to 3% range. It also anticipates a reduced hit to earnings as a result of Covid-19 of 2.5%, from 3.0% previously.

BAT expects a currency translation headwind of 3.3% on 2020 adjusted diluted earning per share growth.

"This update is largely in line with our preview. The key thing here is while a boost to sales expectations is a positive, it is not being driven by reduced risk products, where conviction is key to re-rating. Further, it is also possible street [earnings per share] expectations come down slightly on foreign exchange," said analysts at Jefferies.

In the FTSE 250, Vistry Group was up 5.5%. The housebuilder said it will consider reinstating its dividend, as it expects to deliver annual pretax profit at the top end of the guided range of GBP130 million to GBP140 million.

In November, Vistry had confirmed its intention to resume dividend payments earlier than previously expected with an interim payment payable next November in respect of 2021, with a 2.5 times dividend cover and a progressive policy thereafter. However, given the strong performance and accelerated deleverage, Vistry said it will consider reinstating a "modest" final dividend in respect of 2020.

Large-cap peers, Taylor Wimpey, Berkeley Group, Persimmon and Barratt Developments were up 3.1%, 3.0%, 2.5% and 1.8% respectively - in a positive read-across.

UK Prime Minister Boris Johnson will travel to Brussels on Wednesday to try to reach a breakthrough on a post-Brexit trade deal over dinner with European Commission President Ursula von der Leyen.

The prime minister and the EU chief will continue their talks in person after the UK Government dropped controversial plans that would have allowed ministers to break international law. The olive branch came after the two sides reached an agreement on the implementation of the Withdrawal Agreement divorce deal as time rapidly runs out to the end of the transition period on December 31.

Meanwhile, Brussels' chief negotiator Michel Barnier warned EU foreign ministers that he now believes a no-deal departure is more likely than a trade agreement being brokered in time, the PA news agency understands.

Both sides set the stage for a potentially make-or-break meal in Belgium on Wednesday.

The pound was quoted at USD1.3386 early Wednesday, up from USD1.3360 at the London equities close Tuesday.

"With UK investors also preoccupied by negotiations with the EU, sterling recovered some poise on hopes that a last-gasp deal may yet be agreed before the December 31 deadline. However, the uncertainty has held back some of the otherwise generally positive pandemic sentiment, where the more recent direction of travel has been positive for the flagship [FTSE 100] index," said Interactive Investor's Richard Hunter.

The euro was priced at USD1.2134 early Wednesday in London, up from USD1.2111 late Tuesday. Against the yen, the dollar was trading at JPY104.15, flat from JPY104.14.

Brent oil was quoted at a USD48.48 barrel Wednesday morning, lower from USD48.98 at the London equities close Tuesday.

The Japanese Nikkei 225 index ended up 1.3% on Wednesday. In China, the Shanghai Composite closed down 1.1%, while the Hang Seng index in Hong Kong ended up 0.7%.

China's consumer prices dropped more than expected in November on falling food costs, with a key gauge turning negative for the first time in 11 years due to pork prices, according to official data released.

The consumer price index, a key gauge of retail inflation, fell 0.5% on-year due to a high base of comparison in the same period last year, said Beijing's National Bureau of Statistics.

This continued a recent slide driven by easing prices of pork - a staple meat in the world's second-largest economy whose prices rocketed after an African swine fever outbreak ravaged stocks.

By Arvind Bhunjun;

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