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London open: Stocks gain after better-than-forecast China trade data
London stocks gained on Wednesday after Chinese trade data came in better than expected.
China’s trade surplus widened to 382.05bn yuan in December from 343.10bn yuan in November, beating analysts’ forecasts of 338.80bn yuan.
Exports rose unexpectedly by 2.3% in December following a 3.7% dip a month earlier. Economists had pencilled in a 4.1% drop.
Imports declined 4% last month, compared to analysts’ estimates for a 7.9% fall and November’s 5.6% slide.
“These improvements do appear to suggest that while the economy is slowing things may not be nearly as bad as markets had been fretting about and as such we look likely to see a positive open this morning in Europe, even if Chinese stock markets don’t appear to be basking in the improvement that much,” said Michael Hewson, chief market analyst at CMC Markets.
Meanwhile, oil prices will continue to be closely monitored throughout the session after sliding again on Tuesday as analysts downgraded their forecasts. At 0855 GMT, Brent crude rose 2.2% to $31.56 per barrel and West Texas Intermediate increased 2.1% to $31.10 per barrel.
In the Eurozone, industrial production data is due at 1000 GMT, with analysts expecting a 1.3% increase in November output.
The US will see the release of weekly mortgage applications figures at 1200 GMT while Federal Reserve policymaker Eric Rosengren speaks in Iowa at 1730 GMT and the central bank publishes its Beige Book at 1900 GMT.
In company news, oil producers rallied on the uptick in crude prices. BP, Royal Dutch Shell and Tullow Oil were among the risers in morning trade.
Premier Oil’s shares were suspended from trading on Wednesday morning pending the announcement of a potential acquisition of assets which may be classed as a reverse takeover under the Financial Conduct Authority listing rules.
Sainsbury declined after reporting a 0.4% drop in like-for-like retail sales over the festive third quarter. However it was less than the 0.7% forecast, leading the grocer to say that the second half as a whole is likely to be better than the first.
Sports Direct advanced after it snapped up an 11.5% stake in Umbro and Lee Cooper-owner Iconix Brand Group and 2.3% of US retailing giant Dick’s Sporting Goods. The group last week warned on profits amid widespread criticism about the treatment of its staff.
Ted Baker jumped after saying sales rose 10% over the eight week Christmas period against a tough trading backdrop and said full year earnings to be in line with expectations. –
Galliford Try was a high riser after the construction group pointed to solid trading across the board in the first half, as its order book rose in an improving market.
A speech from the president of the US Federal Reserve bank of St.Louis, James Bullard, in the afternoon would also be closely tracked for any dovish slant.
The possibility also existed that the European Central bank’s Mario Draghi or Benoit Coeure might make some policy-relevant remarks later in the day.
Shire looking to beat targets
Shire chief executive Flemming Ornskov revealed that the drug developer’s internal plans for the merger with Baxalta are much more positive than it set out publicly. Speaking at JP Morgan’s healthcare conference in San Francisco, Ornskov stated that Shire’s “internal synergy goals are much higher” than the $500m target set out in the merger announcement earlier this week.
An impressive like-for-like improvement over the Christmas period helped Tesco limit the third-quarter sales decline to 1.5%, beating market forecasts. Group LFL sales rose 2.1% and UK LFLs 1.3% in the six weeks to 9 January, helped by the abandoning of its three ‘£5 off £40’ national coupon campaigns from the prior year.
Christmas sales at Argos for the 18 weeks to 2 January have dropped 2.2%, but a 5% increase in sales at Homebase has limited the damage to Home Retail Group. The company has been in the sights of supermarket Sainsbury’s in recent months and also announced last night it is in talks to sell off Homebase to an Australian conglomerate. Sales for the DIY and home furnishings business totalled £434m for the period, contributing to year-to-date sales over the last 44 weeks of £1.25bn. At Argos, total sales came in at £1.837bn for the quarter, with year-to-date sales at £3.58bn.
Luxury fashion retailer Burberry said underlying third quarter sales rose 1% to £603m, with comparable sales unchanged year-on-year against a fall of 4% in the second quarter – below the company’s internal expectations. “In what remains a challenging external environment, and ahead of Lunar New Year, we currently expect adjusted profit before tax for FY 2016 to be broadly in line with market forecasts, supported by a further reduction in the performance-related pay charge, additional discretionary cost savings and an FX benefit,” the company said in a trading statement.
In a trading update for the 16 weeks to 2 January, Primark owner Associated British Foods said group revenue fell 2% from the same period last year, but was up 3% at constant currency. Total sales at Primark were 7% higher at constant currency but up 3% at actual exchange rates as due to the weakening euro against the pound. The group said it continues to expect currency pressures to lead to a modest decline in adjusted operating profit and adjusted earnings for the full year.
Full year adjusted operating profits at betting firm William Hill were in line with expectations at £290m although group revenues fell 1% to £1.59bn. In a trading update, the company also announced the head of its online operations, Andrew Lee, would be leaving “at some point in 2016”.
