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London open: Stocks nudge higher as pound steadies
London stocks nudged higher on Tuesday as the pound steadied following sharp losses in the previous session in the wake of political turmoil.
At 0830 BST, the FTSE 100 was up 0.1% at 7,697.35 as Prime Minister Theresa May prepares to face her reshuffled cabinet following the resignation of Boris Johnson and David Davis over her Brexit strategy.
Johnson and Davis have been replaced as Foreign Secretary and Brexit Secretary by Jeremy Hunt and Dominic Raab. Meanwhile, Matt Hancock is the new Health Secretary and Jeremy Wright is the new Culture Secretary, while Geoffrey Cox is Attorney General.
May is also due to meet German Chancellor Angela Merkel later in the day.
In currency markets, sterling was up 0.1% against the dollar and the euro at 1.3266 and 1.1292, respectively, having fallen sharply versus the greenback on Monday following Johnson’s resignation.
Hussein Sayed, chief market strategist at FXTM, said: “If the government starts collapsing, this means that a Brexit deal is unlikely to be reached in the coming months and sterling will receive a big hit. Another negative consequence to the political drama is monetary policy. The Bank of England will need to back off from tightening policy until further clarity is provided, adding additional pressure to the currency. Overall, I think the risk remains to the downside for this week until the facts become clearer.”
On the data front, UK manufacturing and industrial production data and monthly GDP is due at 0930 BST.
London Capital Group analyst Jasper Lawler said: “In the absence of any further Brexit headlines or domestic political disarray, investors will look towards manufacturing and industrial production data due this morning. Both sets of figures are expected to rebound convincingly in May, after heavy falls in March and April thanks to unseasonably harsh weather conditions. Manufacturing is expected to have increased 0.9% month on month whilst industrial production is expected to have picked up 0.5% month on month, up from a contraction of 0.8% in April.”
In corporate news, Ocado fell after saying it swung to a £9m loss before tax for the half-year to 3 June from a £17.7m profit a year ago.
Tesco was in the red as it announced that its UK and Ireland chief executive Charles Wilson is stepping down as he recovers from throat cancer.
Interdealer broker TP ICAP tumbled 29% following a profit warning and news that its chief executive officer is departing.
Infrastructure services provider Kier Group slipped even as it secured three-year extensions on its Highways England contracts for Areas 3 and 9, with a total value of around £250m per annum, it confirmed on Tuesday.
On the upside, Softcat surged after the IT infrastructure products and services provider said it expects 2018 adjusted operating profit to be “materially ahead” of its previous expectations thanks to favourable market conditions.
Dechra Pharmaceuticals pushed higher after the company said trading in the year to 30 June was “strong” and in line with management expectations.
Pubco Ei Group was bubbling up slightly on reports has appointed advisers as it looks to sell its commercial property division.
In broker note action, Acacia Mining was upgraded to ‘overweight’ at Barclays, which also lifted Chemring to ‘overweight’.
Ascential was boosted to ‘add’ by Peel Hunt, while Domino’s Pizza was rated a new ‘buy’ at Goodbody Stockbrokers and Ted Baker was started at ‘buy’ by HSBC.
Computacenter was cut to ‘underweight’ at Barclays and Rentokil was downgraded to ‘hold’ at Jefferies, while Convatec was initiated at ‘underperform’ by Bank of America Merrill Lynch.
