ADVFN Morning London Market Report: Friday 14 September 2018

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London open: Stocks rise despite Carney comments hitting housebuilders

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London stocks rose in early trade on Friday, taking their cue from a positive session on Wall Street as investors eyed comments from Bank of England governor Mark Carney.

At 0840 BST, the FTSE 100 was up 0.4% to 7,312.94, while the pound was up 0.1% against the dollar at 1.3121 and flat versus the euro at 1.1207.

Investors were digesting a slew of Chinese data releases, with industrial production, retail sales and fixed asset investment all out earlier, as well as reports of comments from Carney given to Theresa May’s Cabinet overnight.

In a private Downing Street briefing, BoE Governor warned ministers that a “no-deal” Brexit could see house prices crash by a third, according to reports from the BBC and Sky.

Carney laid out three different scenarios the Bank believes could come to pass if Britain leaves the EU without a withdrawal agreement, with the worst-case scenario being Britain going into recession, with a further slump in the value of the pound and a 35% fall in house prices over three years.

This put housebuilding stocks under pressure on Friday, with Barratt DevelopmentsTaylor WimpeyPersimmon and Berkeley all firmly in the red.

There are no UK data releases of note due on Friday, but market participants will be eyeing more comments from Carney in a speech he will give in Dublin at 1100 BST, with some key US data in the afternoon including retail sales and inflation.

As far as trade relations are concerned, there had been some hope of progress in recent days after Chinese officials welcomed an invitation for new talks from US Treasury Secretary Steve Mnuchin.

However, a tweet from US President Trump on Thursday did little to assuage nerves, as he said: “The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?”

Deutsche Bank said in a note that its economists expect a negotiated settlement between the US and China over the coming quarters, with only a minimal negative impact of tariffs on global GDP growth.

“We note that global PMI new export orders tend to move in line with overall global PMI new orders, which we expect to pick up, helped by improvements in euro area and China PMIs,” DB said.

In corporate news, Shire was among the gainers after Japan’s Takeda Pharmaceuticals’ acquisition of the London-listed company was approved by Chinese regulators.

Investec surged after saying interim profit should be ahead of last year and announcing plans to demerge and publicly list it asset management arm.

Sirius Minerals rallied after it secured a new $250m funding deal with Australia’s Hancock Prospecting that would help fund a polyhalite project in Yorkshire.

Close Brothers advanced as it announced the sale of its retail point of sale finance business, Close Brothers Retail Finance, to Swedish payment solutions group Klarna for an undisclosed sum.

JD Wetherspoon was in the red even as it reported profits slightly ahead of forecasts. The pub group’s like-for-like-sales rose 5.0%, which was short of the 5.2% expected, but profit before tax rose 6.2% to £107.2m versus forecasts for nearer £106m.

AstraZeneca fell after it and its global biologics research and development arm MedImmune were given approval from the US Food and Drug Administration for a treatment for hairy cell leukaemia.

In broker note action, Safecharge was upgraded to ‘overweight’ by Barclays, while EnQuestwas cut to ‘equal-weight’. Whitbread was lifted to ‘overweight’ at JPMorgan.

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