ADVFN Morning London Market Report: Thursday 8 November 2018

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London open: Stocks rise on strong US cues; Fed announcement eyed


London stocks rose in early trade on Thursday, taking their cue from strong gains on Wall Street as investors prepared for the latest policy announcement from the Federal Reserve.

At 0835 GMT, the FTSE 100 was up 0.4% to 7,148.15, while the pound was up 0.1% against the dollar at 1.3136 and flat versus the euro at 1.1487.

Jasper Lawler, market analyst at London Capital Group, said: “Wall Street experienced a phenomenal session on Wednesday, jumping over 2%, in its best post midterm election session since 1982. Democrats flipping the House was the outcome the markets had been expecting. Stocks surged on the prospect of political gridlock, easing any fears of quick changes to policy going forward.”

With the mid-terms out of the way, investors will shift their attention to the latest Federal Reserve policy announcement, which is due at 1900 GMT.

“The focus will be on what the US central bank has to say about domestic growth,” said Konstantinos Anthis, head of research at ADSS. “There’s virtually no chance that they will raise rates today and it looks like the December hike is also pretty much baked-in so any volatility will come from the Fed’s views on the economy and how these may affect investors’ expectations regarding further rate hikes in 2019. The base scenario calls for the Fed to remain bullish, reiterate their intention to keep tightening hinting on a gradual path of further rate increases next year.”

On the UK data front, the Royal Institution of Chartered Surveyors said earlier that its house price balance fell to -10 last month from -2 in September, marking its lowest level since September 2012 and missing expectations for an unchanged reading.

The drop was attributed mostly to London and the South East, as prices continued to rise in other parts of the UK, with the strongest growth in Northern Ireland and Scotland.

RICS chief economist Simon Rubinsohn said: “Although the tone of much of the newsflow surrounding the housing market remains downbeat, this continues to disproportionately reflect developments in the south and east of England with the picture remaining rather more resilient in many other parts of the country. Uncertainty about the economic outlook on the back of the never-ending Brexit negotiations appears a key drag on sentiment according to respondents to the survey.

“Meanwhile, the announcement of the extension of Help to Buy, albeit in a narrower format, should continue to underpin the new build market in the near term. Whether it, alongside other measures recently announced including the lifting of the HRA cap, is sufficient to drive housing starts up to the government’s 300,000 target over the coming years remains to be seen.”

In corporate news, Coca-Cola HBC fizzed higher as the soft drinks bottler said third-quarter revenue was up 2.6% to £1.87bn, slightly ahead of analysts’ expectations.

AstraZeneca was on the rise as its product sales returned to growth in the third quarter, with new cancer drugs in particular beginning to make a noticeable impact on the top line.

Sainsbury’s pushed higher as it reported a 20% increase in half-year underlying pre-tax profits to £302m and said it remains on track to deliver current market consensus for 2018/19 underlying pre-tax profit of £634m.

Luxury fashion brand Burberry gained as it said the response to new creative head Riccardo Tisci’s Kingdom collection has been “exceptional” and posted a rise in interim like-for-like sales.

Hikma Pharmaceuticals surged as it lifted its full-year guidance after solid performances from its injectables and generics divisions and OneSavings Bank advanced as it posted loan book growth of 16% for the first nine months of the year.

Auto Trader rallied as it said interim pre-tax profit rose 9% to £114.5m and that revenue growth for the full year was likely to exceed previous guidance.

On the downside, Inmarsat tumbled as it reported a significant third-quarter EBITDA beat but commentary around the maritime business was poor, with the company losing market share to competition in the core Fleet Broadband business.

BBA Aviation was also on the back foot after a mixed trading update.

On the broker note front, security services firm G4S was cut to ‘sector perform’ at RBC Capital Markets, while Hunting was lifted to ‘buy’ by Canaccord Genuity.

BP, Whitbread, Card Factory, Galliford Try, Go-Ahead Group, Greencoat UK Wind and Lancashire Holdings were among the companies whose stock went ex-dividend.

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