ADVFN Morning London Market Report: Thursday 6 December 2018

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London open: Stocks drop as Huawei CFO arrest sparks jitters

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London stocks fell in early trade on Thursday, taking their cue from heavy losses in Asia amid renewed concerns about trade relations between the US and China.

At 0830 GMT, the FTSE 100 was down 1% at 6,853.85, while the pound was off 0.1% against the dollar at 1.2727 and 0.1% firmer versus the euro at 1.1233.

Investors were feeling newly jittery about US-China relations as it emerged that the chief financial officer of Chinese telecoms company Huawei, Meng Wanzhou, was arrested in Canada over the weekend and faces extradition to the US over possible violations of sanctions against Iran. China has urged both Canada and the US to “rectify wrongdoing”.

CMC Markets analyst Michael Hewson said: “The arrest comes against a backdrop of concerns about trade and technology as well as cyber security when using Chinese hardware for IT systems. ZTE another Chinese firm has already been sanctioned by US authorities so for Huawei to be dragged in as well comes at a bad time when tensions between China and the US over trade at such a delicate stage, and could derail whatever was agreed at the weekend between President’s XI and Trump.”

Across the pond, the CME had to pause the trading for the S&P 500 futures when they opened, amid an intense sell-off. Spying a “bloodbath”, Think Markets analyst Naeem Aslam said: “The risk aversion trade has returned with vengeance as the MSCI Asia Pacific index is on track for its worst three-day plunge since October. The entire trade truce element between the US and China which promoted some optimism in the market is under a huge threat.”

In UK corporate news, packaging company DS Smith was the worst performer on the top-flight index despite saying it grew profits 28% in the first half of the year as acquisitions and solid organic growth combined with an increased return on sales margin.

William Hill suffered the heaviest losses on the FTSE 250, meanwhile, on news that Britain’s gambling companies have voluntarily agreed to stop advertising during live television sport. Ladbrokes owner GVC Holdings was also in the red.

Just Eat and Royal Mail both retreated as it emerged that they will be booted out of the FTSE 100 as of 24 December, replaced by insurer Hiscox and Spirax-Sarco Engineering following the latest quarterly review.

Specialist insurer Beazley declined as it said its early estimate of the cost of claims from the recent California wildfires is $40m (£31m), net of reinsurance. The company said investment markets continue to be volatile and its year to date investment return to 30 November 2018 was 0.5% ($27m).

Business information and events group Euromoney Institutional Investor ticked lower as it agreed to buy BoardEx and The Deal from parent company TheStreet for $87.3m in cash.

Scandal-hit Ted Baker bucked the trend after it confirmed the appointment of an independent law firm to carry out an investigation into reports of “forced hugging” by founder and chief executive Ray Kelvin, as it posted a dip in revenues in the 16 weeks to 1 December.

In a note on the housebuilding sector, Liberum upgraded Barratt Developments, Bovis Homes and Crest Nicholson to ‘buy’. Elsewhere, software group Sage was downgraded to ‘add’ at AlphaValue.

Next, Royal Mail, Babcock, Big Yellow, Britvic, Cranswick, Greene King, HomeServe, Intermediate Capital Group, Investec, LondonMetric and Mediclinic International were among the companies whose stock went ex-dividend.

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