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London open: Stocks edge up on positive US cues; Morrisons drops after update
London stocks edged higher in early trade on Tuesday, taking their cue from a positive session on Wall Street as investors grew hopeful of an improvement in trade relations between the US and China.
At 0830 GMT, the FTSE 100 was up 0.3% at 6,830.43, while the pound was down 0.1% against the dollar at 1.2766 and 0.1% firmer versus the euro at 1.1157 following a report that Prime Minister Theresa May is in secret last-minute talks with EU leaders about possibly extending the 29 March Brexit deadline.
Meanwhile, Chinese and US officials were due to kick off a second day of talks in Beijing later.
Mike van Dulken, head of research at Accendo Markets, said: “With the first day of talks producing no major headlines, traders are looking to a potential post-talks soundbites to feel the pulse of both sides. Chinese Vice Premier and President Xi’s top economic advisor Liu He was among the negotiators, underscoring how seriously Beijing was taking this first round of talks.”
In corporate news, pub operator Greene King rallied as it posted a 10.9% jump in like-for-like sales over Christmas and the New Year and expressed confidence over the full year, while Safestore rose as it reported a 135% increase in full-year pre-tax profit.
After a good day on Monday on the back of a well-received update from homeware retailer Dunelm, retailers were faring less well.
Morrisons was in the red even as it reported stronger-than-expected retail sales over the festive period. Investors were pleased with the company’s like-for-like sales growth but disappointed by another relatively weak performance form the core retail arm.
Richard Hunter, head of markets at Interactive Investor, said: “The shares have fallen foul of the wider and weaker market environment, having dipped 14% over the last six months, although over the last year the 2.5% decline in the price compares favourably with the FTSE100, which has dropped 11.5% in the corresponding period.
“With the bar expected to be high in terms of forthcoming updates from the other supermarkets, the general market consensus of the shares as a hold tends to suggest that investors consider there to be better value elsewhere.”
Outside the FTSE 350, sportswear retailer Footasylum was under the cosh as it warned that full-year earnings would be towards the lower end of analysts’ forecasts, while gross margin will be lower than current market expectations as a result of heavy discounting over Christmas.
The company said it had seen “some of the most difficult trading conditions in recent years” over Christmas, amid economic uncertainty and weakening consumer sentiment.
Elsewhere, building materials group SIG was the worst performer on the FTSE 250 after saying it expects profit for 2018 to drop on the back of lower trading revenue amid challenging market conditions.
In broker note action, Vodafone was cut to ‘underperform’ at RBC Capital Markets, while Ryanair was downgraded to ‘sell’ at Berenberg and Smiths Group was downgraded to ‘underperform’ at Bank of America Merrill Lynch.
Vesuvius and Rotork were upgraded to ‘buy’ by Merrill, while Petrofac was lifted to ‘market perform’ at Bernstein and Ashtead was lifted to ‘neutral’ at UBS.
