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London open: Stocks rise amid signs of Sino-US progress; Tui and Plus500 tumble
London stocks edged up in early trade on Tuesday, taking their cue from an upbeat session in Asia, as investors welcomed signs of improvement in Sino-US trade talks and news that another US government shutdown has been averted.
At 0840 GMT, the FTSE 100 was 0.4% higher at 7,153.73, while the pound was up 0.1% against the dollar and the euro at 1.12869 and 1.1410, respectively.
Trade relations between the US and China were in focus again, with investors increasingly hopeful after White House adviser Kellyanne Conway said President Trump wants to meet with Chinese President Xi Jinping “very soon” as the deadline on trade talks between the two nations looms.
Spreadex analyst Connor Campbell said this was “a slight evolution of last week’s claim that the Donald wouldn’t be seeing his Chinese counterpart this side of the ceasefire ending”.
Meanwhile, sentiment also got a boost from news that Democrats and Republicans have reached an agreement in principle over border security that will avert another partial government shutdown.
Back in the UK, all eyes will be on Prime Minister Theresa May as she addresses MPs later in the day, seeking more time to renegotiate her Brexit deal with the European Union. She is expected to ask Parliament to restate its demand to remove the Irish backstop from the Withdrawal Agreement and pledge a further vote if she hasn’t brought back a tweaked deal by 27 February.
Speaking after a dinner the Brexit Secretary Stephen Barclay in Brussels on Monday night, the EU’s chief Brexit negotiator Michel Barnier said there would be no renegotiation of the Irish backstop.
Neil Wilson, chief market analyst at Markets.com, pointed out that sterling was once again testing last week’s lows of $1.2850. “Should this level go it could open up a return to 1.27. Sentiment remains against the pound – May can buy time but it amounts to little more than a stay of execution.”
On the corporate front, GVC Holdings, Paddy Power Betfair and William Hill all rallied as it emerged that British horse racing would resume on Wednesday following a six-day shutdown due to equine flu.
Stagecoach built up some steam after confirming that its East Midlands Trains subsidiary has won a short-term extension to its rail franchise with the Department for Transport.
CYBG advanced as it said that its Clydesdale Bank chain has entered into a joint venture with Salary Finance to add an “innovative channel” to CYBG’s personal lending business.
Outside the FTSE 350, shares in struggling department store chain Debenhams surged 40% as it secured an extra £40m of credit headroom from its lenders.
On the downside, Tui was the worst performer on the FTSE 100 as it said losses widened in the first quarter, just days after the tour operator downgraded its full-year earnings outlook on the back of warm weather and the weak pound. Underlying losses for the group widened to €83.6m in the three months to the end of December 2018 from €36.7m in the same period a year ago, but revenue ticked up 4.4% to €3.70bn.
Plus500 tumbled more than 38% as it warned that 2019 profit would be “materially lower” than market expectations due to new European Union regulations on financial products.
Indivior was in the red after saying it will petition the US Supreme Court to block a decision by the federal appeals court to allow rival companies to sell their generic versions of its opioid addiction treatment. The company said it assumes that both Dr Reddy’s Laboratories and Alvogen Pine Brook will both launch their copycat versions of its Suboxone Film “at risk” of pending court judgments that they are infringing on Indivior’s patents.
In broker notes, BHP was cut to ‘neutral’ at Goldman Sachs, while Rio Tinto was upgraded to ‘buy’.
Spire Healthcare was downgraded to ‘underperform’ at Credit Suisse and Britvic was cut to ‘equalweight’ at Morgan Stanley.
Polymetal was lifted to ‘neutral’ at JPMorgan. Hammerson, Segro and British Land were all started at ‘sector perform’ by RBC Capital Markets.
Meanwhile, HSBC initiated coverage of a host of UK mid cap stocks, including the likes of Meggitt and Auto Trader.
