ADVFN Morning London Market Report: Tuesday 5 November 2019

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London open: Stocks nudge up ahead of services PMI; gambling stocks still weak

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Mining stocks rallied again on Tuesday amid growing optimism over a US-China trade deal, but the Footsie was just a touch higher overall following solid gains in the previous session, as investors eyed the release of key UK services data.

At 0830 GMT, the FTSE 100 was 0.1% firmer at 7,379.95, while the pound was up 0.1% against the dollar and the euro at 1.2899 and 1.1584, respectively.

Investors were eyeing the release of the UK services purchasing managers’ index for October, which is expected to have ticked up to 49.7 from 49.5 in September.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: “Released last week, the UK’s October manufacturing PMI surprised on the upside. Services PMI is more relevant for the health of the British economy, as services make up to 80% of its economy.

“A consensus of analyst expectations points at a reading of 49.7 for the services PMI today. This expectation is a touch below the 50 level which distinguishes expansion from contraction. Hence, a better-than-expected services PMI print, ideally a surprise expansion could reverse the pound sell-off and encourage an advance past the 1.29 level. A disappointment should flourish the sell-side and pressure the pair toward the 1.2820/1.2800 support zone.”

In equity markets, miners were the top performers again, with Glencore, Antofagasta, Anglo American, Rio Tinto and BHP all higher as copper and iron ore prices rose amid growing expectations that the US and China will strike a trade deal.

Upbeat comments on trade relations from US commerce secretary Wilbur Ross over the weekend continued to underpin the sector.

CMC Markets analyst David Madden said: “During the course of Trump’s trade dispute with China, he suggested he could turn up the heat on Brussels, but remarks yesterday helped chip away at some of those fears.”

Elsewhere, Associated British Foods was sitting pretty at the top of the FTSE 100 after it reported a rise in adjusted full-year profits as its Primark and grocery businesses offset a sharp fall in sugar earnings. Adjusted pre-tax profit rose 2% to £1.4bn on a 2% increase in group revenue to £15.8bn.

Richard Hunter, head of markets at Interactive Investor, said: “AB Foods is playing to its strengths, with its two largest units doing most of the heavy lifting.

“Amid the positive potential, the missing part of the jigsaw of late has been a share price which has fallen 12% over the last six months and has drifted 7% over the last year, as compared to a 3.7% gain for the wider FTSE 100. Today’s share price reaction to these results undoes some of that damage and the general market view of the shares as a buy is also a reflection of the esteem in which the company is held.”

Euromoney was in the green after it said full-year 2019 results were set to be slightly above the board’s expectations while Wood Group and Micro Focus were both boosted by upgrades to ‘neutral’ at Goldman Sachs.

Imperial Brands was in the red as it posted a decline in full-year profit despite a rise in revenue, amid “tough” trading in its net generation products. In the year to the end of September, reported pre-tax profit fell to £1.69bn from £1.82bn the year before, while operating profit ticked down to £2.07bn from £2.28bn, despite a 5.1% jump in revenue to £31.59bn.

On the downside, Weir Group retreated after it issued a profit warning for its oil and gas division.

Gambling stocks William Hill, Rank Group, GVC and 888 Holdings were weaker for the second day running after MPs recommended curbs on online casino games.

Babcock was down after an initiation at ‘underweight’ by Barclays, while Hunting gushed lower as it was cut to ‘sell’ at Goldman Sachs.

 

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