ADVFN Morning London Market Report: Tuesday 5 November 2019

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London open: Footsie nudges lower as property stocks fall; M&S rallies

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London stocks nudged lower in early trade, with property stocks under the cosh after a downbeat update from Intu Properties, as investors eyed fresh developments in Sino-US trade relations.

At 0840 GMT, the FTSE 100 was down 0.1% at 7,382.83, while the pound was flat versus the dollar at 1.2884 and 0.1% weaker against the euro at 1.1627.

Neil Wilson, chief market analyst at Markets.com, said equity markets “hunger for trade news, but the relief rally may have a tad further to run”.

“One can’t help but feel the market is already pricing in all the good news, and ignoring the bad.

“A deal seems to hinge on the US removing the tariffs it’s placed on China – for all the optimism, this would be a stretch. Whilst we noted yesterday the US appeared to have blinked, and does look prepared to reduce some tariffs and scrap some planned tariffs, demands from China to remove all tariffs in order to complete a ‘phase one’ deal would be too much.

“The President would probably like a deal soon that he can sell to voters, whilst still looking tough. Backing down on all tariffs for some agricultural sales and vague commitments on IP wouldn’t achieve that.”

On home shores, general election campaigning officially kicked off. Wilson said there are two key implications for financial markets – the path of Brexit and the effect on the domestic economy from business and economic policies.

“Trying to figure out what the result will be is going to be impossible, given the way voters are cleaving along new lines,” he said.

On the corporate front, British Land, Land Securities and Hammerson were all in the red after Intu Properties said rental income for the year was set to drop and that it was considering a cash call amid tough trading conditions in the retail sector.

On the upside, Marks & Spencer racked up solid gains despite posting a 2% decline in interim revenue due to weaker home and clothing sales and a 17% drop in profits before tax and adjusted items. Food like-for-like sales grew 0.9% driven by volume, while clothing & home like-for-like sales fell 5.5%, reflecting “first half shape of buy and supply chain issues”, M&S said.

Group revenue fell to £4.8bn from £4.9bn. Pre-tax and adjusted items profit was £176.5m, down from £213m a year earlier.

Richard Hunter, head of markets at Interactive Investor, said: “For some considerable time, the company has been split between a food business which has continued to deliver and a general merchandising arm whose performance has been plodding and dowdy.

“This update shows some determination to put things right, from the design of lines through to the supply chain, but the company is playing catch-up with a fiercely competitive and evolving sector. The 5.5% like-for-like sales decline in sales is a stark reminder of the challenges ahead. M&S has reported that October was a positive month, but one swallow does not a summer make and this trend will need to be established as the norm before winning over investors.”

Ultra Electronics gained after the defence contractor said it traded in line with expectations in the nine months to the end of September and that order book development since its interim results had been “good”.

In broker note action, British Airways and Iberia parent IAG flew a little higher after an upgrade to ‘outperform’ at Bernstein, but Standard Chartered slipped after a downgrade to ‘sell’ at Investec.

 

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