LONDON MARKET CLOSE: Stocks Down As US-China Trade War Fears Reemerge – Morningstar

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LONDON (Alliance News) – Stocks in London ended lower on Friday amid renewed fears that the trade spat between the US and China could escalate due to lack of progress from recent trade talks.

The FTSE 100 index closed down 0.3%, or 22.40 points at 7071.18, ending the week up 0.7%. The FTSE 250 ended down 0.8%, or 1.46.38 points at 18652.88, ending the week down 0.8%. The AIM All-Share closed down 0.8%, or 7.03 points, at 904.91, ending the week down 1.8%.

The Cboe UK 100 ended down 0.4% at 12,016.07, the Cboe UK 250 closed down 0.7% at 16,679.73, and the Cboe Small Companies ended down 0.2% at 11,122.36.

In Paris the CAC 40 ended down 0.5%, while the DAX 30 in Frankfurt ended 1.1%.

“After an initially subdued start to European trading, equity markets have rolled back over into the red ahead of the weekend, bringing to an end to what initially looked like being a positive week, but which ultimately has seen the risks of a renewed escalation in the US, China trade war come back to the fore front of investor’s minds,” said CMC Markets Chief Market Analyst Michael Hewson.

On the London Stock Exchange, Ocado ended as the best blue chip performer, up 2.5% after enduring a torrid week which saw the online grocer warn over sales growth following a fire at its flagship warehouse in Andover.

The stock ended the week 9.5% lower.

“Ocado has bounced into the end of the week now that the fire at one of its warehouses is out. The news is a one-off distraction from a company that finally seems to have a path to sustained profitability ahead of it. The tie-up with M&S is interesting, but it is the steady adoption of Ocado’s technology around the globe that will be the real story,” said IG chief market analyst Chris Beauchamp.

Housebuilders ended among the blue chip risers amid optimism over Brexit and positive trading performances from sector constituents.

Barratt Developments closed up 1.8%, Berkeley Group up 1.0%, Persimmon up 0.9% and Taylor Wimpey up 0.1%.

Earlier this week, Barratt and midcap peer Bellway reported strong half year earnings and sold more homes despite Brexit uncertainty – which has hurt sentiment towards the sector.

At the other end of the large cap index, TUI closed down 4.3%, adding to sharp losses suffered on Thursday after the Anglo-German travel operator cut its earnings outlook due to “extraordinary” hot weather and the weakness of the pound. The stock ended the week 21% lower.

Centrica closed down 2.1% after Citigroup downgraded the British Gas parent company to Neutral from Buy.

“Unless Centrica is able to revitalized its current strategy by delivering growth in some of its new business lines or to curb the level of churn in retail or to improve the commodity output, we see little reason for investors to own the shares,” Citi analyst Jenny Ping said.

Centrica will report annual results on Tuesday.

SSE closed down 0.2% after the “Big Six” energy supplier cut its earnings outlook, reported a drop in customers and said it was assessing options for its retail arm following the collapse of a merger with rival Npower.

SSE warned that earnings per share would be 6 pence lower than previously expected, coming in at a range of 64p and 69p, down from earlier estimates of 70p to 75p.

The pound was down, quoted at USD1.2937 at the London equities close, compared to USD1.2967 at close Thursday.

Sterling is down 1.2% since Monday, due to weak UK PMI data during the week and the Bank of England slashing economic growth forecasts on Thursday, amid “intensifying” Brexit uncertainty.

“Markets appear to be banking on the prospect that an outbreak of sanity will break out between EU and UK politicians in the weeks and months ahead, so that a ‘no deal’ scenario is avoided. On the evidence of the last few days, and some of the language coming out of European capitals and London that, on the face of it, seems a big ask,” noted CMC Markets analyst Michael Hewson.

In political news, Irish premier Leo Varadkar has said he will not be negotiating Brexit when he meets Prime Minister Theresa May for dinner in Dublin on Friday evening.

After holding talks in Brussels on Thursday, May travelled to Dublin in an effort to resolve the dispute over the Irish backstop, which remains the main stumbling block to an agreement.

She will be joined for the private dinner at official state guesthouse Farmleigh House by the UK’s Brexit negotiator Olly Robbins and her chief of staff Gavin Barwell.

Varadkar said while the meal presented an opportunity to “share perspectives” on Brexit, actual negotiations “can only be between the EU and the UK”.

Downing Street said May would be “emphasising what we are looking for, seeking the legally binding changes to the withdrawal agreement that Parliament said it needs to approve the deal”.

The euro was down, at USD1.1328 at the European equities close, against USD1.1355 late Thursday.

The single currency has come under pressure after the European Commission on Thursday sharply cut its forecasts for euro zone economic growth this year and next, saying the bloc’s largest countries will be held back by global trade tensions and domestic challenges.

In economic news, Germany’s exports rebounded at a faster-than-expected pace in December, exceeding expectations, extending some positive data for the biggest euro area economy after the recent run of weak figures that suggested a slowdown.

Exports rose a calendar and seasonally-adjusted 1.5% from November, when they declined 0.3%, figures from the Federal Statistical Office showed on Friday. Economists had expected 0.5% growth.

The pace of growth was the fastest since May’s 1.6% gain.

Imports climbed 1.2% month-on-month, recovering from a 1.3% slump in November. Economists had forecast 0.4% growth.

Stocks in New York were lower at the London equities close amid lingering concerns about a potential trade deal between the US and China.

The DJIA was down 1.0%, the S&P 500 index down 0.7% and the Nasdaq Composite down 0.6%.

Adding to the worries, a report from the Wall Street Journal said the US and China do not even have a draft accord that specifies where they agree and disagree.

The report comes after President Donald Trump told reporters he will not meet with Chinese President Xi Jinping before a crucial March deadline.

“Not yet. Maybe. Probably too soon,” Trump said when asked if he would meet with Xi in the next month or so before flatly saying, “No” when asked if the two leaders would meet before the deadline.

Tariffs on Chinese goods are currently set to jump automatically on the deadline, although Trump is expected to delay the increase as talks continue.

Brent oil was quoted at USD61.72 a barrel at the London equities close from USD62.30 at the close Thursday.

Gold was quoted at USD1,314.70 an ounce at the London equities close against USD1,309.84 late Thursday.

The economic events calendar on Monday has UK GDP and industrial and manufacturing figures at 0930 GMT. Also, Chinese markets reopen after the week long holiday for the New Year celebrations.

The UK corporate calendar on Monday has annual results from gold miner Acacia Mining.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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