LONDON MARKET OPEN: Stocks Higher Amid Trade Optimism; UK GDP Ahead – Morningstar

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LONDON (Alliance News) – Stocks in London opened higher on Monday, tracking gains in Asian markets, amid optimism over upcoming trade talks between the US and China.

The FTSE 100 index was up 45.36 points, or 0.6%, at 7,116.54 in early trade. The FTSE 250 was 67.22 points higher, or 0.4%, at 18,720.10. The AIM All-Share was up 0.3% at 907.68.

The Cboe UK 100 was up 0.4% at 12,060.96, while the Cboe UK 250 was flat at 16,884.87. The Cboe UK Small Companies also was up 0.2%, at 11,148.85.

In China, the Shanghai Composite closed up 1.4%. Financial markets in China reopened after being closed for the Lunar New Year holiday last week. The Hang Seng index in Hong Kong ended up 0.6%.

Financial markets in Japan are closed for the National Foundation Day holiday.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were up 0.6% and 0.5% respectively.

On the London Stock Exchange, TUI was the best blue-chip performer at the open, up 2.7% as the Anglo-German travel operator clawed back some of the heavy losses incurred last week after it warned on stagnating earnings. The stock ended the week 21% lower.

Miners were higher amid a surge in iron ore prices, with BHP up 1.5%, Glencore up 1.4%, and Rio Tinto up 1.3%. In addition, Russian steelmaker Evraz was up 2.0%.

“With China returning from the Chinese New Year, domestic markets are playing catch up with recent developments, and this is clearly evident when looking at Dalian iron ore futures, which have surged 8% so far in trading today. This follows news last week that Vale has had to suspend 30 million tonnes per annum of capacity at its Brucutu mine in order to comply with a court order, and as a result Vale declared force majeure on some contracts,” said analysts at ING.

Lloyds Banking was up 0.9% after Morgan Stanley raised the lender to Overweight from Equal Weight.

Smith & Nephew was the worst performer in the FTSE 100 index, down 3.3% after the Financial Times reported Friday that the medical devices maker is discussions to acquire US surgical instruments maker NuVasive, in a deal the newspaper said could be worth more than USD3 billion.

San Diego, California-based NuVasive makes equipment for spinal surgery, as well as bone implants. The FT cited “people with direct knowledge of the talks”. It said the exact terms of the discussions could not be learned and talks may still fall apart.

Royal Bank of Scotland was down 0.5% after Morgan Stanley downgraded the state-backed lender to Equal Weight from Overweight.

In the FTSE 250 index, TalkTalk Telecom was the worst performer, down 3.0% after HSBC cut the home phone and broadband provider to Reduce from Hold.

Acacia Mining was down 1.0% after the gold miner reported a drop in annual revenue, skipped paying a dividend again, and forecast flat production for 2019.

For 2018, revenue was down 13% to USD663.8 million from USD751.5 million last year. Annual earnings before interest, taxes, depreciation and amortisation fell 14% to USD225.9 million from USD257.1 million the year before.

Acacia reported 2018 gold sales of 520,380 ounces, down from 592,861 ounces in 2017. This was due to reduced operations at the flagship Bulyanhulu mine and to stockpile processing at the Buzwagi mine, both in Tanzania, where Acacia is in a long-running dispute with the government. For 2019, Acacia expects production of between 500,000 and 550,000 ounces of gold.

The economic calendar events calendar has UK GDP and industrial and manufacturing figures at 0930 GMT.

The pound was lower against the dollar, quoted at USD1.2912 from USD1.2937 at the London equities close Friday.

“The breakdown of growth will also be watched for likely Brexit impacts and the Bank of England in particular cited concerns that business investment may be slipping. Any near-term negative impact form that on economic growth may be offset by a rise in stockbuilding, and the strength of import growth in December international trade will be another indication whether stockpiling is underway,” noted analysts at Lloyds.

Meanwhile, UK Prime Minister Theresa May has offered further talks with the opposition Labour party in an attempt to secure cross-party support for a Brexit deal.

May questioned Labour leader Jeremy Corbyn’s key call for the UK to remain in a customs union with Brussels but offered concessions in other areas and said she wanted talks between Labour and Tory teams “as soon as possible”.

Her offer came as Brexit Secretary Stephen Barclay prepared for talks with EU chief negotiator Michel Barnier as the government stepped up efforts to secure changes to the Irish backstop measure in the Withdrawal Agreement.

In her letter to Corbyn, responding to the conditions for a Brexit deal set out by the Labour leader, the prime minister said she wanted the Tory and Labour teams to consider “alternative arrangements” to the Irish backstop.

In the US on Friday, Wall Street ended mixed, with the Dow Jones Industrial Average down 0.3%, S&P 500 and Nasdaq Composite both ending 0.1% higher.

Investors will look ahead to the next round of US-China trade talks to be held in Beijing later this week.

“Trade negotiations between the US and China are going to take the centre stage and the tone of these negotiations is changing every day. Given that the deadline is just around the corner before the US slaps more tariffs on China, it is highly likely that both sides choose to extend the current deadline. As long as the US does not slam more tariffs on China and the negotiations process continues, I believe the overall situation would remain a lot more optimistic,” said ThinkMarkets analyst Naeem Aslam.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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