ADVFN Morning London Market Report: Friday 12 January 2018

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London open: Stocks nudge higher after record close; GKN surges after bid

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London stocks nudged higher in early trade on Friday following another record close the day before, with engineering group GKN leading the charge.

At 0830 GMT, the FTSE 100 was up 0.1% to 7,772.98, having hit a record intraday high of 7,774.41 earlier, while the pound was up 0.2% versus the greenback at 1.3562 and down 0.2% against the euro at 1.1232.

There are no major UK macroeconomic data releases due, but in the US investors will eye the release of retail sales and inflation data for December at 1330 GMT.

Market participants will also turn their attention to the US corporate calendar as earnings season kicks off in usual style with big banks JPMorgan Chase, BlackRock and Wells Fargo all due to report.

“Recent market highs have been based on expectations of higher global growth and increased corporate earnings, so the start of the US earnings season today is a major market event,” said analyst Rebecca O’Keeffe at Interactive Investor. “Investors will be hoping that both top line growth and high margins can lead to substantial earnings growth and justify current equity valuations.”

O’Keeffe noted that a fall in US stockpiles after the savage recent cold snap, coupled with confirmation that OPEC, Russia and other oil producers will retain their supply constraints throughout 2018, helped push Brent crude as high as $70 a barrel for the first time in three years.

“With the oil price having risen so far, so fast and with net long non-commercial positions in crude oil at historically elevated levels, the key question for investors is whether the current price levels are sustainable or if yesterday was the short-term high,” she speculated.

On the UK corporate front, the share upswell was led by GKN, which surged 20% after the company said it has rejected a bid proposal from Melrose Industries and appointed Anne Stevens as chief executive, as it announced plans to separate its aerospace and automotive businesses. Melrose shares were up nearly 5%.

Inhaler maker Vectura was in the black following press reports that GlaxoSmithKline is looking to make a bid for the company.

Smiths Group was on the front foot as it said the net impact of the new US tax legislation on the group would be “favourable over the medium term”.

Bovis Homes advanced after saying it built a lower number of homes in 2017 but reporting much improvement in its balance sheet and in customer satisfaction after the controversy that saw its previous chief executive depart under a cloud last summer.

Discount retailer B&M European Value racked up healthy gains as it reported a strong quarter of growth in the pre-Christmas period, helped by 22 new store openings and keeping prices low in the UK and Germany.

Restaurant and pub chain owner Michells & Butlers was in the red despite saying that trading through the core three week festive season was “strong”, with LFL sales growth of 3.9%. Christmas Day was a record taking day with like-for-like sales growth of 5.4% and 225,000 meals sold.

In broker note action, Mondi and Superdry were boosted by upgrades from Investec and Stifel, respectively, while SSP was higher after an upgrade at JPMorgan.

Rotork benefited from an upgrade at HSBC, but TUI was hit by a downgrade to ‘neutral’ at JPMorgan.

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