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London open: Stocks nudge lower after China data; US earnings, geopolitics in focus
London stocks nudged lower in early trade on Friday as investors kept an eye on the geopolitical situation, with the latest Chinese trade data in focus and US bank earnings to look forward to.
At 0835 BST, the FTSE 100 was down 0.1% to 7,252.47, while the pound was up 0.2% against the euro and the dollar at 1.1563 and 1.4259, respectively.
Data out of China earlier showed a surprise monthly trade deficit in March for the first time in 13 months. China’s trade balance swung to a deficit of $4.98bn from a surplus of $33.7bn the month before, versus expectations for a surplus of $19.6bn.
London Capital Group analyst Jasper Lawler said: “A sharp drop in exports is of some concern for the country’s future path of economic growth. One data point does not make a trend, and this drop is likely a combination of exporters front-loading before possible tariffs and simply a pullback from a strong first two month of the year.
“The deficit might have been welcomed by US President Trump, but China’s trade surplus with the US rose significantly in the first quarter. If investors were looking for empirical evidence to tempt the White House to back off from a trade war, it won’t be found here.”
Meanwhile, geopolitics remained in focus after UK Prime Minister Theresa May and US President Trump agreed during a late-night phone conversation that Syria’s suspected use of chemical weapons should not go unchallenged.
Downing Street said Cabinet ministers had agreed “on the need to take action” to “deter further use of chemical weapons” after concluding that it was “highly likely” the Assad regime was behind the chemical attack.
Transport Minister Jo Johnson later said there had been no decision to take military action at this point.
Spreadex analyst Connor Campbell said: “News – well a tweet from Trump – that the US could re-join the Trans-Pacific Partnership appears to be countering the threat of military action in Syria following a unanimous decision from Theresa May’s Cabinet that the use of chemical weapons must be challenged.”
Across the pond later in the day, updates from JPMorgan Chase, Wells Fargo and Citigroup will kick off the US earnings season.
In UK corporate news, London Stock Exchange edged higher as it appointed Goldman Sachs veteran David Schwimmer as its new chief executive.
Elsewhere, software company Sage Group tumbled after cutting its full-year organic revenue growth guidance, reflecting inconsistent operational execution.
Shopping centre owner Hammerson also suffered sharp losses as French real estate investment trust Klepierre said it does not intend to make an offer for the company after its second approach was rebuffed. Klepierre said it was abandoning its pursuit “after careful consideration” as Hammerson “did not provide any meaningful engagement with respect to the increase proposal”.
Rolls-Royce was in the red after saying that it plans to step up the number of inspections it carries out on the Trent 1000 jet engines, a move that will lead to more disruption for customers and higher costs
There was a lot going on the broker note front. Fidessa was lifted to ‘equalweight’ at Barclays, while British Airways and Iberia parent IAG was the standout gainer after being upgraded to ‘hold’ at HSBC a day after revealing it had taken a minority stake in Norwegian, which it is considering making an offer for.
Ultra Electronics also gained on the back of an upgrade to ‘hold’ at Berenberg.
Flybe was cut to ‘hold’ at HSBC, while Royal Mail was knocked lower by a downgrade to ‘underperform’ at RBC Capital Markets and TalkTalk was hit by a cut to ‘sector perform’ at RBC. Lloyds was downgraded to ‘hold’ at HSBC and Wood Group was cut to ‘equalweight’ at Morgan Stanley.
Halma and Hill & Smith were initiated at ‘buy’ at Berenberg, while Renewi was initiated at ‘hold’.
Virgin Money was started at ‘hold’ at HSBC.
