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London open: Stocks climb as miners rally, Brexit Sec Davis resigns
London stocks rose to their highest level in almost a fortnight on Monday morning even in spite of the resurgent pound as Brexit Secretary David Davis resigned from the government.
The FTSE 100 index jumped 30.79 points or 0.4% to 7,648.49, while sterling was up 0.27% on the dollar at 1.3319 and gained 0.2% versus the euro to 1.1329 as investors continued to digest the softer Brexit stance pushed through by Theresa May at Friday’s crunch cabinet meeting at Chequers.
The resignation of Davis and his two under-secretaries was in protest against the new Brexit proposals.
“It’s unwelcome timing for the PM ahead of the UK’s white paper on Brexit, and before crucial talks with Brussels, but markets welcome the removal of a major impediment to a pro-business ‘soft-Brexit’,” said analyst Mike van Dulken at Accendo Markets.
Analyst Jasper Lawler at London Capital Group added: “Today and the next few days will be key for Theresa May’s survival and the buoyancy of the pound. The pound has fallen away from its opening high versus the US dollar, but not actually swung lower on the day, suggesting that investors believe she will keep hold of the reins.”
Lawler said the trade war between US and China remained on the forefront of the market’s hive-mind but that US jobs data had somewhat over-ridden some of the negative thoughts.
“Just because US equities didn’t experience a sell off on Friday, it doesn’t mean that a trade war is already fully priced in. The actual trade tariffs are nothing new, the market has been aware of them for over a month, and for now conditions are still supportive for financial growth, allowing markets to move higher.”
Monday’s should be quiet from data perspective but will pick up over the week.
In company news, the FTSE’s phalanx of heavyweight miners was leading the charge, with Antofagasta, BHP Billiton, Anglo American and Rio Tinto all on the leaderboard, as dollar weakness may hampering the earnings potential of some of the FTSE’s global stocks, but is a boon to the dollar-priced resources sector. Oil and copper prices are also both up.
BP was also reported by Reuters to be in the lead to buy BHP Billiton’s US onshore oil assets.
Stobart Group took off after it was confirmed over the weekend that chairman Iain Ferguson received enough votes at Friday’s annual shareholder meeting to remain in his position. Ex-director Andrew Tinkler, who had been leading a campaign to replace Ferguson, was voted back onto the board, but the board quickly decided to vote him back off.
Cairn Energy climbed as it said ongoing arbitration with the Government of India would face final arbitration hearings scheduled from 20 August in The Hague.
Inmarsat was rising despite US suitor Echostar having abandoned its efforts to acquire the satellite company just after the close on Friday.
Shares in TalkTalk were higher, with reports over the weekend that billionaire chairman Sir Charles Dunstone is facing an attempt by investors to kick him off the board.
Sirius Minerals was up on the back of a materials handling agreement and lease signed with Redcar Bulk Terminal to provide port and ship loading services for up to 10m tonnes of fertiliser a year. The company said the deal will provide greater flexibility in storage and port operations and reduced construction risk and capital expenditure requirements during its current construction programme.
Workspace Group was a little higher after exchanging contracts for the disposal of three properties in London for a total of £51.85m, a premium of 23.2% the March valuation.
Student accommodation manager and developer Unite edged up after it issued a quarterly property valuation of its UK Student Accommodation Fund and the London Student Accommodation Joint Venture, with the former independently valued up 1.2% at £2.32bn and the latter up 2.5% to £1.2bn.
On the downside, Egyptian gold miner Centamin reported production for the second quarter of 92,803 ounces, a 25% reduction year-on-year.
Off the FTSE 350, Mothercare was tumbling again as the retailer went cap-in-hand to shareholders in an effort to raise £32.5m through a one-for-one placing and open offer and said it was now shutting 60 shops instead of the 50 originally earmarked. It added that its Childrens World division was being placed into administration after creditors failed to back a company voluntary arrangement.
“Mothercare’s latest troubles demonstrate how difficult life is for high street retailers,” said analyst Rebecca O’Keefe at Interactive Investor. “Transforming legacy businesses, making them relevant, and generating enough footfall that goes on to buy your product instore, rather than testing it out and then going home to get a better deal online, is incredibly tough. Many investors have given up on the high street retail sector altogether and others are wondering just how long they will have to wait for management to deliver their turnaround strategies, or if it is worth the wait at all.”
