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London open: Italy concession lifts stocks, Tesco and Aston Martin in reverse
London stocks started on the front foot on Wednesday amid reports that Italy’s government might make some concessions on its budget plans and in spite of falls for Tesco and market debutant Aston Martin.
The FTSE 100 climbed 18 points or 0.2% to 7,492.48. Sterling was offering no support, climbing 0.2% to back above $1.30 and flat against the euro at 1.1233.
Shares around Europe were boosted as the Italian coalition government blinked first in its potential debt stand-off with Brussels. Officials in Rome will offer to reduce the country’s budget deficit as a proportion of gross domestic product in 2020 and 2021, to 2.2% and 2.0%, respectively, but hold the line on next year’s expected shortfall of 2.4%, according to a report in Italian daily Corriere della Sera.
Overnight, the Dow Jones Industrials had notched-up a fresh record high, even as the tech-heavy Nasdaq Composite and the small-cap focused Russell 2000 dipped.
Commenting on the news out of Italy, Jasper Lawler, market analysts at London Capital Group, said: “Italy’s already high debt pile would increase significantly under Italy’s original budget intentions. However, plans going forward to bring the deficit under control and avoid another debt crisis has boosted risk appetite across the globe.
“This is by no means the end of this tale, which is why the FTSE MIB is looking to a slower start that its European peers and gains in the euro could be capped. However, the odds of a happy ending have improved. Brussels still need to approve Italy’s budget plans by the middle of the month, so we could still see some jitters until the ink has dried on that approval.”
Back in the UK, traders were waiting on a reading on UK services sector activity in September at 0930 BST from IHS Markit.
They were also expectant ahead of the final day of the Conservative Party annual conference, with all eyes on Theresa May’s speech and her continuing efforts to win DUP support for her Irish border “backstop” plans.
It was a similar story overseas, with services PMIs scheduled for release in the euro area, at 0900 BST, and in the US, at 1500 BST.
Traders will also be keeping an eye out for eurozone services data at 0900 BST and an expected for rebound in eurozone retail sales for August at 1000 BST.
This afternoon, US ADP employment data at 1315 BST will be watched closely. However, market analyst Mike Van Dulken at Accendo Markets said while it may regain some of the lost ground in August, recent divergence from the official jobs report means hints about what to expect from Friday’s non-farm payrolls “may be limited”.
Tesco shares were moving lower despite the supermarket colossus reporting a 42% increase in first-half profits as sales accelerated in the second quarter. Like-for-like sales increased 2.2% but while profit before tax and exceptionals roared up to £806m thanks to the March acquisition of Booker, this was short of the £811m that the City expected.
Elsewhere, Aston Martin shares skidded lower as they began trading after an initial public offer that value the luxury car market at £4.3bn. The shares were priced at 1,900p in the IPO but were quickly shifted into a lower gear, falling 4% to 1,833p in early trading.
Leading the risers was Vodafone as its Italian arm snapped up 5G service airwaves for €2.4bn (£2.14bn) in an auction run by the Italian government. The auction raised €6.bn in total for the Italian treasury.
Schroders was up on the back of a Financial Times report that it is poised to win the £109bn mandate from Lloyds Banking Group to manage the Scottish Widows assets that were withdrawn from Standard Life Aberdeen back in February.
Euromoney Institutional Investor was little moved as it agreed to sell its Mining Indaba business, which operates the world’s largest annual mining investment conference, for £30.1m to ITE Group. For the year ended 30 September 2017, Mining Indaba reported an adjusted operating profit of £2.5m.
Great Portland Estates was down a little after it exchanged contracts to sell 55 Wells Street, W1 to an unnamed overseas investor for a headline sale price of £65.46m.
