London open: Stocks edge up as miners rally; Greggs gains on update
London stocks edged higher in early trade on Tuesday following heavy losses the previous day and mixed sessions in the US and Asia, with miners lending support.
At 0830 BST, the FTSE 100 was up 0.2% to 7,244.87, while the pound was down 0.1% against the dollar at 1.3078 and 0.1% firmer versus the euro at 1.1403.
Investors were digesting news that the International Monetary Fund has downgraded its forecast for global growth for this year and the next due to trade tensions, rising interest rates and political uncertainty. The IMF said it now expects the global economy to grow by 3.7% this year and the next, down from a previous forecast of 3.9% growth for both years.
London Capital Group analyst Jasper Lawler said: “The IMF cutting its global growth forecast for 2018 and 2019 is not that much of a surprise given current conditions. The first downgrade to growth in two years comes amid capital outflows from emerging markets and increased trade tensions between the world’s two largest economies.
“The US economy is firing on all cylinders right now. This makes the IMF prediction that US economic growth will decline feel like a distant problem, but the reality is that once the boost from the tax cut works its way out of the system, the impact of trade tensions with China will be laid bare.”
Data released earlier by the British Retail Consortium showed that UK retail sales grew at their weakest pace in five months in September. Sales were up 0.7% compared to 1.3% growth the month before, while like-for-like retail sales for the month were down 0.2% on September last year compared to a 0.2% increase in August.
“With consumers’ confidence still low amid continued Brexit uncertainty and indicators pointing to slowing employment growth, retail sales look set to be lacklustre in Q4,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Miners were the best performers, with Glencore, Antofagasta, Anglo American, BHP and Rio all higher.
A weaker dollar was helping the pound. “Not great for the internationally exposed and FX sensitive FTSE but good for commodities and Miners which had it tough yesterday,” said market analyst Mike van Dulken at Accendo Markets.
Elsewhere, Aviva rose after announcing that chief executive Mark Wilson was stepping down with immediate effect but would stay with the group until April 2019 to help with the transition.
Greggs racked up strong gains after it posted a rise in third-quarter like-for-like sales as new products proved popular with customers, and the FTSE 250 baker backed its expectations for the full year.
Ferrexpo rallied on the back of a well-received third-quarter production update, while Unite Group ticked up after saying that full-year rental growth is in line with its target of 3-3.5% and announcing the issue of a 10-year £275m senior unsecured bond.
Direct Line was the biggest gainer after an upgrade to ‘buy’ at Deutsche Bank, but Royal Mail was hit hard by a double-whammy of downgrades, as RBC Capital Markets cut the stock to ‘underperform’ and HSBC reduced it to ‘hold’. Sage also suffered heavy losses after a downgrade to ‘underweight’ by Barclays.
WPP was in the red after losing its long held contract as Ford Motor Company’s lead creative agency, which has gone to its fierce rival Omnicom’s BBDO agency.
Great Portland Estates nudged down after selling a multi-let office and retail building at 27/35 Mortimer Street, W1 for £38.5m to Orchard Street Investment Management on behalf of St James’s Place.
In other broker news, Schroders was upgraded to ‘buy’ at Berenberg, while Joules Group was initiated at ‘buy’ and N Brown and Quiz were initiated ‘hold’ by Berenberg. Telecom Plus was lifted to ‘buy’ at Peel Hunt.