ADVFN Morning London Market Report: Friday 11 January 2019

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London open: Housebuilders pace the advance as investors eye raft of data

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London stocks edged up in early trade on Friday, taking their cue from an upbeat session on Wall Street as investors eyed a raft of UK data releases.

At 0830 GMT, the FTSE 100 was up 0.3% to 6,965.96, while the pound was down 0.1% against the dollar at 1.2738 and 0.3% lower versus the euro at 1.1057.

A late rally on Wall Street overnight, as the Dow Jones managed to cross 24,000 for the first time in over three weeks, fed through the Asian markets and into Friday’s European open.

“There were a couple of key reasons why the Dow overturned what was looking set to be a triple-digit, retailer-dragged decline,” said Spreadex analyst Connor Campbell. “Firstly, Federal Reserve head honcho Jerome Powell once again attempted to reassure investors over what the central bank has planned for 2019, emphasising its ‘ability to be patient’ in regards to raising interest rates.

“Secondly, and perhaps the bigger item, was treasury secretary Steve Mnuchin’s suggestion that China’s lead trade official, vice premier Liu He, will ‘most likely’ hop over to the US for some further trade talks later this month. That comment appears to have renewed hopes that the recent get-together in Beijing, though not producing any concrete progress just yet, was nevertheless a step towards an eventual trade war resolution.”

On the data front, manufacturing and industrial production figures are at 0930 GMT, along with the trade balance and gross domestic product for November.

UK industrial production is expected to have risen 0.3%, while manufacturing production is expected to have pushed up 0.4% after some sharp declines in October. Meanwhile, the monthly GDP is forecast to come in unchanged at 0.1% for November.

Housebuilders were the standout gainers on the FTSE 100 as Bank of America Merrill Lynch upgraded its stance on Barratt Developments and Bellway to ‘neutral’ and Persimmon and Taylor Wimpey to ‘buy’.

Elsewhere, Southend airport owner Stobart shot higher as it teamed up with Virgin Atlantic and Cyrus Capital Partners to buy British regional airline Flybe for 1p a share, valuing the company at £2.2m.

The consortium, known as Connect Airways, committed to make available a £20m bridge loan facility to support Flybe’s ongoing working capital and operational requirements. A further £80m would be invested in the business, as well as the contribution of Stobart Air after completion.

Builders merchant Grafton was on the rise as it said it expects adjusted profits for 2018 to be slightly ahead of the top end of analyst expectations even though the rate of growth slowed in the last two months of the year.

Pub operator Ei Group was in the green as it agreed to dispose of 370 properties to Tavern Propco Limited for £348m, a significant chunk of which will be used to cut debt.

Outside the FTSE 350, retailers were in focus again, with fast fashion brand Quiz down 23% as it warned on full-year profits and revenue after a difficult Christmas period and Moss Bros a touch lower as it said margins in the second half were hit by increased promotional activity.

Meanwhile, Debenhams fell sharply as its chief executive and chairman were voted off the board after major shareholder Sports Direct engineered a coup at the embattled department store group’s annual meeting.

Sergio Bucher, the former Amazon executive who has been wrestling with a restructuring of the troubled business since he started at CEO in October 2016, was voted out by 55.85% to 44.15%, as Sports Direct boss Mike Ashley teamed up with shareholders at the Milestone Resources, the third largest investor. However, Bucher will stay on and report to the board.

In other broker news, Hastings was lifted to ‘buy’ at Investec, while Hunting was boosted to ‘overweight’ at JPMorgan and Cairn Energy was upgraded to ‘outperform’ at BMO.

Sage was knocked lower by a cut to ‘sell’ at UBS, while UDG Healthcare was hit by a downgrade to ‘hold’ by Jefferies. Antofagasta was reduced to ‘add’ at Peel Hunt and Direct Line was cut to ‘reduce’ at Numis.

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