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London open: Stocks rise as pound recovers some poise; miners rally
London stocks rose in early trade on Wednesday, led higher by strength in the mining sector as investors mulled Brexit developments and eyed the latest round of trade talks between the US and China and a policy announcement from the Federal Reserve.
At 0825 GMT, the FTSE 100 was up 0.5% at 6,869.70, while the pound was flat against the dollar at 1.3071 and 0.1% firmer versus the euro at 1.1434, regaining some poise, having tanked overnight after the Cooper amendment – which would have allowed Parliament to delay Brexit – failed to pass through parliament.
London Capital Group analyst Jasper Lawler said: “Whilst Parliament voted in favour of the Caroline Spelman amendment to block a no deal Brexit, the rejection of the Cooper amendment means that without a Brexit deal, the UK is still on course to crash out of the EU on March 29.”
Although there is a majority in parliament against a hard Brexit, as demonstrated by the symbolic Spelman vote, Berenberg economist Kallum Pickering observed that this alone is not enough to prevent such an outcome.
“A hard Brexit is the default option unless a deal or delay is secured before Brexit day on 29 March 2019,” he said. “With only 58 days left until the UK is due to leave the EU, we raise the risk of a no-deal from 20% to 30%, and lower the probabilities of ‘Norway plus – soft Brexit’ and ‘no Brexit’.”
May will now head to back to Brussels to reopen talks with European leaders and seek alternatives to the Irish backstop. However, Donald, Tusk, the EU’s most senior official, has already insisted that there can be no renegotiation.
Still, there were some, like CMC Markets analyst Michael Hewson, who saw a small sliver of a chance. “There are those who say that the EU will remain firm in their insistence that the agreement cannot be changed, but then the EU also said they would never bail out Greece and we all know what happened next.”
Investors were also looking ahead to the start of two days of talks between US and Chinese delegates in Washington later in the day and the latest policy announcement from the Fed, due after the European close.
No rate hike is expected so attention will turn to Fed chair Jerome Powell’s press conference.
Konstantinos Anthis, head of research at ADSS, said: “We believe that the head of the Fed has little option but to acknowledge the slowdown in the economy, both on the back of the trade war with China but also from the fact that the US is entering – or has already entered – the late phase of its economic cycle.
“As such, we think that Powell will dial back the need for ‘gradual increases’ in interest rates and instead opt for a ‘flexible and data dependent approach’.”
Miners were the standout gainers in London as copper prices rose, with Rio, BHP, Anglo American and Glencore all higher.
Elsewhere, luxury fashion brand Burberry was on the front foot, boosted by a solid set of results from French peer LVMH, which reported another record year for sales in 2018.
Infrastructure investor 3i Infrastructure ticked higher after saying it was on track to meet or exceed its objectives for the current financial year.
Inmarsat gained ground after signing a contract to provide Indonesian national carrier Garuda with its GX Aviation inflight broadband.
On the downside, London Stock Exchange nudged down after saying it was buying a 4.92% stake in financial market infrastructure company Euroclear for €278.5m (£241.9m).
Wizz Air flew lower as it reported a sharp drop in profits for the three months to the end of December as the budget central and eastern Europe airline’s faster sales growth was met with ever-mounting costs.
In broker note action, Meggitt was initiated at ‘neutral’ by MainFirst, while Rolls-Royce and Senior were started at ‘outperform’.
Pennon was initiated at ‘equalweight’ by Barclays, along with Severn Trent and United Utilities.
