ADVFN Morning London Market Report: Wednesday 6 February 2019

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London open: Stocks nudge lower but housebuilders gain on results

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London stocks nudged lower in early trade on Wednesday following strong gains in the previous session, but well-received results from the likes of Barratt Developments helped to keep losses to a minimum.

At 0830 GMT, the FTSE 100 was down 0.2% at 7,163.59, retreating from the preceding 17-week closing high, while the pound was flat against the dollar at 1.2943 and 0.2% firmer versus the euro at 1.1367, having tanked on data revealing that growth in the UK services sector teetered on the brink of stagnation in January.

Reports that cabinet ministers have held talks on plans to delay Brexit by eight weeks in the Telegraph newspaper overnight were not enough to boost sterling, it seemed.

CMC Markets analyst Michael Hewson said: “There appears to be little doubt that while the UK economy is slowing, it is not alone in its sclerosis with Italy and France out in front, with even weaker data, while the German economy is also struggling. Against this sort of economic backdrop, it ill behoves politicians on both sides of the Channel to play Russian roulette with the Brexit negotiations. The EU has consistently stated that it feels that the UK has more to lose from a disorderly Brexit, with both sides ramping up preparations for a no deal scenario.

“The risk with this sort of calculation is, that at a time when the financial system in Europe is anything but robust, the fallout of a no deal Brexit could bring the roof crashing down on Europe’s head, with serious consequences for the global economy.”

On the corporate front, Victrex was in the red as it said the first quarter was slightly weaker than it had expected, while Just Group fell despite posting a 15% rise in full-year retirement income sales.

Ocado shares were retreating as it revealed that a fire at its Andover warehouse was still burning and had resulted in widespread damage.

On the upside, however, CRH was the standout gainer on news that activist investor Cevian Capital has built a stake in the building materials group.

Housebuilder Barratt Developments rallied after saying it grew profits 19% in the first half of its trading year as it was in a strong position in spite of the uncertainty around Brexit.

FTSE 250 peer Redrow was also on the front foot as it posted a record set of interim results despite Brexit-related uncertainty hitting sales and announced a 30p per share cash return to shareholders through a B share scheme, in addition to a 10p dividend.

Severn Trent edged up as the water company said it was still on track to deliver a full-year trading performance in line with its expectations and prior guidance.

Vodafone enjoyed some solid gains as Bank of America Merrill Lynch upgraded its stance on the stock to ‘buy’ from ‘neutral’, saying that there is “light at the end of the tunnel” as headwinds such as currency depreciation and high spectrum costs are now passing and increasingly baked into forecasts.

CYBG surged more than 10% after it reported “good progress” with the integration of Virgin Money since the merger was completed in October, with group mortgage lending up 1.4% in the first quarter of its financial year but amid pressure on margins in the competitive UK mortgage market.

Electrocomponents gained as it posted a 6% jump in like-for-like revenue for the four months to 31 January 2019 and Grainger advanced as the residential landlord hailed a good start to the year.

In other broker note action, Centrica was hit by a double downgrade to ‘underperform’ at RBC, while National Grid was boosted to ‘outperform’.

Oil giant BP was upgraded to ‘buy’ at DZ Bank, Paddy Power was lifted to ‘hold’ at HSBC and Thomas Cook was initiated at ‘neutral’ by MainFirst.

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