ADVFN Morning London Market Report: Thursday 7 February 2019

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London open: Stocks edge lower ahead of BoE announcement; TUI tumbles

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London stocks edged lower in early trade on Thursday as investors eyed the latest policy announcement from the Bank of England.

At 0830 GMT, the FTSE 100 was down 0.2% at 7,157.70, while the pound was off 0.3% against the dollar at 1.2900 and 0.1% weaker versus the euro at 1.1369 ahead of the BoE rate announcement at 1200 GMT, and with Prime Minister Theresa May off to Brussels for more Brexit negotiations.

Neil Wilson, chief market analyst at Markets.com, said the BoE may well lower inflation and growth forecasts.

“This is not just about Brexit risks – in fact the current indecision would tend to support the central bank staying put and not changing anything until there is more clarity. No instead it’s the clear softening in the economic data that we have seen in recent days, combined with the broader global economic conditions, which would suggest the economy could be set for a tougher time. Albeit rising wages should start to call for a tightening bias, the Bank seems for now at the mercy of near-term geopolitical events.

“There is no expectation that the BoE will alter course on rates, but with the market having priced out a 25 basis points hike since November there is a clear risk to the upside for sterling Mark Carney signals a more hawkish bias. But with Brexit uncertainty, the cloudy economic outlook and, seeing this in the broader context of central banks becoming more dovish of late, it would seem unlikely that the BoE will do anything other than tread water.”

In corporate news, tour operator TUI was the standout loser on the FTSE 100 as it cuts its profit outlook due warm weather and the weak pound.

WPP was also sharply lower after French advertising peer Publicis reported weaker-than-expected fourth-quarter organic revenues.

Shares of fashion brand Superdry slipped after it posted a drop in third-quarter revenue amid weak store sales as it pinned the blame on unseasonably warm weather and product mix.

Food producer and supplier Cranswick tumbled as it said revenue edged down 2% over the festive period and operating margin was likely to decline amid a “challenging” commercial landscape.

Bellway retreated even as the housebuilder reported stronger-than-expected volume growth for the first half, as margin guidance disappointed.

Petrofac suffered heavy losses after one of its former executives pleaded guilty to 11 counts of bribery as part of an ongoing investigation into the company by the Serious Fraud Office.

Sage lost ground as its stock went ex-dividend.

On the upside, catering company Compass rallied as it said organic revenue for the three months to 31 December 2018 grew by 6.9% driven by strong levels of new business wins, continued good retention rates and bolstered by the impact of the new UK Defence contracts and a positive sporting events calendar.

Smith & Nephew was also in the green as it launched five new strategic “imperatives” for the medium-term after it enjoyed a solid finish to 2018. Revenue for the calendar year grew 2% to $4.9bn, with trading profit up 7% to $1.1bn.

Insurer Beazley gained ground as it reported a big drop in 2018 profit but said it expects a stronger 2019, with firmer pricing for some lines of business and higher interest rates set to underpin its investment returns.

In broker note action, BT Group was lifted to ‘buy’ from ‘hold’ at DZ Bank, while Morrisons and Tesco were initiated at ‘equalweight’ and ‘overweight’, respectively, by Morgan Stanley. Citi resumed coverage of William Hill at ‘buy’.

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