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ADVFN Morning London Market Report: Monday 20 May 2019

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London open: Stocks rise but gains muted amid Brexit, Sino-US concerns

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London stocks edged higher in early trade on Monday, but gains were muted amid concerns about Brexit, with Sino-US relations also a worry.

At 0840 BST, the FTSE 100 was 0.1% firmer at 7,356.12, while the pound was up 0.1% against the dollar and the euro at 1.2734 and 1.1411, respectively.

As far as Brexit is concerned, UBS said the way forward is “wide open”, given divided public and parliamentary opinion. It sees three roughly equally plausible pathways to resolution: parliament agreeing the current withdrawal agreement, new elections or a second referendum.

“This implies that we see a roughly one-third chance of parliament agreeing a deal and a roughly 60% chance of a new political process to resolve the way forward on Brexit. At the moment, given parliamentary opposition to a WTO or no-deal Brexit, and public opinion which favours Remain, we see a WTO outcome as just a 10% tail risk.”

Also on home shores, the latest Rightmove survey showed that house price growth slowed in May, with all but two London boroughs seeing a decline.

House prices rose 0.9% on the month in May compared to a 1.1% increase in April. On the year, prices were 0.1% higher, versus a 0.1% drop the month before.

Rightmove said four out of 11 regions were “bucking the Brexit blues”, with Wales, the West and East Midlands and the North West all setting new asking price records for newly-market property.

However, in the capital, just two of the 32 boroughs – Barking and Dagenham and Bexley – saw prices increase.

More broadly, relations between the US and China were in focus again as several US technology companies were said to have started cutting off supplies to China’s Huawei to comply with US president Trump’s executive order. These include Google, Intel Corp, Qualcomm and Broadcom.

“The latest headlines over the weekend indicate that Trump could be softening his stance slightly after he removed tariffs on Canadian steel and aluminium,” said London Capital Group analyst Jasper Lawler. “However, US top tech companies starting to cut off vital Huawei supplies as they comply with the Trump administrations crackdown risks stoking tensions between the US and China further.”

In equity markets, recruiter Hays was lifted by an upgrade to ‘outperform’ at RBC Capital Markets, while oil giant Shell was also a little higher as oil prices rallied after OPEC signalled its intention to maintain production cuts for the rest of the year and after US President Trump threatened Iran over Twitter.

On the downside, Ryanair slumped as it posted a 29% drop in full-year profit due to falling fares and issued a cautious outlook, dragging EasyJet and International Consolidated Airlines Group down with it.

IT infrastructure provider Softcat was in the red even as it said full-year results will now be slightly ahead of previous expectations, and Merlin Entertainments slumped on the back of a downgrade to ‘reduce’ at HSBC.

Marks & Spencer was weaker following a report that the retailer is accelerating plans to close stores. According to the Times, M&S is on track to close 100 outlets by the end of 2020, almost two years ahead of schedule.

 

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