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London open: Stocks rise as pound retreats; inflation data eyed
London stocks rose in early trade on Wednesday, outperforming their European counterparts thanks to sterling weakness, as Prime Minister Theresa May failed to get support for her tweaked Brexit deal.
At 0840 BST, the FTSE 100 was up 0.5% at 7,366.25, while the pound was down 03% against the dollar and the euro at 1.2666 and 1.1355, respectively.
The pound had gained ground on Tuesday following reports that May was offering Parliament a chance to vote for a second Brexit referendum, although it later emerged that this was only if her deal was passed.
Her proposal was met with opposition from MPs both in favour and against Brexit, leading May to urge Labour leader Jeremy Corbyn to compromise and back her deal. However, Corbyn has already stated that his party will not support the deal.
The Prime Minister is now under pressure to abandon another vote and resign.
Spreadex analyst Connor Campbell said: “It appears at this point that the fourth attempt to get Theresa May’s deal through the House of Commons – with a vote set to take place in the first week of June, though at this point who knows – may already be dead in the water.
“May’s ‘new deal’ is an attempt at compromise that has managed to anger everyone it was designed to appeal to; Jacob Rees-Mogg claimed it was ‘worse than before’, while Labour labelled it a ‘rehash’ of previous plans. Even those who supported the deal at the last vote aren’t convinced, with reports suggesting more than 20 Tories who previously backed it are unlikely to do so this time out.
“Already in the middle of a deep Brexit depression, the immediate shrivelling of hope that followed May’s announcement on Tuesday left sterling looking absolutely exhausted.”
On the data front, investors were watching out for the release of the retail price index, consumer price index and producer price index, all due at 0930 BST, along with public sector net borrowing figures.
In equity markets, paper and packaging companies were the standout gainers after Mondi told its customers that the prices of recycled containerboard and kraft top liner will be increased by 60 euros a tonne in June-July “driven by continued reduction of stock levels and rising market demand”. Mondi, Smurfit Kappa and DS Smith were all higher.
Pets at Home was a high riser after it posted a 6% jump in underlying full-year pre-tax profit and a 6.9% increase in revenue.
Intermediate Capital also gained as it reported a 65% rise in full-year pre-tax profit and said assets under management pushed up 29% in the year to the end of March 2019.
Royal Mail was in the green as its full-year results were in line with consensus and the lower end of the guidance range, both of which were cut after the company’s profit warning in October.
On the downside, housebuilders were under pressure, with Persimmon, Taylor Wimpey and Barratt all lower amid worries about Brexit. Bovis Homes was also in the red even as it issued a reassuring trading statement.
Marks & Spencer slumped as it said annual profit fell almost 10% as underlying revenue declined across the retail chain’s food and clothing and home divisions.
Pre-tax profit before adjustments for the year to the end of March dropped 9.9% to £523.2m as revenue fell 3% to £10.38bn. M&S also announced terms of a rights issue to raise £601.3m gross.
Chief Executive Steve Rowe said the company’s transformation had not been consistent and that trade was volatile with results likely to be better in the second half of the current financial year.
SSE was also weaker after the energy provider said full-year adjusted pre-tax profits slumped 38% to £725.7m, reflecting a £284.9m adjusted operating loss previously forecast in Energy Portfolio Management.
Babcock shares tumbled after the company said operating profit and revenue for the financial year ahead were set to drop, partly due to contract step-downs, while Hastings was on the back foot after an initiation at ‘sell’ by Panmure Gordon.
