ADVFN Morning London Market Report: Thursday 23 May 2019

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London open: Stocks drop amid Sino-US worries; UK voters head to the polls

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London stocks fell in early trade on Thursday, taking their cue from downbeat sessions in the US and Asia, as worries about Brexit and Sino-US trade relations took their toll.

At 0845 BST, the FTSE 100 was 0.8% lower at 7,278.33, while the pound was trading at its worst level against the dollar since the start of January, down 0.4% at 1.2691, and 0.3% weaker versus the euro at 1.1322.

Spreadex analyst Connor Campbell said: “With the Tory party in turmoil, and Huawei waving goodbye to another supplier, the markets were in a bad way after the bell.

“Panasonic become the latest company to deal a blow to the Chinese tech giant, joining EE, Vodafone, Qualcomm, Intel and, most importantly, ARM on the list of firms scaling back or outright severing their relationship with Huawei following the US blacklisting.

“Whatever relief was generated by the announcement a 90-day grace period earlier in the week has completely dissipated, as investors fret over the damage this nascent tech Cold War is doing to the chance of a positive outcome to the US-China trade battle.”

Campbell said the fact that the FTSE 100’s loses were so large “despite the cushioning factor of the pound’s decline shows the extent to which the markets are worried”.

“With Britons heading to the polls for a European Election vote that is expected to see the Brexit Party sweep to victory, and Theresa May barely clinging on to her job following cabinet uproar over the contents of the withdrawal agreement bill, the pound’s depression only worsened on Thursday.”

In equity markets, ex-dividends were a drag, with Wm MorrisonBunzlBrewin DolphinDCCDiplomaEuromoneyHill and SmithHowden JoineryMarston’sProvident FinancialSpectrisTritax Big BoxBellway and Countryside Properties all in the frame.

Babcock was under the cosh for the second day in a row following its results on Wednesday, as Stifel downgraded its stance on the stock to ‘hold’.

On the upside, Serco surged as the outsourcer announced the acquisition of Alion’s Naval Systems Business Unit (NSBU), which supplies ship and submarine engineering services to the US Navy, for $225m.

Defence technology company Qinetiq rallied as its full-year underlying pre-tax profit of £124m came in ahead of expectations of £115.1m.

Mitchells & Butlers advanced as a snow-free winter helped the pub and restaurant operator post a return to profit growth in the first half, although it did warn of “limited visibility” ahead due to Brexit uncertainty.

Merlin Entertainments was in the green as the Madame Tussauds owner rejected a call by one of its biggest shareholders to find a buyer to take it private.

 

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