ADVFN Morning London Market Report: Tuesday 13 August 2019

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London open: Stocks edge lower ahead of jobs data; TUI rallies after results


London stocks edged lower in early trade on Tuesday amid ongoing concerns about Sino-US trade relations and protests in Hong Kong, as investors eyed the latest batch of key UK jobs data.

At 0835 BST, the FTSE 100 was down 0.3% at 7,205.77 ahead of the release of average earnings, the ILO unemployment rate and the claimant count at 0930 BST.

Spreadex analyst Connor Campbell said: “Struggling to hold down a rather unpleasant geopolitical breakfast – one that takes in fresh flavours like the worrying situation between China and Hong Kong and Argentina’s peso woes, alongside more familiar tastes like Brexit, the trade war and global growth concerns – Europe opened in the red on Tuesday.

“One of the few instruments to stomach this problematic porridge was gold. The precious metal climbed 0.7% to strike a fresh six-year high of $1,534, a fact that in and of itself reflects the moods of the markets right now.

“While the European indices chew over the headlines, the pound is fretfully prepping for the UK’s latest jobs report. Against the dollar it dipped 0.2%, keeping it near, if not quite at, its recent 32-month nadir; against the euro, a 0.1% bounce allowed it to avoid the scary 10-year lows the currency found itself at in the early moments of Monday morning.”

Campbell said analysts are expecting a wage growth reading of 3.7% including bonuses, which would be a substantial increase on the previous month’s 3.4% and the highest level in over a decade.

“It also, realistically, might not mean much to the pound; wages can skyrocket, they’re not going to prevent a no-deal Brexit. Elsewhere, the unemployment rate is set to remain steady at 3.8%, with the claimant change count rising from 38k to 42k.”

In equity markets, Croda was hit by a downgrade to ‘sell’ at Goldman Sachs, while Aston Martin Lagonda shares fell after a downgrade to ‘neutral’ at Credit Suisse. The stock was also suffering after the Financial Times reported that hedge funds have taken record short positions in the debt and equity of Aston Martin, betting that the car maker will continue to struggle.

Polypipe was also on the back foot even as it said pre-tax profit for the first half rose 4.3% to £31.4m thanks to recent acquisitions and lower costs.

On the upside, travel and tourism operator TUI was the standout gainer as it reported a sharp fall in third-quarter earnings but maintained its outlook for the full year. Underlying third-quarter core earnings fell 46% year-on-year to €100.9m (£93.7m), with a charge of €144m relating to costs from groundings of Boeing’s 737 MAX jet after two fatal crashes this year.

The company said it expected the full year impact of the groundings would be €300m.

Richard Hunter, head of markets at Interactive Investor, said that “set against a raft of challenges, TUI is making valiant efforts to regain its previous growth”.

“TUI had the kitchen-sink experience earlier in the year with two profit warnings, so the fact that there are no further shocks has resulted in a warm share price reaction to these numbers,” he said.

He added: “The overall picture is one which shows the benefits of a diversified business model. Its significant other income streams, most notably Holiday Experiences, Cruises and Destination Experiences have performed strongly in the year to date. In terms of the summer so far, bookings are virtually flat as compared to last year, which is some achievement given the circumstances and the outlook for the remainder of the summer is upbeat.”

Precious metals miner Fresnillo shone as gold prices advanced, with CentaminHochschildand Polymetal also higher.

Online trading platform Plus500 surged after its first-half numbers came in as expected. The company posted a 59% slump in pre-tax profit to $63.9m as it took a hit from regulatory changes and a lack of volatility, and announced a share buyback of up to $50m.

Card Factory was in the green as it reported a 5.5% rise in sales for the six months to July 31 as it reiterated guidance for the full year and said costs had risen as it stockpiled ahead of Brexit.

In other broker note action, InterContinental Hotels was cut to ‘hold’ at Berenberg while Rentokil was lifted to ‘reduce’ at AlphaValue.


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