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London open: Stocks steady amid geopolitical woes; Sirius tumbles
London stocks were flat in early trade on Tuesday, with investors cautious amid ongoing geopolitical tensions in the Middle East.
At 0830 BST, the FTSE 100 was steady at 7,322.90, while the pound was down 0.2% against the dollar and the euro at 1.2409 and 1.1277, respectively, with the Supreme Court due to consider the legality of parliament’s suspension later in the day.
In a hearing expected to last two to three days, 11 Supreme Court justices will decide whether Prime Minister Boris Johnson abused his powers by proroguing Commons.
Neil Wilson, chief market analyst at Markets.com, said: “If the judges rule in favour of the government you’d hope it would draw a line under the prorogation storm. It would also be a welcome boost after the Luxembourg insult.”
More broadly, geopolitical uncertainty was continuing to weigh on sentiment after attacks on two Saudi oil facilities over the weekend.
Wilson said: “Markets face a myriad of questions. First is the extent of the damage – the Financial Times reports four sources as saying it could take months for facilities to be 100% again. This raises the prospect of shortages to global supply that cannot be quickly filled. Wire reports out earlier suggest Aramco is saying it can work on 30% for now and will be fully operational in two weeks. I don’t think anyone really knows how long this will take. Statements are due out today which may provide some elucidation.
“Two, do we see escalation. The language from the US is measured, for now, but it’s seemingly on a collision course with Iran. One feels that even if it’s not drawn into conflict on this attack, the two countries seem destined for a fight. We don’t yet know what the response will be, but the attacks on the Saudi facilities raise the chances of a war.”
Sino-US trade relations also remained in focus, with deputy-level talks set to kick off this week between the US and China ahead of the next round of high-level talks in October.
In equity markets, more gains for oil giants Royal Dutch Shell and BP helped the top-flight index to stay afloat, while Sainsbury’s ticked up as Kantar data showed that the supermarket retailer enjoyed its strongest period in the 12 weeks to 8 September since October 2018. It was also the best-performing of the big four for the second month in a row, despite a marginal sales decline of 0.1%.
On the downside, shares of Sirius Minerals tumbled as it said it would not go ahead with a $500m bond issue due to “poor market conditions” and was “reducing the rate of development” on the world’s biggest potash project as it launched a six-month review of its plans. The company needs to raise the $500m in order to unlock a $2.5bn credit facility arranged with JP Morgan that would give it access to the rest of the money it needs.
Johnson Matthey was in the red after a downgrade to ‘equalweight’ at Barclays.
