ADVFN Morning London Market Report: Wednesday 8 August 2018

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London open: Stocks edge up but Glencore retreats after earnings

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London stocks edged higher in early trade on Wednesday, taking their cue from a positive session overnight on Wall Street as trade war woes were put to one side.

At 0850 BST, the FTSE 100 was up 0.2% to 7,730.55, helped by the continued softness of sterling.

Despite the positive tone, trade war concerns were never far from investors’ minds as Washington said it will start collecting 25% tariffs on $16bn worth of Chinese imports from 23 August.

Meanwhile, Spreadex analyst Connor Campbell said the pound’s abject August was showing no signs of turning around.

“Though it managed to sit effectively unchanged against the dollar, cable still finds itself under $1.294, basically its worst price in 11 months. Against the euro, meanwhile, sterling continued to weaken, slipping 0.2% to duck below €1.114, a level not seen for 10 months.”

Market participants were also digesting trade balance data from China overnight, which showed that exports in July rose 12.2%, up from 11.2% the month before and beating expectations for a 10% jump. Imports increased 27.3% compared to a 14.1% rise in June and ahead of analysts’ forecasts for a 16.2% increase.

China’s surplus with the US shrank a touch to $28.09bn last month from a record $28.97bn in June.

“If the US was hoping that its $34bn opening salvo of tariffs would have an effect on Chinese exports this morning’s China trade numbers would have been a disappointment to them,” said CMC Markets analyst Michael Hewson.

In corporate news, tech-led stocks led the Footsie on the back of the US session, with Micro Focus on the digital-focused Scottish Mortgage investment trust at the top of the leaderboard.

Spirax-Sarco Engineering was on the front foot after posting better first-half operating profits, while recruiter PageGroup ticked up after saying that first-half revenue rose 12%.

Insurer Hastings edged up after reporting a jump in first-half pre-tax profit as gross written premiums and net revenue grew and the insurer said it remains on track to deliver on its 2019 targets, while Quilter, formerly Old Mutual Wealth Management, advanced following the release of its maiden set of results as a standalone company.

Going the other way, Glencore was in the red even as it increased earnings 12% in a half-year where the mining and commodities trading giant was beset by lawsuits and an ongoing investigation by US authorities.

Paddy Power Betfair was also under the cosh as the bookmaker lowered its guidance for full-year earnings before interest, taxes, depreciation and amortisation to £460-480m from £470-490m, partly due to early losses from its newly added US-based FanDuel fantasy sports business

Bellway was weaker even as the housebuilder said it has broken through the 10,000 homes barrier for the first time and reported a jump in full-year revenue amid “favourable” trading conditions.

UDG Healthcare slumped as it released a third-quarter trading update and announced the sale of its Aquilant division for up to €23m.

Hill & Smith tumbled as the motorway barrier maker posted a 12% drop in first-half core earnings and warned that it does not expect to make up for the fall in profits for the full year.

In broker note action, Rio Tinto was upgraded to ‘add’ at AlphaValue and Countrywide was lifted to ‘neutral’ at Credit Suisse.

Pendragon was boosted to ‘neutral’ at JPMorgan, while BBA Aviation was upgraded to ‘buy’ at Investec. Spire Healthcare was cut to ‘sell’ at Berenberg and Rotork was downgraded to ‘hold’ at SocGen.

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