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ADVFN Morning London Market Report: Monday 19 March 2018

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London stocks fell on Monday as investors looked ahead to a busy week that includes the latest policy announcements from the Federal Reserve and the Bank of England.

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At 0830 GMT, the FTSE 100 was down 0.6% to 7,118.78, while the pound was flat versus the euro at 1.1350 and 0.1% weaker against the greenback at 1.3927.

Rebecca O’Keeffe, head of investment at Interactive Investor, said: “Global equity markets are slightly softer ahead of potential fireworks this week, with economic data, G-20 statements and central bank meetings all threatening to move markets. Far from withdrawing the punch bowl, global central banks’ quantitative easing and low interest rate policies continue to provide stimulus for the equity market rally, so it is crucially important for investors to know how long the music is going to keep playing or if the party is coming to an end.”

With the odds of a US rate rise on Wednesday close to 100%, O’Keeffe said the market will be more focused on the FOMC statement and press conference, with new Fed chief Jerome Powell firmly in the hot seat. “All eyes are on whether the Fed will confirm recent hints made by officials that four rate rises are more likely than three this year and provide clarity for investors on their view of the US economy. In the UK, interest rates are a near certainty to remain unchanged on Thursday, but a May rise is a real possibility, so the number of hawks and the tone of the language are likely to be pivotal here.”

The G-20 meeting kicks off later on Monday in Argentina, while the Fed rate announcement is due on Wednesday, a day before the Bank of England’s rate decision, which will be accompanied by retail sales data on the same day.

Investors were digesting the latest data from Rightmove, which showed average asking prices paid by first- and second-time buyers in Britain hit records levels this month of £189,840 and £272,031, respectively.

Overall, house prices were up 1.5% on the month in March and 2.1% on the year. It was a different picture in London, however, where prices were up 0.6% on the month but down 0.6% on the year, with the annual rate in negative territory for the seventh consecutive month.

Miles Shipside, Rightmove director and housing market analyst, said: “There is a lack of spring in the number of new sellers stepping onto the market. With an annual rate of price decrease as opposed to increase being a constant factor for the last seven months, it is bound to be a deterrent to some potential sellers.

“Even though fewer properties are coming to market, the slower rate of sales means stocks of unsold property are growing, leading to subsequent downwards price pressure. This is good news for potential buyers as it strengthens their negotiating power, but means some potential sellers are putting off their marketing given the reduced chances of selling at their desired price.”

On the corporate front, bookmakers were in focus as the Gambling Commission recommended that the maximum stake for fixed odds betting terminals be cut to £30 or less. It said the maximum stake on slot games such a fruit machines should be £2. As it stands, people can bet up to £100 every 20 seconds on electronic casino games.

William Hill, Ladbrokes Coral and Paddy Power Betfair all rallied on the news, as many had feared a bigger cut to as little as £2.

Neil Wilson, senior market analyst at ETX Capital, said: “This should be a relief for the sector as the worst-case scenario looks to have been avoided. Ministers will now have to justify a cut below £30 on grounds of significant risk of harm.

“With the non-slots versions of the B2 machines (roulette etc) far more popular and producing the bulk of revenues for bookies from these machines, this is undoubtedly a positive outcome for bookmakers overall. Although the market had decided a £2 flat cap was looking less likely, the fact the Gambling Commission has left ministers with an easy out for a £30 is perhaps even better than hoped for.”

Shares in Micro Focus nosedived as chief executive Chris Hsu resigned and the company downgraded its profits guidance less than six months after completing the huge acquisition of HP’s software arm.

On the upside, Hammerson surged 26% as it emerged it had rejected a bid from French shopping centre operator Klepierre earlier this month “in less than 24 hours”. The 615p a share offer, which represents a premium of around 40.7% to the closing price last Friday, was made on 8 March.

Elsewhere, the GKN/Melrose saga continued as Dana Inc, which has agreed to combine with GKN’s Driveline business, said the new combined business will hold a standard listing on the London Stock Exchange, in addition to being listed on the New York Stock Exchange. It also said the combined group would create a US and UK-led global leader in vehicle drive systems and electric propulsion, that was well-suited to address the long-term demands of global customers, expecting to deliver $235m (£170m) in synergies.

Meanwhile, Melrose said that its final offer of 466p in value today and 60% of future value creation, was “clearly superior” to the “hasty break-up” being pursued by the GKN board. GKN was in the black while Melrose retreated.

Barclays was on the front foot as it emerged that activist investor Sherborne Investors has acquired 5.2% of the voting rights in the bank.

In broker note action, AstraZeneca was upgraded to ‘buy’ at Jefferies, while Rotork was lifted to ‘buy’ at Peel Hunt. Close Brothers was cut to ‘hold’ by Berenberg.

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