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London open: Stocks rise as miners rally; Sainsbury’s Asda merger in focus
London stocks rose in early trade on Wednesday, helped along by a solid performance from the mining sector as investors eyed key UK inflation data.
At 0830 BST, the FTSE 100 was up 0.5% to 7,334.63, while the pound was up 0.1% against the dollar at 1.3158 and 0.2% lower versus the euro at 1.1252 amid news that the European Union was willing to soften its stance on Brexit talks.
As Prime Minister Theresa May travels to an informal leaders’ summit in Salzburg to push her Brexit blueprint, the EU’s chief Brexit negotiator Michel Barnier said overnight that he was “ready to improve” the bloc’s offer on the Irish border.
Meanwhile, the trade conflict between the US and China was still on investors’ minds after China retaliated with new trade tariffs on $60bn of US goods after President Trump’s fired off a 10% levy on another $200bn of Chinese imports – which could rise to 25% in the New Year.
CMC Markets analyst Michael Hewson said: “China can afford to play a much longer game, particularly when it comes to the US electoral cycle. President Xi will be around long after Donald Trump has departed the White House. China’s economy may well be slowing down, but it is still growing at a decent pace, and the Chinese could make it very difficult for US companies operating in China by disrupting their supply chains, by implementing additional customs costs, or checks, with Apple being particularly vulnerable.”
Hewson said the story is likely to run a lot further as the extra costs of tariffs are likely to weigh on corporate revenues into 2019, with the prospect of additional escalations further down the line. He said any progress on trade remains “unlikely before the US midterms, which may help explain why markets have started to rebound in the past couple of days”.
There was some good news on the geopolitical front, as North Korea said it would close a key missile test facility and potentially destroy its primary nuclear complex if the US agreed to corresponding measures. In addition, after two days of talks, North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed to a number of non-military announcements, including plans to create rail and road links between the two Koreas within the next year and to submit a joint bid for the 2032 Summer Olympics.
On the macroeconomic calendar, the retail price index, producer price index and consumer price index are all due at 0930 BST.
Miners were the standout gainers, with Glencore, Anglo, BHP Billiton, Rio and Antofagasta all firmer as copper prices rose.
Sainsbury’s ticked higher as its merger with Asda was referred to an in-depth competition investigation with a deadline of March next year. The Competition and Markets Authority confirmed that the deal raises sufficient concerns to be referred for a more in-depth review, including on issues relating to fuel, general merchandise and increased ‘buyer power’ over suppliers.
Aveva surged after saying its full-year outlook remains in line with the board’s expectations and that it aims to increase its adjusted EBIT margins to 30%.
Babcock International rallied after the engineering services company said it is trading in line with its expectations, the order book and pipeline are strong and its outlook for the year is unchanged.
Balfour Beatty edged up as it sold its 50% stake in Fife Hospital for £43m in cash to Semperian PPP Investment Partners, which will result in a profit of £22m for the FTSE 250 infrastructure group.
Stagecoach advanced as the transport group said like-for-like revenue at its UK regional bus and rail operations has grown in the year to date.
On the downside, B&Q owner Kingfisher shares slumped to around a seven-year low after posting a 15% drop in first-half profit on the back of a poor performance from its French business.
John Laing Infrastructure slipped as it agreed the terms of its proposed £1.4bn takeover by a consortium of funds.
In broker note action, HSBC cut Jardine Lloyd Thompson to ‘hold’, but SEE was double upgraded to ‘buy’ at Deutsche Bank and Smiths was initiated at ‘buy’ by Citi.
