London close: Hopes of breakthrough in China-US talks boost stocks
By Alexander Bueso
Date: Thursday 16 Aug 2018
(Sharecast News) - London stocks snapped back on Thursday, boosted by news of high level trade talks between the US and China, better-than-expected UK retail sales data and a recovery in the mining sector.
The FTSE 100 was up by 0.78% or 58.51 points to 7,556.38, while the pound was edging higher against the dollar to 1.2716, but off its earlier highs following the release of the retail sales numbers, and 0.17% lower versus the euro at 1.1173.
The mood was lifted after China's Ministry of Commerce said a Chinese delegation led by vice commerce minister Wang Shouwen will travel to the US for talks in late August. The talks, which are at the invitation of the US, will be held with US Under Secretary of Treasury for International Affairs, David Malpass.
Nonetheless, some traders were less than fully convinced, with Joshua Mahony at IG telling clients: "While trade talks with China are set to resume later this month, there is likely to be a degree of scepticism over their ability to strike a deal given the already abrasive tone taken by economic advisor Kudlow today."
Mahony was referring to remarks from the director of the US National Economic Council, Larry Kudlow, who told CNBC: "The Chinese government, in its totality, must not underestimate President Trump's toughness and willingness to continue this battle to eliminate tariffs and non-tariff barriers and quotas, to stop the theft of intellectual property and to stop the forced transfer of technology."
Qatar's pledge late on Wednesday to invest $15bn in Turkey's banking and financial markets was also continuing to underpin sentiment in global capital markets, along with the release of solid retail sales data.
The former saw the Turkish lira add another 3.07% to its rally against the Greenback, reaching 5.7638. In a further boost to sentiment, the US dollar was also on the back foot against China's yuan, slipping by 0.71% to 6.8853, after Beijing moved to limit short-selling of its currency.
According to figures released by the Office for National Statistics earlier, retail sales grew 0.7% on the month in July compared to a 0.5% drop in June, beating expectations for a 0.2% increase as the online segment lent a hand.
On the year, meanwhile, sales grew 3.5%, up from 1.1% growth in July 2017 and beating expectations for a 3% increase.
In the three months to July, retail sales rose 2.1% from the previous three-month period, marking the strongest performance since February 2015.
Online spending was up 15.3% on the year and now makes up 18.2% of all retail sales, which is a new record high. Meanwhile, online spending at department stores rose 35% on the year, and also reached a record proportion of all sales at 18.2%.
Rhian Murphy, senior statistician at the ONS, said: "Many consumers stayed away from some high street stores in July, but online sales were very strong, supported by several retailers launching promotions. Food sales remained robust as people continued to enjoy the World Cup and the sunshine."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the pick-up in sales was largely due to temporary online discounting and warned that July's momentum in overall sales growth was unlikely to be maintained.
Miners lent support, with Rio Tinto, BHP Billiton, Glencore and Antofagasta all in the green, bouncing back from heavy losses in the previous session on the back of falling metals prices and a stronger dollar.
Hochschild was a standout gainer on the back of a reported upgrade out of analysts at Numis and positive comments from those at BMO.
On the Beach rallied as it announced the acquisition of Classic Collection Holidays for £20m and said it continues to expect adjusted pre-tax profit for the year to be in line with management's expectations.
Copper miner Kaz Minerals was also higher as it reported a rise in first-half profit, while Marshalls racked up healthy gains as it said interim profits rose 12% despite the 'Beast from the East' hitting sales by £9m.
Auto Trader edged up after entering into an agreement to create a joint venture with Cox Automotive UK, to provide a leading digital marketplace for wholesale vehicles in the UK.
Going the other way, B&Q owner Kingfisher fell as it said sales in the second quarter were boosted by the warm weather but the DIY retailer's margins were weaker than hoped due to further troubles in France.
Moneysupermarket and Admiral - which owns Confused.com - were on the back foot following reports that Amazon is considering the creation of an insurance comparison website for the UK.
Russ Mould, investment director at AJ Bell, said: "Expanding into financial services may seem a strange move for a retailer, yet it makes sense when you consider Amazon's incredible reach and engagement with such a wide range of consumers.
"Home, travel and car insurance are already highly competitive markets from both an underwriting perspective and the number of price comparison sites. That won't bother Amazon as its muscle power and wide reach could give it a fighting chance of making a big success from facilitating the sale of third party insurance policies."
Oil services firm John Wood Group bounced back from early weakness after announcing the sale of its 50% stake in the Voreas wind farm joint venture in Italy for $27m in cash, while gambling company Rank slumped as it posted a 41% drop in full-year pre-tax profit.
On the broker note front, AstraZeneca and Petrofac were both downgraded to 'hold' at Jefferies, while Informa was cut to 'equalweight' at Morgan Stanley.
Esure was upgraded to 'neutral' by UBS while Hikma Pharmaceuticals was lifted to 'add' from 'hold' at Peel Hunt.
Anglo American, Ashtead, Aviva, Evraz, HSBC, Legal & General, Lloyds, Pearson, Reckitt, Schroders, Segro, Standard Life Aberdeen, CountourGlobal, Domino's, Ibstock, Lancashire Holdings, Merlin Entertainments, and Millennium & Copthorne were among the companies whose stock went ex-dividend.
Market Movers
FTSE 100 (UKX) 7,556.38 0.78%
FTSE 250 (MCX) 20,462.26 0.70%
techMARK (TASX) 3,546.44 0.52%
FTSE 100 - Risers
Ocado Group (OCDO) 1,056.50p 3.94%
NMC Health (NMC) 4,062.00p 3.04%
Melrose Industries (MRO) 219.70p 3.00%
WPP (WPP) 1,281.50p 2.93%
Sainsbury (J) (SBRY) 339.10p 2.61%
Fresnillo (FRES) 918.20p 2.52%
Smurfit Kappa Group (SKG) 3,192.00p 2.43%
CRH (CRH) 2,542.00p 2.33%
Marks & Spencer Group (MKS) 301.40p 2.13%
Compass Group (CPG) 1,675.00p 2.13%
FTSE 100 - Fallers
Evraz (EVR) 461.30p -5.65%
Kingfisher (KGF) 274.60p -4.82%
Informa (INF) 774.00p -1.40%
Legal & General Group (LGEN) 254.97p -1.12%
Aviva (AV.) 482.50p -0.82%
Lloyds Banking Group (LLOY) 60.10p -0.61%
Admiral Group (ADM) 2,050.00p -0.58%
Standard Life Aberdeen (SLA) 316.00p -0.38%
HSBC Holdings (HSBA) 702.90p -0.37%
Associated British Foods (ABF) 2,307.00p -0.35%
FTSE 250 - Risers
On The Beach Group (OTB) 473.00p 15.67%
Marshalls (MSLH) 486.00p 14.44%
Hochschild Mining (HOC) 172.05p 5.94%
Premier Oil (PMO) 113.70p 4.70%
Greencore Group (GNC) 173.70p 4.14%
Drax Group (DRX) 380.20p 3.88%
Syncona Limited NPV (SYNC) 282.50p 3.69%
Bank of Georgia Group (BGEO) 1,747.80p 3.52%
AA (AA.) 117.60p 3.51%
Dunelm Group (DNLM) 509.00p 3.12%
FTSE 250 - Fallers
Moneysupermarket.com Group (MONY) 283.70p -5.18%
RHI Magnesita N.V. (DI) (RHIM) 4,776.00p -3.95%
Hilton Food Group (HFG) 922.00p -3.35%
Contour Global (GLO) 242.80p -3.09%
Rank Group (RNK) 171.60p -2.84%
BTG (BTG) 508.50p -2.68%
Euromoney Institutional Investor (ERM) 1,330.00p -2.06%
Sophos Group (SOPH) 478.40p -2.05%
BCA Marketplace (BCA) 226.00p -1.94%
Petrofac Ltd. (PFC) 605.40p -1.75%
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