London close: FTSE clings on as pound surges, oil slumps
By Oliver Haill
Date: Tuesday 13 Nov 2018
(Sharecast News) - London's FTSE 100 just managed to hold onto a very slight gain on Tuesday as the pound was lifted by strong wage growth figures and Brexit hopes, while oil prices slumped.
The UK equity benchmark closed less than one points or 0.01% higher at 7,053.76, having traded higher early in the session and then slid into the red as the pound turned higher.
Sterling vaulted 0.8% to a seven-month high against the euro at 1.1548 and shot up 1.4% versus the dollar to 1.3024 as reports emerged that Prime Minister Theresa May's cabinet will meet on Wednesday to decide whether to approve a possible Brexit withdrawal agreement, with a new text that has been agreed by UK and EU negotiators.
As part of a proposed UK-wide customs agreement, there would be one overall backstop to avoid a hard land border on Ireland, according to a report from Irish broadcaster RTE, with "deeper" provisions for Northern Ireland on the customs and regulatory side.
Other reports followed that members of May's cabinet were going in for one-to-one meetings on Tuesday night ahead of a group meeting convened for Wednesday.
"While there is still numerous hurdles ahead, sign-off on Wednesday could be a hugely important step towards getting a deal over the line before Christmas and avoiding a disastrous no deal scenario," said market analyst Craig Erlam at Oanda.
He added: "Ultimately, the ability of sterling to build on these gains and gather some real momentum in the coming weeks hangs on May's ability to convince her colleagues that this is the best deal on the table. Given how the last 21 months have gone, I think there's plenty more bumps in the road ahead which will ensure this is anything but an easy ride."
Sterling had picked up earlier in the session after the release of the latest labour market figures for the UK from the Office for National Statistics, showing UK wages grew at their fastest rate since 2008 in the three months to September, although the unemployment rate unexpectedly rose.
The ONS said 32.41m people were employed in the UK in the three months to 30 September, a rate of 75.5% and a marginal increase of 23,000 on the previous quarter.
The number of people out of work also rose, by 21,000 to 1.38m. The unexpected increase was the first after two quarters of failing unemployment, although the figure remains near a historic low.
Wage inflation was 3.2%, or 3% including bonuses, the highest growth since the three months to December 2008 and slightly ahead on the second quarter of 2018. The improvement means that wage growth now stands above inflation.
In corporate news, Vodafone rallied as it swung to a large loss at the half-year stage after restructuring its business in India due to competitive pressures, but underlying earnings remained on track and there was reassurance provided on the dividend.
Richard Hunter, head of markets at Interactive Investor said: "Vodafone is not out of the woods, but it has established a positive direction of travel. This should come as some relief to long-suffering investors who have had a torrid time, with the share price having dropped 34% over the last year, as compared to a 5% dip for the wider FTSE100, with a decline of 19% in the last three months alone."
Consumer credit reporting agency Experian gained ground as it posted a jump in half-year revenue amid growth across regions, but a drop in pre-tax profit.
Melrose Industries racked up solid gains after a reassuring trading statement from the GKN owner highlighted strong revenue growth in the aerospace business.
International support services group DCC pushed up as it said interim pre-tax profits rose 17.2% to £85.9m as three of its divisions reported higher earnings and offset a seasonally weaker performance in its LPG unit.
BTG surged 15% as it posted a rise in interim revenue and upgraded sales guidance for its pharmaceuticals arms, while FirstGroup advanced as it appointed a new chief executive officer and said trading was still in line with plans from the start of the financial year.
Housebuilder Taylor Wimpey was in the red as it said it was on track to meet full-year expectations following a "strong" second half, but warned that volumes would be flat next year as customers in the South East grow cautious amid heightened political and economic uncertainty
On the downside, oil companies were slammed as crude prices tumbled 4% in afternoon trade. BP and Shell led the way, with Wood Group, Premier and Tullow all slipsliding lower.
Even though OPEC marked down its projections earlier in the session, trading momentum was currently holding sway on oil, said AJ Bell's Russ Mould: "In the short term money flows can overwhelm more fundamental considerations - or to paraphrase Benjamin Graham, in the short term the market is voting machine and in the long run it is a weighing machine - and a classic example of this right now might be oil."
Tobacco stocks BAT and Imperial Brands were both getting stubbed out again following reports as worries continued that the US Food and Drug Administration will crack down on menthol cigarettes.
Goldman Sachs said worries about a potential menthol ban in the US appear overdone, particularly for BATS. It said that if a potential ban is proposed, tobacco companies would likely pursue litigation, initially seeking a preliminary injunction and seeking litigation on more substantive issues down the line.
Discount retailer B&M European Value also slumped as it reported a rise interim profit but sounded a cautious note on the outlook.
Ladbrokes owner GVC Holdings was in the red following reports suggesting that the Treasury is facing almost-certain defeat over plans to delay a crackdown on fixed-odds betting terminals.
Sophos was hit by a downgrade to 'hold' at Shore Capital while Pennon was dented by a downgrade to 'hold' at Deutsche Bank.
Market Movers
FTSE 100 (UKX) 7,053.76 0.01%
FTSE 250 (MCX) 18,985.73 0.93%
techMARK (TASX) 3,389.50 1.67%
FTSE 100 - Risers
Vodafone Group (VOD) 155.60p 7.79%
Melrose Industries (MRO) 175.11p 6.19%
Experian (EXPN) 1,873.50p 4.49%
Micro Focus International (MCRO) 1,307.00p 4.23%
Barratt Developments (BDEV) 545.80p 4.04%
Berkeley Group Holdings (The) (BKG) 3,682.00p 3.51%
Standard Chartered (STAN) 585.10p 3.16%
Bunzl (BNZL) 2,325.00p 3.10%
Croda International (CRDA) 4,924.00p 3.01%
St James's Place (STJ) 1,067.00p 2.99%
FTSE 100 - Fallers
British American Tobacco (BATS) 2,836.50p -4.25%
Smurfit Kappa Group (SKG) 2,240.00p -3.20%
BP (BP.) 513.50p -2.76%
Wood Group (John) (WG.) 649.40p -2.73%
Associated British Foods (ABF) 2,549.00p -2.49%
Imperial Brands (IMB) 2,630.00p -2.23%
Royal Dutch Shell 'A' (RDSA) 2,377.50p -2.22%
Just Eat (JE.) 560.40p -2.16%
Severn Trent (SVT) 1,928.00p -2.11%
Royal Dutch Shell 'B' (RDSB) 2,429.00p -2.06%
FTSE 250 - Risers
Contour Global (GLO) 168.20p 12.06%
BTG (BTG) 660.00p 10.74%
FirstGroup (FGP) 87.95p 10.42%
Grafton Group Units (GFTU) 788.00p 8.99%
Thomas Cook Group (TCG) 51.80p 5.50%
Fisher (James) & Sons (FSJ) 1,710.00p 5.17%
Equiniti Group (EQN) 221.00p 4.99%
FDM Group (Holdings) (FDM) 915.00p 4.93%
Just Group (JUST) 90.00p 4.47%
Go-Ahead Group (GOG) 1,598.00p 4.31%
FTSE 250 - Fallers
B&M European Value Retail S.A. (DI) (BME) 372.90p -7.93%
Premier Oil (PMO) 95.15p -4.85%
Sophos Group (SOPH) 315.60p -4.48%
Tullow Oil (TLW) 195.15p -4.34%
Pennon Group (PNN) 757.80p -2.97%
Essentra (ESNT) 374.40p -2.75%
Babcock International Group (BAB) 599.60p -2.69%
Coats Group (COA) 79.80p -2.33%
Halfords Group (HFD) 296.20p -1.86%
Petrofac Ltd. (PFC) 553.00p -1.81%
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