London open: Stocks edge up as miners rally; Next drops after results
By Michele Maatouk
Date: Thursday 21 Mar 2019
(Sharecast News) - London stocks edged higher in early trade on Thursday, with mining and precious metals companies lending support as investors digested a dovish policy announcement from the Federal Reserve, looked ahead to the latest announcement from the Bank of England and mulled overnight Brexit events.
At 0830 GMT, the FTSE 100 was up 0.3% to 7,307.46, while the pound was down 0.2% against the dollar at 1.3168 and 0.1% lower versus the euro at 1.1549.
The Fed stood pat on interest rates on Wednesday, as expected, holding steady on its target of between 2.25% and 2.5%. More strikingly, the central bank also made it clear that no further increases in its interest rate targets would be delivered this year, given inflation was waning and economic growth was slowing.
Federal Open Markets Committee members continue to indicate they believe the balance sheet runoff will end by September, while also slashing their US economic growth estimate for the year to 2.1%.
FOMC members also agreed to take the shears to the Fed's personal consumption expenditure (PCE) inflation forecast, dropping it to 1.8% from a previous 1.9%, while its core PCE estimate remained at 2%.
In the post-meeting press conference, Fed chair Jerome Powell said there was "no need to rush to judgment" when it came to its more cautious stance, with the Fed's policy on its balance sheet set to ensure a "smooth [and] predictable" end to its runoff.
On home shores, market participants were eyeing the latest policy announcement from the Bank of England at 1200 GMT amid expectations for no change or any strong future guidance.
The big focus, however, will be on any Brexit news as EU members prepare to decide whether or not they will allow Theresa May's request for an extension of Article 50 to 30 June. May was set to travel to Brussels later for the EU leaders summit after EU Council president Donald Tusk said on Wednesday that he would consider approving a delay, but only if a deal was voted through by MPs first.
The summit comes a day after May said in a speech that she would not tolerate a longer extension, and tried to shift the blame onto MPs for failing to implement Brexit on time.
May is now in a race against time to win approval for her deal, and then hold a vote in both houses of parliament to change the 29 March exit date set in the EU Withdrawal Act, provided all 27 EU states agree to an extension. If she fails, Tusk left the door open for an emergency summit to potentially approve a longer Article 50 delay.
CMC Markets analyst Michael Hewson said: "It is slowly becoming apparent that patience is wearing thin amongst EU leaders, and it's not hard to sympathise with that sentiment, but putting a gun to the heads of MPs here is probably not the best way to achieve a conclusion to this particular problem."
In equity markets, miners were the standout gainers, with Rio Tinto, Antofagasta, Glencore and BHP all higher as copper prices rallied.
Precious metals miners were also on the rise as gold prices hit a three-week high on the back of a dovish Fed, with Fresnillo, Acacia Mining and Centamin all up.
Going the other way, clothing retailer Next was on the back foot as it confirmed full-year sales and profits in line with its pre-close statement in January and maintained its guidance for earnings to grow 3.6% for the year ahead. Total group sales of £4.2bn were generated in the year to January, up 2.5% on the previous year, while profit before tax was down 0.4% to £722.9m. Earnings per share increased 4.5% to 435.3p, helped by share buybacks.
Housebuilders were weaker after Persimmon said it was set to become the first major UK housebuilder to adopt a policy of providing a homebuyer's retention. This means it will write into its standard contract that 1.5% of the total home value - equating to around 6% of the build fabric costs - could be withheld by the buyer's solicitor until any faults identified at the point of key release were resolved.
Taylor Wimpey, Barratt Developments and Crest Nicholson all retreated, with analysts pointing out that this is a bearish development for the sector that will put pressure on working cash flows and margins.
Engineering company Renishaw saw its shares fall sharply as it cautioned that full-year results would come in below previous guidance.
Fashion brand Ted Baker slumped as it reported a 26.1% drop in annual profit following a "difficult" year in which it was hit by a "forced hugging" scandal that culminated in the resignation of founder and boss Ray Kelvin.
In broker note action, Assura was initiated at 'neutral' by JPMorgan, while Bodycote was cut to 'hold' at Berenberg.
Capital & Counties, Derwent London, Shaftesbury and Great Portland Estates were all initiated at 'hold' by Panmure Gordon.
Compass was downgraded to 'sell' at Goldman Sachs and Lookers was cut to 'neutral' by JPMorgan.
EasyJet was lifted to 'neutral' at MainFirst, while IAG was downgraded to 'neutral' by the same outfit.
Market Movers
FTSE 100 (UKX) 7,307.46 0.23%
FTSE 250 (MCX) 19,349.92 -0.20%
techMARK (TASX) 3,559.37 -0.11%
FTSE 100 - Risers
Fresnillo (FRES) 829.60p 3.62%
Rio Tinto (RIO) 4,283.00p 1.88%
Antofagasta (ANTO) 975.56p 1.81%
Glencore (GLEN) 322.50p 1.75%
Anglo American (AAL) 2,026.50p 1.67%
BHP Group (BHP) 1,796.00p 1.61%
Micro Focus International (MCRO) 1,933.50p 1.12%
Royal Dutch Shell 'A' (RDSA) 2,450.00p 1.09%
Unilever (ULVR) 4,338.00p 1.07%
Royal Dutch Shell 'B' (RDSB) 2,467.32p 1.02%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 252.70p -4.64%
Next (NXT) 5,040.00p -2.74%
Phoenix Group Holdings (PHNX) 685.60p -2.06%
Compass Group (CPG) 1,714.00p -1.80%
SEGRO (SGRO) 671.40p -1.78%
Lloyds Banking Group (LLOY) 64.23p -1.26%
Taylor Wimpey (TW.) 176.43p -1.22%
Persimmon (PSN) 2,187.00p -1.13%
Kingfisher (KGF) 227.20p -1.09%
Barratt Developments (BDEV) 590.00p -0.84%
FTSE 250 - Risers
Acacia Mining (ACA) 203.75p 3.43%
Centamin (DI) (CEY) 92.11p 2.71%
Inmarsat (ISAT) 505.00p 1.96%
Card Factory (CARD) 189.40p 1.55%
Premier Oil (PMO) 95.20p 1.38%
Indivior (INDV) 114.90p 1.28%
Ferrexpo (FXPO) 258.25p 1.27%
Metro Bank (MTRO) 846.00p 1.20%
TI Fluid Systems (TIFS) 194.72p 1.15%
Polymetal International (POLY) 874.40p 1.09%
FTSE 250 - Fallers
Renishaw (RSW) 3,600.00p -14.29%
Crest Nicholson Holdings (CRST) 361.80p -6.94%
Ted Baker (TED) 1,622.00p -5.15%
Hammerson (HMSO) 355.80p -3.42%
OneSavings Bank (OSB) 390.40p -2.74%
Domino's Pizza Group (DOM) 229.90p -2.67%
Plus500 Ltd (DI) (PLUS) 735.00p -2.39%
Bodycote (BOY) 859.50p -2.16%
Bovis Homes Group (BVS) 1,099.00p -2.05%
Kier Group (KIE) 420.93p -1.97%
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