London midday: Stocks extend gains as PM sets off on EU charm offensive
By Michele Maatouk
Date: Tuesday 11 Dec 2018
(Sharecast News) - London stocks has extended gains by midday on Tuesday, boosted by strong showings from the likes of WPP and Ashtead, as the pound clawed back some of the losses from the previous session.
The FTSE 100 was 1.2% higher at 6,803.91. At the same time, sterling was up 0.4% against the dollar at 1.2610 and 0.2% firmer versus the euro at 1.1084, clawing back some ground thanks to strong jobs data after Theresa May's decision to call off this week's parliamentary vote on Brexit sent the currency crashing to its lowest level in almost two years.
May kicked off her tour of European capitals on Tuesday, heading to The Hague for talks with Dutch Prime Minister Mark Rutte before making her way to Berlin for crunch talks with German Chancellor Angela Merkel. She will also hold talks later in the day with European Commission President Jean-Claude Juncker and European Council President Donald Tusk ahead of Thursday's EU council summit as she seeks further assurances on the Brexit backstop.
Juncker reiterated on Twitter that the Brexit deal he has already agreed with May "is the best - and only - deal possible", insisting that there was no room for renegotiation.
Oanda analyst Craig Erlam said: "The inclusion of a unilateral withdrawal from the backstop under certain conditions seems the only way of saving May's deal at this late stage. If she fails to come back from Brussels with it, that could set in motion a series of events that creates huge uncertainty at the most illiquid time of year in the markets which makes for a potentially chaotic few weeks, with a leadership challenge, no confidence vote in the government and second referendum calls all on the table.
"Perhaps this will be viewed in Brussels as a risk worth taking, with a potentially plunging pound piling further pressure on the UK government."
There was some good news on the economic front as the latest figures from the Office for National Statistics showed that UK employment has reached a record high, with nominal wages growing at a rate not seen for a decade.
According to the ONS, there were an estimated 32.48m people in work between August and October, 79,000 more than the previous quarter and a 396,000 improvement on the same three months a year ago.
It means that the employment rate is now at 75.7%, up on last year's 75.1% and the joint highest rate since records began in 1971. The unemployment rate was 4.1%, unchanged on the previous quarter.
Average weekly earnings in nominal terms, which are not adjusted for price inflation, rose 3.3% year-on-year, excluding bonuses. That was the biggest rise since July 2008 and ahead of forecasts of around 3%. In real terms, they increased by 1% including bonuses, a level not seen since late 2016.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the data strengthen the case for a rate hike at the earliest opportunity after the threat of a no-deal Brexit has disappeared.
In corporate news, WPP surged as new boss Mark Read said he will spend £300m over the next three years to restructure the marketing and advertising giant with the aim of achieving an operating profit margin of at least 15%.
George Salmon, equity analyst at Hargreaves Lansdown, said: "Simplifying a business that had become sprawling to put it mildly, while simultaneously focusing on helping clients work with new retail giants like Amazon and Alibaba, seems a sensible strategy to us.
"However, whether the new approach will be enough to counter the severe disruption facing the business is another question entirely.
"Dividend growth is taking a back seat, but given the over-leveraged balance sheet and falling sales trends, that isn't a surprise. In fact, confirmation the payout is to be held rather than cut will likely be taken as a positive, as will the implication that current trading isn't deteriorating at the rate previously feared.
"Still, avoiding a dividend cut and confirming trading isn't as bad as it could be are very much hollow victories. Looking forward, investors will want to see signs the group can thrive, not just survive."
Equipment rental company Ashtead also racked up gains as it said it expects full-year results to beat expectations after interim pre-tax profit rose 45% to £461m, while 888 Holdings rallied as it bought the remaining 53% interest in the All American Poker Network for $28m.
Tesco, Sainsbury's and Morrisons were all in the green, reversing earlier losses even as fresh data from Kantar Worldpanel showed the past 12 weeks had seen the slowest growth rate since March 2017. Grocery sales have softened to 2.0% from 2.6%, 3.2% and 3.8% in the past three updates, as Kantar's measure of inflation has more than halved over the past year.
Standard Life was the biggest loser on the FTSE 100 after a downgrade to 'sector perform' at RBC Capital Markets, while Superdry suffered the heaviest losses on the 250 as Berenberg cut its stance on the fashion brand to 'hold' from 'buy' a day ahead of the retailer's interim results.
Market Movers
FTSE 100 (UKX) 6,803.91 1.23%
FTSE 250 (MCX) 17,649.05 0.90%
techMARK (TASX) 3,352.11 0.93%
FTSE 100 - Risers
GVC Holdings (GVC) 672.00p 6.75%
WPP (WPP) 856.60p 6.41%
Ashtead Group (AHT) 1,663.50p 3.55%
Antofagasta (ANTO) 765.20p 3.46%
Scottish Mortgage Inv Trust (SMT) 487.22p 3.39%
CRH (CRH) 2,049.00p 3.30%
Anglo American (AAL) 1,626.00p 3.24%
Bunzl (BNZL) 2,349.00p 2.80%
Rio Tinto (RIO) 3,625.63p 2.80%
Wood Group (John) (WG.) 630.60p 2.77%
FTSE 100 - Fallers
Standard Life Aberdeen (SLA) 223.35p -2.55%
Morrison (Wm) Supermarkets (MRW) 221.40p -0.94%
3i Group (III) 773.20p -0.92%
RSA Insurance Group (RSA) 498.10p -0.86%
Ocado Group (OCDO) 783.20p -0.84%
Hargreaves Lansdown (HL.) 1,804.00p -0.80%
Direct Line Insurance Group (DLG) 305.10p -0.68%
Associated British Foods (ABF) 2,147.00p -0.65%
Smith (DS) (SMDS) 304.30p -0.56%
easyJet (EZJ) 1,050.05p -0.37%
FTSE 250 - Risers
Indivior (INDV) 82.10p 7.26%
888 Holdings (888) 163.10p 5.98%
Playtech (PTEC) 403.30p 5.30%
JD Sports Fashion (JD.) 368.70p 4.30%
Tullow Oil (TLW) 185.45p 4.21%
Weir Group (WEIR) 1,395.00p 4.18%
Domino's Pizza Group (DOM) 246.70p 4.09%
Premier Oil (PMO) 73.65p 4.03%
Ibstock (IBST) 206.60p 3.66%
Sirius Minerals (SXX) 21.20p 3.62%
FTSE 250 - Fallers
Superdry (SDRY) 573.68p -7.25%
Stagecoach Group (SGC) 150.80p -3.77%
Thomas Cook Group (TCG) 25.61p -3.66%
Bakkavor Group (BAKK) 139.20p -3.33%
Hochschild Mining (HOC) 159.11p -3.01%
Amigo Holdings (AMGO) 258.87p -2.90%
Convatec Group (CTEC) 144.55p -1.87%
CLS Holdings (CLI) 208.00p -1.65%
St. Modwen Properties (SMP) 384.20p -1.64%
Derwent London (DLN) 2,845.00p -1.56%
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