London midday: Stocks tick lower ahead of central bank announcements; airlines in the red
By Michele Maatouk
Date: Monday 17 Jun 2019
(Sharecast News) - London stocks were a touch lower by midday on Monday as traders kept their powder dry at the start of a week that's jam-packed with central bank policy announcements.
The FTSE 100 was down 0.1% at 7,341.79, while the pound was flat against the dollar and the euro at 1.2593 and 1.1228, respectively, as investors eyed the second round of voting in the Tory leadership contest on Tuesday.
IG market analyst Joshua Mahony said: "Johnson remains a huge favourite to become the next prime minister, and given his unpopularity in Brussels, coupled with his insistence that a no-deal Brexit remains on the table, there is good reason to believe we will see the pound continue to suffer if he gets into power.
"Firms have been open about their lack of preparation for a no-deal Brexit, yet should Boris Johnson become prime minister, we are sure to start seeing a sharp rise in stockpiling ahead of the October deadline."
Away from politics and Brexit, it's a big week for central banks, with the Bank of England, the Federal Reserve and the Bank of Japan all due to make their latest policy announcements.
Neil Wilson, chief market analyst at Markets.com said: "All eyes are of course on the Fed meeting this week. It's hard to recall a time we headed into an FOMC meeting with so much at stake and with so much uncertainty about what might be agreed. This means the potential volatility around the event is likely to be substantially higher than at most recent FOMC meetings. Traders may start to show some nervousness ahead of the Fed meeting if they think it won't be accommodative as hoped."
As far as the BoE is concerned, Wilson said "we could see some hawks on the MPC vote for a rate hike to signal their intent, as it appears waiting for Brexit clarity could take a while longer than policymakers had anticipated".
In equity markets, RBS was as high riser as it said the completion of a merger between Alawwal Bank and Saudi British Bank would boost its capital.
Babcock rallied after confirming it had rejected in January a "highly preliminary" takeover approach from outsourcer rival Serco - a combination that would create a £4bn defence giant. RBC Capital Markets said there is some merit in a merger.
"Babcock, in our view, needs a new management team to restore credibility, there would be decent synergies given the overlap and Serco's platform can take more revenue, although it would increase its exposure to the UK.
"However, given the impending change in Chairman at Babcock and the fact that Serco has just done a US deal and raised money - the timing may now have passed, although the fact that all this has been leaked now, may suggest that interested parties wanted to bring the approach to Babcock's beleaguered shareholders' attention."
On the downside, airlines were under the cosh, with EasyJet, International Consolidated Airlines Group and Wizz Air all lower after Lufthansa downgraded its 2019 profit forecast on the back of market-wide overcapacities and growing competition from low-cost carriers.
Construction group Kier slumped after saying it will cut about 1,200 jobs as it looks to reduce debt and deliver annual cost savings of around £55m from 2021. As part of the new strategy announced, Kier will simplify its portfolio by selling or substantially exiting non-core activities. This includes Kier Living and the company's property, facilities management and environment services segments.
British American Tobacco was knocked lower by a downgrade to 'underweight' at Morgan Stanley.
Centrica was initiated at 'underperform' at Macquarie, while National Grid was started at 'outperform', along with Pennon, Severn Trent and United Utilities. Drax was initiated at 'neutral' by Macquarie.
Elsewhere, Hammerson was lifted to 'add' at Peel Hunt, while Shaftesbury was upgraded to 'hold' and JPJ Group was boosted to 'buy'.
Market Movers
FTSE 100 (UKX) 7,341.79 -0.05%
FTSE 250 (MCX) 19,167.82 0.26%
techMARK (TASX) 3,591.56 -0.09%
FTSE 100 - Risers
Standard Life Aberdeen (SLA) 277.70p 2.13%
Royal Bank of Scotland Group (RBS) 216.60p 1.98%
Hikma Pharmaceuticals (HIK) 1,678.00p 1.98%
Standard Chartered (STAN) 687.00p 1.57%
Evraz (EVR) 706.60p 1.52%
WPP (WPP) 973.20p 1.33%
Schroders (SDR) 2,967.00p 1.30%
Marks & Spencer Group (MKS) 218.70p 1.25%
Rolls-Royce Holdings (RR.) 902.80p 1.23%
SEGRO (SGRO) 727.80p 1.22%
FTSE 100 - Fallers
easyJet (EZJ) 881.40p -5.12%
Smith (DS) (SMDS) 336.10p -4.00%
Ocado Group (OCDO) 1,127.00p -2.80%
International Consolidated Airlines Group SA (CDI) (IAG) 448.10p -2.73%
British American Tobacco (BATS) 2,834.50p -1.77%
Associated British Foods (ABF) 2,420.00p -1.75%
Fresnillo (FRES) 826.47p -1.59%
Imperial Brands (IMB) 1,952.40p -1.22%
Next (NXT) 5,470.00p -0.80%
Compass Group (CPG) 1,896.50p -0.78%
FTSE 250 - Risers
Babcock International Group (BAB) 485.10p 4.41%
Hammerson (HMSO) 292.20p 3.43%
NewRiver REIT (NRR) 194.94p 3.36%
Royal Mail (RMG) 205.40p 2.73%
Energean Oil & Gas (ENOG) 845.00p 2.67%
CLS Holdings (CLI) 222.50p 2.53%
Saga (SAGA) 36.70p 2.51%
Funding Circle Holdings (FCH) 248.00p 2.27%
Avast (AVST) 311.20p 2.23%
Hays (HAS) 156.30p 1.89%
FTSE 250 - Fallers
Kier Group (KIE) 115.00p -12.08%
Woodford Patient Capital Trust (WPCT) 53.90p -7.07%
Amigo Holdings (AMGO) 262.00p -5.07%
Wizz Air Holdings (WIZZ) 3,470.00p -4.28%
Centamin (DI) (CEY) 105.25p -3.75%
Just Group (JUST) 53.00p -3.64%
Indivior (INDV) 43.50p -3.20%
Aveva Group (AVV) 3,810.00p -3.05%
Sirius Minerals (SXX) 14.94p -2.86%
Rank Group (RNK) 155.00p -2.39%
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