London midday: Stocks tick higher but Sirius tanks after scrapping bond sale
By Michele Maatouk
Date: Tuesday 17 Sep 2019
(Sharecast News) - London stocks had popped into the green by midday on Tuesday as sterling lost ground, but investors remained cautious amid ongoing geopolitical tensions in the Middle East.
The FTSE 100 was up 0.1% at 7,331.57, while the pound was down 0.2% against the dollar at 1.2410 and 0.3% lower versus the euro at 1.1264, as the Supreme Court kicked off a hearing to decide whether Prime Minister Boris Johnson abused his powers by proroguing Parliament.
David Cheetham, chief market analyst at XTB, said the pullback in the pound was more do with a strengthening of the greenback.
"The pound has been on a strong run in the past month, outperforming all its G10 peers with the currency buoyed by the belief that the prospects of a no-deal Brexit was once more receding into the realms of being highly unlikely," he said.
"While the risk premium in the pound for a hard Brexit has significantly decreased in recent weeks, it can't be completely eliminated until more is known on how far Boris Johnson is willing to push the legal limits, and as such, the upside in sterling may be capped for the time being."
Following the attacks on two Saudi oil facilities over the weekend, Oanda analyst Craig Erlam said a significant risk premium was being priced into the oil markets, not only because of the outages caused but also the prospect of further attacks and an escalation in the region.
"It's clear who the US believes is to blame for the attack, despite the Houthi rebels claiming responsibility but how they respond is yet unknown. We'll also learn in the coming days just how quickly the Saudi's can get lost production back online and whether stocks will be called upon to fill the void. There's a lot of unknowns at the moment which is why we're seeing oil holding onto these gain," he said.
According to Bloomberg, Saudi Aramco has warned some clients to expect delays of days or weeks to their oil deliveries, while Reuters reported that Aramco informed PetroChina that its loadings of light crude oil for October will be delayed by about 10 days.
Oil prices spiked 20% on Monday in the wake of the attacks but have since come off, with West Texas Intermediate down 1.6% at $61.93 a barrel and Brent crude down 1.4% at $68.04.
Elsewhere, Sino-US trade relations remained in focus, with deputy-level talks set to kick off this week between the US and China ahead of the next round of high-level talks in October.
Investors were also beginning to shift their focus to Wednesday's Federal Reserve policy announcement. Erlam said expectations have changed quite dramatically in recent sessions, to the point that a 50 basis point is no longer priced in at all and no change is now priced at more than 30%.
"A 25 basis point cut is still almost 70% priced in but the way markets are moving at the moment, this could slip further over the next 24 hours," he said. Among the reasons for the change in expectations were stronger data last week, improved risk appetite, trade war optimism and even higher inflation potential following the oil price spike.
In equity markets, luxury brand Burberry rose as Exane BNP Paribas lifted its price target on the stock to 2,050p from 1,700p in a note on the luxury goods sector.
On the downside, shares of Sirius Minerals tumbled as it said "poor market conditions" had forced it to cancel a $500m bond issue that was needed to start the next phase of construction on a fertiliser mine in Yorkshire.
Russ Mould, investment director at AJ Bell, said: "Although the share price has taken a beating on today's news, it isn't game over for Sirius and its shareholders. The miner has a few options to try and salvage the project.
"It has enough cash to give it six months' breathing space to either find a different solution for the financing or bring in a new strategic investor who could theoretically provide cash upfront in exchange for a stake in the business."
Johnson Matthey was in the red after a downgrade to 'equalweight' at Barclays, while InterContinental Hotels was trading higher after an initiation at 'buy' by Jefferies.
Market Movers
FTSE 100 (UKX) 7,331.57 0.14%
FTSE 250 (MCX) 20,016.96 -0.22%
techMARK (TASX) 3,841.35 0.20%
FTSE 100 - Risers
Aveva Group (AVV) 3,648.00p 2.01%
AstraZeneca (AZN) 6,929.00p 2.00%
Compass Group (CPG) 1,992.62p 1.90%
British American Tobacco (BATS) 2,955.50p 1.77%
Burberry Group (BRBY) 2,175.00p 1.73%
Rentokil Initial (RTO) 439.10p 1.71%
BAE Systems (BA.) 586.20p 1.66%
InterContinental Hotels Group (IHG) 5,091.00p 1.54%
Relx plc (REL) 1,860.50p 1.50%
Halma (HLMA) 1,973.00p 1.36%
FTSE 100 - Fallers
Evraz (EVR) 498.62p -3.74%
NMC Health (NMC) 2,837.00p -3.31%
Carnival (CCL) 3,652.00p -3.26%
Standard Life Aberdeen (SLA) 264.40p -3.11%
Morrison (Wm) Supermarkets (MRW) 202.80p -2.69%
Persimmon (PSN) 2,047.00p -2.57%
Centrica (CNA) 73.16p -2.40%
Prudential (PRU) 1,445.50p -2.33%
BT Group (BT.A) 173.14p -2.30%
Legal & General Group (LGEN) 247.10p -2.25%
FTSE 250 - Risers
Sophos Group (SOPH) 420.30p 4.53%
Woodford Patient Capital Trust (WPCT) 46.60p 2.98%
Intermediate Capital Group (ICP) 1,412.00p 2.39%
Games Workshop Group (GAW) 4,658.00p 2.10%
Telecom Plus (TEP) 1,224.00p 2.00%
SSP Group (SSPG) 666.00p 1.83%
Hikma Pharmaceuticals (HIK) 1,970.50p 1.73%
Savills (SVS) 909.50p 1.51%
Primary Health Properties (PHP) 136.60p 1.49%
Softcat (SCT) 1,001.00p 1.47%
FTSE 250 - Fallers
Sirius Minerals (SXX) 4.43p -55.72%
Intu Properties (INTU) 41.17p -4.25%
Kaz Minerals (KAZ) 442.80p -3.97%
Vivo Energy (VVO) 125.80p -3.23%
Hays (HAS) 149.40p -2.80%
Tullow Oil (TLW) 234.42p -2.73%
Elementis (ELM) 161.70p -2.59%
TI Fluid Systems (TIFS) 190.80p -2.35%
Metro Bank (MTRO) 284.00p -2.14%
TalkTalk Telecom Group (TALK) 107.10p -2.10%
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