London close: Resources rally helps FTSE regain some lost ground
London stocks on Tuesday recouped just over a quarter of the previous day's sharp losses as energy and resources led a modest rally, though gains were limited as trade war worries continued to weigh on investors' minds.
The FTSE 100 closed up 28 points or 0.37% higher at 7,537.92, outperforming the mid-caps of the FTSE 250 and pretty much all its European peers thanks to its heavier commodities weighting. This came a day after the London benchmark suffered its worst day of losses since February amid escalating tensions between the US and its major trade partners.
Chris Beauchamp, chief market analyst at IG, said the gains on Tuesday were doing little to dent the heavy losses suffered a day earlier and wondered how much further equities will have to go to find the bottom of the market.
"At first glance, it looks like an open-and-shut case; breadth across European and US markets remains weak, with a high number of stocks hitting new one-month lows," he said. "But with trade war rhetoric still in abundance, it might be too early to sound the all-clear. The parallels with the summer of 2015 are becoming more obvious too - then it was a slowdown in China and heavy losses for Chinese markets that prompted a prolonged period of volatility and losses for markets on this side of the globe. The talk of trade wars certainly raises the risk of a re-run of that volatility."
The pound fell 0.3% against the dollar to 1.3239 and was pretty much flat versus the euro at 1.1346.
Sterling's decline followed fairly dovish comments from Jonathan Haskel at a hearing with the Treasury Select Committee ahead of his appointment to the Bank of England's monetary policy committee in September. He suggested that there might be more slack in the economy than previously thought, but stressed on several occasions that he was not yet on the inside, so he did not yet have access to all of the same information available to the rest of the MPC.
On the data front, figures released earlier by UK Finance showed that mortgage lending rose in May as approvals for house purchases fell as economic activity remained subdued but borrowers sought to remortgage on cheaper deals.
Gross mortgage lending increased 8.8% to £22.2bn from a year earlier, with approvals at the big high street banks up 3% from a month earlier. The increase was driven by remortgaging, which rose 18% from May 2017 as borrowers took up cheap deals with interest rate rises looking likely. Loans for people buying houses fell 3.8% in a stagnating property market.
Total consumer credit, which includes credit cards, personal loans and overdrafts, grew 3.9% from a year earlier, the slowest rate since January 2015.
In corporate news, cruise operator Carnival was the standout gainer, bouncing back from a sharp sell-off on Monday when it trimmed its full-year earnings outlook due to higher fuel prices and a strong US dollar.
Sainsbury's shares were down as industry data from Kantar Worldpanel showed sales lagging well behind its rivals, down 0.2% in the past 12 weeks. Morrisons, where sales grew 1.9%, was the only one to see its shares not in the red, while Tesco's sales were up 1.4% but its shares down. Ocado's sales grew 10.1% but its shares fell, while Marks & Spencer was up as rival data from Nielsen indicated sales growth.
BP and Shell were higher as crude oil prices bounced back, with Brent back above $76 a barrel, while a US federal judge also dismissed lawsuits by San Francisco and Oakland alleging oil companies, including the London-listed pair, should pay to protect residents from the impacts of climate change.
BHP Billiton rose after saying that its Samarco joint venture has agreed to extinguish a 20bn reais (£4bn) deal with Brazilian authorities relating to the bursting of a tailings dam that killed 19 people in the Minais Gerais region in 2015.
Anglo American advanced after saying that the value of rough diamond sales at De Beers rose to $575min the fifth cycle of this year from $554m in the fourth and $541m in the fifth cycle of 2017.
Yorkshire potash miner Sirius Minerals gained amid speculation of an imminent update on its efforts to secure £2.1bn of debt to complete its fertiliser project. The company is expected to receive commitment letters from lenders this month before the agreements are finalised in the fourth quarter.
AstraZeneca ticked higher as it announced a series of board committee changes including appointing Nazneen Rahman as the chair of the drug company’s science committee.
Equipment rental firm Ashtead also pushed up after saying it has hired former Sage Group chief executive Paul Walker to succeed Chris Cole as chairman.
Polymetal climbed as it said it has started up its new Kyzyl mine in Kazakhstan ahead of schedule and below budget, while brick maker Ibstock gained after agreeing to sell a former quarry near Bristol for £9.3m in cash.
On the downside, Inmarsat crashed back down to earth a day after rocketing on news that Eutelsat was evaluating the possibility of making an offer for the UK satellite operator, as it made a fairly swift U-turn.
British Airways owner IAG led the FTSE 100 fallers as oil prices continued to remain elevated, rendering fuel costs more expensive, also following parliament's vote in favour of a third runway at London’s Heathrow airport.
"The prospect of a third runway meaning more competition (both short and long-haul) at Heathrow," said analyst Mike van Dulken at Accendo Markets. "Especially from a such a highly successful and seasoned short-haul rival like easyJet. The green light is logically aimed at relieving pressure on an airport which has continued to grow over the years. The flip side for IAG, however, is that expansion may end up putting pressure on both IAG and peers - typically flag carriers, which have benefited from being able to charge a premium for using Heathrow - as new capacity makes each slot less valuable and more economically viable."
Petrofac leaked lower as it said it has taken $1.8bn of new orders since the start of the year, which is slightly more than at this stage last year but that the order backlog of $9.7bn was down from £10.2bn at the end of December and $13bn a year ago.
Outside the FTSE 350, beleaguered flooring retailer Carpetright was trading lower after saying it swung to a full-year statutory pre-tax loss of £70.5m from a profit of £900,000 in 2017.
In broker note action, Royal Mail rallied after an upgrade to ‘sector perform’ from ‘underperform’ at RBC Capital Markets, while Cairn Energy was boosted by an upgrade to ‘buy’ from Bank of America Merrill Lynch.
Peppa Pig rights owner Entertainment One was lifted by a positive recommendation from JP Morgan, while London Stock Exchange Group was also being helped by comments from Berenberg
However, ASOS and Ocado were hit by downgrades at Redburn and Exane, respectively.
Market Movers
FTSE 100 (UKX) 7,555.95 0.61%
FTSE 250 (MCX) 20,770.81 -0.02%
techMARK (TASX) 3,474.73 -0.02%
FTSE 100 - Risers
Carnival (CCL) 4,347.00p 3.13%
BHP Billiton (BLT) 1,643.00p 2.51%
Next (NXT) 6,106.00p 2.42%
Smith (DS) (SMDS) 523.20p 2.39%
London Stock Exchange Group (LSE) 4,493.00p 2.11%
GVC Holdings (GVC) 1,047.00p 2.05%
Royal Mail (RMG) 501.20p 1.87%
CRH (CRH) 2,703.00p 1.85%
Burberry Group (BRBY) 2,164.00p 1.79%
Reckitt Benckiser Group (RB.) 6,181.00p 1.69%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 674.60p -3.32%
Sainsbury (J) (SBRY) 306.00p -2.21%
Micro Focus International (MCRO) 1,264.50p -2.20%
Compass Group (CPG) 1,586.00p -1.89%
Whitbread (WTB) 3,893.00p -1.69%
Tesco (TSCO) 257.20p -1.49%
Just Eat (JE.) 813.00p -1.17%
Relx plc (REL) 1,584.00p -1.09%
InterContinental Hotels Group (IHG) 4,674.00p -1.08%
easyJet (EZJ) 1,706.50p -1.02%
FTSE 250 - Risers
Cairn Energy (CNE) 250.80p 5.29%
Bakkavor Group (BAKK) 186.00p 3.91%
Ferrexpo (FXPO) 194.45p 3.79%
Renishaw (RSW) 5,345.00p 3.19%
Hikma Pharmaceuticals (HIK) 1,458.50p 3.00%
Ibstock (IBST) 295.00p 2.86%
RPC Group (RPC) 721.40p 2.82%
Contour Global (GLO) 228.00p 2.70%
Sirius Minerals (SXX) 33.14p 2.66%
Sanne Group (SNN) 698.00p 2.65%
FTSE 250 - Fallers
Inmarsat (ISAT) 553.20p -12.50%
Provident Financial (PFG) 588.40p -5.13%
Dixons Carphone (DC.) 193.55p -3.18%
McCarthy & Stone (MCS) 100.30p -3.09%
FDM Group (Holdings) (FDM) 993.00p -3.03%
Coats Group (COA) 75.00p -2.98%
TalkTalk Telecom Group (TALK) 108.10p -2.79%
Superdry (SDRY) 1,112.00p -2.54%
Cineworld Group (CINE) 262.00p -2.53%
Clarkson (CKN) 2,585.00p -2.27%