London close: FTSE kisses four-month high but ends flat
London's FTSE 100 had a shy glance at a four-month high on Valentine's Day Thursday but ended the day pretty much back where it started as encouraging results from the likes of Micro Focus and AstraZeneca were balanced by brooding heavyweight miners and oil producers.
The FTSE 100 added just over six points to close at 7,197.01, unable to keep up the passion that saw it touch 7,232.83 in the early afternoon, the highest since 10 October.
Sterling fell 0.4% against the dollar to 1.2796, its lowest level in over a month, and was 0.6% lower versus the euro at 1.1339 as expectations grew that the Brexit debate in the House of Commons this evening would end with defeat for Theresa May on a vote related to her strategy of seeking alternative arrangements to the Irish backstop.
Westminster watchers said a government defeat will make it even less likely that May is able to negotiate significant changes to the backstop.
After rumours emerged of a threat from hard right Tories to rebel against Downing Street's apparent endorsement of an amendment that would rule out a no-deal Brexit, International Trade Secretary said opposition could “send the wrong signals” to Brussels.
"Apart from political embarrassment for the Prime Minister and the further sign of her lack of authority, such a defeat could have little consequence," argued analysts at Daiwa Capital Markets, as the votes are all advisory.
"Certain proposed amendments, aimed at giving MPs greater influence over the process, were also set to be voted on. But with May having promised to come back to Parliament on 26 February with a further update, and parliamentarians to be given yet another opportunity to influence Brexit policy the following day, today's debate risked largely being a rerun of what happened a fortnight ago when MPs failed to agree on anything of substance."
Joshua Mahony, senior market analyst at IG, said markets were following the lead of businesses in factoring in the possibility of a no-deal Brexit, which had weighed on the pound. "However, while a weakening pound is helping keep FTSE 100 afloat, most US and European markets are trading in the red thanks to a disappointing set of US retail sales figures."
US retail sales showed a surprise slump in December, falling by the most since 2009, a few months after the end of the financial crisis. Some economists called the data "unbelievable".
Earlier, positive data out of China helped to underpin sentiment. Figures out earlier showed China's exports rose 9.1% in January from a year earlier compared to a 4.4% drop in December, coming in well ahead of expectations for a 3.2% decline. Meanwhile, imports were down 1.5% versus a 7.6% slump in December, beating expectations for a 10% decline.
This was balanced by news that Germany narrowly avoided a recession last year, with flat growth in the fourth quarter, while euro area economic growth kept pace with the third quarter to rise 0.2% in the final three months of 2018.
On the UK data front, investors were digesting the latest survey from the Royal Institution of Chartered Surveyors, which showed the UK housing market got off to a weak start in 2019, with enquiries, sales and new instructions all down, as Brexit uncertainty continued to take its toll.
RICS found that the number of new properties being listed in January had deteriorated to the lowest since July 2016, with new buyer enquiries falling for the sixth successive monthly and the average time to sell a property lengthening to 19.4 weeks – the longest since RICS started measuring this data point in 2017.
Contributors to the survey blamed Brexit for the weaker market conditions: "In the near term, contributors sense little prospect of a turnaround, as concerns over the potential impact of Brexit continue to cause hesitancy, alongside affordability constraints in parts of the country."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Given that Brexit remains unresolved, activity and prices likely will continue to come under downward pressure in the near-term. But with both mortgage rates and unemployment low and banks willing to lend on a secured basis, the conditions are in place for a recovery when a no-deal Brexit has been averted."
Among notable share price swings, the oil heavyweights BP and Shell were down 1%, with a flat mining sector as positive China data was seen as an anomaly. UK high street banks, including Lloyds, Barclays and RBS, along with retailers Next and Primark owner ABF, were down on the Brexit caution that was hitting the pound.
In corporate news, Micro Focus was feeling the love, surging to the top of the FTSE 100 as the software company's full-year revenue beat analysts' expectations.
Russ Mould, investment director at AJ Bell, said that after the profit warning and change of chief executive almost a year ago, the company is at last showing signs of getting on top of the integration of HPE software business it bought in late 2017.
"Micro Focus had a well-earned reputation as a stock market cash machine in the first part of this decade. It returned some 600p per share in ordinary and special dividends between 2011 and 2017, prior to the HPE deal. Today’s full year results show some signs it can regain its credibility with investors in this regard as both cash flow, debt and revenue come in better than expected, the dividend is hiked and its share buyback scheme is extended."
AstraZeneca also rallied as it reported a strong fourth quarter, beating analyst expectations for revenues and earnings, with the drugs colossus guiding to another strong year ahead. Sector mates GSK and Hikma were also in the green.
Indivior, Lancashire and Moneysupermarket all gained on the back of well-received results.
Coca-Cola HBC fell sharply as, although the drinks bottler's full-year results were fizzy enough, earnings per share were a bit flat. In addition, it warned that a slowdown in economic growth in a number of its key markets this year was likely to dent consumer spending.
Convatec tumbled as the medical device maker posted a 6% drop in adjusted earnings before interest and tax for 2018, while Restaurant Group slid on the shock departure of chief executive officer Andy McCue for personal reasons.
BP, Hargreaves Lansdown, Shell, PZ Cussons and Rank were among the companies whose stock went ex-dividend.
In broker notes, Dunelm was downgraded to 'reduce' by HSBC, while RSA was cut to 'neutral' at JPMorgan. Royal Mail was upgraded to 'equalweight' by Morgan Stanley.
Market Movers
FTSE 100 (UKX) 7,206.69 0.22%
FTSE 250 (MCX) 18,914.92 -0.30%
techMARK (TASX) 3,522.74 1.86%
FTSE 100 - Risers
Micro Focus International (MCRO) 1,712.00p 12.82%
AstraZeneca (AZN) 6,149.00p 7.48%
Hikma Pharmaceuticals (HIK) 1,766.00p 2.14%
BAE Systems (BA.) 526.40p 1.74%
Spirax-Sarco Engineering (SPX) 6,720.21p 1.67%
Informa (INF) 712.49p 1.64%
InterContinental Hotels Group (IHG) 4,628.50p 1.60%
GlaxoSmithKline (GSK) 1,568.60p 1.40%
Wood Group (John) (WG.) 511.80p 1.35%
Sage Group (SGE) 662.80p 1.19%
FTSE 100 - Fallers
Coca-Cola HBC AG (CDI) (CCH) 2,483.00p -7.83%
Smurfit Kappa Group (SKG) 2,354.00p -2.89%
Next (NXT) 4,826.00p -2.68%
Paddy Power Betfair (PPB) 6,260.00p -2.34%
Evraz (EVR) 521.40p -2.25%
TUI AG Reg Shs (DI) (TUI) 813.20p -2.12%
GVC Holdings (GVC) 641.50p -2.06%
RSA Insurance Group (RSA) 534.40p -2.02%
BP (BP.) 540.90p -1.87%
Associated British Foods (ABF) 2,266.00p -1.65%
FTSE 250 - Risers
Lancashire Holdings Limited (LRE) 637.00p 7.06%
Moneysupermarket.com Group (MONY) 333.10p 6.56%
Dechra Pharmaceuticals (DPH) 2,486.00p 4.37%
Premier Oil (PMO) 76.40p 3.31%
Tullow Oil (TLW) 226.30p 3.24%
Domino's Pizza Group (DOM) 254.50p 3.04%
Acacia Mining (ACA) 199.35p 3.00%
Intu Properties (INTU) 118.10p 2.79%
Pershing Square Holdings Ltd NPV (PSH) 1,280.36p 2.59%
Mediclinic International (MDC) 317.90p 2.48%
FTSE 250 - Fallers
Convatec Group (CTEC) 120.25p -18.89%
Restaurant Group (RTN) 130.70p -10.48%
Galliford Try (GFRD) 706.50p -7.47%
Plus500 Ltd (DI) (PLUS) 1,051.70p -6.85%
TBC Bank Group (TBCG) 1,344.00p -6.80%
Card Factory (CARD) 181.80p -6.10%
Superdry (SDRY) 487.00p -4.79%
Ted Baker (TED) 1,845.00p -4.65%
Ashmore Group (ASHM) 398.00p -3.73%
Inmarsat (ISAT) 362.90p -3.64%