London midday: Stocks maintain small gains as energy shares rally; profit warnings weigh
London stocks were just a touch higher by midday on Wednesday as a strong performance from energy shares and an upbeat survey on the retail sector were offset by profit warnings.
The FTSE 100 was up 0.1% to 7,547.40, while the pound was flat against the euro at 1.1351 and 0.1% lower versus the dollar at 1.3213 as Bank of England governor Mark Carney warned about significant risks of disruption to financial services from Brexit and called on the EU to do more to ensure a smooth transition.
In its financial stability report, the BoE said progress had been made on Brexit preparations but that there were risks to derivative contracts. The BoE’s financial policy committee, chaired by Governor Mark Carney, called on the EU to show willingness to solve the problem.
Meanwhile, retailers were in focus as the latest survey from the Confederation of British Industry showed that the sales recovery continued this month, even as high street behemoth John Lewis issued a profit warning.
Retailers reported that average sales jumped to a balance of +32 in June, up from May's +11 and ahead of expectations for an unchanged reading.
The balance comes from 43% of retailers saying sales volumes were higher in the year to June and another 10% saying they were down.
Furthermore, there was a balance of +19% of retailers saying that the volume of sales was good for the time of year, a measure that more closely mirrors the official retail sales data, which was up from -1% a month before. Retailers expect seasonal sales volumes to improve in the year to July, with a balance of +25%.
High street sales growth was reported across retail sub-sectors, with the pick-up in June driven particularly by a rise in non-store sales, department stores, durable household goods, with grocers and hardware stores faring well. On the downside, carpet and furniture stores and clothing retailers saw a drop in sales volumes in the year to June.
Earlier, the latest survey from mortgage lender Nationwide revealed that house prices in the UK rose at their slowest annual rate in five years in June amid subdued economic activity and squeezed household budgets.
House prices were up 2%, down from 2.4% growth in May but above expectations for a 1.7% increase. On the month, prices were up 0.5% in June, accelerating from 0.2% growth the month before and ahead of expectations of 0.3% growth.
London was the weakest performing region in the second quarter and the only region to see a decline, with prices down 1.9% on the year.
Oil majors provided much of the upside, with BP and Shell both higher as oil prices rallied after US API data on Tuesday showed that crude stocks were down 9.2m barrels for the week ended 22 June, versus expectations for a 2.3m barrel draw.
Oanda analyst Craig Erlam said: "Oil is continuing to climb in European trade after a US state department official claimed they are pushing allies to cut oil imports from Iran to zero. This comes at a time when supply disruptions in some countries including Venezuela are already weighing on output. Last week, OPEC and some non-OPEC producers that participated in the 1.8 million barrel a day output cut in recent years agreed to pump an extra million barrels a day, something traders appear to feel will be difficult to achieve.
He added that if the API data is confirmed by the EIA later on Wednesday, this could provide further support to Brent and WTI crude, "which are once again quite elevated and not trading far from their recent highs, despite the agreement last week".
Carnival was sitting pretty at the top of the FTSE 100 as Berenberg upgraded the cruise operator to 'buy', while Sainsbury's followed close behind as Barclays boosted the stock to 'overweight'.
Intermediate Capital rallied after an upgrade to 'buy' from 'neutral' by Bank of America Merrill Lynch.
Elsewhere in broker note action, Petrofac was lifted to 'buy' at Kepler Cheuvreux, while Independent Oil & Gas was started at 'buy' by Peel Hunt.
Whitbread rose after saying it expected annual results to meet expectations as it reported declining like-for-like sales at its Premier Inn and Costa coffee businesses in the first quarter.
AstraZeneca edged up after it said that a phase 3 trial of its cancer drug Lynparza showed success in improving progression-free survival for women with advanced ovarian cancer with a mutation in the BRCA gene.
Housebuilder and urban regeneration partner Countryside Properties was in the green as it said that current trading was in line with expectations and issued new medium-term guidance.
On the downside, there were two profit warnings for investors to sink their teeth into, with serviced office provider IWG and defence company Ultra Electronics in the frame.
IWG sank after cutting its 2018 operating profit forecast by between £15m and £20m, citing the cost of opening new space and weakness in its UK business.
Meanwhile, Ultra Electronics tumbled after saying it now expects full-year operating profit at constant currencies to be down between £4m and £6m as its US defence and aerospace business Herley took a hit from cost overruns on development contracts.
Distribution and outsourcing group Bunzl was on the back foot after saying it slowed to a "more normal" pace of growth in the second quarter of the year.
Broadcaster ITV fell as it announced the retirement of its chief operating officer and group finance director Ian Griffiths.
Market Movers
FTSE 100 (UKX) 7,547.40 0.13%
FTSE 250 (MCX) 20,708.26 -0.24%
techMARK (TASX) 3,470.60 -0.06%
FTSE 100 - Risers
Carnival (CCL) 4,447.00p 2.30%
Sainsbury (J) (SBRY) 312.70p 2.19%
Whitbread (WTB) 3,963.00p 1.80%
Ocado Group (OCDO) 1,036.00p 1.47%
Pearson (PSON) 871.80p 1.44%
BP (BP.) 571.00p 1.35%
Compass Group (CPG) 1,599.00p 1.20%
Royal Dutch Shell 'B' (RDSB) 2,686.00p 1.19%
TUI AG Reg Shs (DI) (TUI) 1,669.00p 1.18%
Informa (INF) 821.00p 1.11%
FTSE 100 - Fallers
Standard Life Aberdeen (SLA) 324.80p -2.67%
Bunzl (BNZL) 2,235.00p -2.49%
NMC Health (NMC) 3,512.00p -1.79%
Royal Bank of Scotland Group (RBS) 253.00p -1.79%
Melrose Industries (MRO) 210.60p -1.73%
ITV (ITV) 173.10p -1.59%
International Consolidated Airlines Group SA (CDI) (IAG) 663.80p -1.40%
Evraz (EVR) 500.40p -1.22%
London Stock Exchange Group (LSE) 4,440.00p -1.18%
Associated British Foods (ABF) 2,802.00p -1.16%
FTSE 250 - Risers
CLS Holdings (CLI) 235.50p 3.52%
Intermediate Capital Group (ICP) 1,106.00p 2.79%
Petrofac Ltd. (PFC) 541.80p 2.77%
Tullow Oil (TLW) 238.10p 2.76%
Hikma Pharmaceuticals (HIK) 1,491.50p 2.26%
BCA Marketplace (BCA) 218.50p 1.86%
Sirius Minerals (SXX) 33.74p 1.81%
Hunting (HTG) 806.50p 1.32%
Telecom Plus (TEP) 1,166.00p 1.22%
Games Workshop Group (GAW) 3,010.00p 1.18%
FTSE 250 - Fallers
Ultra Electronics Holdings (ULE) 1,550.00p -4.38%
IWG (IWG) 312.30p -3.67%
Dixons Carphone (DC.) 187.70p -3.15%
Stobart Group Ltd. (STOB) 232.20p -2.85%
Fidelity China Special Situations (FCSS) 236.01p -2.68%
On The Beach Group (OTB) 509.94p -2.31%
Clarkson (CKN) 2,520.00p -2.14%
Investec (INVP) 526.40p -2.05%
Mediclinic International (MDC) 526.80p -1.90%
McCarthy & Stone (MCS) 98.40p -1.89%