London midday: Stocks eke out gains despite sterling strength; ECB, Davos in focus
London stocks managed to eke out tiny gains by midday on Thursday even as the pound remained firm, with investors focusing on forex markets and the upcoming interest rate decision from the European Central Bank despite there being no shortage of UK corporate or economic news.
The FTSE 100 was up 0.1% to 7,649.84, while the pound gained 0.1% versus the euro and the dollar at 1.1489 and 1.4253, respectively, resuming the move higher sparked by solid UK employment data and comments from US Treasury Secretary Mnuchin the previous session.
UK data points on Thursday came and went with little fuss.
Mortgage approval numbers dropped off more than expected last month, with approvals by the main high street banks falling to their lowest level since January 2015, according to UK Finance.
Meanwhile, a survey from the Confederation of British Industry showed UK retail sales rose in line with expectations in January. The CBI’s retail sales balance fell to +12 from +20 in December.
But the real focus point for the day will be the ECB’s interest rate decision at 1245 GMT, followed by President Mario Draghi's press conference at 1330 GMT. No changes are expected, so investors will be paying close attention to Draghi’s comments.
GKFX analyst David Morrison said: “The key issue for traders is whether the ECB President comments about the current strength of the euro. In the same way that dollar weakness is a great help to the US economy, as pointed out yesterday by US Treasury Secretary Steve Mnuchin, euro strength is a real pain for the currency zone’s exporters, making them less competitive. It also has the effect of tightening monetary policy in a way that the ECB cannot control directly, while making it more difficult for the central bank to hit its inflation target.”
The World Economic Forum in Davos will also continue to be in focus as US President Donald Trump and UK PM Theresa May are expected to make some noise there.
“Criticised as an exclusive but irrelevant talking shop, both Trump and May are quite capable of moving financial markets with comments made when they meet at the Alpine resort on Thursday,” said Lee Wild, heady of equity strategy at Interactive Investor.
“US Treasury Secretary Steven Mnuchin has been talking down the dollar, which has already given Wall Street’s overseas earners a huge boost, triggering fresh highs overnight. Given growing concerns around US protectionism and only a temporary resolution to the US shutdown, it would be a big surprise to see the dollar recover much this month. If American tough talking turns to action beyond recent levies on imported solar panels, life could get harder for the global economy and US companies and give equity traders a good excuse to start banking at least some profit.”
On the UK corporate front, Guinness and Scotch whisky maker Diageo rallied as it served up half-year sales growth and operating profit growth both ahead of market expectations despite a number of market challenges and higher marketing investment. The FTSE 100 group toasted the gin drinkers of Europe, and Britain in particular, where Tanqueray was one of the best performing brands of the period.
Elsewhere, amid an ongoing takeover bid from 21st Century Fox, Sky advanced as it posted a 5% increase in like-for-like revenue for the first half.
Close Brothers was in the black after it reported a rise in its loan book and said it remained well placed for the full 2018 financial year, as it announced the departure of its finance director.
Dechra Pharmaceuticals gained as the company announced the acquisition of Netherlands-based AST Farma and Le Vet for €340m.
Kier Group surged after saying it had traded in line with expectations in the six months to the end of December, with the joint-venture contracts taken on from collapsed Carillion all performing fine.
Garfunkel’s and Frankie & Benny’s owner Restaurant Group reversed earlier losses even as it reported a drop in full-year sales amid a challenging environment, while pub group Greene King frothed higher after initial losses from its report that like-for-like sales in the 37 weeks to 14 January fell 1.4%.
On the downside, mining giant Anglo American slipped as it reported a 5% jump in 2017 output, while Countryside Properties ticked lower after saying it had a “strong” first quarter and is trading in line with expectations for the full year, as it reported a 47% jump in total completions.
Renishaw tumbled as investors booked profits after it posted a 73% increase in first-half profits and wealth manager St James's Place turned lower even as it said full-year net inflows rose 40% to £9.5bn as funds under management increased 20% to £90.7bn.
In broker note action, Smith & Nephew was riding high after an upgrade to ‘overweight’ at JPMorgan Cazenove, while Grainger also rose after an upgrade to ‘overweight’ at JPM.
Bunzl was boosted by an upgrade to ‘buy’ at Goldman Sachs, and Next was up after RBC Capital Markets lifted the stock to ‘outperform’.
Market Movers
FTSE 100 (UKX) 7,649.84 0.08%
FTSE 250 (MCX) 20,514.79 -0.12%
techMARK (TASX) 3,465.94 -0.16%
FTSE 100 - Risers
Smith & Nephew (SN.) 1,300.50p 4.71%
Bunzl (BNZL) 1,986.50p 2.34%
Next (NXT) 5,020.00p 2.20%
Associated British Foods (ABF) 2,842.00p 2.08%
Standard Chartered (STAN) 840.90p 1.82%
Evraz (EVR) 380.70p 1.66%
Mediclinic International (MDC) 626.20p 1.52%
Admiral Group (ADM) 1,877.50p 1.51%
AstraZeneca (AZN) 5,045.00p 1.49%
Old Mutual (OML) 241.40p 1.05%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 846.40p -1.76%
Antofagasta (ANTO) 945.20p -1.46%
Relx plc (REL) 1,564.50p -1.36%
Coca-Cola HBC AG (CDI) (CCH) 2,378.00p -1.33%
3i Group (III) 913.20p -1.28%
Shire Plc (SHP) 3,382.00p -1.23%
Just Eat (JE.) 802.00p -1.18%
Smurfit Kappa Group (SKG) 2,528.00p -1.17%
Halma (HLMA) 1,271.00p -1.17%
InterContinental Hotels Group (IHG) 4,770.00p -1.10%
FTSE 250 - Risers
Kier Group (KIE) 1,126.90p 17.69%
Dechra Pharmaceuticals (DPH) 2,202.00p 6.79%
Close Brothers Group (CBG) 1,529.00p 5.38%
Grainger (GRI) 297.20p 4.21%
Mitie Group (MTO) 179.70p 2.86%
Acacia Mining (ACA) 201.50p 2.73%
Convatec Group (CTEC) 206.60p 2.43%
Go-Ahead Group (GOG) 1,652.00p 2.35%
Ocado Group (OCDO) 538.40p 2.24%
CLS Holdings (CLI) 244.00p 2.09%
FTSE 250 - Fallers
Renishaw (RSW) 5,068.80p -10.13%
Hikma Pharmaceuticals (HIK) 996.20p -3.70%
Kaz Minerals (KAZ) 857.20p -3.69%
Ferrexpo (FXPO) 286.63p -3.56%
SSP Group (SSPG) 635.00p -2.98%
Provident Financial (PFG) 684.20p -2.54%
Pennon Group (PNN) 723.00p -2.51%
Vectura Group (VEC) 102.10p -2.48%
Dignity (DTY) 960.50p -2.29%
Daejan Holdings (DJAN) 6,040.00p -2.27%