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London open: Stocks nudge lower as investors eye jobs data
London stocks nudged lower in early trade on Tuesday as investors eyed a series of key UK jobs data and any Brexit-related developments.
At 0840 BST, the FTSE 100 was down 0.1% to 7,025.25, while the pound was up 0.3% against the dollar and 0.2% firmer versus the euro at 1.1377.
The UK’s divorce from the EU was very much in focus after Prime Minister Theresa said on Monday that a Brexit deal now looks unlikely until December, as it may take “weeks” to break the deadlock in talks.
London Capital Group analyst Jasper Lawler said: “As Theresa May plays for time rather than bulldozing a Brexit treaty through, the pound is in limbo. Important issues remain unresolved in Brexit negotiations and a solution won’t be found before the EU summit in Brussels on Wednesday.
“The clocks have been pushed back not to just November, but now even to December as the can is once again kicked down the road. There is a growing sense that the Irish border issue won’t be resolved; in the words of the EU Commissioner, a no deal Brexit is more likely than ever before.”
On the data front, the UK unemployment rate, claimant count and average earnings are all due to be published by the Office for National Statistics at 0930 BST. Unemployment is expected to remain constant in August at 4%, while weekly earnings are expected to be unchanged at 2.9% for the three months to August.
“It will take a significant beat to the upside to inject some optimism into the pound. On the other hand, any weakness in the figures could drag on the pound given the downside risks of Brexit already making the pound sensitive,” said Lawler.
In corporate news, British American Tobacco edged lower after saying it expected to grow earnings in double figures for the full year, helped by market share gains and a stronger tobacco pricing mix. Currency swings are expected to have a bigger effect than anticipated, however.
Madame Tussauds and Legoland operator Merlin Entertainments tumbled after a disappointing trading update, while BHP Billiton was in the red after saying it spent £45.6m to lift its stake in SolGold, which owns the Cascabel copper-gold project in Ecuador.
FTSE 250 housebuilder Bellway rose after reporting a jump in full-year profit and revenue as completions breached the 10,000 mark for the first time. Defence contractor Meggitt racked up healthy gains as it upgraded its 2018 revenue guidance.
Drax rallied after announcing the acquisition of buying Scottish Power’s portfolio of pumped storage, hydro and gas-fired generation for £702m from parent company Iberdrola, while Rio Tinto advanced after posting a 5% drop in third-quarter iron ore production.
AstraZeneca was up after the US FDA granted its Lynparza orphan drug designation for pancreatic cancer and education publisher Pearson was trading higher ahead of its nine-month trading update on Wednesday.
Meanwhile, there was a veritable avalanche of ratings changes on the broker note front.
Ocado was the standout gainer after a double-upgrade to ‘buy’ at Bank of America Merrill Lynch, while Admiral followed close behind after it was lifted to ‘buy’ at Goldman Sachs. Aggreko powered ahead after an upgrade to ‘outperform’ by RBC Capital Markets, while Antofagasta was boosted to ‘buy’ at Peel Hunt and to ‘outperform’ at Macquarie.
British Land and Capital & Regional were both cut to ‘hold’ at Stifel, which cut Land Securities to ‘sell’ and upgraded LondonMetric, Shaftesbury and Workspace to ‘buy’. Stifel also downgraded Superdry to ‘hold’.
Charter Court Financial Services was initiated at ‘buy’ at Citi, while Close Brothers and Paragon were started at ‘neutral’.
Following its profit warning on Monday, medical equipment maker Convatec was cut to ‘neutral’ by JPMorgan and Goldman Sachs.
Homeserve was started at ‘buy’ by Berenberg and upgraded to ‘buy’ at Citi, while Imperial Brands was initiated at ‘outperform’ by Bernstein. Intu was cut to ‘neutral’ at Citi, while JD Sports was rated new ‘underweight’ at Morgan Stanley and Just Eat was upgraded to ‘hold’ by Deutsche Bank.
PageGroup was raised to ‘outperform’ by Credit Suisse, while Smith & Nephew was cut to ‘hold’ at HSBC and SThree was downgraded to ‘neutral’ at Credit Suisse.
