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London open: Stocks nudge up ahead of central bank announcements; sterling in the doldrums
London stocks nudged up in early trade on Tuesday as investors eyed the latest policy announcements from the Federal Reserve and the Bank of England this week, while sterling languished at its worst level in nearly six months amid worries about a no-deal Brexit.
At 0830 BST, the FTSE 100 was up 0.1% at 7,361.37, while the pound was flat against the dollar at 1.2538 and 0.2% lower versus the euro at 1.1155.
Neil Wilson, senior market analyst at Markets.com, said: “Boris Johnson is the clear favourite to become the next PM – in fact it rather looks like he’s going to walk it. Currency markets display fear that he has said he is prepared to take Britain out on October 31 without a deal if needs be. More BoJo, less mojo. Whilst a crowded trade there is real slippage here with little to spark life into the pound.
“The calculus is simple – failure to take Britain out of the EU this year risks a General Election and wipeout at the polls at the hands of the Brexit Party, potentially handing Jeremy Corbyn the keys to Number 10. The EU says it won’t renegotiate (it may have to), MPs won’t accept the existing deal, and Parliament has limited scope to stop this train.
“Sterling is increasingly reflecting the no-deal risk. Cable was last hovering close to its lowest of the year at 1.2530, having dipped as low as 1.2510, its weakest since the start of January. 2018 lows around 1.2470 could be the next target on the downside.”
Geopolitical concerns were also in play as the White House ordered 1,000 more US troops to the Middle East after the Pentagon released new images it claims show that Iran’s Revolutionary Guard was behind the attacks on two oil tankers in the Gulf of Oman last week.
“The Iran nuclear deal looks dead,” said Wilson. “Markets may start pricing in risk of escalation. Whilst this is only a very small number of additional manpower, and is clearly designed to act as a warning to Tehran, troop build-ups only tend to lead in one direction.”
In London equity markets, AstraZeneca was in the green after the company’s cancer drug Lynparza was approved by the European Commission as a first-line maintenance treatment for a type of ovarian cancer.
Elsewhere, Telecom Plus rallied as the utility supplier reported a 4.9% increase in full-year profit to £43m.
Aaerospace engineer Meggitt slipped after saying it had won a contract with US conglomerate Textron for the supply of fire protection systems on the Cessna Denali and Skycourier platforms.
Equipment rental firm Ashtead edged down even as it posted a 20% jump in full-year pre-tax profit, thanks in part to a strong performance in North America.
Self-storage provider Safestore lost ground as it said interim pre-tax profits fell 53%, driven by a reduced gain on investment properties.
In broker note action, InterContinental Hotels was knocked lower by a downgrade to ‘underweight’ at Barclays, while Homeserve was cut to ‘equalweight’. Also at Barclays, Derwent London was downgraded to ‘underweight’.
Evraz was cut to ‘sell’ at Citi and Experian was downgraded to ‘neutral’ at Credit Suisse.
