ADVFN Morning London Market Report: Tuesday 8 October 2019

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London open: Stocks edge higher but LSE slumps as HKEX abandons bid

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London stocks edged higher in early trade on Tuesday, taking their cue from an upbeat session in Asia as investors continue to eye upcoming Sino-US trade talks.

At 0840 BST, the FTSE 100 was up 0.3% at 7,215.68, while the pound was down 0.1% against the dollar at 1.2283 and 0.2% lower versus the euro at 1.1184.

Top trade negotiators from the US and China are due to meet for talks in Washington on Thursday.

Neil Wilson, chief market analyst at Markets.com, said hopes of a comprehensive deal are “all but zero, but there’s yet the gambler’s optimism that something can be achieved in a much narrower sense”.

“China is making it clear it’s not ready for a comprehensive agreement,” he said. “A small, narrow agreement is possible but even this seems to be asking for too much as the two sides remain far apart. In narrowing the scope of this week’s trade talks China has simultaneously lowered expectations and reduced the risk of disappointment from a negative outcome.”

Overnight, China’s Caixin services purchasing managers’ index for September came in at 51.3, down from 52.1 the month before, missing expectations for a reading of 52.9 and hitting a seven-month low.

In equity markets, Polymetal and Rio Tinto were boosted by upgrades to ‘buy’ at Renaissance Capital, while SSP and St James’s Place were lifted by upgrades to ‘buy’ at HSBC and Deutsche Bank, respectively.

Electrocomponents was on the rise as it said like-for-like sales rose 5% in both the second quarter and the first half.

On the downside, shares of London Stock Exchange slumped after Hong Kong Exchanges and Clearing said it was ditching its £32bn offer for the company, having been unable to engage with management.

Neil Wilson said: “A concerted charm offensive failed to pay off for the Hong Kong group as investors balked at the anti-trust, regulatory and deliverability issues that the tie up implied. And, not least, LSE is fully committed to the Refinitiv deal. Finally, the premium on offer, though chunky, was not enough to compensate shareholders. There was never a cash element, just new shares in a HK-listed group.

“As we said at the time, this deal was a non-starter for a range of reasons, any one of which would have been enough to block a merger. Still we’re slightly surprised HKEX didn’t try again – the fact they didn’t suggests their charms, dubious as they are, were completely lost on the big shareholders.”

EasyJet shares flew lower as the budget airline said it expects annual profits to be at the upper half of its guided range but that total revenue per seat for the year will drop by around 2.7% and total costs will rise by 12%.

PageGroup was under pressure after the recruiter warned over its annual profits, citing slow German growth, Brexit, the Sino-US trade spat and protests in Hong Kong. Rival Hays also lost ground.

 

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