ADVFN Morning London Market Report: Wednesday 4 December 2019

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London open: Stocks edge lower ahead of services PMI

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London stocks edged lower in early trade on Wednesday, weighed down by a stronger pound as investors awaited the release of the latest services data.

At 0835 GMT, the FTSE 100 was down 0.2% at 7,146.03, having fallen sharply in the previous session after US President Donald Trump suggested that a trade deal with China may not happen until after the 2020 US election.

The UK index underperformed its European peers, which were all in the green, as sterling rallied 0.3% against the dollar and the euro to 1.3033 and 1.1758, respectively. A stronger pound tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from abroad.

Spreadex analyst Connor Campbell said: “Joining Hong Kong on the list of disagreements between the two nations, Tuesday saw the House of Representatives approve a bill that would require Donald Trump to impose sanctions on members of the Chinese politburo in response to the country’s treatment of Uighurs in Xinjiang.

“Predictably furious in its response, Beijing said it would react ‘accordingly’ – not exactly the kind of exchange investors are after if a trade deal is to be put in place before December 15th’s latest round of tariffs.”

Investors were mulling the latest data out of China, which showed that activity in the services sector picked up more than expected in November.

Caixin’s services purchasing managers’ index ticked up to 53.5 from 51.1 in October, beating expectations for a reading of 51.2 and marking the fastest expansion since April. A reading above 50.0 signals expansion, while a reading below indicates contraction.

Caixin’s composite manufacturing and services PMI rose to 53.2 last month from 52.0 in October. This marked the best reading in 21 months.

Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, an affiliate of Caixin Global, said: “China’s economy continued to recover in November, as domestic and foreign demand both improved. But business confidence remained subdued, reflecting the impact from uncertainties generated by the China-US trade conflicts. That will restrain a recovery in economic growth.

“The trade dispute is the major reason behind the slowing economic growth this year and will become a key factor affecting the stabilisation and recovery of China’s economy next year.”

On home shores, all eyes will be on Markit’s services PMI for November, due out at 0930 GMT.

In equity markets, Rio Tinto was in the red after saying it had curtailed operations at its Richard Bay Minerals unit in South Africa after one employee was shot and another seriously injured in local violence.

Vodafone was weaker after it announced a collaboration with Amazon’s cloud unit, Amazon Web Services.

Morrisons shares were little changed after the supermarket chain appointed current chief finance and commercial officer Trevor Strain to the role of chief operating officer and trading director Michael Gleeson to the role of chief financial officer.

Segro and Moneysupermarket were hit by downgrades to ‘underperform’ at RBC Capital Markets, while Aviva was lower after a downgrade to ‘equalweight’ at Barclays.

On the upside, housebuilders gained, with Barratt DevelopmentsPersimmon and Berkeley Group all higher

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