ADVFN Morning London Market Report: Thursday 28 February 2019

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London open: Stocks drop on weak China data amid deluge of earnings

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London stocks fell in early trade on Thursday following the release of weak Chinese factory orders data and an abrupt end to the Trump-Kim denuclearisation summit.

A 0850 GMT, the 100 was down 0.8% to 7,050.75, while the pound was off 0.1% against the dollar at 1.3294 and 0.3% lower versus the euro at 1.1676.

Stock market sentiment was hit by data showing that Chinese factory activity contracted to a three-year low in February. The official purchasing managers’ index released by Beijing’s National Bureau of Statistics fell to 49.2 in February from 49.5 the month before, missing expectations for it to remain unchanged and still below.

Meanwhile, news that the Vietnam summit between US President Trump and North Korean leader Kim Jong-un ended with no agreement was also weighing on the mood. White House press secretary Sarah Sanders said earlier: “No agreement was reached at this time, but their respective teams look forward to meeting in the future.”

Neil Wilson, chief market analyst at Markets.com, said: “I don’t think this will ultimately have too much bearing on global indices in the longer term, but for now with hopes of a deal with China on trade not exactly fading, but certainly not rising, it’s 0 from 2 for Trump this week and risk sentiment is suffering as a result.

“The combination of the lack of progress with North Korea and China will drag on equities and we might have to wait for a new catalyst to renew the bullish start to the year.”

On home shores, the latest consumer confidence survey from GfK showed households are holding firm despite Brexit uncertainty. GfK’s long-running consumer confidence index increased by one point in February to -13, beating expectations for a reading of -15.

Joe Staton, client strategy director at GfK, said: “Despite a slowdown in overall growth and concerns about the impact of Brexit uncertainty on the UK economy, topline consumer confidence is stable again this month. Although bumping along in negative territory, the overall index score is not showing any sign of making the dramatic drop seen after the June 2016 Brexit referendum or in the early days of the last financial downturn.

“While the view on personal finances looking at the year to come is still marginally positive, the continuing depressed sentiment towards the general economic situation might point towards the calm before the storm of post-Brexit headwinds and potential negative economic outcomes.”

Elsewhere, the latest data from Nationwide showed that house prices remained subdued in February. Nationwide’s seasonally-adjusted measure of house prices fell by 0.1% month-to-month in February.

However, the year-over-year growth rate increased to 0.4% from 0.1% in January, coming in slightly above consensus expectations of 0.3% growth.

In corporate news, RSA Insurance was the biggest loser as it posted a drop in 2018 underlying pre-tax profit, dragged lower by its London Market business.

Rolls-Royce retreated as the engine maker said it has decided to withdraw from the current competition to power Boeing’s proposed new midsize aeroplane. It also reported a £1.2bn loss due to exceptional charges, though underlying earnings were much improved and free cash flow more than doubled to £641m last year, with management aiming to generate at least £1bn by 2020.

Also under pressure was Mondi as full-year results beat expectations but the packaging company warned that pricing was “mixed” going into 2019.

British American Tobacco was glowing red even as it grew underlying earnings above its target range last year despite cigarette volumes declining 3.5% as predicted. Finance director Ben Stevens also announced his retirement after 30 years with the company.

Aston Martin Lagonda was sharply lower after saying it swung to a loss of £68.2m in 2018 from a profit of £84.5m the year before.

On the upside, pest control giant Rentokil rallied to the top of the FTSE 100 as it reported an 8.8% increase in full-year adjusted pre-tax profit and said it expects “a slight increase” in market expectations for 2019.

British Airways and Iberia parent International Consolidated Airlines Group flew higher as it posted a 9.5% jump in full-year operating profit despite rising fuel prices and currency headwinds.

Building materials group CRH racked up healthy gains as it reported record earnings for 2018, thanks in part to good demand in the US.

Legoland and Madame Tussauds owner Merlin Entertainments was in the green as it said full-year underlying earnings rose 4.3%.

In broker note action, Premier Oil was lifted to ‘buy’ at Berenberg and Rio Tinto was cut to ‘neutral’ at Goldman Sachs.

AstraZeneca, Barclays, Diageo, EasyJet, Micro Focus International, Beazley and SSP Group were among the companies whose stock went ex-dividend.

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