LONDON MARKET CLOSE: Stocks Come Off Highs As Referendum Nerves Set In

LONDON (Alliance News) – The pound and stocks eased off their intraday highs Thursday, but maintained some gains as investors bet on the UK to stay in the European Union while voters flocked to polling stations.

The market appeared to be convinced of a Remain victory, with the pound reaching its highest level of the year against the dollar and the FTSE 100 rising to a two-month high.

The gains were spurred by late opinion polls showing the Remain campaign had the lead. The latest poll from Ipsos Mori showed a significant swing to Remain, tracking other polls the day before.

Ipsos said its latest survey, on behalf of The Evening Standard, showed 52% of respondents will vote for the UK to remain in the EU, compared to 48% who will vote to leave. This marks a sharp swing from the previous Ipsos poll, released last week, which had Leave at 53% and Remain at 47%.

The Ipsos poll was joined around midday by a Populus poll which showed 55% support for Remain and 45% for Leave. The Populus survey was entirely conducted online, which in other polling data had consistently shown a bias towards the Leave camp, in contrast to higher support for Remain coming from those polled via telephone.

Furthermore, betting odds for a Leave vote were down to only 16% with Betfair, the lowest yet in the campaign and indicating an 84% chance of a Remain vote. Betting markets have consistently been in favour of a Remain vote, even when opinion polls had the Leave campaign ahead.

Towards the end of the London equity trading session, confidence seemed to turn into nerves as both sterling and stocks came off their highs.

“Indices in the UK, Europe and the US have posted good gains, although the UK’s top 100 index has shed most of the day’s advances. Given that it has advanced so strongly in recent days, that is hardly surprising,” said Chris Beauchamp, senior market analyst at IG.

The actual results of the referendum will be announced overnight through to early morning Friday.

At the London close, the pound traded the dollar at USD1.4800, having risen as high as USD1.4946. At the close on Wednesday, sterling traded at USD1.4712.

The FTSE 100 saw a last minute surge, closing up 1.2%, or 76.91 points, at 6,338.10. The index reached a high of 6,380.58, its highest level since April 22. The FTSE 250 closed up 1.7%, or 289.97 points, at 17,333.51, and the AIM All-Share ended up 0.6%, or 4.59 points, at 726.92.

In Europe, the French CAC 40 rose 2.0% and the German DAX 30 up 1.9%

On Wall Street at the London close, the Dow 30 was up 1.1%, the S&P 500 was up 1.0%, and the Nasdaq Composite was up 1.2%.

Elsewhere, the manufacturing sector in the US managed a small rebound in June according to flash data from Markit. The manufacturing purchasing managers’ index rose to 51.4 from 50.7, a six-and-a-half year low, in May, and higher than the 50.8 expected by economists.

“The flash PMI for June brought welcome news of improved performance of manufacturing, but the sector still looks to have acted as a drag on the economy in the second quarter, leaving the economy reliant on the service sector and consumers in particular to drive growth,” said Chris Williamson, chief economist at Markit.

At the London close, the euro traded the dollar at USD1.1366, higher than the USD1.1280 seen at the close Wednesday.

The price of gold edged lower, trading at USD1,265.12 an ounce Thursday versus USD1,268.67 Wednesday. Brent oil crept up to USD50.43 a barrel compared to USD49.82 on Wednesday.

In UK corporate news, Tesco announced it is selling its Harris + Hoole coffee shop business to rival chain Caffe Nero, while reporting its second consecutive quarter of like-for-like sales growth in its fiscal first quarter.

On a call with journalists, Chief Financial Officer Alan Stewart said Tesco was not disclosing the financial details, but said the company is pleased with the sale price.

The blue-chip supermarket chain also said like-for-like sales in the 13 weeks ended May 28 grew by 0.9% year-on-year, with 0.3% growth in the UK and and 3.0% in the international business.

Tesco said volume grew by 2.2% in the UK and by 2.7% internationally, while transactions rose by 1.7% in the UK and by 1.5% internationally. The launch of its ‘farm’ brands performed well in the UK, Tesco said, but price deflation did hit UK like-for-like sales by 0.7%.

The stock had been amongst the top performers in the FTSE 100, but by the close only traded up 0.8%.

Recycled packaging company DS Smith reported revenue growth but only a marginal rise in pretax profit for its recently-ended financial year as costs related to acquisitions the company made dragged on results.

The FTSE 250 group said its pretax profit for the year to the end of April was GBP201.0 million, up slightly from the GBP200.0 million it made a year earlier. This was held back by exceptional charges of GBP79.0 million, up from GBP51.0 million a year earlier, as the group made five acquisitions and integrated those businesses over the course of the year.

Stripping out this one-off effect, pretax profit rose to GBP280.0 million from GBP251.0 million.

The stock closed up 6.0%, making it the best performer in the FTSE 250.

Stadium Group said it will not grow as much as expected during the current financial year after losing a “significant customer”, as the supplier of wireless services warned its full year results will fail to meet current expectations.

The company said it has received notice from a significant wireless customer in the telematics space that, following a period of reduced call-off, they will move product design in-house and manufacturing elsewhere.

“The loss of this customer will result in a delay to the company’s anticipated growth and full year results for 2016 are now expected to be below market expectations. Given the seasonality within the business, in line with previous years, the board continues to expect that the company will deliver materially higher profit in the second half of the financial year,” said Stadium Group.

Stadium Group closed down 25%, one of the worst performers in the AIM All-Share.

The focus for Friday will undoubtedly be on the result of the UK referendum. Elsewhere, French Gross Domestic Product is at 0745 BST, IFO business sentiment surveys for Germany are at 0900 BST, and UK mortgage approvals are at 0930 BST. Later, US durable goods orders are at 1330 BST, the Reuters/Michigan consumer sentiment index at 1500 BST, and Baker Hughes at 1800 BST.

In the UK corporate calendar, there are full year results from rare stamps and collectibles trader Stanley Gibbons and FTSE 250-listed Polar Capital Technology Trust.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

Copyright 2016 Alliance News Limited. All Rights Reserved.

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