LONDON MARKET MIDDAY: Stocks Flat After Rally But Pound Adds To Gains

LONDON (Alliance News) – Stocks were flat to marginally lower Tuesday midday, having made stellar gains on Monday, but with Whitbread shares rising after a positive trading update and the pound continuing its rally against the dollar.

“There was a calmer state of play in markets on Tuesday. The massive short-squeeze that saw the pound rise the most in eight years and the FTSE 100 gain 3% could only go on so long. It appears markets have made up their mind which way the referendum will go,” said CMC Markets analyst Jasper Lawler.

Recent polls have put the Remain vote ahead of Leave prior to the UK vote on European Union membership on Thursday.

The FTSE 100 index was down 0.1%, 2.95 points, at 6,201.05, having risen 3.0% on Monday. The midcap FTSE 250 was down 0.2% at 16,922.92 and the AIM All-Share was off 0.1% at 721.11.

Whitbread was up 2.6%, after it reported growth in sales in the first quarter of its financial year and said it is confident of making good progress in the full year.

The owner of the Premier Inn hotel chain and Costa coffee shop brand said total sales in the 13 weeks ended June 2 grew by 8.0% on the same period the year before, as like-for-like sales rose by 1.8%. At Premier Inn, total sales were also up 8.0% and like-for-likes were up 2.1%, while Costa saw total sales growth of 12% as like-for-likes increased by 2.6%.

Whitbread said the hotel market has continued to be soft in the UK, but Premier Inn benefited from its hotel extension programme. Revenue per available room declined by 1.2% as a result of the soft market environment.

Capita was up 2.1% after the outsourcer said it has agreed to acquire software reseller Trustmarque Solutions for GBP57.0 million in cash from owner Ardbid.

Trustmarque provides an enterprise-as-a-service model designed to help customers integrate and better manage technology services. The group provides software asset management and strategic cloud consultancy services, Capita said.

Meanwhile, FTSE 100-listed mining stocks were in the red, with Anglo American down 2.3%, Antofagastadown 1.6% and BHP Billiton down 1.4%.

“UK-listed miners are on the back foot today failing to benefit from the dollar-basket weakness that tends to usher commodities higher,” said Michael van Dulken, head of research at Accendo Markets.

“This as GBP/USD continues to rally…with bookies suggesting a UK referendum Remain vote looking more and more likely come Friday morning. So miners are missing out not just on their usual currency benefit but also from a perception of reduced event-risk on economic growth and thus demand for materials,” noted van Dulken.

The pound was quoted at USD1.4744 at midday, having touched a high of USD1.4783 earlier, compared to the USD1.4689 at the London equities close on Monday.

The euro also was higher against the greenback, quoted at USD1.1340 at midday, higher than the USD1.1318 at the close Monday.

In Europe, the CAC 40 index in Paris was up 0.7% and the DAX 30 in Frankfurt was adding 0.5%.

In Asia on Tuesday, the Japanese Nikkei 225 index ended up 1.3%. In China, the Shanghai Composite fell 0.4%, while the Hang Seng index in Hong Kong added 0.8%.

In New York, stocks were called for a positive open, with the Dow 30 seen up 0.4% while the S&P 500 and the Nasdaq were both pointed up 0.5%.

On the London Stock Exchange, Circassia Pharmaceuticals was up 7.8%, the biggest gainer in the FTSE 250, recovering a small part of its big fall on Monday. Circassia fell 66% on Monday after it said a late-stage study of its key cat allergy treatment failed to achieve its primary endpoint, as the treatment and a placebo used in the study proved equally effective.

At the other end of the mid-cap index, Senior was down 14%. The components and systems manufacturer said its Aerospace arm is trading in line with expectations, but its Flexonics business is continuing to face tough market conditions.

Senior said the Aerospace business has seen activity increase in line with its forecasts, boosted by additional work on new aircraft. Margins for the unit, however, will be lower in the first half of 2016 as the ramp-up on new aircraft production programmes continues.

For Flexonics, which makes expansion joints, flexible metal and teflon hoses and cryogenic equipment for pressure and piping systems, trading has continued to be weighed down by weak conditions in the truck and off-highway sector and ongoing softness in the oil and gas market.

On the economic front, the UK government’s budget deficit narrowed in May, data published by the Office for National Statistics showed. Public sector net borrowing, excluding public sector banks, decreased GBP400 million to GBP9.7 billion in May. Nonetheless, borrowing was above the expected level of GBP9.4 billion.

Meanwhile, British manufacturers’ total order book strengthened slightly in June, the Industrial Trends survey from the Confederation of British Industry showed. The total order balance rose unexpectedly to -2 in June from -8 in May. It was forecast to fall to -10.

Still in the economic calendar Tuesday, in the US, the Redbook index is at 1355 BST, while API crude oil stock data are at 2130 BST.

After the London equities close, Federal Reserve Chair Janet Yellen will address the Senate Banking Committee at its “Semiannual Monetary Policy Report to the Congress” hearing at 1930 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

Copyright 2016 Alliance News Limited. All Rights Reserved.

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