• London open: Stocks rise as pound recovers some poise; miners rally

    london stock market

    London stocks rose in early trade on Wednesday, led higher by strength in the mining sector as investors mulled Brexit developments and eyed the latest round of trade talks between the US and China and a policy announcement from the Federal Reserve.

    At 0825 GMT, the FTSE 100 was up 0.5% at 6,869.70, while the pound was flat against the dollar at 1.3071 and 0.1% firmer versus the euro at 1.1434, regaining some poise, having tanked overnight after the Cooper amendment – which would have allowed Parliament to delay Brexit – failed to pass through parliament.

    London Capital Group analyst Jasper Lawler said: “Whilst Parliament voted in favour of the Caroline Spelman amendment to block a no deal Brexit, the rejection of the Cooper amendment means that without a Brexit deal, the UK is still on course to crash out of the EU on March 29.”

    Although there is a majority in parliament against a hard Brexit, as demonstrated by the symbolic Spelman vote, Berenberg economist Kallum Pickering observed that this alone is not enough to prevent such an outcome.

    “A hard Brexit is the default option unless a deal or delay is secured before Brexit day on 29 March 2019,” he said. “With only 58 days left until the UK is due to leave the EU, we raise the risk of a no-deal from 20% to 30%, and lower the probabilities of ‘Norway plus – soft Brexit’ and ‘no Brexit’.”

    May will now head to back to Brussels to reopen talks with European leaders and seek alternatives to the Irish backstop. However, Donald, Tusk, the EU’s most senior official, has already insisted that there can be no renegotiation.

    Still, there were some, like CMC Markets analyst Michael Hewson, who saw a small sliver of a chance. “There are those who say that the EU will remain firm in their insistence that the agreement cannot be changed, but then the EU also said they would never bail out Greece and we all know what happened next.”

    Investors were also looking ahead to the start of two days of talks between US and Chinese delegates in Washington later in the day and the latest policy announcement from the Fed, due after the European close.

    No rate hike is expected so attention will turn to Fed chair Jerome Powell’s press conference.

    Konstantinos Anthis, head of research at ADSS, said: “We believe that the head of the Fed has little option but to acknowledge the slowdown in the economy, both on the back of the trade war with China but also from the fact that the US is entering – or has already entered – the late phase of its economic cycle.

    “As such, we think that Powell will dial back the need for ‘gradual increases’ in interest rates and instead opt for a ‘flexible and data dependent approach’.”

    Miners were the standout gainers in London as copper prices rose, with RioBHPAnglo American and Glencore all higher.

    Elsewhere, luxury fashion brand Burberry was on the front foot, boosted by a solid set of results from French peer LVMH, which reported another record year for sales in 2018.

    Infrastructure investor 3i Infrastructure ticked higher after saying it was on track to meet or exceed its objectives for the current financial year.

    Inmarsat gained ground after signing a contract to provide Indonesian national carrier Garuda with its GX Aviation inflight broadband.

    On the downside, London Stock Exchange nudged down after saying it was buying a 4.92% stake in financial market infrastructure company Euroclear for €278.5m (£241.9m).

    Wizz Air flew lower as it reported a sharp drop in profits for the three months to the end of December as the budget central and eastern Europe airline’s faster sales growth was met with ever-mounting costs.

    In broker note action, Meggitt was initiated at ‘neutral’ by MainFirst, while Rolls-Royce and Senior were started at ‘outperform’.

    Pennon was initiated at ‘equalweight’ by Barclays, along with Severn Trent and United Utilities.

    US close: Markets mixed amid choppy corporate earnings

    Wall Street finished as its started on Tuesday – in a mixed state – amid fresh trade tensions between the US and China and a slew of high-profile earnings.

    The Dow Jones Industrial Average ended the session up 0.21% at 24,579.96, while the S&P 500 slipped 0.15% to 2,640.00, and the Nasdaq 100 slid 0.96% to 6,632.79.

    Earlier, the Dow opened 120 points higher as market participants patiently awaited two days of Sino-US trade talks, set to kick-off in Washington on Wednesday, following news that the US Justice Department had filed a host of criminal charges against Chinese telecoms company Huawei and its chief financial officer, Meng Wanzhou.

    The US delegation will be led by Trade Representative Robert Lighthizer and will include Treasury Secretary Steven Mnuchin, Secretary of Commerce Wilbur Ross and Trump’s policy advisers Larry Kudlow and Peter Navarro, while the Chinese delegation will be led by Vice Premier Liu He.

    “Trade talks between the US and China appeared to be going rather well until last week when speculation started circling that a preparatory meeting prior to Liu He’s visit this week had been cancelled,” said Oanda analyst Craig Erlam earlier.

    “While this was denied by Larry Kudlow, it was followed by claims that the two sides are miles and miles from a deal and now another spanner has been thrown in the works, with the US filing numerous charges against Chinese telecom giant Huawei.”

    Erlam said Huawei had long been a target of the US, so the charges were not necessarily surprising, although he described the timing of them as “curious”.

    “For now, it threatens to ratchet up tensions between the world’s two largest economies, as they work towards a deal that prevents further tariffs and ideally removes those already imposed.

    “Only time will tell whether the charges damage negotiations or serve as a tool to progress the talks.”

    Elsewhere, the United States approved sanctions against Venezuela’s state-owned oil firm PDVSA as it ramps-up efforts to force President Nicolás Maduro into relinquishing power of the South American nation.

    Treasury Secretary Steven Mnuchin said the proceeds of the purchase of Venezuelan oil would now be withheld from Mr Maduro’s government, but added that sanctions could be avoided by the country’s government recognising opposition leader Juan Guaidó as interim president, as the US and 20 other nations have already done.

    The sanctions were likely to have a sizeable impact as 41% of Venezuelan oil exports are sent to the US, making the country one of the top four crude oil suppliers to the States.

    On the data front, US house prices rose less than expected in November, according to the S&P/Case-Shiller national home price index.

    The 20-city composite index was up 4.7% year-over-year, down from a 5% increase the month before and missing expectations for a 4.9% rise.

    That marked the slowest rate of annual growth since January 2015.

    Elsewhere, a major measure of US consumer confidence fell for a third consecutive month in a row in January, going a way to highlight that political discord in Washington and economic uncertainties were weighing on the nation’s households.

    The Conference Board revealed that its US consumer confidence index had fallen to 120.2 in January from the 126.6 reported back in December.

    Economists had pencilled in a reading of 124.

    Lastly, the Fed kicked off its two-day policy meeting where it was expected to signal a pause in tightening and acknowledge several growing economic risks.

    In corporate news, Pfizer was 3.16% higher after its fourth-quarter earnings and revenue beat expectations, but its guidance for 2019 fell short.

    Xerox shot up 11.26% by the closing bell, as its fourth-quarter profit beat expectations but revenue declined more than expected.

    3M and Biogen picked up 2.06% and 1.35%, respectively, following the release of their quarterly figures, while Verizon lost 3.29% and Harley-Davidson dropped 5.05% on the back of theirs.

    Tech giant Apple and online retailer eBay were tantalising the appetites of traders in the final stages of the day, with both slated to report quarterly earnings after the bell.

    “With concerns about a China slowdown at the forefront of investor thinking and the big drop in Nvidia’s share price yesterday all eyes will turn to Apple’s first quarter numbers later today after the bell, after the falls seen yesterday,” said CMC Markets analyst Michael Hewson.

    “A sharp drop here would suggest that demand for the more expensive models is slowing sharply and that peak iPhone or Apple fatigue is creeping in as consumers tire of the incessant minor upgrades, and lack of innovation elsewhere.”

    Wednesday newspaper round-up: Sofa.com, house prices, Apple, tech giants

    Mike Ashley could be about to make the leap from sportswear to sofa retailing with yet another takeover deal, this time of the online furniture specialist Sofa.com. The Sports Direct founder has been on a buying spree over the past year, snapping up struggling retail chains including House of Fraser and the bike specialist Evans Cycles amid a high street crisis. He is also currently in the running to acquire the collapsed entertainment chain HMV. – Guardian

    House prices have grown fastest since the UK voted to leave the EU in cities in the Midlands, the north of England, Wales and Scotland, according to the property website Zoopla. Birmingham (up 16%), Manchester and Leicester (both up 15%) have seen the fastest growth since the June 2016 referendum, followed by Edinburgh and Nottingham (14%), Leeds and Cardiff (12%), and Liverpool and Sheffield (11%). – Guardian

    Lord Browne of Madingley and other members of Huawei’s UK board are under pressure to review their ties to the Chinese telecoms giant after it was hit with a slew of criminal charges by the US government. Huawei came under fire Monday evening after the US Department of Justice charged the company on accounts of “attempted thefts of trade secrets”, seven counts of wire fraud and obstruction of justice. – Telegraph

    Apple has revealed its first sales drop in more than two years and warned of further falls in the coming months as it confirmed that its iPhone business had gone into decline. The company revealed that revenues in the final three months of 2018, its traditionally lucrative Christmas period, had fallen by 5pc to $84.3bn (£64.5bn). – Telegraph

    The government had “day-to-day” involvement and “strategic” control over the treatment of companies in the hands of Royal Bank of Scotland’s scandal-hit restructuring division, according to allegations in a legal claim against the bank. Court papers reveal that Oliver Morley, a wealthy property developer who is suing RBS, is also considering taking legal action against the Treasury over its alleged role in influencing the aggressive tactics employed against businesses by the bank’s Global Restructuring Group (GRG). – The Times

    Plans have been launched to tear up the global tax rulebook in an effort to end years of avoidance by technology giants and other multinationals. In what promises to be the most fundamental reform of global tax in generations, the Organisation for Economic Co-operation and Development yesterday said that its members had agreed to “address the tax challenges of the digitalisation of the economy”. – The Times

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