London close: Talk trade negotiations might re-start stokes risk appetite

Stocks finished July on a positive note, helped by big gains in shares of oil majors BP and Shell as well as miners, after Bloomberg reported that top officials from Washington and Beijing were holding contacts in a bid to restart trade talks and avoid a full-blown trade war.

Significant too, despite recent volatility in global government bond markets worldwide, tweaks made by the Bank of Japan to its monetary policy drew a yawn from some traders. Indeed, for some the dovish tone struck by policymakers in Tokyo was a signal that the so-called 'carry trade' was back on.

Against that backdrop, the Footsie was ahead by 0.62% or 47.91 points at 7,748.96, albeit with the second-tier index off by 0.38 points at 20,887.87.

In parallel, the pound came off its earlier highs to trade down by 0.02% to 1.31252.

For the month as a whole, the Footsie was up by 111.83 points or 1.46%.

Brent crude oil futures for next month delivery on the other hand were 0.82% lower to $74.36 a barrel on the ICE as the US dollar recouped earlier losses.

"Rumours that the US and China making efforts to kick-start trade talks has helped boost markets. Meanwhile European currency weakness is helping enhance gains seen off the back of a dovish BoJ announcement overnight," said Joshua Mahony at IG.

In another boost to sentiment, China's Politburo on Tuesday said officials would focus more on supporting economic growth, against a backdrop of risks from its campaign to cut debt in the economy and from the ongoing trade spat with the States.

That helped investors brush off weakness in a key report on manufacturing sector conditions in China, helped by gains in Japanese and US government bond prices in the wake of the Bank of Japan's decision to lower its inflation forecasts.

The 'official' factory sector purchasing managers' index for July printed at 51.2, which was down from a reading of 51.5 for the month before.

A gauge of export orders included in the survey was steady, likely showing that weakness in the Chinese currency, the yuan, was compensating for the impact of US tariffs, Capital Economics said; however, that also meant that domestic headwinds were acting as the main drag on activity.

In the background meanwhile, overnight rate-setters in Tokyo did tweak the framework for their monetary policy - as expected - with central bank governor Haruhiko Kuroda saying the monetary authority will now allow a wider trading range for benchmark 10-year Japanese government bond yields.

Policymakers also announced their decision to shift purchases of ETFs towards those of shares listed on the wider Topix index, having focused strictly on the Nikkei 225.

Significantly however, they also pledged to keep policy rates at "extremely" low levels "for an extended period of time" and said they would continue target 10-year JGB yields at 0%.

The response in Japanese 10-year bonds was immediate, with their yield retreating by five basis points to 0.05% and that on similarly-dated US Treasuries off by another four points to 2.94% - retracing the prior day's gains.

On the geopolitical front meanwhile, US President Donald Trump appeared to open the door to meeting with Iran's leaders. Yet in parallel, reports surfaced that North Korea was might be continuing to develop intercontinental ballistic missiles at its facility located in Sanumdong, outside the capital Pyongyang.

Cash flow drops at Centrica, dividend payout raised at BP

Centrica posted its interim results for the period ended 30 June on Tuesday, reporting "stable" adjusted gross margin and EBITDA relative to the first half of last year, with adjusted operating cash flow falling 11% to £1.1bn.

BP reported second-quarter profit four times higher than a year earlier as the oil company increased its dividend for the first time in almost four years. Underlying replacement cost profit for the three months to the end of June surged to $2.8bn (£2.1bn) from $684m the year before. BP increased its quarterly dividend 2.5% to 10.25 cents a share – the first rise since the third quarter of 2014.

Standard Chartered’s first-half profit rose by almost a quarter as revenue rose and bad debts halved at the emerging markets-focused bank. Underlying pre-tax profit for the six months to the end of June rose 23% to $2.4bn (£1.8bn) as operating income rose 6% to $7.6bn. Credit impairment dropped to $293m from $583m a year earlier. Operating costs rose 7% to $5.1bn as Standard Chartered invested in digital banking services and internal efficiency programmes.

Weir Group missed analysts' forecasts for the front half of the year as capacity overhangs continued to weigh on its pricing power in the Oil&Gas market. For the six months ending on 30 June, the oil and mining equipment manufacturer posted a 38% jump in profits before tax to £143m on a continuing basis, which was shy of the £148m which analysts at Numis had penciled in. Topline growth meanwhile was 15%, for sales of £1.062bn or 23% on a constant currency basis.

Tour operator Thomas Cook told markets overall group volumes remained well ahead of the prior year in the third quarter, thanks to the "good progress" the group was making in all areas of its strategy. However, hot weather in June and July was dampening its ability to drive margins in the 'lates' market. Hence, full-year underlying operating profits were now seen at the lower end of market expectations.

Just Eat reported a slight slowing of revenue and order growth and a 3% fall in pre-tax profits for the first half of the year as the online food ordering website increased investment to keep the top line growing. The FTSE 100 group kept its guidance for full-year underlying profits unchanged at £165-185m but raised its revenue guidance to £740-770m.

Rentokil Initial posted a decent set of first half results, with revenue and profit in excess of its medium-term financial targets. The pest control and hygiene firm said ongoing revenue was up 14.2% at constant exchange rates to £1.17bn, while ongoing operating profit grew 13.1% to £134.5m. The interim dividend was increased 15% to 1.311p per share.

Fresnillo reported an 11.3% improvement in adjusted revenue to $1.19bn for the six months ended 30 June. The FTSE 100 precious metals miner said gross profit and EBITDA were of $502.2m and $566.9m - increases of up 9.2% and 8.5% respectively.

Indivior's lawyers have achieved another victory in the drug developer's ongoing US court battle, which will prevent rival Dr Reddy's Laboratories from selling its generic version of Suboxone Film. The US Federal Court of Appeal has denied Dr Reddy's motion to block a preliminary injunction that was granted at the request of Indivior to prohibit the generic drugmaker from selling its buprenorphine/naloxone sublingual film product.

Market Movers

FTSE 100 (UKX) 7,748.76 0.62%
FTSE 250 (MCX) 20,877.87 -0.00%
techMARK (TASX) 3,587.41 0.06%

FTSE 100 - Risers

Fresnillo (FRES) 1,042.50p 4.23%
Admiral Group (ADM) 1,987.50p 4.07%
Anglo American (AAL) 1,739.00p 3.27%
Direct Line Insurance Group (DLG) 343.90p 3.24%
Glencore (GLEN) 334.50p 2.94%
International Consolidated Airlines Group SA (CDI) (IAG) 710.00p 2.39%
Evraz (EVR) 559.00p 2.16%
AstraZeneca (AZN) 5,871.00p 2.02%
Imperial Brands (IMB) 2,922.00p 1.94%
Antofagasta (ANTO) 1,003.00p 1.91%

FTSE 100 - Fallers

Just Eat (JE.) 793.00p -6.31%
Kingfisher (KGF) 296.37p -4.04%
Smith & Nephew (SN.) 1,320.50p -2.76%
Micro Focus International (MCRO) 1,250.00p -2.69%
Centrica (CNA) 148.75p -2.59%
Standard Chartered (STAN) 690.30p -1.26%
DCC (DCC) 7,075.00p -1.26%
Informa (INF) 789.40p -1.18%
Reckitt Benckiser Group (RB.) 6,810.00p -1.06%
Rentokil Initial (RTO) 339.00p -0.96%

FTSE 250 - Risers

Greggs (GRG) 1,054.00p 9.62%
Provident Financial (PFG) 670.00p 8.59%
IMI (IMI) 1,249.00p 6.43%
Vedanta Resources (VED) 820.00p 5.21%
Hastings Group Holdings (HSTG) 249.00p 4.89%
Drax Group (DRX) 363.80p 3.82%
Kaz Minerals (KAZ) 848.00p 3.62%
Centamin (DI) (CEY) 119.00p 3.57%
Superdry (SDRY) 1,244.00p 3.41%
Energean Oil & Gas (ENOG) 524.00p 3.35%

FTSE 250 - Fallers

Travis Perkins (TPK) 1,196.00p -10.78%
Greencore Group (GNC) 177.30p -5.19%
Senior (SNR) 317.20p -5.14%
Contour Global (GLO) 228.00p -5.00%
Games Workshop Group (GAW) 2,995.00p -4.92%
Essentra (ESNT) 481.20p -4.33%
Fisher (James) & Sons (FSJ) 1,802.00p -3.64%
Renewi (RWI) 70.60p -3.05%
IP Group (IPO) 124.00p -2.97%
Millennium & Copthorne Hotels (MLC) 520.00p -2.80%