London midday: Equities advance as China chaos subsides

UK equities advanced on Friday as a report showed the trade deficit narrowed on lower oil prices and as concerns on China abated.

Britain’s trade deficit narrowed to £3.17bn from a downward revised £3.50bn in October, according to the Office for National Statistics, as cheaper oil prices reduced the cost of imports.

“While the UK trade gap narrowed in November (and October’s shortfall was revised down), it still remained uncomfortably high as exports were lackluster,” said Howard Archer, chief UK and European economist at IHS Global Insight.

Archer added the recent weakening of the pound is welcome news for UK exporters, but they will be concerned by the current uncertain global economic outlook.

A slowdown in emerging markets, including China, has been a concern for many across the globe.

Stocks plunged on Thursday as trading in China was suspended after equites on the CSI 300 index fell 7%, triggering the so-called “circuit breaker rule”. The rule came into effect after just 30 minutes, marking the shorting trading day ever in China.

However, regulators suspended the “circuit breaker rule” later on Thursday which helped to lift Chinese stocks higher on Friday.

The new circuit breakers, which kicked in on Monday, have been criticised by analysts for exaggerating declines as investors rush to exit positions before getting locked in by the halts.

“Well after just four days the experiment appeared to fail with the China Securities Regulatory Commission deciding to suspend the mechanism…..in a bid to curb volatility. It's contributing to a better, although still volatile, start for markets in China this morning, but the uneasiness among investors remains high as each day brings about a new wave questions about government policy,” Deutsche Bank analysts said.

In another lift to markets, the People's Bank of China set the daily yuan rate at 6.5646 per dollar - firmer than the previous day's rate, ending eight days of weakening the currency.

Meanwhile, oil prices reversed the previous day’s declines with Brent up 0.32% to $33.86 per barrel and West Texas Intermediate up 0.15% to $33.32 per barrel at 1143 GMT.

In Europe, a report showed German industrial production fell 0.3% in November compared to a month ago, missing expectations for a 0.5% increase.

Germany’s trade balance surplus fell to €20.6bn in November from €22.3bn in October, although it was above the estimated €20.2bn. Exports rose 0.4% in November, compared to forecasts of 0.5% and the previous month’s 1.3% decline. Imports gained 1.6% in November following a 3.2% drop a month earlier, beating projections for a 1% increase.

Across the Pond, US jobs data will be in focus at 1330 GMT including the non-farm payrolls report, unemployment rate and earnings figures for December.

The US Federal Reserve last month decided to raise interest rates for the first time in nearly a decade, as the labour market and economy improved. The central bank looks set to increase rates further this year, provided the recovery continues.

In company news, Spire Healthcare gained after the company reiterated its 2015 guidance for revenue growth.

Tesco jumped after Barclays upgraded the stock to ‘overweight’ from ‘equalweight’, saying the recent share price underperformance has left the supermarket’s valuation at attractive levels.

Royal Dutch Shell, BP, Tullow Oil and Ophir Energy continued to decline on concerns about the sector.

Mining stocks were also under the cosh, including Anglo American, BHP Billiton and Rio Tinto, as precious metal prices declined.

Market Movers

FTSE 100 (UKX) 5,965.56 0.19%
FTSE 250 (MCX) 16,841.89 0.30%
techMARK (TASX) 3,173.06 0.65%

FTSE 100 - Risers

Tesco (TSCO) 145.95p 4.85%
GKN (GKN) 284.00p 3.35%
BAE Systems (BA.) 518.00p 2.47%
Vodafone Group (VOD) 223.05p 2.22%
London Stock Exchange Group (LSE) 2,560.00p 1.91%
Standard Life (SL.) 365.10p 1.84%
Travis Perkins (TPK) 1,940.00p 1.84%
Admiral Group (ADM) 1,630.00p 1.81%
BG Group (BG.) 953.50p 1.77%
easyJet (EZJ) 1,697.00p 1.68%

FTSE 100 - Fallers

Anglo American (AAL) 231.10p -3.97%
Sports Direct International (SPD) 493.50p -3.61%
Royal Dutch Shell 'A' (RDSA) 1,409.50p -3.09%
Royal Dutch Shell 'B' (RDSB) 1,417.00p -3.08%
Ashtead Group (AHT) 1,021.00p -2.48%
BP (BP.) 330.10p -2.25%
Antofagasta (ANTO) 401.80p -2.14%
BHP Billiton (BLT) 664.30p -1.40%
ARM Holdings (ARM) 954.50p -1.39%
Rio Tinto (RIO) 1,764.50p -1.12%

FTSE 250 - Risers

Vectura Group (VEC) 191.80p 7.69%
Elementis (ELM) 217.90p 5.11%
B&M European Value Retail S.A. (DI) (BME) 261.50p 5.06%
Just Eat (JE.) 473.00p 3.39%
Spire Healthcare Group (SPI) 318.00p 2.68%
Card Factory (CARD) 350.20p 2.43%
Ted Baker (TED) 2,919.00p 2.42%
OneSavings Bank (OSB) 331.90p 2.38%
Thomas Cook Group (TCG) 119.30p 2.32%
Booker Group (BOK) 179.70p 2.22%

FTSE 250 - Fallers

Tullow Oil (TLW) 143.50p -4.33%
Vedanta Resources (VED) 230.10p -3.96%
Ophir Energy (OPHR) 85.00p -3.52%
Evraz (EVR) 65.35p -3.33%
Allied Minds (ALM) 390.00p -3.20%
Petrofac Ltd. (PFC) 719.50p -2.97%
Acacia Mining (ACA) 183.70p -2.39%
Aggreko (AGK) 865.00p -2.04%
Cairn Energy (CNE) 138.90p -1.84%
Cobham (COB) 272.90p -1.83%