London open: Stocks rise as results from Diageo, Shell impress

London stocks rose at the open on Thursday, taking their cue from an upbeat session on Wall Street on the back of dovish comments from Federal Reserve chair Jerome Powell, with solid results from the likes of Shell and Diageo lending a hand.

At 0830 GMT, the FTSE 100 was up 0.7% at 6,988.35, while the pound was 0.2% higher against the dollar at 1.3139 and 0.1% lower versus the euro at 1.1414 even as the European Union rejected Prime Minister Theresa May's calls to reopen Brexit negotiations. Michel Barnier, the EU's chief Brexit negotiator, said the Irish backstop was "part and parcel" of the Brexit deal and cannot be renegotiated.

In the US, the Fed left interest rates on hold at between 2.25% and 2.5% on Wednesday, as expected.

"The US central bank dialled down its language, and dropped the phrase ‘further gradual increases’ in relation to rate hikes," said CMC Markets analyst David Madden. "The Fed also said they would also be ‘patient’ when it comes to hiking rates. Regarding the balance sheet, the Fed aims to operate with an ‘ample supply of reserves’, and that helped lift investor sentiment too."

On home shores, meanwhile, investors were digesting the latest survey from Nationwide, which showed house prices rose by 0.3% month-on-month in January, a touch above consensus expectations for a 0.2% increase and following a 0.7% drop the month before.

On the year, prices were up 0.1%, better than the flat reading expecting but down from 0.5% growth seen a month earlier.

Pantheon Macroeconomics said: "The uncertainty created by Brexit largely is responsible for the further decline in year-over-year growth in house prices to near-zero, from a broadly stable rate of about 2% in the 18 months before November.

"The slowdown has occurred at a time when growth in real incomes is improving, thanks to rising nominal wage growth and falling inflation. Mortgage rates flatlined last year - the rate for a 5-year fixed-rate mortgage at a 75% LTV held steady at 2.0% throughout 2018 - and the supply of credit has remained constant. As a result, this is a sentiment-led deterioration in house price growth, which chimes with the drop in measures of consumers’ confidence since November, when it became clear that the Withdrawal Agreement would not be ratified seamlessly."

Elsewhere, the latest UK consumer confidence survey from GfK showed no change in January, with the index remaining at -14 as consumers were in wait-and-see mode amid Brexit uncertainty.

Meanwhile, consumers were the least optimistic about the outlook in seven years, with the index for the general economic situation over the next 12 months at -39, getting close to the levels seen at the end of 2008 and early 2009.

Joe Staton, client strategy director at GfK, said: "This is unsurprising given that consumers, companies and corporations thrive on certainty, which is in short supply just two months before the planned date for the UK’s EU-exit. The next few months promise to be turbulent for the consumer so will this measure for the economic outlook in the coming year drop even further?"

In corporate news, investors ordered double measures of drinks giant Diageo after it said first half net sales rose 5.8% to £6.9bn, with organic growth partially offset by unfavourable exchange rates. Reported operating profit of £2.4bn was up 11.0%, driven by organic growth.

Royal Dutch Shell was also on the front foot after it posted a 36% jump in full-year earnings as it benefited from higher realised oil, gas and liquefied natural gas prices and cost cutting.

Richard Hunter, head of markets at Interactive Investor, said: "The bar is always set high for Shell and, on the whole, the company delivers. In these numbers, the ongoing benefits of a multi-year streamlining operation are crystal clear."

United Utilities, Severn Trent and Pennon were all on the leaderboard as their new business plans were given fast-track status by regulator Ofwat.

Ferrexpo racked up stellar gains as it was boosted by a double-upgrade to 'buy' at Bank of America Merrill Lynch.

On the downside, BT Group was the biggest loser after the telecoms giant released a mixed set of third-quarter results, with revenue and EBITDA beating consensus by around 1% and 3% respectively, but headwinds seen in the consumer segment, where it's taking a hit from competition from Vodafone.

The stock was also knocked lower by a downgrade to 'neutral' at Bank of America Merrill Lynch.

Unilever was in the red as it churned out underlying sales growth at the bottom end of its guidance for 2018 after growth at the Marmite and Ben & Jerry's maker slowed in the fourth quarter. With new boss Alan Jope saying he expects market conditions in 2019 to "remain challenging", fellow consumer goods giant Reckitt Benckiser was also dragged into the red.

Market Movers

FTSE 100 (UKX) 6,988.35 0.67%
FTSE 250 (MCX) 18,885.22 0.30%
techMARK (TASX) 3,363.25 0.12%

FTSE 100 - Risers

Fresnillo (FRES) 1,010.00p 3.82%
Diageo (DGE) 2,865.00p 3.35%
Royal Dutch Shell 'B' (RDSB) 2,359.50p 3.24%
Royal Dutch Shell 'A' (RDSA) 2,346.50p 3.10%
Wood Group (John) (WG.) 547.20p 2.43%
Antofagasta (ANTO) 851.80p 2.31%
United Utilities Group (UU.) 837.60p 2.17%
Severn Trent (SVT) 1,987.00p 1.95%
BP (BP.) 520.60p 1.80%
Anglo American (AAL) 1,931.80p 1.73%

FTSE 100 - Fallers

BT Group (BT.A) 226.75p -3.10%
Standard Life Aberdeen (SLA) 257.65p -2.79%
Unilever (ULVR) 3,993.00p -1.78%
Reckitt Benckiser Group (RB.) 5,805.00p -1.02%
Pearson (PSON) 919.60p -0.78%
Burberry Group (BRBY) 1,800.00p -0.63%
Next (NXT) 4,855.00p -0.63%
HSBC Holdings (HSBA) 647.80p -0.63%
Standard Chartered (STAN) 628.30p -0.60%
Lloyds Banking Group (LLOY) 58.04p -0.50%

FTSE 250 - Risers

Ferrexpo (FXPO) 250.60p 8.39%
RPC Group (RPC) 798.40p 4.23%
Superdry (SDRY) 528.50p 2.52%
Acacia Mining (ACA) 190.80p 2.25%
Investec (INVP) 508.20p 2.21%
Sanne Group (SNN) 510.00p 2.00%
Jupiter European Opportunities Trust (JEO) 743.00p 1.92%
Energean Oil & Gas (ENOG) 630.00p 1.86%
Avast (AVST) 286.95p 1.85%
Hochschild Mining (HOC) 183.70p 1.83%

FTSE 250 - Fallers

Victrex plc (VCT) 2,310.00p -4.07%
Metro Bank (MTRO) 1,177.20p -3.74%
Contour Global (GLO) 174.30p -3.17%
Euromoney Institutional Investor (ERM) 1,230.00p -2.84%
Hilton Food Group (HFG) 930.00p -2.52%
St. Modwen Properties (SMP) 405.00p -2.17%
FDM Group (Holdings) (FDM) 850.00p -2.07%
Fisher (James) & Sons (FSJ) 1,880.00p -1.88%
Hill & Smith Holdings (HILS) 1,109.00p -1.86%
Polypipe Group (PLP) 387.80p -1.82%