London close: FTSE outperforms European peers ahead of Brexit vote
Equity markets in London outperformed extended gains by midday on Tuesday amid gains for commodities stocks, while defensive stocks were on the rise as investors eyed the second parliamentary vote on Theresa May’s Brexit ‘Plan B’ and continued to keep an eye on US-China trade relations.
The FTSE 100 added almost 89 points or 1.3% to close at 6,833.93, while the pound could not hold onto mid-session gains and fell 0.2% against the dollar to 1.3133 and 0.1% versus the euro at 1.1508 as MPs debated ahead of voting on a host of amendments that could help shape the future of Brexit negotiations.
From a total of 19 possible amendments, House of Commons Speaker John Bercow selected seven to Theresa May’s statement on the defeat of her Brexit bill.
The seven chosen by Bercow included an official Labour amendment tabled by Jeremy Corbyn, to seek a form of customs union; the fall-back option known as Cooper-Boles that would look to extend Article 50 until the end of 2019; the Grieve amendment to give Parliament more control by creating a series of indicative votes; the Spelman and Reeves amendments, which both reject a no-deal Brexit but have no legislative force.
Meanwhile, a European Union spokesperson said the bloc will not accept the Brady amendment as no renegotiation of the Brexit deal is possible.
Economist Samuel Tombs at Pantheon Macroeconomics said: "The results of the Cooper/Boles, Benn, Grieve and Reeves amendments are harder to predict, given that they are backed by members from across parties and with different views on Brexit. Only the Reeves amendment effectively rules out a no-deal Brexit, by requiring the government to seek to extend Article 50, if MPs haven't voted for the WA by February 26. But the rest, which would break with the convention of allowing the government to dictate what business is debated in the Commons, would enable MPs to rule-out a no-deal exit within the next month."
He added: "Sterling, therefore, likely will rally if any of these amendments are passed, though perhaps not much; betting markets now are pricing-in only a 10% chance of a no-deal Brexit, down from 30% in December, and 50% before the WA was agreed in November."
Meanwhile, market participants were also looking ahead to the two days of Sino-US trade talks that kick off in Washington on Wednesday, after the US Justice Department threw a spanner in the works by filing a host of criminal charges against Chinese telecoms company Huawei and its chief financial officer, Meng Wanzhou. Huawei has denied any wrongdoing.
The US delegation will be led by Trade Representative Robert Lighthizer and will include Treasury Secretary Steven Mnuchin, Secretary of Commerce Wilbur Ross, President Trump's policy advisers Larry Kudlow and Peter Navarro. The Chinese delegation will be led by Vice Premier Liu He.
On the corporate front, British American Tobacco was the standout gainer on the FTSE 100 after an upgrade to ‘overweight’ from 'neutral' at Piper Jaffray, while Imperial Brands followed close behind.
Other defensives were in demand too, with the likes of GlaxoSmithKline and utilities National Grid and United Utilities trading higher.
Oil producers from BP and Shell to Premier and Tullow were climbing as crude prices rebounded from the previous day's steep losses, with Brent up 2.5% to $61.48 a barrel, after it was announced the US imposed sanctions on Venezuela's state oil company PDVSA over the political turmoil in the country. The Latin American oil producer's output has dwindled in recent years, noted market analyst David Madden at CMC Markets, "so oil supply shouldn’t be squeezed that much".
Housebuilder Crest Nicholson racked up strong gains despite posting a 15% drop in full-year profit amid Brexit uncertainty as it also highlighted strong forward sales and lower costs.
Intermediate Capital rallied after a well-received third-quarter update, while UDG Healthcare and Greencore advanced following the release of their first-quarter statements.
Pensions and investment platform Hargreaves Lansdown was in the red, however, as it reported a 24% drop in net new business for the first half and a 6% decline in assets under administration.
Royal Mail tumbled to a record low as it warned "business uncertainty" is hitting letter volumes and said parcels volumes would take a hit as it defended profit margins. Management now expects to deliver adjusted group operating profit before transformation costs of £500-530m, from the £500-550m previously indicated.
Domino’s Pizza was looking a bit stale as it said full-year underlying pre-tax profit was expected to be at the lower end of the consensus range of £93.9m to £98.2m, while Imperial Leather maker PZ Cussons disappeared down the plughole after saying that adjusted pre-tax profit for the year will be towards £70m, down from £80.1m the year before.
Among small caps on the full list, JKX Oil & Gas was surging after reporting that a sidetrack well in the Ukraine was continuing to exceed expectations, while on AIM cloud-based managed mobility provider Crimson Tide was soaring after saying it expected profits to come in well ahead of forecasts.
In broker note action, Electrocomponents was upgraded to ‘buy’ at Berenberg. Diploma and Halma were downgraded to ‘hold’ at Berenberg, while Polymetal was cut to ‘hold’ at VTB Capital.
Market Movers
FTSE 100 (UKX) 6,830.45 1.24%
FTSE 250 (MCX) 18,702.15 0.90%
techMARK (TASX) 3,337.29 0.88%
FTSE 100 - Risers
British American Tobacco (BATS) 2,510.00p 5.68%
Smith (DS) (SMDS) 334.40p 4.86%
Rio Tinto (RIO) 4,054.00p 2.78%
International Consolidated Airlines Group SA (CDI) (IAG) 639.80p 2.70%
ITV (ITV) 131.65p 2.57%
Fresnillo (FRES) 965.00p 2.51%
3i Group (III) 830.80p 2.47%
Smurfit Kappa Group (SKG) 2,248.00p 2.46%
Experian (EXPN) 1,930.00p 2.44%
Croda International (CRDA) 4,867.00p 2.44%
FTSE 100 - Fallers
Hargreaves Lansdown (HL.) 1,684.50p -6.26%
TUI AG Reg Shs (DI) (TUI) 1,169.50p -2.09%
NMC Health (NMC) 2,532.00p -1.09%
easyJet (EZJ) 1,280.50p -0.97%
CRH (CRH) 2,198.00p -0.95%
Anglo American (AAL) 1,847.00p -0.92%
BT Group (BT.A) 234.30p -0.72%
Halma (HLMA) 1,390.00p -0.71%
Scottish Mortgage Inv Trust (SMT) 465.70p -0.60%
Vodafone Group (VOD) 134.80p -0.47%
FTSE 250 - Risers
Vivo Energy (VVO) 137.26p 9.37%
TI Fluid Systems (TIFS) 183.10p 7.90%
UDG Healthcare Public Limited Company (UDG) 593.00p 6.18%
Crest Nicholson Holdings (CRST) 361.60p 5.85%
Hochschild Mining (HOC) 177.05p 5.39%
Intermediate Capital Group (ICP) 1,020.00p 4.99%
Premier Oil (PMO) 70.40p 4.30%
Ferrexpo (FXPO) 218.00p 4.21%
Intu Properties (INTU) 117.43p 4.15%
Games Workshop Group (GAW) 3,035.00p 4.12%
FTSE 250 - Fallers
PZ Cussons (PZC) 178.60p -14.79%
Royal Mail (RMG) 259.80p -13.60%
Domino's Pizza Group (DOM) 250.00p -8.73%
Metro Bank (MTRO) 1,357.00p -5.70%
Edinburgh Dragon Trust (EFM) 358.00p -3.24%
Stobart Group Ltd. (STOB) 154.80p -2.76%
Wizz Air Holdings (WIZZ) 3,050.00p -2.15%
TBC Bank Group (TBCG) 1,450.00p -2.03%
FirstGroup (FGP) 89.00p -1.22%
Funding Circle Holdings (FCH) 326.00p -1.21%