London midday: Stocks inch higher but risk hampers conviction

Just after noon, the FTSE 100 had lost some of its earlier fizz was up 0.18% at 6,722.19, driven up by news from BT, GKN, and Mondi outweighing further subsidence in the housebuilding sector, while the FTSE 250 warmed up from its early dip to stand 0.5% higher at 17,098.48.

Sterling was struggling for direction by the early afternoon after an early drop in the wake of comments from Bank of England policymaker Martin Weale that suggested his economic outlook for the UK had changed, adding to the near-certainty that the central bank will introduce a stimulus package in next month's meeting to counteract poor growth expectations.

Traders are also focused on the Bank of Japan (BoJ) and US Federal Reserve's meetings this week, with growing concerns that the BoJ might disappoint with its level of stimulus on Friday.

“Equities are positive this morning, holding on to recent highs but lacking conviction with event-risk lurking through Friday," said Mike van Dulken, head of research at Accendo Markets.

"Asian markets saw concern creep in that expectations for stimulus from the BoJ and hawkish rhetoric from the Fed may have been too high. The BoE's Weale may have offset this somewhat by suggesting recent UK data urges him to vote for a rate cut next week, to keep the global stimulus train chugging, but Cable has since bounced. And a weaker USD is not helping the commodity space, especially oil."

On the data front on Tuesday, BBA loans for house purchases data are due at 0930 BST. In the US, S&P/Case-Shiller home prices are at 1400 BST and Markit services PMI is at 1445 BST.

In corporate news, SABMiller fizzed up the leaderboard as it has received a new, final takeover offer of 4,500p from Anheuser-Busch InBev after the collapse of the pound and pressure from a group of new activist shareholders. However this effervescence quickly evaporated as major shareholder Aberdeen Asset Management said the terms of the deal remained "unacceptable".

AB InBev has returned to the table in the morning with a £79bn all-cash offer and a partial share alternative, available for approximately 41% of the FTSE 100 company's shares, consisting of 0.483969 unlisted shares and 465.88 in cash for each SABMiller share. ABI had previously offered 4,400p. But Aberdeen and other activist shareholders that have joined the register recently are extremely concerns that the deal's inclusion of a partial share alternative will favour SABMiller’s two biggest shareholders, US tobacco company Altria and BevCo, which between them own 40.38% of the brewer.

BT Group was a top riser as regulator Ofcom report confirmed the positive news that the company will not have to completely chop off its Openreach infrastructure arm, though it will have to become a distinct company with its own board, own staff and separate branding. As a legally separate company within BT Group, with its own ‘articles of association’ and a majority of independent directors who are not appointed by or connected to BT, the company would be obliged to consult formally with customers such as Sky and TalkTalk on large-scale investments.

Also near the top of the FTSE 100 risers was engineer GKN despite it reporting a drop in first-half pre-tax profit and saying it expects to book a charge in the second half of the year as it looks to cut costs. For the six months ended 30 June, pre-tax profit fell 14% to £182m on sales of £4.24bn, up 17% from the same period last year. Earnings per share fell 4% to 9.5p but the company lifted its interim dividend to 2.95p per share from 2.90p. Chief executive Nigel Stein said: “This is a good set of first half results with GKN continuing to make underlying progress in line with our expectations. Each division has continued to deliver against our strategy."

Mondi Group also gave its shares a lift as it updated the market on its half-year earnings expectations. The FTSE 100 firm said it anticipates basic underlying earnings per share of 73 to 77 euro cents, up from 67.8 cents a year ago, and basic earnings per share of the same 73 to 77 cent range, well up from 60.3 cents last year. Mondi said basic headline earnings per share should also fall within the same range, compared with 60.1 cents in the comparative period.

Among Tuesday's fallers BP reported a steeper than expected fall in profits for the second quarter but said it was drawing a line under the liabilities for the Deepwater Horizon oil disaster at $61.6bn. An underlying replacement cost profit of $720m in the three moths to the end of June was down 45% from the same period last year, though at the reported level the loss before tax of $3.38bn for the second quarter was less than half its comparative from 2015.

"The negative reaction in the share price could have been worse when put into the context of the 10% oil price decline in July," said analyst Jasper Lawler at CMC Markets, "but BP finally drawing a line under its Deepwater Horizon oil spill liabilities was a source of relief. BP’s downstream business continues to be the main bread-winner but a warning that refining margins would stay under pressure worried investors this couldn’t be maintained. The upstream business did return to profitability since oil prices rebounded from lows earlier this year."

Tesco, Sainsbury and Morrison were also on the back foot after a report from Kantar Worldpanel showed the 'Big Four' supermarkets, also including Walmart's Asda, had lost further market share to discounters and seen sales drop in the weeks following the Brexit vote.

Market Movers

FTSE 100 (UKX) 6,727.55 0.26%
FTSE 250 (MCX) 17,111.73 0.12%
techMARK (TASX) 3,438.06 0.52%

FTSE 100 - Risers

Fresnillo (FRES) 1,885.00p 4.66%
BT Group (BT.A) 405.50p 4.65%
Mondi (MNDI) 1,523.00p 3.75%
GKN (GKN) 298.40p 2.93%
Provident Financial (PFG) 2,670.00p 2.69%
Hikma Pharmaceuticals (HIK) 2,635.00p 2.57%
Rolls-Royce Holdings (RR.) 734.00p 2.23%
Randgold Resources Ltd. (RRS) 8,720.00p 1.99%
Rio Tinto (RIO) 2,393.50p 1.83%
TUI AG Reg Shs (DI) (TUI) 925.00p 1.54%

FTSE 100 - Fallers

Tesco (TSCO) 156.35p -3.55%
Barratt Developments (BDEV) 408.50p -2.51%
Sainsbury (J) (SBRY) 222.80p -2.19%
Royal Bank of Scotland Group (RBS) 186.50p -2.10%
BP (BP.) 431.50p -2.01%
Barclays (BARC) 148.25p -1.82%
easyJet (EZJ) 1,002.00p -1.76%
Taylor Wimpey (TW.) 146.50p -1.74%
Berkeley Group Holdings (The) (BKG) 2,583.00p -1.67%
Persimmon (PSN) 1,605.00p -1.41%

FTSE 250 - Risers

Hochschild Mining (HOC) 252.40p 11.24%
Virgin Money Holdings (UK) (VM.) 261.10p 6.70%
Ibstock (IBST) 154.90p 3.96%
SEGRO (SGRO) 436.90p 3.78%
Diploma (DPLM) 871.00p 3.14%
Thomas Cook Group (TCG) 60.80p 3.05%
Centamin (DI) (CEY) 155.10p 2.51%
CYBG (CYBG) 256.30p 2.15%
Zoopla Property Group (WI) (ZPLA) 283.10p 1.94%
Auto Trader Group (AUTO) 357.70p 1.94%

FTSE 250 - Fallers

Man Group (EMG) 117.40p -4.08%
Capital & Counties Properties (CAPC) 284.60p -3.98%
Tullow Oil (TLW) 194.40p -3.09%
Countryside Properties (CSP) 224.70p -2.94%
Greencore Group (GNC) 312.50p -2.80%
Victrex plc (VCT) 1,534.00p -2.73%
Countrywide (CWD) 235.90p -2.44%
Bellway (BWY) 1,964.00p -2.04%
Bovis Homes Group (BVS) 769.50p -1.91%
TalkTalk Telecom Group (TALK) 220.90p -1.87%