London close: Stocks higher despite political uncertainty

London stocks climbed at the start of the week, as news that the Brexit secretary and foreign minister had resigned sapped the pound's strength, boosting shares on the Footsie, with the second-tier index also higher on bets that some kind of softer Brexit was now likely on the cards despite David Davis's and Boris Johnson's decision to leave.

Nevertheless, bookies' odds of a general election before the year was out shortened throughout the session and by the end of the day stood at 7 to 4, versus 11 to 2 at the start of trading, leaving analysts to wonder aloud about the potential implications for markets should there be not only a change of government but also of the party in power.

"Investors might view this as a potential positive for sterling, given the Labour Party leadership’s support for a softer form of Brexit and the fact that the currency has fallen a long way since the vote to leave the EU. But a victory for the Labour Party would carry its own, separate risks for sterling, given the party’s left-wing policies," said John Higgins at Capital Economics.

On a more positive note, Derek Halpenny, European Head of Global Markets Research at MUFG said: "Boris Johnson's resignation changes this from an isolated resignation to a potentially full-blown political crisis for Theresa May and we can expect GBP volatility to remain elevated for now. However, the one fact that doesn't change throughout all of this is that the Hard Brexiteers simply don’t have the parliamentary numbers to get what they want. We are still advancing toward a softer Brexit."

Against that backdrop, the FTSE 100 index gained 70.29 points or 0.92% to 7,687.99, with sterling erasing its earlier gains versus the US dollar to fall by 0.51% to 1.32202.

By the close of trading, the pound had also wiped out an earlier advance versus the euro, retreating 0.55% to 1.1248.

David Davis was replaced by Dominc Raab, a prominent 'Leave' campaigner for the 2016 referendum, who would take over the negotiations with the European Union’s Michel Barnier for the UK’s divorce from the union.

"It’s unwelcome timing for the PM ahead of the UK’s white paper on Brexit, and before crucial talks with Brussels, but markets welcome the removal of a major impediment to a pro-business 'soft-Brexit'," said analyst Mike van Dulken at Accendo Markets.

In macro data, China’s foreign exchange reserves were shown to have risen by an unexpected $1.51bn in June to $1.31trn, compared to a $10bn drop widely expected.

"It was mostly on the back of a pause in the downtrend of Treasury prices last month," said Ken Odeluga at City Index. "Still, the surprise resilience of China’s dollar holdings to a barrage of trade rhetoric and the symbolism of global shares shrugging off tariffs that came into effect was sufficient encouragement for Asian investors, particularly on the basis that pricing of trade concerns could have overshot."

Odeluga wondered how long the good sentiment would hold. "Should Washington go ahead with a threatened $450bn in counter-retaliatory new duties, markets are likely to be less sanguine. Treasury, gilt and bund yields showed signs of having found a floor. Of late, that has been a fair precursor of the next phase in the dollar’s upward grind. Should the greenback’s upticks against the yen broaden, we expect risk appetite to be pared back in the short term."

There was no UK data on Monday but a busy Tuesday lies ahead for the UK's Office for National Statistics, including monthly and rolling three-monthly estimates of GDP for the UK, while the agency also will release the index of services, construction output, the index of production and monthly trade data. China data will also be in the spotlight over the week.

In company news, high street retailers Next and Marks & Spencer and takeaway food group Just Eat were among the top risers, with some analysts suggesting a connection for consumer-focused stocks with the feel-good factor created by England reaching its first World Cup semi-final in nearly 30 years.

Though for M&S, it was revealed that analysts had been told last week that there would be no first-quarter update alongside the group's annual general meeting. "If the feeble excuse had been that the new FD Humphrey Singer only starts his new job today and wants time to get his feet under the desk the City might have swallowed this," mused independent retail analyst Nick Bubb, "but, in response to protests from disbelieving analysts, M&S merely said that management are focused on 'the long-term transformation plan' and that most investors are not interested in 'short-term noise'."

The FTSE's phalanx of heavyweight miners was also helping lead the charge, with Antofagasta, BHP Billiton, Anglo American and Rio Tinto all rising, as although the dollar weakness may hamper the earnings potential of some of the FTSE’s global stocks, it is a boon to the dollar-priced resources sector, analysts said. Oil and copper prices are also both up.

Shell continued to surge ahead but BP was weighed down by a report from Reuters that BP was in the lead to buy BHP's US onshore oil assets.

Stobart Group took off after it was confirmed over the weekend that chairman Iain Ferguson received enough votes at Friday's annual shareholder meeting to remain in his position. Ex-director Andrew Tinkler, who had been leading a campaign to replace Ferguson, was voted back onto the board, but the board quickly decided to vote him back off.

Cairn Energy climbed as it said ongoing arbitration with the Government of India would face final arbitration hearings scheduled from 20 August in The Hague.

Inmarsat was rising despite US suitor Echostar having abandoned its efforts to acquire the satellite company just after the close on Friday.

Shares in TalkTalk were higher, with reports over the weekend that billionaire chairman Sir Charles Dunstone is facing an attempt by investors to kick him off the board.

Sirius Minerals was up on the back of a materials handling agreement and lease signed with Redcar Bulk Terminal to provide port and ship loading services for up to 10m tonnes of fertiliser a year. The company said the deal will provide greater flexibility in storage and port operations and reduced construction risk and capital expenditure requirements during its current construction programme.

Workspace Group dipped after exchanging contracts for the disposal of three properties in London for a total of £51.85m, a premium of 23.2% the March valuation.

Student accommodation manager and developer Unite retreated even after it issued a quarterly property valuation of its UK Student Accommodation Fund and the London Student Accommodation Joint Venture, with the former independently valued up 1.2% at £2.32bn and the latter up 2.5% to £1.2bn.

Aerospace group Meggitt got a lift from Berenberg analysts hiking the stock to ‘buy’.

On the downside, Egyptian gold miner Centamin reported production for the second quarter of 92,803 ounces, a 25% reduction year-on-year.

Hikma Pharmaceuticals was down despite signing a licensing and distribution agreement to distribute Perrigo's over-the-counter consumer healthcare products in the Middle East and North Africa.

Hargreaves Landown recovered from early selling, with investors brushing off a downgrade from JPMorgan to ‘underweight'.

Outside the FTSE 350, Mothercare tumbled again as the retailer went cap-in-hand to shareholders in an effort to raise £32.5m through a one-for-one placing and open offer and said it was now shutting 60 shops instead of the 50 originally earmarked. It added that its Childrens World division was being placed into administration after creditors failed to back a company voluntary arrangement.

"Mothercare’s latest troubles demonstrate how difficult life is for high street retailers," said analyst Rebecca O'Keefe at Interactive Investor. "Transforming legacy businesses, making them relevant, and generating enough footfall that goes on to buy your product instore, rather than testing it out and then going home to get a better deal online, is incredibly tough. Many investors have given up on the high street retail sector altogether and others are wondering just how long they will have to wait for management to deliver their turnaround strategies, or if it is worth the wait at all."

Market Movers

FTSE 100 (UKX) 7,687.99 0.92%
FTSE 250 (MCX) 20,821.16 0.98%
techMARK (TASX) 3,544.12 0.42%

FTSE 100 - Risers

Antofagasta (ANTO) 976.00p 3.39%
Melrose Industries (MRO) 213.70p 2.79%
BHP Billiton (BLT) 1,709.80p 2.64%
Evraz (EVR) 522.80p 2.51%
Ashtead Group (AHT) 2,311.00p 2.48%
Just Eat (JE.) 842.20p 2.39%
Rio Tinto (RIO) 4,161.00p 2.21%
Mondi (MNDI) 2,060.00p 2.18%
Anglo American (AAL) 1,735.00p 2.14%
Royal Dutch Shell 'B' (RDSB) 2,758.00p 2.13%

FTSE 100 - Fallers

Severn Trent (SVT) 2,005.00p -3.14%
United Utilities Group (UU.) 766.60p -2.17%
National Grid (NG.) 867.80p -0.99%
Royal Mail (RMG) 486.70p -0.88%
Rentokil Initial (RTO) 342.40p -0.81%
ITV (ITV) 179.15p -0.69%
SEGRO (SGRO) 673.40p -0.62%
Reckitt Benckiser Group (RB.) 6,374.00p -0.52%
Vodafone Group (VOD) 190.08p -0.48%
SSE (SSE) 1,393.50p -0.46%

FTSE 250 - Risers

Premier Oil (PMO) 129.50p 9.10%
Sophos Group (SOPH) 501.00p 8.09%
Inmarsat (ISAT) 518.40p 7.15%
Superdry (SDRY) 1,340.00p 6.77%
TalkTalk Telecom Group (TALK) 119.20p 5.96%
Energean Oil & Gas (ENOG) 550.00p 5.16%
Kaz Minerals (KAZ) 850.60p 4.96%
Syncona Limited NPV (SYNC) 278.00p 4.71%
Capita (CPI) 162.50p 4.41%
Hunting (HTG) 765.00p 4.37%

FTSE 250 - Fallers

Centamin (DI) (CEY) 113.90p -3.27%
Pennon Group (PNN) 788.00p -3.00%
Contour Global (GLO) 242.00p -2.42%
Hikma Pharmaceuticals (HIK) 1,436.00p -2.25%
Daejan Holdings (DJAN) 5,680.00p -1.91%
Wetherspoon (J.D.) (JDW) 1,240.00p -1.90%
esure Group (ESUR) 204.60p -1.82%
Softcat (SCT) 711.00p -1.80%
Bakkavor Group (BAKK) 190.00p -1.55%
Capital & Counties Properties (CAPC) 285.60p -1.42%