London close: Stocks little changed and pound stabilises ahead of MPC

London stocks pared early losses to finish little changed on Wednesday, as solid corporate news underpinned the housebuilding sector and ahead of the Monetary Policy Committee's quarterly Inflation Report and presser the following day.

The FTSE 100 - which racked up stellar gains in the previous session as sterling was dented by weak services data - was steady at 7,173.09, down by just 0.06% for the session. Meanwhile, the pound was flat against the dollar at 1.2955 and 0.30% firmer versus the euro at 1.1384, with seemingly little impact from a Telegraph report that cabinet ministers have held talks on plans to delay Brexit by eight weeks.

Also in the news, overnight the DUP's Arlene Foster appeared to suggest that she was willing to be flexible in dealing with th Irish backstop.

David Cheetham, chief market analyst at XTB, said the FTSE remains well supported and is looking to extend its recent winning streak with a green close today, which would make it seven consecutive daily gains.

"The pound is trading a little higher and seeking to recoup some of the losses after some pretty large scale declines yesterday following the weak service sector data which caused sterling tumble to its lowest level in a fortnight against the buck."

US President Donald Trump’s state of the union speech did nothing to help financial markets as no new infrastructure initiatives were announced, while he raised the prospect of another government shutdown if there was no agreement to fund his Mexico border wall.

“Investors looking towards the State of the Union address for a fresh trading catalyst were left disappointed,” said market analyst Jasper Lawler at London Capital Group.

On the corporate front, Ocado shares slumped as it revealed that a fire at its Andover warehouse - which accounts for around 10% of its total capacity - was still burning and had resulted in significant damage.

Berstein analyst Bruno Monteyne offered two ways to look at the news, firstly that it is a "material dent" in the UK retail business of around 10% but "probably less as other warehouses are scaled up". And for investors who mainly value Ocado as a technology business, this 10% dent in the near term and "should not make a huge difference," he said, though until the cause of the fire is revealed the implications for the technology platform were unclear.

Royal Mail was knocked lower by a downgrade to 'sell' at Societe Generale.

On the upside, however, CRH pushed higher as it emerged that activist investor Cevian Capital has built a stake in the building materials group.

Vodafone enjoyed solid gains as Bank of America-Merrill Lynch upgraded its stance on the stock to 'buy' from 'neutral', saying that there is "light at the end of the tunnel" as headwinds such as Southern European competition and high spectrum costs are now passing and increasingly "baked in" to forecasts.

Housebuilder Barratt Developments rallied after saying it grew profits 19% in the first half of its trading year and that it was in a strong position in spite of the uncertainty around Brexit.

FTSE 250 peer Redrow was also on the front foot as it posted a record set of interim results despite Brexit-related uncertainty hitting sales and announced a 30p per share cash return to shareholders through a B share scheme, in addition to a 10p dividend.

Russ Mould, investment director at AJ Bell, said: "For all the fears around Brexit hurting the housing market, housebuilders continue to churn out the profits and dish out generous cash rewards for shareholders.

“Barratt Developments, in particular, has produced a set of half year results that most companies would die for. Its pre-tax profit is growing faster than revenue, the dividend keeps storming ahead, and it continues to push up the returns it gets from investing in the business."

Berkeley Group, Persimmon and Galliford Try all traded higher.

Retirement products specialist Just Group reversed earlier losses to trade up as it posted a 15% rise in full-year retirement income sales and CYBG surged after it reported "good progress" with the integration of Virgin Money since the merger was completed in October, with lending up and margins stronger than expected despite pressure from the highly competitive UK mortgage market.

Electrocomponents gained as it posted a 6% jump in like-for-like revenue for the four months to 31 January 2019 and Grainger advanced as the residential landlord hailed a good start to the year.

In other broker note action, Centrica was hit by a double downgrade to 'underperform' at RBC, while National Grid was boosted to 'outperform'.

Oil giant BP was upgraded to 'buy' at DZ Bank, Paddy Power was lifted to 'hold' at HSBC and Thomas Cook was initiated at 'neutral' by MainFirst.

Market Movers

FTSE 100 (UKX) 7,173.09 -0.06%
FTSE 250 (MCX) 19,073.41 0.41%
techMARK (TASX) 3,463.37 0.55%

FTSE 100 - Risers

RSA Insurance Group (RSA) 532.40p 2.94%
Evraz (EVR) 528.35p 2.71%
Barratt Developments (BDEV) 560.20p 2.53%
CRH (CRH) 2,351.00p 2.08%
Hargreaves Lansdown (HL.) 1,732.50p 1.85%
Tesco (TSCO) 229.70p 1.77%
Hiscox Limited (DI) (HSX) 1,462.00p 1.67%
GlaxoSmithKline (GSK) 1,548.00p 1.67%
easyJet (EZJ) 1,320.00p 1.66%
BP (BP.) 554.00p 1.28%

FTSE 100 - Fallers

Ocado Group (OCDO) 968.40p -6.34%
TUI AG Reg Shs (DI) (TUI) 1,184.00p -2.23%
Reckitt Benckiser Group (RB.) 5,843.00p -1.96%
Rightmove (RMV) 471.80p -1.74%
Pearson (PSON) 927.80p -1.70%
British American Tobacco (BATS) 2,733.50p -1.69%
Centrica (CNA) 138.20p -1.67%
Diageo (DGE) 2,925.00p -1.37%
Relx plc (REL) 1,715.50p -1.35%
Unilever (ULVR) 4,170.00p -1.31%

FTSE 250 - Risers

CYBG (CYBG) 203.40p 13.76%
Ferrexpo (FXPO) 260.20p 8.73%
Electrocomponents (ECM) 588.60p 6.32%
Superdry (SDRY) 510.50p 5.39%
Grainger (GRI) 240.20p 4.16%
Sophos Group (SOPH) 337.60p 2.68%
Kaz Minerals (KAZ) 624.80p 2.66%
Games Workshop Group (GAW) 3,040.00p 2.53%
Energean Oil & Gas (ENOG) 645.00p 2.49%
Capita (CPI) 118.80p 2.41%

FTSE 250 - Fallers

Dunelm Group (DNLM) 721.00p -2.44%
Hill & Smith Holdings (HILS) 1,113.00p -2.37%
Greencore Group (GNC) 196.00p -2.29%
Entertainment One Limited (ETO) 397.20p -2.26%
Royal Mail (RMG) 280.00p -2.20%
Apax Global Alpha Limited (APAX) 139.00p -2.11%
Stagecoach Group (SGC) 153.40p -2.11%
Vivo Energy (VVO) 129.42p -1.95%
Howden Joinery Group (HWDN) 499.50p -1.87%
Travis Perkins (TPK) 1,225.00p -1.72%