London open: Stocks muted after trade deal; Pearson slumps on update

London stocks were muted in early trade on Thursday after the US and China signed their ‘phase one’ trade deal, as investors sifted through a raft of corporate updates from the likes of Pearson and Whitbread.

At 0845 GMT, the FTSE 100 was down 0.1% at 7,633.40.

Neil Wilson, chief market analyst at Markets.com, said: "Maybe with the trade deal signed we can refocus on the data and, more importantly, what to the reaction function of the Fed will be to any softness in the coming months.

"Yes, the deal may be a bit puny for some, and there are plenty of risks ahead, but in coming to this agreement they’ve apparently averted never ending war. And doubts about the details of the deal had surfaced in recent days, so the fact it’s done is a relief. The truce will require calm on both sides to prevail and for lasting peace - a far more substantive phase 2 deal - to be reached."

On home turf, investors were mulling over the latest survey from the Royal Institution of Chartered Surveyors, which showed that greater political clarity following December’s general election helped boost sentiment across the UK’s property market.

According to the RICS UK Residential Market Survey for December, sales expectations for the next 12 months rose to a net balance of +66%, compared to +35% in November.

The survey also reported +17% more respondents saw a rise rather than a fall in enquiries from new buyers, compared to -5% in November, while the number of agreed sales edged up to +9%, the first positive number since May.

Regarding house prices, the survey’s headline net balance came in at -2%, compared to -11% previously, which RICS said signalled a "broadly flat national trend". Looking further ahead, however, and near-term price expectations were revised higher in all parts of the UK.

Simon Rubinsohn, RICS chief economist, said: "The signals from the latest survey provides further evidence that the housing market is seeing some benefit from the greater clarity provided by the decisive election outcome.

"Whether the improvement in sentiment can be sustained remains to be seen, given that there is so much work to be done over the course of this year in determining the nature of the eventual Brexit deal. However, the sales expectations indicators clearly point to the prospect of more upbeat trend in transactions emerging with potential purchases being more comfortable in following through on initial enquiries."

In equity markets, education publisher Pearson was the biggest loser, followed by Premier Inn owner Whitbread.

Pearson said that it met full-year guidance, with flat underlying revenue and adjusted operating profit of around £590m as weaker sales in US Higher Education Courseware were offset by a strong performance elsewhere. It also announced the departure of chief financial officer Coram Williams.

Whitbread was on the back foot after it said like-for-like third-quarter sales fell 1.3% as weak accommodation demand offset a good performance in food and beverages.

Recruiter Hays retreated as it warned of a lower first-half operating profit as its main markets were hit by economic uncertainty. Hays cited Brexit-related worries in the UK, the Australian bushfires, a slowdown in Germany and French strikes for a fall in fees as companies delay hiring staff. The US/China trade war and Hong Kong protests have also impacted sentiment.

FTSE 250 food manufacturer Bakkavor was also trading lower despite saying that full-year results will be in line with expectations and posting a rise in sales.

SSE and Compass were both in the red as their stock went ex-dividend, while GlaxoSmithKline and Spirent Communications were hit by rating downgrades at Barclays.

On the upside, Associated British Foods rallied as the Primark owner said group revenue in the 16 weeks to 4 January 2020 rose 4%.

Oilfield services provider Wood Group and gambling company Rank gained on the back of well-received trading updates, while Electrocomponents was boosted by an upgrade to ‘overweight’ at JPMorgan.

Market Movers

FTSE 100 (UKX) 7,633.40 -0.12%
FTSE 250 (MCX) 21,730.32 0.08%
techMARK (TASX) 4,254.53 -0.32%

FTSE 100 - Risers

Associated British Foods (ABF) 2,632.00p 3.01%
London Stock Exchange Group (LSE) 7,746.00p 1.31%
Coca-Cola HBC AG (CDI) (CCH) 2,781.00p 1.20%
NMC Health (NMC) 1,361.00p 1.15%
Experian (EXPN) 2,665.00p 0.87%
Sainsbury (J) (SBRY) 216.80p 0.84%
Persimmon (PSN) 2,824.00p 0.61%
Hikma Pharmaceuticals (HIK) 1,986.50p 0.58%
Centrica (CNA) 91.86p 0.55%
British Land Company (BLND) 592.00p 0.54%

FTSE 100 - Fallers

Pearson (PSON) 534.80p -13.52%
Whitbread (WTB) 4,564.00p -5.64%
SSE (SSE) 1,458.50p -1.88%
Compass Group (CPG) 1,951.00p -1.04%
GlaxoSmithKline (GSK) 1,816.60p -1.01%
Mondi (MNDI) 1,595.50p -0.90%
Evraz (EVR) 388.40p -0.79%
Standard Chartered (STAN) 698.20p -0.71%
Barclays (BARC) 177.28p -0.68%
Auto Trader Group (AUTO) 565.00p -0.63%

FTSE 250 - Risers

Wood Group (John) (WG.) 400.10p 8.14%
Rank Group (RNK) 278.50p 4.31%
Fisher (James) & Sons (FSJ) 2,025.00p 2.58%
Galliford Try (GFRD) 155.66p 2.50%
Electrocomponents (ECM) 701.60p 2.27%
PZ Cussons (PZC) 203.50p 1.95%
Hilton Food Group (HFG) 1,050.00p 1.94%
Grainger (GRI) 303.00p 1.61%
IP Group (IPO) 66.20p 1.53%
BMO Commercial Property Trust Limited (BCPT) 113.20p 1.43%

FTSE 250 - Fallers

Tullow Oil (TLW) 47.04p -5.69%
Hays (HAS) 163.40p -5.33%
Bakkavor Group (BAKK) 130.40p -4.96%
TI Fluid Systems (TIFS) 238.50p -3.83%
Spirent Communications (SPT) 238.50p -3.83%
Big Yellow Group (BYG) 1,140.00p -2.23%
QinetiQ Group (QQ.) 352.80p -1.51%
Coats Group (COA) 78.40p -1.51%
C&C Group (CCR) 396.50p -1.49%
Direct Line Insurance Group (DLG) 323.50p -1.34%