London close: Stocks edge higher as pound continues to drift lower
London stocks were a touch higher at the start of the week as traders kept their powder dry at the start of a week that's jam-packed with central bank policy announcements.
The FTSE 100 was up 0.16% at 7,357.31, while the pound downby 0.21% versus the US dollar to 1.2566 and by 0.39% against the euro to 1.1188, respectively, as investors eyed the second round of voting in the Tory leadership contest on Tuesday.
IG market analyst Joshua Mahony said: "Johnson remains a huge favourite to become the next prime minister, and given his unpopularity in Brussels, coupled with his insistence that a no-deal Brexit remains on the table, there is good reason to believe we will see the pound continue to suffer if he gets into power.
"Firms have been open about their lack of preparation for a no-deal Brexit, yet should Boris Johnson become prime minister, we are sure to start seeing a sharp rise in stockpiling ahead of the October deadline."
On a related note, JP Morgan's Mislav Matejka recommended clients "be long Exporters, in particular Energy, vs Domestic plays, as politics is likely to descend into a lose-lose proposition for the UK domestic plays."
Away from politics and Brexit, it's a big week for central banks, with the Bank of England, the Federal Reserve and the Bank of Japan all due to make their latest policy announcements.
Neil Wilson, chief market analyst at Markets.com said: "All eyes are of course on the Fed meeting this week. It’s hard to recall a time we headed into an FOMC meeting with so much at stake and with so much uncertainty about what might be agreed. This means the potential volatility around the event is likely to be substantially higher than at most recent FOMC meetings. Traders may start to show some nervousness ahead of the Fed meeting if they think it won’t be accommodative as hoped."
As far as the BoE is concerned, Wilson said "we could see some hawks on the MPC vote for a rate hike to signal their intent, as it appears waiting for Brexit clarity could take a while longer than policymakers had anticipated".
In the background meanwhile, in remarks to CNBC, US commerce secretary Wilbur Ross said it was "very hard to put a timetable on a trade deal with China" although he believed the two countries would "eventually, probably" make a deal, but if not, then the White House was "happy" to continue moving ahead with both existing and planned tariffs.
In equity markets, RBS was a high riser as it said the completion of a merger between Alawwal Bank and Saudi British Bank would boost its capital.
Babcock rallied after confirming it had rejected in January a "highly preliminary" takeover approach from outsourcer rival Serco - a combination that would create a £4bn defence giant. RBC Capital Markets said there is some merit in a merger.
"Babcock, in our view, needs a new management team to restore credibility, there would be decent synergies given the overlap and Serco’s platform can take more revenue, although it would increase its exposure to the UK.
"However, given the impending change in Chairman at Babcock and the fact that Serco has just done a US deal and raised money - the timing may now have passed, although the fact that all this has been leaked now, may suggest that interested parties wanted to bring the approach to Babcock’s beleaguered shareholders' attention."
On the downside, airlines were under the cosh, with EasyJet, International Consolidated Airlines Group and Wizz Air all lower after Lufthansa downgraded its 2019 profit forecast on the back of market-wide overcapacities and growing competition from low-cost carriers.
Construction group Kier slumped after saying it will cut about 1,200 jobs as it looks to reduce debt and deliver annual cost savings of around £55m from 2021. As part of the new strategy announced, Kier will simplify its portfolio by selling or substantially exiting non-core activities. This includes Kier Living and the company's property, facilities management and environment services segments.
British American Tobacco was knocked lower by a downgrade to 'underweight' at Morgan Stanley.
Centrica was initiated at 'underperform' at Macquarie, while National Grid was started at 'outperform', along with Pennon, Severn Trent and United Utilities. The Australian broker initiated Drax at 'neutral'.
Elsewhere, Hammerson was lifted to 'add' at Peel Hunt, while Shaftesbury was upgraded to 'hold' and JPJ Group was boosted to 'buy'.
FTSE 100 - Risers
Hikma Pharmaceuticals (HIK) 1,700.50p 3.34%
Evraz (EVR) 709.40p 1.93%
Standard Chartered (STAN) 689.20p 1.89%
Micro Focus International (MCRO) 2,009.00p 1.75%
Rolls-Royce Holdings (RR.) 907.00p 1.70%
ITV (ITV) 107.00p 1.66%
SEGRO (SGRO) 730.80p 1.64%
Scottish Mortgage Inv Trust (SMT) 521.50p 1.56%
Hargreaves Lansdown (HL.) 1,898.50p 1.52%
Hiscox Limited (DI) (HSX) 1,712.00p 1.42%
FTSE 100 - Fallers
Smith (DS) (SMDS) 332.20p -5.11%
easyJet (EZJ) 888.40p -4.37%
Centrica (CNA) 89.28p -2.45%
International Consolidated Airlines Group SA (CDI) (IAG) 450.60p -2.19%
Ocado Group (OCDO) 1,142.00p -1.90%
Fresnillo (FRES) 825.80p -1.67%
Associated British Foods (ABF) 2,423.00p -1.62%
British American Tobacco (BATS) 2,840.00p -1.58%
SSE (SSE) 1,105.50p -1.47%
Flutter Entertainment (FLTR) 5,834.00p -1.32%
FTSE 250 - Risers
Saga (SAGA) 36.86p 2.96%
Pershing Square Holdings Ltd NPV (PSH) 1,372.00p 2.85%
IWG (IWG) 345.90p 2.81%
Hammerson (HMSO) 289.80p 2.58%
Pets at Home Group (PETS) 176.50p 2.56%
NewRiver REIT (NRR) 193.40p 2.55%
Cobham (COB) 106.10p 2.41%
Domino's Pizza Group (DOM) 251.80p 2.40%
Cineworld Group (CINE) 285.80p 2.33%
Moneysupermarket.com Group (MONY) 393.80p 2.18%
FTSE 250 - Fallers
Kier Group (KIE) 107.37p -17.43%
Amigo Holdings (AMGO) 250.00p -9.42%
Woodford Patient Capital Trust (WPCT) 55.00p -5.17%
Sirius Minerals (SXX) 14.65p -4.75%
Centamin (DI) (CEY) 105.00p -3.98%
Just Group (JUST) 53.00p -3.64%
Stobart Group Ltd. (STOB) 102.20p -3.40%
Metro Bank (MTRO) 565.00p -3.25%
Indivior (INDV) 43.75p -2.65%
Wizz Air Holdings (WIZZ) 3,531.00p -2.59%