London midday: Stocks turn higher as sterling slumps on parliamentary suspension
London stocks had turned higher by midday on Wednesday, outperforming European peers as sterling slumped on news that Prime Minister Boris Johnson plans to suspend parliament.
Just before midday, the FTSE 100 was up 0.3% 7,107.25, while the pound was down 0.7% against the dollar and the euro at 1.2209 and 1.1005, respectively, after Johnson confirmed he would suspend parliament and hold a Queen's Speech on 14 October, just a few weeks before the 31 October Brexit deadline.
The timing of the speech, which sets out the government's future plans, will potentially scupper any attempts by pro-European MPs to stop a no-deal Brexit, although Johnson has denied this.
Oanda analyst Craig Erlam said: "This isn't the first we've heard of these dirty tactics but it was maybe hoped that such un-democratic measures would not be needed or used. Some may have thought them inevitable but perhaps not at this point in the process."
"Either way, it certainly caught markets off-guard and came at a time when the pound had been recouping some of its losses. The FTSE, as ever, is the unintended beneficiary of the plunge in the currency, given that the vast majority of its earnings are generated outside of the UK.
"Summer recess is now unofficially over and Brexit season is upon us. The next couple of months promise to be full of drama, boring parliamentary procedure and a few twists and turns along the way."
Berenberg chief economist Holger Schmieding said: "In a way, a need for a Prime Minister to suspend his own parliament because he seems to lack a majority for his key policy - the approach to Brexit - is not exactly a sign of strength, to put it mildly."
The weaker pound meant the Footsie was able to outperform its peers in Europe, as worries about a recession kept markets there in the red.
CMC Markets analyst Michael Hewson said concerns over bond market recession warnings continue to weigh on investors’ minds.
"There’s been a lot of talk of yield curve inversions as a portent of an approaching recession, however the more significant development is the decline in 30-year yields below the Fed funds rate, something that has never happened before," he said.
In UK equity markets, supermarkets were the standout gainers, with Tesco, Morrisons and Sainsbury all higher after Investec upgraded its rating on Morrisons to 'buy' from 'hold'.
Oil giant BP gained after agreeing on Tuesday to sell its entire Alaska business to private oil and gas company Hilcorp Energy for $5.6bn.
Bakery chain Greggs was a high riser after UBS upgraded its stance on shares of the bakery chain to 'buy' from 'neutral', pointing to significant growth opportunities.
Fashion retailer Ted Baker was trading higher after signing a deal with Japan's Sojitz Infinity to sell its goods in Japanese department stores.
On the downside, housebuilders took a beating amid fears of a no-deal Brexit, with Persimmon, Berkeley Group, Barratt Developments, Bovis Homes and Redrow all weaker. Airlines were also on the back foot, with British Airways and Iberia parent IAG and EasyJet lower.
Prudential fell after Bank of America Merrill Lynch took the stock off its Europe 1 List, which is its department-wide list of best research ideas.
Elsewhere, oil industry engineer Petrofac was in the red after it reported a fall in interim core earnings due to a decline in contract margins, higher overheads and higher tax and warned of lower revenues in 2020. Earnings before interest, tax, depreciation and amortisation fell 9% to $305m.
Retailer WH Smith reversed earlier gains even as it said its travel division continues to perform strongly and that results for the year to the end of August will be in line with expectations.
Outside the FTSE 350, shares in Thomas Cook fell sharply as the embattled travel operator said that it has agreed the main terms of a £900m rescue deal. As part of the deal, China's Fosun - already the largest shareholder - will take a 75% stake in the tour operating business and a 25% stake in Thomas Cook's airline for £450m. Meanwhile, the company's core lending banks and noteholders will shell out £450m for a 75% stake in the airline and a 25% share of the tour operator.
Market Movers
FTSE 100 (UKX) 7,107.25 0.25%
FTSE 250 (MCX) 19,193.92 -0.73%
techMARK (TASX) 3,816.22 0.09%
FTSE 100 - Risers
Tesco (TSCO) 218.74p 2.36%
BP (BP.) 497.65p 1.97%
Reckitt Benckiser Group (RB.) 6,362.00p 1.73%
Centrica (CNA) 67.76p 1.65%
Pearson (PSON) 820.40p 1.41%
Sainsbury (J) (SBRY) 198.70p 1.25%
Royal Dutch Shell 'A' (RDSA) 2,274.50p 1.18%
Standard Chartered (STAN) 613.40p 1.09%
United Utilities Group (UU.) 803.60p 1.08%
BHP Group (BHP) 1,690.60p 1.08%
FTSE 100 - Fallers
Persimmon (PSN) 1,875.00p -2.85%
Berkeley Group Holdings (The) (BKG) 3,860.00p -2.70%
Barratt Developments (BDEV) 631.00p -2.50%
Taylor Wimpey (TW.) 144.75p -2.46%
Prudential (PRU) 1,315.00p -2.45%
Mondi (MNDI) 1,557.50p -2.41%
Aveva Group (AVV) 3,756.00p -2.24%
Ocado Group (OCDO) 1,212.00p -1.94%
International Consolidated Airlines Group SA (CDI) (IAG) 414.60p -1.92%
Standard Life Aberdeen (SLA) 246.20p -1.79%
FTSE 250 - Risers
CYBG (CYBG) 140.90p 3.68%
Premier Oil (PMO) 77.46p 2.51%
Tullow Oil (TLW) 215.40p 2.43%
Centamin (DI) (CEY) 152.55p 2.28%
PureTech Health (PRTC) 274.34p 1.99%
Polymetal International (POLY) 1,168.00p 1.48%
Galliford Try (GFRD) 596.00p 1.45%
William Hill (WMH) 165.40p 1.44%
Hochschild Mining (HOC) 221.54p 1.44%
Pennon Group (PNN) 734.99p 1.18%
FTSE 250 - Fallers
Wood Group (John) (WG.) 372.70p -4.46%
Syncona Limited NPV (SYNC) 225.00p -3.85%
Bank of Georgia Group (BGEO) 1,340.00p -3.67%
Hammerson (HMSO) 224.10p -3.65%
SIG (SHI) 122.10p -3.48%
Petrofac Ltd. (PFC) 393.20p -3.15%
Bovis Homes Group (BVS) 1,023.00p -3.03%
PayPoint (PAY) 887.00p -2.95%
Redrow (RDW) 554.00p -2.64%
Crest Nicholson Holdings (CRST) 348.05p -2.56%