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TradeMoneta News bulletin

market news January 2019

London open: Stocks edge lower as investors eye Brexit vote; Ocado surges

London stocks edged lower in early trade on Monday as investors eyed the upcoming Brexit vote in the House of Commons.

At 0830 GMT, the FTSE 100 was off 0.2% at 6,795.55, while the pound was down 0.2% against the dollar at 1.3170 and 0.1% lower versus the euro at 1.1559.

With all the main European indices lower on Monday after Friday’s rally ran out of steam, Neil Wilson, chief market analyst at Markets.com, said: “Pause for breath or just lack of conviction in any rally? The major indices continue to make new highs from the December troughs so at present it does rather appear momentum is to the upside, albeit the FTSE 100 is a notable underperformer compared with peers.

“It’s of course a massive week for pound traders as the Brexit vote round two takes place on Tuesday. Expect some real volatility around the votes as we witnessed last time there will be lots of noise. But lower implied volatility in GBPUSD suggests a degree of complacency that is not fully pricing in all the risks.”

In corporate news, Tesco was a little weaker following reports over the weekend that it could cut 15,000 jobs and close some of its fresh food and bakery counters.

Wood Group slipped even as it said it has reaped $54m in cash proceeds from selling off stakes in non-core joint ventures in the last couple of months.

On the upside, Ocado surged following a report over the weekend that it has held secret talks with Marks & Spencer over the launch of a food delivery service that could mark the end of its tie-up with Waitrose. M&S shares were also up.

Paragon Banking was on the front foot as the specialist lender posted a 40.6% jump in first-quarter total new lending and backed its full-year guidance.

Automotive fluid technology specialist TI Fluid Systems advanced after saying it expects group results for the past calendar year to be in line with its expectations.

In broker note action, Dixons Carphone rallied to the top of the FTSE 250 after an upgrade to ‘overweight’ at Morgan Stanley, while Halfords and Next were both upgraded to ‘equalweight’.

Vodafone was lifted to ‘buy’ at Kepler Cheuvreux, while National Express was upgraded to ‘buy’ at Liberum.

Gym Group was started at ‘neutral’ by CitiMicro Focus was cut to ‘neutral’ at Goldman Sachs and On The Beach was initiated at ‘buy’ at Jefferies.

US close: Investors cheer progress on resolving government shutdown

Investors pushed US stocks higher going into the weekend amid reports that Republican leaders were trying to broker a deal with their peers from across the aisle to end the partial federal government shutdown.

And shortly before the close of trading in New York, President Donald Trump announced an agreement to re-open the government until 15 February, even as he threatened to invoke ‘national emergency’ powers if necessary in order to move ahead with building a border wall with Mexico.

At the closing bell, the Dow Jones Industrial Average was 0.75% or 183.96 points higher to 24,737.20, while the S&P 500 had picked up 0.85% or 22.43 points to trade at 2,664.76 and the Nasdaq Composite was 1.29% or 91.40 points firmer at 7,164.86.

Sino-US relations remained in focus as investors mulled over conflicting signals ahead of the round of trade talks with Beijing over the following week.

Overnight, US Commerce Secretary Wilbur Ross warned that the US and China were “miles and miles” away from ending their trade dispute. However, he also said that there was a fair chance that China will get a trade deal. Meanwhile, Trump’s economic advisor Larry Kudlow said the US president is optimistic on trade talks.

Oanda analyst Craig Erlam said: “Trade negotiations between the US and China continue to be a major focal point for investors, with an apparent softening of tensions since the G20 in December contributing to the improved risk appetite we’re currently seeing.

“The rhetoric coming from these talks has broadly been positive but this week, it has been a little mixed suggesting talks may have stalled with just over a month to go until the 90-day deadline.”

He added that Kudlow’s comments have “failed to kill suspicions that talks aren’t going as well as previously claimed”.

The USD spot dollar index was sharply lower, shedding 0.84% to 95.7910, while the yield on the benchmark 10-year US Treasury note was ahead by four basis points to 2.76%.

In corporate news, Intel Corp was 5.47% lower after its fourth-quarter revenue came in lower than expected and its outlook disappointed.

Colgate-Palmolive was off 0.58% after the consumer products group’s fourth-quarter earnings fell short of analysts’ expectations.

Elsewhere, Starbucks was 3.63% higher after the coffee chain beat earnings estimates with its fourth-quarter numbers late on Thursday.

Shares in Western Digital Corp rallied 7.52% at the opening bell following the release of second-quarter earnings late on Thursday.

Monday newspaper round-up: Brexit, Lloyds, BT, Scottish Power

The UK will be unable to have frictionless, tariff-free trade under World Trade Organization rules for up to seven years in the event of a no-deal Brexit, according to two leading European Union law specialists. The ensuing chaos could double food prices and plunge Britain into a recession that could last up to 30 years, claim the lawyers who acted for Gina Miller in the historic case that forced the government to seek parliament’s approval to leave the EU. – Guardian

A senior minister has praised the “extremely valuable” work of Conservative MPs demanding radical changes to the Irish backstop in the clearest indication yet that they had the tacit support of Downing Street. Tory Brexiteers are coalescing around an amendment to Theresa May’s Brexit motion tomorrow that vows to back the prime minister’s deal with the EU on condition that the insurance plan to avoid a hard border between Northern Ireland and the Republic is replaced by “alternative arrangements”. – The Times

Credit ratings agency Moody’s has warned that failure to strike a Brexit deal with the EU would undermine investor confidence in the institutions of government. Britain has traditionally been seen as a safe, stable location for investment, but analysts claim a no-deal scenario would put this reputation for competence in danger. – Telegraph

Ireland has launched a last-minute effort to warn Theresa May off any attempt to unravel the backstop, two days before a crucial Commons debate that may decide the next move for the UK’s rudderless Brexit policy. Simon Coveney, the Irish foreign minister and deputy prime minister, insisted the backstop – the mechanism to ensure there will be no hard border between the Irish Republic and Northern Ireland if Britain and the EU fail to strike a free trade deal – was “part of a balanced package that isn’t going to change”. – Guardian

Britain’s biggest lender is to offer 100% mortgages to first-time buyers in a return to lending last seen before the financial crash – but only if the buyer has family that can stand behind the loan. Under the new Lloyds Bank “Lend A Hand” deal, a first-time buyer will be able to borrow up to £500,000 for a new home, without putting down a penny of deposit. – Guardian

Political turmoil is causing unease among British households and forcing shoppers to think twice about spending big, amid the Government’s failure to secure a Brexit deal. Spending crept up slowly before Christmas as families took a cautious approach, according to Deloitte’s quarterly consumer tracker. – Telegraph

Former BP boss Lord John Browne and Russian billionaire Mikhail Fridman are poised to kick-start a £23bn float of a new energy giant that will go toe-to-toe with some of the world’s top oil explorers. A merger of the oil and gas business of their holding company LetterOne with that of German industrial powerhouse BASF is in the final stages, paving the way for the enlarged operation to immediately begin preparations for a blockbuster stock market listing. – Telegraph

BP could save “several hundreds of millions” of pounds a year by using artificial intelligence to make oil drilling more efficient, a senior executive says. The energy company is using big data to identify and develop new fields, as well as squeezing more from existing resources. – The Times

Marks & Spencer has held talks with Ocado about a food delivery deal that could improve its online service. It is understood that the talks, which took place in recent weeks, involved senior figures from both companies and would have been about a potential partnership arrangement that would have given M&S access to Ocado’s delivery centres and vans and lorries. – The Times

Scottish Power is lining up against foreign infrastructure investment funds in the race to buy a £2bn electricity network operator. The utility firm will join the early stages of an auction for Electricity North West (ENW), one of Britain’s nine regional power network companies, which was put up for sale by JP Morgan, the US bank, last year. – Telegraph

Openreach has unveiled plans to hire 3,000 apprentice engineers in the next 12 months to hit its multi-million fibre broadband target, as pressure mounts to deliver high speed internet across the UK. BT‘s broadband infrastructure unit said it was extending its recruitment drive to meet its pledge to provide full fibre broadband to three million homes and businesses by the end of 2020. – Telegraph

Austerity cuts have fallen hardest on deprived communities in the north of England, which are enduring the highest poverty rates and weakest economies, according to a study. The Centre for Cities thinktank study shows that the poorest areas have borne the brunt of council spending cuts. – Guardian

The banking industry will come together with leading business groups to issue emergency Brexit advice to small and medium-sized companies amid concerns that few business owners are prepared for a disruptive “no deal” exit from the European Union. Business groups including the Federation of Small Businesses, the British Chambers of Commerce and the CBI, as well as trade groups and accountancy bodies, met UK Finance, the banking industry trade body, this month to discuss the intervention. – The Times

Unions have demanded meetings with Tesco over reports that the supermarket plans to cut thousands of jobs. Tesco may cut as many as 15,000 jobs and close some of its meat, fish and deli counters in a new drive to bring down costs. – The Times

Government spending with Amazon’s cloud computing business is almost 90 times what it was four years ago. Whitehall spent £589,000 with Amazon Web Services in 2015, rising to almost £51 million last year. – The Times

The Financial Conduct Authority passed allegations from a “whistleblower” to the subjects of their complaint, an internal inquiry revealed. An investigation into alleged failings surrounding the incident by a senior adviser to Andrew Bailey, the chief executive of the City regulator, was itself found to have substandard governance, according to internal FCA documents. – The Times

The influence of “big food” must be curbed around the world if obesity, malnutrition and climate change are to be effectively tackled, according to a report. Overconsumption of junk food and not having enough to eat are two sides of the malnutrition coin, said a commission of experts brought together by the Lancet medical journal. A third major global problem is interlinked – climate change that is worsened by food production, waste and transportation. – Guardian

The US has lifted sanctions on Oleg Deripaska’s energy and aluminium companies after the Russian oligarch agreed to give up control of the groups. The decision late yesterday is likely to have a significant effect on the aluminium market today as it removes some uncertainty over Rusal, the world’s second biggest producer of the metal. – The Times

Dyson, the technology group relocating its headquarters from Britain to Singapore, has received £67 million in tax breaks over the past two years. Recent publicly available accounts for Weybourne Group, the UK-based company behind the Dyson empire, show it received a £43 million benefit from UK government investment incentives in 2017, more than the £37 million overseas government benefit, which helped to cut its £131 million UK corporation tax bill to £106 million. – The Times

The NHS could save £319m over the next 21 years if cycling in major UK cities becomes as popular as in London, according to a report by an environmental charity. About 34,000 incidences of type 2 diabetes, stroke, breast cancer and depression would be prevented in seven key cities between 2017 and 2040, if cycling increased at the same rate as in London since the millennium, according to analysis from Sustrans, the walking and cycling charity. – Guardian

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