Gold Price Up, Stocks Down As Risk Aversion Dominates
London (June 6) Stocks in London were lower on Tuesday at midday on investor caution just two days ahead of Thursday's UK general election, with risk aversion benefiting safe-havens such as gold.
The index of London large caps was down 0.1%, or 6.59 points, at 7,519.17. The blue-chip index also was suffering from a fairly resilient pound, amid polls suggesting different outcomes from the election.
A poll by ICM for The Guardian on Monday gave the ruling Conservatives an 11 point lead, with the survey saying the Tories will garner 45% of the vote, while Labour's support rose 1 percentage point to 34%. However, a new Survation poll for Good Morning Britain, released on Tuesday, put UK Prime Minister Theresa May's Tories on 41.5% with Jeremy Corbyn's Labour on 40.4%, little more than a percentage point different.
Sterling was quoted at USD1.2909 at midday, compared to USD1.2923 at the close on Monday.
"Previously we have seen the pound fall with any mention of a hung parliament, yet with the pound rising gradually over recent weeks, it is clear that the markets continue to foresee a Tory majority," said IG analyst Joshua Mahony.
"While the financial markets see things a lot more clearly, there is no doubt that the contest is looking a lot more unpredictable than when Theresa May called the election," Mahony noted.
The FTSE 250 was taking a much bigger hit, with the more UK domestic-oriented index of mid-caps down 1.2% at 19,629.35 points, while the AIM All-Share index was down 1.0% at 978.06.
The BATS UK 100 index was marginally lower at 12,763.97. The BATS 250 was down 1.2% at 17,866.84. The BATS Small Companies was off just 0.3% at 12,065.08.
The risk aversion gave a boost to the gold price, with the precious metal quoted at USD1,291.74 an ounce at midday, against USD1,279.93 an ounce at the London equities close on Monday.
London-listed gold miners Randgold Resources and Fresnillo were up 1.2% and 0.9%, respectively.
The rise in the precious metal's price comes amid political tension in the Middle East, after a group of Arab countries led by Saudi Arabia cut ties with Qatar on Monday, accusing the country of supporting terrorism in Yemen and Syria.
Bahrain, the United Arab Emirates and Egypt, alongside Saudi Arabia, closed their borders and called on Qataris to leave within two weeks. Yemen later joined the action.
A minute of silence was observed in the UK at 1100 BST in memory of the victims of the London terror attack that occurred on Saturday, after the Metropolitan Police on Monday named the three men who were shot dead after vehicle and stabbing attacks.
Detectives believe one of the three men was Khuram Shazad Butt, 27, a British citizen who was born in Pakistan. The second suspected attacker was believed to be Rachid Redouane, 30, who had "claimed to be Moroccan and Libyan" and used a different name and date of birth. Meanwhile, the Corriere della Sera newspaper reported that Italian-Moroccan Youssef Zaghba, 22, who lived in Bologna, has been identified as the third London attacker.
Data published by the British Retail Consortium and KPMG showed that British consumers reduced their spending as household budgets were increasingly squeezed by rising inflation.
Like-for-like sales in the UK declined 0.4% in May from the previous year, when they advanced 0.5%. Sales were expected to drop 0.2%. On a total basis, sales rose 0.2% compared to a growth of 1.4% in May 2016. This was the lowest since January, excluding Easter distortions.
Meanwhile, eurozone retail sales edged up 0.1% in April following a 0.2% increase in March, in line with economist expectations. Year-on-year, retail sales volume growth held steady at 2.5% in April, ahead of forecast for a 2.1% rise. Sales of food, drinks and tobacco rebounded 0.6% following a 0.1% drop a month ago. On the other hand, non-food product sales slid 0.4%, reversing a 0.8% rise.
The Frankfurt stock market reopened on Tuesday after the Whit Monday holiday, with the DAX 30 down 0.7%, while the CAC 40 in Paris was 0.4% lower.
In New York, Wall Street was called for a negative open, with the Dow Jones Industrial Average and the S&P 500 index pointed down 0.1% and the Nasdaq Composite seen marginally lower.
In the US economic calendar, the Redbook index is at 1355 BST, while the JOLTS job openings are at 1500 BST. The API weekly crude oil stocks count is at 2130 BST.
In London, easyJet was up 1.0%, among the best blue-chip performers. The low cost airline said 9.5% more passengers flew with it in May, up to 7.5 million from 6.9 million a year ago. Load factor, however, remained flat at 91.5%.
Irish rival Ryanair also reported year-on-year growth in the number of customers, saying it carried 11% more passengers in May, up to 11.8 million from 10.6 million. Load factor also grew, by 1 percentage point, to 95% from 94%. Ryanair shares were down 0.5%.
Convatec was worst blue-chip performer, down 4.9% at 327.00 pence. Nordic Capital Svenska and Avista Capital Holdings sold 250.0 million shares in ConvaTec for GBP805.0 million, increasing the number of shares sold after strong demand.
UBS said said on Tuesday that Nordic and Avista sold a combined 250.0 million shares at a price of 322.0 pence per share. After the close on Monday Nordic and Avista had said they were going to sell a combined 200.0 million shares in ConvaTec, but increased the size of the placing following strong demand from investors.
In the FTSE 250, AO World was the biggest mid-cap faller, down 6.6%. The online electricals retailer reported a slightly wider loss in its recently-ended financial year, and warned on a slower growth rate for the UK in the first quarter of the new year, despite overall revenue rising in the full year.
AO World said its pretax loss in the year ended March 31 widened slightly to GBP7.0 million from GBP6.7 million the year before, due to set-up costs associated with the early operations of its business in the Netherlands and Germany.
Revenue, however, rose to GBP701.2 million from GBP599.2 million, as UK revenue rose by 13% to GBP629.7 million, and Europe revenue grew by 52% in constant currency to GBP71.5 million.
Source: AllianceNews
