LONDON MARKET MIDDAY: Gold Helps FTSE 100 Overcome Sluggish Start

April 8, 2019

London (April 8)  The FTSE 100 got off to a slow start to the week on Monday, but London's blue-chip index managed to scrape back some early losses and edge into positive territory by midday, as gold miners rose amid the cautious investor attitude.

The FTSE 100 was up 4.27 points, or 0.1%, at 7,451.14 Monday midday. The UK's headline stock index had dipped as low as 7,420.41 in early dealings.

The FTSE 250 was down 11.96 points, or 0.1%, at 19,526.34 at midday, while the AIM All-Share was up 0.2% at 924.66.

The Cboe UK 100 index was down 0.1% at 12,643.08. The Cboe UK 250 was down 0.1% at 17,445.60, and the Cboe UK Small Companies was broadly unchanged at 11,243.63.

European markets got off to a "underwhelming start to the week" in the wake of "sagging" German trade data, said Joshua Mahony, senior market analyst at IG.

Exports fell a calendar and seasonally-adjusted 1.3% month-on-month, preliminary figures from the Federal Statistical Office showed on Monday, while economists had forecast a 0.4% drop. The decline was the first in three months and the biggest since February 2018, when shipments shrunk 2.3%.

On a year-on-year basis, exports increased 3.9% in February, following 1.7% rise in the previous month. Imports climbed 5.1% after a 4.9% rise in January. Both exports and imports grew for a second straight month.

"With both exports and imports falling for the European powerhouse, a worsening picture becomes apparent for the eurozone flagship economy," the IG analyst said. "Hopes of a resurgence in European growth rest largely on US-led trade negotiations, where the EU seems to play second fiddle to negotiations with China."

In European equities, the CAC 40 in Paris and the DAX 30 in Frankfurt were up 0.1% and down 0.3%, respectively, at midday.

In step with Europe, Wall Street is on course for a soft start to the week, with the Dow Jones pointed down 0.2%, the S&P 500 down 0.1% and the Nasdaq 0.2% lower.

Though the US corporate calendar is light at the start of the week, Friday sees earnings season kick off with first-quarter numbers due from banks JPMorgan and Wells Fargo.

In the UK, Prime Minister Theresa May is to visit the French and German leaders for Brexit talks, officials have said. May will meet German Chancellor Angela Merkel in Berlin and French President Emmanuel Macron in Paris on Tuesday.

Time is running out for the UK prime minister to reach a Brexit compromise with the opposition Labour party ahead of a summit with European leaders on Wednesday.

She has angered Tories by holding talks with Labour, with Brexiteers including Boris Johnson concerned she will accept a customs union as the price for a deal with Jeremy Corbyn. The talks with Labour have not yet been confirmed as continuing Monday.

May has told EU leaders she wants a delay to Brexit until June 30 at the latest, with the possibility of an early exit if she can get a deal through Parliament.

But Brussels is expected to demand a clear strategy from the prime minister at a meeting of EU leaders on Wednesday and could insist on a longer delay which would require the UK to participate in European elections.

"It is now abundantly clear that none of the key decision makers in the process desire a no-deal outcome, but that's not to say it won't happen and as Friday's current deadline draws closer the chances of the UK crashing out of the EU remain uncomfortably high," said David Cheetham, chief market analyst at XTB.

Sterling was quoted at USD1.3047 at midday, up from USD1.3020 late Friday.

Amid broad-based losses in London, a higher gold price lifted shares in Mexican precious metals miner Fresnillo as the safe haven asset was boosted by Monday's cautious investment mood.

An ounce of the precious metal was quoted at USD1,296.83 at midday, up from USD1,291.30 late Friday. Fresnillo was the top gainer in the FTSE 100, up 1.1%, while smaller peer Acacia Mining was 2.3% higher in the FTSE 250.

Also gaining in the mid-cap index was drugmaker Indivior, up 3.0% after saying analysis of its Sublocade slow-release injectable found the drug could be more effective as an addition treatment at a higher dose.

In a post-hoc analysis of the phase three Sublocade study, and subsequent open-label study, injecting opioid users who were treated with the 300 milligram Sublocade maintenance dose were found to have spent longer in treatment and were more likely to complete the study than those taking 100 mg.

At the bottom of the FTSE 250 was Saga, slumping 8.3% after UBS downgraded the over-50s insurer to Neutral from Buy in the wake of last week's profit warning.

On Thursday last week, Saga said it is planning a "fundamental shift in strategy" in order to address the long-term challenges facing the business. This was as the insurer and tour operator revealed a swing to loss for the financial year ended January 31, of GBP134.6 million, compared to a GBP180.9 million profit the year before.

Saga shares have tumbled 41% since the start of 2019 alone.

"With management's track record of execution limited, we believe the shares will continue to trade at a depressed multiple near term," said UBS.

Also hurting from a rating downgrade was luxury car maker Aston Martin, slipping 4.0% after Deutsche Bank lowered its recommendation on the stock to Hold from Buy.


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