LONDON MARKET OPEN: Stocks Wary Ahead Of Latest US-China Trade Talks

(Alliance News) - Stocks in London started Wednesday's session cautiously higher as traders look ahead to the latest round of US-China trade talks starting on Thursday, set against a backdrop of rising tensions between the world's two largest economies.

The FTSE 100 index was up 13.66 points, or 0.2%, at 7,156.81 early Wednesday. The FTSE 250 was up 45.75 points, or 0.2%, at 19,246.65, and the AIM All-Share was up 0.1% at 857.95.

The Cboe UK 100 index was down 0.1% at 12,137.30. The Cboe UK 250 was 0.1% higher at 17,145.62 and the Cboe UK Small Companies flat at 10,816.70.

In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were down 0.1% and flat respectively in early trade.

"Trade tensions continue to ramp up between the US and China. These tensions caused a heavy sell-off on Wall Street yesterday and the momentum was picked up by the Asian markets...Over in Europe, we are expecting the market participants to stay on the back foot and caution is the main word among them. Although, we may see some bargain hunters coming into the market, but we do not expect any landslide moves," commented Naeem Aslam at ThinkMarkets.

The US said Tuesday it would curb visas for Chinese officials until Beijing ends its "repression" of Uighurs and other Muslims in the western region of Xinjiang, a day after imposing commercial restrictions.

China voiced anger at the move, denying any human rights abuses in Xinjiang and accusing the US of using "made-up pretexts for its interference".

The actions on Xinjiang come as a trade war shows no signs of abating between the US and China, the world's two largest economies, which have imposed tariffs on billions of dollars worth of each other's goods.

In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.6%. In China, the Shanghai Composite ended up 0.4%, while the Hang Seng index in Hong Kong is down 0.7% in late trade.

In European political news, Leo Varadkar has warned Boris Johnson negotiating a new Brexit agreement by the crucial EU summit on October 17 and 18 will be "very difficult".

The UK prime minister's chances of a breakthrough with Brussels were looking increasingly unlikely on Tuesday after accusations from Number 10 that the bloc was making it "essentially impossible" for Britain to leave with a deal.

Johnson will hope to gain concessions from his Irish counterpart Varadkar during in-person talks anticipated later this week. But with the October 31 deadline rapidly closing in, the taoiseach warned of the challenges of securing a new deal by next week – a key period in the Brexit saga with the summit in Brussels.

Johnson needs a deal sorted by the end of the October 17-18 summit if he is to avoid a dilemma over the Benn Act, which compels him to ask Brussels for an extension if he cannot get an agreement past MPs when he returns, a move he has ruled out taking.

Tensions are high between the UK and the bloc, with fury in Brussels on Tuesday following a series of No 10 briefings claiming German Chancellor Angela Merkel had made clear a deal was now "overwhelmingly unlikely". European Council President Donald Tusk accused Johnson of engaging in a "stupid blame game" ahead of next week's crucial EU summit.

Sterling was quoted at USD1.2209 early Wednesday, flat on USD1.2204 at the London equities close on Tuesday. Late Monday, sterling had been trading above the USD1.23 mark.

"Looking at the sterling-dollar pair, we have seen some serious sell-off for the currency because speculators saw an opportunity, they wanted to draw blood out of this trade. Especially that the deadline, October 31, is just around the corner. The pound-sterling one-week risk reversal has skyrocketed and this simply means that a significant number of players are expecting larger volatility," said ThinkMarkets' Aslam.

In economic events on Wednesday, US Federal Reserve Chair Jerome Powell will be speaking at 1600 BST on Wednesday ahead of the release of Federal Open Market Committee minutes at 1900 BST.

This is after Powell on Tuesday said the American economy should continue its expansion, with strong jobs markets but with price pressures in check and inflation approaching the central bank's target.

In addition, he said the Fed will soon announce more permanent measures to boost banks' cash reserves after a recent shortage sent short-term interest rates skyrocketing. This will include plans to buy more short-term Treasurys to boost reserve levels, he said.

Investors overwhelmingly expect the central bank to lower rates again later this month. The Fed has cut interest rates twice this year to help cushion the American economy against shocks from the US-China trade war, including a sharp drop in investment, and from plummeting demand from foreign markets.

In London, Just Eat was up 3.0% after Amsterdam-listed Takeaway.com - with which it intends to merge in an all-share deal - reported a strong third quarter.

Takeaway.com reported total order growth of 87% in the third quarter of 2019, processing 41.6 million orders. Takeaway.com said its merger with Just Eat should be completed around the year-end.

Following completion, Just Eat shareholders will own 52% of the combined firm, with Takeaway.com investors the remainder.

Takeaway.com shares were up 2.7% in Amsterdam.

In the FTSE 250, GVC Holdings was up 1.7% after upgrading its annual earnings guidance following a better-than-expected third-quarter UK retail performance.

In the three months to September 30, total group net gaming revenue fell 1% at actual rates and 2% at constant currency.

Trends in GVC's UK Retail business remain ahead of initial guidance, the firm said, with like-for-like net gaming revenue down 18% in the quarter, driven by the cut in B2 maximum stakes to GBP2.00.

European Retail revenue was 4% behind last year, and GVC reported an "encouraging start" in the US following the launch of the BetMGM mobile app in New Jersey.

GVC upgraded its annual earnings before interest, tax, depreciation and amortisation guidance to a range of GBP670 million to GBP680 million, from the range of GBP650 million to GBP670 million seen previously.

"I am delighted that the group's financial performance has allowed us to upgrade our full year Ebitda expectations again. Online momentum remains strong across all major territories, with [net gaming revenue] up 12% in the quarter despite the prior period containing part of the World Cup," said Chief Executive Kenneth Alexander.

At the bottom of the index was promotional products maker 4Imprint, down 5.6% after HSBC initiated the stock with a Hold rating. Luxury car maker Aston Martin Lagonda Global Holdings, resumed with a Hold rating at Deutsche Bank, was down 4.8%.

Domino's Pizza Group was down 1.9% after Jefferies started the firm with an Underperform rating.

By Lucy Heming; lucyheming@alliancenews.com

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