FTSE-100 jumps as traders focus on sterling, Brexit and GDP
The markets staged a mini-St Leger’s Day bounce today in early trading after a quiet morning in Asian markets and a pause for breath of the yo-yo US technology stocks.
An old City adage instructs investors to “sell in May, go away, come back on St Leger’s Day”, and London’s premier index jumped 22.61 points to 6025.93 after the markets got confirmation of a bid for the London Stock Exchange’s Italian business from a Euronext consortium.
Shares in the LSE gained 1% on the news.
Astra Zeneca had a strong early start after Pascal Soriot, the chief executive, made positive noises about his hopes for a Covid vaccine. He played down the hiccup this week of one person on the trial suffering side effects, saying it was extremely common in trials. The shares gained 1%, adding 4 points to the Index.
It could be that currencies turn out to be more the talking point after a sharp fall in the pound yesterday greeted yet more worries about the Brexit trade deal negotiations.
Continued uncertainty about whether the British team are serious about exiting with No Deal and falling into World Trade Organisation terms hit sterling hard. Traders were taking the view that, while the EU would also suffer from such an outcome as its exports to the UK get hit, Britain has the most to lose.
Looking shorter term, today’s relatively decent GDP data made no impact on sterling, which was flat in early trading. Brexit is clearly uppermost in traders’ minds.
The euro is in investors’ sights after the European Central Bank yesterday said it was relaxed about the currency’s strength, suggesting its super-easy monetary policy was set to stay for the long term.
Rio Tinto shares fell 1% after its chief executive Jean-Sebastien Jacques and two other executives quit following the Juukan Gorge scandal, which saw the mining giant blow up two rock shelters sacred to Aborigines in Western Australia’s Pilbara region. Iron ore boss Chris Salisbury and corporate affairs chief Simone Niven will both also leave.
Mixed opinions on investment platform AJ Bell came before the market opened, with Numis saying the case for owning the shares “remains clear and simple” and Jefferies telling clients to sell.
Numis said, following a webinar from the management, that AJ Bell’s market is showing structural growth and it is taking market share from rivals. It set a target price of 451p and told investors to Hold.
Jefferies said while the webinar highlighted its popularity among users, more telling was the difficulty of getting potential customers to leave rival platforms and come across, even with the competitive edge of cheaper pricing that AJ Bell has. “Unless that edge can be converted into very high growth, we cannot justify the current [share price] multiple,” it concluded.
The shares opened today up 2p at 427p. Numis has a target of 451p, Jefferies of 280p.
As they say in another old City adage, it takes two opinions to make a market.