Tuesday, 26 February: The dip in to the red at the end of Tuesday trade on the main London index came as a result of a stronger pound, despite a number of positive stock stories driving individual companies higher. Sterling rallied at PM May mulled over the extension of Article 50 and thus delaying the UK’s departure from the EU. The gains in the pound had been more pronounced earlier in the day before dipping back from May 2017 highs against the euro. New entries to MP’s calendars are three votes in 2 weeks’ time. Firstly, they will vote on May’s “revised” Brexit plan on 12 March. Should that not be approved, they will return the following day to vote on whether to leave with no-deal. Failing either of these being passed, they will then return once more on 14 March to vote on a 2-month extension to Article 50. Best keep that week free.
The fallout from a stronger pound sent the FTSE 100 >1% lower within the first half hour of trade, although these losses reversed over the course of the day. Leading the index was online grocery retailer Ocado after announcing they were in discussions with M&S over a possible joint venture. Reports of a deal between the two first surfaced at the end of January and today M&S responded to media speculation that they were on the verge of a £1.8bn joint venture. Further commenting that no deal was guaranteed, investors reacted enthusiastically to the news, sending Ocado up 11.71% at the close while M&S ended the day 3.23% higher.
Shaking off yesterday’s Help-to-Buy exclusion uncertainty, Persimmon rose on the back of full year results (+1.87%). Despite the ongoing Brexit uncertainty surrounding the housebuilding sector, the group reported a 13% rise in pretax profits, benefitting from both rising volumes and sales. Demonstrating continuing stronger margins, 2018’s new housing operating margins rose from 28.2% to 30.8%. The group warned of flatter completions numbers for the upcoming year after a 2.5% rise this year. Dividend returns were flat year on year. Peers in the sector rallied with Taylor Wimpey closing 3.39% ahead of their full year results tomorrow.
At the other end of the index, Mexican silver miner Fresnillo fell c.8% after weaker than expected full year results, further commenting on additional cost headwinds to come. Higher operating costs resulted in pre-tax profits falling well below consensus, although the group are set to be opening a new mine, with an announcement set to be made in due course. Also falling short of expectations was chemical company Croda; the group’s personal care division, who serve customers such as L’Oreal, reported a fall in organic sales in the final quarter of the year and thus leading to an EPS short-fall.
The pound continued to rally as European markets ended the day, rising c.1% against both the euro and dollar to stand at €1.17 and $1.33 respectively, the latter reaching a 2019 high. The FTSE 100 closed the day 0.45% lower, although the more domestically orientated FTSE 250 edged 0.15% higher, led by building merchants Travis Perkins reporting a solid 2018 performance (+12.52%).