Equities climb higher, while Johnson and Corbyn attempt to impress the CBI

19 November 2019

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Market news

European equities are mostly higher this morning, with the FTSE 100 and German DAX among the standout performers over 1% higher. The positive sentiment follows firmer levels in Asian markets overnight, amid speculation over the People's Bank of China's policy stimulus and some de-escalation in the Hong Kong protests. On Monday, China's central bank unexpectedly reduced a widely watched lending rate, prompting optimism that other key rates could follow in a concerted attempt to improve slowing growth.

Last week, Wall Street notched its sixth straight week of gains amid rebounding retail sales and talk of a trade deal with China. The S&P 500 closed up 0.8% and the Dow Jones gained 1.2%, hitting another record close in the process. Beijing is more pessimistic on the trade deal this week, however, after President Trump said there would be no unwinding of tariffs, something China thought was agreed.

In Europe, in a week of relatively scarce economic news, much focus is on UK politics ahead of tonight's televised debate, the first of a series scheduled between now and December's election. Both Boris Johnson and Jeremy Corbyn have addressed the Confederation of British Industry (CBI) this week.

The Prime Minister offered business tax breaks amounting to an overall package of £1bn. This attempt to appease those opposed to Brexit was undermined by their concerns about skills shortages from the government's new immigration policies. His promise of a “fundamental review” triggered scepticism in many who have heard previous promises of reform. Johnson has, however, ditched plans to cut corporation tax, instead promising to spend £6bn on the NHS and other public services.

Corbyn, meanwhile, pledged to promote apprenticeships, a week after scaring many business leaders with talk of nationalising Britain's broadband network. He claimed that accusations that Labour was an “anti-business” party was “complete nonsense”. Last week the CBI said that Labour's nationalisation plans “sent a chill through boardrooms at home and abroad”.

Stock focus

EasyJet reported its full-year results in a positive mood this morning, delivering pre-tax profits in line with expectations at £427m. Profits were hit by fuel costs but the airline enjoyed a 9% rise in passenger numbers, to a record 96.1m, after picking up customers from rivals that suffered strikes. Johan Lundgren, the chief executive, called it a “strong performance”.

Melrose Industries, the industrial conglomerate, said that the company is performing in line with 2019 expectations in a brief trading update this morning. Sales in its aerospace division rose 5%, whilst revenue in the automotive division moved the same amount but in the opposite direction. Nevertheless, the board was bullish on shareholder value and said that “improvements in the business are being delivered at pace”.

Saudi Aramco, the government-owned oil behemoth, has come up short of the $2trn valuation that it was aiming for in its forthcoming initial public offering. Saudi Arabia is only floating 1.5% of the company, helping it raise over $25bn. International investors still seem to be sceptical of the new $1.7trn valuation, but Saudi investors are expected to borrow heavily to buy in.

Associated British Foods, which owns Primark, has defended the fast-fashion industry and claimed that high-street shopping is greener than online shopping. Chief executive George Weston was referring to concerns that more environmentally conscious shoppers could avoid Primark, but he said that it was part of the solution, not the problem.

Aviva was the biggest faller in the FTSE 100 yesterday after it abandoned plans to sell its Singapore and China operations. A strategic review had built expectation that the businesses would be sold for $2.5bn, but it is thought that the joint venture failed to attract a high enough bid. Shares in the insurer fell 4.6% yesterday.

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