Despite positive moves from the heavyweight banking and mining sectors, leading shares have lost early gains to fall into negative territory.
Worries about a possible Greek default were to the fore after Friday’s fractious meeting between the country and its eurozone creditors, while investors are also nervous ahead of this week’s US Federal Reserve meeting. With weaker US data recently it is not clear when the Fed has pencilled in an interest rate rise, with some analysts suggesting a move in June may still be on the cards, but others believing the central bank will wait a little longer.
The imminent UK election is also having an effect.
The uncertainty has helped push the FTSE 100 down 25.35 points to 7045.35, after an early rise to 7106.
HSBC is leading the way, up 18.3p at 648p following Friday’s news it was considering moving its headquarters out of the UK, which would save it from some of the banking levy costs it has to pay. It has also been lifted by reports over the weekend that it may spin off its UK retail banking business.
Standard Chartered - which may also benefit from changing its domicile - is close behind, up 28.5p to 1098.5p.
With metal prices including iron ore prices on the rise again, Rio Tinto has risen 0.5p to £30.04 and Anglo American has added 11p to £10.93.
Ahead of a Channel 4 programme on the business Sports Direct International has been lifted 15p to 628p by RBC analysts moving to sector perform from underperform, albeit with a target price cut from 700p to 650p. It said:
Although we believe the market has underestimated the dollar sourcing risk for SPD from 2017, we think the two key share price drivers of international and online sales are improving again and valuation is now more reasonable.
The same bank is positive on SuperGroup, up 38p to 982.5p:
We see potential for a more consistent trading performance to drive a re-rating of SuperGroup. Superdry is showing strong online momentum and under its new management team is working to improve its product offer, inventory management and buying process. Valuation appears undemanding given that SuperGroup should drive double-digit top and bottom line growth.
But housebuilders are under pressure, with traders suggesting they are being undermined by Labour’s plans for rent controls. Taylor Wimpey is down 2.9p to 166.3p and Barratt Developments is 9p lower at 532p.
Elsewhere Tullow Oil is 8.7p higher at 426.7p after it was cleared to continue current drilling projects in West Africa, following a dispute between Cote D’Ivoire and Ghana. The ruling went mainly in Ghana’s favour, allowing Tullow and its partners to keep working on fields including the Ten project, although no new drilling will be allowed for the moment. Barclays analysts said:
Although the ruling is broadly as we anticipated, we believe it should be viewed positively and reiterate our overweight rating and 550p price target.
Tullow requires clarification on whether the ruling on no new drilling until the case is resolved (due during 2017) includes further Ten development wells. In a pessimistic scenario, plans for additional development drilling from late-2016 may be restricted. However, the impact of this could be mitigated by a negotiated resolution between the countries or a strong production performance from the initial well stock. We believe clarity on the issue could come during the next month, but do not see it as an urgent concern.
Exane BNP Paribas said:
With no suspension to the Ten project, ample credit headroom and revised covenants, concerns over Tullow’s balance sheet should be alleviated. We expect Tullow to get to Ten first oil mid-2016 without exceeding available credit lines or breach covenants on our conservative oil price deck (2015/16/17: $57/63/68 a barrel). Therefore, we don’t see Tullow having to slow its East Africa development to conserve cash.
