London stocks finished with solid gains and near their session highs on Wednesday despite the powerful drag from Sainsbury's after the competition watchdog cast doubt over its merger with Asda, with investors waiting on the release of the Federal Reserve meeting minutes after the close and possible developments from Theresa May's latest talks in Brussels.
The FTSE 100 was 0.69% firmer at 7,228.62.
In currency markets, meanwhile, the pound was in “a bad mood” throughout most of the session, said Spreadex analyst Connor Campbell, highlighting European Commission President Jean-Claude Juncker's claim that he “does not expect a breakthrough” from the latest Brexit discussions and the fact that three Tory MPs have defected from the party to join the headline-dominating Independent Group – a move that could hasten a general election.
Nonetheless, by the end of trading, Sterling had snapped back and was edging higher by 0.06% versus the US dollar to 1.3070 while against the single currency it had pared its losses to just 0.14% to 1.1503.
More broadly, Sino-US trade relations were in focus after US President Trump told reporters at the White House on Tuesday that talks between the two nations were “going very well” and suggested that the 1 March deadline for raising tariffs could be extended.
On the UK data front, the latest industrial trends survey from the Confederation of British Industry showed that the total orders balance increased to +6 in February from -1 in January, coming in ahead of consensus expectations of -5.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the orders balance is likely “misleadingly strong”.
“The pick-up in the total orders balance in February to its 2018 average level suggests that the recent downturn in manufacturing output is just a blip, but we doubt it is giving an accurate steer at present.
“Manufacturers are asked to report whether orders are above or below 'normal' levels, meaning that the survey tends to be slow to reflect downturns that begin after extended periods of growth. For instance, the CBI's survey took about six more months than Markit's PMI to flag up the recession in 2008. As a result, we're still placing more weight on the latter, which pointed to output merely holding steady in January.”
In corporate news, Lloyds rallied as it lifted its dividend 5% and proposed a £1.75bn share buyback after a year of “strong strategic and financial delivery”. Underlying profits, excluding restructuring costs and slightly larger than expected provisions for PPI compensation, were up 6% to £8.1bn, slightly short of expectations.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Lloyds is still in good shape, despite what its share price performance might suggest. The bank has managed to grind some extra income out of a static loan book, and has controlled costs while investing to become more efficient.”
Indivior nudged up after saying it was releasing an authorised generic version of its Suboxone opioid addiction treatment in the US after losing a court bid to stop a copycat version made by India-based rival Dr. Reddy's Laboratories.
Elsewhere, HSBC staged a small bounce from its results-induced losses a day earlier, firmly on the front foot even as JPMorgan cut the stock to 'underweight' from 'neutral'.
On the downside, Sainsbury's tanked nearly 19% as the UK competition watchdog warned that its proposed merger with Asda could result in higher prices and reduced ranges in hundreds of local areas.
Sainsbury's immediately responded that it “fundamentally disagreed” with the provisional findings from the Competition & Markets Authority, which suggested possible remedies including selling off one of the Sainsbury's or Asda brands, divesting large chunks of stores or even prohibition of the merger.
Neil Wilson, chief market analyst at Markets.com, said investors are rightly accepting that this deal is dead in the water.
“Sainsbury's may continue to make its case but the barriers to clearance now seem too high to clear, and even if something could wash with the CMA it would not be acceptable to Asda/Sainsbury's.
“Sainsbury's is the squeezed middle, losing market share to discounters and simultaneously losing out to more premium brands. The worry is it has no credible plan except this merger. Mike Coupe may be singing 'we're in the money', but to borrow another Ginger Rogers movie song of the time, he should really be singing 'I'm putting all my eggs in one basket'.”
Rival Morrisons was also firmly in the red, while Intu Properties tumbled 8% as the shopping centre operator said it swung to a full-year loss amid a challenging retail backdrop.
techMARK 3,540.38 +0.39%
FTSE 100 7,228.62 +0.69%
FTSE 250 19,202.03 +0.70%
FTSE 100 – Risers
Wood Group (John) (WG.) 542.80p +5.81%
GVC Holdings (GVC) 649.00p +5.53%
Kingfisher (KGF) 241.60p +5.41%
Antofagasta (ANTO) 935.40p +5.10%
Lloyds Banking Group (LLOY) 61.13p +4.73%
Fresnillo (FRES) 1,027.50p +4.51%
easyJet (EZJ) 1,320.00p +3.90%
Anglo American (AAL) 2,020.00p +3.35%
Johnson Matthey (JMAT) 3,203.00p +3.19%
Imperial Brands (IMB) 2,713.50p +3.14%
FTSE 100 – Fallers
Sainsbury (J) (SBRY) 234.50p -18.55%
Morrison (Wm) Supermarkets (MRW) 227.25p -5.31%
Hikma Pharmaceuticals (HIK) 1,673.50p -2.42%
London Stock Exchange Group (LSE) 4,508.00p -2.06%
Reckitt Benckiser Group (RB.) 6,025.00p -2.03%
Smurfit Kappa Group (SKG) 2,276.00p -1.90%
British Land Company (BLND) 573.80p -1.65%
SEGRO (SGRO) 636.60p -1.61%
BAE Systems (BA.) 504.40p -1.41%
Land Securities Group (LAND) 869.20p -1.38%
FTSE 250 – Risers
Acacia Mining (ACA) 253.80p +12.80%
Superdry (SDRY) 547.00p +7.36%
Centamin (DI) (CEY) 136.20p +6.78%
Plus500 Ltd (DI) (PLUS) 767.00p +6.53%
William Hill (WMH) 183.95p +5.72%
Mediclinic International (MDC) 326.50p +5.12%
Convatec Group (CTEC) 126.55p +4.41%
Weir Group (WEIR) 1,619.50p +4.11%
Sanne Group (SNN) 537.00p +3.67%
888 Holdings (888) 178.00p +3.55%
FTSE 250 – Fallers
Intu Properties (INTU) 108.95p -7.79%
FDM Group (Holdings) (FDM) 813.00p -3.79%
Hammerson (HMSO) 365.60p -3.05%
Bodycote (BOY) 766.00p -2.54%
Spirent Communications (SPT) 145.00p -2.29%
IP Group (IPO) 103.00p -2.09%
Games Workshop Group (GAW) 3,105.00p -2.05%
FirstGroup (FGP) 93.60p -1.94%
Dechra Pharmaceuticals (DPH) 2,490.00p -1.89%
Cranswick (CWK) 2,492.00p -1.81%