By Sara Sjolin and Carla Mozee, MarketWatch
Ocado leaps on U.S.-market deal
The U.K.'s blue-chip FTSE 100 benchmark closed at a record
Thursday, as traders largely shook off an advance in the pound and
instead welcomed reports that Britain plans to stay in the customs
union after Brexit.
Shares of oil companies ramped up in value as oil prices shot
up, and shares of betting companies managed to reverse losses that
followed a government move to drastically limit bets on certain
machines.
How did markets move?
The FTSE 100 index gained 0.7% to end at 7,787.97, a record
close and marks the first since Jan. 12, according to FactSet data.
Thursday's win was the index's third in a row.
The pound traded at $1.3507 after hitting an intraday peak of
$1.3569, up from $1.3490 late Wednesday in New York. Sterling
strength can pull down the FTSE 100 as it eats into revenue made
overseas by the benchmark's multinational companies.
On Wednesday, sterling traded around its lowest dollar level
since late December, as the greenback rallied on speculation the
Federal Reserve could start to raise interest rates more
aggressively.
What drove markets?
The pound gained ground, although backed away from intraday
highs, following a report that the U.K. government plans to tell
Brussels it wants to stay in the European Union's customs union
beyond 2021 in an effort to avoid a hard border with Ireland. The
report, in the Daily Telegraph
(https://www.telegraph.co.uk/politics/2018/05/16/britain-will-tell-eu-prepared-stay-tied-customs-union-beyond/),
said Prime Minister Theresa May's Brexit subcommittee has agreed on
Britain staying in the union on a temporary basis, if the
technology needed to keep the borders working after Brexit aren't
up and running.
Gambling companies were in the spotlight again after the U.K.
government's decision to cut the maximum bets
(http://www.marketwatch.com/story/uk-betting-companies-warn-of-financial-hits-2018-05-17)
that can be placed on fixed-odds betting terminals to 2 pounds
($2.70). People can currently bet up to GBP100 every 20 seconds on
such machines.
Paddy Power Betfair PLC said the new stake limit could cause a
33% to 43% fall in its total machine gaming revenue. William Hill
PLC (WMH.LN), whose shares trade off the FTSE 100, said the changes
could cause a 35% to 45% fall in its total net gaming revenue.
Shares of Paddy Power and William Hill has been driven lower
after the report, but eventually swing higher to close up 1.9% and
4.2%, respectively. This week, shares of Paddy Power and William
Hill have respectively charged up about 18% and 17% after a
favorable U.S. Supreme Court ruling on Monday
(http://www.marketwatch.com/story/low-odds-seen-for-federal-sports-betting-law-after-supreme-court-decision-2018-05-15)
that could open sports betting around the nation.
What are strategists saying?
Marshall Gittler, chief strategist at ACLS Global, noted that
while the Brexit developments may solve the problem of the Irish
border it may not be acceptable to the hard-core Brexiteers in
May's cabinet.
"It seems to me to be 'Brexit-lite,' leaving the EU in name but
not in reality, as remaining in the customs union also means
adhering to various EU rules and regulations without having any say
in their making. I'm not sure this is going to fly politically in
Britain. It may settle one problem, but set up another one--a
cabinet revolt," Gittler said in a note.
Stock movers
On the FTSE 250 Index , Ocado Group PLC shares (OCDO.LN) soared
44%. The company, which runs online delivery services and makes
related software, said it has signed a partnership agreement with
U.S. supermarket chain Kroger Co
(http://www.marketwatch.com/story/ocado-entering-us-market-through-technology-deal-with-kroger-2018-05-17).(KR)
under which Kroger will use Ocado's technology in the U.S. for
grocery and other food-distribution activities.
Oil producer Royal Dutch Shell (RDSA.LN) (RDSA.LN) bulked up
2.1% and rival BP PLC (BP.LN) (BP.LN) gained 1.4% as Brent crude
futures
(http://www.marketwatch.com/story/brent-oil-prices-surge-to-80-with-market-rattled-by-iran-supply-worries-2018-05-17)
jumped above $80 a barrel. The Trump administration's recent
decision to reinstate sanctions on Iran have continued to fuel a
rally that's pushed the oil market to 3 1/2 -year highs. The U.S.
has said it is possible there will be secondary sanctions imposed
on European companies who continue to deal with Iran.
"The oil market is tightening and we now see it as appropriate
to factor in at least some of the windfall profitability that
higher prices are generating," said Lydia Rainforth, a Barclays oil
and gas equity research analyst, in a note, adding its key
overweight oil stocks are BP, Royal Dutch Shell and France's Total
SA (TOT).
Burberry Group PLC (BRBY.LN)(BRBY.LN) tacked on 3.2%, with
Credit Suisse, UBS and Deutsche Bank among the financial firms that
raised their price targets on the luxury goods company. On
Wednesday, Burberry posted a rise in full-year profit
(http://www.marketwatch.com/story/burberry-to-start-150-million-share-buyback-2018-05-16)
and said it would start a new 150 million pound ($202.8 million)
share buyback, leading to a 3.6% rise in its shares.
On a downbeat note, shares of Royal Mail PLC (RMG.LN) slumped
7.2% after the company said fiscal 2018 pretax profit declined 37%
due to a pension charge
(http://www.marketwatch.com/story/royal-mail-yearly-pretax-profit-declines-2018-05-17).
Shares of Experian PLC (EXPN.LN) surged 5.6% after the
consumer-credit reporting agency said it expects to launch a new
share-buyback program of up to $400 million
(http://www.marketwatch.com/story/experian-profit-falls-plans-new-400-mln-buyback-2018-05-17).
National Grid PLC (NG.LN) picked up 3.8% after the utility
company said its fiscal 2018 pretax profit rose 24%
(http://www.marketwatch.com/story/national-grid-yearly-profit-rises-24-2018-05-17).
It also said it expects its U.S. business to continue performing
well and that the U.K. business remains on track to outperform.
British Land Co. PLC (BLND.LN) added 2.3% after the commercial
property company said pretax profit more than doubled in fiscal
2018
(http://www.marketwatch.com/story/british-land-pretax-profit-more-than-doubles-2018-05-17).
(END) Dow Jones Newswires
May 17, 2018 12:19 ET (16:19 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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