LONDON MARKET MIDDAY: Pound up as UK PM expected to survive Tory poll

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The pound was rising on Monday amid expectations that UK Prime Minister Boris Johnson will survive a non-confidence vote, ushering in a period of stability for Westminster - for a year at least.

Meanwhile, stock markets were rising globally, as China starts to relax the strict lockdowns that have been stifling the world's second largest economy.

Beijing will gradually lift Covid-19 restrictions this week, city officials said. After some easing in recent days, the Chinese capital - which reported 19 new infections Sunday - announced residents would start returning to work from Monday and schools would reopen from June 13.

From Monday, restaurants will be able to welcome customers again – if they have tested negative in the previous three days – and public transport will operate normally, the city's government said in a statement. In Shanghai, most of the city's 25 million inhabitants have been able to move freely since Wednesday last week.

The FTSE 100 index was up 91.25 points, or 1.2%, at 7,624.20. The mid-cap FTSE 250 index was up 210.65 points, or 1.0%, at 20,483.55. The AIM All-Share index was up 7.53 points, or 0.8%, at 980.13.

The Cboe UK 100 index was up 1.3% at 759.74. The Cboe 250 was up 1.1% at 18,162.97 and the Cboe Small Companies was up 0.4% at 14,719.84.

In mainland Europe, the CAC 40 in Paris was up 1.1% and the DAX 40 in Frankfurt was up 1.0%.

‘Many of us might be nursing a bit of a hangover but the FTSE 100 got a post-Jubilee,’ commented AJ Bell investment director Russ Mould. ‘Appropriately following a platinum-themed celebration, the move higher was powered by the mining sector as investors look for a rebound in demand for metals now China is relaxing its Covid restrictions.’

In the FTSE 100, Anglo American was up 3.1%, Rio Tinto 2.8% and Glencore 2.7%.

Melrose Industries was up 4.2% after the industrial turnaround specialist agreed to sell its Ergotron business to funds managed by Sterling Group for a total of $650 million.

Completion of the sale is expected to occur in the third quarter of 2022 and is conditional upon customary US antitrust approvals. On or before completion, Melrose will announce how it intends to use the net proceeds, it said.

CRH was up 2.2% after the Irish building materials firm agreed to buy Barrette Outdoor Living, an Ohio-based maker of residential fencing and railing, for an enterprise value of $1.9 billion.

CRH is buying Barrette from TorQuest Partners and Caisse de depot et placement du Quebec. It is paying $1.85 billion in cash, plus taking on $40 million in capitalised lease liabilities.

Barrette, which will be added to CRH's Architectural Products business, reported $79 million in pretax profit in the financial year that ended January 1. CRH said the price it is paying represent a multiple of 10 times earnings before interest, tax, depreciation and amortisation.

Dublin-based CRH noted the acquisition follows the recent divestment of its Building Envelope business and represents a reallocation of capital.

Conversely, AstraZeneca was the worst performer, down 1.5%. The Anglo-Swedish drugmaker said its jointly developed breast cancer drug Enhertu showed improved overall survival in a phase III trial, while its leukaemia treatment Calquence showed a sustained survival benefit in another phase III trial.

The Cambridge, England-based company said Enhertu improved median overall survival by more than six months compared to chemotherapy in all patients evaluated in the Destiny-Breast04 trial. Enhertu, whose generic name is trastuzumab deruxtecan, is a specifically engineered HER2-directed antibody drug conjugate being jointly developed by AstraZeneca and Tokyo-based peer Daiichi Sankyo.

AstraZeneca also said results from the Elevate-TN Phase III trial showed that Calquence, whose generic name is acalabrutinib, maintained a progression-free survival benefit, and a safety and tolerability profile.

Aveva was down 0.2% after Citigroup downgraded the industrial software provider to 'sell' from 'neutral'.

In the FTSE 250, John Wood Group was up 6.8%. Barclays raised the energy services firm to 'overweight' from 'equal weight'.

On AIM, ADVFN was down 27%. The financial information website operator said that in the second half of the year ending June 30, sales to date have been ‘disappointing’.

For the period so far, ADVFN said there has been a small operational loss, but in the whole financial year to date it has still generated an operational profit. However, it warned its pretax loss for the period will be ‘significant’.

As such, the board has decided to suspend dividend payouts for the time being, including any potential final dividend for the current financial year.

The pound was quoted at $1.2565 at midday on Monday, up from $1.2490 at the London equities close Wednesday last week before the four-day holiday weekend for the Queen's Platinum Jubilee.

Sterling shrugged off political instability at the heart of the UK government as pressure ramped up on UK Prime Minister Boris Johnson.

Johnson will face a vote of confidence by Tory members of Parliament on Monday evening as discontent over the lockdown-busting parties in No 10 and the direction of the prime minister's leadership reached a tipping point.

If Johnson wins, party rules state that he will be immune from a confidence vote for one year. If he loses, then he would not be eligible to stand in the resulting leadership contest.

The PM was informed on Sunday that he would face the vote after Graham Brady, the chair of the backbench 1922 Committee, confirmed he had received the 54 letters from Conservative MPs needed to trigger the ballot.

The vote – by secret ballot – will take place at Westminster on Monday between 6pm and 8pm local time, with the count to take place immediately afterwards.

High-profile Cabinet ministers rallied round Johnson - including those who could seek to replace him if he is forced out, such as UK Foreign Secretary Liz Truss and UK Chancellor of the Exchequer Rishi Sunak.

Shane O'Neill, head of interest rate trading at Validus Risk Management, said: ‘Though it is tempting to see this as an increase in political uncertainty, if Johnson survives there can't be another vote for a year - potentially providing some stability to Whitehall. As for whether or not Johnson will survive, it seems likely that he will.

‘There needs to be 180 votes against him for a loss and with no obvious alternative, Rishi Sunak's star has fallen following the revelation of his wife's non-dom status and the cost-of-living crisis, and the Tories polling so poorly – safe money is on Boris Johnson surviving for a little while longer.’

The euro was priced at $1.0745, up from $1.0655. Against the Japanese yen, the dollar was trading at JP¥130.60 in London, higher against JP¥129.95.

Brent oil was quoted at $120.54 a barrel on Monday at midday, up from $117.23 late Wednesday. Gold stood at $1,855.31 an ounce, higher against $1,843.12.

New York was pointed to a higher open following a lower close on Friday. The Dow Jones Industrial Average was called up 0.8%, S&P 500 up 1.1% and the Nasdaq Composite up 1.5%. The indices had closed down 1.1%, down 1.6%, and down 2.5% respectively on Friday.

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