December 19, 2018 / 8:42 AM / 9 months ago

GSK pulls FTSE 100 out of three-day rut, focus on Fed

(Reuters) - Pharmaceuticals giant GSK helped Britain’s main bourse break a three-day losing streak even as all eyes were on the Fed, ahead of a key announcement that will set the course of interest-rate hikes in the world’s largest economy.

FILE PHOTO: The GlaxoSmithKline (GSK) logo is seen on top of GSK Asia House in Singapore, March 21, 2018. REUTERS/Loriene Perera/File Photo

The FTSE 100 .FTSE closed 1 percent higher and the FTSE 250 .FTMC added 0.6 percent.

The biggest winner was GlaxoSmithKline (GSK.L), which rose 4 percent after saying it would combine its consumer health business with Pfizer’s (PFE.N) in a joint venture with sales of 9.8 billion pounds ($12.41 billion).

GSK rose as much as 8.3 percent earlier in the session after announcing plans to split into two businesses - one for prescription drugs and vaccines, the other for over-the-counter products.

In the macro space, investors were on tenterhooks waiting for signs from the Fed later in the day on the number of U.S. interest-rate hikes next year.

Oil and related stocks provided the biggest support to the FTSE 100, with industry heavyweights Shell (RDSa.AS) and BP (BP.L) rising over 1 percent as crude prices bounced back following steep losses on oversupply worries.

Copper also rose on hopes the U.S. central bank would slow the pace of interest rate rise, leading to miners Rio Tinto (RIO.L), Glencore (GLEN.L), BHP (BHPB.L) and Anglo American (AAL.L) rising more than 2 percent.

Blue-chip Just Eat (JE.L) rose 1.9 percent as Liberum analysts expressed confidence in the takeaway group’s strategy and said a takeover or a go-private deal could be on the cards after calls by a shareholder this week for asset sales.

In the red was postal services group Royal Mail (RMG.L), down 2.4 percent after weak results from FedEx (FDX.N) in the U.S. dented sentiment across the post and logistics sector.

After ASOS’s profit alert on Monday shook the retail sector, FedEx provided the latest window into the effects of weaker consumer sentiment impacting not only retailers but also companies charged with delivering purchases.

Royal Mail, the century-old UK firm, is set to lose its FTSE 100 status later this week.

BREXIT CRESCENDO

On the Brexit front, the government said it would implement plans for a no-deal scenario in full, even as Prime Minister Theresa May is set to bring her divorce deal back to the parliament for a vote in mid-January.

With the March 29 date for departure from the European Union fast approaching, there is still little clarity on how things will pan out, with factions pressing for different options for future ties, leaving without a deal or remaining in the EU.

But investors shrugged off those worries for the time being and concentrated instead on the Fed decision.

“Despite the negative sentiment, it’s unwise to bet on the direction of the stock market in the short term, as it’s prone to defy expectations, sometimes for the better, sometimes for the worse,” Hargreaves Lansdown analyst Laith Khalaf said.

“We’re unlikely to see the gloom lift in January. Brexit looks set to reach a parliamentary crescendo, and a swathe of trading updates from the UK high street isn’t likely to lighten the mood.”

Shares in gambling companies 888 Holdings (888.L) and Rank Group (RNK.L) rose 6.9 percent and 6.1 percent, respectively, and were among the top mid-cap gainers after an upbeat trading update from the former.

Among smaller stocks dealmaking was also a driver, with airline Flybe Group FLYB.L jumping 10.5 percent after Virgin Atlantic said talks about a potential takeover offer were ongoing.

FILE PHOTO: A man walks under an electronic information board at the London Stock Exchange in the City of London January 2, 2013. REUTERS/Paul Hackett/File Photo

Flybe has roughly doubled in market value since Sky News broke the news on the takeover talks in late November - but the struggling airline has still sunk 43 percent this year as profit warnings took their toll on the share price.

Small-cap Gulf Marine Services (GMS.L) plunged 74.7 percent after the support vessels maker said it expects to be in breach of some banking covenants at the end of this year.

AIM-listed YU Group (YU.L), a gas and electricity supplier, fell 27 percent to an all-time low after it said the UK’s financial watchdog was planning to investigate some of the company’s announcements from this year.

Reporting by Muvija M and Shashwat Awasthi in Bengaluru, Editing by Helen Reid/Mark Heinrich

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