Pound hits one-week low after BoE trims inflation forecasts, while investors shrug off Labour's leak

LONDON - May 14, 2017 - PRLog -- Market report: Investors shrug off Labour's pledge to nationalise key industries

Financial markets were unperturbed by the Labour Party's pledge to nationalise key industries, as it attempts to win over voters before next month's election.

According to a leaked copy of the party's draft manifesto, Labour, under its leader Jeremy Corbyn, plans to national rail and mail services and take some of the energy sector into public hands.

In the 43-page document, Labour promised to renationalise rail services by taking over franchises at the end of their existing terms, renationalise Royal Mail and establish publicly-owned bus companies.

Gerald Khoo, of Liberum, said: "This would have significantly adverse valuation implications for the relevant companies, but clearly this must be weighed against the relatively low probability of Labour forming the next government."

The response from potentially affected companies was benign, as investors shrugged off the possibility of a Labour government. Shares in Royal Mail rose 2.6p to 423p, FirstGroup climbed 1.3p to 142.2p, while, Go-Ahead dropped 70p to £18.50, Stagecoach dipped 2p to 214.4p, and National Express slipped 0.9p to 367.4p.

Energy supplier Centrica fell 11p to 192.2p, SSE shed 15p to £14.49 and National Grid ended the day 7p lower at £10.33.

Centrica's fall did not reflect Labour's leaked manifesto. Instead, it was trading ex-dividend and suffered a double rating downgrade. The unsettling reality of UK supply market changes prompted JP Morgan to lower its rating by two notches from "overweight" to "underweight". The US investment bank said its sees "significant downside" emerging through price regulation and evidence of a price war emerging, as Engie enters the residential supply market.

Meanwhile, Berenberg downgraded National Grid to "hold" as it believes the investment case "has now played out".

Other laggards included pharma stocks Hikma and Vectura, which spent a second consecutive trading session in the doldrums. Speculation US regulators would not approve its generic copy of GlaxoSmithKline's lung drug Advair prompted shares to slide on Wednesday. Both stocks extended their losses as Hikma confirmed Advair faced an approval delay due to "major" issues with its application. Hikma plunged 161p to £17.95, while Vectura plummeted 13p to 131.9p.

BT was another big faller, down 14.1p to 297.9p, after it announced plans to slash 4,000 jobs and replace the boss of its global services business following the Italian accounting scandal, which wiped £8bn off the company's value, while paper and packaging group Mondi eased back 34p to £20 on the back of a fall in first quarter operating profit.

Adding to pressure, a number of stocks were trading without entitlement to their latest dividend. Admiral fell 68p to £20.38, BP lost 4.6p to 456p, Sainsbury's drifted 6.6p lower to 265.1p and Sage dropped 3.5p to 687.5p.

Nevertheless, the FTSE 100 managed to crawl into positive territory by close of play. The blue-chip index ended the day 1.39 points, or 0.02pc, higher at 7,386.63, bolstered by a rally in mining stocks.

Gold miners Fresnillo and Randgold Resources climbed 72p and 250p, respectively, while copper miner Antofagasta jumped 17p to 777.5p and Anglo American gained 10.5p to £10.52.

Finally, Watchstone, the insurance claims manager formerly known as Quindell, has confirmed that it is facing a legal claim of around £600m from Slater & Gordon, the Australian law firm that bought its professional services business two years ago, on the basis of fraudulent misrepresentation. In its wake, Peel Hunt put the stock's rating "under review" due to the level of uncertainty about the outcome. Shares fell 6.7pc to 140p.

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