Friday, January 22

London Markets: Centrica soars on U.S. energy unit sale but U.K. stocks sink as China hits back over consulate closure

Shares in British Gas owner Centrica climbed 17% on Friday, as it announced the sale of its U.S. energy arm to NRG Energy.

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British Gas owner Centrica stock soared on plans to sell its U.S. energy arm, but the broader U.K. stock market slumped amid rising U.S.-China tensions. 

The U.K.’s benchmark FTSE 100 UKX, -1.19% index fell 1.2% and the FTSE 250 MCX, -0.99% declined 1%, in line with other major European indexes. The pound ticked higher against the dollar, shaking off concerns over a Brexit trade deal. Equities were put under pressure as Beijing retaliated against the U.S. after the Trump administration ordered the closure of the Chinese consulate in Houston. China ordered the U.S. to close its own consulate in Chengdu, as the spat between the world’s two largest economies intensified.

Asian markets sank overnight, with Hong Kong’s Hang Seng Index falling 2.2%, China’s Shanghai Composite slumping 3.9% and the Shenzhen Composite was 5% down, before the negative sentiment spilled over into Europe and the U.K. The Wall Street tech selloff late on Thursday, led by Apple AAPL, -4.55% and Microsoft MSFT, -4.34%, also added to the negative sentiment.

“It’s a sour end to the trading week with hefty declines across Europe and Asia, echoing a miserable showing on Wall Street last night,” said AJ Bell investment director Russ Mould. “Spooking investors was heightened tensions between Asia and North America whereby China ordered the U.S. to close one of its consulates in Chengdu. Adding to the market woes was data showing the first weekly rise in new U.S. unemployment claims in almost four months, dampening hopes of a quick economic recovery from the pandemic.”

Encouraging U.K. retail sales data failed to inject any life into the FTSE 100. Sales climbed 13.9% in June, beating consensus estimates of an 8.3% rise, with sales now higher than they were before the pandemic.

“U.K. retail sales are now higher than they were precrisis, but this doesn’t necessarily imply that we’re heading for a V-shape recovery. A lot will depend on how far unemployment increases over the coming weeks and months, but also on whether consumers being to feel safer visiting the high street and pubs and restaurants,” said ING developed markets economist James Smith.

Centrica CNA, +16.99%, which was relegated from the FTSE 100 earlier this year, was the stand out performer on Friday. The British Gas owner announced a deal to sell its U.S. energy business Direct Energy to NRG Energy for $3.6 billion, sending the stock surging.

Vodafone VOD, -5.34% stock fell 4.3% as the world’s second-largest mobile operator confirmed plans to list its towers business in Frankfurt next year. The company’s revenue fell 1.4% to €10.5 billion ($12.2 billion) in the fiscal first quarter.

Source: MarketWatch

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