DAILY TRADING STRATEGY

Friday, Feb 02

UK OVERVIEW
U.K. stocks closed lower Thursday, weighed down by losses for heavyweights Royal Dutch Shell and Vodafone after their earnings reports. Shares of house builders were among the advancers, after a report showed U.K. home prices rose more than expected in January. The FTSE 100 index fell 0.6% to finish at 7,490.39, adding to its 0.7% loss from Wednesday, when the London benchmark logged its biggest monthly decline since November. The pound moved higher to $1.4245, compared with $1.4191 late Wednesday in New York. Losses for the some of the biggest U.K. companies helped send the FTSE 100 lower. Shares of heavily weighted Royal Dutch Shell fell 2.5%. That drop, the FTSE’s second-biggest loss, came even after the oil giant’s earnings tripled in 2017 after “a year of transformation.” Brent oil prices the international benchmark moved up 18% last year, which helped boost Shell’s earnings. However, analysts said the company’s cash flows were weak in the fourth quarter, and that concern was holding back the energy giant’s shares. Shares of another London heavyweight, Vodafone PLC lost 4.5% after the giant telecom said its revenue declined in the fiscal third quarter It was the FTSE’s biggest decliner.
The stronger pound was also dragging on the London benchmark, as it can cuts into business overseas for multinational companies when they convert their sales and revenue into the U.K. currency. About 75% of the FTSE 100’s revenue is generated outside Britain, so the index is particularly sensitive to sterling fluctuations. 
In January, sterling scored its best month in almost eight years, boosted by Brexit optimism, a resilient U.K. economy and the hawkish tone of the Bank of England. Shares of Unilever added 0.8% after the consumer products giant said 2017 profit was up 9% and that it expects further growth in 2018. BHP Billiton inched 0.2% lower after a Bloomberg report said the commodities major is considering splitting up its shale assets to speed up the sale of a $10 billion portfolio. 3i Group picked up 2.2% after the private equity and infrastructure investment company reported a 19.4% return on its assets for the nine months to December 31. Shares of house builders also mostly rose after the Nationwide house price index showed U.K. house prices picked up 0.6% in January, beating forecasts for a 0.2% climb. Shares of Barratt Developments PLC finished 0.1% lower after an early gain faded, but Taylor Wimpey put on 1%, and Persimmon picked up 0.6%. Outside the FTSE 100, shares of TalkTalk Telecom Group gained 2.4% after RBC Capital Markets upgraded the company to outperform from sector perform. 


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