DAILY TRADING STRATEGY

Tuesday, Jan 23

UK OVERVIEW

U.K. stocks closed with losses on Monday, feeling the weight of strength in the pound against the U.S. dollar, but the London benchmark was aided by gains for energy companies and Barclays PLC. Meanwhile, shares of bookmakers were slammed lower on fears that a possible regulatory move by the British government will cut into their revenue. The FTSE 100 index closed down by 0.2% at 7,715.44. On Friday, the benchmark gained by 0.4%, the first win in five sessions. But it fell 0.6% last week, the first weekly loss in seven. The pound traded at $1.3954, up from $1.3853 on Friday in New York. The pound was back in focus, pushing well beyond $1.39 against the greenback. Sterling rose roughly 1% last week, logging a fifth consecutive weekly rise. A stronger pound can reduce profit made overseas by multinational companies when it’s converted back into sterling. Among such international companies, Ashtead Group PLC, which rents heavy equipment, fell 0.3%, and Smirnoff vodka and Johnnie Walker whisky Diageo shed 1.1%. Lawmakers in the Republican-led Senate are expected to hold a procedural vote Monday at 5 p.m. London time, or 12 p.m. Eastern Time, to keep the government funded through Feb. 8. 
The government shut down after lawmakers couldn’t reach an agreement over immigration issues. This week, markets will the U.K. jobs report and the first look at British gross domestic product in the fourth quarter. Paddy Power Betfair fell 2.1%, falling alongside other bookmakers, after a Sunday Times report that the U.K. government will set a limit the stake on betting shop terminals to £2, down from £100, in an effort to curb gambling problems. Hit hard on the mid-cap FTSE 250 index shares of William Hill tumbled 12%, Ladbrokes Coral Group sank 7.9% and GVC Holdings PLC, which is purchasing Ladbrokes, dropped 1.2%. “Gambling companies have made hundreds of millions of pounds a year from fixed odds betting terminals and were hoping that the minimum stake would be towards the middle of the £2 and £50 consultation range,” said Rebecca O’Keeffe, head of investment at Interactive Investor, in a note. “Although the consultation does not end until tomorrow, the suggestion that the response to the survey has been overwhelmingly in support of a cut to the minimum £2 means that this is indeed a significant threat to bookmakers,” she wrote. Also on the FTSE 250, Ocado Group PLC share rallied 28%, with the company saying it will develop an online-grocery business for Canadian food retailer Sobeys Inc. Barclays PLC rose 4.3% following a Financial Times report that U.S. hedge fund Tiger Global has invested more than £1 billion in the London-based lender.


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