Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors
Markets

Blue-chips retain gains on Chinese stimulus hopes

The FTSE 100 Index ended the session 97 points higher at 5,876..
leadenhall-building-3_opt_opt.jpg
The City reacted positively to dovish comments from Bank governor Mark Carney
The London market closed with most of the day's gains intact as traders saw the upside of lacklustre Chinese economic figures.
 
The FTSE 100 Index ended the session almost 97 points up, or 1.68% at 5,876 after Beijing released data showing "disappointing" GDP growth of 1.6% quarter-on-quarter in the fourth quarter.
 
It showed the world’s second-largest economy was facing its weakest annual growth rate in a quarter-century,
 
But economists preferred to focus on prospects that the authorities would come to the rescue with more stimulus to keep the economy on an even keel.
 
Financial advice firm DeVere said it believed global investors’ fears over a hard landing in China were overdone and the figures should offer some comfort.
 
Founder and chief executive Nigel Green said: "China is currently going through a transition phase and therefore many economic reports are going to reflect this by showing weak data.
 
“However, on the ground there is little evidence to suggest the economy is in freefall. Indeed, consumer-spending power is strong and the indicators of this remain robust."
 
In the UK, consumer price inflation registered a small rise, which the Office for National Statistics attributed mainly to air fares and motor fuels, partially offset by falls in alcohol and food prices.
 
Bank of England governor Mark Carney talked down the prospect of a UK interest rate rise any time soon. Howard Archer at IHS Global Insight said: "The monetary policy committee is firmly in wait-and-see mode and a Bank of England interest rate hike looks to be off the menu for many months to come."
 
A bounce-back in oil prices also buoyed spirits, with the price of a barrel of Brent crude climbing 2.7% to US$29.35. BP (LON:BP.) rose 0.57% to 342.45p  and Royal Dutch Shell (LON:RDSB) gained 2.39% to 1,369.5p.
 
Ocado (LON:OCDO) jumped 6.85% to 259.10p on rumours that US online giant Amazon (NASDAQ:AMZN) was weighing up a potential approach to the UK grocery delivery service. Both companies declined to comment on the speculation.
 
Tesco (LON:TSCO) fell 1.52% to 159.10p, Sainsbury's (LON:SBRY) was broadly flat and Morrisons (LON:MRW) fell 0.88%  to 158.3p on concerns about the potential challenge an Amazon/Ocado combination could present.
 
IG market analyst Joshua Mahony said: "Rumours of a tie-up between Ocado and Amazon are sending shockwaves throughout the supermarket sector as an already highly competitive industry looks to become even more difficult to operate within."
 
Hopes of a recovery helped the shares of online retail group MySale (LON:MYSL) edge higher. Underlying interim profits were A$1.5mln, a $12.9mln improvement on last year, as South-East Asia grew strongly and new acquisitions in Australia chipped in. Shares in the group, which numbers Sir Philip Green and Mike Ashley as investors, climbed over 4% to 44.75p but remain a long way shy of the 226p float price in 2014.
 
Management Resource Solutions (LON:MRS) rocketed over 48% to 29.5p as the Aussie human resources company, which came to the market in December 2011, changed its spots with a reverse takeover of Bachmann Plant Hire that will see the company's shares effectively cancelled and then readmitted to AIM.
 
Sofa retailer ScS Group (LON:SCS) plumped u 16.72% to 178p as a good Christmas made up for a bad Easter.
 
Greatland (LON:GGP) eased 16.67% to 0.10p  after drilling at the Warrentinna gold project in Tasmania failed to produce the results the market had been hoping for.
 
Elsewhere, Lifeline Scientific (LON:LSIC), the transplantation technology company that recently lifted profits guidance, said operating profit in 2015 should be at least double 2014's level. Shares in the group advanced 2.28% to 190.25p.
 

MID-SESSION MARKET UPDATE

The London market built on gains on Tuesday as Bank of England governor Mark Carney talked down prospects of a rate hike.

The FTSE 100 Index rose 130.42 points to 5910 but the pound fell as traders digested Carney's comments that there was "no set timetable" for raising the cost of borrowing.

Howard Archer at IHS Global Insight said: "The monetary policy committee is firmly in wait-and-see mode and a Bank of England interest rate hike looks to be off the menu for many months to come."

Earlier, the market took heart from the prospect of Chinese money-printing after "disappointing" GDP growth of 1.6% quarter-on-quarter in the fourth quarter.

Analysts noted that, while China’s growth figure was the lowest rate for 25 years, it was "reassuringly" in line with market expectations.

Jasper Lawler at CMC Markets said: "Equities are rebounding on Tuesday; setting up a possible fourth positive day for the FTSE 100 this year after Chinese economic data raised the prospect of further government stimulus."

In the UK, consumer price inflation registered a small rise, which the Office for National Statistics attributed mainly to air fares and motor fuels, partially offset by falls in alcohol and food prices.

Oil prices were on the up, with the price of a barrel of Brent crude climbing 2.9% to US$29.38. BP (LON:BP.) rose 8.6p to 349.1p and Royal Dutch Shell (LON:RDSB) gained 46.5p to 1384p.

Augustin Eden at Accendo Markets said: "Oil prices are rising this morning with both WTI and Brent heading back to their $30 resistance levels. With no change in the news on the supply front, hold on for inventory reports this week."

Ocado (LON:OCDO) jumped 18.9p, or 7.8%, to 261.4p on rumours that US online giant Amazon was weighing up a potential approach to the UK grocery delivery service. Both companies declined to comment on the speculation.

Furniture retailer ScS soared 26.25p, or 17.2%, to 178.75p on news of strong trading during the key Christmas and January sales.

Elsewhere, Lifeline Scientific (LON:LSIC), the transplantation technology company that recently lifted profits guidance, said operating profit in 2015 should be at least double 2014's level. Shares in the group advanced 12.5p, or 6.7%, to 198.5p.

But Quantum Pharma (LON:QP.) reversed 9.5p, or 13%, to 63.5p as it said its niche pharmaceuticals division had faced delays in its product pipeline, which means operating profits are expected to be around £12.7mln for the year ended January 31 – around £700,000 shy of forecasts.

Summit Therapeutics ((LON:SUMM) ticked up 2p to 131p as it secured a European patent for its C.Difficile treatment ridinilazole.

LONDON OPEN

The prospect of Chinese market pump-priming following downbeat economic data boosted London shares on Tuesday.

The FTSE 100 Index rose 86.26 points to 5866.18 as markets hoped for stimulus after Chinese GDP grew at what analysts described as a disappointing pace of 1.6% quarter-on-quarter in the fourth quarter.

Analysts noted that, while China’s growth figure was the lowest rate for 25 years, it was "reassuringly" in line with market expectations.

Jasper Lawler at CMC Markets said: "Equities are rebounding on Tuesday; setting up a possible fourth positive day for the FTSE 100 this year after Chinese economic data raised the prospect of further government stimulus."

In the UK, consumer price inflation registered a small rise, which the Office for National Statistics attributed mainly to air fares and motor fuels, partially offset by falls in alcohol and food prices.

Oil prices were on the up, with the price of a barrel of Brent crude climbing 2.8% to US$29.38. BP (LON:BP.) rose 4p to 344.5p and Royal Dutch Shell (LON:RDSB) gained 20p to 1357.5p.

Augustin Eden at Accendo Markets said: "Oil prices are rising this morning with both WTI and Brent heading back to their $30 resistance levels. With no change in the news on the supply front, hold on for inventory reports this week."

Ocado (LON:OCDO) jumped 42.3p, or 17.4%, to 284.8p on rumours that US online giant Amazon was weighing up a potential approach to the UK grocery delivery service. Both companies declined to comment on the speculation.

Elsewhere, Lifeline Scientific (LON:LSIC), the transplantation technology company that recently lifted profits guidance, said operating profit in 2015 should be at least double 2014's level. Shares in the group advanced 14.75p, or 7.9%, to 200.75p.

But Quantum Pharma (LON:QP.) reversed 12.5p, or 17.1%, to 60.5p as it said its niche pharmaceuticals division had faced delays in its product pipeline, which means operating profits are expected to be around £12.7mln for the year ended January 31 – around £700,000 shy of forecasts.

MARKET PREVIEW

London's blue chips are set to claw back yesterday's losses, encouraged by hopes of the Chinese authorities providing more help to markets.

Spread-betting quotes point to the FTSE 100 opening at around 5,870, up 90 points on last night's close.

The old “bad news is good news” mind-set returned overnight in China, with slowing growth in gross domestic product (GDP) raising hopes that the authorities will provide more stimulus.

GDP grew at its slowest rate in a quarter of a century in 2015, rising 6.9%, versus 7.3% in 2014.

Fourth quarter GDP grew at an annualised rate of 6.8%, which was one-tenth of a percentage point lower than the consensus forecast.

Shares in Hong Kong put in a good shift, with the Hang Seng 1.6% higher in the last hour of trading, while in Shanghai, the Composite index was 3.1% firmer.

Elsewhere in Asia, Japan's Nikkei 225 was 0.6% top the good.

The US equity market was closed yesterday.

Back in Blighty, full-year results from consumer goods leviathan Unilever (LON:ULVR) are scheduled, as is a trading statement from oil & gas firm Cairn Energy (LON:CNE).

“Recent press commentary indicates a planned refinancing for First Oil (private company), a partner with Cairn and Enquest in Kraken, has fallen apart and a sales process for First Oil is now under way,” notes Thomas Martin at Numis Securities.

“We understand that there has been no adverse impact upon development progress at Kraken to date as a consequence of the developments at First Oil,” he added.

“We look for an update on progress and evidence that the changes made by the FPSO [floating platform] contractor to address the scheduling issues at the yard are bearing fruit. Cairn has no producing assets today and is thus not exposed to current oil price weakness,” Martin noted.

Unilever has guided towards profit before tax of €7.37bn - €7.72, with the consensus a little below the halfway point at €7.50bn.

“Underlying fourth quarter sales growth in the region of 4% to 5% may be reported, with Emerging Market growth again outpacing Developed markets,” suggests Keith Bowman at Hargreaves Lansdown.

“The group’s focus on product innovation and cost control could be further underlined, with management’s summary of its markets as 'challenging' potentially repeated,” he added.

Phil-Waller.jpg

© Proactive Investors 2016

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.