UPDATE: FTSE 100 rallies, Dow Jones and S&P 500 seen higherJune 19 2012, 2:43pm
The FTSE 100 surged this morning after the Office for National Statistics (ONS) reported that growth in consumer prices in the UK slowed last month, giving the Bank of England more room for stimulus action to support the economy.
The UK’s blue chip index stood at 5,551 this afternoon, up 60 points (1.1 percent) from Monday’s close.
The report from ONS said inflation reached 2.8 percent in May, while analysts expected to see no change from the three percent rate reported in April.
“The key question is whether this reduction will pave the way for further quantitative easing from the BoE in the near future,” said chief economist at FXPro Simon Smith.
“The emphasis appears to be on increasing the effectiveness of monetary policy, rather than simply doing more of it.
“This could well mean that near-term expectations of more QE are disappointed, but more QE appears likely by the August meeting.”
Traders are also keeping an eye on the meeting of the Group of 20, which kicked off in Mexico today. G20 leaders are expected to back Europe’s efforts to stem the euro zone debt crisis and call for further steps to boost economic growth and job creation.
Hospitality group Whitbread (LON:WTB, up 6.2pct at 1,964p) led the FTSE 100 rally, followed by engineering group Weir (LON:WEIR, up 4.8pct at 1,506p), which today said it remains on track to hit its full year targets.
Investors also bought mining stocks as base metal prices rose after a survey by the People’s Bank of China showed that 32.4 percent of bankers – up from 25.7 percent in the previous report - expect to see further monetary policy easing in the next quarter.
Meanwhile, food processing group Tate & Lyle (LON:TATE, down 1.7pct at 635.5p) slid to the bottom of the FTSE 100 pile.
Consumer goods group Unilever (LON:ULVR, down 1.6pct at 2,054p) also was in decline after peer Danone reported that consumer demand has fallen over the past few months as a result of the debt crisis in southern Europe, leading it to reduce its profit expectations.
Financial bookmakers are expecting to see a positive start on Wall Street.
Futures for the Dow Jones Industrial Average (DJIA) rallied 24 points (0.2 percent) in pre-market and the broader S&P 500 index climbed five points (0.4 percent).
Today’s US data was mixed. The Commerce Department said that housing starts dropped 4.8 percent to an annualised rate of 708,000 in May, while permits to build new homes climbed 7.9 percent to 780,000.
On the corporate front, Oracle (NYSE:ORCL) said after the close of play yesterday that earning surged eight percent to US$3.45 billion in the May quarter, which was ahead of forecasts.
UK corporate news
Back in the UK, other news in the top flight included another contract win by Rolls-Royce (LON:RR., up 0.5pct at 843p).
The engine giant has delivered thrusters to power the largest ever construction vessel - in an £18 million deal.
The contract is the largest order for thrusters for a single vessel, the engineering giant said today.
It comes after the company revealed yesterday that it had secured a £1 billion contract from the Ministry of Defence to supply reactor cores for the UK's nuclear-armed submarine fleet.
Kari Välimaa, Rolls-Royce's operations director in Finland, told investors today: "We are delighted to deliver our largest ever thruster order to power this record-breaking vessel.”
In the FTSE 250, Home Retail Group (LON:HOME, up 25pct at 92.9p) blamed the bad weather for its poor sales at Homebase, while first quarter sales at Argos steadied.
Like-for-like sales fell by 8.3 per cent at DIY chain Homebase in the 13 weeks to 2 June, while its total sales were down 8.1 per cent.
Chief executive Terry Duddy said the heavy rain in April washed it out like other retailers across the country.
“At Homebase the poor weather conditions adversely impacted seasonal product sales,” he said.
Sales at Argos, however, stabilised in the face of a tough trading environment, growing 0.2 per cent in total, with a 0.2 per cent drop in like-for-likes.
Fellow midcap, engineering firm Kentz Corporation (LON:KENZ, up 12pct at 363.2p), reported that demand for its services remained strong and it still expected to top full year expectations.
Today’s bullish update came only a month after Kentz said its full year performance would be slightly ahead of forecastsas it continued to grow revenues and order backlog over the first four months of the year.
Kentz reported today that intake of new orders and growth from existing clients reached US$700 million and it had an order backlog of US$2.5 billion at the end of May.
This backlog, said Kentz, gives it visibility of work up until 2015 and “positions us strongly for continued growth in the business”.