London shares closed on Monday at their highest level in exactly eleven months, feeding off Wall Street’s record levels, and as expectations of a UK rate cut on Thursday began to build.
The FTSE100 index closed up 1.4% at 6,682 – its highest level since August 10, 2015. That came after the S&P 500 US stock bellwether hit a fresh record high.
The FTSE 100, whose constituents have large interests outside of the UK and Europe, has surged into bull territory, rising more than 20 per cent from the three-year low it hit in February, thanks largely to the Brexit-induced weakness of sterling. Dollar earnings will now be worth more once translated to UK accounts after the pound lost 14% against the greenback.
The FTSE 100’s biggest post Brexit gainers are largely miners.
In contrast to most large European equity indices, the FTSE 100 has surged after an initial post-Brexit vote drop, and is now up 5%since the referendum, while the Xetra Dax and the FTSE 250 are both down 4.5%.
“The bounce has been led by a big recovery in mining stocks, and a boost from the falling pound which has augmented the Sterling value of the overseas earnings streams generated by many of the big blue chips. In terms of the miners, BHP Billiton and Rio Tinto are trading around 50% up on their February price, with Glencore doubling in price since 11th February,” said Laith Khalaf, Senior Analyst, Hargreaves Lansdown
“The positive mood was helped by the emergence of Theresa May as Conservative party leader, and the expectation of a rate cut, and possibly more QE, from the Bank of England on Thursday.
“House builders did particularly well today, perhaps an acknowledgement of the supportive nature of loose monetary policy on their businesses. It is important to point out not every blue chip has enjoyed the last five months, with around three out of every ten FTSE 100 stocks still below their 11th February price. Some airlines, banks and house builders are still trading below their price on that day,” he added.
Even dire warnings from brokers at Deutsche Bank that UK inflation could be hurtled as high as 5.2% in the wake of sterling weakness, was not enough to derail a London rally.
The FTSE AIM 100 Index closed up 1.7% at 3,424, while the FTSE AIM All-Share Index gained 1.4% to 715.
For the first time in months, the gaining stocks in London not only outnumbered others but also commanded more than 50% of the market. Gainers were 52%, losers 13% and unchanged 35%.
Top gainer was Aquatic Food (LON:AFG) up 63.6% at 13.5p while the biggest faller was Goldplat (LON:GDP), down 19.2% at 5.25p, after the company announced that Rand Refinery (Pty) Limited has informed Goldplat Recovery (Pty) Limited ("GPL"), a 74%-owned subsidiary of the company, that it disputes an amount due to GPL in relation to a binding Memorandum of Understanding entered into between GPL and Rand Refinery for GPL to process a batch of silver sulphide material.
Midsession
Stocks large and small built on gains on Monday amid speculation about a UK interest rate cut, while drug industry takeover talk swirled.
The FTSE 100 Index climbed 55.17 points to 6645.81 while the FTSE 250 jumped 408.64 points to 16586.39.
Meanwhile, the FTSE AIM 100 rose 43.2 points to 3410.02 and the FTSE AIM All-Share lifted 7.5 points to 713.06.
Markets warmed to speculation that the Bank of England would cut UK interest rates on Thursday.
Uncertainty around the issue of a new UK prime minister ebbed after Tory leadership contender Andrea Leadsom pulled out of the race, leaving the way clear for rival Theresa May.
But sterling was still lower, falling 0.05% to US$1.29 as the result of Britain’s EU referendum continued to take its toll on the currency, which has hit 31-year lows.
Shares in AstraZeneca PLC (LON:AZN) were down 34.5p at 4539.5p following rehashed speculation that it had its eye on US drug group Medivation Inc (NASDAQ:MDVN).
AstraZeneca is mulling a US$10bn bid for Medivation, which opened its books to potential bidders including US-based Pfizer Inc and France's Sanofi SA last week, the Sunday Times reported.
Rumours emerged in April that AstraZeneca was among a number of potential suitors for the San Francisco-based group, which is developing cancer treatments.
In small-cap world, Ortac Resources Limited (LON:OTC) soared nearly 35% to 0.04p as it said Slovakian authorities had rejected a legal challenge to a mining application.
Sound Energy PLC (LON:SOU) powered ahead by 14% to 27.5p as the Europe and Mediterranean-focused upstream gas company reported better-than-expected drilling results from its Tendrara licence area in Morocco.
Investors transformed Surface Transforms PLC’s (LON:SCE) share price by 8,7% to 18.75p after it did a technology development deal with an unidentified German performance car maker for its carbon fibre-reinforced ceramic brake discs.
News of a payment dispute hit shares in South Africa and Ghana-focused gold recovery service company Goldplat plc (LON:GDP) by 19.2% to 5.25p.
Flat first-half revenues and lower profits sparked a 3.4% fall in the shares of financial advisor Frenkel Topping Group PLC (LON:FEN) to 43p.
Back among blue chips, a riser was Glencore PLC (LON:GLEN) with a 5% gain to 175.7p, followed by other major miners.
Among the losers was Rolls-Royce Holdings PLC (LON:RR.), down 1.4% to 725p as it announced the €720mln acquisition of the outstanding 53.1% that it did not already own in Industria de Turbo Propulsores SA.
Preview at 6.59am
The FTSE 100 is set to open the week in positive territory with the resilience of the US economy, rather than the fall-out caused by Brexit, driving sentiment.
The spread betters are predicting the index of blue-chip shares will follow Friday’s near 60-point gain by posting an early rise of around 15 points to 6,605.94.
In Asia overnight it was all about general elections. In Japan, Premier Shinzo Abe won a landslide, making it easier, analysts said, for him to push through his economic reforms.
The equity markets greeted his re-election with a strong upward movement as the benchmark Nikkei 225 jumped 4.5%.
In Australia, the ASX powered ahead 1.8% after it emerged that Prime Minister Malcolm Turnbull’s coalition had won a very narrow victory in the polls.
Elsewhere, the mood was reasonably upbeat with the Hang Seng in Hong Kong adding 1.7% and the Shanghai Composite up 0.9%.
Friday’s non-farm payrolls surprised on the upside, which in normal circumstances would have investors fretting about a rise in US base rates.
But there’s nothing normal about the economic and political backdrop at the moment following the UK’s vote to depart the EU, which has traders a little fidgety.
That the world’s largest economy remains on track provided a welcome piece of good news.
“Asia markets took their cues from Friday’s US numbers as well as a decisive win by Japanese Prime Minister Shinzo Abe in upper house elections at the weekend, which some have hoped will make it much easier to implement new reforms and a stimulus package to revive the stuttering Japanese economy,” said Michael Hewson of CMC Markets.
Back in the UK, this week we have scheduled corporate news from fashion retailer ASOS plc (LON:ASC), pub chain JD Wetherspoon plc (LON:JDW) and comparison site Moneysupermarket.com Group PLC (LON:MONY).
*Brent crude oil is down 39 cents a barrel at US$46.37.
*Gold is trading US$12.10 higher at US$1,370 an ounce
*The pound is worth US$1.295.
*Bids & rumours: BGL, the owwner of CompareTheMarket and the French comparison website LesFurets, is preparing to hold a beauty parade of investment banks to handle an initial public offering tipped to value the company at up to £2bn.
City Pages
*The Bank of England will consider the first interest rate cut for more than seven years this week, as it seeks to contain the economic fallout from the Brexit vote – Guardian.
*Deutsche Börse is considering cutting the acceptance threshold for its merger with the London Stock Exchange Group in an effort to ensure the deal goes through – FT.
*Political uncertainty in Westminster is raising further doubts over a £1.3bn tidal power project in Swansea Bay even as backers of the scheme intensify efforts to win government approval – FT.
*The UK economy is already showing early signs of stress in the wake of the Brexit vote with a consumer spending and productivity slipping to multi-year lows last month – Telegraph.
*Security firm G4S has agreed a deal to sell its ATM service business to technology giant IBM as it offloads parts of the company to shore up its finances – Telegraph.