London shares ended higher on Tuesday after an unexpected helping hand from the government bond market.
The FTSE 100 index closed up 0.6% at 6,851 – its best level since late May 2015. The UK-centric FTSE 250 rose 0.7% to 17,687 – its highest level since late June 2015.
In the face of downbeat UK Gross Domestic Product forecasts – growth slipped in the three months to July according to think-tank National Institute of Economic and Social Research – as well as evidence of a Britain’s trade deficit swelling to its widest in over a year and a slide in oil prices – markets might have had a drubbing.
But the Bank of England’s bond-buying spree hit a snag, sapping away valuable demand for debt assets. Just two days into the resumption of Quantitative Easing investors refused to part with their gilts.
The BoE had hoped to buy £1.17bn of long-dated gilts as part of a scheme policymakers hope will cushion the UK economy from the worst effects of Brexit.
However, investors offered to sell the Bank just £1.12bn. Long-dated securities are traditionally favoured by pension schemes and insurance companies who hold the bonds to maturity. The reason for the sellers’ impasse may be to do with the fact that pension funds are currently battling ballooning deficits. They need equities to grow in the future, but they also need to hold onto bonds to settle current liabilities.
The developments could force the central bank to buy short-dated bonds in future, which will stunt the impact of the policy.
Among those who sit on a mountain of bonds was the biggest riser on the FTSE 100, Standard Life PLC (LON:SL. which gained 6.8% to 340p. Standard Life posted an 18% increase in operating profit before tax for the first half thanks to diversification, as its assets under management grew.
Operating profit before tax rose to £341m, with assets under management up 7% to £328bn, helped by gross inflows into its growth channels of £20.6bn and net inflows of £4.1bn.
The FTSE AIM 100 Index shot up by 0.9% to 3,737 while the FTSE AIM All-Share Index rose by 0.6% to 777.
A total of 42% of London stocks gained on the day, just 22% lost and 36% were unchanged.
The top gainer overall was Aquatic Food (LON:AFG) which gained 42% to 17p. The stock’s only news today was that Ms Po Ling Low had been appointed Finance Director.
The top faller was Melrose (LON:MRO) down 82% to 141p. It provided news that was expressly forbidden for publication into the United States among other jurisdictions.
Midsession
UK shares, big and small, were higher at lunch as the market reacted to rebounding oil prices and strong earnings from the US.
FTSE100 is up around 20 at 6,828, while the AIM 100 index is 0.74% higher and the FTSE AIM All share is 0.47% higher.
On Footsie, the biggest gainer is Worldpay Group plc (LON:WPG), up over 5% to 317p as the market cheered its interim results.
Standard Life (LON:SL.), the pensions and retirement provider, was also up over 5% as it reported forecast beating asset growth and profits.
City index analyst Fawad Razaqzada noted the strength of US tickers recently.
"In Europe, however, stocks have been far less buoyant as the major indices remain well below their prior record levels or multi-year highs.
"This has been due, among other things, to the economic stagnation in the Eurozone, troubles with Italian banks, concerns about Brexit, a rapid rise in terrorist threats and so on."
However, he added that European indices have started Tuesday’s session on the front foot after a lacklustre performance on Monday.
Online clothing retailer Boohoo.com Plc (LON:BOO) added over 7% to 80p after telling investors it now anticipates results for the current year to be above expectations, with sales growth seen between 28% and 33%, versus prior guidance for 25-30% growth.
Aquatic Foods Group PLC (LON:AFG) was top riser in London, adding 62.5% to 19.5p as it announced the appointment of Ms Po Ling Low as finance director.
The Chinese marine foods and seafood processor said Po Ling has over 18 years of experience in the corporate finance, audit and investor relations sectors across the UK and Asia.
London’s FTSE 100 held positive territory, up 21 points or 0.32% changing hands at 6,831 just after 10:00am.
In comes despite a negative close in New York last year, and has been helped somewhat by Chinese inflation numbers in Tuesday’s early hours.
Indeed, economic statistics are providing some distraction for day traders, particularly given the current scrutiny on what anything and everything means for central bank policy.
UK retail sales figure out today give a boost, with an unexpected 1.1% rise for July following June’s 0.5% decline.
Across the channel a measure of investor confidence in the Eurozone was ahead of expectations, German industrial output was also ahead of estimates and French business sentiment was better rather than worse.
Whilst all that sounds encouraging, at the same time UK industry output figures showed a drop off in June, up to and immediately after the Brexit vote.
These are of course loose pieces of an incomplete puzzle. The material fact the market is presently comfortable with is that the Bank of England has thrown the kitchen sink and, for now at least, equities are being supported. Next week’s inflation report will naturally be closely eyed.
On the corporate front insurer Legal & General Group Plc (LON:LGEN) was the notable FTSE 100 faller, losing more than 6.5% after releasing interim results.
Shares in rival Standard Life Plc (LON:SL.), meanwhile, rose 4.5% after its half year results.
Worldpay Group Plc’s (LON:WPG) interims also delivered a boost of around 4.5% for the FTSE 100 stock.
WM Morrison Supermarkets PLC (LON:MRW) shares were lifted by news of a revised deal with Ocado which sees the supermarket’s online ordering operations supported under new, more favourable terms.
Elsewhere, online clothing retailer Boohoo.com Plc (LON:BOO) gained over 8% after telling investors it now anticipates results for the current year to be above expectations, with sales growth seen between 28% and 33%, versus prior guidance for 25-30% growth.
Furthermore, the company said it is also expecting better margins though its guidance on this will be reviewed with its interim results (due in September).
Open at 8.15am
The FTSE 100 opened 5 points higher to 6,815.
The top winner this morning was Worldpay Group (LON: WPG), up 4% to 314p.
The biggest loser was Legal & General Group (LON: LGEN), down 4% to 208.8p
Preview at 6.55am
UK stocks are tipped to open modestly higher, despite US indices pulling back from all-time intra-day highs yesterday.
Spread betting quotes point to the top-share index opening its account around 10 points higher than last night’s close of 6,809, which was its highest closing level since June of last year.
Stateside, the S&P 500 briefly reached a new high but turned back to finish two points lower at 2,181. The Dow also finished lower, ebbing 14 points to 18529, as did the Nasdaq Composite, which fell eight points to 5,213.
Heading into the last hour of trading, Japanese stocks were mostly in positive territory, but Hong Kong stocks were mixed.
Japan’s Nikkei 225 was up 101 points, or 0.6%, at 16,752, while in Hong Kong the Hang Seng was down 22 points, or 0.1%, at 22,467.
In the UK, insurers Legal & General Group PLC (LON:LGEN) and Standard Life PLC (LON:SL.) are set to report.
Commodities & currencies
- Oil: West Texas Intermediate for September delivery – US$42.66 a barrel, down 36 cents; Brent crude for October delivery – US$44.99 a barrel, down 40 cents
- Gold: US$1,338.80 an ounce, down 0.2%
- Sterling: US$1.2985 (-0.55 cents)
- Euro: US$1.1077 (-0.12 cents)
Market buzz
Prices comparison web site Comparethemarket.com closes in on a £2bn flotation after appointing bankers to oversee its listing.
Newspapers
- Hinkley deal is null and void, say French unions
- Barclays pays $100 million to settle Libor investigation
- Savers to suffer as First Direct cuts rates further than Bank of England