FTSE pares gains after sterling surge
FTSE 100 still marks 2-week high, FTSE 250 record high
BP leads losers on poor earnings
Pound firms to close at $1.2474
FTSE 100 stocks pared gains into the Tuesday close - but still marked a two-week high - after sterling recovered against the US dollar.
Part of the optimism for the UK currency rested on a survey by accountants PwC which suggested the UK could shake off the near-term impact of Brexit to become the fastest-growing economy in the G7 group of rich countries between now and 2050.
The negative brunt of the decision to quit the European Union would be felt by 2020 and in the years that follow the UK would outperform its peers thanks to its relatively large working age population and its flexible economy.
The blue-chip FTSE 100 closed up 0.2% at 7186. Earlier it touched an intraday high of 7,227.
The FTSE 100 usually benefits when the pound weakens as, for the multinational companies listed on the index, overseas earnings are worth more when they are converted back into sterling.
The pound's earlier drop against the dollar had been driven by the possibility of an earlier-than-expected rise in US interest rates.
Later, a buoyant outlook for the UK economy and the threat from Bank of England policy maker Kristin Forbes that she might be close to voting for a rate rise to combat the threat of inflation, helped boost the pound.
The top blue-chip riser was DCC Plc (LON:DCC) up 5.7% to 6740p. Alongside a strong third quarter profit, DCC struck a deal to buy Esso's retail petrol station network in Norway as part of its plan to extend its presence in Europe.
The FTSE 100 business support services outfit said it expects operating profit and adjusted earnings per share will be significantly ahead of the prior year and in line with expectations.
The index’s biggest faller was oil giant BP (LON:BP.) down 4.1% to 457.1p after its latest profits fell short of expectations. The company reported underlying replacement cost profit of $400mln for the fourth quarter, but analysts had hoped for $560mln.
Meanwhile, the sterling-resistant mid-cap FTSE 250 index closed up 1% at 18,559 and marked an intraday record high of 18,584.41.
“With the FTSE100 hitting a two-week high and the FTSE250 set to post a new record close, begging the question, are UK stocks becoming a safe haven for European political risk?” said Michael Hewson, Chief Market Analyst at CMC Markets UK.
Mid-caps were led higher by Hochschild Mining Plc (LON:HOC) up 9.3% to 271.4p. Mining shares rallied, including Hoschchild Mining, Kaz Minerals and Centamin, as metal prices gained.
The FTSE AIM 100 Index ended up 0.7% at 4325 and the FTSE AIM All-Share Index up 0.5% at 900.
London’s gainers outnumbered losers by 40% to 25%.
1515 GMT - FTSE 100 extends gains as US stocks advance
FTSE 100 gains 50 points
Dow Jones, Nasdaq hit intra-day highs
Sterling weakness boosts dollar earners
Oil major BP drops after results
3.15pm … US stocks hit records ...
The FTSE 100 extended its session highs in late afternoon trading as US stocks jumped in early deals, with the Dow Jones hitting a new intra-day peak.
Around 3.15pm, the UK blue chip index was ahead almost 50 points at 7,222, just off the day’s peak of 7,227.
In New York, the Dow Jones was up over 80 points at 20,138, easing slightly off the fresh all-time high, while the tech-laden Nasdaq composite added 20 points, also reaching an intra-day peak.
US stocks bounced back after falls on Tuesday thanks to some improved earnings reports and a narrowing in the US trade deficit to the lowest level in three months
Dennis de Jong, managing director at UFX.com, said: “The US Trade Deficit figures didn’t draw much attention during the Obama era, but the arrival of Donald Trump is sure to change that.
“The new President has vowed to reduce the near $500 billion deficit, which was today confirmed as running negative for the 41st year in a row.
“The two countries that account for the lion’s share of that balance, China and Mexico, are certainly in Trump’s crosshairs”.
A stronger dollar was also a big feature, with the pound falling 0.7% against the greenback to US$1.2383, having earlier hit its lowest level in two weeks, as the US currency rallied on Federal Reserve rate hike possibilities.
In London, strength in dollar earners in reaction to the big fall by the pound provided the main lift for the FTSE100 index, with the likes of drugmaker Shire Plc (LON:SHP) gaining 2% at 4,551.5p, while x-ray machines group Smiths Industries PLC (LON:SMIN) added 2.5% at 1,547p.
12.45pm … Footsie resilient …
The Footsie pushed back up towards session highs at lunchtime boosted by strength in dollar earners in reaction to a big fall by the pound versus the US currency.
At 12.45pm, the FTSE 100 index was up around 47 points at 7,219, just below the session peak of 7,223.
On currency markets, sterling was down 0.8% at US$1.2370, having earlier hit its lowest level in two weeks against the dollar as the greenback rallied on US rate hike possibilities.
Neil Wilson, senior market analyst at ETX Capital, said: “Traders in the City seem to have woken up to the prospect of the Fed tightening interest rates quicker than they’d thought, after Philly Fed president Patrick Harker said he would support hiking rates in March.
“That’s thrown the cat among the doves a bit as the last FOMC meeting suggested the Fed was not likely to raise rates until the summer. The rally in safe haven assets seems to have stalled and traders are piling back into long dollar positions.”
Broker comment provided some interest in London, with engines maker Rolls Royce PLC (LON:RR.) up 2.7% at 698.5p as Citigroup featured the stock in its 'top calls' for the day ahead of results next week.
Education group Pearson PLC (LON:PSON) was also a FTSE 100 gainer, up 1.6% at 654p after Morgan Stanley raised its target price on the stock to 615p from 550p.
Among the mid-caps, workwear and hygiene specialist Berendsen PLC (LON:PRSN) led the FTSE 250 risers, up over 6% at 898p after RBC Capital upgraded its rating for the stock to ‘outperform’ from ‘sector perform.’
But energy firm Premier Oil PLC (LON:PMO) was the top mid cap faller, down 4.7% at 80.75p after Deutsche Bank cut its stance to ‘hold’ from ‘buy’.
10.30am … Sterling drop fuels Footsie …
The FTSE 100 index powered back through the 7,200 level in mid morning trading as a big fall by the pound versus the US dollar gave a lift to international earners, although oil giant BP remained a drag after results.
Around 10.30am, the UK blue chip index was ahead about 35 points at 7,207, just easing off the session peak of 7,217.
On currency markets, sterling fell to its lowest level in two weeks against the dollar, down 0.9% to US$1.2347 as the greenback rallied against a raft of other major currencies following its fourth consecutive weekly fall.
Chris Beauchamp, chief market analyst at IG, said: “Once again the falling pound is proving to be a boon for the FTSE, lifting the index’s international firms and pushing the FTSE itself back above 7200.
“BP’s relatively muted numbers are evidently being treated in isolation, with peer Shell moving firmly higher despite continued weakness in the oil price.”
He added: “Another multi-month high for gold yesterday is boosting the likes of Randgold and Fresnillo, continuing the sector’s stellar outperformance since the beginning of the year, leaving the FTSE 100 far behind.”
Among the FTSE 100 gainers, Irish firm DCC Group PLC (LON:DCC) stood out, jumping 6% to 6,780p after it said its third-quarter profit was "strongly" ahead of the previous year and in line with expectations.
The business support services firm also said it has agreed to buy Esso's retail petrol station network in Norway as part of its plan to extend its presence in Europe.
Housebuilders were also in demand, despite Halifax data showing a 0.9% fall in UK house prices in January and the impending launch of a government ‘white paper’ on housing, helped by a bullish statement from Bellway (LON:BWY).
The FTSE 250-listed firm gained nearly 4% at 2,613p as it posted a 6.5% jump in housing completions in the six months to the end of January and said it expects to build 5% more homes this year.
Bigger peers Persimmon PLC (LON:PSN) and Barratt Developments PLC (LON:BDEV) both gained over 2% at 1,985p and 509p respectively.
8.30am … Miners provide a prop …
The Footsie rallied higher in early trading, recovering after yesterday’s falls thanks to gains by heavyweight gold miners, although oil giant BP PLC (LON:BP) was lower after its latest results disappointed.
Around 8.30am, the FTSE 100 index was up 18 points at 7,190, recouping all of yesterday’s 16 points decline.
Among the blue chip gainers, African gold miner Randgold Resources Limited (LON:RRS) was a strong gainer, up another 1% to 7,230p, extending yesterday’s advance following upbeat full-year results.
But BP was the biggest FTSE 100 faller, dropping 2.3% to 465.6p after the oil major’s fourth-quarter and full-year earnings missed estimates, hitting their lowest in around 10 years.
Naeem Aslam, chief market analyst at Think Markets UK Ltd, said: “BP missed its forecast and there is nothing else to blame except weak supply and fragile trading performance.
“It appears that European oil companies have established this trend and using these excuses. Although, the firm clearly have been able to enrich its reserve replacement ratio but it can not pump more oil and gas out of these because of weaker demand."
5.53am ... Recovery seen ...
The blue-chip index is set to open modestly higher this morning, in defiance of global trends yesterday and this morning.
Spread betting quotes indicate the FTSE 100 will open around seven points above last night’s close.
The market’s reaction to results from integrated oil giant BP PLC (LON:BP.) will have a big bearing on whether the Footsie does actually open modestly higher.
The controversial energy giant is bringing out fourth quarter figures, while the figures for the year as a whole should look a lot healthier than 2015’s, as large write-downs should not feature.
Deutsche Bank is expecting earnings before interest and tax of around US$380mln.
Income investors will hope for positive noises on the dividend front.
Stateside, yesterday’s session was on the wishy-washy side, with the Dow Jones industrial average down 19 points, which is less than one tenth of a percentage point, and the S&P 500 off five points at 2,294.
In Asia this morning, the two big indices were both in negative territory heading towards the end of the trading day.
In Japan, the Nikkei 225 was down 29 points at 18,948 and in Hong Kong the Hang Seng was 35 points lower at 23,313.
Around the markets
- Sterling: US$1.2466, down 0.02 cents
- Gilts: 10-year yield is 1.418%
- Gold: US$1,234.90 an ounce, up US$2.80
- Brent crude: US$55.88 a barrel, up 16 cents
Headlines
- Draghi leaps to defence of the euro – The Times
- Scotland’s last fossil fuel power station threatened with closure - The Times
- Boss has £15 million payday riding on Reckitt deal - The Times
- Rolls-Royce faces fresh bribery case – The Times
- Lettuce shortage: Cheap salad days over as prices rise – The Independent
- Toyota and Suzuki agree to begin formal talks on partnership – The Independent
- Insurer Reliance ends 100 years of mutual ownership – Financial Times
- Tiffany shares lose sparkle as chief executive departs – Financial Times
- Volkswagen facing first lawsuit from major German customer – Daily Telegraph
- Germany not ‘exploiting’ euro, says S&P – Daily Telegraph
- ‘The UK is a tax haven’ – Bermuda attacks plan to end financial secrecy – The Guardian
- Older people to get help to downsize and free up family homes – The Guardian
- MPs call for Lloyds Bank to compensate businesses affected by HBOS crooks – Daily Mail