FTSE 100 gains as banks bet on looming US rate hike
FTSE 250 rises with miners in the lead
Pound unchanged against the US dollar at $1.2465
Sterling 0.16% lower against the euro at 1.1768 euros
FTSE 100 shares closed higher on Wednesday, led by banking shares which teamed up with their Wall Street brethren to cheer on what may be a US rate hike as soon as March.
Overall, the 100-share index was up 0.5% at 7,302.41.
Standard Chartered (LON:STAN) up 2.4% at 817.9p, RBS (LON:RBS) up 2.1% at 246p, Barclays (LON:BARC) up 1.7% at 239.25p, Lloyds (LON:LLOY) up 1.5% at 67.47p as well as yield-hungry insurers like Old Mutual (LON:OML) up 1.5% at 216.8p were among the top gainers on the blue-chip index after US Fed chair Janet Yellen signalled that the central bank could raise interest rates soon.
The moves came as some of America’s biggest and most brash banks posted record share prices, among them Goldman Sachs (NYSE:GS) and Wells Fargo (NYSE:WFC).
Fed futures indicated a 42% chance of a March rate hike. On Monday it was only 30% chance.
But the biggest gainer, above Standard Chartered, was Ashtead Group (LON:AHT), up 2.5% at 1709p after broker Bank of America-Merrill Lynch upped its price target on the stock to 2,000p from 1,620p and reiterated its 'buy' rating.
The bank said Ashtead remains an attractive long-term investment opportunity, offering around 20% earnings per share compound annual growth rate for an attractive price-to-earnings rating of 12.6x to April 2018.
Travel firm Tui (LON:TUI) fared worst, down 7.2% to 1130p on profit-taking. On Tuesday, it dominated the blue-chip risers, gaining 5.3% after saying first-quarter losses had narrowed.
The mid-cap FTSE 250 closed up 0.2% at 18.827 and led by Acacia Mining plc (LON:ACA) up 3.5% to 519.5p after a bullish note from broker Jefferies which reiterated its 'buy' rating and status as the investment bank's top pick in the sector, and lifted its target price to 575p from 550p as the once-chronic underperformer continues to deliver operational and financial improvements under new management.
Small-caps also had a good run. The FTSE AIM 100 Index closed up 0.5% at 4343 and the FTSE AIM All-Share Index up 0.5% at 906.
London gainers were 39% of the market and losers only 26%.
1530 GMT - Footsie slips from highs as US stocks make slow progress
FTSE 100 index ahead 28 points
Financials up on US rate hike prospects
Pound lower on UK wages data
Falcon Oil & Gas, Metal Tiger strong
3.30pm … Off highs …
The Footsie held firm but drifted off highs in late afternoon trading as US stocks made modest early progress after ending at fresh highs yesterday.
Around 3.30pm, the FTSE 100 index was up about 28 points at 7,296, easing back from an earlier peak of 7,310.
After an hour of trading in New York, the Dow Jones was up around 26 points at 20,534, while the broader S&P 500 and tech-laden Nasdaq composite both just ticked higher.
Investors were digesting a big batch of stronger-than-expected US economic data, which enhanced US rate hike expectations after ‘hawkish’ comments to Congress yesterday from Federal Reserve boss Janet Yellen, who continues her testimony today.
The data showed the biggest surge in US inflation in January for four year, while retail sales rose by more than expected last month, and a fall industrial output proved less than feared.
Naeem Aslam, chief market analyst at Think Markets UK Ltd, said: “The US retail sales data was hot and it tells us how much investors are willing to dig deep into their pockets and how confident they are in their spending attitude.”
He added: “The CPI data released today was also able to move the needle from its previous reading. You can see that the picture is changing as inflation has picked up over in China and this is having more prominent impact over in the US.”
In London, financial stocks continued to provide the main lift for the FTSE 100, with insurer Prudential PLC (LON:PRU) a feature, up 1% to 1,634p after the Financial Times reported that the insurer is bidding to take a large portion of the £12.50bn worth of mortgages issued by Bradford & Bingley that are being sold by the UK government.
Food producer to Primark clothing chain owner Associated British Foods PLC (LON:ABF) was another gainer, edging up 0.2% to 2,530p after Shore Capital upgraded its rating ‘buy’ from ‘hold’ following a positive meeting with the company's finance director.
But holidays firm TUI Group was the biggest FTSE 100 faller, shedding over 7% at 1,129p, retreating from strong gains made yesterday when it affirmed its full-year guidance and unveiled the sale of its Travelopia business for £325mln.
12.15pm … Gains remain …
The Footsie stayed higher in lunchtime trading, although New York stocks were seen retreating after yesterday’s record highs, with London underpinned by a weaker pound after more below-forecast UK data.
At about 12.15pm, the FTSE 100 index was up 40 points at 7,309, hovering around the day’s peak.
On currency markets, having fallen sharply yesterday when UK inflation numbers missed forecast, the pound shed another 0.4% versus the dollar to US$1.2425 and lost 0.1% against the euro at €1.1776 after UK wage growth data came in lower than expected.
The focus this afternoon, however, will be very much on the US as investors await a second day of Congressional testimony from Federal Reserve chair Janet Yellen, this time before the House Financial Services Committee, and some key US economic data including the latest retail sales and inflation numbers.
Craig Erlam, senior market analyst at Oanda, said: “While Yellen was in no mood to give anything away (yesterday) that had not already been disclosed in previous statements or minutes, traders did get excited by the disclosure that a rate hike will likely be appropriate at one of its upcoming meetings if employment and inflation evolve in line with expectations.
“You don’t have to be Sherlock Holmes to come to the same conclusion given the Fed’s intention to raise rates on three occasions this year but perhaps the simple act of leaving a March hike on the table, given that it had been all but written off by investors, is what triggered such a reaction.”
In London, small caps resources investor Metal Tiger PLC (LON:MTR) was a big feature, with its shares surging 24% higher to 2.05p as investors anticipated good news from its joint venture partner in Botswana, MOD Resources (ASX:MOD).
MOD, the majority partner in a 70/30 joint venture with Metal Tiger on a prospect in the Kalahari copper belt, is expected to release “significant drill results” from below the proposed T3 copper/silver pit
But on the downside, green energy group Powerhouse Energy Group PLC (LON:PHE) shed 18% to 1.23p as it raised £2.5mln via a placing of shares at 0.8p each.
The group said the funds raised will largely be used to repay a convertible loan note facility with finance house, Hillgrove.
And shares in Tracsis (LON:TRCS) fell 13% to 405p as the transport software specialist said its first half underlying profit is expected to be slightly ahead of the previous period but warned of price competition in its traffic and data services business.
10.10am … Wages focus …
The FTSE 100 index held its gains in mid morning trading, supported by strength in banking stocks on US rate rise hopes, but the pound fell back after UK unemployment data proved weaker than expected.
Around 10am, the UK blue chip index was about 36 points higher at 7,305, just below a session peak of 7,308, and recouping all of yesterday’s 10 points fall.
But on currency markets, having been steadier early on, sterling took a tumble after UK wage growth came in lower than expected, with average weekly earnings at 2.6% year-on-year in the fourth quarter of 2016.
At the same time, the number of people in work rose in the three months to December after two previous monthly reports had shown employment falling.
Having fallen sharply yesterday when UK inflation numbers missed forecasts, the pound lost another 0.3% versus the dollar to US$1.2430 and shed 0.1% against the euro at €1.1778.
Ben Brettell, senior economist at Hargreaves Lansdown said: “Sterling fell around a third of a cent on the news, presumably as less ‘tightness’ in the labour market lessens the chance of an interest rate rise.
“The stock market was largely unchanged, having already rallied on optimistic comments made overnight by Fed chief Janet Yellen. “
Banks continued to lead the FTSE 100 gainers, with Royal Bank of Scotland Group PLC (LON:RBS) adding 2% at 245.8p and Barclays PLC (LON:BARC) ahead 1.6% at 239.1p after the 'hawkish’ comment on future US rate hike prospects from the Federal Reserve boss yesterday, which drove Wall Street to new record highs.
The FTSE 250 index extended its run of all-time highs in London as well today, up to a peak of 18,847.
But among weaker mid caps, bookmakers William Hill PLC (LON:WMH) and Ladbrokes Coral Group (LON:LCL) were under pressure, losing 2.5% to 265.2p and 4% to 1,220.8p respectively, after HSBC downgraded its rating for the pair to ‘reduce’ from ‘hold’
With today’s meagre corporate news, FTSE 250-listed defence contractor QinetiQ Group (LON:QQ.) added 0.6% at 277.8p after saying trading met its expectations in the third quarter of its financial year, leaving it in line to meet its forecasts for the full year.
Among the small caps, Falcon Oil & Gas Ltd (LON:FOG) was a strong gainer, jumping almost 31% to 6.875p after it said drilling results from the Beetaloo Basin project in Australia's Northern Territory indicate a material shale gas resource at the site.
Galileo Resources PLC (LON:GLR) also moved higher, up 3.2% to 3.975p after saying drilling has begun on its Concordia copper project in South Africa's Northern Cape Province.
8.45am … Strong start …
The Footsie pushed higher at the open, breaching the 7,300 level once again following a third straight session of record highs overnight as testimony from Federal Reserve boss Janet Yellen failed to dent optimism over US president Donald Trump’s hoped-for tax boost.
Around 8.30am, the FTSE 100 index was about 33 points higher at 7,301, recovering after a 10 points decline yesterday.
Banks led the FTSE 100 gainers, with Standard Chartered PLC (LON:STAN) up 1.8% at 813.3p and Barclays PLC (LON:BARC) ahead 1.7% at 239.15p on US rate rise prospects after Yellen’s comments, and ahead of the sector results season, which kicks off next week.
On currency markets, after sharp falls yesterday when UK inflation numbers missed forecasts, the pound was a bit steadier today, just down 0.1% versus the US dollar at US$1.2459 and flat against the euro at €1.1796 with the latest unemployment numbers due today.
Connor Campbell, financial analyst at Spreadex, said: “With inflation on the rise the most talked about figure this Wednesday will likely be the wage growth reading, which is set to remain unchanged at 2.8%.
“That’s all well and good for now, but given that UK inflation could hit 3% at some point in the second half of 2017 growth needs to pick up to avoid severely pinched pockets across the country.
“Elsewhere the unemployment rate is set to come in at 4.8% for the fourth month in a row, while the claimant count change is expected to jump up to 1.1k having seen a surprising 10.1k drop in December.”
6.50am ... Positive start expected ...
The FTSE 100 is set to make a positive start following a third straight record session on Wall Street overnight and mainly positive movements on Asian stock markets.
According to the spread-betting firms, the index of blue-chip shares will open 19 points to the good at 7,287.56.
The US, meanwhile, appears to have been unfazed by remarks to Congress by Fed chair Janet Yellen saying it was “unwise” to wait too long to raise interest rates.
She also revealed that, economically at least, America was faring marginally better than expected.
So while Treasuries and financial stocks were sold off, the Dow Jones ended the session 0.45% higher. The broader-based S&P 500 was up 0.4% and the tech-focused NASDAQ edged 0.3% higher.
“It would appear that while investors had priced out the prospect of a move on rates in March the Fed, not unreasonably wants to keep the markets guessing,” said CMC Markets analyst, Michael Hewson.
“But it was always likely that the Fed would want to keep its policy options open, fiscal policy uncertainties notwithstanding.”
In Japan the scale of Toshiba’s nuclear liabilities have been quantified in a Reuters report at US$6.4bn, sending shares in the giant down 10%.
However the Nikkei 225 was untroubled by the kerfuffle, rising 1%. The Shanghai market and Australia’s ASX 200 were up respectively 0.2% and 0.9%.
Back here in the UK it is set to be a slow day for scheduled corporate news. On the macro front we have unemployment figures later this morning.
Business Headlines
- Claims that house price growth was easing because of a post-Brexit slowdown were thrown into doubt after official figures revealed an acceleration at the end of last year – Times.
- Sales of three key Jaguar Land Rover vehicles have slowed markedly as the Indian-owned British manufacturer reported a sharp reverse in profits – Times.
- The price of admission to the elite club of Berkshire Hathaway “A” shareholders has hit a quarter of a million dollars for the first time, taking the value of Warren Buffett’s famed investment vehicle to a new record – FT.
- The UK financial watchdog is exploring ideas for an “international segment” to accommodate overseas companies in British capital markets, in which large groups could obtain a London listing without obligation to comply with stringent requirements for a premium listed company – FT.