FTSE 100 closes up 29 at 7,514
US stocks higher ahead of Fed minutes
M&S, Dixons Carphone gain after updates; Kingfisher falls
FTSE 100 closed nearly 30 points up as shares in New York went higher and traders awaited Fed minutes.
The bluechip benchmark finished at 7,514, up 0.40% beating the session's previous peak of 7,512.
Meanwhile, FTSE 250 also made gains, up over 30 points at 19,950.
The biggest riser on Footsie was budget carried easyJet (LON:EZJ), which gained 3.31% to 1,344p after a number of recent upbeat broker comments.
Liberum Capital today hiked its target price for easyJet, noting that its “faster growth appears to be delivering the desired improvement in its strategic positioning”, albeit at a cost.
The biggest laggard on FTSE 100 was Kingfisher plc (LON:KGF), down over 7% to 334p as Credit Suisse took the red pen to its target price to 410p from 430p.
3.10pm: US stock see modest gains
The Footsie held just off session highs back above the 7,500 level in late afternoon trading, as US stocks put in a positive but cautious early showing.
Around 3.10pm, the FTSE 100 index was 24 points higher at 7,509, just below the session peak of 7,512.73, but well above the low of 7,475.11.
US stocks started with modest gains today, with the Dow Jones up 23 points at 20,961, while the broader S&P 500 index added 1.1 points and the tech-laden Nasdaq composite took on 4.3 points, holding near record levels set last week.
S&P 500 erases losses from last Wednesday’s Trump-driven sell-off https://t.co/SEyOnrHkqJ
— fastFT (@fastFT) 24 May 2017
Trading was fairly subdued in New York as investors awaited the publication of minutes from the Federal Reserve's latest meeting, due at 7pm London time.
Connor Campbell, financial analyst at Spreadex, said: “A mid-June rate hike from Yellen and co. is very much in play, so tonight’s release may be important for the dollar’s showing in the rest of the week.”
On currency markets in early afternoon trading sterling slipped 0.1% lower versus the dollar at US$1.2946, giving back earlier gains, Against the euro, the pound was off 0.2% at €1.1572.
Among the blue chip risers in London, discount airline easyJet PLC (LON:EZJ) was a good gainer, up 2.8% to 1,377p after a number of upbeat broker comments recently, including an upgrade in rating yesterday by RBC Capital.
Liberum Capital today hiked its target price for easyJet note that its “faster growth appears to be delivering the desired improvement in its strategic positioning”, albeit at a cost.
The broker raised its target for easyJet to 1,000p from 825p to reflect higher estimates, but retained a ‘sell’ rating on the stock.
Among the small cap gainers, telematics group Trakm8 Holdings PLC (LON:TRAK) saw its shares jump over 12% higher to 113.5p on news it has won a contract with an undisclosed roadside assistance technology company to supply devices and data.
And ValiRx Plc (LON:VAL) was another good AIM gainer, adding 8% to 2.32 as it revealed its joint venture company ValiSeek Limited has received notification that the Australian has allowed its patent covering ling cancer compound VAL401.
2.15pm: China buying Lotus
China's Geely is buying British sports car maker Lotus, as part of a deal in which the firm is acquiring a 49.9% stake in Malaysian carmaker Proton, the Norwich-based firm’s owner.
Geely, which owns the London Taxi Company and Sweden's Volvo Car Group, will take a 51% stake in Lotus.
Lotus, which reduced its losses to £27m last year, has said it aims to make a profit this year.
At the Geneva car show in March, the firm unveiled a revamped Evora 400 model, which complies with US regulations. The vehicle costs about £75,000 in the UK.
1.15pm: Inflation expectations within tight range
Consumer expectations for inflation over the next 12 months rose slightly this month but remains within the tight range of the past six months, a survey for Citi by polling company YouGov has showed.
Citi said year-ahead inflation expectations increased to 2.6% from April's reading of 2.5%, lagging behind a sharper increase in the official measure of headline consumer price inflation which hit a three-year high of 2.7%.
In a note to clients, Citi economists said: "Stable short-term expectations show that the current spike in inflation is not self-reinforcing."
"There is no urgency to hike rates, in our view, and we expect the majority (of Bank of England policymakers) to avoid premature monetary tightening, given the economic risks."
UK inflation expectations edge up, little pressure on BoE - Citi/YouGov https://t.co/stoYgVC8Fn
— Education At Web (@EducationAtWeb) 24 May 2017
On currency markets in early afternoon trading, the pound had drifted back from earlier gains, turning flat versus the dollar at US$1.2965, and shedding 0.1% against the euro at €1.1585.
The pound's fall back added support for the FTSE 100 index which, at 1.15pm, was 23 points higher at 7,508, albeit still below the day’s peak of 7,512.73.
12.30pm: Footsie back above 7,500
The FTSE 100 index pushed up to session highs back above the 7,500 level in lunchtime trading, buoyed by gains in banking stocks and selected retailers, although US stocks are expected to make a lacklustre start today ahead of the Fed minutes.
At 12.30pm, the UK blue chip index was 20 points higher at 7,505, just holding off the session peak of 7,512.73, but well above the low of 7,475.11.
Craig Erlam senior market analyst at Oanda, said: “We’re expected a relatively flat open on Wall Street on Wednesday, as traders await the minutes from the FOMC meeting earlier this month having already strongly priced in a rate hike in June, with a second in December looking less certain.”
He added: “While the FOMC minutes will likely attract the most attention today, we’ll also get existing home sales data from the US and hear from a couple of Fed officials, with Robert Kaplan and Neel Kashkari both due to appear for the second time this week.”
June Hike All But Priced In Ahead of #FOMC Minutes - MarketPulse https://t.co/nGx1jRnZj7 #US #Fed #Oil #OPEC #China #moodys pic.twitter.com/aemdYd9uR3
— Craig Erlam (@craig_forex) 24 May 2017
Banks were higher in London helped by the hopes for interest rate hikes across the pond next month.
Royal Bank of Scotland Group PLC (LON:RBS) stood out, up 1.7% to 269.5p as investors also awaited news on a possible settlement deal over an investor lawsuit on claims they lost money in a 2008 rights issue ahead of the lender’s government bail-out.
READ: RBS investor lawsuit trial adjourned until June 7
A trial had been due to start Monday, but today it was reported that the case has been adjourned until June 7 as lawyers for the two sides remained optimistic they could strike a settlement.
Another bailed-out Lloyds Banking Group PLC (LON:LLOY) – which was returned to private ownership this month - was also in demand, adding 1.2% at 73.05p.
And Barclays PLC (LON:BARC) gained 0.6% at 215.5p even though German investment bank Berenberg has made a well-reasoned case today as to why investors should be offloading shares in the bank at current valuations.
READ: Barclays one for the Byrds?
Broker comment blighted some FTSE 250 players, however, with TalkTalk Telecom (LON:TALK) the worst off, shedding 3,6% to 176.3p after Goldman Sachs cut the stock to ‘sell’ from ‘neutral’ and dropped its price target to 150p from 190p.
READ: TalkTalk Telecom slumps 3% after Goldman Sachs downgrades
In a note entitled ‘Growth Priced In, Not Competition’, the Wall Street Bank said the stock’s premium to the European telecoms sector was unsustainable even if its focus on growth over cash is “sensible”.
And Homeserve PLC (LON:HSV) lost 2.9% at 755p as both Citigroup and RBC Capital downgraded ratings for the home emergency services provider on valuation grounds following gains after an update yesterday.
10.30am: FTSE 100 up but still below 7,500
The Footsie held firm as the morning session progressed, but held below the 7,500 level following a mixed bag of updates from the retail sector, and with miners staying depressed after a ratings downgrade for China
Around 10.30am, the FTSE 100 index was up 12 points at 7,497, slipping back from the session peak of 7,507.75, but holding above the low of 7,475.11.
Markus Huber, trader at City of London Markets Limited, said: “Moody's downgrading China overnight so far has had only a minor impact on markets partially because this move didn't necessarily come as a major surprise.
“Generally there isn't that much news making the rounds at the moment which is one of the reasons why some traders prefer sitting on the sidelines for now.”
He added: “Main focus today will be later this evening on the release of the FOMC minutes. However it appears unlikely that the Fed will provide more clarity regarding the timing of the next rate hike mainly because it wants to see first the impact the last hike is having on the economy. “
On currency markets, the pound was up 0.2% versus the dollar at US$1.2995, and also added 0.2% against the euro at €1.1619, with little impact from news the UK government borrowed a surprise £10.4bn last month in the final update on its finances before the general election..
The Office for National Statistics said public sector net borrowing, excluding State-owned banks, rose by £1.2bn in April to reach the highest amount borrowed for the month since 2014.
It came in higher than the expectations of economists who had pencilled in a smaller figure of £8.8bn.
London economy subsidises rest of UK, ONS figures show @guardian https://t.co/GWX7UOissT
— John Ashcroft (@jkaonline) 24 May 2017
Retailers mixed after updates
On the corporate front, after initial falls, Marks & Spencer Group PLC (LON:MKS) saw its shares rally 1% higher to 391.4p as the high street retailer's 10% drop in full-year profit proved to be less than forecast, even though its clothing and homeware sales fell in the current quarter as a previous recovery stalled.
But Kingfisher PLC (LON:KGF) stayed the top FTSE 100 faller, down over 6% to 336.8p as the DIY stores group reported a 0.6% decline in first-quarter like-for-like sales, hit by weak trading in France where the firm remains cautious.
Analysts at Credit Suisse cut their current year pre-tax profit forecast for Kingfisher by 5% to £800mln, down from £842mln previously, leading them to reduce their target price to 410p from 430p, although they retain an “outperform” rating on the stock.
Two transport stocks were features on the second line, with National Express PLC (LON:NEX ) the top FTSE 250 gainer, up 4% at 377.9p as JPMorgan Cazenove upgraded its rating for the buses and trains operator to ‘overweight’ from ‘neutral’.
But peer Go-Ahead Group PLC (LON:GOG) was a big FTSE 250 faller, shedding 3% at 1,794p as the same broker made the opposite move for it, downgrading its stance to ‘neutral’ from outperform’.
Among the early small cap gainers, Asiamet Resources Limited (LON:ARS, CVE:ARS) took on 7.5% at 5.0p after the miner confirmed further extensions to the mineralisation at its BKM copper deposit, both along strike and at depth.
The company said resource infill drilling results have confirmed “a very robust resource with excellent continuity”.
The drilling update follows hot on the heels of Monday’s encouraging test work on the copper deposit in Indonesia.
READ: Asiamet even more confident about its BKM resource after latest drilling results
And Obtala Ltd (LON:OBT) added 6,.6% at 20.25p after the Africa-focused agriculture and forestry group said it is acquiring a profitable trader and producer of timber for up to US$14.8mln.
WoodBois International (WBI) owns a 102,000-acre concession in Gabon with a 24,000-square metre sawmill and an 18,000-square metre veneer plant opening later this year.
8.30am: Miners drag Footsie lower
The FTSE 100 index rallied modestly in early trading, recoverying after yesterday’s post-Manchester bomb falls thanks to advances by US and Asian stocks, although weakness in miners and a drop by DIY retailer Kingfisher PLC were drags.
After three-quarters of an hour of trading, the UK blue chip index was up around 9 points at 7,494, having shed 11 points yesterday,.
US stocks gained overnight as the dollar rose ahead of today’s publication of minutes from the last Federal Reserve policy meeting, due at 7pm London time.
US dollar rebounds ahead of Fed minutes | CMC Markets https://t.co/adjSz5WKdo #FOMC #forex #USD
— Michael Hewson (@mhewson_CMC) 24 May 2017
Michael Hewson, chief market analyst at CMC Markets UK, said: “In the last week or so market odds of a June rate rise have fluctuated quite sharply, though the consensus still remains that it remains more or less a done deal.
“I still have doubts about that but the Fed do appear to have boxed themselves into a corner for a move in June, and one that they may find difficult to extricate themselves from if things do go a bit pear shaped in the next few weeks.”
On currency markets this morning, the dollar was a touch easier, however, with sterling up 0.1% at US$1.2967. The pound also found gains against the euro, ahead 0.2% at €1.1614.
Asian markets were mostly higher today, shrugging aside a downgrade of China by ratings agency Moody’s, which cited concerns about the country’s financial strength due to its highly leveraged debt levels.
But in London, miners were unsettled by the downgrade move for the world’s biggest consumer of commodities, with Rio Tinto PLC (LON:RIO) shedding 2.3% at 3,118.5p and BHP Billiton plc (LON:BLT) down 1.8% at 1,179p.
Glencore PLC (GLEN) was also a faller, down 1.6% at 287.2p as the commodities trader and miner confirmed media speculation that its Agriculture business has made an informal approach to US grains trader Bunge Ltd (NYSE:BG) regarding a possible “business combination.”
The biggest FTSE 100 faller was DIY stores group Kingfisher PLC (LON:KGF), which dropped 5.3% to 340.3p after reporting a 0.6% decline in first-quarter like-for-like sales, hit by weak trading in France where the firm remains cautious.
READ: Kingfisher reports 0.6% decline in first-quarter like-for-like sales
Elsewhere on the high street, Marks & Spencer Group PLC (LON:MKS) lost 1.3% at 382.5p after the retailer posted a 10% drop in full-year profit, albeit above forecasts, but saw its clothing and homeware sales fall by more than expected in the current quarter.
READ: M&S posts less than expected drop in full-year profit, but clothing and homeware sales fall worse
However, FTSE 250-listed electricals and mobile phones retailer Dixons Carphone PLC (LOON:DC.) was a strong gainer, adding 3.3% at 337.3p as its fourth-quarter trading beat forecasts.
7.00am: Modestly firmer start expected
After a moderately firm showing on Wall Street yesterday, UK stocks were set to open cautiously higher.
Spread betting quotes indicate the FTSE 100 will open around eight points higher at 7,490, clawing back most of yesterday’s losses.
Stateside, the Dow Jones closed 43 points to the good at 20,938 and the broader-based S&P 500 advanced 4 points to 2,398.
In Asia, the debt rating agency Moody’s downgraded China’s debt for the time in almost 30 years, shifting it from Aa3 to A1.
In Moody’s view, China is set to join most of the rest of the world n having a slow-down in economic growth and a rising debt mountain.
The news did not exactly paralyse Chinese stocks; the Shanghai Composite was down 19 at 3,044 heading towards the close while in Hong Kong the Hang Seng was 29 points lower at 25,374.
In Tokyo, stocks were having a better day, with the Nikkei 225 103 points better at 19,715.
Closer to home, it will be groundhog day again for high street bellwether Marks & Spencer Group PLC (LON:MKS).
Brokers are expecting the usual story of “food, good; clothing, meh!”, with the added complication this time round of a later Easter making the performance even more pedestrian.
HSBC expects like-for-like sales in the clothing arm to turn negative in the fourth quarter, but sees potential for a return to growth from fiscal year 2018 on the back of positive momentum.
Barclays expects underlying pre-tax profit to fall to £596mln from £684.1mln the prior year and an unchanged dividend of 18.7p.
It might also be groundhog day for DIY-focused retailer Kingfisher PLC (LON:KGF).
Last time it reported, its outlets in the UK & Ireland were doing OK but the French stores were dans la something rhyming with “heard”.
Around the markets
- Sterling: US$1.2975, up 0.14 cents
- Yield on 10-year gilt: 1.085%
- Gold: US$1,251.30 an ounce, down US$4.30
- Brent crude: US$54.26 a barrel, up 11 cents
City headlines
- UK set to become third global hub for biosciences as investment booms - Daily Telegraph
- US pharma giant Merck & Co. accused of blocking cheaper arthritis drugs for the NHS - Daily Telegraph
- Glencore makes takeover approach to grain trader Bunge - Daily Telegraph
- Barclays facing £1.6 billion High Court lawsuit - Daily Telegraph
- BT and TalkTalk compensation row threatens Openreach plans for faster broadband - City AM
- Women sue Lloyds over pension cuts - The Times
- Drill in Arctic to cut debt, says Trump - The Times
- Nearly 94% of Shell shareholders reject Paris Agreement climate target - The Independent
- VAT receipt slowdown in April points to weakening consumers - The Independent
- Bitcoin approved as acceptable currency in Fidelity’s canteen - Financial Times
- Fiat Chrysler hit by emissions test suit in the US - Financial Times
- German prosecutors to investigate Daimler over emissions - Financial Times