FTSE 100 closed over 22 points higher as the new trading week began as the UK's minority government forged a new confidence and supply deal with the Democratic Unionist Party (DUP) of Northern Ireland.
It brings some kind of certainty to Theresa May's administration after two weeks of wrangling over the form their backing would take.
FTSE 100 closed up 22.67 at 7,446, but the FTSE 250 finished down a tad - 0.47 - at 19,684.
It will see £1bn extra cash spent in Northern Ireland over the next two years.
In the currency markets, the pound lost 14% against the US dollar, but gained 0.05% against the Euro.
Top dog on Footsie was hospitality giant and Premier Inn owner Whitbread (LON:WTB), which added 2.17% to 4,045p. Last week shares were also buoyed after the group reported on an upbeat start to the year.
Miners were on the losing side with silver giant Fresnillo (LON:FRES) dropping 3.12% to 1,555p.
3.55pm: Senior bonds rise in banks rescued by Italian government
Jasper Lawler, Senior market analyst at London Capital Group, has noted that Senior bonds in the banks recued by the Italian government - Veneto Banca and Banca Popolare di Vicenza - have risen more than 15 points.
Vicenza’s €750mln 2020 Senior note was trading at about 85 cents on the euro on Friday, according to Tradeweb prices, but rose to 102 cents this morning. Veneto’s €500mln 2019 senior bond jumped from 88 cents to 103 cents over the same period.
"For some unimaginable reason, bondholders seem to prefer taxpayers funding the purchase of bad loans over losing their investments," Lawler said.
"Although two small regional banks basically just went belly up and shareholders were wiped out, it was the shares of similarly-sized banks that outperformed. The logic is quite sound. Italy has just shown the age of bailouts is not over. That significantly reduces the risk of an investment in a bank going sour."
3.40pm: FTSE 100 risers and fallers
In late afternoon trade, the biggest risers on the FTSE 100 remain UK banks, lifted by news that the Italian government will inject up to €17bn to rescue two of the country’s banks. RBS, Barclays and HSBC were on the front foot.
Lloyds, however, was in the red after a police commissioner has claimed that bosses at the bank and its HBOS subsidiary tried to cover up a banking scandal at its HBOS Reading branch.
Airlines were also flying higher with International Consolidated Airlines and easyJet as oil prices reversed early gains. Brent crude fell 0.59% to US$45.27 per barrel and West Texas Intermediate dropped 0.32% to US$42.87 per barrel.
On the negative front, gold miners slumped as the price of the yellow metal fell. Shares in Fresnillo, Antofagasta and Randgold Resources declined.
Provident Financial was a top faller after RBC Capital cut its rating on the stock to ‘sector perform’ from ‘underperform’ and lowered the target price to 2,650p from 3,400p following its profit warning last week.
3.02pm: Theresa May outlines agenda on climate change, trade and migration
Theresa May has urged US President Donald Trump to reconsider his decision to pull the US out of the Paris climate agreement.
Speaking in the House of Commons after making a pact with the DUP, the Prime Minister said the UK has reaffirmed its commitment to the agreement and she has “expressed my disappointment to President Trump that he has taken a different decision”.
“We will continue to make the case to our American allies to think again,” she said.
On Brexit, she said the UK was working to “deal with the drivers of migration while also doing more to stem the flow”.
May said while she was at the EU Summit Brussels, she made a £75mln commitment to meet humanitarian aid in the central Mediterranean while also facilitating voluntary returns of migrants making “these treacherous journeys”.
The UK is working on making new trade deals with “old friends and new alleys alike”, May said..
“As long as still part of the EU we’ll continue to press for an ambitious trade agenda that can deliver jobs and growth across the continent and that is what I did at this summit.”
PM @theresa_may sets out the government's position on migration, trade and climate change, as discussed with the European Council #Brexit pic.twitter.com/oEQ0opShYS
— Sky News (@SkyNews) 26 June 2017
2.37pm: George Osborne taunts Theresa May on deal with DUP
George Osborne, the former Chancellor-turned-editor of the London Evening Standard, seems to think the deal between the Conservatives with the DUP is a joke. He has taken to Twitter to make fun of the deal with a reference to hit comedy 'Austin Powers'.
And here's our second edition @EveningStandard ..... pic.twitter.com/Z2MRUISCDz
— George Osborne (@George_Osborne) 26 June 2017
2.23pm: Corbyn slams Tory-DUP pact
Labour leader Jeremy Corbyn has said the Tory-DUP deal is "clearly not in the national interest" but rather designed to keep Prime Minister Theresa May in power after her shock general election losses.
"The government must immediately answer two questions," Corbyn said.
"Where is the money for the Tory-DUP deal coming from? And, will all parts of the UK receive the much needed additional funding that Northern Ireland will get as part of the deal?"
As part of the deal, the DUP will receive £1bn extra for Northern Ireland over the next two years.
Corbyn is not the only one who has criticised this funding with Twitter users slamming the deal.
#DUPCoalition Can't find the money to fund the NHS properly, but can afford £1,000,000,000 to form a coalition of Tories and DUP. pic.twitter.com/xzdkXqka1u
— Jake Page (@JakePage17) 26 June 2017
When they say there's no magic money tree they mean there's no tree for the 99%. The tree is only for the Tories & their mates #DUPCoalition pic.twitter.com/xtHlGuQmDD
— The Pileus (@thepileus) 26 June 2017
These are the standards governing public life. MP's should be reporting Theresa May for clear breach with the #DUPCoalition #dupdeal pic.twitter.com/u2NSQZKXYE
— Bryan Blears (@bryanblears) 26 June 2017
1.47pm: US durable goods orders fall more than expected
US durable goods orders fell for the second consecutive month in May, according to the Commerce Department.
Orders dropped 1.1% last month, more than the 0.8% decline expected and the biggest decrease in six months.
The weakness reflected a 12% slump in orders for large planes, offsetting a 1.3% rise in orders of new autos.
1.30pm: Tory plans to scrap Triple Lock on state pension dropped on DUP deal
Hargreaves Lansdown has noted reports that the Conservatives and the DUP’s agreement will include dropping the Tories plans to scrap the state pension Triple Lock and the means-testing of the Winter Fuel payment.
“This has to rank as one of the least surprising aspects of the deal,” said Tom McPhail, head of policy at Hargreaves.
“The Conservatives’ assumption they could win the election comfortably whilst withdrawing policy support from their core constituency of older voters back-fired painfully. The DUP position of retaining the Triple Lock and the winter fuel payment allows the Conservatives a welcome way out of this bind in the short-term.”
However, McPhail said there is widespread support for the abolition of the Triple Lock so it may happen down the line.
“A possible way through this impasse is to build consensus with the pensions industry and across the political spectrum, through the formation of a Savings Commission to explore the development of a joined up savings policy for the benefit of all ages across society.”
Interesting news, though hardly a surprise under the circumstances https://t.co/56V6dd90US
— Tom McPhail (@PensionsMonkey) 26 June 2017
1.13pm: Still many political headwinds after Tory-DUP deal, says UFX analyst
Theresa May has been on a "very bumpy ride" since announcing the snap general election in April, but a pact with the DUP has "steadied the ship, for the time being at least", according to Dennis de Jong, managing director at UFX.com.
“It comes as no surprise that the pound has rallied against the dollar following the news, with the markets breathing a sigh of relief that the Conservatives can now form a government.
“Investors in the pound will be happy the deal has finally been done, but there are still plenty of political headwinds out there. Rising inflation combined with stagnant wage growth means the average Briton is much worse off than they were a year ago.
“Some within the Bank of England now want to see interest rates rise to counteract inflationary pressures. We will know more about the Bank’s strategy when Governor Mark Carney speaks at the ECB forum on Wednesday.”
12.37pm: Improved market sentiment weighs on gold
Gold prices have fallen 1.03% to US$1,243.50 per troy ounce, weighing on UK-listed mining shares. Craig Erlam, senior market analyst at Oanda, said improved market sentiment is providing a drag on safe haven assets, particularly gold.
"Gold recovered back towards US$1,260 towards the end of last week but has been sold heavily this morning, hitting its lowest level since the middle of May at one point," Erlam said.
The improved sentiment comes as the Tories confirmed a pact with the DUP. The deal will see Northern Ireland receive an extra £1bn over the next two years in exchange for the DUPs support for May’s minority government
12.00pm: FTSE 100 as lenders boosted by Italian taxpayer bank rescue deal
The FTSE 100 rose 49 points to 7,473.87 in midday trading, led by banks, as Italy’s government agreed to bailout two lenders in the Venice region.
UK lenders, including Royal Bank of Scotland, Lloyds Banking Group and HSBC, gained after the Italian government committed up to €17bn in a rescue deal of Veneto Banca and Banca Popolare di Vicenza.
“The Italian banking situation has long been a background concern for its European peers, the issue every now and again bubbling to the surface to spook the markets,” said Connor Campbell, financial analyst at Spreadex.
“The bailout, then, has been greeted with relief by the sector as a whole, even if it has sparked anger from more than a few MEPs, especially in Germany. “
Closer to home, the Conservatives have reached confidence and supply agreement with Northern Ireland’s Democratic Unionist Party to form a government. The DUP’s 10 MPs will support Theresa May’s minority government following two weeks of talks.
The pound rose 0.13% versus the dollar to US$1.2735 and increased 0.26% against the euro to €1.1383.
Meanwhile, oil prices edged higher on a weaker dollar with Brent crude up 0.15% to US$45.61 per barrel and West Texas Intermediate up 0.32% to US$43.15 per barrel.
Gold prices, on the other hand, fell 1.03% to US$1,243.50 per troy ounce, sending shares in Fresnillo and Randgold Resources lower.
11.17am: Conservatives and DUP reach deal
The Conservatives have reached an agreement with the Democratic Unionist Party to form a government.
The DUP's 10 MPs will support Theresa May's minority government after the Tories failed to win the general election outright. There will be no formal coalition.
The two parties have been in talks for the past two weeks since the general election resulted in a hung parliament.
DUP deal done - Pound rises to highest since 10:15 this morning
— Neil Wilson (@neilwilson_etx) 26 June 2017
10.44am: BBA confirms pressures on housing market activity, says EY Item Club
Howard Archer, chief economic advisor to the EY Item Club, has weighed in on the latest BBA data showing a slowdown in mortgage approvals.
“The fundamentals for house buyers could deteriorate further over the coming months with consumers’ purchasing power squeezed even more by a combination of higher inflation and muted earnings growth,” he said.
“It is also possible that the labour market will increasingly falter despite its current resilience. Additionally, housing market activity is likely to be hampered by soft consumer confidence and reduced willingness to engage in major transactions.”
#BBA mortgage approvals for #UK #house purchases at 8-month low in May reinforces belief #prices unlikely to rise by more than 2% over 2017
— Howard Archer (@HowardArcherUK) 26 June 2017
He added that potential house buyers may also be concerned on the prospect that the Bank of England could raise interest rates. Stretched house prices to earnings ratios and strict checking of prospective mortgage borrowers by lenders are also weighing on housing market activity and prices, Archer said.
"House prices look unlikely to rise by any more than 2% over 2017, and the downside risks to this already muted outlook are rising."
10.10am: German MEP slams Italy's bank bailout
German conservative MEP Markus Ferber has expressed his disappointment that the Italian government has bailed out two banks in the Venice region at a cost of €5.2bn.
“With this decision, the European Commission accompanies the Banking Union to its deathbed,” he said in a statement.
“The promise that the tax payer will not stand in to rescue failing banks anymore is broken for good.”
He added: “I am very disappointed that the commission has approved this course of action.
“By doing so the Commission has massively undermined the credibility of the Banking Union. If the common set of rules governing banking resolution is so blatantly ignored, there is no point in negotiating any further on a common deposit insurance scheme.”
09.50am: Loans for house purchase approvals fall in May, BBA reveals
Loans for house purchase approvals fell 3.3% to 40,347 in May compared to the same time a year ago, the British Bankers’ Association said.
Remortgaging approval numbers also dropped 10% to 24,248 in the lead up to the general election.
Gross mortgage borrowing came to £13.3bn in May, 9% higher than a year ago while net mortgage borrowing rose 2.4% year-on-year.
Consumer credit slowed to a 5.1% increase in May from 6.4% in April, driven by weaker growth in personal loans and overdrafts.
“This month’s figures show that in the run up to the general election, credit growth in personal loans, cards and overdrafts has slowed, which was reflected in lower spending; with increased household costs affecting growth in deposits and saving,” said Eric Leenders, BBA managing director for Retail Banking.
UK BBA Loans for House Purchase May: 40347 (est 40250; rev prev 40686)
— LiveSquawk (@LiveSquawk) 26 June 2017
08.30am: London stocks track gains in Asia
London stocks tracked gains in Asia as oil prices recovered and as the Conservatives edged closer to a deal with the Democratic Unionist Party to form a government.
The FTSE 100 rose 46 points to 7,469.77 at the opening bell.
Oil prices rose on a weaker dollar, with Brent crude up 0.97% to US$45.99 per barrel and West Texas Intermediate up 1.03% to US$43.46 per barrel.
“A positive opening call comes courtesy of a positive session in Asia to start the new trading week and oil recovering more of last week’s lost ground, although we caution that crude prices have yet to convince that they can overcome their falling channels of the last month,” said Mike van Dulken abd Henry Croft of Accendo Markets.
The pound rose 0.27% versus the dollar to US$1.2752 and edged up 0.19% against the euro to €1.1386 following reports that the Tories and the DUP would reach a deal by Tuesday.
DUP leader, Arlene Foster, told Sky News today that the party had returned to London and aimed to finalise a pact with the Conservatives.
Elsewhere on the politcal front, the Italian government has been forced to bail out two banks in the Venice region - Banca Popolare di Vicenza and Veneto Banca - at a cost of £4.6bn.
In company news, Ultra Electronic Holdings plc (LON:ULE) shares ticked higher as confirmed reports that it was in advanced talks to buy the whole issued share capital of New York-listed Sparton Corporation (NYSE:SPA).
Hikma Pharmaceuticals plc (LON:HIK) rose after saying that Michael Raya will retire as chief executive of the US business.
Amec Foster Wheeler plc (LON:AMFW) gained as it completed the sale of its circulating fluidised bed (CFB) boiler business to Sumitomo Heavy Industries for US$170m.
07.00am: FTSE to start on the front foot
The FTSE 100 is set to start the week in positive fashion, taking its cue from Asia overnight and mirroring the gains seen on Wall Street on Friday.
The index of blue-chip stocks will advance 52 points to 7,376.37, according to the spread betting firms.
Italy’s £4.6bn bailout of two banks in the Venice region will likely send ripples across the financial sector early on although the implications are minor for the UK, analysts said.
Oil stocks will also be in focus (and most likely in positive territory) Monday with the price of a barrel of crude rising overnight after a period of sustained pressure amid oversupply worries.
The big corporate news over the weekend was the £1.8bn sale of health food group Holland & Barratt to Russian billionaire Mikhail Fridman.
Looking ahead, we’ll get a better handle on the state of UK retail sentiment Wednesday when Dixons Carphone (LON:DC.) weighs in with prelims.
There are also updates from online estate agent Purplebricks (LON:PURP) and Tullow Oil (LON:TLW).
- Brent crude up 0.15% a barrel at US$45.61
- Gold down 1.02% an ounce at US$1,243.60
- Pound worth US$1.2736
Business Headlines
- US$20bn New York hedge fund, Tiger Global, is using an offshore shell company to anonymously bet against the shares of the UK supermarket Tesco, raising fresh questions over the efficacy of European short selling disclosure rules – FT.
- Since the financial crisis, bank shareholders have borne pretty much the whole cost of cleaning up the reputational and legal damage done to the sector. A thumping US$350bn has glugged out from bank balance sheets to regulators around the world in conduct fines and compensation – FT.
- Overseas banks and financial institutions are desperate to establish footholds in the City of London even amid uncertainty about its continued access to European Union markets, according to the lord mayor of London – Times.
- Takata, the Japanese automotive supplier at the centre of a global recall of exploding airbags, has filed for bankruptcy protection in Japan and the U.S., saddled with liabilities exceeding US$10bn to address massive recall costs – FT.
- Switzerland’s Nestlé has become the latest target of US activist investor Daniel Loeb, who says the world’s largest food and drinks company is “stuck in its old ways” and needs a shake-up – FT.
- EDF is bracing for a multi-billion euro rise in costs at its Hinkley Point C nuclear site after a fresh evaluation of the project revealed yet another likely delay – Telegraph.
- South African fund Pallinghurst Resources is set to vote through a move to take over Aim-listed miner Gemfields – Telegraph.
- Petrofac will be hoping to convince investors that it is business as usual for the troubled oilfield services group in its trading update on Tuesday – Telegraph.
- The status of Bond Street as the UK’s most exclusive shopping destination is under threat, as one in four retailers on the famous street consider shutting up shop and moving out as a result of high rents and business rates – Guardian.
- Murdoch’s Sky takeover bid: culture secretary’s verdict due this week. Rupert Murdoch is about to learn whether the government has cleared his latest bid to buy Sky or whether concerns about competition could yet derail the deal – Guardian.