FTSE 100 closes up 87 at 7,416
FTSE 250 up 52 at 19,267
Dow Jones hits new high
FTSE 100 finished the day strongly , up 87, or 1.19% as US shares also went north after Janet Yellen's speech before congress.
The UK blue-chip benchmark closed at 7,416 and registered the biggest single day gain since April as traders appeared to welcome the Fed chair's measured approach of how she sees the forthcoming months.
Interest rate rises will come but at a gradual pace, she suggested.
The FTSE 250 was also higher - up over 52 points at 19,267.
Oil was also surging ahead with a barrel of Brent crude- the UK benchmark -up 2.36% at the time of writing, to stand at US$48.10.
The biggest gainer on Footsie was Mediclinic International (LON: MDC), up 4.72% to 742.50p, while the top loser was legacy software specialist Micro Focus International, which shed 8.10% to 2,020p.
Its fall came after full-year results, though it was not the P&L (profit & loss account) that had traders nervous; it was the impending completion of its merger with the software arm of US information technology giant Hewlett Packard Enterprise.
3.00pm
Resource stocks were doing their bit to keep the Footsie above the 7,400 level.
With the prices of crude oil, gold and silver all on the up, investors gravitated towards the likes of energy stocks Royal Dutch Shell PLC and BP PLC, plus miners Glencore PLC, Fresnillo PLC, BHP Billiton plc and Anglo American PLC.
The stocks, which make up a substantial part of the weighting of the FTSE 100 index, reach an intra-day high of 7,418, up 89 points.
State-owned lender Royal Bank of Scotland Group PLC (LON:RBS) failed to participate in the advance of the blue-chips. The lender's shares were down 0.2% at 256p after it reached a settlement with US regulators over mortgage mis-selling.
READ RBS reaches US$5.5bn settlement with US regulators over mortgage mis-selling scandal
Meanwhile, in Washington, Federal Reserve chair Janet Yellen was preparing to go before the House Financial Services committee, just as the Dow Jones hit a new high.
Timing is everything.
“In her testimony to the House Financial Services Committee, Janet Yellen has suggested that tepid prices could be a fork in the road for monetary policy for the remainder of the year,” observed Dennis De Jong, managing director of forex trading platform operator UFX.com..
“The Fed Chair appears puzzled, and if inflation refuses to pick up then investors will become increasingly likely to bet against another rate hike in 2017.
“Uncertainty is swirling around the US economy and the dollar could fall under further pressure with the Bank of Canada raising rates today for the first time in seven years,” he noted.
2.10pm ... FTSE establishes itself above 7.400
The FTSE 100 regained ground above 7,400 and this time it has remained there.
The top-share index was up 83 (1.1%) at 7,413, which was no mean feat given that there were some heavy fallers among its constituents, including Micro Focus International PLC (LON:MCRO), down 8%, and yesterday’s whipping boys Pearson plc and Marks and Spencer Group Plc. The former was down 4.7% and the latter, which was downgraded from ‘hold’ to ‘sell’ today by SocGen, down 1.8%.
Legacy software specialist Micro Focus’s fall came after full-year results, though it was not the P&L that had traders nervous; it was the impending completion of its merger with the software arm of US information technology giant Hewlett Packard Enterprise.
House broker Numis Securities said the results were in line with its forecasts.
As house broker, it won’t be inclined to say what many in the market are thinking: that the £7bn purchase of Hewlett Packard Enterprise’s software assets might prove to be a pig in a poke.
It did go so far to say that “the key question remains the shape of the business on arrival, which will determine the scale (and thus cost and timing) of restructuring as well as potentially de-risk the process.”
Meanwhile, the FTSE 250, weighed down though it is by big fallers Carillion, Amec Foster Wheeler and John Wood Group, managed to crawl back into positive territory, with an 11 point gain at 19,226.
12.55pm ... Wall Street tipped to start on the front foot
After briefly rising above 7,400, the FTSE 100 was shedding gains in lunchtime trading, despite expectations of a firm start on Wall Street.
Spread betting quotes indicate the Dow Jones will open at around 21,467, after closing yesterday little changed at 21,409.
The broader-based S&P 500 was expected to kick-off at around 2,430, having eased a couple of points yesterday to 2,426.
Back in Blighty, the FTSE 100 was up 54 at 7,384 while its baby brother, the FTSE 250, was going the other way, down 31 at 19,184.
Among the blue-chips, B&Q owner Kingfisher PLC (LON:KGF) saw earlier gains reversed. The gains had arrived after Morgan Stanley upgraded the stock, but the stock was trading 3.1% lower circa 1.00pm at 292.6p, despite strong growth in mortgage lending in May.
READ Morgan Stanley double upgrades B&Q owner Kingfisher even though it expects turnaround plan to fail
Home buyers borrowed £10.8bn, up 10% on April and 16% on May 2016. This equated to 58,400 loans, up 12% on April and 10% on May 2016.
“The apparent strong growth in mortgage lending in May might flatter to deceive. The relative weakness in lending last May following the stamp duty changes makes comparisons misleading. The seasonally adjusted data shows a less buoyant lending picture, with home buying activity remaining relatively unchanged month-on-month and remortgage lending gradually decreasing each month since January,” explained Paul Smee, head of mortgages at UK Finance.
“In the summer months, we expect home buying activity to continue with an even split between first-time buyers and home movers but in greater numbers than in the winter months; we expect buy-to-let to remain subdued compared to its recent 2015 peak,” he added.
Talking of house building, Barratt Developments PLC (LON:BDEV) was unchanged after its update this morning.
READ Barratt Developments expects annual profits to beat market forecasts on strong housing demand
11.45am ... Carillion back in the firing line
Slightly worryingly, the FTSE 100 index was up 66.6 - the number of the beast - at 7,397.
Among the mid-caps, the hedge funds have returned from taking a brief time-out to undermine the share prices of Amec Foster Wheeler and John Wood Group (see 8.30 update below) to resume putting the boot into crisis stock Carillion PLC (LON:CLLN).
Jamie Nimmo, once of this parish and now the market reporter for the London Evening Standard, notes I was a bit premature in my earlier observation that the short-sellers appeared to have shown the struggling infrastructure group a bit of mercy.
The Carillion crisis continues. Shares down another 9% this morning.
— Jamie Nimmo (@JamieNimmo63) July 12, 2017
Carillion shares were down 10.6%, while Amec and Wood Group were down 6.2% and 5.1% respectively, despite which the FTSE 250 was up 29 at 19,244.
Among third liners, ASA Resource Group (LON:ASA) - the company formerly known as Mwana Africa - soared 49% to 1.90p following a 2.1p per share cash offer from 3% stakeholder Rich Pro Investments.
Meanwhile, Premier Oil PLC (LON:PMO) was 28% higher at 59.25p as it revealed the Zama-1 exploration well in Block 7, offshore Mexico, has made a world class oil discovery.
There’s thought to be more than a billion barrels of oil in the well. Premier has a 25% stake in Block 7.
11.00am ... FTSE 100 resumes advance after digesting jobs data
The jobs and earnings data gave traders pause for thought, but the pause did not last long, and the advance resumed.
Approaching 11 o’clock, the FTSE 100 was close to its high for the day, up 58 at 7,388.
Loads of people have been trying to make sense of this morning’s jobs and earnings data, which included the interesting nugget that the unemployment rate has fallen to a level last seen since Harold Wilson was Prime Minister.
Business lobbying group, the Confederation of British Industry (CBI), opted not to give good old Mr Wilson a name check.
“These figures underline the strength of the UK’s flexible labour market, which was recognised in yesterday’s Taylor Review, but declining real pay and productivity remain concerning, reinforcing the imperative that any changes following the review support the economy’s ability to create great jobs,” said Anna Leach, head of the CBI’s Economic Intelligence unit.
“Making real progress on productivity growth requires a modern industrial strategy, with real change on the ground on skills, infrastructure and innovation,” she added.
Chris Williamson, the chief business economist at IHS Markit, was in slightly world-weary mode.
“Another month and another disappointing set of pay data, with official numbers showing wage growth falling further behind inflation.
“The unemployment rate meanwhile fell to its lowest since 1975 and the employment rate hit a record high, adding to the conundrum of why pay growth is so anaemic given the low level of joblessness,” Williamson said.
Recruiter Robert Walters PLC (LON:RWA) chose a good day to release a trading update.
The shares were up 5.7% at 449.21p as it raised full-year expectations following a record performance in the second quarter.
10.15am ... Anaemic wages growth data prompts Footsie to take its foot off the pedal
The UK unemployment rate fell to its lowest level since June 1975 in May but traders were more concerned about anaemic earnings growth.
The unemployment rate fell to 4.5% in the three months to May and it is slightly bizarre to think that this level of relatively high unemployment was last seen when Harold Wilson was Prime Minister.
While the unemployment rate might have been encouraging, the picture was less bright on the wages front, with pay (including bonuses) rising by 1.8% in the three month period, which is comfortably below the inflation rate.
“Shrinking real pay doesn’t bode well for economic growth – the UK economy is heavily reliant on the consumer and falling real incomes should eventually translate into lower retail sales,” opined Ben Brettell, a senior economist at wealth management firm Hargreaves Lansdown.
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, thinks the unemployment numbers will embolden the hawks on the Bank of England’s Monetary Policy Committee to press more assertively for an interest rate rise, but he is of the view that the anaemic wage growth outweighs this.
“Despite low unemployment, we continue to expect wage growth to remain in the low 2’s, placing little pressure on the MPC to hike rates,” he said.
9.45am ... Jobs data good; wages growth not so good
After a confident start the Footsie quickly moved into consolidation mode after some mixed signals on the employment front (see above).
The FTSE 100 was up 52 at 7,381, some 8 points off its high for the day.
Micro Focus International PLC (LON:MCRO) had supplanted Pearson in the Footsie cellar after full-year results from the legacy software specialist.
Shares were down 5.1%.
The blue-chip index was getting support from the energy stocks with Royal Dutch Shell (LON:RDSB) and BP PLC (LON:BP.) both advancing around 1.6%.
Proactive News Headlines:
US-based cell engineering technology firm MaxCyte Inc (LON:MXCT) is poised for continued growth after a solid first half of the year.
ClearStar Inc (LON:CLSU) expects to report first-half year-on-year revenue growth of approximately 12% to US$8.9mln, the highest level of revenue it has generated in a six-month reporting period.
Galantas Gold Corporation (LON:GAL) says the underground development of its Omagh mine is going well, with the development tunnel advanced by approximately 47m from the underground portal. The Ulster-based miner said plans are in hand to increase the blasting frequency, while a narrow vein of gold shooting off from the Kearney system has also been intercepted as expected.
Berkeley Energia PLC (LON:BKY) has received delivery of the primary crusher at the Salamanca uranium mine in Spain. The 400 tonne per hour crusher was one of the long lead items identified in last year’s fund raise and marks the start of the build and commissioning phases that are scheduled to be completed during the second half of 2018.
Trading in shares of Premier African Minerals Limited resume trading following a temporary suspension after the firm announced that it has posted its Annual Accounts for the year ended 31 December 2016 to shareholders.
Richard Burrell, chief executive officer of Aggregated Micro Power Holdings PLC (LON:AMPH) has transferred 40,000 of his AMP shares to his self-invested personal pension. Burrell’s holding in AMP remains at around 7.2% of the company following the housekeeping sales and purchase transaction.
It is often said that ‘charity begins at home’, but for WideCells Group PLC (LON:WDC) boss João Andrade, his goodwill starts at the office. Andrade has started training for a 135-mile ultramarathon in the Californian desert – dubbed ‘the world’s toughest foot race’ – as part of the stem cell specialist’s corporate charity engagement plan
8.30am: Burberry leads the climb
The top-shares index has wiped out all of yesterday’s losses, with fashion firm Burberry leading the charge after its first quarter trading update.
The FTSE 100 was up 41 at 7,371, despite two of yesterday’s laggards - Pearson and Marks & Spencer - remaining in the doghouse this morning.
Educational publisher Pearson PLC (LON:PSON) fell 4.7% to 624p as the City becomes increasingly antsy about the company’s balance sheet, while retailer Marks and Spencer Group Plc (LON:MKS) shed another 2p at 321.1p after yesterday’s underwhelming trading update.
If M&S’s clothing range is proving about as popular as wide flared trousers at a rock and roll revivalists gig, Burberry Group PLC’s (LON:BRBY) wares appear to be back in favour among the Chinese again.
“Like for like sales, up 4%, have come in a little stronger than analysts expected at Burberry in the first quarter of their financial year. The company say they are seeing ‘top customers returning’. to their stores. In other words, the Chinese are spending again,” summarised Steve Clayton, manager of the Hargreaves Lansdown UK Growth Shares fund.
“Retail sales on the mainland were up in the mid-teens and Hong Kong continues to improve after a tough patch. Back home, sales are still strong, but slowing a little as the sharp drop in the value of sterling annualises. The strength of the dollar means that US luxury consumers are spending less at home, but more overseas, showing that the rich are canny too. Overall, comparable retail sales for the group rose by 4% in the period,” he continued, adding that “this is an encouraging performance from Burberry, which looks to be at long last pulling out of the doldrums.”
Burberry shares sat atop of the Footsie tree in early deals, up 4.7%.
Continuing the retail theme, DIY goods seller Kingfisher PLC (LON:KGF) was lifted by an upgrade from Morgan Stanley (MS).
The shares rose 2.1% to 308.3p after MS flipped from ‘underweight’ to ‘overweight’ and increased its price target from 290p to 380p.
Mid-caps were also going well early doors, with the FTSE 250 index up 111 at 19,326.
The short sellers’ favourite whipping boy, Carillion PLC (LON:CLLN) was shown a bit of mercy this morning and was down just 0.3% at 77.55p as the bears got their teeth instead into oilfield support services plays Amec Foster Wheeler PLC (LON:AMEC) and John Wood Group PLC (LON:WG.).
The former was down 6.6% after it confirmed the Serious Fraud Office had been snooping around. Wood Group, which is set to be taken over by Amec, fell 3.9% in sympathy.
READ Amec Foster Wheeler confirms Serious Fraud Office investigation but says no impact expected on takeover by Wood Group
Market preview
Having shed 40 points yesterday, the FTSE 100 was set to recoup a chunk of those losses at the open.
Spread betting quotes indicated a 20 point rise to 7,350 for the top-shares index, despite a lacklustre showing by US shares last night.
The Dow Jones industrial average closed virtually unchanged at 21,409 while the S&P 500 dipped a couple of points, as US investors wait for Federal Reserve chair Janet Yellen to make the first of two appearances this week before law-makers.
“In her speech, Yellen is expected to keep her policy outlook unchanged, which involves one more rate hike before the end of the year and the balance sheet normalisation. Yesterday, Fed’s Brainard said that the Fed should start reducing the size of its balance sheet ‘soon’. The term ‘soon’ is a source of confusion and provides a window of opportunity for speculation. Lack of further detail on the size and the timing of the Fed’s portfolio unwind could keep the US dollar under pressure,” said Ipek Ozkardeskaya, at LCG.
Asian markets were sending mixed signals this morning, with Japan in the dumps and Hong Kong on Happiness Street, Arizona.
Heading towards the close of trading, the Nikkei 225 in Tokyo was sporting a triple digit loss of 102 at 20,094.
Hong Kong’s Hang Seng index was up 203 at 26,081.
Back in the UK, attention is likely to be on fallen glamour stock Burberry Group PLC (LON:BRBY).
READ Burberry to see modest Q1 sales growth as luxury market struggles for momentum
Like many fashion firms operating at the “how much???” end of the market, its fortunes are very dependent on the Chinese market, and the People’s Republic’s economy has not been steaming ahead like a runaway train of late.
House builder Barratt Developments PLC (LON:BDEV) will also give a trading update, while there will also be a party political broadcast by Tim Martin, hidden inside which might be some indication of how well the pubs group he founded, JD Wetherspoon PLC (LON:JDW) has been trading.
Around the markets
- Sterling: US$1.2851, up 0.06 cents
- Yield on 10-year gilt: 1.28%
- Gold: US$1,218.90 an ounce, up US$4.30
- Brent crude: US$48.25 a barrel, up 73 cents
City headlines
- Twitter names former Goldman Sachs exec as new chief financial officer (Daily Telegraph)
- The end of cash? Cards now account for more than half of retail purchases, BRC finds (Daily Telegraph)
- Energy networks’ £7.5 billion windfall ‘should be returned to consumers’ (The Guardian)
- Chancellor urged to recover money lost from recruitment sector tax avoidance (The Guardian)
- First Group facing competition inquiry (The Times).
- Snap judgement as shares fall: The investment bank that led Snap’s stock market début has taken the unusual step of cutting its price forecast for the company’s shares to less than the amount at which they were offered to investors before the float. (The Times)
- Trump picks hawk for Wall Street post (The Times)
- Societe Generale planning to move up to 400 banking jobs from London to Paris (The Independent)
- Using Uber taxis is ‘not morally acceptable’, says Labour shadow business secretary (The Independent)
- UK workers are 27% less productive than German counterparts, say British business leaders (The Independent)
- JP Morgan’s Jamie Dimon warns that US banks may be forced to up sticks and leave London if the EU plays hardball after Brexit (Financial Times)
- Audi has launched what it claims is the most advanced self-driving car out there on public roads (Financial Times)
- Motorists set to benefit at the pumps as US fracking boom sinks the cost of crude oil (Daily Mail)
- Wimbledon seating provider announces stock market float plan to raise £60 million (Daily Express)
- HSBC chief executive warns fragmenting the euro clearing market would hit “the man on the street” (City AM)
- TfL awards Taylor Woodrow a £17.8 million contract to rebuild White Hart Lane station (City AM)