FTSE 100 closes 29 ahead at 7,383
FTSE 250 closes up 2.34 at 19,694
Pound weakens after UK inflation holds steady in July
Britain calls for temporary customs union deal with EU
FTSE 100 closed the day almost 30 points ahead as traders bought back into equities as fears eased over the US and North Korea.
The UK bluechip benchmark closed up 29.96 at 7,383, while the FTSE 250 index was ahead 2.34 at 19,694.
Footsie was bolstered by the weak pound, which fell 0.40% and 0.76% against the Euro and the US dollar respectively as UK inflation unexpectedly held at an annual rate of 2.6% for July.
It was the same as June but lower than the 2.7% the market was expecting and tempered further fears of a UK interest rate rise any time soon.
In stocks, the low cost airline easyJet (LON:EZJ) flew to the top of FTSE 100, up 4.51% at 1,322p, while British Airways owner IAG (LON:IAG) added 2.94% to 631p.
The moves may have been prompted by the falling oil price, with Brent crude down 2.75% to $50.62 a barrel.
On the losing front, Provident Financial (LON:PFG) plunged 3.78% to 1,882p and was top laggard.
3.50pm: FTSE holds gains, led by newly merged Standard Life Aberdeen
Ahead of the closing bell, the FTSE 100 is up 23 points to 7,376 and the pound has slumped against the dollar and the euro.
Sterling has been hit by economists’ suggestion that an interest rate hike by the Bank of England could still be a way off after inflation unexpectedly held at an annual rate of 2.6%.
On the company front, gold miners continued to suffer after prices of the yellow metal fell with Fresnillo, Randgold Resources and Anglo American on the back foot.
Next remained the top faller after Berenberg cut its rating on the stock to ‘sell’ from ‘hold’, saying the company lacks a differentiated product offering to lure in customers.
Standard Life Aberdeen was the biggest gainer a day after its merger was completed.
Royal Bank of Scotland shares were higher after the lender had its price target upped by Swiss investment bank UBS, which cited better-than-expected first half results.
3.00pm: US retail sales cause 'no harm' to interest rates expectations
A pick-up in US retail sales boosted the dollar but has made little impact on expectations for interest rates, according to Oanda's Craig Erlam.
"The dollar was already relatively well bid heading into the release on the back of some hawkish comments from William Dudley on Monday and today’s release is doing that no harm," he said.
"While today’s report will likely increase the chances of another rate hike this year, it is still far from being priced in by the markets. The general trend of retail sales still remains worrying, despite the improvement over the last couple of months and 2% inflation still looks a pipe dream."
1.28 next big test for #GBPUSD but 1.2850 (61.8 fib) may hold it for now #forex #fx #trading pic.twitter.com/DhLEv8PFDc
— Craig Erlam (@craig_forex) 15 August 2017
2.30pm: Dollar strengthens after US retail sales data
The pound has taken another turn for the worse against the dollar after better-than-expected US retail sales data gave the greenback a boost.
Sterling is now down 0.78% versus the dollar at US$1.2863.
“The beat pushed the dollar higher across the board and that’s left the pound tasting the dirt a bit today after the earlier UK CPI inflation figure missed and we saw no positive uplift from the government’s more positive Brexit stance,” said Neil Wilson, senior market analyst at ETX Capital.
“A move back to $1.27 or even $1.26 now looks achievable as it would constitute a simple retracement of the gains registered since late June following remarks from Mark Carney that the market took as being a lot more hawkish than perhaps it should have.
“Back then he said some removal of stimulus might be needed soon but this depends on a number of factors – business investment, firmer wage growth and more generally how the economy fares in light of Brexit negotiations and tighter financial conditions. That combined with a 5-3 split in the MPC had pound traders pricing in an earlier rate hike. But a couple of months of softer inflation (although still above target) have left the market assuming the hawks’ wings are now well and truly clipped.”
1.30pm: US retail sales rise more than expected
US retail sales rose more than expected in July, driven by purchases of motor vehicles and discretionary spending, data from the Commerce Department has revealed.
Retail sales increased 0.6%, compared to expectations of 0.3% and following a 0.3% increase a month earlier.
Excluding autos and gasoline, sales rose 0.5% after a 0.3% gain.
“This indicates the US consumer is now choosing to spend rather than save, which bodes well for the economy’s long-term growth and will put Fed chair Janet Yellen in a bullish mood," said Dennis de Jong, managing director at UFX.com.
“All eyes, however, continue to be on Trump’s disagreement with North Korea, which saw markets dip last week. Things have recovered since the North Koreans backed off threats to attack Guam with missiles, but the geo-political outlook looks unpredictable and that will continue to destabilise the economy."
12.45pm: UK may have to pay for temporary deal to remain in customs union
The Brexit secretary has suggested that the UK will have to pay the European Union to remain in the customs union temporarily after Britain’s withdrawal from the bloc.
David Davis confirmed the government would propose a deal to allow the transit of goods across borders to continue under the customs union for a short period.
Speaking to reporters he was asked if the UK would have to pay to remain the customs union.
“What happens in that sort of interim period you will have to leave me to negotiate, I’m afraid. But the aim is to bring to an end these £10bn-a-year payments," he said.
“We are still haggling with them on what we may owe them in the short term, but we are going to bring the overall thing to an end.”
12.00pm: FTSE 100 edges higher
The FTSE 100 increased 36 points to 7,390 as the pound weakened on the expectation that the Bank of England is unlikely to raise interest rates any time soon after UK inflation held steady in July.
The pound dropped 0.64% against the dollar to US$1.2881 and fell 0.38% versus the euro to €1.09.62.
UK inflation held at an annual rate of growth of 2.6% in July, compared to analysts’ forecasts of 2.7%.
“With price pressures appearing to have cooled and the economy still facing a couple of years of uncertainty and slower growth, markets appear to once again be pricing out a rate hike this year and possibly next,” said Oanda’s Craig Erlam.
Meanwhile investors have been buying more risky assets after tensions between the U Sand North Korea appear to have eased, Erlam added. This has sent prices in gold, a safe haven for investors, lower today. The yellow metal dropped 0.62% to US$1,274 per ounce.
The decline in gold prices saw shares in miners Randgold Resources, Fresnillo and Rio Tinto slump.
Fashion retailer Next was the biggest faller after Berenberg cut its rating on the stock to ‘sell’ from ‘hold’, saying the company lacks differentiated product offering needed to lure in customers.
On the upside, Standard Life Aberdeen topped the FTSE 100 a day after its merger was completed.
Shire rallied after the company said the UK had validated marketing approval of its dry eye drug, lifitegrast.
11.10am: Bank of England unlikely to hike interest rates in 2017, says economist
With inflation remaining unchanged in July, the Bank of England is expected to hold off from raising interest rates any time soon.
“We believe it is highly unlikely that the BoE will raise interest rates in 2017, with growth likely to remain lacklustre over the second half and with inflation looking close to peaking and likely to fall back appreciably in 2018,” said Howard Archer, chief economic advisor to the EY Item Club.
“We have pencilled in one interest rate hike to 0.5% late on in 2018, but this is far from certain. It is partly based on the assumption that there will eventually be an agreement on a Brexit transition period that helps the economy improve later on in 2018. We certainly would not be surprised if interest rates remained at 0.25% going into 2019.”
Some relief for #consumers & #BOE as #UK #consumer #price #inflation stable at 2.6% in July, down from near 4-year high of 2.9% in May
— Howard Archer (@HowardArcherUK) 15 August 2017
The expectation that the BoE will stand pat on rates has sent the pound lower against the dollar by 0.58% to US$1.2889. Against the euro, sterling is down 0.28% to €1.0973.
On house prices, Archer said growth of more than 2% looks unlikely in 2017 and could be flat over 2018. He said the fundamentals for house prices are likely to remain weak as consumers’ purchasing power is being squeezed by inflation running higher than earnings growth.
10.45am: The good and the bad of inflation data
Russ Mould, investment director at AJ Bell, has taken a look at the positives and negatives of today's ONS data.
“The good news is the rate of inflation is no longer accelerating, but the bad is that a 3.6% year-on-year increase in the retail price index of inflation sets the tone for January’s increases in rail fares, as the RPI benchmark is used to set regulated ticket costs," he said.
“At least train operators do not always (or have to) increase season-ticket prices to the full extent of RPI inflation. It will be interesting to see if the government brings any pressure to bear on the leading franchise managers, who include Go-Ahead, FirstGroup and Stagecoach (National Express withdrew from the market in January when it sold c2c to Trenitalia), since the fare increase must ultimately receive Government approval."
Commuters have taken to Twitter to complain about the rise in rail fares.
Great, because we don't spend enough already just to get to work! #RipOff
Rail fares to rise by up to 3.6% https://t.co/yuYvFEn2zk
— Steven Spires (@1StevenSpires) 15 August 2017
Rail fares increasing AGAIN. Already the most expensive in Europe and now another unjustified price rise higher than the rise in wages.
— Lewis (@Lewis_Wally) 15 August 2017
Just been on @SkyNews talking about Britains rip off railways as fares are set to rise massively in January. We need a new approach on rail!
— Samuel Tarry (@SamTarry) 15 August 2017
10.15am: Rail fares to rise 3.6% in January
Rail fares in England and Wales will rise 3.6% from next year, the biggest annual increase in five years. The increase is set by the government and linked to July's retail price index measure of inflation announced by the ONS alongside its consumer price inflation figures.
RPI rose 3.6% year-on-year in July. compared to expectations for a 3.5% increase and the previous month's 3.5% gain.
10.05am: Inflation could fall in coming months, says Hargreaves Lansdown
Has inflation peaked? One economist at least thinks so.
“It now looks quite possible inflation has peaked, and will fall back further in coming months,” said Ben Brettell, senior economist at Hargreaves Lansdown.
“All this is good news for the consumer, as it helps alleviate the continuing squeeze on household finances, though pay is still shrinking in real terms for now.
“It’s also good news for borrowers – moderating inflation means less pressure on the Bank of England to consider raising interest rates, and will allow the MPC to remove the sticking plaster of ultra-low interest rates very slowly indeed. . With only two of the eight members voting for higher rates earlier this month, it seems even a return to 0.5% is some way off for now.”
Meanwhile, the pound is down 0.30% versus the dollar to US$1.2925 and down 0.15% against the euro to €1.0988.
9.50am: UK house price growth slows
UK house prices rose 4.9% to an average of £223,000 in the year to June, slowing from 5% annualised growth in May, ONS data showed. Economists had expected a 4.3% increase.
In England, house prices increased 5.2% to an average of £240,000 while Wales saw prices rise 3.6% to £152,000, Scotland prices edged up 2.9% to £144,000 and Northern Ireland prices grew 4.4% to £129,000.
House price growth has eased since the UK voted to leave the European Union and the government raised stamp duty on second home purchases and Buy-to-Let properties last year.
9.45am: Inflation loses steam but continues to overshoot Bank of England target
Naeem Aslam, chief market analyst at Think Markets UK Ltd, said it appears that inflation data is "losing steam. "The UK home grown prices are still somewhat muted and it is something which the (Bank of England's) Monetary Policy Committee is comfortable about. “The inflation data overshooting the bank’s target continues to be blamed on the sterling weakness. “Going forward, the growth picture still looks subdued and this does not appear to be changing in 2018 as well. More notably, one can not disregard the influence of higher energy prices from Big six energy suppliers making its way to the CPI basket.”
9.30am: Inflation remains unchanged, ONS reveals
UK inflation held steady in July at an annual rate of 2.6%, the Office for National Statistics revealed, surprising analysts who had expected it to rise to 2.7%.
The ONS said fuel prices continued to fall, offset by an increase in the price of clothing, household goods, gas, electricity, food and drinks.
Core inflation, which strips out volatile items such as food and fuel, was also unchanged at 2.4%. Economists had forecast 2.5% growth.
CPIH remained at 2.6% in the year to July with falling fuel prices being offset by food, clothing & household goods https://t.co/eMEStjmNw5
— ONS (@ONS) 15 August 2017
The Bank of England, which is targeting inflation of 2%, has said it expects it to reach a peak of 3% in October as a weaker pound pushes up import costs.
8.45am: FTSE opens in positive territory ahead of inflation data
It didn’t quite match the surge seen in the US and Asia overnight following the ratcheting down of tensions between America and North Korea.
However the FTSE 100 did open in positive territory with the index of blue-chip shares adding 13 points to move to 7,366.62, building on Monday’s gains.
The talking point early on was the UK’s call for a customs union deal following the official Brexit date of 2019.
“The market is treating anything from London with due caution, rightly so given the open splits in the cabinet and precarious tenure of Theresa May,” said Neil Wilson of ETX Capital.
“The real test comes when the third round of Brexit talks begin. If it flies with Michel Barnier and co it could be a lot more pound positive than we’re seeing now.
“There are also doubts about whether this would be palatable for the Brexit camp in parliament and among voters if it involves compromises on the divorce bill and the free movement of people.
“It also doesn’t address services, although it is a pretty good guide to what the government will pursue on that front.”
The pound was steady at US$1.2943 following the latest update on the May government’s thinking and ahead of inflation figures later Tuesday morning.
On the stock market, a downgrade to ‘sell’ by the mid-tier German house Berenberg, coupled with some negative High Street data, saw retailer Next’s (LON:NXT) stock fall 3% early on. The miners were also on offer.
The conclusion of its asset management merger with Aberdeen Asset Management PLC (LON:ADN) gave a boost to Edinburgh-based insurer Standard Life (LON:STAN), whose shares advance 2.7%.
Proactive news headlines:
Challenger Acquisitions Limited (LON:CHAL) has noted yesterday’s share price spike on US reports over the weekend that a new contractor had been found to finish the New York observation wheel but provided no confirmation that an appointment is imminent. In a statement, the AIM-listed firm simply said: “Challenger looks forward to updating the market when a new contractor is formally appointed and a new date is set for the completion of the New York Wheel.”
It has been a difficult 12 months or so for PCG Entertainment Plc (LON:PCGE), but the Asia-Pacific online gaming and media group is more upbeat on its future as it looks to bring itself “back from the abyss”. For the 15 months ended 31 March (PCG is moving its year-end), the company – which is still in the pre-revenues stage – recorded a total comprehensive loss of US$14.2mln (2016: US$2mln).
The higher gold price gave a turbo boost to a business that was already motoring at pawnbroker H & T Group PLC (LON:HAT). Profit before tax in the first half of 2017 rose 62.2% to £6.0mln from £3.7mln the year before.
Akers Biosciences Inc (LON:AKR, NASDAQ:AKER) said it believes China will be a significant market for its rapid test for an allergy to the blood thinner heparin as it gave an upbeat assessment of prospects alongside interim results. “We continue to believe that, once additional regulatory hurdles in China are complete, China will become a very significant non-US revenue stream for PIFA Heparin/PF4 Rapid Assay products,” investors were told.
Regenerative medicines specialist WideCells Group PLC (LON:WDC) has raised £750,000 through a share placing as it looks to further its penetration of the rapidly growing stem cell market. The London-listed company has issued 5.35mln shares at 14p apiece to both new and existing shareholders, as well as several members of the board.
Emerging markets income trust APQ Global Limited (LON:APQ) has raised just over £20mln through a convertible loan issue backed by major shareholder Old Mutual. Some £20.1mln CULS have been issued with a coupon of 3.5% and a conversion price of about 105.4p, a 10% premium to the book value of 95.8p.
The process of protecting its intellectual property continues at Silence Therapeutics PLC (LON:SL.) with the grant of two more US patents on its technology expected soon. It said the US Patent and Trade Mark Office has issued what’s called a notice of allowance for the applications it made.
Lionsgold Limited (LON:LION) has revealed feasibility numbers for the Jonigiri gold project in India, which it has an interest in through 21.15%-owned Geomysore Services. Jonigiri looks economically robust and is likely to produce at all-in costs of US$753 per ounce and have a mine life of seven years.
Asiamet Resources Limited (LON:ARS) has filed a technical report confirming the previously announced resource at the Beruang Kanan Main zone as 49.2 million tonnes at 0.70% copper. This equates to containing 711.3 mln pounds or 322,600 tonnes of copper at a 0.2% copper cut-off grade.
Merchandising software and technology group ATTRAQT Group plc (LON:ATQT) told investors it has appointed Eric Dodd as its new chief financial officer. Dodd joins the company from Iptor Supply Chain Systems UK Limited, a private equity backed software business, and he is slated to start on September 1. He replaces Mark Johnson who is retiring and stepping down from the board.
Sound Energy PLC (LON:SOU) investors can start looking forward to new catalysts at the group’s Moroccan operations, as the company is now gearing up for new programmes. The explorer, via Twitter, told investors that equipment for a planned seismic exploration campaign has now arrived in the country.
Seeing Machines Limited (LON:SEE), the driver monitoring technology firm, has announced a deal with fleet telematics solutions provider Geotab. Geotab has added Seeing Machines’ fleet Guardian solution to the Geotab marketplace, which serves more than 14,000 Geotab customers. The marketplace features a plethora of applications, plug-ins and add-on modules aimed at fleet managers.
Action Hotels PLC (LON:ACHG) said its non-executive chairman, Sheikh Mubarak A. M. Al-Sabah, has purchased another 66,700 ordinary shares in the company, at a price of 40.25p each, taking his holding in the group to 97,305,616 shares, representing approximately 65.91% of the hotels operator issued share capital.
Orosur Mining Limited’s (LON:OMI CVE:OMI) recent funding has given an opportunity for it to become a sUBStantial gold producer, according to house broker Cantor Fitzgerald. The Uruguay-based junior raised C$4mln (24.1c or 14.7p) through an oversUBScribed placing, while warrants exercisable at 20.4p before 2020 may bring in a further £1.7mln.
6.45am: Positive start predicted
London’s blue chips are set for a strong start as stock markets in the US and Asia surged higher overnight.
Financial spread bet firms see FTSE 100 adding at least 20 points to the 43 point gain notched up on Monday at 7,353.
Pundits in the US were calling yesterday’s rises a relief rally following Donald Trump’s brinkmanship-lite with North Korea over the weekend.
A toning down of the weekend’s rhetoric helped the Dow Jones Industrial Average add 135 points to 21,933 and to put it within touching distance of 22,000 for the first time.
Concerns over Trump’s response to the Far Right gathering in Charlottesville were brushed aside even though two more chief executives resigned from the President’s manufacturing council in protest.
Asian markets fared even better, with big gains in Tokyo and healthy rises in both Hong Kong and Shanghai.
READ: Hargreaves Lansdown looking to recover from capital punishment
Commodities/currencies
- Brent crude: US$50.32, down 0.81%
- Gold: US$1,270, down 0.89%
- GBP/USD: $1.2854, down 0.85%
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