FTSE 100 closes up 49 at 7,433
US stocks gain
Mining shares rebound
Admiral the biggest faller
FTSE 100 stayed steady on Wednesday, adding over 49 points to close at 7,433.
Miners supported the heavyweight index, while the pound eased against the US dollar, which helps its constituents.
The FTSE 250 index was also well up , adding over 164 points to finish at 19,859.
David Madden, market analyst at CMC Markets, said: "European stock markets remain strong as the bullish sentiment that returned to the markets at the beginning of the week is still with us."
The rise in equities comes as the UK labour market showed bigger-than-expected increase in employment and wage growth.
But taking into account inflation, real wages fell, further cementing expectations that the Bank of England will refrain from a rate hike this year.
On FTSE 100 the biggest riser was commodities behemoth Glencore plc (LON:GLEN), which gained 4.23% to 345.25p, while insurer Admiral Group (LON:ADM) tanked over 6% to close at 2,047p.
The firm reported in-line headline first-half results. But the numbers were soured by concerns over margin deterioration and pricing issues in its UK motor insurance business.
3.55pm: FTSE 100 continues to rise
The FTSE 100 has continued its strong run, rising 57 points to 7,441, as investors weigh UK jobs data.
The labour market report showed bigger-than-expected increase in employment and wage growth. But taking into account inflation, real wages fell, further cementing expectations that the Bank of England will refrain from a rate hike this year.
Monetary policy speculation has sent the pound lower against the dollar in afternoon trading, giving the FTSE an extra boost.
Mining shares led the gains, with Glencore, Antofagasta and Rio Tinto among those in the black.
Sage Group shares also surged after it was upgraded to a ‘neutral’ rating by UBS.
Admiral Group continued to lead the fallers after it disappointed with its interim dividend pay-out and frst half profit growth was held back by rising personal injury costs related to changes to the Ogden rate.
Fellow insurer Direct Line slumped.
Meanwhile, oil prices edged higher after the Energy Information Administration said crude inventories fell by 8.9 million barrels last week, soothing concerns of a global supply glut.
Brent crude rose 0.49% to US$51.05 per barrel and West Texas Intermediate increased 0.21% US$47.65 per barrel.
3.20pm: ECB's Draghi expected to keep a lid on policy at Jackson Hole
The euro has weakened following reports European Central Bank chief Mario Draghi will not use his Jackson Hole appearance to signal any policy changes, dashing bets for the unwinding of stimulus. The currency fell 0.15% versus the pound and 0.26% against the dollar.
“Reports that ECB President, Mario Draghi, will downplay any policy shift announcement at next week’s Jackson Hole conference, seems to have been used as a catalyst to sell the Euro,” said FXTM’s Ahmad.
“I also wouldn’t rule out the possibility that investors might be starting to price some German election premiums, into their portfolios.
3.00pm: Bank of England rate hike unlikely, says FXTM
The pound’s recovery today has proven short-lived against the dollar, partly due to strong US housing starts data giving the greenback a boost.
But sterling is more sensitive to monetary policy speculation than data and many economists think the Bank of England is likely to hold off on an interest rate hike this year after data showed inflation steadied and UK wage growth remained weak.
“This means that with interest rate rise talk fading into the background, this will result in many buyers losing interest in the pound, said FXTM’s Jameel Ahmad.
“I don’t think there are any chances that the BoE will be raising UK interest rates over the upcoming months.”
Ahmad added: “The only reason for the interest rate talk in the first place are UK inflationary pressures, but the British Pound, rebounding from its milestone 30+ year low below 1.20 in late 2016, should ease inflationary pressures later this year. This, coupled with the ongoing EU uncertainty and falling growth, will ultimately encourage the BoE to at least maintain rates at the current record low."
2.30pm: US stocks open higher
US stocks have opened higher ahead of the Federal Reserve's policy meeting minutes. Investors are looking out for any hints on when the Fed might next raise interest rates and how many hikes can be expected over the rest of the year.
Company-wise, Amazon shares dropped after Donald Trump took to Twitter to get on his high horse about the company.
Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt - many jobs being lost!
— Donald J. Trump (@realDonaldTrump) 16 August 2017
On this side of the pond, the FTSE has edged up 56 points to 7,441 as the pound has slipped back against the dollar following strong US data on housing starts.
2.00pm: US housing starts fall unexpectedly
US housing starts dropped 4.8% in July to 1.16 million units, compared to economists' forecasts for a 0.4% rise. June's figure was revised down to a 7.4% gain from a 8.3% increase.
The Commerce Department's data could temper expectations of a rebound in housing market activity in the third quarter after contracting in the second quarter.
1.00pm: Miners unerpin Footsie's gains
Mining stocks were lighting a fire under the Footsie in the lunchtime trading session.
The FTSE 100 was up 42 at 7,426, with miners such as Glencore, Anglo American, Antofagasta and Rio Tinto prominent among the risers.
At the other end of the greasy pole, car insurers were being sold off after Admiral Group PLC (LON:ADM) disappointed with its interim dividend pay-out.
The group declared an interim dividend of 56p, 10% higher than the previous year on an underlying basis including the return of surplus capital; excluding surplus capital paid last year, the dividend was cut by 11%.
“So far, 53 members of the UK’s corporate elite have done so and only two – Pearson and Admiral – have cut their interim dividend pay-out (excluding special dividends),” noted Russ Mould, investment director at A J Bell, in response to the 5.2% share price fall of Admiral.
Rival Direct Line fell in sympathy.
On Wall Street, after an indifferent showing yesterday, indices looked set to head higher.
The S&P 500, which fell just over a point uesterday to 2,465, was tipped to open at around 2,470.
The more narrowly-based Dow Jones Industrial Average, which eked out a five point gain yesterday, was seen opening at around 22,036, up 37 points.
12.00pm: FTSE 100 climbs, led by mining shares
At the midday mark, the FTSE 100 rose 51 points to 7,435, boosted by recovery in mining shares and better-than-expected UK jobs data.
Glencore, Anglo American, Rio Tinto and Antofagasta were among the top risers as copper prices jumped 1.49%. Mining shares slumped yesterday as investors moved away from safe havens such as gold after tensions between the US and North Korea appeared to ease.
Conversely, defensive stocks, such as utilities Severn Trent and United Utilities Group, have reversed previous gains.
In other company news, Admiral shares dropped after its first half profits rose just 2% due to the impact of costs related to a cut to the Ogden discount rate determining the payout of personal injury claims.
The pound staged a slight recovery, rising 0.09% versus the dollar to US$1.2881 and 0.31% against the euro to €1.10. However, gains were limited after economist said a lack of significant wage growth in the latest jobs data meant that the Bank of England is likely to hold fire on raising interest rates.
11.40am: UK productivity declines in latest quarter, ONS reveals
While the UK added more jobs in the three months to June, productivity fell for the second quarter in a row.
Output per hour, a measure of labour productivity, fell by 0.1% in the second quarter following a 0.5% drop the previous quarter.
An increase in employment led to a rise in total hours worked but gross value added increased a slower rate, the ONS said.
Matthew Percival, Confederation of British Industry’s head employment said, “this matters as rising productivity is the only sustainable route to higher wages and better living standards”.
“It’s therefore incumbent upon the government to work with businesses to protect the UK’s flexible labour market, and design an industrial strategy that will drive productivity and wage growth.”
11.30am: Chancellor reacts to jobs data
The Chancellor seems pretty chuffed about the UK labour market figures:
Lowest unemployment rate for 42 years is good news for every family. We are building an economy that works for everyone.
— Philip Hammond (@PhilipHammondUK) 16 August 2017
11.15am: UK labour market resilience set to be diluted by political uncertainty, says economist
Employers added more jobs and unemployment fell in the three months to June but it remains questionable as to how long UK employment can sustain this resilience, according to EY Item Club’s Howard Archer.
“We suspect that sooner or later UK labour market resilience will be diluted by weakened UK economic activity and heightened uncertainty over the economic and political outlook, including Brexit developments,” Archer said.
He also noted that headline wage growth remained weak and real wages declined.
“Some companies are clearly keen to limit pay as they face a highly challenging domestic economy and as their input costs have been lifted markedly by the sharp overall weakening of the pound.”
Our full analysis of the latest #UK #employment & #earnings data https://t.co/ATYcMtT52l via @EYNews
— Howard Archer (@HowardArcherUK) 16 August 2017
10.55am: Eurostat lifts estimate for second quarter eurozone GDP
Eurozone economic growth in the second quarter was upgraded to 2.2% year-on-year from a previous estimate of 2.1%, Eurostat revealed. The quarter-on-quarter rate of gross domestic product growth remained at 0.6%.
Euro area GDP +0.6% in Q2 2017 (EU 0.6%),
+2.2% compared with Q2 2016: flash estimate from #Eurostat https://t.co/cAGJm6EBST pic.twitter.com/uxAEMb9nJN
— EU_Eurostat (@EU_Eurostat) 16 August 2017
“Strong economic performances from Germany, France and Spain have contributed to the eurozone’s GDP being exactly where ECB president Mario Draghi would like it," said Dennis de Jong, managing director at UFX.com.
He added: “Draghi has made it clear that he will refuse to budge on interest rates for the foreseeable future – a policy that appears to be working well. Given the political uncertainty in Europe over the past year, Draghi has sailed the ECB ship safely through the choppy waters of the Italian referendum and French election.The ECB will be hoping for calmer times ahead, but global financial instability is beyond its control. Should there be a slowdown in external trade due to a wobble in China, the UK or US, dark clouds could be on the horizon once again."
10.20am: Interest rate unlikely given lacklustre wage growth, says economist
“A persistent lack of any significant upturn wage growth in the economy further dents the prospect of interest rates rising, especially given the steadying of inflation in July,” said Chris Williamson, chief business economist at IHS Markit.
“Although the unemployment rate fell to 4.4% in the second quarter, its lowest since 1975, the tightness of the labour market is still not translating into the sort of wage growth that we would normally be seeing with such few people out of work. It’s therefore hard to make the case that wage growth will spike higher, warranting higher interest rates, any time soon. “
9.50am: Pound recovers on UK labour market report
The pound rose 0.19% against the dollar to US$1.2894 and increased 0.22% versus the euro to €1.0990 after UK jobs data beat forecasts. Sterling slumped yesterday after official data showed inflation held steady in July, prompting many economists to say an interest rate hike is unlikely this year.
"The UK wages growth surprised on the upside, as the British households saw their average earnings improved by 2.1% (3 month-on-year) versus 1.8% anticipated by analysts," said Ipek Ozkardeskaya, senior market analyst at London Capital Group.
"Still, consumer prices rose by 2.6% over the same month. Although, the divergence between the price and wages growth will likely continue weighing on British households’ purchasing power and cool down the inflationary pressures, the Bank of England (BoE) hawks will remain alert on the economic data as long as the rates remain at the historical low levels."
9:30am: UK jobs data exceeds expectations
Real wages in the UK fell by 0.5% in the three months to June as inflation continued to outpace wage growth, the Office for National Statistics revealed.
Excluding the impact of inflation, average weekly earnings rose 2.1% compared to the same period a year ago, beating forecasts for 1.8% growth and exceeding the upwardly revised 1.9% increase reported in the prior three months.
The unemployment rate, however, fell to 4.4% from 4.5% the previous three months. Economists had expected no change.
The number of people in work rose by 125,000 to 32.07mln, ahead of expectations for a gain of 97,000.
In July, the number of jobless claims fell by 4,200, compared to an upwardly revised 3,500 increase in June. The claimant count remained at 2.3%.
"Employment picture remains strong, with a new record high employment rate & another fall in the unemployment rate" 1/2 pic.twitter.com/VhmIWrmzgw
— ONS (@ONS) 16 August 2017
8:45am: FTSE opens on the front foot
The FTSE 100 was up 37 points early on at 7,420.46, with the ‘tea leaf readers’ of the world technical analysis suggesting the index had broken through a key resistance level at 7,4000.
“Bulls will be hoping the break-out overcomes yesterday’s flash highs of 7,420 to further recover from last week’s risk-off move,” said Henry Croft, research analyst at Accendo Markets.
Sentiment in London at least is expected to be guided by the wage and jobs data that is imminent.
UK average earnings growth is predicted to remain at 2% for the three months to June, while economists expect the unemployment rate hold at 4.5%.
Shares of insurer Admiral Group (LON:ADM) were the Footsie’s biggest casualty as they fell in the wake of interim results that showed its profits had been dented by a change to discount rates governing pay-outs.
Another results-driven move was that of stock in Balfour Beatty (LON:BBY), which advanced after it said it would boost the dividend by a third, underlining management’s confidence in the financial recovery of the civil engineer.
Proactive news headlines:
Greka Drilling Limited (LON:GDL) has won two new drill contracts with PetroChina Huabei Oilfield Limited, for coal-bed methane blocks in Shanxi Province. The China-focussed drilling and well services contractor estimates that the new contracts will be worth a total of US$2mln.
Increased revenues and prudent cost cutting helped online business-to-business marketplace creator CloudBuy PLC (LON:CBUY) to narrow its losses in the first half of 2017. Executive chairman Ronald Duncan added that full-year revenues and operating profits (excluding share-based payments), will be broadly in-line with market expectations in 2017.
Shares in Bezant Resources plc (LON:BZT) zipped higher at the opening bell after the junior miner confirmed it had achieved the first commercial gold and platinum production at its Choco project in Colombia.
Xtract Resources PLC (LON:XTR) gave investors an update on its contractor arrangements at the Manica alluvial project. The company highlighted that all of Omina Mining’s earthmoving equipment is on-site already, and two thirds of Omnia’s plant equipment is on site and installed. Almost one third of the first two Omina settling dams completed, it added.
Investment trust APQ Global Limited (LON:APQ) expects the strong performance of emerging markets to continue even with the recent tensions between the US and North Korea. “Emerging markets have been boosted in particular by a strong performance in a number of individual economies, a weakening US dollar and strong liquidity,” said Bart Turtelboom, chief executive.
Bushveld Minerals Limited (LON:BMN) is to move forward plans for a vanadium electrolyte plant in South Africa after a study predicted battery demand is set to soar. A paper produced in conjunction with the World Bank’s Industrial Development Corporation (IDC) indicated demand for vanadium redox batteries (VRFB) would peak in 2025-2030 as their use in energy storage systems rockets.
Rose Petroleum PLC (LON:ROSE) told investors that the deal to sell its Mexican milling operation is proceeding, after the buyer Magellan Gold Corp made the extended August 15 deadline. “The company is pleased confirm that it has received from Magellan both the irrevocable commitment letters totalling US$900,000 to fund the purchase and the first US$25,000 cash payment relating to the August 2017 running costs of the mill,” Rose said in a statement.
Sirius Minerals PLC (LON:SXX), the developer of the York potash project, said development of the Woodsmith mine is on time and within budget. The company said the shaft sinking contract with Associated Mining Construction (AMC) has been finalised with costs expected to be within the allocated budget.
Harvest Minerals Limited (LON:HMI) has lauded better-than-expected agronomic results from the Arapua fertiliser project on its direct application natural fertiliser and remineraliser product, KPfértil.
European Metals Holdings Ltd (LON:EMH) is pleased with the first assay results from its infill drilling programme at the Cinovec lithium-tin project, which returned a continuous mineralized intercept of 148.30m averaging 0.40% lithium oxide.
Action Hotels PLC (LON:AHCG) today announced the appointment of Beaufort Securities as the company's Joint Broker with immediate effect.
Capital Networks has issued a note on European Metals Holdings PLC (LON:EMH) which concluded that “potential cashflow at the asset level should be able to allow for plenty of dilution resulting from the funding mix, and still leave equity investors with significant cash yield.”
6.45am: Third day of gains predicted
The FTSE 100 is set to add to yesterday’s gains, despite a mixed showing by US markets overnight.
Spread betting quotes suggest the top-shares index will open around 14 points higher at 7,398, after advancing 30 points yesterday.
In the US, the S&P 500 shed just over a point at 2,465 and the Nasdaq Composite fell 7 to 6,333 but the Dow Jones average eked out a five point gain at 21,999.
Today, investors will be waiting for the minutes of the most recent meeting of the central bank's policy-making committee, the FOMC, which may give some clue as to the Fed's thinking on interest rates.
Asian markets shook off initial lethargy to resume their advance, heading into the last half hour of trading.
In Tokyo, the Nikkei 225 was 5 points firmer at 19,759 while in Hong Kong the Hang Seng was up 192 at 27,367.
Back home, attention will move back to the health of the UK economy on Wednesday, with official wages and jobs data due.
Wage increases have continued to fall behind inflation, with data from the ONS for the three months to May showing average earnings, excluding bonuses, rose by 2.0% year-on-year, while real wages, including the impact of inflation, fell by 0.5% in that three month period.
ING predicts the latest UK average earnings growth to remain at 2.0% for the three months to June, when the data is released on Wednesday.
UK unemployment also dropped in May, down 64,000 to 1.49mln, while the jobless rate fell by 0.2% to 4.5%, its lowest since 1975.
Figures for the three months to June, also due on Wednesday, are forecast to see the unemployment rate hold at 4.5%, although ING are predicting a 100,000 rise in the jobless count.
Admiral solid despite Ogden cut
On the corporate front, the traditional summer lull sees fewer blue chip news releases but there will still be some highlights, including Admiral Group PLC (LON:ADM).
Shares in the motor insurance outfit are up 18% year-to-date but have lagged those of sector peers esure and Hastings Group.
They have at least outdone sector leader Direct Line, but investors will be hoping for a bit of va-va-voom in Wednesday's results.
The half-year report from Direct Line at the beginning of the month provided some comfort, with Direct Line reporting that the impact from the change in the Ogden rate – the discount rate applied to personal injury claims – was not as severe as feared.
In its 2016 results Admiral estimated the cost of the change in the Ogden rate on open claims at about £150mln; much of that hit was recognised in the 2016 results with around £65mln expected to be recognised in coming years.
The change did not prevent the insurer from continuing to pay a handsome dividend; the shares yield more than 5% so the level of the interim dividend will be of interest to income investors.
Significant announcements expected:
Interims: Admiral PLC (LON:ADM), Balfour Beatty plc (LON:BBY), CLS Holdings (LON:CLI), Hochschild Mining PLC (LON:HOC), Lookers PLC (LON:LOOK)
Economic data: UK unemployment, average earnings
Around the markets:
- Sterling: US$1.2865, down 0.03%
- Gilts (10-year yield): 1.11%
- Gold: US$1,273.31 an ounce, up 0.14%
- Brent crude: US$51.02 a barrel, up 0.43%
City headlines:
The Guardian
Rail users face steepest fare rise in five years as inflation hits 3.6%
Bill Gates gives US$4.6 billion to charity in biggest donation since 2000
IMF warns China over ‘dangerous’ growth in debt
Government pulls all Learndirect contracts and funding
Nestlé cuts nut out of chocolate after prices surge
The Times
Collapse in business rate appeals is a ‘disaster’ for small companies
Uber Founder ‘sabotaging’ attempts to replace him
First-time buyers capitalise on Help to Buy scheme
Hydroelectric power station in Snowdonia is given a new lease of life
China promises to fight US threat of trade war
BT removing half its red telephone boxes
ECB bond-buying scheme may have broken rules, say German judges
Glencore mine error risks stoking African anger over ‘underpaid’ tax
Transocean drills deeper into market
German growth puts it on course for a record
The Independent
Inflation comes in lower than expected in July
Airbnb bans White supremacists from making reservations
Mastercard appeal revives hope of millions receiving compensation
‘Radical action needed on gender, ethnicity and disability pay gaps’
Uber investor gave Travis Kalanick a month to quit before suing him
New conflict questions over Trump company’s links to Dubai billionaire
Barclays plans to close around 54 branches by the end of 2017
UK risks ‘losing its place as property-owning democracy’, says estate agent boss, as house prices rise further
Beijing public transport commuters can now hop on a train using smartphones if they’re not iPhones
Financial Times
Tom Patrick to head Deutsche Bank's Americas business
Royal Bank of Scotland intends to axe 40% of its London IT staff
Betsy Duke to succeed Stephen Sanger as chairman of Wells Fargo
Facebook trials photo-sharing app in China
Air Berlin files for insolvency
The Daily Telegraph
Now it’s personal: investors target individual directors in pay battles
Energy company billing blunders fall – but still cost consumers £100 million
Urban Outfitters ‘disappointed’ as sales decline continues
Low-cost airline boss sees pay soar as Jet2 passenger numbers take off
Shire seeks European approval for dry-eye disease drops
Daily Mail
Laura Ashley rocked by second profit warning in under a year with shares falling 18.2% to hit a 14-year low
JP Morgan Chief under pressure to resign from Trump’s business council
Daily Express
Corbyn vows ‘flexible’ state pension age
Holidaymakers urged to buy euros as pound set for parity against single currency
New UK-China export £200 million deal as demand for British pork surges
City AM
Coach turnaround drags on performance while share price drops on projections
Watchdog plans to force firms to make anti-corruption and anti-bribery disclosures
Openreach puts dark fibre plans on ice after successful legal challenge against regulator Ofcom