FTSE 100 closes higher as markets soothed by possible US interest rate cuts

The UK blue chip share index closed up around 67 points at 7,327. Over the week as a whole it was up around 2.3%

Pictured is the US Federal Reserve
  • FTSE 100 closes day and week up

  • Fashion retailers M&S and Next fail to join the fun

  • Dollar takes a pounding as traders bet on June rate cut by the Fed

FTSE 100 closed higher Friday as global stocks rose as traders fears were eased on hopes of possible US interest rate cuts.

The UK blue chip share index closed up around 67 points at 7,327.

Over the week as a whole it was up around 2.3%

FTSE 250, a  more UK Company focused exchange, gained over 126 points at 19,191.

The German DAX and French CAC 40 gained 92 points and 85 points respectively, while the Dow Jones Industrial Average is up over 281 points at the time of writing, while the Nasdaq is up 127 points.

Stocks have hit their highest level since mid-to-late May as the underwhelming headline non-farm payrolls report in the US has increased chatter about the Federal Reserve cutting rates," noted David Madden, analyst at CMC Markets.

"The US central bank is open to the possibility of loosening monetary policy, and traders have pounced on the message, and the markets are pricing in an extremely high probability of an interest rate cut in September, and that is fuelling the drive in stocks."

The headline US payrolls figure for May was 75,000 jobs, which was nowhere near the 185,000 forecast, and the April figure was revised down to 224,000 from 263,000.

3.15pm: Footsie set for its fifth successive day of progress

Barring a dramatic late swoon, the Footsie is on course to finish in credit, as it has done every day this week.

The index was just five points below its intra-day high at 7,324, up 64 points (0.9%) on the day.

Just a dozen index constituents failed to join the party, including fashion retailers Marks and Spencer Group PLC (LON:MKS), down 2.3%, and Next PLC (LON:NXT), down 0.6%, plus airlines International Consolidated Airlines (LON:IAG), down 0.5%, and easyJet PLC (LON:EZJ), down 0.1%.

Among those on the up train were packaging giants Mondi Plc (LON:MNDI), up 2.4%, and DS Smith PLC (LON:SMDS), up 2.1%.

Unit trusts supermarket operator Hargreaves Lansdown PLC (LON:HL.), under a cloud since Neil Woodford’s fund management firm ran into trouble, returned to favour somewhat with a 2.4% rise.

2.15pm: Equity investors shrug shoulders at US jobs miss; not so forex traders

Weaker than expected jobs growth in the US does not seem to have frightened US investors, with US benchmarks tipped to open higher.

Spread betting quotes point to the Dow Jones average opening at around 25,774, just over 50 points up from last night’s close.

The S&P 500, which closed last night at 2,843, was expected to open at around 2,854, 11 points higher.

In London, the FTSE 100 had a small wobble following the release of the US non-farm payrolls data but has recovered to 7,320, up 60 points (0.8%).

Foreign exchange markets have not been so indifferent to the jobs data, with the US dollar index sliding 0.28 to 90.02 as traders bet the Fed will now cut its benchmark lending rate.

“The dollar was sold and bonds bid as the latest non-farm payrolls report grossly missed expectations. One swallow does not make a summer though, and a poor print every few months does not mean the US economy is on the cusp. Market odds of a June rate cut just increased for sure, but it’s hard to see how this is indicative of where the FOMC is yet. Markets are baking in too great a chance of a hike and this NFP miss only increases the risk,” suggested Neil Wilson at Markets.com.

“It was a big miss for US jobs – coming in at 75k versus the c180k expected – this will reinforce the perception that the Federal Reserve is inching closer towards cutting rates. We’d called 100k but this was worse than expected,” he added.

1.31pm: US jobs data disappoints

The US economy added 75,000 jobs in May. The unemployment rate remained at 3.6%.

"No new jobs created and that means no wage pressure but the miss on the headline number has shaken the sentiment among investors. Usually the reaction would not be this rough, but investors are dropping the dollar index like a stone because of the concerns around the trade war," said Naeem Aslam at ThinkMarkets.

"Remember we are really in a situation where bad news is bad news. This is because the Fed is always late in the game and we clearly know that it has taken a long time for the Fed to acknowledge the weakness in the economic data, and now, the question is not for one rate cut but perhaps more," he added,

12.45pm: Halifax house price data puts a dampener on the housing sector

The Footsie was trading close to its intra-day high although that could change in an hour’s time when the US jobs report comes out.

London’s index of heavyweight shares was up 62 points (0.9%) at 7,322, a couple of points below its highest level of the day.

Housebuilders Berkeley Group Holdings PLC (LON:BKG), Barratt Developments PLC (LON:BDEV) and Taylor Wimpey PLC (LON:TW.) failed to participate in the advance despite the latest Halifax Price Index hitting a new high.

Berkeley and Barratt were off 0.4% while Taylor Wimpey was down 0.1%; sector peer Persimmon PLC (LON:PSN) nudged up 0.1%.

“Instead of coming back down to Earth after the huge 5% annual growth recorded last month, we’ve got a new record high on our hands,” said an understandably pleased Lucy Pendleton of estate agent James Pendleton.

“Halifax said last month that particularly high growth in February was behind the meteoric annual figure reported in April; however, instead of the annual rate falling now February has slipped out of these sums, it has increased even further.

“This headstrong performance proves once and for all that when political uncertainty and availability of cheap credit go head to head, borrowing power wins hands down. That has been the case for the past two years,” she opined.

Marc von Grundherr of another estate agent, Benham and Reeves, was singing from the same hymn-book as Pendleton.

“I think this week, in particular, we’ve been reminded that Brexit isn’t the be all and end all and this is a mentality that’s been returning to the UK housing market over the last few months,” he said.

“On the face of it, the clouds of political uncertainty seem to be lifting from the UK property market, although it remains unclear as to whether this is a brief respite or this positive movement will remain,” he added.

Howard Archer, the chief economic advisor to the EY ITEM Club (and not an estate agent), noted that the “Halifax house price measure has been an outlier in recent months, consistently deliver[ing] markedly higher annual house price increases than other measures (and it has also been more volatile in monthly movements)”.

“The majority of the current evidence across surveys points overwhelmingly to muted house prices – although some have come off their recent lows,” Archer said.

Meanwhile, latest data from the Bank of England shows that mortgage approvals for house purchases rose to a three-month high of 66,261 in April from a 15-month low of 62,559 in March.

“April’s rise in mortgage approvals to 66,261 took them back into – and towards the top end – of the 63,000-68,000 range that has broadly held since late-2016. Nevertheless, mortgage approvals were still 17.9% below their long-term (1993-2019) average of 80,751,” Archer said.

The improbably named Shepherd Ncube, the chief executive officer of Springbok Properties, said: “We’re starting to see the strong uplift in mortgage approvals seen throughout the start of this year translate into some pretty consistent house price growth and while the market isn’t moving at full speed, it is certainly building up a head of steam.

“This positive growth continues to be driven by the nation’s more affordable regions but it’s only a matter of time before the likes of London and the South East follow suit,” Ncube suggested.

11.00am: Stocks rise on hopes of lowering of US-Mexican trade tensions

As the countdown to the release of May’s US jobs data continues, London’s index of leading shares was steadily extending its advance.

The FTSE 100 was up 55 points (0.8%) at 7,315 as it joins in with the general feel-good mood surrounding the simmering trade war between the USA and Mexico.

Although the trade war is still simmering it is doing so on a lower gas setting if reports are to be believed, which probably accounts for why the futures market is pointing to an 80 point gain for the Dow Jones when it opens this afternoon.

The only problem with that scenario is that between now and then the US non-farm payrolls numbers for May are due out and few economic indicators have more power than US jobs data to move the market.

In London, Primark owner Associated British Foods plc (LON:ABF) was moving against the trend, dipping 10p to 2,505p after RBC Capital Markets lopped a quid off its price target for the stock, which now stands at 2,900p.

Contract caterer Compass Group PLC (LON:CPG) shrugged off a downgrade by the same broker, rising 10p to 1,836p. RBS has downshifted to “sector perform” from “outperform”.

After dropping a heavy hint in a trading update about how undervalued it is, digital payments technology Company Thinksmart Limited’s (LON:TSL) shares soared 65% to 9.5p; according to the Company, that’s still 6.5p or so below the net asset value per share of ThinkSmart.

9.45am: Optimism over US tariffs fires up global markets

So far, so good for the Footsie as it seeks to complete a week without once shifting into reverse gear.

The index of heavyweight shares was up 54 points (0.7%) at 7,314, with British American Tobacco PLC (LON:BATS) leading the advance with a 2.7% rise, adding to yesterday’s solid gains.

“Financial markets appear to be adopting a glass half full attitude to events after US markets posted their fourth straight day of gains, on optimism that any Mexican tariffs, which are still due to start on, Monday, may well not last too long,” said CMC’s Michael Hewson.

“Optimism over progress on taking steps to curb migrant flows at the US’s southern border has risen after US vice president Mike Pence said he was encouraged by the talks. As a result, US stocks look set to post their first positive week since April, though some of these gains can also be attributed to much more dovish expectations over the direction of US interest rates,” he added.

Drugs giant GlaxoSmithKline PLC (LON:GSK) rose 0.8%, slightly outperforming the market after it disclosed that the US Food and Drug Administration has approved two new methods for administering Nucala, an autoinjector and a pre-filled safety syringe.

The only other news of note from a blue-chip Company came from Smiths Group PLC (LON:SMIN), which has appointed JehanZeb Noor as chief executive officer of Smiths Medical ahead of the proposed demerger of the division, scheduled to take place in the first half of next year.

Shares in Smiths were up 1.5%.

8.45am: Footsie firm early on

With the Dow up a further 180 points overnight and bouncing 1,100 points from its low earlier this week, the direction of travel for the FTSE 100 was always going to be upward, with the index adding 45 points to 7,304.94 early on.

Buoyed by the US Federal Reserve’s inclination towards rate cuts rather than rises, traders appear to have regained their mojo.

That said, the mood could easily change if the US and Mexico can’t sort out their trade difference by the close of play Friday, analysts said.

American jobs data should provide a glimpse of the state of health of the world’s largest economy and could also guide sentiment.

“Nonfarm payrolls are the headline risk event,” said Neil Wilson of Markets.com. “The ADP print earlier in the week could herald a bad-un, but we’re still looking for something in the region of 180k [180,000 jobs added], in line with the long-term trend.”

Back here in the UK, the continued rally of defensive sin stocks left British American Tobacco (LON:BATS) 1.5% higher and atop the FTSE 100 list of risers.

Shares in investment group AJ Bell (LON:AJB) fell further after long-standing investor Invesco completed the sale of part of its stake for £144mln.

Proactive news headlines:

Kibo Energy PLC (LON:KIBO) said an independent Base Case Financial Model has been completed for its 65%-owned Benga Power Plant in Mozambique, with initial findings demonstrating the economic robustness and viability of the project.

W Resources PLC (LON:WRES) has announced the formal signing of a mining contract with General de Maquinaria y Excavación (GME) for the La Parrilla tungsten project in Spain. A mining fleet, comprising three 60-tonne haulage trucks, is now in place at La Parrilla along with a Liebherr excavator and other auxiliary equipment.

Sativa Investments PLC (LON:SATI) has agreed a commercial offtake agreement with a Swiss supplier of cannabis oil for the manufacture of cannabidiol (CBD) products in the UK. Big Pic in April.

Anglo African Oil & Gas PLC (LON:AAOG) has highlighted new third party analysis of the Tilapia oil field’s Djeno horizon, with a report revealing “very encouraging” findings to the Company. AAOG also updated on production from the Tilapia field’s TLP-103C well which has continued to flow oil to surface under its own pressure with minimal water content.

Braveheart Investment Group PLC (LON:BRH) has updated on its investment portfolio and accounts ahead of the release of its final results.

Sure Ventures PLC (LON:SURE) said it has raised gross proceeds of £292,999.68 by way of a private placing of ordinary shares have been issued at 96p each. After the costs and expenses of the issue, the placing price represents a premium to the group’s last published NAV of 83.03p per share.

Impax Environmental Markets PLC (LON:IEM) announced on Thursday that it has appointed Stephanie Eastment as a non-executive director of the Company with effect from 1 July 2019. It said Eastment, a chartered accountant and Company secretary with over 30 years' experience of the financial services industry, retired as Head of Specialist Funds Company Secretariat and Accounts at Invesco in 2018.

6.45am: FTSE 100 set to make positive start

The FTSE 100 looks set to make a positive start in its quest to make it five days of rises in a row.

After advancing 40 points yesterday to close at 7,260, London's index of leading shares was expected to open around 17 points higher at 7,277, taking its lead from Wall Street overnight and Asian markets this morning.

US benchmarks made solid progress yesterday, helped by a recovery by technology stocks that had been sold off earlier in the week on reports of Federal Trade Commission and Department of Justice investigations into possible anti-competitive behaviour.

The Dow Jones climbed 181 points to 25,721 and the S&P 500 hardened 17 points to 2,843.

“As well as a less pessimistic take on near-term tariff risks, it looks like investors are reassessing the ability of Washington prosecutors to land materially damaging blows to the dominant consumer web groups anytime soon. The quiet message from Facebook, Alphabet, Amazon and others is that they’ve been prepared for such a reckoning for months, if not years, and have plans to step up existing huge lobbying efforts together with formidable legal firepower,” said Ken Odeluga at City Index.

Focus in the US today, and indeed in most of the world’s stock markets, will be on the jobs data release this afternoon covering May.

“The consensus estimate is 185,000, and keep in mind that 263,000 jobs were added in April. The unemployment rate is at a 50 year low, and it is tipped to hold steady at 3.6%. The yearly average earnings is tipped to remain at stay at 3.2%,” reported David Madden at CMC Markets.

In Asia, Chinese markets have been closed today to celebrate the Dragon Boat festival, while in Tokyo, the Nikkei 225 was 119 points to the good at 20,893.

In the UK, today’s the day the zombie prime minister Theresa May stands down as leader of the Conservative Party; will anyone notice the difference? Most of the chatter in Westminster today will be around last night's by-election result in Peterborough that saw the Labour Party scrape in and deny the Brexit Party its first MP.

Labour's Lisa Forbes won 10,484 votes, beating the Brexit party’s Mike Greene, who took 9,801 votes,

The Bank of England will release a survey on public expectations for inflation in a year’s time.

UK inflation rose to 2.1% in April from 1.9% in March, marginally above the Bank’s 2% target.

For most of the past two years, inflation has been rising above 2% as a weaker pound following the Brexit vote has pushed up the cost of imports.

With Brexit uncertainty intensifying, the pound faces further downward pressure.

There is little scheduled in terms of corporate news flow but something is sure to turn up to attract traders’ interest.

Significant announcements due on Friday:

AGMs: Circassia Pharmaceuticals PLC (LON:CIR)

Economic data: US non-farm payrolls, BOE inflation survey

Around the markets

  • Sterling: US$1.2694, up 0.02 cents
  • 10-year gilt: yielding 0.827%
  • Gold: US$1,337.30 an ounce, down US$5.40
  • Brent crude: US$62.52 a barrel, up 87 cents
  • Bitcoin: US$7,811.88, up US$119.92

Business headlines

Financial Times

  • Theresa May wants to sign off as prime minister by making big spending announcements but the chancellor of the exchequer, Philip Hammond, is resisting.
  • The ECB’ boss, Mario Draghi, is mulling interest rate cuts and a fresh round of bond purchases in a bid to boost the eurozone’s economy.
  • Sharon White, a telecoms regulator with no retail experience, is the new chairman of Waitrose owner John Lewis.
  • In another blow for once renowned stock-picker Neil Woodford, Openwork, his fund’s last remaining large client, has abandoned the embattled fund manager.

The Daily Telegraph

  • Mark Carney has warned that the global economy faced growing risks from $30 trillion of investment that has the potential to spread hazards around the world.
  • The UK’s biggest online car marketplace Auto Trader defies stalling car market to post bumper revenues and profits.
  • Mitie boss Phil Bentley has promised to make its staff more accountable for their work to help it get back on track as it unveiled a return to profit.
  • CMC Markets reported a 90% plunge in profits blaming a “difficult period” where new regulations and tougher trading conditions battered sales.

Daily Mail

  • Strong momentum overseas helped Joules fashion a 17% jump in sales to £218 million in the last 12 months.
  • New Look founder Tom Singh has announced his retirement amid a major boardroom reshuffle.
  • Switzerland's competition watchdog handed out fines totalling £71.3 million to five banks saying they uncovered “several anti-competitive practices”.

The Guardian

  • Aviva will cut 1,800 jobs over the next three years as it attempts to lower annual costs by £300 million by 2022.
  • Peter Simon, the owner of the Monsoon and Accessorize retail chains, has delayed plans for a restructuring after landlords failed to back similar plans by Philip Green’s retail empire.

The Times

  • Nigel Farage’s Brexit Party has failed in its first attempt to enter parliament, as Labour held on to its seat in the Peterborough by-election with a slim majority.

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