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FTSE 100 closes higher as global markets buoyed by Fed's hint on rates

Carnival and Evra were the two big fallers among Footsie constituents

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  • FTSE 100 index closes higher

  • BoE leaves rates unchanged, cuts growth forecast

  • US stocks/ European shares higher

FTSE 100 closed higher  on Thursday  as European and Wall Street shares pounded higher as markets basked in yesterday's Federal Reserve announcement, suggesting an interest rate cut further down the line.

The UK's premier index of shares closed  up nearly 21 at 7,424.

The FTSE 250 added over 138 points at 19,384.

The German DAX gained over 46 points and the French CAC 40 added around 17 at 5,535.

The Dow Jones Industrial Average is up nearly 68 points at the time of writing, while the S&P 500 is up around ten.

"Stocks rallied today thanks to the dovish announcement from the Federal Reserve yesterday," said David Madden, at CMC Markets.

"The US central bank suggested that monetary policy could be loosened, and traders jumped on the bullish bandwagon. Investors were hoping for a dovish announcement from the Fed, and once it was delivered it sparked buying in Europe today."

3.50pm: Carnival and Evraz slow the Footsie's progress

The FTSE 100 looked set to end the day with a solid gain despite chunky falls for Carnival and Evraz.

The Footsie was up 33 points (0.4%) at 7,437, some 24 points below its intra-day high.

Cruise ships operator Carnival PLC (LON:CCL) was the biggest blue-chip faller, down 11% at 3,603p, after it slashed its full-year guidance once again, citing the Cuba travel ban and troubles with one of its ships as the major reasons.

Steel-maker Evraz plc (LON:EVR) was also out of favour, shedding 4.1% at 648p, after a large chunk of shares was sold in the market.

Abiglaze Limited, Crosland Global Limited, Greenleas International Holdings and Toshi Holdings successfully placed 24.9mln shares at 635p a share.

The top riser on the Footsie was Latin American precious metals miner Fresnillo plc (LON:FRES), which was up 6.2% at 873.8p as gold headed 2.8% higher and silver advanced 2.6%.

2.35pm: US benchmarks open higher

US benchmarks opened higher following some encouraging first-time jobless claims numbers.

Initial jobless claims in the last week fell by 6,000 to 216,000 from the week before.

Meanwhile, the June Philly Fed index tumbled in June to 0.3 from 16.6 in May; economists had pencilled in a figure of 10.4 for May.

“The plunge in the Empire State index, reported earlier this week, meant that the Philly Fed consensus was unrealistic,” suggested Ian Shepherdson at Pantheon Macroeconomics.

“Both surveys were conducted in the early part of the month, during the Mexico tariff fiasco, so we’re not surprised they weakened from their April levels. Note that the key Philly new orders and employment indexes fell by only 2.7 and 2.8 points respectively; the headline sentiment measure is more volatile and more immediately responsive to developments over trade.

“With Mexico tariffs now off the table, we’re assuming the headline index will rebound in May, provided we are right in our view the Osaka summit does not result in a breakdown in relations between presidents Trump and Xi, and the imposition of further tariffs on China,” he added.

According to Roiana Reid, an economist at Berenberg Capital Markets, “the US manufacturing sector is stuck in a protracted slump due to slower global growth, declining trade volumes, trade tensions and uncertainties, tariffs, China’s economic slowdown, the inventory overhang and the strong dollar”.

“The current slump has been milder than the 2014-16 slump, but the marked declines in these regional manufacturing sentiment indexes in June point to a potential deepening,” Reid claimed.

Be that as it may, the Dow Jones was up 245 points (0.9%) and the S&P 500 was 28 points (1.0%) higher at 2,955.

 

In the UK, where economists continued to try to read the minds of the policy makers at the Bank of England, the FTSE 100 index was up 46 points (0.6%) after the Bank's Monetary Policy Committee (MPC) voted unanimously to leave its key lending rate unchanged.

“It is notable that the Bank of England is still sending out the message that interest rates will likely need to rise, while the US Federal Reserve is increasingly indicating that interest rate cuts may soon be needed and the ECB is increasingly talking about further stimulus. If nothing else, the MPC seems keen to head off any belief for now that the Bank of England are likely to cut rates barring the occurrence of a disorderly Brexit which damages the economy,” opined Howard Archer, the chief economic advisor to the EY ITEM Club.

1.15pm: And then there were three ... Johnson, Gove and Hunt

The Conservative Party leadership contest is now down to the three “big beasts” that were the initial favourites: Borish Johnson, Michael Gove and Jeremy Hunt.

The votes were: Johnson 157 (up 14 on the previous ballot); Gove 61 (+10); Hunt 59 (+5); Sajid Javid 34 (-4).

Javid has been eliminated from the ballot; there were two spoiled ballot papers.

The FTSE 100 was up 50 points (0.7%) at 7,453.

12.30pm: Analyst thinks rate hike unlikely between now and October

Nancy Curtin, chief investment officer at Close Brothers Asset Management, said: “With Brexit unresolved, it is now practically inconceivable that there will be a rate hike between now and October, despite GDP growth being close to potential.

"MPC members have been doing the rounds of late, making hawkish comments and it’s easy to see why. The labour market is tight and prices are rising in sectors sensitive to the output gap, but – for now – this is being outweighed by weak goods inflation. With headline CPI on target, that’s a decision for another day."

12.00pm: Bank of England leaves rates unchanged

The Bank of England voted unanimously to leave interest rates unchanged at 0.75% and left its asset purchase programme at £435bn. 

The central bank said further rate rises were likely to be required “at a gradual pace and to a limited extent”.

It also lowered its economic growth forecast for the second quarter to 0% from 0.2% previously, saying “underlying growth in the UK appears to have weakened slightly in the first half of the year relative to 2018 to a rate a little below its potential”. The UK economy grew by 0.5% in the first quarter. 

In a statement the BoE said: "Globally, trade tensions have intensified. Domestically, the perceived likelihood of a no-deal Brexit has risen. Trade concerns have contributed to volatility in global equity prices and corporate bond spreads, as well as falls in industrial metals prices. Forward interest rates in major economies have fallen materially further. Increased Brexit uncertainties have put additional downward pressure on UK forward interest rates and led to a decline in the sterling exchange rate."

11.10am: Retail in focus

London’s leading shares continue to remain in positive territory, shrugging off some iffy UK retail sales numbers.

The Footsie was up 34 points (0.5%) at 7,437.

“Colder temperatures have kept shoppers away from the high street in the UK, and this will only add to the slowdown in second-quarter growth but with wage growth continuing to perform well, we think the Bank of England will retain a reasonably hawkish bias at its meeting later today,” said James Smith at ING Economics.

Samuel Tombs, an economist at Pantheon Macroeconomics, said the further drop in retail sales in May can be attributed to usual volatility, rather than signs of an emerging consumer slowdown.

“Provided a no-deal Brexit is avoided, we continue to think that growth in households’ spending will remain brisk in the second half of this year, giving the MPC [Bank of England’s Monetary Policy Committee] the confidence to raise bank rate again around the end of this year,” Tombs said.

Elsewhere in the retail sector, news from the mid-caps has been mixed.

Electronic doo-dads and extended warranties flogger Dixons Carphone Plc (LON:DC.) was the FTSE 250's biggest faller, down 12.6% at 108.85p following the publication of its full-year results.

“In normal circumstances, these numbers would be poorly received, let alone with an outlook for the next year which looks even more challenging. The mobile business, in particular, is on life support, draining capital and resources prior to its integration with the electricals business,” commented Richard Hunter, the head of markets at Interactive Investor.

“The rapidly evolving nature of this segment has threatened to leave Dixons behind and thus, as a matter of urgency, the company has renegotiated its network contracts, although such benefits will take time to wash through. Elsewhere, tepid group revenue growth, lower free cash flow, higher net debt and a previously slashed dividend are far from being cause for celebration,” he added.

In contrast, cushions and curtains retailer Dunelm PLC (LON:DNLM), up 7.1% at 968.5p, was flying high on the FTSE 250 leader-board after its trading update.

Dunelm, said AJ Bell's Russ Mould, is “back with its third bit of good news in 2019 by raising earnings guidance yet again, confirming the retail sector still has some bright spots”.

Outside of the FTSE 250, N Brown PLC (LON:BWNG) was another retailer surprising the market with good news. It reaffirmed its full-year estimates despite a 3.8% drop in first-quarter revenue – a period in which its legacy offline business continued to provide a drag.

READ N Brown reiterates full-year guidance as first-quarter revenue drops


 

10.00am: The Footsie shrugs off another fall in retail sales

UK retail sales for May are out and it seems the High Street - if one overlooks department stores - is just about still alive.

In the three months to May 2019, the quantity bought in retail sales increased by 1.6% when compared with the previous three months, with growth across all stores except department stores and household goods stores.

However, in May alone, sales declined by 0.5%, following April’s 0.1% fall.

The year-on-year growth rate in the average store price for clothing fell for the ninth consecutive month in May 2019 but evidence from retailers suggested that the poor weather may have delayed the sales for summer ranges, the Office for National Statistics said.

Online retailing accounted for 19.3% of total retailing, with an overall growth of 8.2% when compared with the same month a year earlier.

“Retail sales continued to grow in the latest three months despite two consecutive monthly falls, with clothing sales declining considerably in May, due to unseasonably cold weather,” said Rhian Murphy, the head of retail sales at the Office for National Statistics.

“We see quite a mixed picture across the rest of the sector as the decline in department store sales continued, with no growth since September of last year,” she added.

The FTSE 100 was little affected by the release, cementing a 23 point (0.3%) rise at 7,427.

Primark owner Associated British Foods plc (LON:ABF) was up 0.7% at 2,426p but fellow clothing flogger Marks and Spencer Group PLC (LON:MKS) was down 0.8% at 210.4p; Nest PLC (LON:NXT), on the other hand, was up 0.5% at 5,556p.

8.40am: Footsie forges higher

The FTSE 100 opened 28 points higher at 7,431.30, taking its cue from Wall Street and Asia’s main markets, which were buoyed by the mood music from the US Federal Reserve on Wednesday, with traders also awaiting the latest Bank of England rate decision today.

With eight of the 17 members of the Fed’s committee in favour of rate cuts, world stock markets appear to be pricing in the prospect of lower American borrowing costs.

So too were government bond traders, while the price of an ounce of gold is inching ever closer to US$1,400 as real interest rates (the base rate minus the cost of living) nudge towards zero.

The surging price of the yellow metal provided a significant boost to Fresnillo (LON:FRES), the Mexico-focused sliver miner and seller. Fellow diggers Hochschild Mining (LON:HOC) and Centamin (LON:CEY) followed in its wake, rising 3.5% and 2.8% respectively.

Natural resources stocks dominated the blue-chip risers’ board amid hopes of a Sino-American trade deal.

China, it would appear, has been hardest hit of the two by the escalating tariffs war so any sniff of an armistice would enhance the prospects of the major miners that count big businesses in the People’s Republic among their largest customers.

Anglo American (LON:AAL) and BHP Billiton (LON:BHP) led the pack with rises of 1.4% and 1.2% respectively.

Takeaway delivery group Just Eat (LON:JE. bounced 2.5% after Wednesday’s sell-off, which was prompted by a bearish broker note by UBS.

On the downside, United Utilities fell 4.4% after the shares started trading without an entitlement to a dividend payment.

Proactive news headlines:

ValiRx Plc (LON:VAL) has been given regulatory clearance to increase the dose of its VAL201 drug following an amendment to the clinical trial it is currently carrying out. The first-in-human study of men suffering prostate cancer has revealed the safe toxicological limits are higher than suggested by pre-clinical assessments of the compound.

Ceres Power Holdings PLC (LON:CWR) has launched the first fuel cell system using its technology into the Japanese market as part of a partnership with boiler maker Miura.

Azerbaijan-based gold miner Anglo Asian Mining PLC (LON:AAZ) has repeated its forecast for up to 86,000 of gold equivalent ounces this year (2019). Anglo is currently operating at an all-in sustaining cost of US$541 per ounce, among the lowest for a gold miner anywhere, and made a profit of US$25.2mln in 2018 - a four-fold increase.

Shanta Gold Limited (LON:SHG), the East Africa-focused gold producer, has found exceptional grades in its latest drilling campaign at New Luika in south-western Tanzania.

Cosmetics testing group Integumen PLC (LON:SKIN) has added two industry veterans to its senior management team. Paul Ryan has been appointed as the company’s head of enterprise sales at Labskin AI, while Colin O’Sullivan joins as chief information officer, a position he previously held at the Australian Medical Association. In a separate stock exchange announcement, the AIM-quoted company confirmed a shareholder had exercised warrants over 2.5mln shares, bringing in £37,500.

Avacta Group PLC (LON:AVCT) has selected a company called Selexis to help develop the Chinese hamster ovary cell line that will be used to manufacture the company’s first Affimer clinical candidate.

IronRidge Resources Ltd (LON:IRR) has reported ‘significant’ intersections of mineralisation at the Ewoyaa West target, part of its Cape Coast lithium assets in Ghana. The mineralisation was encountered via the company’s trenching operations at Ewoyaa West.

Adamas Finance Asia Ltd’s (LON:ADAM) investment manager completed a significant restructuring of the portfolio last year and invested in a number of SMEs the board believes have strong prospects.

Coinsilium Group Limited (LON:COIN), the NEX-listed blockchain venture builder, announced that Jet Trade Global Limited, a company wholly owned by its chief executive officer Eddy Travia yesterday purchased 200,000 ordinary shares in the company at a price of 2.75p each. The group said that Travia now holds, via Jet Trade Global Limited, 7,706,701 ordinary shares representing 6.09% of the issued share capital with voting rights of the company.

Diversified Gas & Oil PLC (LON:DGOC) announced late on Thursday that it had been notified that its chief financial officer, Eric Williams had acquired 10,000 ordinary shares in the company through the market at a price of 106.5p each. Following purchase, it added, Williams is now interested in 48,855 ordinary shares representing approximately 0.01% of the company's issued share capital.

Rockfire Resources PLC (LON:ROCK), the gold and base metal-focused resource company, announced that an updated version of its corporate presentation is now available on the company's website.

African Battery Metals Plc (LON:ABM) advised shareholders that Dr Roger Key, chief executive officer of Kalahari Key Mineral Exploration Pty Limited – in which ABM holds an 18.26% stake -  gave a presentation at the Botswana Resource Sector Conference held in Gaborone, Botswana. The AIM listed battery metals exploration and development company said the presentation was entitled "Exploration for Ni and PGMs in the Molopo Farms Complex's Feeder Zone" and can be viewed through the following link: https://www.capconferences.com/files/2019/06/Tuesday-11th-June-1120hrs-Roger-Key.pdf

6.45am: Footsie called higher 

The FTSE 100 is set to start Thursday’s trading on the front foot as global equities respond to the latest guidance – or lack thereof – from the US Federal Reserve.

IG Markets is calling the London index around 29 points higher, making the price at 7,427 to 7,430.

US interest rates were left unchanged as was the Fed’s economic growth forecast, though its inflation report was downgraded (to 1.5% from 1.8%).

Some expected a change in tone, if not a tangible change in guidance.

Michael Hewson highlighted that the market was “front running a possible move towards an aggressive easing bias.”

He added: “This still seems a rather optimistic view point given that the Fed is still running down the size of its balance sheet, a process which is not due to finish until September.

“Last night’s decision and subsequent statement and press conference, offered more questions than answers when it came to when and how the Fed was likely to move next.”

On Wall Street, the Dow Jones closed 0.15% higher at 26,504 while the S&P 500 was up 0.3% at 2,926. The Nasdaq rose 0.42% to finish at 7,987.

Asian equities were also positive. Japan’s Nikkei traded 136 points or 0.64% to trade at 21,471, while Hong Kong’s Hang Seng climbed 0.84% to 28,439 and the Shanghai Composite added 2% to 2,978.

Significant announcements due Thursday June 20:

Bank of England rate decision

Trading update: N Brown Group PLC (Q1) (LON:BWNG)

Finals: Dixons Carphone Plc (LON:DC.), Best of the Best plc (LON:BOTB)

Interims: CareTech Holding PLC (LON:CTH)

AGMs: Anglo Asian Mining PLC (LON:AAZ), Eurasia Mining plc (LON:EUA)

Ex-dividends to clip 1.83 points off FTSE 100 index: Compass Group PLC (LON:CPG), Land Securities Group PLC (LON:LAND), United Utilities PLC (LON:UU.)

Economic data: UK retail sales; US weekly jobless claims; US Philly Fed index

Around the markets:

  • The pound: US$1.2688, up 0.39%
  • Gold: US$1,380 per ounce, up 2.68%
  • Brent crude: US$62.69 per barrel, up 0.87%
  • Bitcoin: US$9,310, up 1.73%

City Headlines:

  • US Fed opens door to interest rate cut after Trump criticism – BBC News
  • Trump’s attack on Draghi should be a clear warning to the entire EU – The Times
  • Hargreaves Lansdown reveals Woodford concerns from 2017 – Financial Times
  • Facebook urged to pause Libra crypto-currency project – BBC News

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