FTSE 100 closes nearly 16 points higher
US stocks continue to climb
Analyst expresses caution at London's gains
The FTSE 100 closed at 7,508.70 points on Friday, up nearly 16 points or 0.2% to end the week positively.
In New York, the Dow Jones Industrial Average continued to climb, up 87 points (0.3%) at 27,310 while the S&P 500 fell slightly but was still 0.1% above its opening level at 2,998 points.
Chris Beauchamp, Chief Market Analyst at IG, a global leader in online trading, however, expressed cautious optimism at London's overall gains ahead of key central bank meetings next week.
"Equities are finishing the week on a positive note, as investors look forward to the upcoming ECB and Fed meetings. The day has seen rapidly evolving expectations of what the Fed might do next, as officials sought to play down a speech that seemed to suggest dramatic action was round the corner. John Williams may well have been speaking ‘academically’, but the timing is too convenient for it to be viewed as anything more than a hint about what the Fed will do next.
"Meanwhile, the ECB is gearing up for its next meeting, and here the case for action is even more pressing than in the US. A failure to act now would hit investor sentiment hard, prompting drops in European equities that are already vulnerable to further declines. Worryingly for the FTSE, it has been unable to hold its gains over the past few days, with a similar situation prevailing in European indices. A boost from the Fed and the ECB would help revive flagging sentiment, especially as we approach the thin August period.
Beauchamp also noted: "After leaping higher yesterday, GBPUSD has reversed to an extent. Next week is almost certain to see Boris Johnson ascend to the premiership, promising more upheaval for the UK and EU. Signs point to increased instability if the new government attempts to push for a ‘no deal’ outcome, suggesting that the Johnson government could be the shortest administration in recent memory, as this could spark a full-blown rebellion among soft-leave and Remainer Conservatives."
3.05pm: Footsie just about in positive territory as US stocks open higher
US markets opened higher for much the same reasons why European markets were buoyant: optimism that the next US rate cut will be a biggie.
The Dow Jones industrial average was up 78 points (0.3%) at 27,301 while the S&P 500 was 8 points firmer (0.3%) at 3,003.
The FTSE 100, meanwhile, was 12 points higher at 7,505.
“It’s a lacklustre tug of war between index bulls and bears on Friday, as Europe’s main gauges dither a few tenths of a percentage point over the flat line. They last stood a little higher,” observed Ken Odeluga.
“Two Fed officials have essentially contradicted each other in the space of a few minutes, albeit ultra-dovish comments by New York Fed President John Williams have mostly prevailed on Friday. This has contained the dollar and buffed interest in silver and gold,” he added.
1.45pm: Footsie back in the blue
After a brief foray into negative territory, London’s index of leading shares is back on the up, thanks largely speculation concerning the next US rate cut.
The FTSE 100 was up 21 points (0.3%) at 7,515.
Terrestrial broadcaster ITV plc (LON:ITV) was wanted, rising 1.5% to 111.05p, after it confirmed it is to launch the BritBox streaming service in conjunction with the BBC in the UK in the fourth quarter of this year.
12.30pm: Early gains evaporate
The Footsie’s bright start has turned into what might be called a beige mid-period.
London’s index of heavyweight shares was down 17 points (0.2%) at 7,476, despite expectations of a firm start on Wall Street this afternoon.
Spread betting quotes suggest the Dow will open with a 50 point gain at 27,273 and the S&P 500 with a 4 point rise to 2,999.
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11.15am: UK shares in cruise mode
London’s leading shares moved into cruise mode in the second half of the morning, paying little attention to grim public finances data.
Having raced off to a fast start, blue-chips took their foot off the pedal, resulting in the FTSE 100 pulling back a little to 7,523. up 30 points (0.4%) on the day.
Public sector net borrowing excluding public sector banks was £7.2bn in June, up from £3.3bn in June 2018, and well ahead of the consensus forecast of £3.9bn.
“June’s public finance data are a tentative sign that the economy is flagging. Admittedly, just over half of the year-over-year rise in public sector borrowing was driven by a £2.1bn increase in interest payments,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“The accrued level of interest payments is calculated from month-to-month changes in the RPI two months earlier because RPI inflation determines payouts on the stock of index-linked gilts. The 1.1% month-to-month increase in the RPI in April 2019 was much bigger than the 0.5% increase in April 2018, due to the timing of Easter, hence the big rise in interest payments. In addition, contributions to the EU’s budget rose £0.5bn year-over-year in June, but should revert to normal levels soon,” Tombs explained.
Howard Archer, the chief economic advisor to the EY ITEM Club, said the figures were disappointing.
“This was the largest June shortfall since 2015,” he noted.
“However, it is premature to draw any conclusions as monthly public finance data can be prone to significant revisions as well as being influenced by specific factors. Much will depend on Brexit developments and how the economy reacts,” he suggested.
Equity investors were clearly more focused on the US economy and specifically the Federal Reserve’s plans for a rate cut.
“New York Fed president John Williams’ statement that ‘it’s better to take preventative measures than to wait for disaster to unfold’ highlights a growing feeling that we could see the FOMC take more drastic steps to reverse their overzealous monetary tightening. With market expectations of a 50-basis point cut rising from 3.5% to 45.5% in just two weeks, the pricing of such a drastic move is going to continue dictating the pathway for the dollar, according to Joshua Mahony at IG Group.
Oil prices were heading higher after reports that US forces had shot down a drone over the Strait of Hormuz; Iran denies the event happened and accused President Trump of trying to ratchet up tensions in the Middle East.
We have not lost any drone in the Strait of Hormuz nor anywhere else. I am worried that USS Boxer has shot down their own UAS by mistake!— Seyed Abbas Araghchi (@araghchi) July 19, 2019
Either way, West Texas Intermediate was trading at US$56.07 a barrel, up 77 cents (1.4%) while Brent crude was up US$1.12 (1.8%) at US$63.05 a barrel.
10.00am: Miners driving the market higher
Miners were driving the Footsie higher in early trade on Friday.
The FTSE 100 was up 51 points (0.7%) at 7,544, with mining giants such as Anglo American PLC (LON:AAL), BHP Group PLC (LON:BHP) and Rio Tinto PLC (LON:RIO) – up by between 1.6% and 2% - doing much of the heavy lifting.
Away from the miners, The Royal Bank of Scotland Group PLC (LON:RBS) chief executive officer, Ross McEwan, has announced he will become the boss of National Australia Bank when he leaves RBS next year.
Shares in the NatWest bank owner were unchanged following the announcement.
Marketing and advertising conglomerate WPP PLC (LON:WPP) was the worst-performing blue-chip, shedding 3% at 909.6p on a read-across from perennial rival, Publicis, which lowered its revenue for the target for the year yesterday.
8.45am: FTSE 100 off to a hot start
The FTSE 100 got off to a hot start, rising 48 points to 7,540.96 amid hopes the US Federal Reserve may be a little more aggressive in its rate cutting than first thought.
This and the absence of sabre rattling on either side of the Sino-American trade war made for a positive session in Asia and on Wall Street – albeit the Dow only just crept into the green.
“Stock markets in Asia rallied overnight as traders were hopeful the Fed would loose monetary policy later this month,” said David Madden of CMC Markets.
“Richard Clarida of the Fed, said the central bank shouldn’t wait until the economy cools before cutting rates.”
Barrick Gold put some pep in the step of the precious metals miners in bidding for the part of Acacia Mining (LON:ACA) it doesn’t already own in a deal valuing the FTSE 250 group at just over £950mln.
On the FTSE 100, Mexico-focused Fresnillo (LON:FRES) advanced 2.6% and led a revival of interest in the diggers.
ITV (LON:ITV) was buoyant following a broker circular that suggested its studios arm could potentially be in the cross-hairs of Netflix, which is struggling to fill its content roster and increase its customer base fast enough.
6.45am: FTSE 100 called higher
The Footsie was expected to recover most of yesterday’s losses following some dovish remarks yesterday from policy makers at the US central bank.
Spread betting quotes suggest London’s index of heavyweight shares will open around 38 points higher at 7,531.
“Market sentiment turned swiftly positive yesterday as prominent FOMC board members of the New York Fed, Williams and Vice Chair Clarida, delivered very soft remarks highlighting the need for swift action before economic data actually turns for the worse,” noted Danske Bank.
“The remarks at first seemed very coordinated, driving a weaker USD, a drop in front US yields and a sharp rally in the August Fed funds futures, essentially leaving market pricing skewed towards a 50bp [half a percentage point] July cut rather than the consensus 25bp cut. Meanwhile, this morning, the New York Fed stressed that Williams had not tried to send a specific policy signal, leading to a rebound of more than half the initial drop in US 2Y swap rates, even if the USD FX gains were more modest with EUR/USD, for example, staying around 1.1260,” the bank added.
Sterling has given back some of yesterday’s gains on the foreign exchange market, which is also likely to boost sentiment towards UK blue-chips.
Overseas markets in positive mood
US benchmarks finished in positive territory yesterday, albeit only just in the case of the Dow Jones, which closed at 27,223, up just 3 points. The broader-based S&P 500 advanced 11 points to 2,995.
Asian markets have been mostly firm this morning with Japan’s Nikkei 225 42 points to the good at 21,466 and Hong Kong’s Hang Seng up 300 points at 28,762.
The company results schedule in London is typically sparse for a Friday, with Self-storage provider Big Yellow Group PLC’s (LON:BYG) and asset manager Close Brothers Group PLC (LON:CBG) the biggest names on the slate.
Big Yellow said in May that its closing occupancy at the end of the 2019 financial year rose 1.9 percentage points to 82.4% from 80.5% despite a more muted final quarter in the run-up to the original Brexit date.
Investors will be hoping to see a rebound in the first quarter after a disappointing end to fiscal year 2019, although Brexit uncertainty remains a key headwind.
Close Brothers has said it expects to report solid full-year results after a strong performance in the third quarter.
The company publishes a year-end trading update on Friday ahead of its full-year results in September and the key focus will be on the outlook.
Significant announcements due:
Economic data: UK public sector finances; US University of Michigan consumer sentiment survey
Around the markets
- Sterling: US$1.2537, up 0.11 cents
- 10-year gilt: yielding 0.764%, up 28 basis points
- Gold: US$1,444.80 an ounce, up US$16.70
- Brent crude: US$63.09 a barrel, up US$1.16
- Bitcoin: US$10,470, down US$138
Midatech Pharma PLC (LON: MTPH.L, NASDAQ:MTP) has announced positive results from a phase I clinical trial of a drug being developed to treat type-1 diabetes.
BlueRock Diamonds PLC (LON:BRD) has sold a 12.2 carat diamond for US$105,00 in its July tender.
Motif Bio PLC (LON:MTFB) is working diligently to regain compliance with NASDAQ rules on its market value after being served with a deficiency notice by the US exchange. It stressed the notice has no immediate impact on trading in its American depository shares. "This action by Nasdaq is not uncommon for publicly traded biopharmaceutical companies that have had clinical or regulatory setbacks that negatively impact stock price,” said chief executive Graham Lumsden.
ECR Minerals PLC (LON:ECR) said its service providers have shown a "vote of confidence" in the business by agreeing to by paid in shares. The miner has issued more than 5mln shares valued at £50,900 to pay for business support, marketing and communications services.
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