FTSE 100 closes higher as risk-on investor mood returns, trade war fears fade

"Chinese exports and imports in July both came in better than expected, and that added to the feel-good factor," noted analyst David Madden.

Proactive Published 08/08/2019

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FTSE 100 closes up 87 points

Wall Street shares higher

US jobless claims fall in first days of August

5.20pm: Footsie closes higher

FTSE 100 joined other global indices and headed higher on Thursday as trader optimism appeared to bounce back.

The UK index of leading shares closed 87.20 points higher at 7,285. Elsewhere, the mid-cap FTSE 250 added over 196 points to stand at 19,137.

"The fact the Chinese central bank fixed the yuan at a lower rate than expected gave the markets some respite," said market analyst David Madden at CMC Markets.

"Chinese exports and imports in July both came in better than expected, and that added to the feel-good factor. The trade spat is far from over, but while the rhetoric and the actions have been dialled down, traders are swooping in snapping up relatively cheap stocks."

China's central bank today set the reference rate for the yuan at 7.0039 per US dollar- the weakest level since April 2008 but above levels hit last week.

On Wall Street, the Dow Jones Industrial Average was up over 291 points at 26,300, while the broader-based S&P 500 gained over 43 points at 2,927.

it was a fairly quiet day on the currency markets, due in part to the actions of the Chinese central bank. Sterling was down 0.03% against the US dollar.

2.50pm: US markets open in the green as jobless claims signal continued economic strength

As expected, Wall Street’s main indices kicked off trading on the front foot on Thursday as a fall in jobless claims provided a glimmer of optimism.

Shortly after the opening bell, the Dow was up 0.48% while the S&P 500 was 0.62% higher and the Nasdaq rose 0.59%.

Meanwhile, fears of an impending recession were given a little respite in the form of US weekly jobless claims for the start of August, which showed that 209,000 people applied for unemployment benefit in the seven days to 3 August, a drop of 8,000 and a sign that the US economy remained strong despite some recent softness.

Jobless claims are usually seen as one of the early signs of economic trouble if they begin to rise, so the decline may serve to calm some jitters in the wider market.

The data also seemed to have given some strength to the dollar, which in mid-afternoon had erased sterling's rally to leave the pound 0.26% lower against the greenback at US$1.2108.

This was good news for the FTSE 100, however, which jumped 49 points to 7,247.

12.45pm: Wall Street points higher

The US markets are tipped to open positively on Thursday as better currency and export data from China helped soothe some nerves on the global markets.

Aside from the better than feared export numbers from the People’s Republic, traders have also taken some relief from the yuan being pegged at a stronger exchange rate than was previously expected on Thursday at around ¥7 against the dollar.

However, fears over the currency continue to persist as markets worry the ongoing trade dispute between the US and China has now spilled over into a currency war, a concern that was compounded on Monday when the US labelled China as a currency manipulator for the first time since 1994.

In company news, US traders will be keeping an eye on upcoming results from taxi app Uber Technologies Inc (NYSE:UBER), which are expected to garner some momentum following a strong second quarter update from rival Lyft Inc (NASDAQ:LYFT) on Wednesday which forecast higher full year revenues.

Adam Vettese, an analyst at eToro, said that price competition had been “the main concern” for the ride-hailers until recently as it had eaten into profit margins.

However, Vettese said the struggle showed signs of easing and that upside to Uber’s stock price was expected as a result.

“Uber’s stock is still below its IPO price so it remains a tricky investment case to make. However, many continue to buy into Uber’s ambition to become a one stop-shop for local transportation and commerce’ and will be hoping Lyft’s positive performance rubs off on its bigger brother”, he added.

Meanwhile, in London, the FTSE 100 was up 14 points at 7,212.

11.35am: FTSE 100 hovers above 7,200 into lunchtime

As Thursday morning drew to a close the FTSE 100 was just about managing to keep its head above 7,200 level following its recent tumble and was up around 21 points at 7,219.

Hargreaves Lansdown continued to hold the top spot among the risers in the index, up 8.7% at 1,992p after 11 am, while Rolls-Royce followed in second place after rising 5.2% to 768p.

At the other end of the scale, BT’s ex-dividend status had pushed it 5.4% lower to 174.4p to make it the worst performer among the blue chips.

Meanwhile, the small rally in sterling following the positive Chinese trade figures had tapered off somewhat, with the pound 0.11% higher at US$1.2153 against the dollar.

Traders may also not want to pin their hopes on a China-backed recovery, with ING economist Iris Pang saying in a note that the while there could be more good numbers for August, these would be a “one-ff” as exporters looked to front-load their activity ahead of more US tariffs on US$300bn of Chinese goods which are due to come into effect at the start of September.

As a result, Pang said that for the rest of the year China’s export volumes would “shrink” as the trade war escalated and exporters switched towards Europe and the domestic market to avoid US tariffs.

10.15am: FTSE 100 ticks higher into mid-morning

Going into mid-morning the FTSE 100 managed to stay on the front foot with the blue-chip index up around 10 points at 7,209.

Meanwhile, the pound was enjoying something of a recovery as demand was bolstered by unexpectedly positive export data from China, which showed that exports from the world’s largest economy had grown in July despite the ongoing trade war with the US.

Sterling was up around 0.2% at US$1.2164 against the dollar and 0.02% higher at €1.084 against the euro, although these levels are still close to a 31-month low of US$1.208 which was reached earlier in August as fears over a no-deal Brexit continue to rattle the forex markets.

Fiona Cincotta, senior market analyst at City Index, said that the pound was expected to continue its decline as Brexit fears intensified over the next few months ahead of the UK’s planned departure date of 31 October.

In company news, blue-chip insurer Aviva PLC (LON:AV.) rose 0.9% to 385.6p after upping its interim dividend by 3% to 9.5p per share following a strong first half performance from its general insurance arm which more than offset weakness in its fund management division.

It wasn’t all good news for the insurers, however, with FTSE 250 firm Hastings Group Holdings PLC (LON:HSTG) sinking 7.3% in early trading after reporting a sharper than expected 36% decline in pre-tax profits for its first half.

8.40am: FTSE 100 slow out of the traps

The FTSE 100 made a rather subdued start to the session, opening just 18 points to the good 7,216.61, or around 50 points below predictions ahead of the start.

Ex-dividend factors slammed on the brakes with AstraZeneca (LON:AZN), BT (LON:BT.A), Diageo (LON:DGE) and GlaxoSmithKline (LON:GSK) all trading without an entitlement to a payout.

BT led the fallers with a 5.2% decline. Topping the leader board was Hargreaves Lansdown (LON:HL.), whose final results appear to have passed muster with the City.

Rolls rockin'

Rolls Royce (LON:RR.) wasn’t too far behind after two days of post-results blood-letting.

Against a highly uncertain backdrop, gold has continued to push on past the US$1,500 an ounce mark, and, according to experts, it’s destined to challenge fresh highs.

“The cue was a major melt-up in bonds,” said Markets.com’s Neil Wilson, with his technical analyst’s hat on.

“[A price of] US$1525-50 looks to be a big area to overcome with a ton of horizontal past support around this region as the market seeks to overcome the April 2013 crash. On the one-hour chart we’ve got a nice bullish-looking flag formation too.”

Proactive news headlines:

Savannah Resources PLC (LON:SAV) is to be awarded mining licences over the Mahab 4 and Maqail South high-grade copper deposits near the Port of Sohar in Oman.

Touchstone Exploration Inc (LON:TXP) told investors that drilling operations have kicked off in the Ortoire block, in Trinidad.

Goldplat plc (LON:GDP) steadied in the second half of year just ended after cost-cutting and the mothballing of the Kilimapesa gold mine.

Block Energy PLC (LON:BLOE) has begun preparations to drill a second well at its promising West Rustavi field in Georgia.

Genel Energy PLC (LON:GENL) has resumed a US$10mln share buyback as part of an effort to boost its share price value.

Diversified Gas & Oil PLC (LON:DGOC) chief executive has told investors that the strategy to build scale within Appalachia continues to prove successful.

Motor finance and property bridging firm S & U PLC (LON:SUS) said it continues to trade well and in line with expectations despite a tough car market and a subdued housing market.

IronRidge Resources Limited (LON:IRR) has signed a deal with Canadian listed explorer GeoDrill Limited (TSX:GEO) for a ‘drilling for equity’ program across its gold and lithium portfolio in Africa.

Screening specialist ClearStar Inc (LON:CLSU) said its Medical Information Services (MIS) business has passed a significant milestone by posting monthly sales in excess of US$1mln for the first time.

6.30am: FTSE 100 set to start on the front foot

The FTSE 100 is set to start Thursday’s session on the front foot, as positive equity trading continues through global markets.

London’s premier index is called 64 points higher by IG Markets which makes the price at 7,224 to 7,227 with just over an hour to go until the start of trading.

David Madden, analyst at CMC Markets, noted the difference between a bounce and genuine positivity.

“Bargain hunting and short covering might have assisted some of the major equity benchmarks, but trade concerns are still hanging over the markets – falling government bond yields highlights the fear factor,” the analyst said in a note.

He added: “US stocks suffered during the middle of the session yesterday as some traders took their money out of equities and ploughed their funds into US government bonds, and in turn we saw further declines in US government bond yields. Last night, US stocks finished largely positive with the S&P posting fractional gains.”

Wall Street’s S&P 500 finished Wednesday’s dealing up just 0.07% at 2,883 whilst the Nasdaq marked a 0.38% gain. The Dow Jones though left a red marker, down 0.08% finishing at 26,007.

In Asia, Japan’s Nikkei gained 112 points or 0.55% to trade at 20,629 and Hong Kong’s Hang Seng rose 189 points or 0.73% to 26,186. The Shanghai Composite gained 1.06% to 2,798.

Around the markets

Pound: US$1.2162, up 0.16%
Gold: US$1,500, down 0.44%
Brent crude: US$57.92, up 1.76%
Bitcoin: US$11,898, up 2.36%

Significant announcements expected on Thursday:

Finals: Hargreaves Lansdown PLC (LON:HL)

Interims: Arrow Global PLC (LON:ARW), Aviva PLC (LON:AV.), Coca-Cola HBC PLC (LON:CCH), Hastings PLC (LON:HSTG), Tritax Big Box PLC (LON:BBOX), Telecom Egypt S (LON:TEEG), Temple Bar Investment Trust PLC (LON:TMPL)

FTSE 100 ex-dividends: BT Group PLC (LON:BT.A), Diageo plc (LON:DGE), AstraZeneca PLC (LON:AZN), GlaxoSmithKline PLC (LON:GSK)

Economic data: US weekly jobless claims, RICS UK housing market survey