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FTSE 100 closes higher as Wall street surges on trade deal hopes

In London, Footsie closed up 67.27 points higher on the day, or 0.92% at 7,369.69,

Mining truck
London shares closed higher as markets cheered a potential US/China trade deal
  • FTSE 100 closes 67points higher

  • US shares surging

  • Resource stocks top London gainers

5.10pm: Footsie closes up

FTSE 100 index closed up as US shares hit new record highs, including the Dow Jones Industrial Average.

Shares stateside are reaching new peaks on hopes that the US and China may sign a provisional trade deal this month to end the lengthy wrangling.

In London, Footsie closed up 67.27 points higher, or 0.92% at 7,369.69, with resource stocks, unsurprisingly, doing well, due to the easing trade situation.

Commodities giant Glencore (LON:GLEN) added 5.13% to 253.30p, while copper titan Rio Tinto (LON:RIO) added 3.35% to 4,307.50p.

The mid-cap FTSE 250 was also up, adding 65.05 points to close at 20,223.82. 

"Trade hopes have lifted sentiment in global equity markets," said David Madden, analyst at CMC Markets.

"The US-China trading relationship is heading in the right direction, which is driving the rally. The continued chatter that Beijing and Washington DC are close to signing phase one of the trade deal is lifting the mood in the markets."

The pound was down 0.26% to stand at 1.2905 against the US dollar.

On Wall Street, the Dow Jones is up 102 points and the S&P 500 is ahead by over 12 points.

3.05pm: US stocks start higher

US stocks opened firmer, with the Dow Jones 139 points (0.5%) heavier at 27,486 and the S&P 500 14 points (0.5%) firmer at 3,081.

Back in Blighty, the Footsie - up 75 points at 7,377 - crept close to the 7,400 level and a triple-point gain before retreating a tad, after the pound shifted into reverse on forex markets.

The UK currency was down three-tenths of a cent against the US dollar at US$1.2909.

On the commodities markets, oil was on the climb, with the spot price of Brent crude up 64 cents (1.0%) at US$62.33.

Index heavyweights BP PLC (LON:BP.) and Royal Dutch Shell (LON:RDSB) followed the spot price higher, rising 2.8% and 2.2% respectively.

2.15pm: Leading shares take a breather over lunch

The Footsie traded sideways over the lunchtime session ahead of what is tipped to be a firm start to trading in the US.

London’s index of large-cap shares was up 79 points (1.1%) at 7,382.

In the US, spread betting quotes point to the Dow Jones opening at around 27,480 (up 133 points) and the S&P at about 3,082 (up 15 points).

“Comments by Wilbur Ross, US Commerce secretary that he was optimistic of progress and that talks were ‘in good shape’ and that there was ‘no natural reason’ why a deal couldn’t be signed has helped drive momentum,” said CMC’s Michael Hewson.

12.15pm: Footsie has a storming morning

With US benchmarks expected to open higher, London’s blue-chips have extended gains.

The FTSE 100 was up 75 points (1.0%) at 7,378, helped by a deterioration in the value of sterling against the US dollar.

The mid-cap FTSE 250 is also on the up but trailing in its bigger brother’s wake, with an 81 point (0.4%) increase to 20,240.

Gambling stocks are slowing down the mid-cap index’s progress.

Ladbrokes owner GVC Holdings PLC (LON:GVC) has appointed Barry Gibson, a seasoned betting firm director and current chair of Homeserve PLC (LON:HOME) as its new non-executive chairman, replacing Lee Feldman who has held the role for 11 years.

GVC shares were down 8.6% at 820p while sector peers William Hill PLC (LON:WMH) and Rank PLC (LON:RNK) were off 6.8% and 4.7% respectively.

Homeserve PLC (LON:HSV), meanwhile, fell 2.7% to 1,179p, reflecting increasing concerns among the investment community over directors who are sitting on too many boards.

Shares in Ryanair Holdings PLC (LON:RYA) gained altitude after the no-frills airline reported unchanged half-year profits.

Despite warning that losses from its Laudamotion acquisition will be higher than originally expected and that customer traffic is likely to slow in the second half, albeit with flight fares improving, the shares rose 7.8% to 13.46p.

Sector peer easyJet PLC (LON:EZJ) rose 3.5% in sympathy.
 

10.30am: Mothercare plunges after announcing UK stores are to go into administration

Mining companies were driving the Footsie’s progress following encouraging comments from US commerce secretary Wilbur Ross about breaking the US/China trade war negotiations impasse.

London's index of leading shares was up 52 points (0.7%) at 7,354, shrugging off unimpressive data relating to the construction industry.

“The UK construction sector continues to shrink, with uncertainty likely to remain until the election is over. US-China trade talks will dominate sentiment, helping push stocks higher for now,” suggested Joshua Mahony at IG.

The Christmas trading period often seems to trigger the demise of well-known high street retailers and this year the chopper has come down earlier than usual, with Mothercare PLC (LON:MTC) announcing plans to puts its 79 UK stores into administration.

READ Mothercare buckles under retail pressure, putting UK stores into administration

“The decline of the UK high street continues to play out, with Mothercare the latest firm to face closure after posting a £36.3 million loss last year,” IG's Mahony observed.

“Once again it is the prominence of internet competitors that has played a key role in taking down this high street staple, highlighting the difficulty in doing business on a brick-and-mortar model. With many firms relying on the festive period to ensure profitability, the big question is whether the continued expectation of discounted shopping will drive more firms to the wall at a time that has typically been a bounty for the high street,” he pondered.

Shares in Mothercare were down 29% at 8p.

Among blue-chips, insurance broker Hiscox PLC (LON:HSX) was the biggest faller, shedding 2.2% at 1,443p, after it said it had set aside US$165mln to cover the impact of Typhoon Faxai, Typhoon Hagibis and Hurricane Dorian.

9.45am: Another "distressing" decline in construction activity

The IHS Markit/CIPS UK Construction Total Activity Index for October came in at 44.2, well below the 50.0 “no-change” threshold.

On the plus side, the reading was up from September’s reading of 43.3 but it was not far off the 10-year low of 43.1 seen in June.

Construction companies noted that client demand remained subdued in response to domestic political uncertainty and the economic backdrop, IHS Markit said. In some cases, survey respondents noted that unusually wet weather in October had acted as an additional headwind to construction output.

“UK construction companies experienced a downturn in business performance during October as political uncertainty and subdued economic conditions again combined to hold back sales. New orders have fallen in each month since April, which is the most prolonged period of decline recorded for more than six years,” observed Tim Moore, an economics associate director at IHS Markit.

“Civil engineering was the worst-performing area of activity in October, with business activity dropping at the fastest pace in ten years. Construction companies also voiced concerns about the uncertain outlook for large-scale infrastructure projects upon which growth is expected to rest in the coming years.

"House building has also lost momentum this autumn amid a broader slowdown in market conditions, with the latest survey data signalling the sharpest drop in residential work since June 2016,” he added.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CIPS), described the construction sector’s continued decline as “distressing”.

"To say these figures are disappointing is a big understatement. Given that the next political hurdle is December’s General Election, all eyes will be on the new administration and clear direction, because at the moment there is little insight into what could possibly pull the sector out of its ditch," Brock said.

Presumably, that’s the ditch the prime minister threw himself into at midnight on 31 October as the old Brexit deadline passed …

The FTSE 100 was up 45 points (0.6%) at 7,348, having been loitering around 7,344 before the construction data release.

8.45am: Positive start to the week

As predicted, the FTSE 100 got off to a positive start, bolstered by renewed optimism over trade.

Taking its cue from Asia’s generally buoyant markets, the UK index of blue-chip shares advanced 30 points to 7,332.19.

Forex traders, meanwhile, held their collective nerve with pound trading at just under US$1.30 on the back of a slew of weekend polls that gave Boris Johnson a commanding lead ahead of next month’s election.

As lobbying for votes has begun, so an air of calm has descended with a no-deal exit from Europe off the table - for the foreseeable future - and the Tory rhetoric mellowing, analysts said.

Saudi Aramco float

The morning’s big talking point was the flotation of Saudi Aramco, the country’s oil producer.

Reuters has done some digging which reveals analysts are split over the valuation of the business by a margin of more than US$1tn with investment banks placing a US$1.2tn-US$2.5tn price tag on Aramco.

Sources suggest 1-2% of the company could be sold on the Riyadh exchange, with a secondary quote expected on one of the major capital markets such as New York or London.

“This kind of listing requires a major exchange to provide the sheer scale of liquidity that it will gobble up,” said Neil Wilson of Markets.com.

“Can the market even handle the incredible amount of liquidity that this listing will require?”

 

6.35am: Positive start to week predicted

The FTSE 100 looks set to make a positive start to the week amid hopes the frosty trade stand-off between America and China is finally thawing.

The catalyst for the sentiment change was a strong suggestion by commerce secretary, Wilbur Ross, that Chinese telecoms giant Huawei will be licensed to trade with up to 260 US companies.

Mired in spying allegations, Huawei has been in trade cross-hairs since the start of on-off negotiations between the world’s two largest economies.

Speaking from the ASEAN economic summit in Bankok, Ross also told reporters that “long overdue” talks with China would recommence, adding the two sides are “very far along” with a preliminary trade accord under discussion.

“On the trade front, some progress was made at the back end of last week,” said David Madden, analyst at CMC Markets. “The US have had concerns about the dip in the Chinese yuan, in addition to intellectual property rights, and positive steps were taken in relation to those issues.”

Asia’s main markets were generally in positive territory. This is likely to provide a bump to the UK blue-chip index, which is predicted by the spread betting firms to advance 34 points at the open to 7,336.

The pound, meanwhile, held steady at US$1.2936 as weekend polls put Boris Johnson in a commanding lead in the race for 10 Downing Street.

On the corporate front, it is a big week for the retail sector with updates from Sainsbury (LON:SBRY), Ocado (LON:OCDO) and Primark owner Associated British Foods (LON:ABF).

Around the markets:

Gold US$1,513.80 an ounce, up US$2.40

Brent crude US$61.31 a barrel, down 38 cents.

Bitcoin US$9,165.47, down US$117.54

Significant expected on Monday:

Interims: Norcros PLC (LON:NXR), Ryanair Holdings PLC (LON:RYA)

Trading statements: Hiscox Ltd (LON:HSX)

Economic announcements: UK and EU construction PMI, US factory orders

City Headlines: 

Financial Times

  • Saudi Aramco sweetens US$2trln IPO terms to win over investors
  • KPMG to cull a tenth of its UK partners
  • McDonald’s sacks chief over relationship with employee
  • Parties’ spending plans signal return to a ‘1970s-sized state’

Times

  • Business confidence picked up in October as concerns over Britain leaving the European Union eased
  • Higher national living wage gets all-clear from Treasury study
  • Investment banks working on Saudi Aramco’s listing are on course to share as much as US$450mln

Telegraph

  • Just Eat warns of £7mln tax blow as bidding war simmers
  • Daily Mail deal for the ‘i’ is on the table but taking longer than expected
  • Kier in fight for survival as lenders offload debt

Guardian

  • Chinese giant Jingye is leading contender for British Steel buyout
  • Labour plans to make 27m homes energy efficient

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