London midday: Stocks hold gains as pound shows life after wages surprise

Wed 16 Aug 2017

LONDON (SHARECAST) - (ShareCast News) - London stocks held on to Wednesday's early gains by midday as the pound rebounded on the back of labour market data, geopolitical tensions faded and resources stocks rallied.
The FTSE 100 was up 0.67% to 7,433.13 not long after midday, as the recently battered pound showed some life after many tumbles against the dollar and euro of late.

Sterling was lifted initially against the dollar but fell back, even though stronger earnings data suggested that there was no immediate need for the Bank of England to sanction tighter monetary policy.

"Simply put, the pay gains are strong but the policy members would still need to cautious. If the unemployment rate remains at record low levels and the output does not spike, then it would imply that most of the impact by Brexit would be on the supply side," said analyst Naeem Aslam at Think Markets.

UK unemployment unexpectedly fell to a new 42-year low of 4.4%, the Office for National Statistics revealed, from the 4.5% at which it was forecast to remain.

This helped nudge average earnings growth for the same three month period to 2.1% from 1.9%, when the consensus forecast had pointed to a worsening to 1.8%. Excluding bonuses, average earnings rose 2.1%, which was also higher than the 2% level from a month ago that was expected to prevail.

More timely data from July showed the claimant count dropped 4.2K, bigger than the 3.7K expected and an improvement from the 3.5K in June.

Traders were also keeping in mind the later release of minutes from the US central bank's most recent policy meeting. The Federal Reserve release is due at 1900 BST, which will give investors more clues regarding the outlook for monetary policy Stateside in the near-term.

In particular, some economists were hoping for a better indication on when the Federal Reserve might be most inclined to begin the process of 'normalising' its balance sheet.

The pound was up against the euro as Eurozone GDP picked up slightly in the second quarter and expectations of a big announcement from European Central Bank President Mario Draghi at next week's Jackson Hole Symposium were dealt a blow, with an ECB spokesman saying that Draghi will not provide any new policy announcements.

"Eurozone inflation has eased back over recent months, and so the pressure on the ECB has lessened somewhat, reducing the chance of a hawkish shift," said Joshua Mahony, an analyst at IG.

"The risk-on rally has continued apace this morning, with the FTSE hitting a new high for the week, although the gains have been pared in response to a sterling rebound. Fears of a conflict between the US and North Korea appear to have been left behind for now and the focus is clearly upon the positives. European markets are benefiting in particular from the recent dollar strength."

Among individual stocks, miners were leading the rally, with Glencore, Anglo American and Antofagasta to the fore, bouncing back after a subdued few days.

Accounting software group Sage was beating them all after it was upgraded by UBS, with the Swiss bank coming out as a fan of the recent acquisition of Intacct.

G4S was also rebounding a day after being downgraded by Morgan Stanley.

Construction outfit Balfour Beatty was up as it swung to a first half pre-tax profit of 12m from a loss of 15m last year as its more selective bidding approach started to yield results. However, chief executive Leo Quinn warned that Brexit and the weak pound it has caused were likely to reduce migrant labour at a time when a growing pipeline of major projects is likely to increase demand for skilled workers.

Kingfisher shares rallied a day ahead of the retailer's interim results. Analysts at Morgan Stanley anticipated "a subdued, but not bad, statement", forecasting 1% like-for-like sales growth at B&Q UK, 10% for Screwfix and a fall of 3% in LFL sales at Castorama France and 5% for Bricot Depot.

Prudential shares edged up after it offloaded its US independent broker-dealer network for a fee that could rise to $448m as the life insurer looks to trim some of its fat around the global. After the deal was signed off overnight, the transition is expected to be completed by the end of the first quarter of 2018.

Admiral shares tumbled as it reported a 8% jump in net revenues and a 2% rise in statutory profits before tax for the first half of the year, although it reported a higher cost of personal injury claims. The interim dividend was raised by 10% to 56.0p.

Gold and silver miner Hochschild plunged on concerns over its rising costs. Interim pre-tax profits fell 33.8% to $39.9m (30.9m) as higher costs hit the bottom line, though silver production rose 8.9% and gold production remained relatively flat.

Petra Diamonds was down as Investec cut its target price on the miner and reiterated its 'sell' recommendation.

Market Movers

FTSE 100 (UKX) 7,433.13 0.67%
FTSE 250 (MCX) 19,859.89 0.84%
techMARK (TASX) 3,415.95 0.54%

FTSE 100 - Risers

Sage Group (SGE) 705.00p 3.22%
Glencore (GLEN) 339.85p 2.60%
Provident Financial (PFG) 1,930.00p 2.55%
Old Mutual (OML) 206.90p 2.43%
Anglo American (AAL) 1,271.50p 2.42%
Kingfisher (KGF) 315.40p 2.34%
3i Group (III) 964.00p 2.34%
G4S (GFS) 304.10p 2.29%
Paddy Power Betfair (PPB) 7,630.00p 2.07%
Antofagasta (ANTO) 940.00p 2.06%

FTSE 100 - Fallers

Admiral Group (ADM) 2,069.00p -5.00%
Direct Line Insurance Group (DLG) 388.50p -1.82%
BT Group (BT.A) 293.95p -0.91%
Severn Trent (SVT) 2,251.00p -0.79%
United Utilities Group (UU.) 913.50p -0.49%
International Consolidated Airlines Group SA (CDI) (IAG) 629.00p -0.32%
National Grid (NG.) 964.10p -0.17%
Lloyds Banking Group (LLOY) 65.49p -0.15%
AstraZeneca (AZN) 4,450.00p -0.15%
Informa (INF) 703.00p -0.00%

FTSE 250 - Risers

Balfour Beatty (BBY) 283.60p 8.04%
Tullow Oil (TLW) 162.80p 5.99%
Vedanta Resources (VED) 738.00p 5.28%
Sirius Minerals (SXX) 28.58p 5.23%
Just Eat (JE.) 637.00p 3.66%
Ferrexpo (FXPO) 268.50p 3.63%
Marshalls (MSLH) 400.10p 3.30%
Acacia Mining (ACA) 180.80p 3.08%
Melrose Industries (MRO) 238.60p 3.02%
BGEO Group (BGEO) 3,536.00p 2.79%

FTSE 250 - Fallers

Hochschild Mining (HOC) 271.40p -14.38%
Computacenter (CCC) 877.50p -3.09%
Capita (CPI) 647.50p -2.92%
IP Group (IPO) 142.70p -2.46%
esure Group (ESUR) 282.00p -1.74%
Softcat (SCT) 393.00p -1.68%
Wizz Air Holdings (WIZZ) 2,893.00p -1.33%
Countryside Properties (CSP) 354.00p -1.26%
Millennium & Copthorne Hotels (MLC) 460.10p -1.03%
Petra Diamonds Ltd.(DI) (PDL) 90.05p -0.99%
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