London open: Stocks battle to stay flat after dollar dips on dovish Fed

Thu 17 Aug 2017

LONDON (SHARECAST) - (ShareCast News) - London stocks recovered from an initial dip to trade almost flat on Thursday morning after the release of a relatively dovish set of Federal Reserve meeting minutes overnight led to a positive Wall Street session.
After half an hour of trading the FTSE 100 was down around three points or 0.03% to 7,430 and the FTSE 250 was almost unmoved despite both being weighed down by a large cabal of stocks going ex-dividend.

The pound was trundling along mostly sideways, flat against the dollar at 1.2892 and inching up 0.06% on the euro to 1.0962.

The previous day saw sterling fail to hold onto the boost it received from a surprisingly strong UK jobs report, and analyst Connor Campbell at Spreadex said the currency "may struggle to find any good news" this Thursday given the release of UK retail sales data later in the morning, where growth expected to slow to 0.2% from 0.6% month-on-month.

Overnight the dollar was squeezed lower by an unexpected split at the heart of the US Federal Open Markets Committee, where minutes from the last central bank monetary policy meeting revealed an unexpected divergence of opinion among the policymakers on whether they should carry on with the interest rate hikes or not.

Although "most participants expected inflation to pick up over the next couple of years....and to stabilize around the 2% objective over the medium term", many participants see "some likelihood that inflation might remain below 2% for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside," the minutes read.

Commenting on the content of the minutes, Ipek Ozkardeskaya at London Capital Group said: "The minutes revealed debates regarding the Fed's inflation outlook, concerns about the unprecedented rise in stock prices and financial stability. Apparently, some Fed members favoured announcing the balance sheet normalisation plans at the July meeting, hoping to kick off in September. Others highlighted risks of an excessively rapid policy normalisation and remained cautious on achieving the 2% inflation target."

In the aftermath of the FOMC minutes, the probability of a December rate hike plunged below 40%.

The US 10-year yield softened slightly below the three month average. Gold rallied to $1,289, as the dovish Fed minutes removed a major barrier to last month's positive trend. Ozkardeskaya said the conditions are conducive for a price breakout for gold above the $1,295/1,300 resistance level.

After UK retail sales at 0930 BST, there is likely to be keen interest in the minutes of the European Central Bank's last policy meeting, which is due to be published at 1330 BST.

Stateside, investors are waiting on a flurry of economic data, including the Philly Fed regional manufacturing index for August at 1330 BST and industrial production figures for July at 1415 BST.


Hikma Pharmaceuticals was being hammered in early trade after reporting a 1% rise in first-half sales and trimming its guidance for the full year as the generic drugs arm faces tougher market conditions. For the full year management now see sales rising to "around $2bn", down from previous guidance of $2-2.1bn issued in May.

In comparison, shares in retailer Kingfisher received only a light hammering, after sales in the second quarter fell and the B&Q and Screwfix owner expressed caution on the outlook for the UK and France in the second half. In the three months to 31 July, group like-for-like sales shrank 1.9%, deteriorating from the 0.6% decline in the first quarter, though management said they "remain comfortable" with the market forecast of underlying earnings per share of 26p for the full year.

Fallers were led by a list of stocks going ex-dividend, including British American Tobacco, Evraz, Legal & General Group, Man Group, Merlin Entertainments, Millennium & Copthorne Hotels, Pearson, Reckitt Benckiser Group, Schroders, and Segro.

Marshalls, the making of paving slabs and interior tiling, was headed higher as it reported revenue up 8% and EBITDA up 13% as it saw a continued improvement in operating margins.

Kaz Minerals was on the front foot as revenues more than doubled thanks to higher volumes and commodity prices. Together with net cash costs of $0.64 per pound of copper, that drove a greater than four-fold jump in operating profits to $291m.

Market Movers

FTSE 100 (UKX) 7,424.98 -0.11%
FTSE 250 (MCX) 19,857.74 -0.01%
techMARK (TASX) 3,428.13 0.37%

FTSE 100 - Risers

Johnson Matthey (JMAT) 2,819.00p 2.36%
Fresnillo (FRES) 1,542.00p 2.25%
Randgold Resources Ltd. (RRS) 7,425.00p 2.06%
Shire Plc (SHP) 3,899.00p 1.17%
Anglo American (AAL) 1,301.50p 1.17%
BHP Billiton (BLT) 1,383.00p 1.10%
Antofagasta (ANTO) 958.00p 1.00%
Taylor Wimpey (TW.) 194.30p 0.99%
Experian (EXPN) 1,544.00p 0.98%
Smurfit Kappa Group (SKG) 2,321.00p 0.96%

FTSE 100 - Fallers

Kingfisher (KGF) 300.50p -2.24%
Legal & General Group (LGEN) 268.80p -1.57%
Admiral Group (ADM) 2,015.00p -1.56%
British American Tobacco (BATS) 4,854.50p -1.51%
Standard Chartered (STAN) 766.90p -1.19%
Imperial Brands (IMB) 3,195.00p -0.98%
Reckitt Benckiser Group (RB.) 7,334.00p -0.97%
HSBC Holdings (HSBA) 741.30p -0.90%
Schroders (SDR) 3,414.00p -0.87%
Ashtead Group (AHT) 1,600.00p -0.87%

FTSE 250 - Risers

QinetiQ Group (QQ.) 251.70p 6.56%
Marshalls (MSLH) 417.00p 4.12%
Kaz Minerals (KAZ) 728.00p 2.90%
Hochschild Mining (HOC) 266.10p 2.58%
Polymetal International (POLY) 933.00p 2.19%
Card Factory (CARD) 330.00p 1.76%
Centamin (DI) (CEY) 153.10p 1.66%
Carillion (CLLN) 50.75p 1.62%
Ferrexpo (FXPO) 275.60p 1.29%
NewRiver REIT (NRR) 347.00p 1.28%

FTSE 250 - Fallers

Hikma Pharmaceuticals (HIK) 1,240.00p -6.70%
Evraz (EVR) 253.20p -5.77%
BGEO Group (BGEO) 3,350.00p -4.39%
Rank Group (RNK) 232.00p -3.17%
Tullow Oil (TLW) 158.40p -2.28%
Man Group (EMG) 164.40p -2.08%
Aldermore Group (ALD) 229.70p -1.96%
Halma (HLMA) 1,112.00p -1.51%
Virgin Money Holdings (UK) (VM.) 282.00p -1.47%
Pershing Square Holdings Ltd NPV (PSH) 1,090.00p -1.45%
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