14th Oct 2016 16:10
LONDON (Alliance News) - Better-than-expected inflation data from China eased concerns about the world's second biggest economy, supporting a positive close for London equities, alongside strong quarterly updates in the US banking sector, which also cheered up investors.
The FTSE 100 index closed up 0.5%, or 35.81 points, at 7,013.55. However, the blue-chip index couldn't recover all the losses from the week, ending down 0.4% for the week as a whole.
The FTSE 250 index of mid-caps ended 0.6% higher, or 103.07 points, at 17,980.18 points, down 0.1% for the week. The AIM All-Share rose 0.1%, or 0.78 point, to 826.21, and flat for the week.
The BATS UK 100 index rose 0.4% to 11,859.23, while the BATS 250 ended 0.5% higher at 16,351.06 and the BATS Small Companies closed flat at 11,084.40.
The Chinese National Bureau of Statistics said its consumer price index rose 1.9% year-on-year in September, exceeding forecasts for 1.6% and accelerating from 1.3% in August.
Its producer price index unexpectedly increased 0.1% annually in September to end a period of industrial deflation that lasted 54 months, the bureau said. Producer prices have been falling since March 2012, squeezing companies' cash flow and impairing their ability to receive and repay loans. The reading for September was expected to fall by 0.3%.
Mining stocks took back losses suffered on Thursday, when investors reacted to weak Chinese export data. The Asian giant's exports slumped by 10% in September from a year prior, much bigger than the expected fall of 3.3%
BHP Billiton, up 2.6%, Anglo American, up 1.9%, and Rio Tinto, up 1.3%, ended among the biggest blue-chip gainers. FTSE 250-listed Vedanta Resources, up 4.0%, benefited as well from an upgrade to Neutral from Underperform by Credit Suisse.
Unlike its peers, gold miners Fresnillo and Randgold Resources, both down 2.4%, fell tracking the Gold price down. The precious metal had a weak session, quoted at USD1,254.21 an ounce at the London equities close against USD1,256.50 an ounce on Thursday. FTSE 250-listed Centamin fell 3.1%.
Meanwhile, Brent oil stood at USD51.57 a barrel at the close, compared to USD51.81 a barrel on Thursday.
The pound remained firm against the dollar, following the 'flash crash' suffered last Friday. Sterling was quoted at USD1.2218 at the London equities close compared to USD1.2202 at the same time on Thursday.
The Bank of England is willing to tolerate above-target inflation to support growth and employment after 'Brexit', Governor Mark Carney said, speaking at Birmingham Town Hall as part of the BoE's Future Forum event in Nottingham. Inflation expectations have risen after the sharp decline in the pound after the vote to exit the EU in June.
The bank is "willing to tolerate a bit of overshoot in inflation over the course of the next few years" in order to avoid an increase in unemployment and, "to cushion the blow", the BoE Governor added. The BoE's target for inflation is 2% year-on-year, with the last UK inflation reading being 0.6% in August.
Carney added that the BoE will not take instructions on its policies from politicians, just a week after Prime Minister Theresa May took a swipe at the impact of the bank's policies. May hit out at the impact of quantitative easing at the Tory Party conference last week.
She said it was the rich who benefited from the bank printing money and cutting interest rates in the years after the 2008 financial crash, while ''ordinary working-class people'' were asked to make sacrifices in terms of stagnating pay, job insecurity, unaffordable housing and wages undercut by competition from low-skilled immigrants.
In Europe, the French CAC 40 index ended up 1.5% and the German DAX 30 closed 1.6% higher. The euro stood at USD1.1004 at the European equities close, compared to USD1.1040 on Thursday.
In New York at the London equities close, the Dow Industrials was up 0.8%, the S&P 500 index up 0.7%, and the Nasdaq Composite up 0.7%.
Investors in the US reacted to better-than-expected third-quarter results from US banks Citigroup, JPMorgan Chase & Co, and Wells Fargo, released in the London afternoon.
"Thoughts of a bigger selloff have been banished this afternoon as a trio of US bank earnings beat expectations, restoring optimism regarding US equity markets and giving investors the chance to step back into the market," said IG analyst Chris Beauchamp.
Data from the US Commerce Department showed retail sales climbed by 0.6% month-on-month in September after edging down by a revised 0.2% in August, in line with economists expectations of a 0.6% rise.
In the London evening, US Federal Reserve Chair Janet Yellen will make a speech in Boston, Massachusetts at 1830 BST, focusing on macroeconomic research after the financial crisis.
Elsewhere on the London Stock Exchange, Tesco ended as the best FTSE 100 performer, up 4.3%, taking back the losses seen on Thursday, when the stock shed 2.1%.
Anglo-Dutch consumer goods company Unilever late Thursday said it has "successfully resolved" the supply situation with the UK's biggest supermarket after Unilever had demanded higher prices for its products to offset the cost of imported goods following the pound's devaluation in the wake of the UK's vote to leave the EU. Tesco earlier Thursday had revealed that it had pulled dozens of products owned by Unilever from its website.
However, Unilever closed down 1.2% on Friday, adding to its 2.7% decline on Thursday.
Provident Financial lost 1.7%. The sub-prime lender said all of its businesses have traded well in the third quarter of 2016, and the company has produced a profit performance in line with its internal plans. The group said Vanquis Bank has delivered good growth and margins through the third quarter to the end of September, with customer numbers up 7.0% year on year, increased from 6.5% at the end of the second quarter in June, and receivables up 13%.
Analysts said Provident Financial shares were taking a breather following a rally since the European Union referendum, with the stock still up 42% since a low touched on June 27.
In the FTSE 250, Man Group ended as the best mid-cap performer, up 14%. The hedge fund manager said it saw positive fund growth and inflows over the third quarter, as it prepares to launch a private markets business, jump-started by an acquisition, and conduct a share buyback.
William Hill also ended higher, up 4.4%. A major shareholder in the bookmaker has come out against the company's proposed tie-up with Canada's Amaya, potentially creating a significant hurdle to the deal getting done, the Financial Times reported.
William Hill and Amaya confirmed last weekend they were discussing a possible all-share merger, a deal which would create a combined business worth around GBP4.6 billion and which comes amid a slew of merger and acquisition activity in the UK gambling industry.
Parvus Asset Management, which owns a 14.3% stake in William Hill, has criticised the initiative in a letter to the bookmaker's board. Parvus said the combination with Amaya had "limited strategic logic and would destroy shareholder value" and instead suggested William Hill should consider putting itself up for sale.
In the UK corporate calendar Monday, Pearson and Robert Walters issue trading statements, Lok'N Store publishes full-year results, while Bioventix and Avacta Group release half-year results.
In the economic calendar, Japan's industrial production is at 0530 BST, the eurozone consumer price index is at 1000 BST, while the UK's CB leading economic index is at 1430 BST. In the US, the New York Empire State manufacturing index is at 1330 BST, while industrial production data are at 1415 BST.
By Daniel Ruiz; [email protected]
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