30th Mar 2016 16:13
LONDON (Alliance News) - London shares closed higher Wednesday as dovish comments Tuesday by US Federal Reserve Chair Janet Yellen hit the dollar and boosted commodities prices, with oil finding further support later in the day after weak US crude production data.
In prepared remarks on Tuesday after the London stock market close, the Fed Chair said she considers it appropriate for the central bank to proceed cautiously in adjusting monetary policy given the risks to the economic outlook. Yellen said the caution is especially warranted because the Fed's ability to use conventional monetary policy to respond to economic disturbances is limited with interest rates still at such low levels.
"If economic conditions were to strengthen considerably more than currently expected, the [Federal Open Market Committee] could readily raise its target range for the federal funds rate to stabilize the economy," Yellen said. "By contrast, if the expansion was to falter or if inflation was to remain stubbornly low, the FOMC would be able to provide only a modest degree of additional stimulus by cutting the federal funds rate back to near zero."
The speech largely offset recent speculation that the Fed will raise interest rates at its next meeting, after Yellen's colleagues struck a more hawkish tone in their respective speeches last week.
The dollar fell following Yellen's comments, pushing commodities prices higher. The pound traded the greenback at USD1.4403 at the London equities close versus USD1.4271 at the close Tuesday, while the euro was at USD1.1335 at the close against USD1.1189 on Tuesday.
Gold was quoted at USD1,227.10 at the London equities close, having stood at USD1,225.74 at the same time on Tuesday. The precious metal reached a high of USD1,244.00 in early trade, but ended giving back most of its gains. FOREX.com analyst Fawad Razaqzada said speculators are probably booking profit on their long positions.
"As gold is a non-interest-bearing asset, falling interest rates – or expectations thereof – reduce the opportunity cost of gold ownership," noted Razaqzada.
Meanwhile, the North Sea benchmark Brent oil price stood at USD39.76 a barrel at the close Wednesday, compared to USD38.84 at the close Tuesday.
The oil price received a late boost towards the end of the European session after data from the US Energy Information Administration showed that crude stockpiles in the US rose slower-than-expected in the week ended March 25. The report said US crude oil inventories increased by 2.29 million barrels last week, with economists expecting a rise 3.16 million barrels from the 9.35 million barrels reported the previous week.
Mining and oil stocks were the main support for the FTSE 100 to close up 1.6%, or 97.27 points, at 6,203.17. Anglo American, up 12%, and Glencore, up 8.1%, ended among the best performing miners, while Royal Dutch Shell's 'A' shares closed up 3.4%, and BP rose 2.8%.
In New York, stocks were adding to the gains from Tuesday at the London close, with both the Dow Jones Industrial Average and the S&P 500 at their highest levels so far in 2016. The Dow was up 0.5%, with both the S&P and the Nasdaq Composite up 0.4% at the London close.
Payroll processor ADP released a report showing slightly stronger-than-expected US private sector job growth in March, partly reflecting strong job growth in the trade, transportation and utilities sector. ADP said private sector employment increased by 200,000 jobs in March after jumping by a downwardly revised 205,000 jobs in February.
Economists had expected employment to climb by about 195,000 jobs. The slightly bigger-than-expected increase in jobs was partly due to continued strength in service-providing employment.
Also released Wednesday, Germany's consumer prices rose at a faster-than-expected pace in March after remaining unchanged in the previous month, preliminary estimates from Destatis revealed. The consumer price index increased 0.8% month-on-month in March after rising 0.4% in February. Economists had expected a 0.6% climb. The monthly gain was the fastest since February last year. The CPI climbed 0.3% year-on-year following the unchanged reading in February. Economists had forecast 0.1% rise.
In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt ended up 1.8% and 1.6%, respectively.
In London, Carnival ended up 4.0% after the cruise operator said its cumulative bookings for 2016 are well ahead year-on-year as its net income and revenue grew in the first quarter of its financial year. Carnival said bookings for the rest of 2016 were higher than at the same point a year earlier and had been made at slightly higher prices.
Net income for the first quarter to the end of February was USD142.0 million, significantly ahead of the USD49.0 million made a year earlier, as revenue grew to USD3.65 billion from USD3.53 billion. Cruise revenue was boosted by growth in passenger ticket sales and onboard revenue, while tour and other revenue was flat in the quarter.
GlaxoSmithKline rose 1.4% after CitiGroup upgraded the FTSE 100 drugmaker to Buy from Neutral.
The FTSE 250 index ended up 1.3%, or 218.63, at 16,974.95 and the AIM All-Share finished up 0.2%, or 1.54 points, at 709.73.
Shares in mid-cap gold miner Centamin ended up 4.3% supported by an upgrade to Add from Hold by Numis. The broker said the change to its recommendation comes following a recent decline in the stock.
At the other end of the index, Homewares retailer Dunelm Group declined 2.8%, after Jefferies cut it to Hold from Buy. Meanwhile, fellow FTSE 250 constituent William Hill ended down 0.1%, after the bookie was downgraded to Underweight from Equalweight by Morgan Stanley.
On the Main Market, Premier Foods once more said a higher offer made by McCormick & Co undervalued the company but said it would enter talks with the US spices and flavourings maker on its offer. McCormick tabled an increased, 65.00 pence per share offer for Premier Foods on Wednesday morning, valuing the group at GBP536.7 million. The new offer came after McCormick had seen two offers, of 52.00p and 60.00p, rejected by Premier as undervaluing the company.
Premier said the meetings would be held to discuss "value drivers, a review of material pensions documentation, current trading and material contracts" with a view to establishing whether McCormick will increase its offer further.
On Wednesday, the stock closed up 6.7% at 60.28p, valuing the company at GBP507.89 million by market capilisation.
In the corporate calendar Thursday, RPC Group, Booker Group and Iomart Group issue trading updates. Hilton Food Group, Scisys, Wireless Group, Polypipe Group, Chesnara, Sierra Rutile, Publishing Technology, Fidelity Japanese Values release full-year results. James Halstead publishes half-year results.
In the economic calendar, Germany's retail sales and unemployment data are due at 0700 BST and 0855 BST, respectively. The UK's fourth-quarter gross domestic product and mortgage approvals and current account data are due at 0930 BST. The Eurozone's consumer price index is due at 1000 BST, while the European Central Bank monetary policy accounts are due at 1230 BST.
In the US, initial and continuing jobless claims are due at 1330 BST, while the US Chicago Purchasing Manager's Index is due at 1445 BST.
By Daniel Ruiz; [email protected]
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