20th Jul 2016 15:59
LONDON (Alliance News) - London stock indices ended higher Wednesday, helped by a late rise in oil prices after data from the Energy Information Administration showed US crude oil stocks declined by more than expected.
The EIA said US commercial crude oil inventories fell by 2.3 million barrels in the week ending July 15, a bigger decline than 2.1 million barrels expected by consensus. However, the EIA said that at 519.5 million barrels, US crude oil inventories are at historically high levels for this time of year.
Oil prices leapt higher in response to the report. Brent oil went from USD45.95 a barrel just before the data to USD47.11 at the London stock market close. This meant it ended the day above the USD46.90 seen at the same time on Tuesday.
US benchmark West Texas Intermediate rose to USD45.75 a barrel from USD44.67 before the data.
The FTSE 100 closed the day up 0.5%, or 31.62 points, at 6,728.99, marking its fourth successive session of gains and its highest close since August 2015. The FTSE 250 ended up 0.7%, or 112.63 points, at 17,018.89, and the AIM All-Share finished up 0.9%, or 6.20 points, at 736.67.
In mainland Europe, France's CAC 40 index ended up 1.2%, and Germany's DAX 30 rose 1.6%.
On Wall Street at the London close, the Dow 30 was up 0.3%, the S&P 500 up 0.5%, and the Nasdaq Composite up 1.1%. The Nasdaq was boosted by Microsoft shares, which were up 6.8% after the software giant reported better-than-expected results on Tuesday after the New York close.
The pound rose Wednesday after data from the Office for National Statistics showed unemployment dropped to its lowest level since 2005 in the run-up to the referendum on European Union membership.
The unemployment rate for the three months to May fell to 4.9%, lower than the expected rate of 5.0% which would have matched the rate seen in the three months to April. The last time the reading was lower was for July to September 2005.
At the same time, the number of people in work rose 176,000 to 31.7 million, meaning the employment rate reached 74.4%, the highest since comparable records began in 1971.
Average weekly earnings including bonuses increased 2.3% and earnings excluding bonuses climbed 2.2% compared with a year earlier. The number of people claiming unemployment benefits increased marginally by 400 from May, while it was expected to increase by 4,000.
The pound shot higher following the data and at the close traded the dollar at USD1.3172, having traded at USD1.3092 before the report. The pound is now slightly higher than USD1.3134 seen at the London equities close on Tuesday.
A report from the Bank of England on UK business conditions also eased concerns about the UK economy amid the uncertainty caused by the UK's vote to leave the European Union.
In the month before the referendum, the Bank of England's regional agents said the annual rate of activity growth had remained moderate and little changed. Consumer spending and construction output growth had eased a little, offset by a pick-up in manufacturing growth from a low base.
"There had been further signs of uncertainty leading to delays in decision-taking, including on capital spending, hiring and property investment," the report said.
Following the result of the referendum many of the agents' business contacts said they planned to undertake strategic reviews of their operations, but the majority of firms said they did not expect a near-term impact from the result on their investment or staff hiring plans.
The BoE concluded that, so far, there was "no clear evidence of a sharp general slowing in activity".
The euro ended the day a touch lower against the dollar, trading at USD1.1007 at the European equity market close, compared to USD1.1011 at the same time on Tuesday.
Miners dominated the worst performers in the FTSE 100, led by Anglo American, down 4.9%. The company maintained a "cautious outlook", lowering its production guidance for copper and iron ore as its production of most commodities fell in the first half.
Copper is one of Anglo American's three key commodities and following the 4.0% decline in production in the first half, the miner lowered its guidance for the current year and also for next year.
Diamonds, another key area for the company, experienced steep declines in production in the first half, dropping 15%. This was expected though, as the company is scaling back in this area to respond to market conditions.
Platinum was the only main commodity area to see a rise in the period, as production increased 2.0% after the unit benefited from the recovery at its refinery following planned stocktakes and safety stoppages early on in the year.
BHP Billiton, down 4.0%, said production of almost all of the company's major commodities fell during the last financial year and warned of further declines in most areas in its current year as it continues to focus on improving productivity and costs rather than ramping up volumes.
The company reported year-on-year falls in production of petroleum, copper, iron ore and thermal coal as only one commodity, metallurgical coal, experienced a tiny rise.
Even though BHP lowered its production guidance for iron ore during the year following the Samarco dam burst in Brazil back in November, the company failed to mine enough to hit its revised target and thermal coal production also fell short due to unfavourable weather.
Gold miners Fresnillo and Randgold Resources closed lower, down 2.7% and 2.6% respectively, tracking the fall in the gold price. At the London close, gold traded at USD1,318.57 an ounce, versus USD1,330.87 on Tuesday.
Electrocomponents led the gainers in the mid-cap index, up 10%. The electronic components distributor said trading in its first quarter was in line with its expectations and said it had made margin improvements in the period.
The group said underlying sales growth for the first quarter, at constant currencies, was 1.0%. The first half of the quarter was slower year-on-year against a strong comparator for orders in southern and central Europe.
This since has improved, and Electrocomponents said trading so far in July has been encouraging. Gross margin improved in the first quarter by 30 basis points year-on-year, driven by cost cuts made in the business and by a higher-margin revenue mix.
In the economic calendar Thursday, the main focus will be on the European Central Bank's monetary policy decision at 1245 BST, and the subsequent press conference with President Mario Draghi at 1330 BST.
Elsewhere UK retail sales and public sector net borrowing are at 0930 BST, US initial and continuing jobless claims are at 1330 BST, the same time as Philadelphia Fed Survey and the Chicago Fed national activity index.
It's a busy day in the UK corporate calendar, with updates from a number FTSE 100 companies. Drinks giant SABMiller, utility company SSE, and defence and engineering support services company Babcock International Group are all scheduled to release trading updates, while budget airline easyJet reports third quarter results and consumer goods company Unilever issues interim results.
There will also be trading statements from food and beverage ingredients manufacturer Tate & Lyle, soft drinks maker Britvic, online domestic appliances retailer AO World, specialist money manager Intermediate Capital Group, and financial services company Close Brothers Group, amongst others.
By Neil Thakrar; [email protected]; @NeilThakrar1
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