19th Jan 2016 17:04
LONDON (Alliance News) - Stocks in London closed higher Tuesday, with miners and other China-exposed stocks gaining after weak data from the Asian giant increased hopes for more stimulus, while the pound took a hit after Bank of England Mark Carney pushed back rate hike expectations in the UK.
The FTSE 100 index ended up 1.7% at 5,876.80 points, the FTSE 250 up 1.0% at 16,114.56 and the AIM All-Share up 0.7% at 693.03. In Europe, the CAC 40 in Paris closed up 2.0% and the DAX 30 in Frankfurt up 1.5%.
Miners, as well as other stocks with exposure to China, benefited the most from the latest set of weak economic data from China, which analysts said could prompt further easing measures from the People's Bank of China.
"There hasn't been a big deceleration in China over December but while inflation remains low, missed expectations raise the possibility of further rates cuts from the PBoC", said CMC Markets Jasper Lawler.
Chinese economic growth eased to 6.9% in 2015 from 7.3% in the previous year, its lowest level since 1990, data published by the National Bureau of Statistics showed. Growth also was slower than the government's full-year target of about 7.0%.
In the fourth quarter, gross domestic product grew 6.8% year-over-year, while economists had expected the growth rate to remain unchanged at 6.9%. This was the weakest quarterly growth since 2009. On a quarterly basis, GDP advanced 1.6% in the three month-period to December, but slower than previous quarter's 1.8% rise. The sequential growth was expected to remain steady at 1.8%.
Meanwhile, China's industrial production grew at the weaker pace of 5.9% year-over-year in December following November's 6.2% rise. The expected rate of increase was 6.0%. Likewise, Chinese retail sales climbed 11.1% in December, slightly weaker than previous month's 11.2% increase and the 11.3% rise expected by economists.
"The added measures could now be imminent, with many expectations pointing to the fact that we could well get an announcement before the start of the [Chinese] New Year celebrations at the beginning of February," said James Hughes, chief market analyst at GKFX.
The Chinese Shanghai Composite index closed up 3.2% on the data, the Japanese Nikkei 225 up 0.6% and the Hang Seng index in Hong Kong up 2.0%.
China-exposed stocks in London as Prudential and Aberdeen Asset Management rose 3.4% and 2.1%, respectively.
Glencore, up 5.1%, BHP Billiton, up 3.0%, Anglo American, up 2.6%, and Rio Tinto, up 1.5%, ended firmly in the green, though they lost much ground throughout the day, with Anglo American having gained as much as 11% earlier in the session.
Later in the day, BHP Billiton is expected to issue its December Quarter Operational Review at 2130 GMT.
Rio Tinto reported a solid end to 2015 late on Monday with production figures that broadly met market expectations. The miner reported year-on-year rises in production across all of its commodities apart from copper and titanium slag during 2015, but copper production is expected to rise in 2016.
Rio Tinto said its fourth-quarter global iron ore production was 87.2 million tonnes, up 10% from the year-ago quarter. Global iron ore shipments for the quarter improved 11% to 91.3 million tonnes.
"We will continue to focus on disciplined management of costs and capital to maximise cash flow generation throughout 2016," Rio Tinto Chief Executive Sam Walsh said.
Global iron ore production in 2016 is expected to be around 350 million tonnes. Rio Tinto's expected share of production of bauxite, alumina and aluminium is 45 million tonnes, 7.8 million tonnes and 3.6 million tonnes, respectively.
Oil-related stocks also ended in the green, as crude prices recovered some ground after touching 12-year lows on Monday. Royal Dutch Shell 'B' shares closed up 2.4%, BG Group up 1.2%, and BP up 0.6%. Mid-cap Tullow Oil was up 1.4%, and Cairn Energy was up 0.7%.
Royal Dutch Shell and BG Group will release a trading statement and an operational and trading update, respectively, on Wednesday.
North Sea benchmark Brent oil was standing at USD29.46 a barrel at the London close, having touched a low of USD27.69 on Monday. US benchmark West Texas Intermediate was at USD29.17 a barrel at the close, off its Monday low of USD28.35 a barrel.
Unilever ended up 3.2%, after it revealed it beat its full-year underlying sales growth guidance after the strong performance it achieved in the third quarter continued into the fourth quarter, although it did warn of volatile times ahead.
The Anglo-Dutch group, which owns brands including Marmite, Colman's mustard, Persil detergent and TRESemme hair products, is the first UK blue-chip to publish 2015 results. It said underlying sales, which strip out currency translation and acquisition and disposal effects, grew 4.1% in 2015, slightly ahead of its 2% to 4% guided growth range, while revenue grew 10% to EUR53.27 billion from EUR48.43 billion in 2014.
Shares in CRH ended among the best blue-chip performers, up 3.0%, and peers Wolseley and Travis Perkins ended up 2.2% and 0.9% respectively.
UBS said in a note that investors in the European building materials sector will have to be selective about the stocks they buy, but opportunities are opening up, as it cited CRH, Travis Perkins and Wolseley among its top picks.
UBS analyst Gregor Kuglitsch said the European building materials market will start to see a broad-based recovery, albeit at a modest pace, in 2016, while the US will continue to be an attractive space for companies to be in, with good fundamentals outside of the oil and gas and industrial sectors.
In the FTSE 250, Ocado Group closed as the best mid-cap performer, up 9.9%, following a report in the Daily Mail newspaper which suggested US online retail giant Amazon.com was running the rule over a possible bid for the online grocery delivery service.
Elsewhere, the International Monetary Fund slashed its world growth forecast for 2016 and 2017 as the pickup in global activity is expected to be more gradual than expected earlier, especially in the emerging market and developing economies.
In an update to its biannual World Economic Outlook, the Washington-based lender cut its 2016 growth forecast to 3.4% from 3.6%. The outlook for 2017 was lowered to 3.6% from 3.8%. The growth estimate for 2015 was retained at 3.1%.
"The slowdown and rebalancing of the Chinese economy, lower commodity prices, and strains in some large emerging market economies will continue to weigh on growth prospects in 2016-17," the IMF said.
Data from the Office for National Statistics showed that UK inflation rose in December. UK consumer prices rose 0.2% on a yearly basis, in line with economists expectations, following a 0.1% increase in November. This was the second consecutive rise in prices. Month-on-month, consumer prices edged up 0.1%, in line with forecast, after staying flat in November.
Core inflation, which excludes energy, food, alcoholic beverages and tobacco, accelerated to 1.4% in December, with economists expecting it to remain unchanged from the 1.2% rise of November.
"Core inflation is gradually recovering from its trough last summer while headline inflation has been laid low by further falls in oil and other commodity prices," said Bank of America Merrill Lynch economist Robert Wood. "In other words, it looks like sterling's drag on inflation has been very slowly fading. Recent falls in sterling, if they are sustained, could quicken the rise in core inflation we expect".
The pound rose after the data, but it gave back its gains after Bank of England Governor Mark Carney pushed back expectations for a rate hike in the UK further away, citing weak domestic growth and turmoil in the global economy.
Since last summer, progress has been insufficient along these dimensions to warrant a tightening of monetary policy, Carney said in a speech at Queen Mary University in London. He noted that the UK growth has slowed and inflation weakened due to the oil price collapse, saying he expects inflation to remain very low for longer.
"Recent developments suggest that the firming in inflationary pressure we had expected will take longer to materialise," Carney said. "The journey to monetary policy normalisation is still young".
Following the data, sterling found its peak of the day at USD1.4340, but at the end of the session was standing at USD1.4157, still at lows not seen since mid-2010.
Meanwhile, the euro was at USD1.0897 at the close, while the price of gold slightly retreated to USD1,085.04 an ounce.
The New York market opened back with gains from a holiday on Monday. At the London close, the Dow 30 up 0.5%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.1%.
Still ahead in the US corporate calendar, fourth-quarter results from on-demand entertainment streaming service Netflix is expected after the US market close.
In the economic calendar Wednesday, German producer price index is due at 0700 GMT, while UK's unemployment rate is due at 0930 GMT. In the US, consumer price index is due at 1330 GMT, while the Redbook index is due at 1355 GMT. The World Economic Forum 2016 Annual Meeting starts in Davos, Switzerland.
Also in the UK corporate calendar, WH Smith publishes a trading statement while Fresnillo and Hochschild Mining issue fourth-quarter production results. Genel Energy, Pets At Home, JD Wetherspoon and Diploma release trading statements. WH Smith publishes a Christmas trading statement.
By Daniel Ruiz; [email protected]
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