21st Jun 2016 16:08
LONDON (Alliance News) - The FTSE 100 staged a late recovery Tuesday to build on robust gains made on Monday, with the campaign for the UK to stay in the EU taking the lead in recent polls as Thursday's referendum draws closer.
"It appears markets have made up their mind which way the referendum will go, but before the result is known, there is still two-way risk," said Jasper Lawler, market analyst at CMC Markets.
The FTSE 100 ended Tuesday up 0.4%, or 22.55 points, at 6,226.55. The index rose 3.0% on Monday after polls released over the weekend gave the Remain campaign the lead ahead of the EU referendum on Thursday. Polls continued to show a substantial swing towards the Remain camp on Tuesday.
The final ORB poll on behalf of The Daily Telegraph showed a significant boost in support for the Remain camp, which surged to a seven-point lead. The survey showed Remain at 53% compared to 46% for Leave.
That represents a reversal from the equivalent poll a week earlier, which showed the Leave camp holding a one-point lead, 49% to 48%.
The survey sits in line with the surge in support for the Remain camp which emerged over the weekend and which has continued into this week, only days ahead of the poll on June 23.
However, a Survation poll on Tuesday showed 45% supported the Remain campaign and 44% the Leave campaign. This was a narrower gap than the 45% for Remain and 42% for Leave that Survation found in its recent poll for the Mail on Sunday.
The chiefs of the European Central Bank and the US Federal Reserve said they have an eye on the outcome of the UK vote. ECB President Mario Draghi hinted that risks emanating from a potential Brexit are challenging and the bank has taken measures to overcome any impact.
"The ECB is ready for all contingencies following the UK's EU referendum," Draghi said in Brussels on Tuesday.
Fed Chair Janet Yellen said in her testimony on Capitol Hill before the Committee on Banking that the US central bank is monitoring closely the UK referendum and warned a Brexit could have "significant economic repercussions".
"Even given moderate financial vulnerabilities, a number of possible external shocks, including if the UK chooses to leave the EU in a pending referendum, could pose risks to financial stability," she said.
On the US economy, Yellen reiterated that a "gradual" pace of interest rate increases seems appropriate in the US, as global headwinds die down.
A "cautious approach" on interest rates "remains appropriate" amid "considerable uncertainty" about the economic outlook, Yellen said.
Paul Ashworth, chief US economist at Capital Economics, said that Yellen added "almost nothing" to her comments from last week's post Fed meeting press conference. Ashworth said that was expected, given that Yellen's testimony comes just two days before the UK's vote.
"All things considered, we expect the Fed to resume raising interest rates in September, by which time the weather-related slowdown in payroll employment growth should have been reversed. We anticipate a second hike this year in December," Ashworth said.
At the London equities close the pound traded the dollar at USD1.4661, a touch lower than the USD1.4689 at the same time on Monday. Sterling hit a high of USD1.4784, its highest level since the beginning of January. The euro traded the dollar at USD1.1262, against USD1.1318 the same stage Monday.
In commodities, Brent oil traded at USD49.87 a barrel at the London equities close, versus USD50.39 on Monday, and gold was quoted at USD1,270.61 an ounce, down from USD1,285.75 at the same time Monday.
The FTSE 250 closed up 0.1%, or 21.20 points, at 16,980.31, and the AIM All-Share ended down 0.1%, or 0.88 point, at 721.12.
In Europe, the CAC 40 in Paris closed up 0.6% and the DAX 30 in Frankfurt ended up 0.5%.
On Wall Street at the London close, the Dow 30 was up 0.1%, the S&P 500 was up 0.2% and the Nasdaq Composite a touch lower.
In UK corporate news, Whitbread shares closed up 1.9% after the hotel and coffee shop operator reported improved sales growth in the first quarter of its financial year.
The owner of the Premier Inn hotel chain and Costa coffee brand pleased the market with its trading update, which showed that in the 13 weeks ended June 2, total sales grew by 8.0% on the same period the year before, as like-for-like sales rose by 1.8%, which Davy Research and Shore Capital both said were in line with expectations.
This was an improvement on the 7.7% total sales growth and 1.7% like-for-like growth reported in the final quarter of the previous financial year.
In the FTSE 250, Senior closed as the worst performer in the index, down 13%. The components and systems manufacturer said its Aerospace arm is trading in line with expectations, but its Flexonics business is continuing to face tough market conditions.
Senior said the Aerospace business has seen activity increase in line with its forecasts, boosted by additional work on new aircraft. Margins for the unit, however, will be lower in the first half of 2016 as the ramp-up on new aircraft production programmes continues.
For Flexonics, which makes expansion joints, flexible metal and teflon hoses and cryogenic equipment for pressure and piping systems, trading has continued to be weighed down by weak conditions in the truck and off-highway sector and ongoing softness in the oil and gas market.
Chemring Group said its pretax loss widened in the first half due to contract delays and a weaker sales mix despite higher revenue, prompting it to pull its dividend for the period.
The company, which makes countermeasures such as flares and decoys that military aircraft use against missile attack, as well as sensors and electronics used in military vehicles, said its pretax loss for the half to the end of April was GBP16.8 million, compared to a GBP15.1 million loss a year earlier.
Revenue for the half grew to GBP180.1 million from GBP161.7 million, up 11%, thanks to growth in all the group's operating segments. However, a lower-margin sales mix, phasing of revenue to the second half, and issues involved in the sale of ammunition to a customer in the Middle East, which was held up, hurt profitability.
That ammunition contract is now up and running, and initial revenue from the deal has been recognised, Chemring said. A substantial increase on this contract in the second half will increase the weighting of the group's full year to the second six months, and Chemring said it now anticipates its annual results will be slightly below market expectations.
The stock closed down 18%, making it the heaviest faller on the FTSE All-Share.
The economic calendar for Wednesday, focuses on the US housing market with MBA mortgage applications at 1200 BST, housing price index at 1400 BST and existing home sales at 1500 BST. Fed Chair Yellen will complete the second day of her testimony to congress at 1500 BST.
The UK corporate calendar remains thin, the highlight being a trading statement from FTSE 250 department store Debenhams.
Diagnostics company Immunodiagnostic System Holdings reports full-year results.
By Neil Thakrar; [email protected]; @NeilThakrar1
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