1st Jul 2016 07:33
LONDON (Alliance News) - Stocks in London were higher Friday morning, as the prospect of an interest rate cut by the Bank of England this summer also was seen likely to delay any rate hike by the US Federal Reserve.
The FTSE 100 was up 0.4%, or 26.33 points at 6,530.86. The blue-chip index touched at the open its highest level since August 2015. The FTSE 250 was up 0.4% at 16,351.25 points, and the AIM All-Share was up 0.1% at 708.88.
Bank of England Governor Mark Carney said Thursday in a press conference that "the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer," fuelling expectations of a possible cut in UK interest rates from their current 0.5%.
"The [Monetary Policy] Committee will make an initial assessment on July 14, and a full assessment complete with a new forecast will follow in the August Inflation Report," Carney said. "In August, we will also discuss further the range of instruments at our disposal."
Ben Brettell, senior economist at Hargreaves Lansdown said the MPC meeting on August 4 is "the likeliest date for a rate cut". However, Brettell notes that markets are still pricing in a July cut "as more likely than not", with a 57% probability, while there is a 73% chance of a rate cut in August.
The pound took a hit Thursday against the dollar following Carney's comments. The currency has remained stable since then, quoted at USD1.3305 shortly after the London equities open, compared to USD1.3294 at the equities close Thursday.
"While markets like the idea of more stimulus from any major central bank, they especially like the idea that a weak sterling keeps the dollar strong and thus fends off the Fed from a rate rise for a good while longer," said Accendo Markets market analyst Michael van Dulken.
Blue-chip gold miners Fresnillo and Randgold Resources were up 2.7% and 1.3%, respectively, tracking the precious metal's price higher. Gold was quoted at USD1,331.84 shortly after the London equities open, compared to USD1,318.96 at the equities close Thursday.
Miner BHP Billiton was missing out on the gains, down 1.4%, after it said Brazilian courts have been told to suspend their decision on whether to ratify the framework agreement that will start to rectify the aftermath of the Samarco dam failure that occurred last year.
BHP, alongside its partner Vale SA, had the framework agreement approved by courts in early May, but said Friday that the Superior Court of Justice in Brazil has now issued an interim order suspending the decision of the Federal Court of Appeal to ratify the agreement.
BHP said the effect of the interim order from the Superior Court of Justice is to reinstate a BRL20.00 billion public civil claim made by Brazilian authorities against Samarco, the joint venture company that operates the project, and its 50:50 owners BHP and Vale. BHP said it intends to appeal the decision of the court, but Samarco will continue its remedial work in the meantime.
In the FTSE 250, Synthomer was up 1.5%. The specialty chemicals company, which supplies latices and emulsion polymers, said its outlook for 2016 is unchanged and trading has been in line with its expectations in the first half. It will publish interim results on August 9.
Synthomer also said it has completed the USD226.0 million purchase of Hexion PAC from US-based chemicals company Hexion Inc. The deal will boost its position in the performance adhesives and coatings market, adding new products and customers to its books.
In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were adding 0.5% and 0.6%, respectively. Standard & Poor's Global Ratings lowered its long-term rating on the European Union from AA+ to AA after Britain's vote to leave triggered "greater uncertainty" over the EU's revenue forecasting, long-term capital planning and adjustment to key financial buffers.
It said it had to review its "previously favourable opinion of solidarity within the EU" from positive to neutral because its previous view was based on all 28 member states remaining inside the European Union. S&P said the outlook is stable.
In Asia on Friday, the Japanese Nikkei 225 index closed up 0.7%. In China, the Shanghai Composite rose 0.1%, while the Hang Seng index in Hong Kong continues up 1.8%.
Survey data from Nikkei showed Japan's manufacturing sector continuing to contract in June, with a manufacturing PMI score of 48.1, but up from 47.7 in May. Likewise, the Chinese manufacturing sector also contracted in June, the latest survey from Caixin revealed, with a manufacturing PMI score of 48.6, below the 49.2 reading of May.
Highlights in the economic calendar Friday are Markit manufacturing PMIs from France and Germany at 0850 BST and 0855 BST, respectively. The same for the UK is at 0930 BST. In the US, the Markit manufacturing PMI is at 1445 BST.
By Daniel Ruiz; [email protected]
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