15th Jan 2014 16:51
LONDON (Alliance News) - UK stocks have rallied Wednesday, with the FTSE 100 outperforming its smaller peers, peaking at almost an 8-month high, as major equity markets around the global rise, following an increase to the global-growth forecast by the World Bank. Meanwhile the dollar has broadly strengthened following far better-than-expected growth in the US manufacturing industry.
The FTSE 100 has closed up 0.8% at 6,819.86. Earlier in the afternoon, the UK's leading index peaked at 6,825.20, a high for the year so far and the highest level reached since mid-May. The FTSE 250 has closed up 0.4% at 16,292.94 and the AIM All-Share has closed up 0.3% at 883.20.
Major global markets were boosted by the release of the World Bank's latest report on Global Economic Prospects. The lender said it now expects the world economy to grow 3.2% this year, stronger than the 3% expansion forecast in its report last June. Encouragingly, the US economy is now forecast to grow 2.8% in 2014, materially faster than 2013's 1.8% expansion, with the eurozone projected to grow 1.1% this year, which will mark the end of two years of recession.
The trend of shifting growth away from emerging merging markets and back to developed ones was evident in the report. The World Bank projected that China's gross domestic product growth rate will stay flat in 2014 at 7.7%, slowing to 7.5% for the next two years, weaker than the 8% previously forecast for 2014 and 2015.
While the World Bank noted that growth prospects are sensitive to both US monetary policy and structural shifts currently taking place in China's economy, it said it expects global GDP to grow 3.4% in 2015, slightly faster than 3.3% forecast previously, with a 3.5% expansion in 2016.
In a relative quiet day for macro data, the major European release of the day was German GDP. The first estimate of 2013 full-year growth for Europe's largest economy came in at 0.4%, a deceleration from the 0.7% growth in 2012 and slower than the 0.5% growth expected by economists.
The disappointing German growth data was shrugged off by equity markets and the German DAX actually closed up nearly 2.0% having soared to new record high throughout the day of 9,747.40. Other European majors have also rallied, with the French CAC40 closing up 1.3%.
It's a similar story in the US where after the European market close, the DJIA, the S&P500 and the Nasdaq Composite are all close to 0.5% higher.
The New York Empire State Manufacturing Index, conducted by the Federal Reserve, recorded 12.51 for January, well above the previous reading of 2.22 and also vastly exceeding the 3.75 expected by economists.
Similarly, US MBS Mortgage Applications for the week ended January 10 also came in strong, recording a rise of 11.9%, a sharp turn around from the 4.2% decline seen in the previous week.
The strong US data, combined with the weaker than expected growth in Germany and the dearth of data from the UK allowed the US dollar to be the major currency winner of the day, gaining more than 0.3% against both the euro and the pound. At the European equity market close the pound trades at USD1.6355 and the euro trades at USD1.3595.
Within UK equities, personal goods stocks led the gains. The FTSE 350 sector closed up 3.3%, led by Burberry, which topped the FTSE 100 winners table for most of the day, closing up 4.2%. Burberry's outgoing CEO Angela Ahrendts looks to be going out with a bang, achieving a 14% rise in the group's revenues over the third quarter. The luxury fashion retailer's growth continues to be driven by Asia, though this is providing some foreign exchange headwind due to the recent strength in the pound. "At current levels, exchange rates will be a significant headwind in the second half and beyond," Ahrendts said.
Anglo American pipped Burberry as the top gaining blue chip of the day, closing up 5.4% after being upgraded to Buy from Neutral by UBS. Analysts at UBS said the upgrade reflects the improving risk-reward ration for investors following recent under performance of the stock to it's peers.
Hargreaves Lansdown closed as the heaviest FTSE 100 faller, down 4.2% after releasing its new pricing structure following the second stage of the retail distribution review. Management estimates the company needs to gather about GBP3.5 billion of new assets over the next three years to offset the price cuts and the do-it-yourself, non-advisory broker market becomes more competitive following years of almost unrivalled dominance by Hargreaves Lansdown.
Providing a boost to the FTSE 250, Bwin.party Digital Entertainment shares closed as one of the top gainers, up 3.4%. The gaming group has managed to grab 45% of the market share of the recently regulated online gambling market in New Jersey, according to figures released by the US state overnight. "This endorses the potential for bwin.party and 888 if other states do chose to regulate internet gambling," says Numis Securities analyst Ivor Jones.
Still to come after the UK close Wednesday, the US Fed Beige Book of economic conditions will be released at 1900 GMT. Following last week's US jobs report, the Beige Book, "will be dissected for any evidence of the so-called weather effect cited by some commentators for the disappointing December employment number," says CMC Markets Chief Analyst Michael Hewson.
Looking to Thursday, Eueopean inflation will be in focus in the morning, with CPI data due for release from Germany at 0700 GMT and the whole eurozone at 1000 GMT. The European Central bank will also publish its monthly report of economic conditions at 0900GMT.
In another day empty of UK data, the focus will then switch to the US for further CPI data and initial jobless claims at 1330 GMT.
In the corporate calendar Thursday, trading statements are due from Ladbrokes, Dixons, Bovis Homes, and Premier Oil. While interim management statements are expected from Halfords, Experian, Aberdeen Asset Management and Home Retail Group.
By Jon Darby; [email protected]; @jondarby100
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
BurberryAnglo AmericanBovis HomesHargreaves LansdownExperianHalfordsPMO.L888.LHome ReitLAD.LADN.LDXNS.L