3rd Jul 2014 16:09
LONDON (Alliance News) - Stock markets made strong gains across the UK and Europe on Thursday amid some supportive PMI data and as the European Central Bank maintained it's dovish monetary policy stance. Furthermore, stocks were boosted by a stronger-than-expected US non-farm payroll report, which was rushed out ahead of its normal Friday slot, as US markets will close for the Independence Day holiday on July 4.
The FTSE 100 has closed up 0.7% at 6,865.21, the FTSE 250 has closed up 0.8% at 16,028.96, and the AIM All-Share has closed up 0.7% at 790.07.
Within European majors the German DAX has rallied 1.2% to close above the 10,000 mark at 10,028.85, while the French CAC has gained 1.0% to close at 4,488.55.
US non-farm payroll employment rose by 288,000 in June, exceeding the consensus expectation for 212,000 jobs to be added. That means that over the past 3 months, job growth has averaged 272,000 per month, giving investors confidence that the US economy may well be experiencing the rebound that analysts have been expecting following the particularly harsh US winter.
The headline US unemployment rate fell to 6.1% in June, beating expectations for the rate to remain unchanged at 6.3%. That's the lowest rate of US unemployment since September 2008.
The bumper unemployment report helped Wall Street open at new record highs, with the DJIA breaking above the 17,000 barrier for the first time ever in early trade. After the European markets have closed, the DJIA continues 0.4% higher at 17,050, while the S&P 500 is up 0.4%, and the Nasdaq Composite is up 0.5%.
"If momentum wasn't enough to get the DJIA trading above 17,000 for the first time, a blistering non-farm payrolls number would do instead," said Spreadex trader David White.
The unusual timing of the US employment report somewhat stole the thunder from the ECB, which made no changes to its interest rates, leaving the main refinancing rate at 0.15%, and the deposit rate at negative 0.1%, after the historic cut it made last month.
Mario Draghi did manage to talk the euro down a little further at the press conference that followed the meeting however, falling as it did to below USD1.36 for the first time this week as the ECB President reiterated that the central bank stands ready to take action when needed. At the equity market closes the single currency trades at USD1.3605.
"This may not be the most dovish press conference than Mario Draghi has given but it certainly had dovish undertones, with the ECB President stressing again that rates will remain low for an extended period of time," said Alpari market analyst Craig Erlam.
The most interesting part of the press conference was the advanced warning from Draghi that the ECB will be changing its meeting schedule to only meet once every six-weeks, rather than once every month, as of January 2015. The ECB will also be falling in line with the Bank of England and the Federal Reserve by publishing minutes of the meetings for the markets to pore over, something it has resisted for some time.
Draghi said it is too early to say what format the minutes will take, leaving central bank watchers guessing for now whether it will be a full transcript publication, a la the Fed, or carefully constructed minutes, a la the BoE. So while there will be less points of market volatility throughout the year as a result of ECB meetings, there will be new ones when the minutes are published.
"The most interesting thing that could come from the minutes in the short term is the policy makers view on quantitative easing and how close they actually are to trying it," said Alpari's Erlam.
UK stocks had already opened in a bouyant mood, following the release of some supportive Chinese economic data that supported the mining and metal stocks. The Chinese non-manufacturing PMI came in at 55.0 in June, slightly lower than the 55.5 recorded in May but still signifying strong expansion, while the HSBC service sector reading expanded strongly to 53.1 in June from 50.7 previously.
The FTSE 350 mining sector ended the day up 2.0%, while the FTSE 350 Industrial Metals sector gained 2.3%. Antofagasta ended up 2.2%, while African Barrick Gold gained 3.5%, and Centamin rose by 2.4%.
"Good news from China is always an ideal way to shake the FTSE 100 into life, thanks to the heavy mining component in the index," said IG market analyst Alastair McCaig.
Data throughout the day was broadly supportive of stocks, with a morning round of eurozone service sector PMI's repainting the same picture as the manufacturing numbers did earlier in the week, with France having spent the month of June firmly in contraction while Germany continued to expand.
The eurozone service sector PMI came in as expected at 52.8 in June, down from 53.2 in May. The composite eurozone number, which takes into account both the service and manufacturing sector, also came in as expected at 52.8, down from 53.5 in May.
The UK Markit service sector PMI slipped to 57.7 in June from 58.6 in May, disappointing economists that were looking for a stronger reading of 58.3, and disappointing market watchers that were hoping for a beat on all three of the UK PMI's after the strong manufacturing and construction numbers earlier in the week. However, with a reading above 50.0 indicating expansion, the UK service sector remains the strongest in Europe, and the three PMI readings are starting to balance out, rather than be driven by services.
"The manufacturing PMI has now caught up with services, while construction continues to boom as house prices rocket," said Berenberg chief UK economist Rob Wood.
Elsewhere in the UK stock movers, Sports Direct International ended the day as the top FTSE 100 gainer, closing up 5.7%. In a note to investors, Jefferies said that it expects the company's full-year results on July 17 to detail strong top-line growth, and healthy underlying pretax earnings. On Wednesday, Sports Direct shareholders finally backed a bonus plan for it's executives, including founder Mike Ashley, after repeatedly voting against the move.
The fact that the debate has come to an end can only help the retailer concentrate on the job of selling sportswear, analysts say. "We still have a fair bit of the summer to go in this summer of sport and with the Commonwealth Games, Test Cricket and Tour de France to come the company is well positioned to sate the UK consumers appetite for sports clothing," says CMC Markets chief market analyst Michael Hewson.
Poundland delivered its first set of full-year numbers since its IPO earlier this year. Investors were pleased with the results and sent the stock up 3.6% Thursday. The discount retailer said a strong performance has continued into the current financial year, with sales currently up 18% year-on-year since April 1.
Balfour Beatty had a less impressive day, dropping 4.5% to end at the bottom of the FTSE 250 after plugging a GBP35 million shortfall in its UK Mechanical & Electrical engineering division with increased disposals from its Private Finance Initiatives portfolio. The group left its full-year guidance unchanged after making the extra provisions, but analysts point out that it's the fourth profit warning in less than two years, and there's no guarantee that there will not be a fifth.
With the US remaining closed for the July 4 holiday, a much quieter day can be expected Friday. In the data calendar, German factory orders data is due at 0700 BST, followed by the UK house price index from Halifax. In the UK corporate calendar, monthly data on passenger numbers in due from Easyjet.
By Jon Darby; [email protected]; @jondarby100
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