London close: Miners boosted by more positive tone to US-China trade talks
London stocks regained some ground on Wednesday as commodity stocks were boosted by a weaker dollar, encouraging sounds from China-US trade talks and the euro spiking on hawkish comments out of the European Central Bank.
The FTSE 100 added 25.57 points or 0.33% to hit 7,712.37, despite the pressure from higher sterling, which was up 0.18% against the dollar at 1.3414.
Some progress was emerging from US-China trade talks, with Beijing offering to buy $70bn worth of US goods in exchange for having no further tariffs imposed on Chinese imports, with the White House working on a deal to allow tech giant ZTE to resume operations and perhaps also calling off the planned tariffs on Chinese goods.
Nevertheless, not all analysts were on board when it came to markets' apparently positive reaction to that news.
"None of this will do much to narrow the bilateral trade balance," grumbled Julian Evans-Pritchard at Capital Economics, "nor will it address concerns that China’s industrial policy is undermining US interests. So it would be naïve to assume that such a deal, if it goes ahead, will prevent tensions from flaring up again in future."
Earlier, European Central Bank chief economist Peter Praet gave a speech saying there is strong evidence that tight labour market conditions are translating into wage growth, and that the underlying strength of the eurozone economy persists.
That prompted analyst Neil Wilson at Markets.com to tell clients that Praet's comment about "improving" signals showing the convergence of inflation towards the ECB's targets aim, points to confidence about tightening sooner rather than later and that the overall tone of the speech was "fairly hawkish".
Rate expectations and improved investor risk appetite were also helping lift banking shares off their lows, added Accendo Markets analyst Mike van Dulken in a note to clients, as the fears of late around Italy, Spain and trade all recede with the aggregate being more than enough to overpower unhelpful sterling strength, which has a negative transnational impact on both foreign earned profits and dividend income.
"From where does this GBP strength hail?" he rhetorically mused. "Hawkish comments from ECB members helping the EUR outperform vs major pairs. With the single currency making up 57% of the widely watched trade-weighted dollar index, this is keeping downward pressure on the US currency, in turn helping the UK's sterling."
The euro was up 0.2% against the pound and 0.4% against the dollar at 1.1771.
Good news for consumer focused stocks was previous day's data from Barclaycard that consumer spending showed growth in April of 5.1% on last year, the strongest performance for 13 months.
In company news, commodities stocks dominated the leaderboard thanks to the dollar weakness helping oil and metals prices, with Centrica, Anglo American and Rio Tinto pushing highest. "Oil prices are recovering from recent lows to continue a two-day rally (to the benefit of energy shares around the world) on the back of a surprise API oil drawdown (even if gasoline stocks rose; US consumer confidence barometer, driving less?) and in spite of talks about oil-producing nations mulling adding back supply," van Dulken said.
Airline easyJet was outdone by larger rival IAG after the orange-liveried budget carrier reported increased passengers and capacity utilisation in May, a month when 2.5% of planned capacity was affected by French and Italian industrial action and bad weather.
Tatty-carpeted stationery and snacks retailer WH Smith impressed with stronger sales growth in the third quarter of its trading year, where like-for-like sales rose 1% compared to last year, reversing the 1% decline in the previous six months.
Smurfit Kappa shares were higher as it talked up its prospected after US-based International Paper walked away from takeover talks overnight, bemoaning the Dublin-based cardboard packing group's lack of communication after it rebuffed approaches in February and March.
Giving outsourcer Serco a boost was the winning of a US health insurance eligibility support contract worth up to $900m.
RPC Group continued to melt lower amid market worries about the crackdown on plastic waste and analyst suspicions about its numbers. Despite a successful year turning plastic into dividends, with management trumpeting the "unprecedented" opportunities for growth in the market, analysts at Northern Trust Capital Markets highlighted adjusted profits slightly short of consensus, free cash flow that ''looks low" and organic growth "not flowing through into profits", with continued "questions about underlying growth".
Workspace fell despite reporting profit before tax more than doubled to £170.4m after “significant” increases in both trading profit and property valuation. The serviced office outfit said it saw strong growth in net rental income of 21% to £95.6m, resulting in 20% growth in adjusted trading profit after interest to £60.7m.
Train companies were again under pressure, led by Stagecoach and FirstGroup this time after MPs launched an inquiry earlier in the week into the chaos on UK rail services and Liberum Capital cut its target price on Stagecoach to 145p from 185p but reaffirmed its 'hold' rating.
Market Movers
FTSE 100 (UKX) 7,712.37 0.33%
FTSE 250 (MCX) 21,171.40 0.57%
techMARK (TASX) 3,547.62 0.24%
FTSE 100 - Risers
Rio Tinto (RIO) 4,492.00p 3.30%
Barratt Developments (BDEV) 569.40p 3.26%
Antofagasta (ANTO) 1,149.00p 3.14%
Anglo American (AAL) 1,914.60p 3.00%
Glencore (GLEN) 400.40p 2.75%
BHP Billiton (BLT) 1,773.80p 2.45%
3i Group (III) 968.00p 2.05%
Next (NXT) 6,032.00p 1.96%
Lloyds Banking Group (LLOY) 63.74p 1.90%
Barclays (BARC) 201.45p 1.74%
FTSE 100 - Fallers
United Utilities Group (UU.) 771.20p -1.93%
Imperial Brands (IMB) 2,632.00p -1.92%
Unilever (ULVR) 4,092.00p -1.78%
Royal Mail (RMG) 486.90p -1.10%
Diageo (DGE) 2,731.00p -1.03%
British American Tobacco (BATS) 3,703.00p -0.99%
Smiths Group (SMIN) 1,771.50p -0.87%
British Land Company (BLND) 686.00p -0.75%
Aviva (AV.) 509.20p -0.74%
Severn Trent (SVT) 1,954.00p -0.71%
FTSE 250 - Risers
Alfa Financial Software Holdings (ALFA) 177.40p 10.29%
WH Smith (SMWH) 2,123.04p 7.49%
Contour Global (GLO) 226.00p 5.61%
Kaz Minerals (KAZ) 1,072.00p 4.64%
Serco Group (SRP) 101.50p 4.61%
Stobart Group Ltd. (STOB) 248.00p 4.20%
Inmarsat (ISAT) 409.90p 4.06%
Ocado Group (OCDO) 920.80p 3.90%
Greencore Group (GNC) 189.85p 3.69%
Purecircle Limited (DI) (PURE) 398.50p 3.51%
FTSE 250 - Fallers
RPC Group (RPC) 681.80p -11.91%
BTG (BTG) 556.00p -5.04%
Workspace Group (WKP) 1,131.00p -2.92%
Clarkson (CKN) 2,655.00p -2.57%
Stagecoach Group (SGC) 139.20p -2.45%
FirstGroup (FGP) 90.40p -2.06%
Provident Financial (PFG) 642.60p -2.04%
esure Group (ESUR) 222.20p -2.03%
Wood Group (John) (WG.) 643.20p -1.89%
Dechra Pharmaceuticals (DPH) 2,806.00p -1.82%