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LONDON MARKET CLOSE: Stocks Rally On Hopes Of US Interest Rate Cut

LONDON (Alliance News) - Stocks in London ended higher on Wednesday, continuing to sustain ...

Alliance News 5 June, 2019 | 5:08PM
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LONDON (Alliance News) - Stocks in London ended higher on Wednesday, continuing to sustain momentum in the wake of dovish comments from the US Federal Reserve on Tuesday.

The FTSE 100 index closed up 5.93 points, or 0.1%, at 7,220.22. The FTSE 250 ended up 64.01 points, or 0.3%, at 19,072.17, and the AIM All-Share closed 2.52 points lower, or 0.3%, at 939.41.

The Cboe UK 100 ended flat at 12,243.51, the Cboe UK 250 closed up 0.5% at 17,129.78, and the Cboe Small Companies ended down 0.1% at 11,727.06.

In Paris the CAC 40 ended up 0.5%, while the DAX 30 in Frankfurt ended up 0.1%.

"European and US markets are trading in the green today, as an increasingly dovish picture from the Fed drives optimism over the more expansionary monetary policy framework that is developing globally. After three years of rate hikes, comments from Fed's James Bullard and Jay Powell point towards a growing openness to cutting rates this year in response to the detrimental impact of President Donald Trump's trade war," said IG Group's Josh Mahony.

In the FTSE 100, International Consolidated Airlines Group closed up 1.6% after JPMorgan started coverage on the airline operator at Overweight.

The US bank said IAG's diversified portfolio and high profit margins can facilitate strong returns for shareholders.

At the other end of the large cap index, Hargreaves Lansdown ended the worst performer, down as investors continued to punish the fund supermarket for being one of the most prominent backers of star fund manager Neil Woodford's funds.

On Monday, Woodford suspended withdrawals from its flagship equity fund, which had been a constituent of Hargreaves' favourite fund investment list.

In the latest development, Hargreaves Lansdown said it would waive its platform fee while the fund's dealing is suspended, effective immediately - and called on Woodford to do the same.

"We have taken the decision to waive the platform fee on the Woodford Equity Income fund while dealing is suspended, effective immediately. We do not think it is fair to charge our clients a fee while they cannot trade in the fund. This is a frustrating and difficult time for clients and we are doing what we can to support them. We have been in communication with Woodford Investment Management to explain why we think this is the right thing to do and have put pressure on them to do the same," said Hargreaves Lansdown's Emma Wall.

Woodford Patient Capital Trust ended the worst performer in the FTSE 250, down 6.9%.

St James's Place said it has removed embattled Woodford Investment Management as manager of certain funds to ensure "clients' investments continue to be managed effectively."

Aviva closed down 1.7% after the insurer said Chief Financial Officer Tom Stoddard will step down from his role and the board from the end of June. Stoddard - CFO since 2014 - will be replaced by Aviva UK Insurance CFO Jason Windsor on an interim basis, with Stoddard remaining at Aviva until the end of 2019 in order to "support an orderly transition."

Subprime lender Provident Financial ended as the best performer in the FTSE 250, up 16% after smaller rival Non-Standard Finance withdrew its GBP1.3 billion hostile takeover bid for the company.

NSF shares closed down 10%.

The pound was quoted at USD1.2725 at the London equities close, up from USD1.2675 at the close Wednesday, amid dollar weakness and positive economic data.

The UK service sector growth improved more-than-expected to a three-month high in May, but overall private sector activity weakened due to the contractions in manufacturing and construction, survey data from IHS Markit showed Wednesday.

The Chartered Institute of Procurement & Supply Purchasing Managers' Index for services rose to 51.0 in May from 50.4 in April. The reading was also above the forecast of 50.6.

At 50.7 in May, the all sector output index dropped from 50.9 in April. Nonetheless, a score above 50 indicates expansion in the private sector.

A sharp slowdown in manufacturing production growth and lower construction output more than offset an improvement in service sector, the survey revealed.

The euro stood at USD1.1257 at the European equities close, higher than USD1.1240 late Wednesday.

Eurozone private sector growth saw modest expansion in May, with the services sector expanding at a solid pace while manufacturing output fell for a fourth successive month, IHS Markit said.

Data from IHS Markit showed the eurozone composite purchasing managers' index edged up to 51.8 in May from 51.5 in April. The final May print also represented an improvement on the flash reading of 51.6 points.

IHS Markit said the growth in May was driven by the services sector. The eurozone services PMI in May read 52.9 points, up from 52.8 in April, and ahead of the 52.5 points flash estimate for May.

The European Central Bank will announce its latest monetary policy decision at 1245 BST on Thursday, followed by a press conference with President Mario Draghi at 1330 BST. The central bank is widely expected to leave interest rates unchanged.

Stocks in New York were mixed at the London equities close continuing to benefit from optimism about an interest rate cut after Federal Reserve Chairman Jerome Powell pledged to sustain the US economic expansion.

The DJIA was up 0.6%, the S&P 500 index up 0.4% and the Nasdaq Composite was up 0.3%.

US private sector job growth slowed much more than forecast in May, igniting fears over a possible recession in the economy and triggering hopes for a Fed rate cut in near future.

Data from payroll processor ADP showed that private sector employment edged up by 27,000 jobs in May after spiking by a downwardly revised 271,000 jobs in April.

Economists had expected employment to increase by 180,000 jobs compared to a jump of 275,000 jobs originally reported for the previous month.

Market participants are convinced about the possibility of Fed rate cut after Fed Chair Jerome Powell opened the door for a rate reduction this year, as escalating trade tensions would have a negative impact on the economy.

Speaking in Chicago on Tuesday, Powell said the Fed would "act as appropriate" to the challenges emerging from growing trade tensions and other recent developments.

The ADP data serves as a precursor to non-farm payrolls data to be released on Friday, with the Labor Department set to release its closely watched monthly jobs report, which includes both public and private sector jobs.

Employment is expected to climb by 185,000 jobs in May after surging up by 263,000 jobs in April, while the unemployment rate is expected to hold steady at 3.6%.

Brent oil was quoted at USD60.44 a barrel at the equities close, down from USD61.78 at the close Wednesday.

The Energy Information Administration reported a weekly build in crude oil inventories, at 6.8 million barrels, compared to a draw of 4.0 million barrels for the previous week. The consensus estimate was for a drop of 849,000 barrels.

Gold was quoted at USD1,329.29 an ounce at the London equities close, up from USD1,321.10 late Wednesday.

"Gold resumed growth against the backdrop of the rally from the end of last week after a pause on Tuesday. The decline in US government bond yields spurs gold purchases amid a decline in the attractiveness of investments in short-term debt securities," said analysts at FXPro.

In the bond market, treasuries have pulled back off their highs of the session but have continued to see modest strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by one basis point at 2.109%.

FTSE Russell is set to announce its latest index review changes late Wednesday, with easyJet expected to depart the FTSE 100 and JD Sports set to get promoted to the large cap index.

The UK corporate calendar on Thursday has annual results from digital automotive marketplace Auto Trader Group, outsoucer MITIE Group and online trading firm CMC Markets.

The economic events calendar on Thursday has Germany factory orders at 0700 BST and eurozone GDP readings at 1000 BST. Elsewhere, Bank of England Governor Mark Carney will deliver the keynote speech at the Institute of International Finance Spring Membership Meeting in Tokyo, Japan at 1000 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Woodford Patient Capital Trust 30.15 GBX -1.63
Aviva PLC 400.00 GBX 0.58
Hargreaves Lansdown PLC 1,805.50 GBX 2.73 -
Provident Financial PLC 420.20 GBX 0.19 -
International Consolidated Airlines Group SA 555.20 GBX 1.57 -

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