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London open: Equities slightly higher on stimulus hopes
London stocks opened higher on Friday, underpinned by expectations of fresh stimulus from the Bank of England and possibly from the European Central Bank.
The FTSE 100 was trading almost flat at 6,505.65, up by just 0.02%, despite a backdrop of positive trading overnight on Wall Street and in the Asia Pacific region.
The mood was supported by BoE governor Mark Carney, who on Thursday hinted at the prospect of further interest rate cuts over the summer.
Furthermore, after the close of trading in London on Thursday, Bloomberg reported that some ECB officials supported broadening their programme of quantitiave easing to include more debt from the likes of Italy and Spain.
CMC Markets’ Michael Hewson said: “While a rate cut probably won’t come in July given the governor’s assertion that the MPC would assess situation at the July 14 meeting, further measures could well get implemented at the August meeting when the bank sets out its latest inflation report, along with revised growth forecasts where we are quite likely to see the 2016 forecast lowered sharply from the current 2%.”
“Yesterday we saw Q1 GDP confirmed at 0.4% and with Q2 likely to struggle to grow at all, its highly questionable that we would have got anywhere near 2%, whichever way last week’s vote went.”
Expectations of further policy easing from the BoE and ECB helped compensate some downbeat data published during Asian trading hours.
The Caixin manufacturing purchasing managers’ index, a private gauge of factory activity, dropped for the third month in a row to 48.6 in June from 49.2 in May, missing expectations for it to remain unchanged. A reading below 50 indicates contraction.
China’s official manufacturing PMI fell to 50.0 in June from 50.1 the previous month, in line with expectations.
Capital Economics said: “The manufacturing PMIs continue to disappoint. But given the recent resilience of the service sector and signs of strength in construction, we still aren’t overly concerned about the near-term outlook for China’s economy.”
The Shanghai Stock Exchange´s Composite index finished the day up by 0.11% to 2,932.823.
Meanwhile, in Japan, core consumer prices declined for a third consecutive month in May, by 0.4%, while household spending was 1.1% weaker versus a year ago. In parallel, the Bank of Japan´s index of corporate confidence fell from +22 in March to +19 in June.
Still to come, UK manufacturing PMI is at 0930 BST. In the US, Markit manufacturing PMI is at 1445 BST, while ISM manufacturing is at 1500 BST, along with construction spending.
Some Deutsche Boerse owners undecided on LSE tie-up
In corporate news, LSE shareholders continued to support a tie-up with German peer Deutsche Boerse, but some of the latter´s main investors remained undecided about whether to tender their shares, according to the Wall Street Journal.
Shareholders representing comfortably more than 75% of the LSE´s ownership had told their proxy advisers to vote in favour of the merger at the special shareholder meeting scheduled for 4 July. However, several large shareholders in Deutsche Boerse told the newspaper they remained undecided regarding whether to tender their shares.
BHP Billiton’s plans to settle claims over the 2015 Samarco mine disaster suffered a major blow on Friday when a Brazilian court reinstated a AUD$8bn public civil claim.
BHP and joint-venture partner Vale agreed a $3bn settlement in March, however Brazil’s Superior Court issued an interim order suspending the ratification and reinstated the public civil claim for clean-up costs and damages against Samarco, Vale and BHP.
“BHP Billiton Brasil intends to appeal the decision of the Superior Court of Justice,” BHP said in a statement.
Synthomer completed the acquisition of rival Hexion Performance Adhesives & Coatings for a total cash consideration of $226m, funded via existing cash resources and the utilisation of additional credit facilities.
Hexion´s China business, which accounts for about 1.0% of the parent company´s sales, would be subject to a deferred completion, which was expected for the third quarter of 2016. Ahead of its full-year numbers the polymer manufacturer said its outlook, in constant currency, remained unchanged and in-line with the Board´s expectations.
Pharmaceutical giant AstraZeneca announced on Friday it has entered into agreements to support its strategic focus on three main therapy areas – respiratory, inflammation and autoimmunity; cardiovascular and metabolic disease; and oncology.
