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London open: FTSE creeps higher on commodities gains
London stocks opened surprisingly higher on Wednesday as precious metals miners were joined by commodities heavyweights as the blue chip index looked to continue the advance from the previous day.
The FTSE 100 was up 27.37 points or 0.42% at 6,572.74 by 0837, while the FTSE 250, which is felt more relfective of the UK economy, moved the other way as its commodities companies moved lower.
Trader had thought the market would dip on the back of renewed words of warning from the Bank of England about Brexit, exacerbated by some big-names suspending redemptions for their UK property funds.
Sterling plumbed a new 31-year low versus the dollar, sinking below 1.2800 at one point in the early hours.
Overnight, US stock markets ended lower, dragged down by oil prices falling 4%, while Asian equities also moved lower as the European session began.
“European sentiment is highly negative today as investors have become largely apprehensive about the condition of the European markets,” said Naeem Aslam, chief market analyst at Think Forex.
“German and Japanese yields reflect the true picture of this anxiety as bonds up to 15 years produced negative yields. Further spotlight on the Italian banking sector is making investors nervous, and a huge amount of non-performing loans have become a matter of deep concern.
Looking ahead on Wednesday, outside the publishing of the long awaited Chilcot inquiry into the Iraq invasion that will dominate UK news headlines, there are meeting minutes due from the US Federal Reserve’s rate setters, with traders looking into the finer details as they position themselves amid a general belief that interest rates will remain at their current level.
The FOMC minutes will show how the committee views the landscape for policy normalisation in light of June’s surprisingly weak US jobs report.
“However, with the meeting having taken place in mid-June, well ahead of the Brexit vote and with so much having happened since, the information we get may be of limited use,” said analyst Mike van Dulken at Accendo Markets.
“And with the BoE pledging additional stimulus support this summer that could weaken the GBP even more and thus further strengthen the USD, many see central bank action on this side of the pond likely keeping any Fed rate hikes from the markets door until well into next year. Is US data as important as it once was?”
In company news, low cost airline easyJet reported a 5.8% jump in passengers for the month of June on Wednesday, with 6.94m customers taking to their orange jets, compared with 6.56m in June 2015. The FTSE 100 firm’s load factor for the month was 94.1%, up 1.4 percentage points from the 92.7% figure the same time last year.
Late on Tuesday, the government unveiled changes to the new Digital Economy Act that will scrap a law that could boost the coffers of public broadcasters such as the BBC, ITV, and Channel 5 by tens of millions of pounds a year. ITV was said to be poised to seek to charge Virgin Media to broadcast its flagship channel as a result.
Melrose Industries has agreed to acquire US air conditioning and security technology group Nortek for $1.44bn in cash, funded by a proposed £1.61bn issue of new shares. Due to the size of the deal, where the proposed offer price of $86 per share values Nortek’s shares at $1.436bn (£1.1bn) and the entire enterprise including debt at $2.81bn million (£2.15bn), it will be classed as a reverse takeover and require the approval of FTSE 250-listed Melrose’s shareholders. As well as the fundraising, Melrose, which said it had received “very supportive” noises from number of its institutional shareholders about the deal, proposed to fund the balance of the debt repayment through new debt of approximately $780m.
A High Court challenge by alternative network builder CityFibre has accused regulator Ofcom of making “ridiculous” policy decisions that will cement BT Group‘s position in the broadband market as a “single, unassailable wholesale infrastructure provider”. The communications regulator, theTelegraph reported, is planning a major overhaul of the broadband market by allowing rival service providers such as Sky and Vodafone to connect their own equipment to the high-capacity fibre-optic lines inside BT’s Openreach network at controlled prices.
