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London open: FTSE relief rally continues but Carney comments eyed
London stocks continued to creep higher on Tuesday morning as an unexpected outbreak of political certainty boosted sentiment, helped by a record high on Wall Street overnight and another positive session in Asia.
After half an hour of trading, the FTSE 100 had crawled up 0.12% to 6,690.76, led by the extended rebound of housebuilders and banks, while the 250 was up 1.0% at 16,871.79 with similar sectors to the fore.
Sterling was extending its recovery too, trading above 1.31 against the dollar and topping 1.18 versus the euro.
CMC Markets’ Michael Hewson said: “The unexpected removal of an additional two months of uncertainty as Andrea Leadsom suddenly dropped out of the race to replace outgoing Prime Minister David Cameron and elevated Theresa May to the top position in UK politics, helped push the FTSE 100 to new 11-month highs yesterday and the FTSE 250 back to levels last seen the day after the referendum vote.”
He added that the recent few day’s global developments were also helpings: “the multiple boost of a decent payrolls number, and the promise of additional stimulus measures out of Japan contrived to turbo charge equity markets in the last few days”.
Market strategist Hussein Sayed at FXTM said the relief rally is “likely to be short-lived, as many questions remain unanswered”, with potential volatility arising from clues and comments that emerge from Bank of England Governor Mark Carney’s grilling by MPs on Tuesday ahead of the BoE’s policy meeting on Thursday, which is felt likely to result in new stimulus measures to help deal with the Brexit vote.
Carney will appear in front of MPs at 1000 BST with other members of the Financial Stability Committee to answer questions about the BoE’s recent measures to ensure markets were orderly following the vote to leave the European Union.
In corporate news, Shire led the blue chip risers after the US Food and Drug Administration approved its lifitegrast eye drops for treating signs and symptoms of dry eye disease. Lifitegrast, to be sold under the Xiidra name, is expected to launch in the third quarter.
“An estimated 16m adults in the U.S. are diagnosed with dry eye disease. An often chronic ocular disease, dry eye is associated with inflammation that may eventually lead to damage to the surface of the eye. An eye care professional can diagnose dry eye disease based on signs and symptoms and determine management options, which could include the use of a prescription treatment,” Shire said.
Builders merchant and DIY retailer Grafton Group said like-for-like revenue growth was negative in June as the current uncertainty about Brexit weighed on the building trade. Group revenue for the six months to 30 June increased by 13.3% to £1.23bn and by 11.7% in constant currency.
Housebuilder and construction group Galliford Try said it expects to report record full year results, with profit before tax in line with management’s expectations.
Despite the political and economic uncertainty, the FTSE 250 company said it was “too early” to predict specific effects on our markets, but took confidence from the strength of underlying demand for new homes and the continuing availability of mortgage finance and the government’s Help-to-Buy scheme for both sides of the business.
On AIM, online fashion retailer ASOS reported a 30% rise in total sales for the four months to 30 June to £500.5m and said it expects full-year sales growth to be at the upper end of the 20-25% range. Total retail sales beat analysts’ expectations of around 23% growth.
Sales in the UK were up 28%, while sales in the US rose 53% and EU sales advanced 32%. In the rest of the world, sales were up 16%, while international retail sales grew 31%.
