ADVFN Morning London Market Report: Thursday 11 July 2019

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London open: Stocks up as traders mull possibility of 50 point cut by the Fed

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Shares in London are moving slightly higher in early trading, tracking gains made by stocks overnight on Wall Street after the head of the US central bank signalled that interest rate cuts were indeed on the table, leaving traders wondering if even a 50 basis point reduction might be possible.

In the background meanwhile, at its daily briefing, China’s ministry of commerce said negotiators from both sides were implementing the ‘Trump-Xi consensus’, with a spokesman adding that Beijing hoped that the US would soon lift its restrictions on telecommunications equipment manufacturer Huawei.

As of 0808 BST, the FTSE 100 was rising by 0.28% or 21.30 points to 7,551.48. Asia’s main equity benchmarks were also in the green, with the Shanghai Stock Exchange’s Composite Index adding 0.08% to 2,917.76.

Front month Brent crude oil futures on ICE were 0.357% higher alongside, adding to sharp gains from the Wednesday session following news that Iranian vessels had attempted to block a commercial oil tanker from leaving the Persian Gulf.

Overnight, the S&P 500 finished 0.45% higher after Federal Reserve chairman Jerome Powell told the US Congress that there were multiple headwinds bearing down on the US economy from overseas – not least from trade – and that price pressures were limited so that inflation risked falling persistently below target.

In parallel, the minutes of the Federal Open Market Committee’s 18-19 June policy meeting, which were published shortly afterwards, revealed that “many” rate-setters in the US had supported a rate cut last month.

Combined, financial markets were caught a bit by surprise by the Fed’s ‘dovishness’, so that ‘market chatter’ on Thursday morning was again centred on whether rate-setters would cut the target range for the Fed funds rate by 25 or 50 basis points when they next convened to decide on policy on 30-31 July.

Fed funds futures were left pricing-in 30.7% odds of a 50 basis point rate cut at the July FOMC.

Against that backdrop, the market spotlight on Thursday was expected to be on US consumer price data for June which was set for release at 1330 BST.

There was also a full slate of Fed speakers scheduled for throughout the US session, including Powell himself, who was due to deliver his semiannual monetary policy report again, at 1500 BST, but this time before the Senate Banking Committee.

In the UK, the Royal Institute of Chartered Surveyors‘s house price balance for June jumped from -9.0% for May to -1.0% in June (consensus: -12.0%), returning to its best level since October 2018 and, according to economists, pointing to a year-on-year rate of house price growth of about 2.0%.

No first-tier economic data was set for release in the UK.

In terms of early broker notes, analysts at Jefferies trimmed their target price for shares of Pagegroup from 590.0p to 540.0p, while sticking with a ‘buy’ recommendation for the shares, while those at Berenberg upped their target for Barratt Developments from 650.0p to 670.0p.

Reckitt comes clean

Reckitt Benckiser said it had agreed to pay to $1.4bn to resolve all US federal investigations in connection with the sales and marketing of Suboxone Film by its former prescription pharmaceuticals business Indivior. Indivior had been accused of illegally boosting prescriptions for its opioid addiction treatment by the US Justice Department. The deal was struck with US Department of Justice and Federal Trade Commission. Indivior was demerged from Reckitt in 2014.

Technical products supplier Diploma on Thursday said it had bought the assets and trade of Virginia Sealing Products for £56m. VSP supplies gaskets and fluid sealing products to the industrial maintenance, repair and overhaul market. Further deferred payments up to £8m may be payable in late 2020 subject to achievement of operating profit targets, Diploma said.

Workspace Group reported a “good level” of customer demand in its first quarter on Thursday, with enquiries averaging 1,060 per month, compared to 1,021 a year ago, and lettings standing at 121 per month, up from 88. The FTSE 250 real estate investment trust added two new buildings, in Hoxton and Clerkenwell, and one building extension and refurbishment in Chiswick during the quarter.

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