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London open: Stocks gain on US cues; Prudential rallies
London stocks rose in early trade on Wednesday, taking their cue from a solid session on Wall Street, with Prudential pacing the gains.
At 0905 BST, the FTSE 100 was up 0.5% at 7,503.21.
US stocks has a strong finish on Tuesday following the release of weak consumer confidence data and JOLTS figures showing that vacancies fell to 8.827m in August from 9.165m in July – the lowest level since March 2021.
Susannah Streeter, head of money and markets, Hargreaves Lansdown, said: “What appears to be bad news for the US economy is being notched up as good news for equities with a weakening jobs snapshot and slide in consumer confidence lifting indices. Signs of America’s cooling economy have raised hopes that the pause button will be pushed on punishing interest rate hikes.
“The more optimistic tone has pushed the FTSE 100 up in early trade, offsetting ongoing concerns about the fragility of China’s economy. The positive vibes are expected to keep reverberating with stock futures pointing to a positive start for Wall Street. A raft of other figures, including estimates of US economic growth in the second quarter, will be picked through today to see if the information backs up expectations that central bank policymakers at the Federal Reserve will leave rates unchanged.
“Chair Jerome Powell said last week that another interest rate hike could still be on the table, but it’s all going to depend on the data. Data is king right now in terms of market sentiment and the non-farm payrolls snapshot out on Friday will crown the week. If it points to a fresh slowdown in hirings, we could see another spurt in stock prices.”
Looking ahead to the rest of the day, investors were eyeing UK net lending, consumer credit and mortgage approvals for July at 0930 BST. In the US, the latest ADP employment report is due at 1315 BST, while Q2 GDP data is at 1330 BST.
In equity markets, Prudential was the top riser on the FTSE 100 after the insurer posted a better-than-expected 6% rise in first-half operating profits as Chinese investors bought its products in Hong Kong after Covid restrictions were lifted. It also outlined a new investment strategy pivot towards Asia.
Engineering giant Smiths Group pushed higher after saying it was beefing up its US heating, ventilation and air conditioning operations with the purchase of Ohio-based Heating & Cooling Products for $82m.
Direct Line advanced as it appointed Adam Winslow as chief executive to succeed Jon Greenwood who has been acting CEO since January. Winslow, who will start with the insurance company in the first quarter of 2024, has led Aviva’s UK and Ireland general insurance business.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Prudential Plc | +3.27% | +32.20 | 1,017.00 |
| 2 |  |
Persimmon Plc | +2.31% | +24.00 | 1,063.00 |
| 3 |  |
Fresnillo Plc | +1.93% | +11.00 | 581.60 |
| 4 |  |
Bunzl Plc | +1.67% | +47.00 | 2,855.00 |
| 5 |  |
Taylor Wimpey Plc | +1.46% | +1.65 | 114.55 |
| 6 |  |
Smurfit Kappa Group Plc | +1.28% | +42.00 | 3,330.00 |
| 7 |  |
Direct Line Insurance Group Plc | +1.21% | +1.95 | 162.70 |
| 8 |  |
Hikma Pharmaceuticals Plc | +1.20% | +26.00 | 2,187.00 |
| 9 |  |
Rolls-royce Holdings Plc | +1.08% | +2.30 | 215.20 |
| 10 |  |
Barratt Developments Plc | +0.98% | +4.40 | 451.90 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Kingfisher Plc | -1.90% | -4.50 | 232.10 |
| 2 |  |
Sse Plc | -1.51% | -25.00 | 1,626.00 |
| 3 |  |
International Consolidated Airlines Group S.a. | -1.41% | -2.30 | 160.80 |
| 4 |  |
Tui Ag | -1.17% | -5.60 | 473.80 |
| 5 |  |
Associated British Foods Plc | -1.00% | -20.00 | 1,977.00 |
| 6 |  |
Next Plc | -0.89% | -62.00 | 6,896.00 |
| 7 |  |
Antofagasta Plc | -0.79% | -11.50 | 1,450.00 |
| 8 |  |
Flutter Entertainment Plc | -0.77% | -110.00 | 14,240.00 |
| 9 |  |
Crh Plc | -0.66% | -30.00 | 4,527.00 |
| 10 |  |
Bae Systems Plc | -0.65% | -6.50 | 996.00 |
US close: Stocks rise ahead of busy few days for data
Wall Street closed with some decent gains on Tuesday, with investors looking ahead to a slew of US economic data scheduled to be released later this week.
At the close, the Dow Jones Industrial Average was up 0.85% at 34,852.67, while the S&P 500 index rose 1.45%, ending the trading day at 4,497.63.
The Nasdaq Composite, buoyed largely by tech stocks, showed the strongest performance among the three major indices, gaining 1.74% to close at 13,943.76.
On the currency front, the dollar was last down 0.03% on sterling at 79.07p, while it slipped just 0.01% against the common currency to trade at 91.9 euro cents.
The greenback also recorded a minor decrease of 0.02% against the yen, to last change hands at JPY 145.85.
“With last week’s Jackson Hole symposium out of the way and it not giving many clues as to the future direction of monetary policy, traders are looking at this week’s inflation, growth and employment data for guidance,” said IG senior market analyst Axel Rudolph.
“On Wednesday Germany will publish its inflation data for August, followed by the second estimate of US second-quarter GDP and EIA crude oil inventories.
“On Thursday a plethora of retail sales, industrial production and inflation data should keep investors busy ahead of Friday’s eagerly awaited US non-farm payrolls.”
US job openings drop, house prices rise, consumer confidence falls
On the economic front, the Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics suggested that job openings experienced a downturn in July, dropping to 8.827 million from 9.165 million in June.
The figure was the lowest since March 2021, and notably less than the 9.465 million predicted by economists.
Moreover, the number of new hires dipped to 5.773 million from 5.94 million, and layoffs increased marginally to 1.555 million from 1.551 million.
Meanwhile, the number of quits – a parameter some economists view as an indicator of worker confidence in finding better employment opportunities – also saw a reduction, declining to 3.549 million from 3.802 million.
On the housing front, the latest S&P/Case-Shiller national home price index revealed that house prices in the US continued their upward trajectory in June.
The 20-city house price index increased by 0.9% for the month, although it showed a year-on-year decline of 1.2%.
Additionally, the seasonally-adjusted US National Index observed a month-over-month rise of 0.7%.
“June is the fifth consecutive month in which home prices have increased across the US,” said Craig Lazzara, managing director at S&P DJI.
“With 2023 half over, the National Composite has risen 4.7%, which is slightly above the median full calendar year increase in more than 35 years of data.
“We recognise that the market’s gains could be truncated by increases in mortgage rates or by general economic weakness, but the breadth and strength of this month’s report are consistent with an optimistic view of future results.”
Consumer confidence, however, took an unexpected hit in August, as the Conference Board‘s monthly consumer confidence index dropped to 106.1, down from a revised 114 in July, defying expectations for a reading of 116.
The present situation index, which assesses the public’s view on current business and labour market conditions, fell from 153 to 144.8.
Meanwhile, the expectations index, which measures future outlook, plummeted from 88 to 80.2.
The Conference Board warned that an expectations Index reading around 80 often presages a recession within the upcoming year.
“Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, chief economist at the Conference Board.
Analyst recommendations and earnings updates propel stocks
In equities, Verizon Communications led the telecom sector with a 3.4% increase after favourable commentary from analysts at Morgan Stanley.
The financial services firm suggested that Verizon could raise its dividend in September, a move that would set it apart from sector peers.
That came in contrast to AT&T, which reduced its dividend, and Lumen, which eliminated its dividend payout entirely last year.
In the tech sector, Oracle Corporation‘s stock rose by 3.26%, spurred by an upgrade from UBS.
The brokerage firm shifted its stance on Oracle from ‘neutral’ to ‘buy’, boosting investor confidence and catalysing the stock’s upward movement.
Electronics retailer Best Buy Co saw its stock rise by 3.86% despite delivering a mixed second-quarter earnings report.
While the company surpassed both sales and profit expectations for the quarter, it revised its full-year outlook downward.
Still, the stock moved higher as investors seemed to focus more on the immediate positives – Best Buy noted that 2023 was likely to be “the low point in tech demand”.
Snack food firm the JM Smucker Company also enjoyed a favourable day, with its stock rising by 2.13%.
The gain came after the company lifted its profit forecasts for the year, following a strong performance in its first quarter.
Wednesday newspaper round-up: House sales, dividend income, Body Shop
The number of UK homes sold this year is expected to fall to the lowest level in more than a decade, as the soaring cost of mortgages puts off homebuyers. House sales reaching completion are expected to fall 21% year-on-year to about 1m in 2023, the lowest level since 2012, according to a report from the property website Zoopla. – Guardian
Ministers have been accused of hypocrisy in claiming Sadiq Khan expanded London’s ultra-low emission zone (Ulez) to raise revenue after it emerged the Department for Transport urged the mayor to extend the city’s congestion charge for the same reason. On the first day of Ulez covering every London borough there was renewed bickering between the Labour mayor and the government, with Khan castigating Mark Harper, the transport secretary, for what he called factual mistakes after the pair crossed paths at a TV studio. – Guardian
A single rogue flight plan caused the IT meltdown which led to thousands of flight cancellations, it emerged on Tuesday night, as Downing Street refused to rule out that a French airline was to blame. The National Air Traffic Service (Nats) revealed that a “technical issue” that led to more than 1,000 flight cancellations was caused by “some of the flight data we received”. – Telegraph
Shareholders globally are heading for a second year of real-terms cuts to dividend income as inflation this year is set to eat into a healthy rise in nominal payouts. A bumper increase in bank dividends this year produced a pick-up in global dividend income in the second quarter to a record of almost $570 billion, according to the latest Janus Henderson study of company payouts. – The Times
The owner of The Body Shop is exploring a potential sale of the skincare and cosmetics retailer after struggling to turn around its fortunes. Yesterday Natura & Co, the Brazilian beauty conglomerate that owns the Avon and Natura brands and is in the process of selling its Aesop brand to L’Oréal, said that its board had authorised management to explore “strategic alternatives” for The Body Shop. – The Times
