Two surprisingly positive readings on the strength of the US economy bolstered Wall Street overnight and were lifting European shares early Wednesday, with the dollar also on the rise.
The FTSE 100 index opened up 24.35 points, or 0.3%, at 7,485.33. The FTSE 250 was up 86.64 points, or 0.5%, at 18,141.48. The AIM All-Share was down 0.27 of a point at 755.34, however.
The Cboe UK 100 was up 0.3% at 746.92, the Cboe UK 250 was up 0.3% at 15,875.73, and the Cboe Small Companies was up 0.3% at 13,038.25.
In New York on Tuesday, the Dow Jones Industrial Average closed up 0.6%, the S&P 500 up 1.2% and the Nasdaq Composite up 1.7%.
Better-than-expected economic data improved the mood among US investors, with consumer confidence and new home sales both surprising on the upside.
US consumer confidence surged unexpectedly to an 18-month high in June, fuelled by an uptick in the outlook for family finances, while new home sales in the US reached the highest rate in over a year.
Additionally, manufactured durable goods orders rose by 1.7% in May from a month earlier.
‘Against this backdrop of encouraging data, it pushes back on those recession fears that were building last week when the screech of hawkish central bank filled the air. Indeed, the US economy continues to chug along at a solid pace, especially for an economy that many market participants have thought was on the brink of recession for the past year-plus,’ said Stephen Innes, managing partner at SPI Asset Management.
The dollar was largely stronger on Wednesday morning.
The pound was quoted at $1.2731 early on Wednesday in London, down from $1.2748 at the close on Tuesday. The euro stood at $1.0949, lower against $1.0959.
Against the yen, the dollar was trading at JP¥144.00, unchanged compared to JP¥144.01. Francesco Pesole at ING said focus in the foreign exchange market will be on the yen on Wednesday.
‘Overnight, Japan’s top currency official, Masato Kanda, stepped in with a verbal ’protest’, saying that authorities are ready to intervene if there are excessive FX moves, but USDJPY is facing fresh upward pressure this morning and today, hawkish comments by Powell, backed by the solid US data seen so far this week, could easily take the pair closer to 145.00,’ he said, noting that the JP¥145 area could be seen as a potential ‘line in the sand’ for foreign exchange intervention by Japan.
In London, Sage was the top blue-chip performer early Wednesday, up 3.8% after JPMorgan raised the accounting software maker to ’overweight’ from neutral.
Going the other way, Admiral fell 1.8%, making it the FTSE 100’s worst performer, after JPMorgan placed the insurer on ’negative catalyst watch’.
In the FTSE 250, SDCL Energy Efficiency Income Trust added 1.6% despite reporting an annual loss and a lower net asset value per as a result of increased discount rates.
The investor in assets such as electric vehicle charging infrastructure and geothermal and biogas projects reported a net asset value per share of 101.5 pence at March 31, down from 108.4p at the same time a year prior. The trust said this was largely as a result of increases in discount rates, which lowers the value of assets.
It swung to a pretax loss in the year ended March 31 of £19 million from a profit of £80 million the year prior.
‘During the year, and in particular since early September 2022, there were significant increases in interest rates globally, including in SEEIT’s key geographical areas. This has stemmed from geopolitical uncertainties and a high inflationary environment due, in part, to high energy costs. This has led to an increase in discount rates across the whole investment portfolio,’ the company explained.
Elsewhere in London, boohoo was up 2.1%.
The online fashion retailer flagged ‘serious concerns’ regarding the conduct of the board of Revolution Beauty, in which it holds just under a 27% stake.
boohoo called the Revolution board ‘self-serving’ and said it was not acting in the best interest of shareholders. It pointed to the attempts of the company’s board to adjourn a quorate meeting with the approval of shareholders present, the annual general meeting proceeding with defeated resolutions, and the conduct of independent director Jeremy Schwartz as evidence of this.
boohoo called on the Revolution board to convene a requisitioned general meeting, proposing to remove three directors and appoint another two.
Revolution Beauty responded: ‘The board of Revolution Beauty remains focussed on value creation at this critical time for the company, and continues to believe that boohoo’s hostile actions are value-destructive, opportunistic and self-serving, as well as not being in the interests of the company’s shareholders as a whole.’
Shares in the beauty product seller surged 55% in early morning trade Wednesday, having been restored to trading on AIM at the open.
In European equities on Wednesday, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was 0.5% higher.
German consumer confidence has fallen for the first time since October, a survey showed, after Europe’s largest economy fell into recession and while inflation remained stubbornly high.
Pollster GfK said its forward-looking survey of around 2,000 people fell to minus 25.4 points in July from 24.4 points in June.
The drop is the first since October, when the barometer hit a low of minus 42.8 points, as inflation soared and consumers worried about the cost of heating their homes over the coming winter.
In Tokyo on Wednesday, the Nikkei 225 index closed up 2.0%. In China, the Shanghai Composite closed marginally lower, while the Hang Seng index in Hong Kong was up 0.2%.
The S&P/ASX 200 in Sydney closed up 1.1% following a softer-than-expected inflation print in Australia.
Consumer inflation in Australia slowed by more than expected last month, according to official data from the Australian Bureau of Statistics.
The rise in consumer prices cooled to 5.6% on an annual basis in May, from 6.8% in April. The reading was lower than market consensus estimates of 6.1%, as cited by FXStreet.
The lower-than-expected reading helped to fuel hopes for a pause in interest rate hikes from the Reserve Bank of Australia at its meeting next week.
Brent oil was quoted at $72.78 a barrel at early in London on Wednesday, down from $73.55 late Tuesday. Gold was quoted at $1,909.70 an ounce, lower against $1,914.73.
Still to come on Wednesday’s economic calendar, the US Federal Reserve releases its annual stress test results shortly after the New York equities close.
Central bankers, including Bank of England Governor Andrew Bailey, Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde, on Wednesday take part in the ECB Forum in Sintra, Portugal.
Referring to Tuesday’s US economic indicators, ING commented: ‘While those are not the set of data points either the markets or the Fed primarily focus on, they surely point to some resilience in key parts of the US economy and would underpin a reiteration of a hawkish message by Powell today. That would probably take the shape of a further endorsement of dot plot rate hike projections (two more before the peak) with potentially an additional pushback against rate cuts.’
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