A hawkish set of US Federal Reserve minutes and political turmoil in the UK weren’t enough to stop the FTSE 100 extending recent gains.
‘Despite the accumulation of bad news, equities appeared to continue marching to the beat of their own drum,’ said Deutsche Bank.
London’s blue-chip index was bolstered by oil majors as the price of Brent topped $100 a barrel again, offsetting a drag from housebuilders and gambling firm Entain.
The FTSE 100 index was up 84.03 points, or 1.2%, at 7,191.80. The FTSE 250 index was up 140.56 points, or 0.8%, at 18,735.04. The AIM All-Share index was up 1.57 points, or 0.2%, at 876.16.
The Cboe UK 100 index was up 1.3% to 717.28. The Cboe 250 was up 1.0% at 16,285.28, while the Cboe Small Companies was 0.1% lower at 13,150.47.
In mainland Europe, the CAC 40 stock index in Paris was up 1.7%, while the DAX 40 in Frankfurt was up 0.9%.
Northern Ireland Secretary Brandon Lewis has resigned from the Cabinet, piling further pressure on embattled PM Johnson.
Lewis told Johnson the government requires ‘honesty, integrity and mutual respect’ and it is ‘now past the point of no return’.
‘It seems unlikely that prime minister Boris Johnson will be able to hang onto the keys of Number 10 into next week. This will then prompt a Conservative leadership election and possibly some earlier fiscal stimulus than had been expected. That makes sterling a tricky sell. And probably one of the reasons that sterling has not sold off more is because of the large Tory majority in parliament,’ analysts at ING commented.
The pound fetched $1.1952 early Thursday in London, up from $1.1917 late Wednesday.
The euro stood at $1.0187, down from $1.0192. Against the yen, the dollar was trading at JP¥136.00, up from JP¥135.56.
Fed policymakers reaffirmed their commitment to combating elevated levels of inflation even at the risk of damaging economic growth, according to the central bank’s meeting minutes.
At its most recent meeting in June, the Fed enacted a 75 basis points interest rate hike, taking the federal funds rate to a range of 1.5% to 1.75%. It was the first hike of that magnitude since November 1994.
Notably, FOMC members highlighted that ‘inflation pressures had yet to show signs of abating,’ which meant rising prices could be ‘more persistent than they had previously anticipated,’
As such, rate-setters at the Fed said the July meeting would likely see another substantially sharp move in interest rates.
In Tokyo on Thursday, the Nikkei 225 closed up 1.5%. In China, the Shanghai Composite ended up 0.3% and the Hang Seng in Hong Kong was marginally higher in late dealings. The S&P/ASX 200 in Sydney rose 0.8%.
Brent oil was quoted at $101.12 a barrel early Thursday UK time, up from $99.67 late Friday.
Although oil markets have calmed in recent sessions, the dizzying heights of crude prices so far this year has led Shell to up the value of its assets.
For the second quarter, it expects to reverse $3.5 billion and $4.5 billion worth of previously impaired assets, due to changes in its commodity price outlook.
It expects a Brent price of $80 per share in 2023, before $70 in 2024 and 2025.
Shell shares were 2.2% higher early Thursday. BP added 4.3% in a positive read-across.
The impairment reversals are a stark contrast to the hefty write-downs oil producers suffered after the start of the Covid-19 pandemic sent commodity prices tumbling.
Shell also said it expects its indicative refining margin to improve to $28.04 a barrel in the second quarter, from $10.23 in the first. This will hand a boost between $800 million and $1.20 billion to its Products division, a provider of lubricants, in the second quarter.
RS Group climbed 3.3% as it expects annual revenue and profit to be ‘slightly ahead of current consensus estimates’.
Revenue consensus for the year ending March 31 stands at £2.74 billion. The industrial and electronic products distributor has been tipped by the market to post adjusted pretax profit of £345.3 million.
Group like-for-like revenue jumped 18% in the first quarter of the year.
Entain sat towards the bottom of London’s large cap benchmark, down 4.0%.
The Ladbrokes owner nudged annual guidance lower. For 2022, it now expects flat online net gaming revenue, excluding impacts from the upcoming UK Gambling Act Review. It had previously forecast mid to high single digit growth.
Wider group net gaming revenue rose 18% in the first half of 2022 and was up 8% in the second quarter alone.
Online NGR was down 7% in both the first half and second quarter.
A white paper into gambling reform, planned in the coming weeks, is the next big risk event for bookmakers.
The UK is set to announce restrictions on the industry as part of the review of the 2005 Gambling Act amid concerns current regulations require changes to accommodate the growth of online betting.
Sky News on Monday reported the Premier League has called on its football clubs to support a plan to phase out gambling sponsorship on shirts.
The government will also reportedly announce measures including online casinos having maximum stakes of between £2 and £5, a ban on free bets and VIP packages for those who incur heavy losses, as well as ‘non-intrusive’ affordability checks.
Housebuilders also hit the FTSE 100. Persimmon fell 5.6%.
It said its half-year revenue and legal completions were lower, though forward sales are on the up and it expects to report an improved gross margin for the six months to June 30. Its operating margin will take a hit, however.
Revenue was down 8.2% to £1.69 billion in the first half of 2022 from £1.84 billion a year earlier. Completions have fallen to 6,652 from 7,406.
Completions were below expectations due to ‘further delays in the planning system and material and labour shortages’. However, the average selling price was 4.0% higher at £245,600.
Forward sales were 2.7% higher at £1.87 billion from £1.82 billion.
Persimmon’s statement came as separate figures from Halifax showed the UK housing market remained strong.
UK house price growth accelerated in June, defying expectations that the market will cool as consumers face pressure from rampant inflation.
According to Halifax, UK house prices rose 13% yearly in June, the strongest growth since late 2004, accelerating from an 11% rise in May.
Monthly, prices rose 1.8%, hitting £294,845, another record high. House prices have now risen for 12 months on-the-bounce, Halifax noted. In May, house prices had risen 1.2%.
Berkeley Group shares were 2.6% lower, while Barratt gave back 2.3%.
Elsewhere in London, Jet2 shares fell 6.8% as it posted a widened annual loss and cautioned that its performance in the year ahead depends on the aviation market returning to stability.
Revenue for the financial year to March 31 jumped to £1.23 billion from the Covid-hit prior year result of £395.4 million. Pretax loss widened to £388.8 million from £341.3 million.
The firm said it has been hit by broader disruption across the travel sector despite investing ‘well ahead’ of the summer 2022 season.
‘Many suppliers have been woefully ill-prepared and poorly resourced for the volume of customers they could reasonably expect, inexcusable, bearing in mind our flights have been on sale for many months and our load factors are quite normal,’ the company said.
As such, its performance in the 2023 financial year depends on how fast the broader aviation sector returns to ‘some level of stability’.
On AIM, Novacyt, one of the London market’s pandemic winners, slumped 20% as it lowered annual revenue guidance.
It now expects yearly revenue of £25 million, down from the previous £35.0 million to £45.0 million outlook. Covid-19-releated revenue has tumbled quicker than expected, the biotechnology group said.
Trading at 118.71 pence, shares are down 91% from a peak of 1,270p hit back in October 2020.
Gold stood at $1,742.34 an ounce early Thursday, up from $1,738.77 late Wednesday.
The economic events calendar on Thursday has the US ADP jobs report at 1315 BST and latest jobless claims numbers at 1330 BST. The latest European Central Bank meeting minutes are reported at 1230 BST.
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