The FTSE 100 started the week on the front foot as an interest rate cut in China boosted share prices of UK-listed miners.
The FTSE 100 index traded up 28.35 points, 0.3%, at 8,386.60. The FTSE 250 was up 36.02 points, or 0.2%, at 21,185.60, and the AIM All-Share was up 2.31 points, or 0.3%, at 743.00.
The Cboe UK 100 was up 0.4% at 839.69, the Cboe UK 250 also rose 0.4% to 18,742.74, and the Cboe Small Companies edged up to 16,961.30.
China’s central bank on Monday said it had cut two key interest rates to historic lows, in the latest move by Beijing to boost sluggish spending and kickstart the world’s second-largest economy.
The cuts come just days after the country posted its slowest quarterly growth in a year and a half, underlining the deep economic woes the country faces.
Leaders are targeting annual growth of 5% this year, but that goal is being challenged by weak consumption and a prolonged and debilitating debt crisis in the colossal property sector.
The one-year loan prime rate, which constitutes the benchmark for the most advantageous rates lenders can offer to businesses and households, was cut to 3.1% from 3.35%.
The five-year LPR, the benchmark for mortgage loans, was cut to 3.6% from 3.85%.
Both rates were last reduced in July and are sitting at all-time lows.
London listings Glencore and Antofagasta rose 1.7% and 1.5%, as the mining sector is exposed to the ebbs and flows of the Chinese economy. China is a big buyer of minerals.
The Shanghai Composite rose 0.2% on Monday. However, the Hang Seng in Hong Kong was down 1.6% in late trade. In Tokyo, the Nikkei 225 fell 0.1%. The S&P/ASX 200 in Sydney rose 0.7%.
In New York on Friday, the Dow Jones Industrial Average edged up 0.1%, the S&P 500 added 0.4% and the Nasdaq Composite climbed 0.6%.
The pound was quoted at $1.3025 early Monday, down from $1.3040 at the time of the London equities close on Friday. The euro stood at $1.0851, fading from $1.0858. Against the yen, the dollar was trading at JP¥149.84, up from JP¥149.54.
The week got off to a quiet start on Monday, but there will be a number of economic reports and corporate earnings to digest over the coming days.
Thursday has a slew of flash purchasing managers’ index reports, including from across the eurozone, readings that will be in focus in the wake of the European Central Bank’s rate cut.
ING analysts commented: ‘Thursday’s release of PMIs across the Eurozone region will also be crucial to EUR/USD this week. Lagarde surprised some last Thursday by elevating the importance of the PMIs in ECB decision-making. Unless there is a miraculous recovery in these (which seems unlikely), EUR/USD should stay relatively offered in a 1.08-1.09 range.’
In the central banking space, ING noted Bank of England Governor Andrew Bailey has a number of speaking engagements this week .
‘We have four speeches from BoE Governor Andrew Bailey. We still think the market is under-pricing the pace of the BoE easing cycle – and should Bailey add to some of his rare comments that the BoE could become more ’activist’ in its easing, sterling could come under pressure. That may more be felt against the dollar than the euro, with the 1.30 level looking vulnerable for GBP/USD. Thursday’s release of the UK PMI should also have a big say on whether sterling continues to out-perform or perhaps succumbs to some dovish BoE rhetoric,’ ING added.
Also in the spotlight, the UK banking earnings season kicks off, while across the Atlantic, soft drinks maker Coca-Cola and aerospace firm Boeing report over the coming days.
XTB analyst Kathleen Brooks commented: ‘The market does not appear worried about the continuous march higher, and the trend seems steady. Earnings season has seen some big outperformers, and the Vix index, Wall Street‘s fear gauge, fell back last week. Thus, unless we see a surprise, the market may stick to the path of least resistance and continue to move higher in short term.’
In London, Fresnillo was the best FTSE 100 performer in early trade, rising 3.0%, tracking gold higher.
Gold was quoted at $2,726.69 an ounce early Monday, up from $2,717.31 at the time of the London equities close on Friday. Gold spiked to another record high on Monday, this time above $2,732 an ounce.
Housebuilders recovered, with Barratt Redrow climbing 2.0%, after a 1.2% decline on Friday. Shares in developers fell on Friday, on a report that UK Chancellor Rachel Reeves is mulling bringing a stamp duty discount introduced by the Tories to an end.
A senior minister has declined to rule out extending the freeze on income tax thresholds as speculation about possible tax increases in the upcoming UK government budget continued to mount.
Wes Streeting said he would not second guess measures that the chancellor might introduce in the budget on October 30, but told broadcasters on Sunday morning that he had already agreed health spending with Reeves.
‘If you’re asking me whether I would vote against anything in the chancellor’s budget? The answer is no, of course I’m not going to do that,’ the Health Secretary told Sunday Morning with Trevor Phillips on Sky News.
Streeting went on to say: ‘What we’re not going to do is duck the difficult decisions, have government by gimmick, short-term sticking plasters, because that is exactly how we ended up in this situation.’
Back in London, Hollywood Bowl rose 2.2%. It said it achieved record annual revenue, and it expects profit to land ahead of market expectations.
The ten-pin bowling operator said it expects to report revenue of £230.4 million in the six months to September 30, up 7.2% on-year. UK revenue alone rose 3.8%, it said, while at constant currency, Canada revenue jumped 42%.
Hollywood Bowl expects to post earnings before interest, tax, depreciation and amortisation, on a pre-IFRS 16 basis, ahead of market expectations and above £65.0 million. According to company-compiled consensus, market expectations stand at £64.1 million.
Deltic Energy climbed 7.7%, as the AIM listing announced moves which will save costs, amid a trick outlook for the UK oil and gas industry.
Deltic said its focus over the next 12 months will be on extracting ‘value from its existing core UK assets’, particularly the Selene prospect in the southern North Sea. The asset is operated by Shell and Deltic has a 25% stake.
The company added that it will be ‘eliminating or deferring expenditure on non-core UK assets’.
‘For the last decade, Deltic has invested in its UK portfolio and achieved material exploration success despite the well-publicised political and fiscal headwinds that have hampered the UK’s oil and gas industry in recent years. It is clear that, while this situation persists, the UK is not the ideal place in which to invest in new oil and gas exploration or appraisal opportunities. Therefore, the board has carefully considered the best way to leverage the company’s international experience and expertise to create value for shareholders going forward,’ it said.
Chief Executive Officer Andrew Nunn said the moves will result in savings of 40%, compared to costs the firm had budgeted for next year.
‘These savings are key to extending the time period in which to identify and incubate those new opportunities that we believe will help towards stabilising the business and providing a platform for future growth supporting our objective of creating positive returns for shareholders,’ Nunn added.
Brent oil was quoted at $73.40 a barrel on Monday morning UK time, from $72.45 at the time of the London equities close on Friday.
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