Stocks in London edged into the green at midday on Thursday after the US debt ceiling deal was approved by the House of Representatives, defying negative news from the UK housing market.
The FTSE 100 index was up 28.28 points, 0.4%, at 7,474.42. The FTSE 250 was up 112.02 points, 0.6%, at 18,834.92, and the AIM All-Share was up 0.25 of a point at 783.02.
The Cboe UK 100 was up 0.4% at 746.19, the Cboe UK 250 was up 0.5% at 16,383.39, and the Cboe Small Companies was up marginally at 13,551.15.
The US House approved the debt ceiling and budget cuts package agreed between President Joe Biden and Speaker Kevin McCarthy. With the vote of 314-117, the bill now heads to the Senate with passage expected by the weekend.
‘The FTSE 100 started the day on the front foot as the US debt ceiling deal was approved by the House of Representatives, virtually guaranteeing it will be signed off ahead of the extended 5 June deadline,’ said AJ Bell investment director Russ Mould.
‘This positive driver for stocks may not last as a US Treasury which has been draining its account at the Federal Reserve to keep the government going, thereby injecting significant liquidity into the system, reverses this policy and starts tapping the debt markets to bolster its coffers.
‘For now, though, relief that a US default has been averted is dominating market sentiment.’
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.2%, and the Nasdaq Composite flat.
Net mortgage approvals in the UK fell in April, while approvals for remortgaging increased slightly, according to Bank of England data on Thursday.
Borrowing of mortgage debt by individuals continued to decline from net-zero in March to £1.4 billion of net repayments in April.
‘This is the lowest level on record, if the period since the onset of the Covid-19 pandemic is excluded,’ the BoE said.
Net mortgage approvals for house purchases fell to 48,700 in April from 51,500 in March, while approvals for remortgaging increased slightly to 32,500 from 32,200 during the same period.
The annual decline in UK house prices sped up in May, according to new data from mortgage lender Nationwide on Thursday.
On a seasonally adjusted basis, May saw a 0.1% month-on-month fall in house prices. In April, on the same basis, house prices had inched up by 0.4%. On an annual basis, house prices declined by 3.4% in May, accelerating from a fall of 2.7% in April.
London-listed housebuilders were marginally higher following the data. Taylor Wimpey was up 0.6%, Berkeley Group up 1.3% and Barratt Developments up 0.8%.
Commercial property developer British Land was up 0.4%.
After the market close on Wednesday, index publisher FTSE Russell said British Land will drop down to the FTSE 250 from the FTSE 100, effective from June 5, following its quarterly index review.
Engineering firm IMI will replace British Land in the FTSE 100. It was up 1.1% at midday on Thursday.
From London’s small-caps, Me Group jumped 8.0%. It will move to the FTSE 250 index on Monday.
On Thursday, the instant-service equipment firm, formerly know as Photo-Me International, increased its full-year outlook following an unexpectedly strong performance over the last six months, with profit and revenue jumping in part due to increased photo booth use.
Me Group said that in the half year ended April 30, its pretax profit was up by over 35% compared with the same period one year prior. Group revenue was up by more than 24%.
In the FTSE 100, Auto Trader lost 3.2%, pushing it towards the bottom of the index.
The Manchester-based digital automotive marketplace said after a ‘comprehensive’ search, it has selected Matt Davies to replace Ed Williams as its chair.
Davies is currently chair at bakery chain Greggs, and was previously chief executive at Pets at Home, Halfords, and Tesco’s UK & Republic of Ireland arm.
Separately, Auto Trader announced its results for the financial year to March 31. Revenue climbed 16% year-on-year to £500.2 million, compared to £432.7 million.
Pretax profit fell 2.5% to £293.6 million from £301.0 million.
The firm proposed a final dividend of 5.6 pence per share, unchanged from the previous year. This would bring the total payout for the year to 8.4p, up slightly from 8.2p a year before.
In the FTSE 250, Dr Martens lost 12%.
The Wollaston, Northamptonshire-based footwear and clothing brand posted a pretax profit fall for the year that ended March 31 of 26% to £159.4 million from £214.3 million the previous year.
The company said this was due to increased depreciation from system investments, a £3.9 million impairment charge and a £10.7 million charge from the foreign exchange market translation impact on its Euro bank debt.
Revenue was up 10% to £1.00 billion from £908.3 million.
Dr Martens proposed a final dividend of 4.28 pence per share, level with last year, and declared a total dividend of 5.84p, up 6.0% from 5.50p the previous year.
The company announced its intention to commence an initial share buyback programme of up to £50.0 million.
‘Dr Martens has struggled operationally but also hasn’t done a good job of managing expectations. This is a key part of being a public company, where the aim should always be to under-promise and over-deliver,’ said AJ Bell’s Mould
‘Revenue may have hit a £1 billion milestone, but profit is heading in the wrong direction as the company’s margins are under strain thanks to rising costs.’
In European equities on Thursday, the CAC 40 in Paris was up 0.7%, while the DAX 40 in Frankfurt was 1.1%.
The pound was quoted at $1.2458 at midday on Thursday in London, up compared to $1.2381 at the equities close on Wednesday. The euro stood at $1.0710, higher against $1.0657. Against the yen, the dollar was trading at JP¥139.60, down compared to JP¥139.83.
Brent oil was quoted at $72.22 a barrel at midday in London on Thursday, down from $73.07 late Wednesday.
Gold was sharply lower, as a US debt default looked increasingly unlikely. Gold was quoted at $1,964.44 an ounce, down against $1,971.75.
Still to come on Thursday’s economic calendar, there is a manufacturing PMI print from the US.
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