• FTSE 100 closes up 1.25%
  • Primark owner back with a bang
  • US stocks mixed at midday

5pm: FTSE 100 finishes higher

FTSE 100 index finished convincingly higher on Thursday – the first day of the new trading month – as the Bank of England‘s governor Andrew Bailey calmed nerves on rising inflation.

His dovish tones on monetary policy sent the UK pound falling, which had a knock-on positive effect for the US dollar earning UK blue-chips.

Footsie finished up over 87 points, or 1.25%, at 7,125. The midcap FTSE 250 was also up, over 246 points, or 1.10%, at 22,622.

Against the US dollar, the pound was down 0.42% at US$1.3773.

“The FTSE 100 has outperformed its peers today, as dovish tones from the Bank of England helped to drive the pound lower,” said Joshua Mahony, the senior market analyst at online trading group IG.

“Despite warnings from the Fed that rising prices could ultimately draw forward the tightening phase for monetary policy, BoE governor Andrew Bailey instead laid out a confident stance that higher prices would be temporary in nature.

“While Bailey admitted we could soon see inflation hit 4%, the temporary nature of that rise should ensure the bank can remain accommodative throughout this economic recovery.”

4.04pm: Bright start to the month continues

Well so far it’s been a good start to the month – and indeed the quarter –  for the UK market.

The leading index is 78.07 points or 1.11% higher at 7115.54, while the FTSE 250 is 1.07% better at 22,615.87.

US markets are also higher, with the Dow Jones Industrial Average up 69 points or 0.2% and the S&P 500 and the Nasdaq Composite both currently in positive territory.

Postive manufacturing figures are helping, although investors appear to be chosing to ignore growing pricing pressures and agreeing with central banks that this is just “transitory.”

As OPEC+ decides whether to increase production and by how much, crude prices are heading higher and giving a lift to oil shares.

BP PLC (LON:BP.) is 3.02% better while Royal Dutch Shell PLC (LON:RDSA) has risen 2.79%.

JD Sports Fashion PLC (LON:JD.) is the biggest riser in the leading index, up 5.35% at 968.2p as it attempted to quell some of the concerns raised by investors.

Primark owner Associated British Foods PLC (LON:ABF) has added 3.57% after a well received update.

Among the miners, Fresnillo PLC (LON:FRES) is up 4.23%, benefitting from a rise in the gold price.

3.30pm: US factories show strong growth but prices paid jump

US manufacturing growth has slipped slightly in June but is still performing strongly.

But there are also signs of inflationary pressures in the latest ISM survey.

The index fell from 61.2 to 60.6, compared to expectations of a figure of 60.9.

 

But prices paid jumped from 88 to 92.1, well above the 87 level which had been forecast and a 40 year high.

US markets are still higher as investors attempt to digest the news.

The Dow Jones Industrial Average is up 86.84 points or 0.25% at 34,589.35 after earlier hitting 34,604.

The S&P 500 is up 0.27% while the Nasdaq Composite is 0.02% higher. Both are just below their peaks for the day.

In the UK the FTSE 100 is gaining ground again, up 81.58 points or 1.16% at 7119.05.

2.50pm: Crude surges as OPEC meets

Oil is heading even higher as OPEC+ meets to discuss putting more crude on the market.

Brent is now up 2.45% at $76.45 a barrel while West Texas Intermediate – the US benchmark – is 3.13% better at $75.77.

The first meeting – of OPEC members alone – appears to be over, but OPEC+ seems to be the one that matters. That includes OPEC itself plus additional oil exporting countries including, most notably, Russia.

 

2.40pm: Wall Street manages higher start following jobless data

The main indices on Wall Street opened on a higher footing on Thursday following the better than expected weekly US jobless claims numbers.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.28% at 34,599 while the S&P 500 rose 0.22% to 4,307 and the Nasdaq inched up 0.05% to 14,510.

Back in London, the FTSE 100 was continuing to push higher into late afternoon, rising 64 points to 7,101 at around 2.40pm.

1.44pm: Jobless claims beat expectations

US weekly jobs claims have come in better than expected, a further sign of the recovery of the US economy.

The number of Americans seeking unemployment support last week was 364,000, a decrease of 51,000 from the previous week and the lowest level since 14 March 2020.

This is better than the fall to around 388,000 which had been forecast.

The previous week’s figure was revised up by 4,000 to 415,000.

 

 

Charles Hepworth, investment director at GAM Investments, said: “Whilst this data print is volatile week to week, the overall tone points to the slow continual improvement in the US economy and in particular the jobs market as the economy continues to reopen.

“As certain states begin to phase out unemployment pandemic assistance, it is obvious that workers will feel more compelled to seek work and one has to expect, bar a resurgence of new variants hampering the reopening, the trend will see further declines in unemployment from here.”

The news has seen an improvement in the Dow Jones Industrial Average futures, and it is now expected to open up 103 points or 0.23%. The S&P 500 is set for a 0.09% increase but the Nasdaq Composite is indicated down 0.11%.

In the UK the FTSE 100 has also gained a bit of ground, up 58.28 points or 0.83% at 7095.75.

12.25pm: Dow forecast to edge marginally higher after previous day’s gains

Wall Street is set for a mixed start after a mixed day on Wednesday.

Both the Dow Jones Industrial Average and the S&P 500 moved ahead yesterday while the Nasdaq Composite slipped back.

And the same pattern holds true for the futures, albeit there is very little movement in truth. The Dow is expected to open 42 points or 0.05% higher and the S&P around 0.01%. But the Nasdaq is indicated 0.21% lower.

Sophie Griffiths, market analyst at Oanda, said: “Today all eyes will be on US ISM manufacturing PMI, particularly the prices subcomponent, given the recent spike in inflation. The paid prices index is expected to inch lower to 87 in June, down from 88. Jobless claims and the Challenger jobs report will provide further clarity on the health of the US jobs market ahead of tomorrow’s key non-farm payrolls.”

Also on the agenda is the return to the stock market of Krispy Kreme following a buyout in 2016.

It will join Nasdaq with the ticker DNUT, but its shares have been set at $17 each, below the bottom end of the predicted price range.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Timing is everything for an IPO, and this launch comes at a time when the public is becoming more health conscious, particularly following the pandemic where obesity now appears to have been a major factor in cases of severe sickness.

“The fact that [the price] has come in well below the bottom of the expected range indicates that initial demand for shares was lukewarm. As with any new offering, there could well be a flurry of interest as soon as trading begins, with customers and retail investors still keen to get a bite of the action.”

Meanwhile the FTSE 100 is up 36.67 points or 0.52% at 7074.14.

12.06pm: Fresnillo lifted by gold price rise

The gold price has been under pressure recently, ever since the US Federal Reserve made comments perceived to be more hawkish than expected and lifted the US dollar.

But it has regained some ground and has edged higher to US$1,783 an ounce.

In turn that has helped lift precious metals miner Fresnillo PLC (LON:FRES) which after recent weakness is up 4.54% or 35p to 806.6p and is topping the FTSE 100 risers.

The index itself is currently slipping back but is still positive, up 32.62 points or 0.46% at 7070.09.

11.23am: BP and Shell head higher

 Oil prices are gushing higher as the OPEC+ producers meet to decide their next mover.

Brent crude has climbed 0.92% to $75.31 a barrel while the US West Texas benchmark is 0.95% better at $74.17.

BP PLC (LON:BP.) has benefitted, adding 1.65% or 5.2p to 320.2p while Royal Dutch Shell PLC (LON:RDSA) has risen 1.41% or 20.4p to 1467.2p.

Ipek Ozkardeskaya, senior analyst at Swissquote, said: “All traders, from bulls to bears are holding their breath before the OPEC+ decision.

“The expectation is that OPEC producers add another half-a-million barrels per day to the global supply, relaxing their strict production cut regime on the back of business reopening, improved travel and activity prospects. The problem is, the latest news flow hasn’t been encouraging on the COVID-19 front. We now see cases rising across the globe, some countries going back to strict lockdown measures and imposing travel restrictions.  

“If another wave of contagion sticks up its nose and changes the direction of the wind, then the global oil demand could take an unexpected hit.  

“Yet, the global glut that was building during the pandemic has now dried and OPEC probably has the margin to take a chance for increasing supply, with the possibility of reversing the decision as early as next month, if needed.

“Therefore, the base case scenario is a 500,000-barrel increase in daily OPEC+ supply and a potential deeper downside correction in US crude price to the $72/70 region. But in case of a surprise no-move, we may well see the price of a barrel shoot above the $75 mark.”

Helped by the gains in the oil giants, the FTSE 100 remains in the green, up 58.47 points or 0.83% at 7095.94.

10.46am: Pound slips on Bank governor speech

Andrew Bailey’s comments have helped push the pound lower,.

The Bank of England governor’s comments suggesting it would not over-react to “transitory” pricing pressures – by say easing off QE or raising interest rates – has left the pound 0.3% down at $1.3783.

Chris Beauchamp, chief market analyst at IG, said: “Andrew Bailey has returned to the tune of transitory inflation, warning that policymakers should not be too keen to overreact to higher prices. Such a policy sounds sensible, but of course is much harder to implement in practice, when monthly CPI data keeps erring on the hot side and markets and the media are full of people warning about uncontrolled inflation and the spectre of the 1970s.

“Unsurprisingly these headlines have not been great for the pound, which is moving below its mid-June low against the dollar as markets bet on a policy divergence between the BoE and the Fed.”

Meanwhile the FTSE 100 continues to shrug off worries about the Delta variant, currently up 57.44 points or 0.82% at 7094.91.

Associated British Foods PLC (LON:ABF) continues to lead the way following a positive update which included the Primark-owner raising its full year sales and operating profit forecasts.

The shares have jumped 4.96% or 110p to 2326p.

 

10.07am: Bank should not over-react to inflation signs – Bailey

Bank of England governor Andrew Bailey has been trying to ease concerns about rising inflation, and said the Bank should not over-react to the current situation.

In a speech at the Mansion House this morning he said pricing pressures should be temporary. He even said “transitory” which appears to be the current central bank buzz-word.

The three reasons for this, he said, were that weak COVID-19 activity last year meant weaker prices then and this effect would drop out of the equation; shortage of supply and growth of demand as the economy recovered was temporarily pushing up prices; and finally as the economy recovers, there should be a switch from demand for goods towards services where there is more spare capacity. 

Bailey said: “The economy is bouncing back rapidly, which is good news. With that has come a rise in inflation, and we expect that rise to continue in the near term as we go through the rest of this year, such that CPI inflation is expected to pick up further above the target, owing primarily to developments in energy and other commodity prices.

“I have set out the reasons why we expect this rise in inflation to be a temporary feature of the bounce-back. The reasons for taking this view are well-founded, it is not a vain hope or a matter of whistling in the wind. It is important not to over-react to temporarily strong growth and inflation, to ensure that the recovery is not undermined by a premature tightening in monetary conditions. But it is also important that we watch the outlook for inflation very carefully, which of course we do at all times, particularly for signs of more persistent pressure and for a move of medium term inflation expectations to a higher level.”

 

Meanwhile the FTSE 100 remains firmly in the green, although it is off its best levels, up 74.57 points or 1.06% at 7112.04.

9.47am: Near record growth but inflation worries continue

UK manufacturing continued to enjoy strong growth last month, albeit slightly below forecast.

The latest IHS Markit purchasing managers’ index has come in at 63.9 in June compared to an estimated 64.2 and down from May’s record high of 65.6.

But rates of expansion in output, new orders and employment were still among the best seen during the near 30-year survey history, said Markit. And it is still the thirteenth month of improvement.

Improved demand was linked to the easing of COVID-19 restrictions and improving global market conditions.

On the down side, companies were still reporting supply chain and distribution difficulties, leading to disruption to production schedules. 

And for those worried about inflation, average input costs rose at the fastest pace in the survey history, with over three-quarters (77%) of manufacturers reporting an increase. A wide range of raw materials were up in price, including chemicals, electronics, energy, food products, metals, plastics and timber. 

 

Rob Dobson, director at IHS Markit, said: “UK manufacturing maintained a near survey-record pace of expansion at the end of the second quarter, as the reopening of economies at home and overseas supported increased production, new orders and employment. Solid business confidence and rising backlogs of work also suggest that the current upturn has further to run.

“The sector is still beset by rising cost inflationary pressures, however, as Brexit-related trade issues exacerbated global supply chain delays. The resulting widespread raw material shortages drove purchase prices up to the greatest extent on record, leading to an unprecedented steep rise in selling prices. There are also widespread reports of supply issues causing disruptions to production schedules and impeding the re-building of buffer stocks.

“The continued inflationary impact of capacity issues at both manufacturers and their suppliers will be a further factor keeping headline inflation above the Bank of England‘s 2% target in coming months.”

Earlier manufacturing growth in the Eurozone hit a new high in June, with the PMI edging up from 63.1 in May to 63.4.

The FTSE 100 is remarkably unmoved by all this, still well ahead on the day. It is now up 85.1 points or 1.21% at 7122.57.

9.10am: Ex-divs fail to spoil the party

Among the FTSE 100 fallers were the usual Thursday ex-dividend companies.

Just two this week, both retailers in keeping with one of the day’s themes.

B&M European Value Retail S.A. (LON:BME ) is down 10.4p or 1.81% at 562.8p while Burberry PLC (LON:BRBY) has slipped 0.39% or 8p to 2058p.

This has not stopped the positive mood, with the leading index now up 85.21 points or 1.21% at 7122.68.

Neil Wilson at Markets.com said: “European and global stock markets have enjoyed a strong run-up in the last six months as a combination of ultra-loose monetary policy, fiscal largesse and a vaccine-enabled reopening of economies allowed investors to look ahead to a brighter future for earnings and growth. Now there are risks on the horizon, but the market remains biased to the upside.”

8.44am: Market makes strong start to the month

The FTSE 100 opened strongly as traders shrugged off concerns over the COVID-19 delta variant and decided instead to accentuate the positives.

Corporate news flow, meanwhile, increased from its late June trickle.

Leading the pack early on was Associated British Foods (LON:ABF). The owner of the Primark retail chain’s third-quarter figures were well received with the shares up 3.7% in the early exchanges.

“Primark is back with a bang after restrictions were eased and has taken over the heavy lifting which other parts of the group had assumed during the various lockdowns,” said Richard Hunter, head of markets at Interactive Investor.

“With revenues rising by 207% versus the previous year and now accounting for around 40% of the group total, this is an important return to form. In addition, there is still more to go for, with tourism travel and opening hours restrictions still in place.

“At the same time, the now profitable US business has added another store in Chicago, and the total Primark estate should reach 400 shops in the autumn.”

Sticking with the retail theme (in this case online sales of white goods), shares in AO World (LON:AO.) continued their dour year-to-date performance, falling a further 2.5% following the release of its prelims.

However, it is worth noting that the stock is still up around 400% from its March 2020 lows and significantly outperformed the FTSE 250 and its nearest competitors.

6.50 am: FTSE 100 set to open on the front foot 

The FTSE 100 is called slightly higher on Thursday as COVID-19 continues to worry.

“The moves reflected investor sentiment that’s been dampened in recent days by the spread of the delta variant of Covid-19 along with the fact that the global decline in cases we’ve seen since mid-April looks to have come to a stop now,” analysts at Deutsche Bank commented.

“Meanwhile growing concerns about the recovery in the second half have in turn reduced fears of an imminent withdrawal of monetary stimulus, with yesterday seeing fresh gains for sovereign bonds as investors pushed back the likely date of future rate hikes.”

“Data releases will potentially provide the next catalyst for markets, with the PMIs and ISMs out from today, before we get the all-important US jobs report tomorrow.”

In fact, on the calendar, we have UK manufacturing PMI, US jobless claims and US manufacturing PMI.

Spreadbetter IG is expecting London’s main index to open 5 points higher on Thursday morning.

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mostly lower on Thursday as Chinese factory activity growth slowed in June.

The Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) for June came in at 51.3, lower than May’s 52.0.

In Japan, the Nikkei 225 fell 0.43% and South Korea’s Kospi declined 0.43%.

The Shanghai Composite in China rose 0.23% while Hong Kong’s Hang Seng index slipped 0.57%

Shares in Australia dipped, with the S&P/ASX 200 trading 0.52% lower.

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