London close: FTSE makes late rally as investors get FOMO

London stocks made a late rally on Tuesday as the pound flattened off and investors were gripped by a fear of missing out as Wall Street set a more upbeat tone.

The FTSE 100 climbed out of its earlier hole, eventually adding just over 30 points or 0.43% to finish at 7,059.4. Sterling, earlier up 0.6% against the dollar and the euro, lost momentum in the afternoon and just after the close had retreated to a 0.4% gain on the greenback at 1.3208 and 0.3% versus the single currency at 1.1396.

Data released earlier by the Office for National Statistics showed that British average weekly wages grew at the fastest pace since January 2009 in the three months to August, though employment levels did not improve as predicted.

An unexpected 5,000 decline in employment in the period, with economists having pencilled in a 15,000 increase, was not enough to move UK unemployment off its 43-year low of 4.0% in the three months to August.

UK average weekly earnings, excluding bonuses, rose 3.1% in the three month period, up from the 2.9% rate reported a month ago, which was forecast to be maintained. Adding bonuses into the calculation and average pay rose 2.7%, which was again better than the 2.6% seen a month ago that the market expected to be repeated, and equal to the level of CPI in August.

Fresher data from the ONS showed jobless claims in September of 18,500, more than double the number seen in August but still 2.6% of the workforce.

The labour report was undeniably good news, said currency strategist Jane Foley at Rabobank. "The data strengthens the perception that if it was not for political uncertainty there would be a strong case for the BoE to hike interest rates again before the end of this year.

"That said, political uncertainty looms large in the UK and, with no sign yet that the UK and the EU are ready to sign a post Brexit trade deal, the outlook for GBP is still littered by pitfalls."

Currency traders were looking ahead to Wednesday's EU summit in Brussels after Theresa May said on Monday that a Brexit deal now looks unlikely until December, as it may take "weeks" to break the deadlock in talks.

The Irish border remains the main sticking point in negotiations, with the EU wanting to keep Northern Ireland in the single market and customs union as a backstop in case no other solution is found during talks.

"If no deal were done, and the UK were forced to leave the EU without a deal in March 2019, not only would there be potentially severe disruption to trade, but the hard border the two sides are trying to avoid in Ireland might well go up anyway," HSBC said in a note. "So, by failing to reach an agreement to avoid the border, the two sides might actually end up forcing it to happen, and 21 months earlier than it would otherwise have done (because there would be no transition to end-2020 in this scenario). For this reason, we would expect some kind of agreement between the two sides by March 2019, even if it is only to extend the Article 50 negotiation period."

In corporate news, several sectors were swathed in green, with not a single share price in the red, including electronics and electricals, industrial engineers, support services and defence, with the Footsie led by many US-focused stocks lifted by Wall Street upbeat note.

Investors jump on the opportunity to buy into the weakness that has permeated through stock markets over the past week, said Joshua Mahony, market analyst at IG: "We have seen substantial gains today, providing traders with the feeling that they must get on board or risk missing out."

Housebuilder Bellway rose after reporting a jump in full-year profit and revenue as completions breached the 10,000 mark for the first time while defence contractor Meggitt surged as it upgraded its 2018 revenue guidance.

Ocado was the standout gainer among the blue chips after Bank of America Merrill Lynch double-upgraded the stock to 'buy' and said the online grocery specialist offered supermarkets a "unique" tool to combat Amazon. "We remain supportive of the online business model developed in the UK, flagging the unique shopping experience, high quality of service and strong proprietary technology behind it," Merrill said.

Drax rallied after announcing the acquisition of Scottish Power's portfolio of pumped storage, while Rio Tinto advanced after posting a 5% drop in third-quarter iron ore production.

Education publisher Pearson was trading higher ahead of its nine-month trading update on Wednesday. Broker Liberum noted that this is usually the point at which the company has greater visibility on the full year as the US higher education selling season comes to an end and it starts to get some visibility on the level of returns coming through in the market.

Johnson Matthey, which makes emission control technologies and is a supplier to Volvo, stalled after the Swedish manufacturer warned that some of its vehicle engines may exceed emissions limits.

British American Tobacco was lower after saying it cut its full-year revenue target for next-generation products, while Merlin Entertainments slid after revealed disappointing trading at its Legoland parks update.

Tesco slumped as the latest data from Kantar Worldpanel showed the supermarket chain lost more market share in the 12 weeks to 7 October, while Sainsbury's was also weaker as it was again found to be the slowest growing of the 'big four'. This was not surprising, said Russ Mould at AJ Bell, as the chain has been having "major issues with stock availability in its stores with countless pictures on social media showing empty shelves, meaning shoppers visiting its stores weren’t able to buy everything they wanted".

Meanwhile, there was a veritable avalanche of ratings changes on the broker note front.

Admiral gained after it was lifted to 'buy' at Goldman Sachs, Aggreko powered ahead after an upgrade to 'outperform' by RBC Capital Markets and Antofagasta was upgraded by both Peel Hunt and Macquarie.

British Land and Capital & Regional were both cut to 'hold' at Stifel, which downgraded Land Securities to 'sell' and upgraded LondonMetric, Shaftesbury and Workspace to 'buy'. Stifel also downgraded Superdry to 'hold'.

Charter Court Financial Services was initiated at 'buy' at Citi, while Close Brothers and Paragon were started at 'neutral'.

Following its profit warning on Monday, medical equipment maker Convatec was cut to 'neutral' by JPMorgan and Goldman Sachs.

Homeserve was started at 'buy' by Berenberg and upgraded to 'buy' at Citi, while Imperial Brands was initiated at 'outperform' by Bernstein. Intu was cut to 'neutral' at Citi, while JD Sports was rated new 'underweight' at Morgan Stanley and Just Eat was upgraded to 'hold' by Deutsche Bank.

PageGroup was raised to 'outperform' by Credit Suisse, while Smith & Nephew was cut to 'hold' at HSBC and SThree was downgraded to 'neutral' at Credit Suisse.

Market Movers

FTSE 100 (UKX) 7,059.82 0.44%
FTSE 250 (MCX) 19,149.87 1.84%
techMARK (TASX) 3,335.88 1.74%

FTSE 100 - Risers

Ocado Group (OCDO) 833.40p 5.52%
Ashtead Group (AHT) 2,061.00p 4.49%
Experian (EXPN) 1,809.50p 4.41%
Paddy Power Betfair (PPB) 6,555.00p 4.21%
Rolls-Royce Holdings (RR.) 897.80p 3.60%
Halma (HLMA) 1,302.86p 3.57%
Intertek Group (ITRK) 4,559.00p 3.40%
NMC Health (NMC) 3,182.00p 3.18%
Pearson (PSON) 817.40p 3.15%
Associated British Foods (ABF) 2,337.00p 3.13%

FTSE 100 - Fallers

British American Tobacco (BATS) 3,176.35p -4.64%
Tesco (TSCO) 208.90p -3.29%
Marks & Spencer Group (MKS) 285.80p -2.39%
Johnson Matthey (JMAT) 3,028.00p -2.16%
Imperial Brands (IMB) 2,533.50p -2.07%
Randgold Resources Ltd. (RRS) 5,990.00p -1.51%
GVC Holdings (GVC) 925.00p -1.33%
Glencore (GLEN) 315.05p -1.13%
Anglo American (AAL) 1,683.60p -1.01%
Sainsbury (J) (SBRY) 302.40p -0.98%

FTSE 250 - Risers

Contour Global (GLO) 176.90p 7.21%
Equiniti Group (EQN) 216.50p 7.18%
Meggitt (MGGT) 529.40p 7.06%
Kier Group (KIE) 920.50p 6.17%
Computacenter (CCC) 1,298.00p 6.05%
Capita (CPI) 129.85p 6.04%
Safestore Holdings (SAFE) 528.50p 5.83%
Greencore Group (GNC) 200.00p 5.76%
Spirax-Sarco Engineering (SPX) 6,525.00p 5.58%
Drax Group (DRX) 386.00p 5.46%

FTSE 250 - Fallers

Merlin Entertainments (MERL) 340.40p -7.93%
JD Sports Fashion (JD.) 395.60p -5.49%
BTG (BTG) 546.00p -3.11%
Kaz Minerals (KAZ) 491.30p -2.64%
Card Factory (CARD) 181.00p -2.58%
Brewin Dolphin Holdings (BRW) 318.80p -2.57%
Bakkavor Group (BAKK) 152.40p -2.56%
Thomas Cook Group (TCG) 45.96p -2.30%
Metro Bank (MTRO) 2,638.00p -1.93%
Ferrexpo (FXPO) 224.70p -1.83%