London close: Stocks track gains on Wall Street, Fed firmly in focus

London stocks finished near their session highs on Monday as investors began to entertain the apparently real possibility that rate-setters in the States might not be quite as hawkish as some market participants had been expecting.

Critically, last Friday the head of the Federal Reserve bank of New York, William Dudley, made the case for allowing prices to rise past the monetary authority's 2% target, arguing that it followed logically from the central bank's 'symmetric' inflation target.

Against that backdrop, the FTSE 100 was up 0.62% to 7,289.58, while the pound edged lower by 0.12% against the dollar to 1.3951 and by 0.13% against the European single currency to 1.1346, despite comments from Bank of England deputy governor Dave Ramsden and Labour leader Jeremy Corbyn.

In an interview with the Sunday Times, BoE Deputy Governor David Ramsden said he now sees a stronger case for lifting rates sooner than previously thought.

David Cheetham, chief market analyst at XTB, said: "Ramsden was one of only two members who voted against raising rates for the first time in a decade back in November, and this apparent hawkish shift in his views can be seen to suggest that there will be little opposition to further rate hikes going forward."

To take note of as well, speaking from Coventry, opposition leader Jeremy Corbyn expressed his support for a customs union with the European Union after Brexit, which he said would avoid the need for a hard border with Northern Ireland and allow free-flowing trade for business.

"Labour would seek a final deal that gives full access to European markets and maintains the benefits of the single market and the customs union [...] with no new impediments to trade and no reduction in rights, standards and protections," he said.

"We have long argued that a customs union is a viable option for the final deal. So Labour would seek to negotiate a new comprehensive UK-EU customs union to ensure that there are no tariffs with Europe and to help avoid any need for a hard border in Northern Ireland."

Investors were also digesting the latest figures from UK Finance, which showed mortgage approvals rose in January for the first time in four months, although lending to consumers fell. Approvals rose to 40,117 from a 56-month low of 36,085 in December, but consumer credit slipped 0.2% on an annual basis.

Howard Archer, chief economic advisor at the EY Item Club, said: "January's rebound in mortgage approvals suggests that there may have been a hit to activity in December as a reaction to the Bank of England raising interest rates in November. It is also possible that cutting stamp duty for first-time buyers in the Chancellor’s Budget may have provided limited support to mortgage approvals in January. It should be noted that housing market activity can be particularly volatile around Christmas and New Year.

“While January’s rebound in mortgage approvals suggests that December’s drop overstated the weakness of housing market activity, it is still subdued."

In corporate news, miners were up on the back of early selling in the dollar and stronger copper and steel prices. Anglo American topped the group as it announced the completion of the sale of its interest in the Drayton thermal coal mine in Australia.

Associated British Foods rose despite reporting a rare decline in like-for-like sales at its Primark retail arm in the first half of the year, as it said its full-year outlook was unaltered.

Vodafone also advanced after saying it will become Samsung's exclusive strategic telecoms partner in selected European markets, to develop and launch a range of consumer ‘internet of things’ (IoT) smart home product and services.

Veterinary products manufacturer Dechra Pharmaceuticals rallied as first-half revenues cantered in ahead of expectations, while Senior was on the front foot as full-year profit came in ahead of expectations and sales exceeded £1bn for the first time.

Events and business information provider Ascential gained after announcing a strong dividend hike and a review of its events business.

Turnaround specialist Melrose Industries edged lower despite saying that its hostile £7.4bn for GKN has received clearance from financial authorities in the US and Canada.

On the downside, Hiscox tumbled after the insurer posted a 91% drop in full-year pre-tax profit as it took a hit from natural catastrophes. "In a brutal year for insured catastrophe losses across the globe, Hiscox has delivered a fine underlying result," said broker Shore Capital.

Distribution and outsourcing group Bunzl reversed earlier gains even as it posted a 13% jump in full-year pre-tax profit thanks to recent acquisitions and a weaker pound.

Sub-prime lender Provident Financial was also under the cosh ahead of its preliminary full-year results on Tuesday and after reports in the Sunday newspapers that it has been sounding out investors about a "bumper cash call". The shares were coming off their lows later in the morning amid some optimistic broker comment.

Hammerson turned lower as the property development and investment company - which announced a £3.4bn takeover of Intu Properties in December - reported a rise in full-year pre-tax profit as net rental income jumped 7%. "It was a strong set of results from the real estate investment trust (REIT), but the industry as a whole is suffering from the rise in online shopping, as major retail parks are starting to become less relevant," said David Madden at CMC Markets.

Interserve retreated as the outsourcer was reported by the Sunday Telegraph to be "struggling" to put ­together a crucial debt refinancing deal after the collapse of Carillion spooked its lenders.

In broker note action, BP and Centrica were lifted to 'outperform' from 'sector perform' by RBC Capital Markets, while Jupiter Fund Management was downgraded to 'sell' at UBS.

Market Movers

FTSE 100 (UKX) 7,289.58 0.62%
FTSE 250 (MCX) 19,828.73 0.14%
techMARK (TASX) 3,330.80 0.32%

FTSE 100 - Risers

Anglo American (AAL) 1,844.20p 3.09%
Associated British Foods (ABF) 2,726.00p 3.06%
International Consolidated Airlines Group SA (CDI) (IAG) 602.80p 2.66%
BAE Systems (BA.) 577.60p 2.23%
Kingfisher (KGF) 360.30p 2.07%
easyJet (EZJ) 1,664.50p 2.02%
Pearson (PSON) 714.00p 2.00%
WPP (WPP) 1,381.50p 1.92%
St James's Place (STJ) 1,144.00p 1.92%
Unilever (ULVR) 3,843.50p 1.89%

FTSE 100 - Fallers

Hammerson (HMSO) 465.80p -2.18%
Bunzl (BNZL) 1,982.00p -1.79%
Evraz (EVR) 425.50p -1.55%
Mediclinic International (MDC) 600.00p -1.38%
Standard Life Aberdeen (SLA) 371.00p -1.36%
TUI AG Reg Shs (DI) (TUI) 1,529.50p -1.07%
Relx plc (REL) 1,502.00p -1.05%
Shire Plc (SHP) 3,002.50p -0.71%
Barclays (BARC) 208.50p -0.62%
Rentokil Initial (RTO) 292.00p -0.54%

FTSE 250 - Risers

Ascential (ASCL) 400.60p 5.92%
Sirius Minerals (SXX) 26.84p 4.84%
Metro Bank (MTRO) 3,802.00p 4.02%
Vedanta Resources (VED) 770.80p 3.77%
Wizz Air Holdings (WIZZ) 3,542.00p 3.60%
Genus (GNS) 2,316.00p 3.58%
Kaz Minerals (KAZ) 861.60p 3.19%
Vectura Group (VEC) 74.80p 2.98%
Ultra Electronics Holdings (ULE) 1,481.00p 2.85%
Ferrexpo (FXPO) 313.50p 2.75%

FTSE 250 - Fallers

AA (AA.) 75.70p -12.23%
Provident Financial (PFG) 588.00p -10.45%
Serco Group (SRP) 89.75p -4.77%
Capita (CPI) 176.15p -3.05%
Spire Healthcare Group (SPI) 236.40p -3.04%
Cobham (COB) 116.95p -2.94%
Mitie Group (MTO) 156.80p -2.85%
Phoenix Group Holdings (DI) (PHNX) 795.00p -2.45%
Royal Mail (RMG) 556.60p -2.35%
Aggreko (AGK) 773.20p -2.32%