London close: Markets finish Friday with modest gains
London stocks sneaked into the green by the close on Friday, as investors digested news that public sector net borrowing in the UK rose sharply in June and continued to react to Fed developments stateside overnight.
The FTSE 100 was up 0.21% at 7,508.70, while the pound was down 0.39% against the dollar at $1.2500 and 0.13% firmer versus the euro at €1.1140.
Stocks had started the day firmly in positive territory, amid rising expectations of a rate cut from the Fed after New York Fed President John Williams said in a speech on Thursday that policymakers could not wait for economic disaster to strike before adding stimulus.
In addition, Fed Vice Chairman Clarida said the central bank needs to act quickly when the need for stimulus arises.
However, a spokesperson for the Fed was quick to clarify Williams comments.
Speaking to CNBC, he said: "This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting."
“While it is looking increasingly certain that the Fed will probably cut rates this month, it is stretching credibility to suggest that they will cut by 50 basis points, something markets are assigning an almost 50% probability of happening,” said CMC Markets analyst Michael Hewson earlier.
“Quite simply the data in no way supports such drastic action and while one could also argue the case that a 25bp cut isn’t needed either, it would now be major surprise were the Fed not to act, by at least shaving 25 points of the Fed funds rate on the 31 July."
Borrowing figures from the Office for National Statistics took the early shine off markets as they showed an unexpected increased to £7.2bn in June - the highest level for that month in four years.
Public sector net borrowing excluding public sector banks increased by £3.8bn from June 2018 as the government paid more to borrow and increased public spending.
The £7.2bn figure for June 2019 was the highest June borrowing since 2015 and was well ahead of economists' average forecast of £3.9bn.
An extra £2.1bn was paid in interest, but excluding that volatile measure and extra EU payments the UK still borrowed £1.3bn more than a year earlier.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the underlying figures were "not pretty" and suggested the economy was flagging.
In London equity markets, miners were on the rise as copper prices advanced, with Antofagasta, Anglo American and Rio Tinto all higher, by 3.94%, 2.27% and 1.49% respectively.
Acacia Mining shares surged 19.29% as it agreed to be bought by Barrick Gold in a deal that values the UK gold miner at about £951m and concludes two months of fractious talks between the companies.
Aston Martin Lagonda was a high riser, adding 3.5% after its biggest shareholder, Strategic European Investment Group, offered to buy a further 3% stake in the car maker.
On the downside, advertising giant WPP was off 2.24% after French peer Publicis cut its revenue target for the year.
Merchant bank Close Brothers was 3.51% weaker as it said it has continued to deliver a “solid” performance amid “mixed” trading conditions, with loan book growth in its banking division but lower trading volumes in its securities arm.
Paper and packaging group DS Smith retreated 1.71% as the Competition and Markets Authority said Liqui-Box’s proposed takeover of its rigid and flexible packaging business could leave food and drink suppliers worse off.
The two companies will now need to address the CMA’s concerns or the deal will be referred for an in-depth investigation.
Paper companies were weaker generally, with Smurfit Kappa down 0.7% and Mondi off 0.93% after Finnish paper manufacturer Stora Enso reported a decline in second-quarter profits amid weaker demand.
In broker note action, Superdry and Ted Baker were initiated at ‘overweight’ and ‘equalweight’, respectively, by Morgan Stanley, while Asos was cut to ‘equalweight’ at Barclays.
EasyJet was boosted to ‘hold’ at HSBC.
FTSE 100 - Risers
TUI AG Reg Shs (DI) (TUI) 804.00p 5.13%
Ocado Group (OCDO) 1,194.50p 4.73%
Antofagasta (ANTO) 934.00p 3.94%
Johnson Matthey (JMAT) 3,117.00p 2.33%
Anglo American (AAL) 2,234.00p 2.27%
Vodafone Group (VOD) 129.48p 2.03%
Sainsbury (J) (SBRY) 205.10p 1.94%
NMC Health (NMC) 2,300.00p 1.86%
United Utilities Group (UU.) 778.00p 1.78%
Just Eat (JE.) 626.20p 1.62%
FTSE 100 - Fallers
Fresnillo (FRES) 794.80p -2.29%
WPP (WPP) 916.80p -2.24%
Smith (DS) (SMDS) 356.90p -1.79%
Berkeley Group Holdings (The) (BKG) 3,763.00p -1.72%
International Consolidated Airlines Group SA (CDI) (IAG) 450.10p -1.29%
St James's Place (STJ) 1,098.00p -1.21%
Smurfit Kappa Group (SKG) 2,530.00p -1.17%
Royal Bank of Scotland Group (RBS) 228.10p -1.13%
Lloyds Banking Group (LLOY) 56.79p -1.05%
Unilever (ULVR) 5,016.00p -0.97%
FTSE 250 - Risers
Acacia Mining (ACA) 222.60p 19.29%
Kaz Minerals (KAZ) 581.00p 6.41%
Entertainment One Limited (ETO) 447.80p 4.38%
Oxford Instruments (OXIG) 1,350.00p 4.01%
GVC Holdings (GVC) 630.60p 3.21%
Morgan Advanced Materials (MGAM) 256.80p 3.13%
Bakkavor Group (BAKK) 112.00p 3.13%
SSP Group (SSPG) 701.00p 2.94%
Aston Martin Lagonda Global Holdings (AML) 990.40p 2.85%
Marston's (MARS) 125.00p 2.80%
FTSE 250 - Fallers
Amigo Holdings (AMGO) 160.60p -6.08%
Close Brothers Group (CBG) 1,400.00p -3.51%
Big Yellow Group (BYG) 998.00p -3.20%
Hilton Food Group (HFG) 922.00p -2.85%
Funding Circle Holdings (FCH) 120.40p -2.75%
Moneysupermarket.com Group (MONY) 360.10p -2.41%
Plus500 Ltd (DI) (PLUS) 654.20p -2.21%
TalkTalk Telecom Group (TALK) 106.70p -2.11%
Hill & Smith Holdings (HILS) 1,148.00p -2.05%
Woodford Patient Capital Trust (WPCT) 54.00p -2.00%