London close: Stocks finish stronger ahead of Powell speech
London stocks closed in positive territory on Tuesday, underpinned by a strong showing in the property sector, as investors got their trades in ahead of a speech by US Federal Reserve chair Jerome Powell.
The FTSE 100 ended the session up 0.39% at 7,090.01, and the FTSE 250 was 0.99% firmer at 22,679.64.
Sterling was in the red, meanwhile, last trading 0.11% weaker against the dollar at $1.3918, and losing 0.04% on the euro to change hands at €1.1686.
“Yesterday’s exuberance has cooled off ahead of Powell’s testimony tonight, but since this week appears to be mainly about walking back some of the views expressed in the FOMC it is likely a supportive atmosphere for risk assets will remain in place,” said IG chief market analyst Chris Beauchamp.
“Equity markets continue to make gains while in forex markets the likes of the euro, sterling and the Loonie are making some cautious headway against the greenback, which has found itself becalmed following last week’s bounce.”
Beauchamp said that after last week’s Fed and options expiration caught an extended market napping, adding that now that investors had been jolted out of complacency, the rally could resume once more.
“From the looks of things so far this week, fresh record highs for key indices might not be too far away.”
On the economic front, UK manufacturing output surged at the fastest rate on record in the last quarter, as the economy continued to open up.
According to the latest CBI Monthly Industrial Trends Survey, output volumes in the three months to June grew at the fastest pace since 1975, when the Confederation of British Industry’s records began.
The net balance was +37, compared to +18 in May.
Growth was driven primarily by high demand in two sub-sectors: motor vehicles and transport, and food, drink and tobacco.
In total, 15 of the 17 sub-sectors saw output increase.
“There is a real sense of optimism from many in the sector that there are good times ahead,” said Tom Crotty, group director at chemicals firm Ineos and chair of the CBI Manufacturing Council.
“However, the picture is not all rosy, with firms continuing to face difficulties arising from supply chain disruptions and cost pressures.
“Staff shortages are also causing issues for many.”
Supermarket sales, meanwhile, eased over the last three months as shoppers made more regular trips, but spent less.
According to the latest figures from retail consultancy Kantar, take-home grocery sales fell 1.6% in the 12 weeks to 13 June year-on-year, although they remained £3.3bn higher than the same period in 2019.
Since last year, there has been a 13.1% hike in the number of shopping trips made each month by UK households, but the average spend per trip has declined 13.6%.
Kantar said the data indicated that shoppers were returning to the "more typical" shopping patterns seen before the pandemic.
However, Fraser McKevitt, head of retail and consumer insight at Kantar, added a note of caution.
"While it’s encouraging to see shoppers returning to the habits of old, there is still a way to go before the market entirely returns to normal," he said.
"That’s demonstrated by the fact sales were still £3.3bn higher than in 2019, before the pandemic hit.”
Finally, UK government borrowing was lower than expected in May as the reopening of the economy supported government receipts and the state spent less than forecast.
Public sector net borrowing, excluding public sector banks, was £24.3bn, the Office for National Statistics estimated.
Borrowing was £19.4bn less than a year earlier and better than the £28.5bn forecast by the Office for Budget Responsibility.
Analysts had expected borrowing of £25.5bn on average.
“Public borrowing is continuing to decline more rapidly than the OBR expected, with the main measure of borrowing in May undershooting its £28.5bn forecast by £4.2bn,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
In equity markets, commercial landlords British Land and Land Securities rallied 4.72% and 3.19%, respectively, after an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan, which argued that UK retail was turning a corner.
Hammerson and Shaftesbury followed suit, advancing 0.28% and 2.85%.
Shell rose 2.77% and BP gushed 1.85% higher, after crude oil prices breached $75 a barrel for the first time in two years.
GKN owner Melrose Industries rose 2.53% after it said it will return around £730m in cash to shareholders after completing the sale of its Nortek Air Management business.
On the downside, packaging group DS Smith fell 1.71% after it said the current financial year had started well, but reported a sharp drop in annual profit caused mainly by higher costs and lower prices during the pandemic.
Rolls-Royce reversed earlier gains to close down 0.97%, after Bloomberg reported earlier that private equity firms Bain Capital and Cinven were battling it out in the final bidding for its ITP Aero division, which could fetch around €1.5bn.
Aston Martin Lagonda was also in the red, losing 1.63% after saying it was suing Swiss car dealer Nebula Project and its board members for failing to pay some customer deposits for orders of the £2.5m Valkyrie sports car.
It said that would dent full-year profits by up to £15m.
FTSE 100 - Risers
British Land Company (BLND) 519.20p 4.72%
Land Securities Group (LAND) 703.40p 3.19%
Royal Dutch Shell 'B' (RDSB) 1,400.20p 2.77%
Melrose Industries (MRO) 162.40p 2.53%
Flutter Entertainment (CDI) (FLTR) 13,955.00p 2.38%
Glencore (GLEN) 308.40p 2.11%
Scottish Mortgage Inv Trust (SMT) 1,275.00p 2.04%
Royal Dutch Shell 'A' (RDSA) 1,452.60p 2.01%
BP (BP.) 322.70p 1.85%
Burberry Group (BRBY) 2,256.00p 1.58%
FTSE 100 - Fallers
Hargreaves Lansdown (HL.) 1,588.00p -2.64%
Smith (DS) (SMDS) 425.00p -1.71%
International Consolidated Airlines Group SA (CDI) (IAG) 194.60p -1.62%
Prudential (PRU) 1,435.00p -1.48%
GlaxoSmithKline (GSK) 1,394.80p -1.43%
Standard Chartered (STAN) 466.10p -1.17%
Phoenix Group Holdings (PHNX) 693.60p -1.03%
Rolls-Royce Holdings (RR.) 108.20p -0.97%
Legal & General Group (LGEN) 269.40p -0.96%
Entain (ENT) 1,821.50p -0.74%
FTSE 250 - Risers
Sirius Real Estate Ltd. (SRE) 110.80p 7.20%
Travis Perkins (TPK) 1,723.00p 6.71%
Beazley (BEZ) 340.90p 6.17%
Grafton Group Ut (CDI) (GFTU) 1,183.00p 5.42%
Restaurant Group (RTN) 129.60p 5.39%
C&C Group (CDI) (CCR) 248.00p 4.64%
IWG (IWG) 303.80p 4.28%
Future (FUTR) 3,166.00p 4.19%
888 Holdings (888) 398.80p 4.18%
Apax Global Alpha Limited (APAX) 204.00p 3.83%
FTSE 250 - Fallers
Network International Holdings (NETW) 373.00p -3.37%
Capita (CPI) 39.82p -3.07%
SSP Group (SSPG) 295.20p -2.41%
Mitie Group (MTO) 68.40p -2.29%
CMC Markets (CMCX) 445.00p -2.20%
Dixons Carphone (DC.) 124.50p -2.12%
Mediclinic International (MDC) 312.80p -1.64%
Aston Martin Lagonda Global Holdings (AML) 1,898.50p -1.63%
Hochschild Mining (HOC) 158.40p -1.61%
Micro Focus International (MCRO) 501.20p -1.49%