London midday: Investors brush-off warning that Bank Rate might be slashed to zero
Stocks were continuing to trade slightly higher come midday on the back of a record close overnight on the Dow Jones Industrials and continued hopes of looser central bank policies, even as a top Bank of England official said that Bank Rate might have to be cut nearly to zero in the event of a no-deal Brexit.
Speaking at Thomson Reuters in London, the BoE's Vlieghe said that under a no-deal Brexit scenario interest rates would need to be cut nearly to zero while if the UK did manage to clinch a deal then Bank Rate would likely rise to 1.7% in three years' time.
By noon, the FTSE 100 was advancing by 0.25% or 18.96 points to 7,528.82 even as cable was adding 0.09% to 1.25322, with gains for the currency coming amid speculation on the part of analysts at Goldman Sachs that the US might be tempted to push back on further dollar strength - by intervening in foreign exchange markets.
Acting as a backdrop, overnight the Dow Jones Industrials climbed 0.85% which saw it climb past the psychological 27,000 point level to 27,088.08 in anticipation of looser policy by the Federal Reserve, although some analysts were questioning the merits of a hypothetical cut in rates.
However, the positive impact on sentiment from gains in US shares was dulled by data on Chinese imports in June pointing to continued weakness in the Asian giant's domestic economy.
The year-on-year rate of contraction in Chinese imports eased from -8.5% for May to -7.3% in June (consensus: -4.5%).
Ahead of those figures, Singapore's highly-dependent export driven economy was reported to have shrunk at an annualised 3.4% quarter-on-quarter pace (consensus: +0.5%) in the second quarter of 2019.
As an aside, the data out of Singapore was in stark contrast with numbers out the day before showing that Irish GDP bounded ahead at a 2.4% pace in the first three months of 2019 following an expansion of 8.2% in 2018.
On a more positive note, US and Eurozone officials are making positive sounding noises around trade talks between the two blocs, with the US Trading Representative having reportedly said that it was in the interest of both to avoid an escalation.
Scheduled for release later in the day were factory gate price data in the US covering the month of June at 1330 BST.
M&A in focus: China's Fosun looking to take stake in Thomas Cook unit, WPP offloads to sell 60% of Kantar
British travel firm Thomas Cook announced on Friday that it was in "advanced discussions" with Chinese conglomerate Fosun regarding a £750m capital injection and the break-up of the group. The Chinese group's plan would see it take a controlling stake in Thomas Cook's tour operating business and a large interest in its embattled airline. A significant amount of Thomas Cook's external debt would also be converted into equity, lighting its debt burden.
WPP said it planned to sell 60% of its Kantar market-research business to US private equity company Bain Capital, valuing Kantar at $4bn. The advertising giant said it would retain around 60% of net proceeds to reduce debt, with the balance, around $1.2bn returned to shareholders.
Global fund management group Ashmore saw its assets under management jump again during the fourth quarter of its trading year, albeit by less than expected by some analysts and with maket performance accounting for a larger proportion of the improvement than anticipated. AuM grew by $6.5bn, which was a tad short of the $6.9bn that analysts at UBS had penciled-in and the split between net inflows and market performance was less positive than anticipated.
Hiscox on Friday said the insurance market continued to deteriorate after 2018 catastrophes, as it forecast first-half pre-tax profits of $150m - $170m (£119m - £135m). The market was hit by events such as typhoon Jebi in Japan and hurricane Michael in Florida. Hiscox said the impact of reserve strengthening needed for those catastrophes would be around $40m.
Sales, marketing and support group DCC on the other hand said it had traded in line with expectations in the first quarter, with “good growth” in group operating profit, driven by acquisitions completed in the prior year. “DCC's profits are significantly weighted towards the second half of its financial year. At what is still a very early stage in the financial year, the group reiterates its belief that the year ending 31 March 2020 will be another year of profit growth and development,” the company said in a trading statement.
Cloud networking and cybersecurity services provider Sophos Group updated the market on its trading in the first quarter on Friday, reporting a 3% improvement on revenue year-on-year to $180.2m, or 7% at constant currency. The FTSE 250 company said it saw “strong” subscription revenue growth of 10% at constant currency in the three month period ended 30 June, which was offset by a reduction in hardware revenue of 11%.
FTSE 100 - Risers
Persimmon (PSN) 1,978.50p 3.97%
Smith (DS) (SMDS) 366.00p 2.95%
Taylor Wimpey (TW.) 165.40p 2.73%
Barratt Developments (BDEV) 629.68p 2.49%
Smurfit Kappa Group (SKG) 2,600.00p 2.28%
Antofagasta (ANTO) 872.00p 2.20%
Legal & General Group (LGEN) 272.30p 2.18%
BAE Systems (BA.) 502.40p 1.84%
Melrose Industries (MRO) 183.45p 1.80%
Mondi (MNDI) 1,759.00p 1.79%
FTSE 100 - Fallers
Hiscox Limited (DI) (HSX) 1,670.00p -4.24%
Just Eat (JE.) 616.20p -1.69%
Severn Trent (SVT) 2,039.00p -1.26%
Auto Trader Group (AUTO) 550.40p -1.22%
United Utilities Group (UU.) 776.40p -1.17%
Diageo (DGE) 3,395.50p -1.14%
Coca-Cola HBC AG (CDI) (CCH) 2,698.00p -0.74%
Hargreaves Lansdown (HL.) 2,007.50p -0.67%
National Grid (NG.) 834.90p -0.67%
Standard Chartered (STAN) 716.00p -0.64%
FTSE 250 - Risers
Sirius Minerals (SXX) 16.73p 5.29%
Dixons Carphone (DC.) 120.95p 4.31%
Sophos Group (SOPH) 429.50p 4.07%
Ascential (ASCL) 374.00p 3.89%
Syncona Limited NPV (SYNC) 238.88p 3.86%
Crest Nicholson Holdings (CRST) 366.40p 2.98%
Bellway (BWY) 2,838.00p 2.86%
Kaz Minerals (KAZ) 539.20p 2.47%
Hays (HAS) 151.40p 2.44%
Renishaw (RSW) 3,872.00p 2.38%
FTSE 250 - Fallers
Funding Circle Holdings (FCH) 122.37p -4.55%
TI Fluid Systems (TIFS) 187.80p -3.79%
Senior (SNR) 211.20p -2.94%
Pagegroup (PAGE) 413.00p -2.82%
Ted Baker (TED) 832.50p -2.17%
Drax Group (DRX) 280.20p -1.75%
Pennon Group (PNN) 737.80p -1.57%
Beazley (BEZ) 550.00p -1.52%
IP Group (IPO) 71.20p -1.52%
Hikma Pharmaceuticals (HIK) 1,777.00p -1.50%