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London open: Stocks climb as Trump Trade looks back on
London stocks pinged higher on Friday to wipe out losses from the previous session as the pound was weaker against the dollar after the US Senate approved a budget plan for 2018.
At 0825 BST, FTSE 100 had gained 0.36% to 7,550.22, with sterling losing 0.3% against the greenback at 1.3123 but up 0.2% on the euro at 1.1123.
On Thursday, the Senate agreed a budget blueprint for fiscal 2018 allowing Republicans to pursue a tax-cut package without the need for Democratic support.
This deal essentially paves the way for a $1.5tn US tax cut package and, said analyst Mike van Dulken at Accendo Markets: “would represent the first major reform from President Trump’s administration following several stumbles, seen as supportive of US growth, Fed rate hikes and, of course, equity markets.”
As the London session develops the pound is likely to be buffeted by soundbites from the EU 27 summit in Brussels where Brexit will be discussed after UK PM May’s apparent lack of success in trying break the deadlock on negotiations.
Pressure on the pound was also coming from diminishing expectations for a November rate hike, after Wednesday’s decline in real wages, poor retail sales and comments overnight from Bank of England deputy governor Jon Cunliffe that cast further doubt on a November rate hike, as he argued that the UK is “not seeing sustained signs of domestic inflation pressure”.
Events in Spain will also be getting a side-eye, with a Saturday cabinet meeting in Madrid following on from the threat to re-imposing direct rule on Catalonia following the autonomous region’s referendum.
Data-wise the public finances will be announced at 0930 BST, with public sector borrowing forecast to be slightly higher in September, continuing to increase again following the mid-year seasonal improvement.
Across the Channel, the eurozone current account is expected to show a smaller August deficit, reversing much of its recent rise, back around the 2017 average, with a potential knock-on for the single currency.
Looking at individual shares, mining heavyweights were leading the charge, with Anglo American, Antofagasta, Rio Tinto,
Glencore and BHP Billiton top of the leaderboard.
Fresnillo was a faller, however, after being downgraded by Credit Suisse.
Barclays was higher as a Berenberg upgrade came as news emerged that Red Kite, a hedge fund specialising in metals investments, was reported to have filed an $850m lawsuit against the bank, accusing it of causing it vast losses by front-running its trades in the copper market.
On the downside was Acacia Mining, a day after a deal to resolve its dispute with the Tanzanian government sent its shares shooting higher. The gold miner reported revenue down 40% for the third quarter and a much diminished cash balance.
InterContinental Hotels Group was lower despite reporting a third quarter of “good” performance, with revenue per available room up 2.3%. This meant for the year-to-date, revpar edged up 2.2% from 2.1% in the first half, including 1.5% in the second quarter.
