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London open: Stocks edge higher even as China claims US is ‘bullying’ it
Stocks were moving slightly higher on Thursday morning, with all eyes on the US central bank’s number two official and what he had to say regarding the outlook for monetary policy in the world’s largest economy, even as an official from China’s Ministry of Commerce said that “US bullying will eventually hurt itself” and that the country “won’t accept a deal that hurts its sovereignty or its pride”.
Fed vice-chairman, Richard Clarida, was set to speak at The Economic Club of New York, at 1800 BST.
Over the past several weeks, on the back of the escalating trade war between the US and China, fed funds futures had moved to price in a roughly 50% chance of two 25 basis point cuts in short-term official interest rates before the end of 2019, having previously factored in less than 50% odds of just one reduction.
Against that backdrop, as of 0852 BST, the top flight index was trading 22.30 points or 0.31% higher to 7,207.51. In parallel, futures on the S&P 500 were adding 11.25 points to 2,791.25 and the front month West Texas Intermediate crude oil futures contract was up by 0.81% to $59.29 on the ICE.
To take note of, on Wednesday evening the S&P 500 closed right atop its 200-day moving average, a level of so-called technical support often considered to be a good barometre of whether the underlying trend in stocks is ‘bullish’ or ‘bearish’.
In Asian trading, the Shanghai Stock Exchange’s composite index was down by 0.31% at 2,905.81, alongside a 0.15% dip in the US dollar in its cross against the yuan to 6.9044.
Commenting on the mood in markets, analysts at Rabobank could be heard telling clients: “Overall tone is going to be set by the one other set of fundamentals all markets revolve around: greed vs. fear. Will fear keep winning?”
In remarks to Bloomberg TV from China, Morgan Stanley chief, James Gorman, said that financial markets were “fragile” and that there was more news at present to be anxious about than not and labelled the inversion seen in the US Treasury yield curve “worrying”.
Nevertheless, he reportedly considered a “collapse” in the stock market to be unlikely and said that trade talks between Beijing and Washington were likely to resume as there was simply too much to lose on the table.
Other market pundits were also out overnight with similarly cautious assessment, with Bridgewater Associates founder, Ray Dalio, saying in a post on his LinkedIn account that the US-China stand-off was more than a “trade war”, adding that greater export controls would constitute a major escalation .
No major economic reports are scheduled for release in the UK.
In the US on the other hand, investors were waiting on figures covering weekly jobless claims, first quarter gross domestic product and foreign trade in April.
Across the Channel, Spanish harmonised CPI data were set for release at 0800 BST. As well, Italy’s Five Star movement has called an internal vote on Thursday on whether to keep Luigi di Maio as head of the party.
“Mr. Di Maio will most likely win the vote, but this might not be enough to fully dispel the increasing tension among the movement’s MPs after its severe defeat on Sunday,” said analysts at UniCredit Research.
Several well-known corporates were set to start trading without the rights to their latest dividend on Thursday, including National Grid, Bank of Georgia, Whitbread, Spire Healthcare and Marks&Spencer.
Off to the races: FirstGroup at two-year high after announcing intention to sell Greyhound unit
First group delivered a better than expected full-year performance, on the back of strength in its North American operations outside of its Greyhound coach unit and announced the results of a wide-ranging strategy review, including the proposed sale of the iconic coach franchise in the States and the separation of its First Bus operations in the UK. The news sent First Group shares to their best level in approximately two years
De La Rue was the standout faller in the small cap space after posting a 78% drop in profits on the heels of exceptional charges linked to American sanctions on Venezuela and after its boss announced his intention to step down.
Speciality chemicals company Johnson Matthey posted a 53% rise in pre-tax profits as tighter regulation in Europe and China helped its clean air division. Profits came it at £523m on revenues of £10.7bn, up 5% as the company said it expected current year growth in operating performance at constant rates to be within medium term guidance of mid to high single digit growth.
Pennon dripped lower despite announcing its decision to bump up its final dividend by 6.0% in the wake of a 6.1% rise in its full-year underlying revenues, which drove a 7.2% jump in the water utility’s EBITDA.
Satellite communications giant Inmarsat announced on Thursday that Airbus Defence & Space had been selected as its satellite manufacturing partner, as part of the development of its ‘Global Xpress’ (GX) network. The FTSE 250 company said the partnership would provide a “step-change” in GX’s capabilities, capacity and agility for the benefit of existing and future Inmarsat customers, partners and investors.
TR Property Investment Trust reported a 5.8% improvement in its net asset value per share in its full-year results on Thursday, to 418.54p. The FTSE 250 firm said shareholders’ funds were also ahead 5.8% at £1.33bn in the year ended 31 March, with shares in issue at year-end totalling 317.4 million, in line with the prior year. Its net debt ratio stood at 10%, narrowing from 14.6% year-on-year.
