FTSE 100 makes a positive start on what promises to be a slow day; Friday the 13th horror show for A

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  • FTSE 100 gains 29 points
  • Index hits one-year high
  • US stocks heading for muted open

New upwards momentum takes the Footsie close to its 17-month high, or in other words, the highest since before the worries about the coronavirus pandemic first slammed into the market last February.


Up 29 points or 0.4% to 7,222, the index is testing the 7224 high reached earlier in the session.


These highs come as investors continue to hold record levels of equities and pump money into “value trades”, especially stocks in the financial sector and in Europe, according to this week’s Flow Show report from Bank of American Merrill Lynch.


BoAML clients increased their allocation to equities up to a record high of 65%, with cash flowing into financial and basic materials shares during the past week, the weekly statistics showed.


The US$1.5bn of investment into European stocks being the largest inflow in eight weeks, Merrill calculated, while the financials sector has attracted US$2.6bn of inflows – the sector’s largest flow in ten weeks.


Looking at US stocks, the market is expecting a more muted close to the week, albeit still close to the new record highs hit overnight as investors cheered some benign US data and a blockbuster round of corporate earnings.


Futures for the Dow Jones Industrial Average were up less than 0.1% after hitting a record high in the previous session, while futures for the broader S&P 500 were roughly flat with the index having reached its 47th all-time closing peak of 2021 on Thursday. Futures for the tech-laden Nasdaq-100 were also up less than 0.1%.


Stocks have moved higher in thin summer trading thanks to solid earnings growth from some of the biggest US companies, even as worries over the coronavirus (COVD-19) Delta variant threaten to dull the economic recovery.


One risk is that, after recent benign jobs and inflation data, the Federal Reserve withdraws stimulus measures faster than investors are expecting. The latest data will see the release on Friday of the University of Michigan’s first gauge of consumer sentiment for August, which could show if rising COVID-19 cases have knocked consumer confidence.


10.53am: FTSE holds higher


The FTSE is being helped by the pound slipping to its lowest point in almost three weeks against the dollar, at 1.3804.


Weaker sterling helps London’s blue chips as so many of them are multinationals that earn most of their money overseas.


A disappointing week for the pound comes in spite of the strong rebound in the UK economy confirmed in the GDP figures yesterday, though Michael Hewson at CMC Markets pointed out that there were pockets of weakness in the numbers, notably in construction output, as well as the significant weakness in industrial production, with the “lumpy recovery” looking set to continue into the third quarter.


Michael Brown at Caxton FX said the decline today “appears to be a continuation of the modest dollar bull trend that appears to have embedded itself as a result of the market pricing a sooner than expected taper from the Fed”.


In company news, the biggest faller is Best of the Best PLC, which used to be best known for running competitions to win a sports car in airports and shopping malls.


A fortuitous move online resulted in business booming last year but the shares have collapsed 50% to 815p this morning after a profit warning on the back of a reduction in average weekly sales as people enjoy their refound freedoms and spend less time online playing competitions.


Another big faller is McColl’s Retail Group PLC after it raised GBP30mln in a heavily discounted placing to accelerate the roll-out of its store conversions to the Morrisons Daily format, which it says has been going very well and is “a transformational opportunity” amid the growth in the “food-led convenience” subsector.


9.34am: Footsie hits one-year high


London stocks remain in the green as they spring back from yesterday’s ex-dividend hit, with retail investor favourite Rolls-Royce Holdings top of the blue-chip leaderboard.


The Footsie earlier hit its one-year high, just above 7224. It’s lately slipped a bit, with a 22-point gain on the day to 7215.


It’s mid-cap sibling, the FTSE 250, is also on the up, continuing to hover around the new all-time high reached yesterday, up 40 points at 23,786.1.


One of those mid-caps not helping the index is Vectura Group PLC (AIM:VEC) after the board of the respiratory drug specialist seemed to have found the lure of Philip Morris’s cash too much and is recommending shareholders accept the cigarettes maker’s 165p per share offer, rather than the 155p from private equity group Carlyle.


Vectura’s directors, advised by JP Morgan Cazenove and Rothschild, were sent a strongly worded letter from groups including the Royal College of Physicians, Asthma UK and the British Lung Foundation raising ethical concerns about selling out to a tobacco giant.


They warned that the takeover would jeopardise Vectura’s “future commercial viability as a company dedicated to improving respiratory health”.


Elsewhere, says analyst Neil Wilson at Markets.com, “there is not a whole lot going on today and risk remains fairly muted as US 10yr yields hover around 1.34% and FX markets look reasonably calm”.


Exactly 50 years after President Nixon made the decision to close the gold window and end the Bretton Woods system of exchange rate management, gold bugs are enjoying further gains to US$1,760.


Wilson says notes this rise is in the wake of yesterday’s strong producer price inflation print in the US.


8.35am: Positive start


The FTSE 100 opened in positive territory as London’s traders ignored falls earlier in the day across Asia’s main markets.


The mood in the east was dampened by the spread of the Covid delta variant and a threatened regulatory clampdown by China.


In the Square Mile, it is expected to be a slow day. Certainly, corporate news flow has slowed to a mid-summer trickle, while trading volumes are set to be thin.


Against this backdrop, the Footsie opened 25 points higher at 7,217.94, while the FTSE 250 pushed further into record territory as it nudged 39 points higher to 23,786.23.


The morning’s big mover was Avon Protection (LON:AVON), which fell 18% in the early exchanges after the gas mask maker cut its revenue guidance.


Defence contractor Babcock (LON:BAB) sailed 5.5% higher after selling its consultancy business for GBP293mln.


6.50 am: Quiet end to the week predicted


On what is shaping up to be a quiet end of the week, London’s leading equities are set to open modestly firmer.


Spread betting quotes suggest the FTSE 100 will open 12 points heavier at 7,205 after a positive session yesterday on Wall Street.


Stateside, the Dow Jones put on 15 points at 4,461 and the S&P 500 rose 13 points to 4,461.


Asian markets are mixed this morning, with Japan’s Nikkei 22 points better at 28,037 and Hong Kong’s Hang Seng 189 points weaker at 26,329.


“It looks set to be a quiet day on the data front, with the only items of note being July import and export prices, and the latest University of Michigan Consumer Sentiment survey for August, along with the latest consumer inflation expectations surveys,” said CMC’s Michael Hewson.


On the corporate announcements thread, the cupboard looks similarly bare, with the first set of results from Thungela Resources PLC (LSE:TGA) since it demerged from Anglo American.


Even thermal coal miners have to bang the ESG (environmental, social and governance) drum these days; perhaps more so than other companies.


Expect lots of commentary on how the company is very important to the local economy in the interim results.


Around the markets


  • Sterling: US$1.3814, up 0.07 cents
  • Gilt: 0.603%, up 2.72 basis points
  • Gold: US$1,756.50 an ounce, up US$4.70
  • Brent crude: US$70.86 a barrel, down 45 cents
  • Bitcoin: US$45,262, up US$821

6.50am: Early Markets – Asia / Australia


Stocks in the Asia-Pacific region were mostly lower on Friday with shares of firms related to conglomerate Samsung declining after the firm’s heir was released from prison.


Samsung Electronics (KRX:005930) Vice Chairman Jay Y. Lee was released from prison after South Korea’s justice ministry announced earlier this week that he had qualified for parole.


The Shanghai Composite in China fell 0.34% and Hong Kong’s Hang Seng index dipped 0.91%


In Japan, the Nikkei 225 gained 0.07% while South Korea’s Kospi slumped 1.33%.


Shares in Australia rose, with the S&P/ASX 200 trading 0.48% higher.


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