FTSE 100 closes firmly higher as stocks boosted by weaker pound

  • FTSE 100 closes up 88 points
  • US stocks higher too
  • The UK services PMI falls to 40-month low, manufacturing also dips
  • European PMI data shows services weakening

5.30pm: FTSE 100 closes up

FTSE 100 jumped back into positive territory on Friday, closing firmly higher, with its dollar earning constituents bolstered by the weaker pound.

Britain's blue-chip index closed up around 88 points at 7,326.

The FTSE 250 higher too, adding over 115 points to stand at 20,485.

On the week as a whole, FTSE was also up – around 0.32%.

Against the US dollar, sterling dropped 0.62% as traders sold off the currency following disappointing UK private sector data for this month, while in the US, factory and services sector activity picked up in November.

"Equities are advancing once more, bolstered by hopes that a China trade deal is still a possibility before the end of the year," noted Chris Beauchamp, the chief market analyst at IG"

" 'Very close could mean a variety of things, but it was enough to create a more positive outlook for equities. Some of that was however diminished following suggestions that the Federal Communications Commission will vote to designate Huawei and ZTE as security risks. There is still plenty that can go wrong where trade talks are concerned. Low readings in volatility continue, with the bounce earlier in the week being mostly faded, and as a result downside for stocks continues to be limited."

On Wall Street, the Dow Jones Industrial Average added over 76 points at 27,843. The S&P 500 added around three to 3,107.

4pm: FTSE keeps up gains

The FTSE kept up the days gains, as sterling stayed weak and boosted the clue chip index.

The pound plummeted today after UK PMI surveys showed the crucial services sector slowed in November, while the manufacturing decline continued.

“Nasty, nasty numbers,” said Connor Campbell at Spreadex, “so bad that sterling was swiftly booted into the red.”

The FTSE 100 was up 1.4% or 101 points at 7,339

But marketwatchers are likely to be retained on politics this evening, as candidates for the UK general election are due to speak at 7pm tonight.

Boris Johnson, Jeremy Corbyn, Nicola Sturgeon, and Jo Swinson will appear in a leaders television special ahead of the 12 December election.

Ahead of the big event, Welsh party Plaid Cymru unveiled their manifesto, promising investment in rail and bus travel and a new offshore wind farm.

The Brexit Party unveiled policies including a cap on permanent immigration and a large-scale tree planting programme.

Andy Scott at JCRA said: “The outlook for sterling meanwhile very much hangs on the outcome of the election, with the currency reacting positive to a number of voting intention polls that give the Conservatives a double-digit lead over the Labour party.

A Conservative majority government is “seen as a positive for the currency”, with a Labour outcome potentially risky for the economy, while “prolonging the Brexit uncertainty through another renegotiation of the withdrawal agreement.”

3.30pm: US and China make positive noises over trade deal

London's blue-chip index made the most of the pound's downward spiral, outstripping its morning gains.

The pound fell against the dollar after weak manufacturing and services data this morning, boosting the FTSE 100 index.

Miner Glencore led the pack, with a rise of almost 4% on renewed hopes for world trade.

Pharma giant AstraZeneca PLCs (LON:AZN) was also jostling not far behind with 2% higher stocks, as markets were impressed by FDA approval for its leukaemia drug.

The FTSE 100 rose 100 points to 7,339, or 1.4%, which will be the best day on the London market since July if it can cling on to gains today.

Meanwhile across the pond, Wall Street bounced higher on trade hopes.

In the US, President Donald Trump added fuel to China trade optimism saying that a deal is “potentially very close” following worries that a deal might not be reached before the year is out.

“The bottom line is, we have a very good chance to make a deal,” Trump said on television programme “Fox and Friends,” one day after the House Democrats finished its second week of public impeachment hearings.

The Dow jumped 0.3% to 27,849.81 points.

1.45 US to open high on China trade optimism

Wall Street looks ready to rebound after three consecutive days of losses as traders look for clarity about US-China trade negotiations.

Chinas President Xi Jinping drove optimism in the markets when he was quotes as saying during a forum in Beijing: “We want to work for a Phase 1 agreement on the basis of mutual respect and equality.”

Hopes of a deal continue to look fragile, with Donald Trump soon expected to pass a bill intended to support protesters in Hong Kong, which has already been approved by Congress, which is likely anger China.

Xi added that China would “fight back” if necessary, but said that they have been “working actively to try not to have a trade war.”

Talking heads expect a jittery session on Wall Street as US and China continues to unnerve traders.

“Despite expectations that Trump will sign a pro-activist Hong Kong bill, we have heard from Xi Jinping overnight who stated that they still hope to put together a phase one deal,” said Joshua Mahony at IG.

He added: “Ultimately, we will need to see a shift on the US side, with the removal of tariffs key to getting that deal across the line.”

US economic data may also continue impacting trade after yesterdays employment data marked the most jobless claims in five months.

Futures for the Dow Jones trickled up 52 points in pre-market trading to 27,800 points.

The FTSE 100 also kept climbing, led by biggest riser Centrica PLC (LON:CAN), which gained almost 4% as it continued its rally from yesterday.

The blue chip index was up 1.35% at 7,336.16 points.

11.30: Sterling weakens against the dollar on bleak economic data

The Footsie continued its rise after bleak economic data prompted the pound to fall below $1.29 handle.

The first ever flash PMI readings for the UK showed a contracting level of activity for both the manufacturing and services sector.

“Looking under the hood we can see further signs for concern, with drops in output and new orders and while this could be explained away due to the heightened political uncertainty ahead of next months election there is little doubting the fact that the UK economy has pretty much ground to a halt,” said David Cheetham at XTB.

Eurozone PMIs were more of a mixed bag, with declines in the services sector somewhat offset by better-than-feared manufacturing figures.

Andy Scott, associate director at JCRA, added: “sterling reacted negatively to todays data which points to economic activity declining in November, as it supports the case made by two MPC members who voted for a rate cut last month.”

The BoE's decision to keep interest rates steady was marred by two dissenters on the committee, who voted to follow US's lead and cut interest rates.

Elsewhere, European markets gained ground in Germany and France, but in general there was a muted reaction to the first appearance of the new ECB governor, Christine Lagarde, who kept talk pretty vague with few big ticket announcements to drive markets.

The former French finance minister encouraged governments to hike spending, said there is “a cross-cutting case for investment in a common future” as growth and investment slow.

Lagarde said that traders will get to hear about plans for monetary policy when an impending strategy review is presented at the next ECB meeting in December.

The FTSE rose 71 points, or 0.98% to 7,309.82.

10.20 Footsie jumps at sharp drop in UK private sector

The Footsie took a disappointing set of macro data releases in its stride, as traders returned to reading the US-China trade talk tea leaves.

Londons index of large-cap shares was up 68 points at 7,306, helped by sterling losing around a third of a cent against the US dollar.

The IHS Markit / CIPS Flash UK Composite PMI (Purchasing Managers Index) releases did not make for pretty reading.

The headline Composite Output Index – which is based on about 85% of the usual monthly replies – registered 48.5 in November, down from 50.0 in October and below the crucial 50.0 no-change value.

Reports from survey respondents largely attributed weaker domestic economic conditions to a lack of clarity concerning Brexit, alongside a fresh injection of business uncertainty from the forthcoming general election. IHS Markit reported.

In the manufacturing sector, there were also reports that customer overstocking ahead of the Brexit deadline on 31st October had acted as a headwind to production volumes in November, the market research firm added.

“With an upcoming general election adding to Brexit-related uncertainty about the outlook, its no surprise to see UK businesses reporting falling output and orders in November,” said Chris Williamson, the chief business economist at IHS Markit.

“The decline signalled by the flash PMI follows stagnation in October and adds to what has been the surveys worst spell since the recession of 2008-9.

"The weak survey data puts the economy on course for a 0.2% drop in GDP [gross domestic product] in the fourth quarter, and also pushes the PMI further into territory that would normally be associated with the Bank of England adding more stimulus to the economy,” Williamson noted.

"While Brexit issues such as stock-building and car factory closures have led to volatile GDP data so far this year, making monetary policymaking especially difficult and encouraging the Bank of England to sit on its hands until the fog clears, the PMI surveys are not only warning that the underlying trend in the economy is deteriorating markedly, but also that the labour market is cooling. A worsening jobs market has the potential to feed through to weaker consumer spending and slower wage growth, thereby undermining two of the key supports to the economy in recent months. The big question will be just how long can the Bank of England hold its nerve in keeping policy unchanged,” Williamson said.

Duncan Brock, the group director at the Chartered Institute of Procurement & Supply (CHIPS) chipped in with his comments.

“With the longest stretch of weak numbers for a decade, the headline figure is a sad sight to behold. New orders fell at the fastest pace since July 2016, as domestic and overseas clients, worn-out by continuing political indecision withdrew from the marketplace, reducing overall activity in the manufacturing and services sectors,” Brock said.

Our newly-released UK flash PMI data showed combined manufacturing and services output falling at the sharpest rate for over three years. Weakness notably evident in services, while stock-building ahead of Oct 31st was put into reverse in manufacturing.

— IHS Markit PMI™ (@IHSMarkitPMI) November 22, 2019

9.45am: The sharpest drop in UK private sector output since July 2016

Markit Economics said the UK Services Business Activity Index for November hit a 40-month low of 48.6, down from 50.0 in October.

The UK Manufacturing Output Index hit a two-month low of 48.3, down from 49.7 while the UK Manufacturing Purchasing Managers Index also fell to a two-month low, of 48.3, down from Octobers 49.6.

The UK Composite Output Index hit a 40-month low of 48.5, down from 50.0 the month before.

The FTSE 100 index was up 61 points (0.8%) at 7,299.

#Manufacturing #PMI in the United Kingdom decreased to 48.30 in November from 49.60 in October of 2019.#EURUSD #GBPUSD #FOREX #FUTURES #DGCX

— EGM Futures (@EgmFutures) November 22, 2019

8.50am: Cautious optimism over trade talks boosts the Footsie

Cautious optimism over the state of trade talks translated into a sharp jump in the FTSE 100, which looks set to finish the week on a high.

However, the mood could change dramatically if UK data on the manufacturing and service sectors later points towards recession.

“The uncertainty surrounding Brexit has caused an economic malaise in the UK, and investment has tapered off, so the reports will provide an insight into the health of the British economy,” said David Madden, an analyst at CMC Markets.

The miners, buoyed by trade hopes, were in demand with Chile-focused copper digger Antofagasta (LON:ANTO) leading the index with a 2.4% gain.

On the flipside, Fresnillo (LON:FRES), a silver miner, was hit by a fall in precious metal prices.

On the FTSE 250, Coats Group (LON:COA), the sewing thread specialist, tanked 12% after it sounded the earnings alarm.

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