London close: Stocks rise after Fed minutes, but some traders wary

Stocks and Gilts rose, but prices for industrial metals and the US dollar retreated after the minutes of the US central bank’s policy meeting were released overnight.

The FTSE 100 index finished the day higher by 50.96 points, or 0.81%, at 6,329.93, with similar gains evident on the Continent. The second-tier FTSE 250 on the other hand advanced by a much smaller 0.33% to 17,144.72.

The initial reaction from many traders and economists to the Federal Reserve’s minutes was that a December interest rate hike was now quite possible, but for some – especially the former – apparently not certain.

Front-month Brent crude futures were essentially flat, after bobbing around all day, ending at $44.14 per barrel in ICE trading. Three-month copper futures lost another 0.5% to $4,612.5 per metric tonne in LME trading.

The yield on the benchmark 10-year Gilt retreated by four basis points to 1.89%.

Cable moved up 0.51% to settle at 1.5315 by the end of trading, despite weaker than expected data on retail sales and industrial orders. Dollar/yen, one popular gauge of investors’ risk-appetite, retreated 0.64% to 122.76.

Fed is not boxed into a rise

To take note of, speaking on Thursday afternoon the president of the US Federal Reserve bank of Cleveland, Loretta Mester, who is not a voting member of the FOMC this year, said the central bank had not painted itself into a corner for December.

Rather, said Mester, it was trying to be as transparent as possible.

At last count, Fed funds futures were pricing in about a 68% probability of a Fed hike at its 15-16 December meeting, up from 66% before the release of the minutes, according to Bloomberg data.

Speaking in the afternoon, the president of the Federal Reserve bank of Atlanta, Dennis Lockhart, said the normalisation of interest rates in the current cycle "might look somewhat different than one's sense of normal based on historic episodes of rising rates." Nonetheless, he said he was comfortable with raising interest rates "soon", adding that the national economy is on a reasonably solid trajectory.

US still opposed to al-Assad

Speaking from Manila, US president Obama reiterated the only way his country would coordinate attacks in Syria with Russia was if it refocused its own attacks against ISIS.

So far, Russian strikes have not been focused on Islamic State, he said, according to Bloomberg.

Retail sales miss forecasts, but no harm done

UK retail sales figures for October revealed a decline of 0.6% month-on-month. Economists had expected a 0.5% drop month-on-month following a surge in September.

"Below our expectations, but broadly in line with market expectations. Our baseline remains that private consumption growth should slow down slightly to +0.6% q/q in Q4 after +0.7% q/q in Q3," economists at Barclays said by way of reaction to the data.

FTSE 100: Johnson Matthey shows investors the money

Steady sailing was the theme for Johnson Matthey on Thursday morning, as it released its half-year results showing underlying revenue at the specialty chemicals firm was up 20% on the previous period, with total sales up 5% to £1.588bn. The company announced it would return £305m to shareholders via a special dividend, more than the roughly £250m some analysts had penciled in.

Building materials group CRH said sales in the nine months to the end of September rose 16% from last year, as it reiterated its guidance that 2015 will be a year of growth thanks to continued positive momentum in the Americas. Cumulative sales from continuing operations increased to €15.5bn (£10.8bn), while earnings before interest, taxes, depreciation and amortisation were up 34% to €1.5bn.

Meggitt won a multi-million dollar contract to provide the cargo smoke detection system (CSDS) for the Boeing 777X aircraft. The company did not give a specific value on the contract. Production will start in 2017 from Meggitt's facility in Simi Valley, California to meet entry into service in 2019.

Australia’s competition watchdog approved the proposed merger of Royal Dutch Shell and BG Group, leaving just two more major regulatory hurdles and shareholder approval of both companies. The Australian Competition and Consumer Commission (ACCC) rubber-stamped Shell’s $47bn cash and share takeover offer of BG Group late on Thursday morning (Wednesday night UK time).

Revenues were flat at Royal Mail in the first half as UK and European parcel growth offsett letters weakness, while the focus on costs saw group operating profit flat. Adjusted profit before tax down 16.4%.

FTSE 250: Poundland weighed down by poor results, Qinetiq up

Poundland shares were pounded after a poor half-year result. The single-price retailer’s underlying results for the period ended 27 September were largely disappointing, with like-for-like sales down 2.8% and EBITDA down 18.5% to £16.5m. Pre-tax profits were down a sizeable 26.3% to £9.3m in the period.

Half year profits rose at Defence products group QinetiQ despite a severe fall in its order intake during the period. The company said pretax profits rose to £48.3m from £44.4m last time with revenues up to £370.9m from £365.6m.

Shares in Bovis Homes slumped almost 10% early on Thursday after the home builder revealed its mix of homes for 2015 will be more weighted to existing sites than previously expected.

Domino’s Pizza announced chief financial officer Paul Doughty was leaving the company and stepping down from the board at the end of the year.The company said he had tendered his resignation after just five months in the role.

Investors also had confidence in Investec after interim operating profits at the South African bank rose 16.5% year-on-year to £315m, despite the falling rand.

Drax rebounded after earlier falls on Wednesday following Energy Secretary Amber Rudd’s new policy to phase out coal power by 2025.

Market Movers

FTSE 100 (UKX) 6,329.93 0.81%
FTSE 250 (MCX) 17,144.72 0.33%
techMARK (TASX) 3,170.83 0.71%

FTSE 100 - Risers

Johnson Matthey (JMAT) 2,694.00p 9.65%
CRH (CRH) 1,875.00p 5.46%
Royal Mail (RMG) 476.70p 4.95%
Hikma Pharmaceuticals (HIK) 2,110.00p 3.03%
Sage Group (SGE) 562.50p 2.93%
Randgold Resources Ltd. (RRS) 4,043.00p 2.80%
Hammerson (HMSO) 612.00p 2.51%
Kingfisher (KGF) 356.40p 2.06%
Ashtead Group (AHT) 1,052.00p 2.04%
Experian (EXPN) 1,217.00p 2.01%

FTSE 100 - Fallers

G4S (GFS) 225.80p -2.88%
Imperial Tobacco Group (IMT) 3,499.00p -1.99%
Berkeley Group Holdings (The) (BKG) 3,093.00p -1.47%
Persimmon (PSN) 1,840.00p -1.34%
Vodafone Group (VOD) 221.50p -1.12%
Lloyds Banking Group (LLOY) 73.38p -0.84%
Rolls-Royce Holdings (RR.) 541.00p -0.37%
Burberry Group (BRBY) 1,279.00p -0.23%
Taylor Wimpey (TW.) 185.30p -0.22%
Royal Bank of Scotland Group (RBS) 315.20p -0.19%

FTSE 250 - Risers

QinetiQ Group (QQ.) 260.10p 10.35%
Nostrum Oil & Gas (NOG) 366.00p 6.24%
Investec (INVP) 542.00p 6.07%
Acacia Mining (ACA) 170.80p 5.37%
Drax Group (DRX) 228.10p 5.07%
Petra Diamonds Ltd.(DI) (PDL) 60.50p 4.40%
Atkins (WS) (ATK) 1,530.00p 3.52%
Vesuvius (VSVS) 350.90p 3.48%
Spectris (SXS) 1,704.00p 3.34%
Intermediate Capital Group (ICP) 595.50p 3.21%

FTSE 250 - Fallers

Poundland Group (PLND) 222.70p -20.06%
Bovis Homes Group (BVS) 904.00p -8.59%
Ophir Energy (OPHR) 90.60p -6.55%
Virgin Money Holdings (UK) (VM.) 353.00p -5.61%
Aldermore Group (ALD) 262.30p -5.31%
Paragon Group Of Companies (PAG) 402.50p -4.49%
Spire Healthcare Group (SPI) 287.50p -4.42%
OneSavings Bank (OSB) 391.20p -3.55%
Redefine International (RDI) 52.25p -3.24%
Tullett Prebon (TLPR) 347.30p -2.80%