London midday: Currency shifts send FTSE to two-week high

London stocks tickled a two-week high on Wednesday thanks to commodities strength and sterling weakness as traders chewed over the pace of central bank easing in coming months.

Not long after noon, the FTSE 100 was up almost 0.8% at 7,394.12 on the back of the pound falling to new eight-month lows against the euro earlier and dropping to its lowest against the dollar so far in July. The FTSE 250, which is more domestically focused than its larger sibling, was just above flat at just over 19,218.

Sterling was under pressure after dovish comments from Monetary Policy Committee member Ben Broadbent ahead of eagerly-awaited testimony from US central bank chief Janet Yellen later in the day.

In an interview with the Press & Journal newspaper, Bank of England deputy governor Broadbent sounded a cautious note, saying now was not yet the time for an interest rate hike. "In my opinion, it is a bit tricky at the moment to make a decision. I am not ready to do it yet," he said.

Broadbent was being seen as the proxy for whether the consensus has shifted and his comments suggest "there may still be some way to go", said market analyst Craig Erlam at Oanda, "although future MPC votes are likely to be very close".

The pound then received a boost as the UK unemployment rate edged down to a 42-year low, falling to 4.5% for the three months to May, down from the 4.6% the month before, where it had been expected to remain.

However, data from the Office for National Statistics showed wage growth remained soft, which prevented a bigger reaction from the pound.

But the weaker US dollar against most other major currencies was continuing to feed a rally in commodity prices, putting miners such as Antofagasta, Glencore and BHP Billiton at the top of the FTSE 100, while a resurgence in oil prices meant that BP and Shell were not far behind.

Burberry was top of the leaderboard however after releasing an encouraging first quarter update, with new chief executive Marco Gobbetti promising to create "new energy to drive growth". Retail was up 13% compared to the same period last year or up 3% on an underlying basis if currencies rates are ignored. Like-for-like retail sales rose 4%, accelerating from 1% in the last full year.

Barratt Developments was also on the up, continuing the recent run of strong updates from housebuilders with full-year profits ahead of expectations.

Discount retailer B&M was leading the mid-caps as it began its new financial year at an impressive pace, buoyed by strong sales of garden furniture in the recent hot spell. Total sales rose 18.3% to £656.3m over the three months to 30 June.

London-based property business Daejan's preliminary results said its investment property figure had risen to £2.26bn from £2.01bn at the same time last year, as profit before tax rose to £198.4m from £173.2m despite income falling to £64.8m from £68.2m.

Micro Focus shares were down more than 5% and are now 22% off their May all-time high as the software group posted full year adjusted numbers which had been well flagged earlier. Management confirmed the HPE Software reverse takeover is on track to complete on 1 September, while management also said they remained keen to continue to do more deals and see long term shareholder returns of 15-20%.

"I think the pro forma growth underwhelmed the market," said Jamie Constable at broker N+1Singer, who said the talk of more M&A to come when they haven’t even completed the HPE deal yet was likely to have put the willies up investors too.

Kingfisher was down despite a double upgrade from Morgan Stanley who put out a slightly cryptic note saying it still expects management's One Kingfisher plan to fail. "However, when this becomes clear, probably in 2018, we expect investors to start valuing the company on its assets, not its earnings," analysts said, but upgrading to 'overweight' as the shares "look cheap on that basis".

Later on Wednesday, traders' eyes turn to Janet Yellen and the Bank of Canada, as the Federal Reserve chair gives testimony to Congress and the latter announces its latest policy decision, providing plenty more grist for the market's mills, and for currencies in particular.

"Canadian dollar bulls have run rampant over the past two months, but with the news so widely-known an impact is likely to be muted," said Chris Beauchamp, senior market analyst at IG, "unless the central bank is much more hawkish than expected.

"Meanwhile, Janet Yellen might get some awkward questions about her future, as talk mounts that NEC chairman Gary Cohn is the current favourite to replace her."

Market Movers

FTSE 100 (UKX) 7,394.48 0.88%
FTSE 250 (MCX) 19,228.56 0.07%
techMARK (TASX) 3,477.66 0.11%

FTSE 100 - Risers

Antofagasta (ANTO) 852.00p 2.90%
Mediclinic International (MDC) 727.50p 2.61%
Glencore (GLEN) 314.70p 2.34%
BP (BP.) 452.45p 2.26%
Burberry Group (BRBY) 1,611.00p 1.96%
Royal Dutch Shell 'B' (RDSB) 2,092.00p 1.75%
Barclays (BARC) 209.25p 1.70%
BHP Billiton (BLT) 1,287.00p 1.70%
CRH (CRH) 2,801.00p 1.67%
Royal Dutch Shell 'A' (RDSA) 2,078.00p 1.64%

FTSE 100 - Fallers

Micro Focus International (MCRO) 2,066.00p -6.01%
Pearson (PSON) 625.50p -4.50%
Kingfisher (KGF) 295.70p -2.09%
easyJet (EZJ) 1,396.00p -1.41%
Marks & Spencer Group (MKS) 319.50p -1.11%
Next (NXT) 3,586.00p -0.86%
Provident Financial (PFG) 2,281.00p -0.70%
Taylor Wimpey (TW.) 177.50p -0.67%
BAE Systems (BA.) 622.50p -0.64%
Worldpay Group (WPG) 374.30p -0.45%

FTSE 250 - Risers

Evraz (EVR) 232.70p 4.73%
Hochschild Mining (HOC) 267.10p 3.81%
Daejan Holdings (DJAN) 6,410.00p 3.81%
Petrofac Ltd. (PFC) 458.00p 3.36%
Nex Group (NXG) 650.50p 3.34%
NMC Health (NMC) 2,141.00p 3.08%
Cairn Energy (CNE) 174.20p 3.02%
Petra Diamonds Ltd.(DI) (PDL) 103.80p 2.98%
Rotork (ROR) 239.50p 2.75%
Indivior (INDV) 307.70p 2.46%

FTSE 250 - Fallers

Carillion (CLLN) 69.85p -10.33%
Amec Foster Wheeler (AMFW) 425.30p -6.53%
Wood Group (John) (WG.) 591.00p -5.14%
Stagecoach Group (SGC) 178.60p -3.51%
Nostrum Oil & Gas (NOG) 430.00p -3.15%
Entertainment One Limited (ETO) 220.20p -2.61%
FirstGroup (FGP) 116.00p -2.52%
Fisher (James) & Sons (FSJ) 1,545.00p -2.34%
Greencore Group (GNC) 226.00p -2.21%
Dixons Carphone (DC.) 263.90p -2.19%