London open: Stocks jump on the back of Fed minutes, grim times ahead for copper

London investors reacted with glee to the gains seen overnight on Wall Street after the release of the last set of Fed minutes which appeared to point to a shallower path for interest rate increases over the coming year, although some traders were left harbouring doubts about the exact timing of the first rate hike by the US central bank.

As of 08:49 the FTSE 100 index was up 65.93 points, or 1.05%, taking it to 6,344.80, alongside similar gains over on the Continent.

Front-month Brent crude futures were also higher, tacking on 0.63% to $44.42 per barrel in ICE trading.

Other asset classes however reacted with far more calm. The yield on the benchmark 10-year Gilt was off by two basis points to 1.91% whereas cable was in fact higher by 0.26% to 1.5275.

Fed likely to raise rates in December

The summary of US rate-setters' debate about whether or not raise rates in October had a less hawkish bias to it than had been anticipated, leaving the door open to a tightening of monetary policy in December but seemingly also implying a shallower path of rate rises would follow thereafter, market watchers seemed to agree.

"The minutes suggest that the committee remains divided. However, since the time of the October meeting, we see them as having reached a broad consensus on a December rate hike," economists at Barclays said following the release of the minutes.

Deutsche Bank was of a similar view but added: "This doesn't mean to say that a hike wouldn't be a policy error and it'll be too early to conclude on this for sometime. Monetary policy works with a lag that can be around 1-2 years and we worry that with global nominal growth still so low, the Fed has left it rather late in the cycle to be hiking. In our minds we still see 2017-2018 as potential recessionary years which fits with the above."

In the run-up to yesterday's minutes three Fed speakers had weighed in seemingly favouring a rate rise in December, although - just the same as the Fed minutes - their remarks weren't unequivocally hawkish.

For example, as Michael Hewson, chief market analyst at CMC Markets UK pointed out: "New York Fed President William Dudley’s assertion that policymakers don’t really know the effect a rate rise would have on markets, doesn’t exactly inspire confidence."

On Thursday morning, the Bank of Japan announced its decision to stay put on monetary policy, as was widely expected.

UK retail sales, grim times ahead for copper ahead

UK retail sales figures for October were scheduled for release at 09:30. Economists expected a 0.5% drop month-on-month following a surge in September. In a contrarian vein, Barclays forecast a 0.2% gain on the month, thanks to the salutary effects of the Rugby World Cup over the first fortnight of last month.

To take note of, anlaysts at FC Stone told Bloomberg that the price of copper could slide a further 17% by next year,

“It’s grim-to-bleak, so the onus is on the supply side. The market needs to transition to a lower price point to force more cuts,” analyst Ed Meir told the newswire.

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 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 has 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 has 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

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.

Shares in Bovis Homes Group 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 has announced chief financial officer Paul Doughty is 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.

Market Movers

FTSE 100 (UKX) 6,334.44 0.88%
FTSE 250 (MCX) 17,148.79 0.35%
techMARK (TASX) 3,169.10 0.65%

FTSE 100 - Risers

Johnson Matthey (JMAT) 2,617.00p 6.51%
Royal Mail (RMG) 475.80p 4.76%
Glencore (GLEN) 96.70p 3.63%
CRH (CRH) 1,836.00p 3.26%
BHP Billiton (BLT) 905.90p 2.86%
Randgold Resources Ltd. (RRS) 4,031.00p 2.49%
Sky (SKY) 1,119.00p 2.47%
Shire Plc (SHP) 4,773.00p 2.14%
Anglo American (AAL) 458.75p 2.07%
Rio Tinto (RIO) 2,305.00p 1.97%

FTSE 100 - Fallers

Persimmon (PSN) 1,844.00p -1.13%
Imperial Tobacco Group (IMT) 3,539.00p -0.87%
Berkeley Group Holdings (The) (BKG) 3,115.00p -0.76%
Taylor Wimpey (TW.) 184.30p -0.75%
Whitbread (WTB) 4,475.00p -0.56%
Bunzl (BNZL) 1,868.00p -0.53%
Rolls-Royce Holdings (RR.) 540.50p -0.46%
Barratt Developments (BDEV) 575.00p -0.43%
Pearson (PSON) 809.50p -0.31%
Vodafone Group (VOD) 223.75p -0.11%

FTSE 250 - Risers

QinetiQ Group (QQ.) 250.60p 6.32%
Electrocomponents (ECM) 238.00p 4.34%
Investec (INVP) 529.50p 3.62%
Marshalls (MSLH) 335.00p 2.86%
Grainger (GRI) 249.40p 2.47%
Kaz Minerals (KAZ) 92.30p 2.16%
Aggreko (AGK) 996.50p 2.15%
Henderson Group (HGG) 300.50p 2.14%
Home Retail Group (HOME) 102.00p 2.05%
Just Eat (JE.) 422.00p 1.93%

FTSE 250 - Fallers

Poundland Group (PLND) 231.20p -17.01%
Bovis Homes Group (BVS) 887.00p -10.31%
B&M European Value Retail S.A. (DI) (BME) 313.40p -2.79%
Aldermore Group (ALD) 269.30p -2.78%
Redefine International (RDI) 52.50p -2.78%
Vesuvius (VSVS) 330.20p -2.62%
Virgin Money Holdings (UK) (VM.) 364.90p -2.43%
TalkTalk Telecom Group (TALK) 237.00p -2.11%
Paragon Group Of Companies (PAG) 412.70p -2.06%
P2P Global Investments (P2P) 990.00p -1.98%