London open: Stocks climb as post-Brexit rebound continues

London stocks opened higher on Monday morning, carried by positive sentiment from Asia and the US, with domestic thoughts turning to the Bank of England monetary policy meeting this week.

As the Asia session finishes on the front foot and following the strong non-farm payrolls report that lifted Wall Street at the end of last week, the FTSE 100 was 0.66% higher at 6,633.98 and the 250 up 1.07% at 16,350.06.

Extending the post-Brexit rally, the indices were driven forward this time by mining giants, including Anglo American, Glencore, Antofagasta and BHP Billiton, along with rebounding financials and house-builders.

Monday is a quiet day for macroeconomic data, with some focus on US Labour market conditions this afternoon, while filling the macro gap will be ECB president Mario Draghi and another member of the Eurogroup meeting of finance ministers and a speech by Kansas City Fed President Esther George on the US economy.

But the UK is just days away from the BoE meeting, with investors almost certain there will be a rate cut announced on Thursday, as the Monetary Policy Committee looks to to reduce the shock of the EU referendum decision on the UK economy.

Governor Mark Carney has made his dislike of negative interest rates clear and has also has indicated that the July and August MPC meetings should be considered together as a package that will likely deliver stimulus.

Some feel the only option is a shock cut from the current 0.5% base rate all the way down to zero, followed by quantitative easing in August, though odds are pointing to a 25 basis points cut and a revival of asset purchases as the likely option.

"A plunge in consumer confidence and evidence of markedly reduced business sentiment since the Brexit vote has enhanced the case for interest rates to be cut from 0.50% to 0.25% as soon as Thursday. To us, there seems little reason to wait on an interest rate cut front," said economist Howard Archer at IHS Global Insight, suspecting a revival of quantitative easing and end up extending its Funding for Lending Scheme in August.

Sterling will be volatile, whatever happens, and indeed began the week choppily, still around its 31-year low. It was down 0.1% versus the dollar at 1.2941 and up 0.1% on the euro at 1.1732.

Forex traders have already begun positioning themselves for a rate cut scenario, keeping pressure on the pound while the yield on bonds could go even lower as money takes flight towards safe havens.

In company news, Rolls-Royce has agreed to pay €720m to complete the full takeover of Spanish aero engine component manufacturer Industria de Turbo Propulsores (ITP). The FTSE 100 company, which currently owns a large minority stake in the profitable Bilbao-based business, will purchase the outstanding 53.1% shareholding in ITP from SENER Grupo de Ingeniería in eight instalments over a two-year period.

RPC Group was one of the early leaders of the FTSE 250 as it unveiled a positive update on its first quarter trading - a quarter in which it continued integrating the acquisition of GCS and made an offer for BPI. The plastic products design and engineering companysaid revenues in the three months to 30 June were significantly higher than the same period last year, due to underlying growth and the contribution of acquisitions. Adjusted operating profit at constant currencies was also significantly ahead of both 2015, and management expectations.

CLS Holdings said it has exchanged contracts to buy two properties, one in Düsseldorf and one in Hamburg, for a total of €49.5m. The Düsseldorf property is to be bought for €43.6m including costs, and generates net rental income of €3.1m, reflecting a net initial yield of 7.1%. The property benefits from a high occupancy rate and presents significant scope for future rental uplifts and other asset management opportunities, CLS said.

Market Movers

FTSE 100 (UKX) 6,628.18 0.57%
FTSE 250 (MCX) 16,361.27 1.13%
techMARK (TASX) 3,284.14 0.56%

FTSE 100 - Risers

Anglo American (AAL) 779.00p 4.56%
Glencore (GLEN) 173.35p 3.62%
Royal Bank of Scotland Group (RBS) 174.10p 3.14%
Taylor Wimpey (TW.) 135.20p 2.81%
Barclays (BARC) 142.90p 2.62%
Antofagasta (ANTO) 468.60p 2.61%
International Consolidated Airlines Group SA (CDI) (IAG) 384.70p 2.59%
Persimmon (PSN) 1,455.00p 2.46%
St James's Place (STJ) 790.50p 2.46%
BHP Billiton (BLT) 984.60p 2.41%