London open: Stocks kick off new year in the green after China easing
London stocks kicked off the first session of 2020 in the green on Thursday, taking their cue from a positive Asian session as investors welcomed the latest monetary policy move by the Chinese central bank.
At 0830 GMT, the FTSE 100 was up 0.8% at 7,606.14.
Sentiment was boosted after the Chinese central bank said it will cut the required reserve ratio for commercial lenders by 50 basis points from 6 January to help bolster the slowing economy.
According to the People’s Bank of China, the move will release around 800bn yuan (£87bn) of liquidity into the financial system. As it stands, the required reserve ratio is 13% for big banks and 11% for smaller ones.
The latest cut by the PBOC means it has reduced the reserve requirement for banks eight times since early 2018.
Spreadex analyst Connor Campbell said: "That this comes after the ‘phase one’ trade agreement with the USA - set to be signed on January 15th - caused the markets to have a very merry start to the New Year. It also meant investors could choose to ignore a worsening Caixin manufacturing PMI."
Campbell said the FTSE, which struck 7,650 towards the end of last year before tumbling at its close, was also helped by sterling’s 0.3% decline against the dollar and euro alike, "the currency feeling the pressure now that we are less than one month away from leaving the EU".
Investors were also mulling the release of the latest manufacturing figures out of China. According to a private survey released earlier, activity in the Chinese manufacturing eased a touch in December. The Markit/Caixin purchasing managers’ index printed at 51.5 for December 2019, down from 51.8 in November and below expectations for a reading of 51.7. Still, it remained above the 50 mark that separates contraction from expansion.
The sub-index for new orders fell the second month in a row, while the index for export orders ticked lower by remained above 50. The sub-index for output also nudged down for the second month in a row.
Pantheon Macroeconomics said the Caixin manufacturing PMI was due a correction.
"The index was well above its uptrend, so a decline is not surprising," said senior Asia economist Miguel Chanco. "Without the phase one trade deal it would have been worse. With the index in correction mode, we are reticent to read too much into the details, but the loss of momentum in new orders is disappointing, chiming with the official report."
Still to come, Markit’s UK manufacturing PMI for December is due at 0930 GMT.
Corporate news was scarce. Shares of Tullow Oil tumbled after it said its Carapa-1 exploration well offshore Guyana had discovered oil, but this was lower than pre-drilling estimates.
Building materials group CRH was higher after it appointed Richie Boucher to the role of chairman.
Market Movers
FTSE 100 (UKX) 7,606.14 0.84%
FTSE 250 (MCX) 21,978.26 0.43%
techMARK (TASX) 4,187.06 0.48%
FTSE 100 - Risers
Glencore (GLEN) 241.10p 2.44%
Pearson (PSON) 652.40p 2.42%
Antofagasta (ANTO) 937.60p 2.27%
TUI AG Reg Shs (DI) (TUI) 974.80p 2.20%
Lloyds Banking Group (LLOY) 63.72p 1.95%
Legal & General Group (LGEN) 308.70p 1.88%
Melrose Industries (MRO) 244.60p 1.87%
Hargreaves Lansdown (HL.) 1,971.00p 1.86%
Royal Bank of Scotland Group (RBS) 244.70p 1.83%
Smiths Group (SMIN) 1,717.00p 1.78%
FTSE 100 - Fallers
British Land Company (BLND) 633.20p -0.88%
Diageo (DGE) 3,187.50p -0.41%
Smith & Nephew (SN.) 1,829.00p -0.19%
AstraZeneca (AZN) 7,599.00p -0.11%
Experian (EXPN) 2,551.00p -0.04%
SEGRO (SGRO) 898.20p 0.11%
Unilever (ULVR) 4,356.00p 0.13%
Carnival (CCL) 3,650.00p 0.16%
Relx plc (REL) 1,909.00p 0.18%
Associated British Foods (ABF) 2,605.00p 0.27%
FTSE 250 - Risers
IP Group (IPO) 73.40p 3.38%
Sanne Group (SNN) 697.00p 2.95%
Senior (SNR) 177.50p 2.66%
Sirius Minerals (SXX) 3.62p 2.55%
Investec (INVP) 454.00p 2.46%
Rank Group (RNK) 283.50p 2.35%
Kaz Minerals (KAZ) 542.20p 2.03%
Micro Focus International (MCRO) 1,085.00p 1.99%
Capita (CPI) 166.80p 1.65%
Travis Perkins (TPK) 1,628.00p 1.62%
FTSE 250 - Fallers
Tullow Oil (TLW) 53.00p -17.19%
Restaurant Group (RTN) 155.90p -4.36%
Finablr (FIN) 163.10p -4.28%
Hochschild Mining (HOC) 175.80p -3.93%
PayPoint (PAY) 979.00p -3.26%
Helios Towers (HTWS) 153.10p -3.10%
TI Fluid Systems (TIFS) 259.00p -2.63%
4Imprint Group (FOUR) 3,410.00p -2.01%
C&C Group (CCR) 399.00p -1.85%
GCP Infrastructure Investments Ltd (GCP) 129.40p -1.82%