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LONDON (Alliance News) - London shares are trading higher Tuesday, while Wall Street is called for an open in the green, opening back up after closing down on Monday due to the Labor Day celebration, as investors cheered a positive close in Chinese stocks.
"Today?s rally will be a real test, as any big upward moves we have witnessed have been short-lived, and the underlying confidence just wasn?t there," said IG market analyst David Madden. "Traders have a spring in their step today because it?s the first trading session in nearly one week that all the major markets are open after being closed for holidays in China and the US."
US stock futures point to a higher open, with the DJIA seen up 1.9%, the S&P 500 up 2.0% and the Nasdaq 100 up 2.0%. On Friday, The DJIA closed down 1.7%, the S&P 500 down 1.5% and the Nasdaq Composite down 1.1%.
In the US economic calendar, labor market conditions index is due at 1500 BST and consumer credit at 2000 BST.
Lloyds Bank said the US Federal Open Market Committee's monetary decision due at its meeting on September 17 remains firmly at the top of the agenda. Although saying that it acknowledges that the risks are evenly balanced, the bank called for a US rate hike by the US Federal Reserve this month.
"Despite last week?s employment report showing a weaker-than-expected rise in August payrolls, the upward revisions to headcount gains over the previous two months, alongside a stronger-than-anticipated decline in the unemployment rate to 5.1%, chimed with the Committee's desire to see a continued improvement in the labour market as a prerequisite for a hike," said Lloyds.
Concerns still remain about how the economic situation in China could affect the Fed decision, with analysts still debating between a lift in US interest rates this month or later in the year.
China posted a trade surplus of USD60.24 billion in August, the National Customs Office said, well above forecasts for a surplus of USD48.0 billion and up from USD43.03 billion in July.
Exports were down 5.5% on year, also bettering expectations for a fall of 6.6% after tumbling 8.3% in the previous month. Imports skidded an annual 13.8% versus expectations for a fall of 7.9% and after dropping 8.1% a month earlier. In yuan-denominated terms, exports fell 6.1% on year and imports plummeted 14.3% for a trade surplus of CNY368.03 billion.
After the release of weak export figures last month, the People's Bank of China devalued its currency on August 11 in an effort to support exports. The devaluation was the biggest one-day reduction in value in two decades.
As the central bank sold dollars to stabilise the yuan exchange rate, country's foreign exchange reserves declined by the most on record in August. Foreign exchange reserves fell by USD93.9 billion to USD3.56 trillion in August. The PBoC also cut its interest rates in August for the fifth time since last November and reduced the reserve ratio to support bank lending.
However, worries still remain about the world's largest economy, with the country's imports declining by much more than expected, signalling weak domestic demand.
Chinese main indices closed higher Tuesday, with the Hang Seng up 3.3% and the Shanghai Composite was up 2.9%. Meanwhile in Japan, the Nikkei 225 in Tokyo closed down 2.4%.
The FTSE 100 was up 2.0% at 6,192.67, the FTSE 250 was up 1.3% at 17,065.78 and the AIM All-Share traded up 0.4% at 735.36.
European major indices were also higher, with the CAC 40 in Paris up 2.0% and the DAX 30 in Frankfurt up 2.4%. The stock price movements came after data published by Destatis showed German exports and imports grew more than expected in July, taking the the nations trade surplus to a record level.
Germany's exports rose 2.4% month-on-month to EUR103.4 billion in July. This was the fastest growth since December 2014. Economists had forecast shipments to grow 1% reversing a 1.1% fall in June. At the same time, imports advanced 2.2% to EUR80.6 billion in July, beating expectations of a 0.7% rise. Imports had declined 0.8% in June. These were the highest seasonally adjusted monthly figures ever calculated both for exports and for imports, Destatis said.
Meanwhile France's trade deficit in July widened by more than expected from the previous month as both exports and imports moderated, figures from French Customs showed. The trade deficit increased to EUR3.30 billion from EUR2.76 billion in June, which was the smallest since July 2009. Economists had forecast a shortfall of EUR3.10 billion.
Eurozone economy grew more than initially estimated in the second quarter, data released by Eurostat showed Tuesday. Gross domestic product advanced 0.4% sequentially after rising 0.5% a quarter ago. The growth rate for the second quarter was revised up from 0.3%.
Likewise, annual growth was raised to 1.5% from 1.2% for the June quarter. GDP climbed 1.2% in the first quarter. The expenditure-side breakdown of GDP showed a 0.4% rise in household spending, while investment declined 0.5%. Government spending climbed 0.3%. Exports and imports grew 1.6% and 1%, respectively.
London commodity-related stocks were pushing higher. The FTSE 350 Mining Sector Index was up 2.5%, led by Anglo American, up 3.4%, BHP BIlliton, up 2.8%, and Rio Tinto, up 2.8%. In the FTSE 250, Vedanta Resources was up 2.4% and Kaz Minerals was up 2.1%.
Oil-related companies are also higher, benefiting from a rise in oil prices. Brent oil price was at USD48.66, standing at 47.75 at the London close Monday. West Texas Intermediate is also higher, but not that much, at USD45.34, after trading at USD44.40 when the European equity market closed on Monday.
BP was up 2.6%, also after receiving an upgrade by UBS to Buy from Neutral. Royal Dutch Shell 'A' was up 1.9%, while BG Group was up 1.9%. In the FTSE 250, Petrofac was up 1.7%.
Elsewhere on the London Stock Exchange, United Utilities Group was up 2.8% after Societe Generale upgraded the water company to Buy from Hold.
Meanwhile, Amlin was up 33% at 653.67 pence after saying it has agreed to be acquired by Mitsui Sumitomo Insurance in a deal valuing the insurer at about GBP3.47 billion, as the wave of mergers and acquisitions continues across the industry. Mitsui Sumitomo Insurance, which is owned by Japan's MS&AD Insurance Group Holdings Inc, will pay 670 pence per Amlin share. In addition, Amlin shareholder will be able to receive the insurer's 8.4 pence interim dividend declared last month.
The price tag is a 36% premium to Amlin's closing price on Monday and a 2.4 times multiple to the insurer's net tangible book value per share on a fully diluted basis of 275.2 pence at the end of June.
Amid expectations of further industry consolidation, Amlin's peers Novae Group, up 6.3%, Lancashire Holdings, up 5.7%, Beazley, up 4.9%, and Hiscox, up 3.1%, all were higher following the news.
In AIM, Conviviality Retail shares were up 21% after the company said it has struck a deal to fully acquire drinks supplier Matthew Clark (Holdings) for GBP200 million, of which it will pay just over half to fellow-listed Punch Taverns.
The Matthew Clark business is a 50/50 joint venture between Punch Taverns and Hertford Cellars, a subsidiary of Accolade Wines Ltd. As part of the same transaction, Hertford Cellars will sell its 50% shareholding in Matthew Clark to Conviviality Brands. Conviviality will pay GBP100.7 million to Punch for its 50% stake in Matthew Clark, with the remaining balance being paid for the other 50% stake held by Hertford Cellars.
By Daniel Ruiz; danielruiz@alliancenews.com
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