(Alliance News) - Stocks in London ended the first trading day of the new year comfortably in the green, shaking off troubling local and European manufacturing readings and following Asian stocks higher after China's central bank moved to boost the country's slowing economy.
The FTSE 100 index closed up 65.62 points, or 0.9%, at 7,608.06 on Thursday.
The FTSE 250 climbed 208.29 points, or 1.0%, at 22,091.71. The AIM All-Share closed up 4.47 points, or 0.5% at 960.73.
The Cboe UK 100 ended up 0.7% at 12,887.84 on Thursday, the Cboe UK 250 closed up 0.9% at 19,990.97, and the Cboe Small Companies ended up 0.3% at 12,277.86.
In European equities on Thursday, the CAC 40 in Paris closed up 1.2%. In late trade Frankfurt's DAX 30 was up 1.1%.
China's central bank announced it was cutting the reserve requirements for banks, freeing up about USD114 billion to boost lending in the hopes of invigorating the world's number two economy.
The People's Bank of China will cut the reserve requirement ratio on January 6 by 50 basis points, reducing the amount of cash banks must hold. Lowering the ratio frees up more money for banks to lend to small businesses.
The central bank cut the requirement three times in 2019 to bolster the Chinese economy, which grew at the slowest rate in three decades last year.
"News that the People's Bank of China would be slashing its reserve requirement ratio by a further 50 basis points, following on from 3 cuts in 2019, gave the markets a New Year’s lift. That, and the announcement that the US-China trade deal would be officially signed on January 15," Spreadex analyst Connor Campbell said.
US President Donald Trump on New Year's Eve said that he will sign the first phase of a trade deal with China at the White House next month. Trump said he will travel to Beijing at a later date to open talks on other sticking points in the US-China trade relationship.
The promising news on the trade war front boosted London-listed miners.
Antofagasta ended the day up 3.1%, Glencore 2.4% and Anglo American 1.3%.
The pound was quoted at USD1.3155 at the London equities close, down compared to USD1.3200 at the close on Tuesday, as traders now eye the looming Brexit deadline.
Sterling got a boost at the start of December, however, as Prime Minister secured a sizeable parliamentary majority in the UK general election. The pound has become twitchy once again, as the UK's exit from world's largest trading bloc nears.
"Missing out on a 2020 bounce was the pound. This as investors digest the prospect of another year blighted by Brexit uncertainty. For while the UK will be leaving the EU on January 31, the hard, more contentious, really important work is only just about to begin, as the two sides try to hash out their future trading relationship. A negotiation that has the deadline of December 31st – at least, that’s what Boris Johnson is chasing," Campbell continued.
Elsewhere in forex, the euro stood at USD1.1185 at the London equities close Thursday, down against USD1.1230 at the London close on Tuesday. Against the yen, the dollar was trading at JPY108.33, soft compared to JPY108.55 late Tuesday.
Thursday saw a raft of manufacturing data across the globe. In the US, the manufacturing sector continued to recover, albeit at a slower pace, in December, IHS Markit data showed.
The IHS Markit final manufacturing purchasing managers' index print came in at 52.4 for the month of December, down slightly from 52.6 in November but still above the 50.0 mark which separates growth from decline. It was also in line with the flash estimate.
Elsewhere, UK manufacturing data showed the sector contracted at the fastest pace in almost seven-and-a-half years in December.
The IHS Markit/Chartered Institute of Procurement & Supply purchasing managers' index fell to 47.5 in December from 48.9 in November. The final reading for December was slightly better than the flash reading of 47.4.
"The UK manufacturing sector took a turn for the worse at the end of 2019. Output fell at the quickest pace in seven-and-a-half years as new order inflows decreased and Brexit safety stocks were reduced," said IHS Markit Director Rob Dobson.
The factory PMI has read below the neutral mark of 50.0 in each of the past eight months.
"The optimism seen in the FTSE 100 comes despite the seeing the sharpest deterioration in manufacturing for seven years. Despite seeing the reading tick marginally higher than the first estimate, the worry is that we have not seen the post-election data provide any decent improvement in terms of activity and business in the sector. Widely heralded expectations of a rebound in UK business and spending appear to have been subdued by Johnson's insistence that he will not allow for any extension beyond 2020 for European Union trade talks," IG Markets analyst Joshua Mahony said.
The eurozone's manufacturing slump also continued, with the December reading coming in at 46.3, down from 46.9 in November, IHS Markit data showed.
Germany ended 2019 in "deep" contraction, IHS Markit noted. The manufacturing PMI there read 43.7 points in December, down from 44.1 in November.
China's manufacturing sector continued to grow, IHS Markit reported, though not as fast as in the prior month. The Caixin purchasing managers' index, released by IHS, was 51.5 in December, from 51.8 in November.
In commodities, Brent oil was quoted at USD65.76 a barrel at the London equities close ON Thursday, down from USD65.94 late Tuesday.
Gold was quoted at USD1,527.98 an ounce at the London equities close Thursday against USD1,521.04 at the close on Tuesday.
"Gold has hit level last seen in late September as its bullish move continues. The rally began to break higher late last month and today's upward move is made all the more impressive by the fact the US dollar is stronger as are global stocks. Should the bullish move continue it might retest the USD1,555 area," CMC Markets analyst David Madden said.
"Oil has had a lacklustre session despite the optimism still doing the round in relation to the US-China trade situation, and the announcement from the PBoC. It is possible the slightly softer-than-expected Caixin manufacturing reading caused the mood to be downbeat in the oil market," Madden continued.
Second from bottom on the large-cap index was retailer Next, down 0.5%. Exane BNP cut its rating to Neutral from Outperform.
The high street retailer is scheduled to release a Christmas trading update on Friday.
Other British retail chains ended Thursday in the red. FTSE 100 firm Ocado closed 1.5% lower, the index's worst performer. In the FTSE 250, Dixons Carphone and Card Factory ended 1.4% and 2.3% lower respectively.
UK consumers switched to spending Boxing Day on leisure activities rather than shopping, figures from researchers Springboard showed.
The post-Christmas shopping period saw footfall drop by an average of 4% in a week from December 26 to January 1.
In the FTSE 250, Tullow Oil ended the day plum last, down 6.8%, as its struggles saw no sign of subsiding in the new year.
The oil exploration firm said it discovered oil on the Kanuku licence off the coast of Guyana, South America, but the amount was short of pre-drilling estimates. Early results from drilling at the Carapa-1 well found oil in Upper Cretaceous sandstones. Results show the four metres of net oil pay have a sulphur content of less than 1%.
Tullow is going through a rocky patch. In December, Chief Executive Paul McDade left with immediate effect amid continued underperformance from the TEN and Jubilee fields in Ghana. This led to several production guidance cuts in 2019.
Given weak cash flow forecasts, Tullow also axed its dividend.
Intellectual property business investor IP Group was one of the best performing mid-cap stocks, up 5.6% after announcing portfolio company Oxford Nanopore Technologies received a total investment of GBP109.5 million from a capital raise and secondary sale of shares.
Oxford Nanopore raised GBP29.3 million of new capital and also facilitated a secondary sale of GBP80.2 million of shares.
Oxford Nanopore noted that funds were raised from both new investors and existing shareholders from the US, Europe and Asia Pacific.
Lekoil was one of the best performing small cap stocks in the first trading day of the year, closing 57% higher after announcing it has obtained funding from Qatar's sovereign wealth fund for drilling and development of the Ogo field offshore Nigeria.
The Qatar Investment Authority will loan USD184.0 million to Lekoil in five tranches over a period of 11 months with the first drawdown scheduled for February 2020.
Eqtec closed 52% higher, it said North Fork Community Power finalised and signed the legal documentation that allows the financial close of the proposed construction and operation of a two megawatts biomass plant at the North Fork project in the US.
Back in June, the Cork, Ireland-based energy company said it would buy a 20% interest in North Fork Community Power on financial close of the project. Under the contract, EQTEC said it will invoice to North Fork Community Power a total of EUR2.2 million for the sale of equipment and the supply of engineering and design services.
In the US, stocks were green, following the lead of their global counterparts. The Nasdaq Composite was 0.7% higher at the London close. The Dow Jones Industrial Average was 0.6% higher with the S&P 500 up 0.3%.
The domestic economic calendar has construction purchasing managers' index data. Provisional consumer price inflation figures from Germany will also be released on Friday.
By Eric Cunha; ericcunha@alliancenews.com
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