Kingfisher Share News (KGF)

LONDON (Alliance News) - Stocks in London closed higher Tuesday, supported by a positive US open after weak economic data cooled some suggestions of a US Federal Reserve rate hike on Thursday.

The blue-chip FTSE 100 index ended up 0.9% at 6,137.60, the FTSE 250 closed up 0.2% at 16,961.84 and London's junior market, AIM, also ended higher, with the All-Share up 0.7% at 736.70.

In Europe, the CAC 40 in Paris rose 1.1% and the DAX 30 in Frankfurt rose 0.6%.

On Wall Street at the London close, the Dow Jones Industrial Average was trading 0.9% higher, while the S&P 500 and Nasdaq Composite were both up 0.8%.

The higher open came after the US Commerce Department released a report saying retail sales edged up by 0.2% in August following an upwardly revised 0.7% increase in July. Economists had expected retail sales to rise by 0.3% compared to the 0.6% growth originally reported for the previous month.

The modest increase in retail sales was partly due to continued growth in sales by motor vehicle and parts dealers, which climbed by 0.7% in August after jumping by 1.3% in July. Excluding the increase in auto sales, retail sales ticked up by just 0.1% in August following an upwardly revised 0.6% increase in July.

Additionally, business activity for New York manufacturers continued to contract in September, according to a report released by the Federal Reserve Bank of New York.

The New York Fed said its general business conditions index inched up to a negative 14.7 in September from a negative 14.9 in August, with a negative reading indicating a contraction in manufacturing activity. Economists had expected the general business conditions index to show a more substantial improvement to a reading of negative 0.5.

While rising much less than anticipated, the index still climbed off the six-year low set in the previous month.

Furthermore, industrial production in the US pulled back by more than expected in the month of August, according to a report released by the Federal Reserve. The Fed said industrial production fell by 0.4% in August following an upwardly revised 0.9% increase in July. Economists had expected production to dip by 0.2% compared to the 0.6% growth originally reported for the previous month.

The bigger than expected decrease in production was partly due to a pullback in manufacturing output, which fell 0.5% in August after climbing by 0.9% in July.

Connor Campbell, financial analyst at Spreadex said the data from the US this afternoon was just the "September rate hike-denying data the markets were after".

"Whilst another afternoon of awkward US numbers doesn't guarantee the Fed won't raise rates on Thursday, it is a firmer indication of the state of the US economy than has been provided for the past few weeks," Campbell added.

Meanwhile in the UK, inflation returned to zero in August, as expected, on a renewed decline in oil prices, casting doubt about the ability of the Bank of England to achieve its inflation target of 2.0%.

The central bank has estimated that inflation will return to the target level within two years.

Consumer prices remained unchanged in August from a year ago, following a 0.1% rise in July, data released by the Office for National Statistics showed. The slowdown was caused by a fall in fuel prices and slower growth in clothing costs.

Investec economist Chris Hare expects headline inflation to pick up after staying within a 0.1 percentage point range of zero since February.

"The falls in energy prices should drop out of the annual CPI calculation towards the end of this year. Strength in the pound should continue to weigh on import price growth over the next year or two, but the drag should unwind eventually," Hare said. "Perhaps most importantly, the normalisation of the labour market should see more pronounced increases in wage (and therefore price) growth."

On the London Stock Exchange, ARM Holdings was one of the best FTSE 100 performers, up 3.4%. The chipmaker said its current trading and operating costs in the third quarter are broadly in line with the guidance it gave in its second quarter results in July.

Meanwhile on Monday, major ARM customer Apple said initial sales of its newly introduced iPhone 6s are likely to beat a record set just last year. Worldwide pre-orders for the new smartphone were "very strong" and "on pace to beat last year's 10 million unit first weekend record" set by the then-new iPhone 6, Apple said in a statement. Apple said the online demand exceeded its own forecasts.

Kingfisher closed as the worst blue-chip performer, ending down 4.0%. The DIY retailer posted lower profit for the first half of its financial year, hit by a weak euro and poor trading in its French business, though it said it remains on track with its turnaround programme.

The company, which owns brands including B&Q, Screwfix, Castorama and Brico Dépôt, reported a 1.8% decline in pretax profit in the 26 weeks ended August 1 to GBP386 million from GBP393 million in the same period the year before. Sales fell 4.8% to GBP5.49 billion from GBP5.77 billion, as growth in the UK and Ireland was offset by a poorer performance in France.

In the FTSE 250, Stagecoach Group was one of the worst performers, down 2.7% after Investec slashed the transport operator's rating to Sell from Add.

The valuation on Stagecoach implies it will have a market share in the UK transport sector well above its historical average, Investec said, as it downgraded the company following a change to its methodology for valuing transport groups and as it outlined potential challenges these operators will face from the UK National Living Wage and other legislative changes.

In the economic calendar Wednesday, UK jobs report is at 0930 BST before eurozone inflation figures at 1000 BST. In the afternoon, the focus will be on US inflation data at 1430 BST and Energy Information Administration crude oil stocks at 1530 BST.

In the UK corporate calendar, there are full-year results from construction and housebuilding company Galliford Try, while sports retailer JD Sports reports interim results. Chip maker Imagination Technologies Group also reports half-year results.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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