LONDON (Alliance News) - London shares closed mixed Tuesday after investor's attention was divided between Greece, the nuclear agreement that lifts US and European Union oil exports sanctions to Iran and Bank of England Governor Mark Carney's warning that UK interest rates may rise soon.
Speaking in front of the Treasury Committee in the House of Commons on Tuesday morning, BoE Governor Mark Carney gave the pound a lift, while pushing down equities, with the FTSE 100 dropping heavily after the UK central bank Governor suggested that the BoE soon could start to normalise UK monetary policy.
However, the blue-chip index recovered throughout the session, ending up 0.2% at 6,753.75. The FTSE 250 closed down 0.4% at 17,642.40 and the AIM All-Share finished up 0.4% at 755.14.
In Europe, the CAC 40 closed up 0.6% and the DAX 30 was up 0.2%.
"The point at which interest rates may begin to rise is moving closer, given the performance of the economy," Carney said. There would inevitably be "shocks and adjustments," he cautioned, while he reiterated that the increase in rates would be limited and gradual.
When the London equity markets closed the pound was at USD1.5582 after jumping following Carney's remarks from USD1.5475 prior.
Meanwhile, UK inflation returned to zero in June, data published by the Office for National Statistics showed. Consumer prices remained flat on a yearly basis in June as expected by economists, after rising 0.1% in May. The consumer price index remained flat on a monthly basis as well, in contrast to a 0.2% increase in May and a 0.1% rise forecast by economists.
Foreign ministers from six world powers and Iran reached a long-awaited agreement to prevent the country from developing nuclear weapons following a final marathon round of talks in Vienna. The agreement restricts Iran's nuclear activities for years to come in an effort to prevent a new nuclear power from emerging in the conflict-ridden Middle East. In return, US and EU embargoes against Iran's oil exports and its international banking ties will be lifted.
The prospects of an even greater supply of oil onto the market sent crude oil prices lower in the session, however when the European equity markets closed Brent oil was flat at USD57.96 a barrel and US benchmark West Texas Intermediate was higher at USD52.95 a barrel.
In Greece, Prime Minister Alexis Tsipras faces a showdown with members of his Syriza party and coalition partners, who are angered by his capitulation to European demands for the most sweeping austerity package in the history of the common currency. Tsipras' coalition is in disarray over a preliminary deal brokered in Brussels that keeps the beleaguered Greek economy in the eurozone but bypasses many of the campaign pledges on which Syriza swept to power.
Before formal negotiations can begin on up to EUR86 billion in bailout funds, the Greek parliament must agree to legislate on a raft of measures that are even tougher than those rejected by more than 61% of Greeks in a July 5 referendum.
In the US, after reporting a sharp jump in retail sales in the previous month, the Commerce Department released a report on Tuesday showing that sales unexpectedly pulled back in the month of June.
The report said retail sales fell by 0.3% in June compared to economist estimates for an increase of about 0.3%. The unexpected drop in sales came after a 1.0 increase in May, which was revised downwards revised from an originally reported 1.2% jump.
The decline in retail sales data comes after US Federal Reserve Chair Janet Yellen said Friday that the US central bank is likely to begin tightening "at some point later this year" its benchmark interest rate in 2015 after seven years of unprecedented slack monetary policy.
"After signs were pointing towards a September lift-off [on US interest rates], severe misses in the latest retail sales figures suggests that the country’s second quarter recovery may not be as big as hoped," said Spreadex analyst Connor Campbell.
Wall Street was higher when the European stock markets closed, with the DJIA up 0.6%, the S&P 500 up 0.4% and the Nasdaq Composite up 0.7%.
On the London Stock Exchange, Sky ended as the biggest gainer in the FTSE 100, up 4.1%, after Deutsche Bank upgraded it to Buy from Hold. The bank says it believes the broadcaster is best positioned in Europe to capitalise from the acceleration in online video growth. However, ITV ended down 1.6% after Deutsche cut it to Sell from Hold.
Pearson ended down 1.8% after Morgan Stanley downgraded the publisher to Equal-Weight from Overweight, while Kepler Cheuvreux also cut the company to Hold from Buy.
International Personal Finance was the best performer in the FTSE 250, up 6.6%. Panmure Gordon upgraded the home credit and digital loans provider to Buy from Hold after a sharp sell-off Monday, when it dropped by 25%. The decline came after IPF said that there could be financial consequences from potential legal changes in Poland, that could result in a cap that covers a broader definition of non-interest costs than previously suggested.
Housebuilders took a hit after house price inflation in the UK accelerated in May from a 16-month low in the previous month, figures from the Office for National Statistics showed Tuesday. Average house prices climbed 5.7% year-over-year in May, slightly faster than April's 5.5% increase. In March, prices had risen 9.6%. The pace of annual house price growth rose slightly across the majority of the U.K in May, the ONS said.
Blue-chips Persimmon, down 1.5%, Taylor Wimpey, down 1.5%, Barratt Developments, down 1.1% and FTSE 250 constituents Bellway, down 3.5%, and Berkeley Group Holdings, down 2.5%, ended amongst the worst performers in their respective indices.
In the corporate calendar Wednesday, Burberry Group and JD Wetherspoon issue fourth-quarter interim management statements, while Severn Trent and Workspace Group issue first-quarter trading statements. ICAP releases first-quarter results and Halfords Group issues a trading update. Intermediate Capital publishes half-year results, Lavendon issues an interim management statement, while Moneysupermarket.com Group issues a trading update.
In the economic calendar, Chinese GDP is due at 0300 BST, while Chinese retail sales data is due at 0630 BST. UK claimant count and ILO unemployment rate are due at 0930 BST. In the US, industrial production is due at 1415 BST, while US producer prices index is due at 1430 BST. US Fed Chair Janet Yellen is due to give a speech in the Semiannual Monetary Policy Report to the US Congress at 1500 BST. EIA Crude Oil Stocks change is due at 1530 BST. Fed's Beige Book is due at 1900 BST.
By Daniel Ruiz; danielruiz@alliancenews.com
Copyright 2015 Alliance News Limited. All Rights Reserved.
27 Jan 2017 15:22
