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LONDON (Alliance News) - Stocks in London ended higher on Thursday, as a strong set of US macro data gave investors yet another signal that the US Federal Reserve could lift interest rates in December, with Fed Chair Janet Yellen saying that "such an increase could well become appropriate relatively soon".

The FTSE 100 index ended up 0.7%, or 44.99 points, at 6,794.71. The FTSE 250 closed up 0.7%, or 126.97 points, at 17,600.94, and the AIM All-Share finished up 0.2%, or 1.53 points, at 810.85.

The BATS UK 100 rose 0.6% to 11,486.24, the BATS 250 ended 0.6% higher at 15,953.11, and the BATS Small Companies closed up 0.2% at 10,852.34.

In New York at the London close, the Dow Industrials was up 0.1%, the S&P 500 index was up 0.4%, and the Nasdaq Composite was up 0.6%.

The case for a lift in US interest rates looks increasingly feasible following solid US consumer inflation and jobs data.

The Labor Department said the consumer price index rose by 0.4% month-on-month in October after climbing by 0.3% in September, above economists expectations for a flat reading. Excluding food and energy prices, core consumer prices rose by 0.1% for the second straight month. Economists had expected core prices to rise by 0.2%.

First-time claims for US unemployment benefits decreased to 235,000 in the week ended November 12, according to another report from the Labor Department, with claims falling to their lowest level in over forty years. This represented a decrease of 19,000 from the previous week's level of 254,000. Economists had expected jobless claims to inch up to 257,000.

After the US macroeconomic data were released, Yellen testified before the Joint Economic Committee of Congress in Washington.

Yellen said that the Federal Open Market Committee considers that the case for an increase in US interest rates has continued to strengthen "and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee's objectives".

In addition, Yellen said the FOMC judges the near-term risks to the outlook to be "roughly balanced". The Fed Chair added that "holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability".

Spreadex analyst Connor Campbell commented: "Combine Yellen's comments with the confirmation that US inflation rose ... and the market received yet another signal that the Federal Reserve could raise rates in their December meeting, twelve months on from 2015's long-awaited increase."

The Fed's next two-day meeting is on December 13-14, with chances of a rate hike at 94%, according to IG analyst Chris Beauchamp.

The pound had strengthened against the dollar in the London morning after strong UK retail sales data. However, the greenback recovered the ground lost against sterling, standing firm at the London equities close. The pound was quoted at USD1.2453 at the London close, compared to USD1.2443 at the same time on Wednesday.

A report from the Office for National Statistics showed that UK retail sales volume increased 1.9% in October from September, when retail sales had edged up 0.1% on month. Economists had expected 0.4% growth. Year-on-year, retail sales grew 7.4%, compared to 4.2% in September, above the 5.3% rise economists had expected.

Sales excluding auto fuel, advanced 2.0% month-on-month, much faster than the 0.1% rise registered in September and the 0.4% growth economists had expected. On a yearly basis, ex-fuel retail sales growth improved to 7.6% from 4.0% a month ago, above the 5.4% growth expected.

In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt ended up 0.6% and 0.2%, respectively. The euro stood at USD1.0661 at the London equities close, compared to USD1.0680 late Wednesday.

European Central Bank policymakers widely agreed that it was better to wait until December to get a clearer picture of the inflation outlook to form a policy view, the minutes of the October rate-setting session showed. The Governing Council meeting was held on October 19-20. The central bank kept interest rates on hold for a fifth consecutive time.

"There was wide agreement among members that it was premature to make a firm assessment of the outlook for price stability and to discuss its implications for the monetary policy stance at the current meeting," the report said. While the eurozone economic recovery remained on track, underlying inflation lacked a convincing upward trend, and outlook for both were based on the easy financing conditions, the ECB noted.

Final data from Eurostat showed that eurozone inflation rose in October to 0.5% year-on-year from 0.4% in September. On a monthly basis, however, inflation slowed to 0.2% compared to 0.4% in September.

Gold was quoted at USD1,226.00 an ounce at the London close, firm compared to USD1,225.75 at the same time on Wednesday. Brent oil stood at USD46.56 a barrel at the close, compared to USD46.89 a barrel on Wednesday.

On the London Stock Exchange, Mondi ended up 2.4%, the best performer in the FTSE 100. UBS said it sees scope for the Anglo-South African paper and packaging company to pay a special dividend should it fail to find the right acquisition target, following a meeting with the company's chief financial officer.

"If they fail to find anything that meets their strict criteria in the right time horizon, the CFO stated the company could consider a one-off cash distribution in the form of a special dividend or buyback as a rebalancing exercise," said UBS analyst Mark Fielding.

Royal Mail ended fell 4.7%, the worst blue-chip performer, after the postal service operator's interim results came in below analyst expectations. It said its full-year performance will depend on a good performance over the Christmas holidays, as it reported lower profit but higher revenue for the first half of its financial year.

In the FTSE 250, Vectura Group rose 8.1%, the biggest mid-cap gainer. Numis analyst Stefan Hamill highlighted a major overhaul of treatment guidelines issued by the Global Initiative for Chronic Obstructive Lung Disease, including "many changes in treatment recommendations".

"The changes see a major upgrade in recommended use of LABA-LAMA combination inhalers such as Vectura / Novartis's Ultibro. We see these changes helping Ultibro on its way to becoming a blockbuster", Hamill said.

Infrastructure products and galvanising services company Hill & Smith Holdings rose 4.6% after it said it anticipates hitting the top end of expectations for 2016. Hill & Smith's Infrastructure business has performed well, it said, with encouraging progress in its roads division and a stronger performance seen in its Utilities business in the period.

Safestore Holdings ended up 3.0%. The self-storage space provider said it expects its earnings per share to be at the top end of the consensus range, after revenue for its fourth quarter was up 18% year-on-year.

Anglo-South African bank and asset manager Investec rose 1.9% after saying a rise in its income for the first half of its financial year showed the diversified strength of its business, despite a much smaller profit rise.

On the flip side, Virgin Money Holdings declined 6.1% after WL Ross sold its remaining shareholding in the lender, some 53.6 million shares.

The sale was increased from a planned disposal of 27 million shares due to "strong demand", said Bank of America Merrill Lynch, and represents approximately 12% of Virgin Money's issued share capital. The final offer price was set a 320 pence per share, resulting in gross proceeds of GBP171.5 million. Virgin Money was quoted at 318.00p Thursday.

Meanwhile, Lancashire Holdings fell 8.8%, after going ex-dividend, meaning new buyers no longer qualify for the latest dividend payment.

Highlights in the UK corporate calendar Friday are half-year results from Electrocomponents and Fuller Smith & Turner, while Bodycote publishes a trading statement.

In the economic calendar, China's house price index is at 0130 GMT, while Germany's producer price index is at 0700 GMT. The eurozone current account data are at 0900 GMT. In the US, the Kansas Fed manufacturing activity index is at 1600 GMT, while the Baker Hughes US oil rig count is at 1800 GMT.

At 0900 GMT, the 26th Frankfurt European Banking Congress kicks off. Participants include ECB President Draghi, Deutsche Bundesbank President Jens Weidmann, and St. Louis Fed President James Bullard. German Finance Minister Wolfgang Schauble is also expected to attend, as well as Deutsche Bank Chief Executive John Cryan.

By Daniel Ruiz; danielruiz@alliancenews.com

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