LONDON MARKET CLOSE: Stocks Rally But Not Everyone Convinced

LONDON (Alliance News) - European major indices closed higher Thursday, while Wall Street was adding to its rise on Wednesday, as a positive day for Asian stock markets reassured investors.

However, some analysts think the quick rebound by global stock markets this week could be just a "dead cat bounce", meaning a temporary recovery within a prolonged decline, and question how much longer the latest euphoria will last.

"The continued recovery seen in both European and US markets today has given many an increased degree of confidence that we're not simply seeing a dead cat bounce but rather something like a recovery," said IG analyst Joshua Mahony. "However, with markets currently driven to a large extent by the volatile Chinese market, the worst may not be over quite yet."

Asian stocks encountered another volatile, though positive, trading session, with the Nikkei 225 in Tokyo closing up 1.1%, the Hang Seng in Hong Kong up 3.6% and the Shanghai Composite up 5.3%.

The recent fall in global stock prices was sparked by concerns about the Chinese economy and volatility in its stock markets. On Tuesday, the People's Bank of China cut its key interest rates and reserve ratio in an effort to stem heavy losses in its stock markets and support its slowing economy. On Wednesday, China's central bank injected CNY140 billion into the financial system through its short-term liquidity operations facility.

"The combined effort of these two stimulus measures appears to have brought some stability to Chinese markets for now," said Craig Erlam, senior market analyst at Oanda. However, Erlam said that as it has seen repeatedly, and not just in China, these gains can be rapidly reversed, with investors behaviour showing how much anxiety there is still in the market.

In London, the FTSE 100 index ended up 3.6% at 6,192.03, the mid-cap FTSE 250 closed up 1.9% at 16,921.95 and the AIM All-Share finished up 1.4% at 726.64. In Europe, the CAC 40 in Paris ended up 3.5% and the DAX 30 in Frankfurt closed up 3.2%.

At the London close, Wall Street was enjoying another positive session, with the Dow Jones Industrial Average up 1.5%, the S&P 500 up 1.7% and the Nasdaq Composite also up 1.7%.

Wednesday's gains in the US stock market followed comments by New York Federal Reserve President William Dudley, who said that a US Federal Reserve rate hike next month "seem less compelling to me [now] than it was a few weeks ago". Nevertheless, as US Fed Chair Janet Yellen has said before, Dudley said that he expects the US central bank to raise rates this year, and repeated that moves on monetary policy remain "data-dependent".

Investors will now be looking ahead to the Jackson Hole Symposium starting later Thursday, where other key Fed officials will be speaking. Though Yellen is not expected to attend, comments from Fed Vice-Chairman Stanley Fischer, speaking on Saturday, will attract attention instead.

Speaking at the sidelines of the meeting Thursday, Kansas City Federal Reserve Bank President Esther George said the Fed needs to start its normalisation process as the US economy is "continuing a trend rate of growth".

The comments from George came before data showed that the US economy expanded faster than previously estimated in the second quarter and jobless claims fell last week.

The Commerce Department released a report showing that US real gross domestic product increased by 3.7% in the second quarter compared to the previously reported 2.3% growth. With the upward revision, the pace of GDP growth in the second quarter was even stronger than the 3.2% jump expected by economists.

Meanwhile, the Labor Department data showed that first-time claims for US unemployment benefits decreased modestly in the week ended August 22nd. The report said initial jobless claims edged down to 271,000, a decrease of 6,000 from the previous week's unrevised level of 277,000. Economists had expected claims to dip to 270,000.

The two economic reports come after an unexpected rise in durable goods orders data on Wednesday, which climbed by 2.0% in July while economists had expected a drop by 0.4%.

The dollar strengthened against the pound following the data, with sterling standing at USD1.5404 when European markets closed, having touched an intraday high of USD1.5508.

On the London Stock Exchange, miners rebounded from Wednesday's losses, with Anglo American, up 9.3%, and Antofagasta, up 8.9%, ending as the best two blue-chip performers.

Oil-related companies also were higher as crude prices rose. BP, up 6.0%, Royal Dutch Shell 'A', up 5.0%, and BG Group, up 4.1%, benefited from a lift in Brent oil prices, which rose from an intraday low of USD43.65 a barrel in early trade, to stand at the London close at USD45.81 a barrel. In the FTSE 250, Hunting, up 13%, Premier Oil, up 8.2%, and Petrofac, up 8.0%, were among the top gainers in the mid-cap index.

Outside commodities, CRH added 5.2%. The Irish building materials company said its pretax profit for the first half rose slightly, held back by the cost of a bond repayment, but its earnings and revenue both surged, boosted by the weak euro. It also said it has struck a USD1.3 billion deal to acquire US group CR Laurence Co, a manufacturer of customer hardware and installation products for the professional glazing industry.

FTSE 250-listed Aldermore Group rose 7.9% after it reported a jump in profit in the first half and said it is on track to deliver its goals for 2015. The retail bank said pretax profit amounted to GBP39.5 million in the six months to the end of June, up from GBP18.6 million in the corresponding period the prior year. Excluding the costs of its initial public offering, the bank's pretax profit increased to GBP43.6 million from GBP20.8 million.

Meanwhile, Allied Minds gained 11% after it said that a biopharmaceutical enterprise it owns with US-based Bristol-Myers Squibb has agreed a worldwide licensing deal with Yale University in a move intended to treat diseases such as prostate cancer. The news came as Allied Minds said it made a USD39.1 million pretax loss in the six months ended June 30, compared with a USD27.2 million loss the corresponding half the prior year.

In a busy month-end UK corporate calendar Friday, Bwin.Party Digital Entertainment, 888 Holdings, Computacenter, Huntsworth, Harworth Group, Henry Boot, UTV Media, Candover Investments, John Laing Infrastructure Fund, Dunedin Enterprise Investment Trust, Charles Taylor, Exova Group, Lavendon, Restaurant Group, British Polythene, Chesnara and Matomy Media all release half-year results.

In the economic calendar, UK gross domestic product is due at 0930 BST, while eurozone consumer confidence data are due at 1000 BST. The German consumer price index is due at 1300 BST. In the US, personal income and spending are expected at 1330 BST, while the Reuters/Michigan consumer sentiment index is due at 1500 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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