LONDON MARKET CLOSE: Stocks Up As Investors Brace For 'Super Thursday'

LONDON (Alliance News) - UK stocks closed higher Wednesday as investors prepared for potentially market-moving economic events in the last two days of the week, beginning with the Bank of England's 'Super Thursday'.

The FTSE 100 closed up 1.0% at 6,752.41, the FTSE 250 ended up 0.2% at 17,775.08, and the AIM All-Share also closed up 0.2% at 756.36.

European stocks rallied, with the CAC 40 in Paris closing up 1.7% and the DAX 30 in Frankfurt up 1.6%.

On Wall Street at the London close, the DJIA was up 0.5%, the S&P 500 was up 0.8%, and the Nasdaq Composite was up 1.3%.

The dollar fell against other major currencies following the release of data showing that private sector jobs grew at a slower pace in July. The data from payroll processor ADP showed that private sector employment climbed by 185,000 jobs in July following a downwardly revised increase of 229,000 jobs in June. Economists had expected an increase of about 215,000 jobs, compared to the addition of 237,000 jobs originally reported for the previous month.

However, the dollar clawed back some of its losses after other data showed US service sector activity expanded at a significantly faster rate in July. The report released by the Institute for Supply Management showed that the non-manufacturing index jumped to 60.3 in July from 56.0 in June, with a reading above 50 indicating growth in the service sector. Economists had expected the index inch up to just 56.2.

"Just as the doves were ready to call for a December lift-off (something the Dow Jones took to heart after the bell as it rapidly approached three-digit gains), that ISM figure once again muddies the rate-hike waters," said Connor Campbell, financial analyst at Spreadex.

"Of course, all of this chatter is somewhat premature given that the government-released non-farm figure isn't out until the end of the week. However, it shows that just when the Fed's path is looking clear(ish) another potential obstacle jumps in the road. Perhaps it’s time for some Fed firmness, rate-hike or no rate-hike," Campbell added

At the London close, the pound traded at USD1.5612 and the euro at USD1.0871.

Investors are awaiting the key nonfarm payrolls report on Friday amid heightened speculation that the US Federal Reserve may start to raise interest rates as early as next month. The Fed said in the minutes of its most recent policy meeting that it "anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the US labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term".

The central bank's emphasis on continuing job improvement will make the next US nonfarm payrolls number more important than usual.

Before all that, the focus in London on Thursday will be on the Bank of England, which will release its monetary policy decision, meeting minutes, and inflation report simultaneously for the first time. Bank of England Governor Mark Carney has previously hinted that the central bank will start to consider changing its UK interest rate policy at end of 2015, but said that any increases will be slow and suggested that interest rates will rise to no more than 2.25% in the medium term.

This has led some analysts to expect some members of the monetary policy committee to vote for a rate hike in the August meeting, with known hawks Martin Weale and Ian McCafferty the most likely. The statements will be released Thursday at 1200 BST, and Carney will hold a press conference starting at 1245 BST.

"If Mark Carney's comments from last month about interest rates increasing are to be viewed as anything more than bluff and bluster, we will need to see a change in the MPC's voting, and at present that is not something that the currency markets are reflecting in sterling strength," said IG market analyst Alastair McCaig.

While investors geared up for the rest of the week, individual UK company news took the spotlight on Wednesday.

Standard Chartered slashed its interim dividend and said it hasn't decided if it will ask shareholders for new capital, as the emerging markets bank reported a drop in first-half pretax profit and a jump in impairment charges for bad loans.

The emerging markets bank, which makes the bulk of its money in Asia, the Middle East and Africa, said its pretax profit amounted to USD2.10 billion in the six months to the end of June, compared with USD3.25 billion in the corresponding half of the prior year.

Operating income decreased to USD8.77 billion from USD9.25 billion, and operating expenses fell to USD5.04 billion from USD5.08 billion. Impairment losses on bad loans and advances, together with other credit risk provisions, increased to USD1.65 billion from USD846 million.

Standard Chartered shares closed up 0.2%, having swung between a 6.4% gain and 2.5% loss during trading.

Legal & General Group shares added 3.1%. The insurance and investments company said its first half operating profit rose by 18%, driven by growth in four of its six divisions. L&G increased its interim dividend by 19% to 3.45 pence per share from 2.90p, as operating profit increased by 18% to GBP750 million in the six months to the end of June, ahead of the 3.36p interim dividend and GBP692 million operating profit analyst forecast provided by the company.

Mining stocks continue to rebound from their heavy losses on Monday, with Rio Tinto up 3.9%, BHP Billiton up 3.6%, and Antofagasta up 2.8%. BHP and Rio also are benefiting from an upgrade to Hold from Sell by Liberum. The broker believes that the recent drops in their share prices, alongside its analysis, suggest that the risk-reward ratio is fairly poised.

Glencore also was upgraded to Hold from Sell by Liberum and closed up 1.6%. However, the miner said the directors of its Optimum Coal Holdings and Optimum Coal Mine have started business rescue proceedings in South Africa, similar to being put into administration, amid an ongoing dispute with local utility Eskom on the coal supply agreement between the two.

In the FTSE 250, Spirax-Sarco Engineering closed as the worst performer down 5.8%. The company, which makes steam management systems and peristaltic pumps, said a slowdown in global industrial production, together with negative currency movements, dragged down its pretax profit and revenue in the first half.

Spirax also incurred costs associated with the start-up of its business in India and with the restructuring of its UK operations. It said pretax profit in the first half was down by 10% to GBP57.3 million from GBP63.5 million a year earlier.

In the economic calendar Thursday, aside from the Bank of England releases, there are German factory orders at 0700 BST, UK industrial and manufacturing production at 0930 BST, US initial and continuing jobless claims at 1330 BST and the National Institute of Economic and Social Research's UK GDP estimate at 1500 BST.

In the UK corporate calendar, there are half-year results from Inmarsat, Aviva, Rio Tinto, RSA Insurance Group, Mondi, Randgold Resources, Aggreko, Savills, Cobham, Kennedy Wilson Europe Real Estate and Vitec Group. EasyJet releases July traffic statistics and Enterprise Inns issues a trading statement.

With a Tube strike in London on Thursday, early trading could be light.

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

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