LONDON MARKET CLOSE: UK Stocks Rise As US Rate Hike, Brexit Fears Cool

LONDON (Alliance News) - The FTSE 100 closed Friday nearly entirely in the green as traders appeared to take a more sanguine view on the possibility of a US interest rate hike in the near future and fears over a Brexit cooled, while bookmaker Ladbrokes surged after the remedies tabled to get regulatory passage for its merger with Gala Coral were viewed as manageable.

The FTSE 100 closed the day comfortably higher, clawing back some of the losses made on Thursday. The blue-chip index closed the day up 1.7%, or 102.97 points, to 6,156.32, with only five companies closing the day in the red.

The risers were broad-based, with food and drug retailers, the life insurance sector, housebuilders and property firms all among the best performers. Miners also bounced back after a tough day on Thursday, though some early gains made in the sector dissipated as trade wore on.

On Thursday, the blue-chip index closed down 1.8%, led by the mining sector, after a surprisingly hawkish set of minutes from the US Federal Reserve, and comments from New York Fed President William Dudley, raised the prospects of a rate hike in June.

Dudley said "June is definitely a live meeting", coming after the Fed's minutes indicated most members of the rate-setting Federal Open Market Committee were open to a June hike if economic data proves strong enough to warrant such a move.

FOREX.com analyst Fawad Razaqzada said traders on Friday were "making a more sober assessment of the hawkish Fed minutes," with sentiment in the market boosted further by the oil price restarting its climb towards USD50 a barrel.

Oil pushed higher on Friday, up to USD48.73 per barrel from USD47.73 at the close on Thursday. Gold was slightly lower at USD1,249.50, from USD1,251.18 at Thursday's close.

Razaqzada also said the FOMC had indicated it was less concerned on the economic impact of a rate rise due to a slightly weaker dollar, stronger equity markets and better financial conditions overall. Since the April meeting, however, the dollar has already appreciated and stock markets have fallen slightly.

As a result, Razaqzada said traders should not "be surprised if the Fed starts to talk down the prospects of a June rate hike in the coming weeks."

US markets were broadly higher, also clawing back losses made on Thursday. The Dow Jones Industrial Average was up 0.7% at the London equities close, while the S&P 500 was up 0.8% and the NASDAQ Composite was up 1.4%.

UK markets were also given a boost by easing fears on the possibility of the UK leaving the European Union. A poll published by Ipsos Mori earlier in the week had given the Remain camp in the Brexit debate an 18-point lead, a gulf given further credence by a later poll from ComRes which gave the Remain campaign an 11-point advantage.

Oliver Jones at Capital Economics said these polls, and a shift in the probability of a Brexit implied by betting markets, had helped the pound rise against the dollar over the course of the week.

For the week, the pound was up 1.1% against the dollar, though edged lower against the US currency on Friday at USD1.4514, from USD1.4583 at the close on Thursday. The euro was a broadly flat against the dollar at the London close at USD1.1207, compared to USD1.1204 at Thursday's close.

IG market analyst Josh Mahony, however, said the FTSE 100 continues to be constrained by Brexit fears and June rate hike prospects, and will continue to be held with a range of around 160 points until these issues are out of the way.

Investors may also be keeping half an eye on the G7 meeting in Japan "in the unlikely event that finance ministers put differences aside for a coordinated effort to revive global growth," said CMC Markets analyst Jasper Lawler.

The FTSE 250 closed up 1.2%, or 191.95 points, to 16,922.06 on Friday, led higher by bookmaker Ladbrokes, up 6.5%.

The UK Competition & Markets Authority said Ladbrokes may have to dispose of around 350 to 400 shops ahead of its merger with Gala Coral, although this only equates to just under 10% of the combined estate of the merging bookies.

Ladbrokes and Gala Coral are the second and third-largest bookmakers in the UK by number of shops, behind William Hill. Ladbrokes operates 2,231 betting shops in Great Britain, while Gala Coral operates around 1,850 betting shops in the UK.

William Hill, up 0.7%, released its own news later in the day, announcing a GBP350.0 million bond issue, the proceeds of which will be used to refinance existing debt and for general corporate purposes.

Also higher among the mid-caps was financial services firm Close Brothers Group, up 4.6%. It delivered an improved performance in the third quarter, with good trading for all three of its divisions. Close, which runs banking, securities and asset management operations, said its banking arm has continued to see good demand for its specialist lending services, while its asset management saw net inflows and its Winterflood securities business saw an improvement in conditions.

At the other end of the FTSE 250 sat Spectris, which makes precision measurement instruments for industrial markets. The firm finished 4.4% lower after it said its 2.0% sales growth in the first four months had been driven by acquisition contributions, while like-for-like sales sunk 4.0%.

The AIM All-Share closed the day up 0.7%, or 5.22 points, to 727.86, with sharp moves at both ends of the index.

On the up side, China New Energy rose 81% after it said its prospective partner is close to securing an Investment Promotional & Protection Agreement on its bioethanol project in Zambia.

China New Energy said Sunbird Bioenergy Africa, which whom it signed a deal to work on developing biofuel refineries in Zimbabwe and Zambia last year, has been advised by the Zambian Development Agency that terms of the IPPA have been agreed, and the agreement is set to be signed shortly.

Rising even further was Aqua Bounty Technologies, shares in which more than tripled after it said it had secured approval from Health Canada for the commercial sale of its genetically-modified AquAdvantage Salmon.

At the other end of AIM, Circle Oil shares sunk 70% after it conceded its strategic review is likely to lead to "little or no value" being left for its shareholders. The company has USD77.5 million worth of outstanding debt, very high for a company with a market capitalisation, after Friday's declines, of around GBP3.5 million, and it said it is now considering all options available, including selling the business, restructuring debt or launching a share subscription.

In Europe, the CAC 40 in Paris closed up 1.5%, while the DAX in Frankfurt closed up 1.2%, both also recovering after falls on Thursday in what has been a choppy week for European markets.

Monday's economic calendar will be dominated by manufacturing data releases. Japan publishes manufacturing PMI overnight, followed by data from France, Germany, and the eurozone through the morning before US manufacturing data arrives at 1445 BST. Irish retail sales will be published at 1100 BST, while eurozone consumer confidence numbers will come at 1500 BST.

In a relatively light earnings calendar on Monday, Irish budget airline Ryanair Holdings publishes full-year results, as does support services provider Mitie Group.

By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance

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