LONDON MARKET CLOSE: US-China Trade Fears Ease As Banks Boost FTSE 100

(Alliance News) - Stocks in London ended higher on Friday as investors found comfort in the further easing of trade tensions between the US and China.

The FTSE 100 index closed up 22.79 points, or 0.3% at 7,367.46, ending the week up 1.2%.

The FTSE 250 ended up 233.18 points, or 1.2% at 20,195.75, ending the week up 2.4%, and the AIM All-Share closed up 5.56 points, or 0.6% at 886.06, ending the week up 0.5%.

The Cboe UK 100 ended up 0.4% at 12,501.27, the Cboe UK 250 closed up 1.3% at 18,071.18, and the Cboe Small Companies ended up 0.4% at 10,945.56.25.

In Paris the CAC 40 ended up 0.2%, while the DAX 30 in Frankfurt ended up 0.5%.

CMC Markets analyst David Madden said: "Stocks are in positive territory heading into the close as a mixture of the feelgood factor from yesterday's European Central meeting and the improved trading relationship between the US and China has lifted sentiment. The stimulus package from the ECB boosted eurozone stocks, and the DAX hit a level not seen since late July."

"Beijing revealed that it will exclude pork and soybeans from its latest round of tariffs and that has been seen as a conciliatory move, and the helps its trading relationship with the US. Global trade tensions are at their lowest in a number of weeks, and that has encouraged traders to buy back into the market," Madden added.

On the London Stock Exchange, stocks closely tied to the UK economy such as banks ended among the blue chip risers, in tandem with the stronger pound.

Royal Bank of Scotland, Barclays and Lloyds closed up 5.5%, 5.3% and 5.2% respectively.

London Stock Exchange Group closed up 3.6% after the stock exchange operator rejected a GBP29.6 billion takeover offer from Hong Kong Exchanges and Clearing and reiterated its commitment to the acquisition of financial data and trading platform provider Refinitiv.

HKEX responded to LSEG's vociferous rejection of its offer, saying the business combination could "create a global market infrastructure leader".

Earlier on Friday, LSEG rejected the HKEX bid over what it described as "fundamental flaws". Reasons provided for the rejection included that it did not meet LSEG's objectives and would "represent a significant backward step" strategically, given HKEX's "high geographic concentration and heavy exposure to market transaction volumes".

SSE closed up 1.5% after the energy provider agreed to sell its struggling household supply arm to smaller rival Ovo Group in a GBP500 million deal.

At the other end of the large cap index, Diageo closed down 3.0% after Reuters reported on Thursday that unions were demanding a 5% pay rise for workers set to strike this month in Scotland.

The news agency - citing a source familiar with the matter - said the Unite and GMB unions have "never" agreed to settle for a 3.5% wage increase, with their previous 5% demand remaining in place.

Members of the Unite and GMB union working for Diageo in Scotland are set to go on a rolling strike between next Tuesday and September 27. The strike is estimated by unions to be set to cost the firm GBP1 million.

The pound was quoted at USD1.2455 at the London equities close, sharply higher than USD1.2334 at the close Thursday. Sterling hit an intraday high of USD1.2477 versus the greenback in mid-morning trade - its highest level since late July.

The pound was higher against the dollar on speculation the two sides were edging closer to a compromise over the contentious Irish border issue.

UK Prime Minister Boris Johnson said Friday he was "cautiously optimistic" about striking a Brexit deal ahead of his first face-to-face talks with EU chiefs next week.

Johnson is due to meet European Commission President Jean-Claude Juncker and the EU's chief Brexit negotiator Michel Barnier in Luxembourg on Monday.

Johnson's upbeat tone on striking a divorce deal with the EU in time for the UK's scheduled October 31 departure date is in marked contrast with the tone from Brussels.

On Thursday, the EU's chief negotiator Michel Barnier told MEPs that he had "no reason to be optimistic" about the prospects for a deal.

Meanwhile, DUP leader Arlene Foster poured cold water on reports the party was ready to soften its "red lines" of the backstop issue to help Johnson get a deal.

The Times reported the DUP was prepared to accept some EU rules after Brexit as part of a new agreement to replace the backstop - intended to ensure there is no return of a hard border with the Republic.

It said the party was ready to drop its objections to regulatory checks between Northern Ireland and the rest of the UK - something it has vehemently resisted.

However, Foster said they remained opposed to what would amount to a Northern Ireland-only backstop with a border in the Irish Sea.

"UK must leave as one nation. We are keen to see a sensible deal but not one that divides the internal market of the UK," Foster tweeted.

Spreadex analyst Connor Campbell said: "It's been quite the week for the pound. Even with the prorogation of Parliament factored in, it has benefited from the Benn bill’s royal assent, better than forecast jobs and GDP data and, now, a report that the DUP are ready to 'shift red lines' regarding the Irish backstop. And while Arlene Foster's party have denied any such softening, that hasn’t stopped the currency climbing.

"Normally such a sharp rise from sterling would spell trouble for the FTSE. However, the lingering goodwill in Europe following Mario Draghi's parting QE and rate cut-shaped parting gift allowed the UK index to cross 7,350."

The euro stood at USD1.1078 at the European equities close, higher than USD1.1035 late Thursday, as the dust settled from European Central Bank President Mario Draghi's decision to restart the bank's quantitative easing programme on Thursday.

The head of Germany's Bundesbank on Friday hit out at the ECB chief for "overshooting the mark" with his huge stimulus package aimed at propping up the flagging eurozone economy.

"Such a far-reaching package was not necessary," Jens Weidmann told Bild daily, a day after ECB governors pushed the deposit interest rate further into negative territory and relaunched net purchases of government and corporate debt.

The discontent over Draghi's highly expansionary move burst into the open after Thursday's monetary policy meeting left eurozone central bankers deeply divided.

Analysts at Oxford Economics said: "The smaller-than-expected QE package partly reflects some of the increasing divisions within the Governing Council, with some of its members publicly opposing new asset purchases. In that sense, we had highlighted last week that a more moderate package should offer a workable compromise to please both doves and hawks.

"However, the open-ended programme is already drawing a lot of criticism by those arguing the ECB is exceeding its mandate and that the eurozone economy is headed towards a 'Japanification' scenario, of permanent low rates and central bank intervention in financial markets. But with inflation expectations risking being permanently de-anchored, not acting was never an option for the ECB, and the stimulus package amounts to nothing less than the central bank remaining credible in its determination to achieve the inflation target."

Stocks in New York were higher at the London equities close amid signs the US and China's frosty trade relationship was beginning to thaw.

The DJIA was up 0.2%, the S&P 500 index up 0.1% and the Nasdaq Composite was flat.

China said Friday that some high-profile US agricultural products including pork and soybeans will be exempt from added tariffs, ahead of trade talks between Beijing and Washington scheduled for October.

The announcement is the latest in a series of appeasement measures between the world's two biggest economies, who for the past year have been locked in a bitter trade war resulting in tit-for-tat tariffs on hundreds of billions of dollars in bilateral trade.

In economic news, solid gains in auto sales and online shopping in August spurred another big increase in US retail sales In August, the Commerce Department said.

Retail sales increased 0.4% last month, down from a healthy 0.8% in July. Excluding autos, sales were unchanged for the first time since February.

However, sales excluding autos and parts dealers showed no increase, according to the data.

The gains compared to last year remain solid, with total sales 4.1% higher than August 2018 and up 3.5% for categories other than autos. Online retail sales were higher, rising 1.6%, roughly the same amount as in July.

Brent oil was quoted at USD60.32 a barrel at the London equities close, up from USD59.30 at the close Thursday.

Gold was quoted at USD1,496.00 an ounce at the London equities close, down from USD1,512.20 late Thursday, as the dollar strengthened following the release of US retail sales data.

The economic events calendar on Monday has UK Rightmove house price index data at 0001 BST, China retail sales figures at 0300 BST and Italy inflation readings at 0900 BST. Financial markets in Japan are closed on Monday for the Respect for the Aged Day holiday.

The UK corporate calendar on Monday has interim results from private healthcare operator Spire Healthcare, low-cost UK housebuilder MJ Gleeson and palm oil producer MP Evans.

London Close is available to subscribers as an email newsletter. Contact info@alliancenews.com