MARKET COMMENT: Strong US Economic Readings Cheer London Stocks

LONDON (Alliance News) - UK shares ended higher Tuesday, lifted by strong economic data from the US and by doveish comments made by European Central Bank President Mario Draghi on Friday at the Jackson Hole symposium.

The FTSE 100 closed up 0.7% at 6,822.76, the FTSE 250 up 0.7% at 15,998 and the AIM All-Share index up 0.8% at 770.32.

European markets recovered from a sluggish start to make strong gains as well, with the CAC 40 ending the day 1.2% higher, while the German DAX ended up 0.8%.

At the close of play in Europe, the DJIA was trading up 0.4% in New York, the S&P 500 was up 0.3% and the NASDAQ Composite up 0.3%.

UK indices shot up at the beginning of trade as they were given their first chance to react to Draghi's remarks at the Jackson Hole symposium following the long holiday weekend. The ECB president had said on Friday he is confident that the package of stimulus measures announced in June by the central bank will provide the intended boost to demand, but that the ECB stands ready to adjust its policy stance further if required.

"While the UK would not directly benefit from Eurozone [quantitative easing] since it does not use the euro, London is the financial capital of Europe, and there’s a good chance some of the easy money would slosh across the Channel," said Jasper Lawler, an analyst at CMC Markets. "Should the policy be enacted with the UK economy growing, it could be enough for the FTSE 100 to make new all-time highs above 6,950."

The index recovered from a midday lull after promising economic numbers in the US. Durable goods orders for July grew an unprecedented 23% over the previous month, compared to 2.7% month-on-month growth in June and surpassing economists' expectation of a growth of 7.5%. The figure was skewed by The Boeing Co which signed a record number of contracts for new jets, according to government figures released Tuesday.

In addition, US consumer confidence for August rose to its highest level since October 2007, with the Conference Board index reading 92.4. The results were up on July's reading of 90.3 and outstripped the consensus of 89.0.

"A jump in US consumer confidence to its highest level since October 2007 provides yet more proof that it is America leading the way in economic terms," said IG market analyst Chris Beauchamp.

In individual stock news, Antofagasta ended the day as the heaviest fallers in the FTSE 100, with its shares falling 1.2%. The company reported a fall in pretax profit and revenue in the first half of 2014, as it said market conditions remained challenging and it was hit by the declining price of copper, despite production coming in ahead of expectations.

In its first-half results for the six months to June 30, 2014 the miner said pretax profit fell 13% to USD850.7 million from USD981.0 million last year. Revenue declined 4.2% to USD2.66 billion from USD2.78 billion in the first-half of 2013 after copper prices fell by 2.2% as prices "trended downwards during the period, as well as lower gold sales and realised prices."

WPP was amongst the top gainers in the blue-chip index for most of the day, though it slipped down the winners list toward the close. The stock ended up 1.8%.

WPP said it is likely to achieve its targeted dividend pay-out ratio of 45% in 2014, a year ahead of schedule, as it saw pretax profit rise in the half-year to the end of June. The company proposed an interim dividend of 11.62 pence, up from 10.56 pence in the previous year while pretax profit rose to GBP491.1 million from GBP427.1 million in the previous year.

The economic calendar is relatively quiet on Wednesday, the highlight being German GfK consumer confidence survey at 0700 BST.

In the corporate calendar, interim results will be released from FTSE 250 stocks Evraz, Foxtons, Polymetal International, Hansteen Holdings and John Laing Infrastructure Fund.

By Neil Thakrar; neilthakrar@alliancenews.com

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