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FTSE 100 edges up as Bank of England lifts growth forecast, Wall Street set for subdued start

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  • FTSE 100 adds 7 points
  • Dow to open marginally higher
  • UK service sector growth fastest since 2013

12.55pm: US investors await jobless claims figures

US markets are expected to edge higher at the open after a mixed performance on Wednesday.

The Dow Jones Industrial Average, which is sitting at a new peak, is expected to add just 21 points or 0.09% to 34,251 while the S&P 500 is set to rise 0.16% and the Nasdaq Composite – which fell on Wednesday – is forecast to recover 0.16%.

Sophie Griffiths at Oanda said: “US indices are pointing to a subdued start after the Dow hit a fresh all-time high… News that President Biden supports the suspension of patents on Covid vaccines was bad news for drug makers but is good news for the global economic recovery. The quicker the world receives the vaccine, the faster global economic recovery will be, and the less likely we will see a vaccine-resistant mutation.”

On the US data front there are the weekly jobless claims, which are expected to show a drop from 553,000 to 538,000. These come ahead of Friday’s widely watched non-farm payroll numbers, which could see a million jobs added in April.

On the non farm numbers Michael Hewson at CMC Markets said: “Average estimates are for a number in the region of 1m especially since weekly jobless claims are also trending lower dropping sharply below 600,000 a week, while the unemployment rate is expected to fall further, from 6% to 5.8%.”

Back with the Bank of England, and the slowing of the bond buying programme is being interpreted as the first sign of a move away from a dovish stance.

Dean Turner, economist at UBS Global Wealth Management, said: “Markets were eagerly awaiting to see if the Bank of England would lean further towards the hawkish end of the central bank spectrum, and those who expected this to be revealed today were not disappointed. The Bank’s decision to slow the pace of purchases was inevitable at some point and doing so now means there will be less of cliff edge later in the year.

“The upgrades to the growth outlook were also widely expected considering the recent Budget, but the message is still one of caution. The Bank said that clear evidence that progress is being made will be needed before they consider their next policy move. In our view, this points to the Bank keeping base rates unchanged for some time yet.  This low interest rate environment will support equity markets as the UK and global economy continues to recover.

“The pound initially fell, but then recovered on today’s release. On balance, we think that the slightly more hawkish outcome of the May meeting will be one factor that will help sterling make further gains between now and the end of the year.”

The FTSE 100 meanwhile is up just 7.69 points or 0.11% at 7046.99.

12.15pm: UK economy upgraded for this year

The Bank of England has kept interest rates at their record low of 0.1% and maintained its asset purchase programme at £895bn.

But as widely predicted it has raised its forecast for economic growth for this year.

It now expects GDP to grow by 7.25% this year compared to the 5% it forecast in February and the 10% decline seen last year.

But the 2022 forecast has been cut from 7.25% to 5.75%.

It said: “COVID-19 and the actions taken to contain it have continued to have a dramatic and rapidly changing impact on the United Kingdom and countries around the world…

“UK GDP is expected to have fallen by around 1½% in 2021 Q1, less weak than was assumed in the February Report. New Covid cases in the United Kingdom have continued to fall, the vaccination programme is proceeding apace, and restrictions on economic activity are easing. Reflecting these developments, GDP is expected to rise sharply in 2021 Q2, although activity in that quarter is likely to remain on average around 5% below its level in 2019 Q4. GDP is expected to recover strongly to pre-Covid levels over the remainder of this year in the absence of most restrictions on domestic economic activity.”

But it warned of the growing number of cases outside the UK, particularly India and added: “The outlook for the economy, and particularly the relative movement in demand and supply, remains uncertain. It continues to depend on the evolution of the pandemic, measures taken to protect public health, and how households, businesses and financial markets respond to these developments.”

There was also the suggestion the asset buying programme could be slowed.

It said: “As envisaged since the announcement of the programme in November 2020 and consistent with developments in financial markets since then, the pace of these continuing purchases could now be slowed somewhat. This operational decision should not be interpreted as a change in the stance of monetary policy.”

The FTSE 100 has barely reacted, edging off its best levels but still up 9.37 points or 0.13% at 7048.67.

The pound has edged up 0.15% against the dollar to $1.393.

11.47am: Tobacco shares climb

Ahead of the Bank of England announcement at noon, the FTSE 100 is holding firm, up 16.07 points or 0.23% at 7055.37.

Chris Beauchamp, chief market analyst at IG, said: “A fresh one-year high for the FTSE 100 maintains the brighter outlook for UK assets as markets await the outcome of the latest BoE meeting

” An upgrade to forecasts for economic growth should help maintain this optimistic assessment, but as night follows day, it will also bring a discussion about when the UK central bank will taper its efforts, in a similar vein to the never-ending debate in Washington regarding the Fed’s efforts.

“All investor energy appears to be concentrated on divining the next move in central bank policy, something that is of course important, but risks obscuring the broader picture that has seen a remarkable global recovery, providing a much more congenial environment for risk assets in the long-term.”

Tobacco stocks are among the current risers, with Imperial Brands PLC (LON:IMB) up 32.5p or 2.11% at 1570p and British Amercan Tobacco PLC 55p or 2.03% better at 2771p. They have been lifted by read-across from rival Japan Tobacco, which beat first-quarter profit forecasts. 

10.10am: Company results support markets

Leading shares remain in positive territory – just – with the FTSE 100 now up 10.17 points or 0.14% at 7049.47.

Company results are giving some support, with Next PLC (LON:NXT) up 246p or 3.02% at 8372p after the clothes retailer lifted its profit guidance once again.

Barrat Developments (LON:BDEV) is 10.2p or 1.33% better at 755.8p on news it plans to build more homes than expected this year.

And industrial group Melrose (LON:MRO) is up 2.35% or 3.85p at 167.55p. It said trading in 2021 so far had been slightly ahead of expectations.

Sales over the four months to 30 April rose by 8% compared to the same period in 2020 and were up by 4% excluding Nortek Air Management, which Melrose recently agreed to sell for US$3.6bn.

But it cautioned the global shortage of semiconductors could hit growth in its automotive business.

Laura Hoy, equity analyst at Hargreaves Lansdown, said: “The silver lining for Melrose has been the group’s focus on cost-saving, which improved margins throughout the business. That has helped it keep its head above water to weather this storm and should stand it in good stead as conditions improve.

“The Nortek Air Management sale is also on track to bring in a welcome cash injection to help stabilise the group’s balance sheet. Operationally, it won’t do Melrose any favours as it’s one of the only divisions performing well at present, but shareholders are expected to benefit from the cash windfall, though the exact proportion to be returned has yet to be revealed.“

Heading lower was Admiral PLC (LON:ADM), off 3.6% or 112p at 2998p as the insurer’s shares were quoted without the 86p a share dividend.

AJ Bell investment director Russ Mould said: “The FTSE 100 built on yesterday’s gains to reach a new 14-month high helped by positive corporate updates.

“Sterling is likely to be in focus over the next 24 hours with the outcome of the Scottish elections front and centre.

“If the SNP can secure the outright majority it says will be a mandate for a second independence referendum then there may be volatility in the pound as the markets factor in a heightened risk of a break-up of the union.

“In the short term sterling weakness would likely give the FTSE 100 a lift, given it boosts the relative value of the overseas earnings which dominate the index.”

 

9.43am: Best performance for services since October 2013

Ahead of the Bank of England announcement on interest rates et al, the UK service sector performed better than expected last month.

Providing more evidence for the Bank to lift its growth forecasts, business activity in the sector hit a seven and a half year high in April as lockdown restrictions began to ease, people made bookings at pubs and restaurants and non-essential retailers reopened.

The IHS/Markit purchasing managers index came in at 61, better than the 60.1 expected by analysts. That compares to 56.3 in March and is the highest since October 2013.

Tim Moore, economics director at IHS Markit, said: “April data illustrates that a surge of pent up demand has started to flow through the UK economy following the loosening of pandemic restrictions, which lifted private sector growth to its highest since October 2013.

“The roadmap for reopening leisure, hospitality and other customer-facing activities resulted in a sharp increase in forward bookings and new project starts across the service sector. If the rebound in order books continues along its recent trajectory during the rest of the second quarter, then service sector output growth looks very likely to surpass the survey-record high seen back in April 1997.

“The successful vaccine roll out continued to underpin expectations of a strong recovery in the year ahead, with service providers responding by boosting employment and investment spending during April.”

The news has not exactly sparked the FTSE 100 into life but it is still ahead, 16.41 points or 0.23% better at 7055.71.

8.46: Leading shares ahead at the open

The FTSE 100 made a tentative but positive start ahead of the local and Scottish elections.

The latter is likely to fuel calls for a second independence referendum, while the former looks likely to shore up Tory gains in former Labour heartlands.

Away from politics, the Bank of England’s Monetary Policy Committee Meeting minutes later are likely to focus on the pace of the UK’s recovery from Covid.

A successful vaccine roll-out is expected to have lit the blue touch paper under the economy, according to previews of the announcement.

Experts at the EY Item Club think the BoE will bolster gross domestic product predictions for the next few years ‘significantly’.

On Friday, Barclays published figures suggesting the economy could grow by 6.5% this year, marking the best rate of growth since records began in 1948.

On the market, Next (LON:NXT) was one of the few robust performers on the high street, according to its first-quarter numbers.

Full-price sales in the year to date exceeded expectations, enabling the forecast full-year pre-tax profit figure to be raised.

“Next has the uncanny ability to under-promise and overdeliver and this update runs true to form,” said Richard Hunter, head of markets at Interactive Investor. The shares were up 1.1%.

Barratt Developments (LON:BDEV) advanced 2% after its latest market update.

ITM Power (LON:ITM), the green energy specialist valued at £2.1bn, found itself in an unaccustomed position – among the day’s fallers.

It fell 7% after Morgan Stanley downgraded its recommendation on the stock to ‘equal weight’ from ‘overweight’.

The shares, currently changing hands for 385p, are well off their record high of more than 700p achieved in late January.

Proactive news headlines

Alien Metals Ltd (LON:UFO) said initial results were encouraging from the maiden drilling programme on its Hancock iron ore project, part of the Hamersley iron ore project in Western Australia.

Anglo Pacific Group PLC (LON:APF, TSX:APY), a natural resources royalty and streaming company, said all of the producing assets in its portfolio are now back in operation, following the resumption of activities at the McClean Lake Mill after a period of COVID-19 related care and maintenance.

DeepVerge PLC (LON:DVRG) said it is expanding its data and technology division, Rinocloud, into the Moorepark Technology Centre (MTC) in Fermoy, Cork, Ireland, to create a European centre of excellence for the real-time detection of dangerous pathogens such as coronavirus (SARS-CoV-2) in water and wastewater systems.

Allergy Therapeutics PLC (LON:AGY) said it has completed the treatment of all patients taking part in an exploratory field study of short-course inoculation against grass pollen-induced hayfever.

Jersey Oil and Gas PLC (LON:JOG), in its results statement, said it is delivering on its growth strategy with the Greater Buchan Area project in the North Sea.

Genel Energy PLC (LON:GENL) chief executive Bill Higgs is expecting the company will end the year with a material cash position.

Bahamas Petroleum Company PLC (LON:BPC) is counting down to the start of drilling for the Saffron-2 appraisal well in Trinidad, with rig mobilisation starting this weekend.

Savannah Resources PLC (LON:SAV) announced the development of a Corporate Environmental and Social Management System (ESMS) to help deliver its Corporate Sustainability Policy and support the implementation of its Environmental, Social and Governance (ESG) commitments.

Frontier IP Group PLC (LON:FIPP) said The Vaccine Group, one of the companies in its investment portfolio, has appointed Dr Jeremy Salt as its chief executive officer. He joins The Vaccine Group from GALVmed, a not-for-profit organisation that develops and makes available livestock vaccines, medicines and diagnostics for small-scale livestock producers, where he was the chief scientific officer.

Feedback PLC (LON:FDBK) announced the appointment of Anesh Patel as chief financial officer of its trading subsidiary, Feedback Medical Limited.

AFC Energy PLC (LON:AFC) notified that it will today be presenting to international institutional investors as part of Goldman Sachs’ 14th European Small & Mid Cap Symposium. 

XLMedia PLC (LON:XLM) confirmed its annual general meeting is scheduled for 27 May, with investors invited to submit any questions and complete a proxy voting form in advance as they will be unable to attend due to coronavirus regulations.

Jersey Oil & Gas PLC (LON:JOG) will hold its annual general meeting on 2 June in St Helier, Jersey. As it will be a closed meeting, shareholders are strongly encouraged to vote by proxy.

Braveheart Investment Group PLC (LON:BRH) announced that on this week Trevor Brown, a director of the company, sold a total of 1,447,385 shares at an average price of 57.161p per share, leaving him with 1,976,714 ordinary shares or a 5.16% stake.

Sensyne Health PLC (LON:SENS) reported that an allocation of unit awards has been made to the company’s executive directors and other eligible employees under its value creation plan of September 2020. 

Thor Mining Plc (LON:THR, ASX: THR, OTCQB:THORF) advised that an updated investor presentation is available on the company website.

Cellular Goods PLC (LON:CBX) announced that it has granted certain warrants over ordinary shares to new members of staff and has agreed to extend the exercise period of certain previously granted warrants.

6.50 am: Slightly higher start predicted 

The FTSE 100 is set to start Thursday slightly higher as international stock markets look a little shaky and domestic attentions are on politics, as local elections are potentially set to act as a bellwether.

CFD and spread betting firm IG Markets sees the blue-chip benchmark around 7 points into positive territory, making a price of 7,047 to 7,050 with just over an hour to go until the open.

It comes after a back-‘n’-forth couple of sessions in the shortened four day week.

“While Tuesday’s sharp falls were blamed on a multitude of factors the reality was nothing much had changed from where we were at the end of last week,” said Michael Hewson, analyst at CMC Markets.

“This may help explain why stocks managed to rebound yesterday given that the economic outlook remains undimmed, despite concerns of higher inflation.

“That’s not to say that the risk of further losses for US stocks has diminished, it hasn’t as evidenced by yesterday’s rather lacklustre US finish, which saw the Nasdaq and the Russell 2000 end the day lower for the second day in a row, even as the Dow made a new record high.”

The analyst added: “Today’s European session looks set to get off to a slightly weaker start as a result of the failure of US markets to hang onto their gains, with the main focus on sterling today as local and regional elections get under way across the country, with a lot of attention set to be on the Scottish vote and whether the SNP will be able to obtain a majority to claim the right to hold another independence vote.”

Wall Street benchmarks ended mixed on Wednesday albeit the trading pattern and sentiment weren’t massively dissimilar.

The Dow Jones gained 97 points or 0.29% to finish Wednesday at 34,230.

At the same time, the S&P 500 nudged 0.07% higher to end the session at 4,167 whilst the Nasdaq remained in negative territory, down 0.37% to 13,582.

Small-cap focussed Russell 2000 was similarly 0.31% lower at 2,241.

In Asia, Japan’s Nikkei rallied up some 472 points or 1.64% to reach 29,284 whilst Hong Kong’s Hang Seng added 101 points or 0.35% to trade at 28,519.

The Shanghai Composite dipped slightly lower, losing 0.16% to 3,439.

Around the markets

Pound: US$1.3905, down 0.01%

Gold: US$1,790 per ounce, up 0.29%

Silver: US$26.61 per ounce, up 0.59%

Brent crude: US$69.18 per barrel, up 0.4%

WTI Crude: US$65.70 per barrel, up 0.1%

Bitcoin: US$57,259, up 4.43%

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Thursday as investors look ahead to the US jobs report due later this week.

The Hang Seng index in Hong Kong gained 0.37% while the Shanghai Composite in China slipped 0.17%.

In Japan, the Nikkei 225 rose 1.71% and South Korea’s Kospi gained 0.66%.

Shares in Australia declined, with the S&P/ASX 200 trading 0.64% lower.

Proactive Australia news:

Alkane Resources Ltd (ASX:ALK) non-executive chairman Ian Jeffrey Gandel has shown confidence in Alkane’s ambition of becoming Australia’s next multi-mine gold producer by acquiring shares worth $2.92 million.

Bardoc Gold Ltd (ASX:BDC) has intersected broad zones of shallow high-grade gold mineralisation at the cornerstone 1.7-million-ounce Aphrodite Deposit within its flagship 3.07-million-ounce Bardoc Gold Project in the Kalgoorlie region of Western Australia.

Cauldron Energy Ltd (ASX:CXU) (OTCMKTS:CAULF) has reached an agreement with Kuuwa Rentals to lease a T4 Sami Mobile Concrete Batching Plant (CBP) in Onslow, WA.

Tietto Minerals Ltd‘s (ASX:TIE) latest infill drilling results further enhance the company’s plans to grow open pit gold resources at Abujar-Pischon-Golikro (APG) deposit, part of the Abujar Gold Project in Cote d’Ivoire West Africa.

Zelira Therapeutics Ltd (ASX:ZLD) (OTCMKTS:ZLDAF) has launched its HOPE™ range of autism spectrum disorder products in Washington DC through its partnership with Alternative Solutions LLC, a licensed manufacturer and distributor of medical cannabis products.

Predictive Discovery Ltd’s (ASX:PDI) new resource drilling results at Bankan Gold Project in Guinea have extended the NE Bankan Central zone to the south at depth with higher grades.

Element 25 Ltd (ASX:E25) has boosted its finances to the tune of $9.2 million through the set-off of 4.8 million collateral shares previously issued to Acuity Capital under a Controlled Placement Agreement.

FYI Resources Ltd (ASX:FYI) (OTCMKTS:FYIRF) (FRA:SDL) has entered an exclusivity agreement with Alcoa Australia Limited which will see the parties undertake detailed negotiations for a possible high purity alumina (HPA) project joint venture.

VIP Gloves Ltd (ASX:VIP), which is undertaking an aggressive expansion drive with the construction of a second factory, expects to see its earnings increase gradually in financial years 2022 and 2023 from the additional capacity.

Volt Resources nears completion of due diligence for producing European graphite project

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