London close: Equities end higher as UK consumer confidence rises

China’s government said that monetary policy must be more “flexible” and more “forceful”, according to a statement released after the Central Economic Work Conference by Xinhua News Agency on Monday. The news comes as concerns mount over China’s economic slowdown.

Closer to home, GfK’s UK consumer confidence index  increased one point to +2 in December during the festive season, a touch higher than consensus forecasts for a reading of +1.

“Looking ahead, we continue to think that a snap-back in inflation , slowing job gains and rising interest rates will put consumers in a more morose mood next year,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

In Germany, GfK’s consumer confidence index rose to 9.4 in January from 9.3 the previous month, surprising analysts who had expected no change.

On another positive note for the markets, the oil sector regained ground with Brent crude up 0.38% to $36.49 per barrel and West Texas Intermediate up 1.37% to $36.31 per barrel at 1628 GMT.

Meanwhile, UK public sector borrowing rose £1.3bn to £14.2bn in November from the same month last year, according to data released by the Office for National Statistics. The figure was far higher than the £11.8bn economists had been expecting.

Across the Atlantic, the final estimate of third quarter US gross domestic product was revised to an annualised 2% from a previous estimate of 2.1%. Analysts had been expecting a revision to 1.9%.

“Altogether, the third estimate of third quarter GDP does little to change the picture of solid domestic activity offset by weakness abroad, as final sales to domestic purchasers (GDP less trade and inventories) rose 2.9% in the quarter,” said Barclays Research analysts.

The core personal consumption expenditure index unexpectedly increased to 1.4% quarter-on-quarter in the third quarter from a prior estimate of 1.3%. PCE is a measure of GDP and the Federal Reserve’s preferred measure of inflation. The US central bank is targeting 2% inflation.

Sales of existing US homes fell sharply in November, to their lowest pace in 19 months, according to data released by the country’s National Association of Realtors. The NAR figures suggest existing home sales dropped 10.5% to an annual rate of 4.76m from a downwardly-revised 5.32m in October and compared with consensus estimates for an increase to 5.35m.

In company news, heavily-weighted miners were the biggest gainers, with Antofagasta and Anglo American firmly in the black as Chinese copper producers consider a possible production cut in January.

BG Group and Royal Dutch Shell were also on the front foot as oil prices recovered.

On the downside, retailer Marks & Spencer slid after Nomura cut its price target on the stock to 565p from 600p, although it retained its ‘buy’ rating.
ITV headed south after rising on Monday amid speculation that it could be a takeover target.

Centrica also slipped after RBC Capital Markets cut its target price on the British Gas owner to 260p from 280p, but reiterated its ‘outperform’ recommendation.

Heavily-weighted miners were the biggest gainers, with Antofagasta and Anglo American firmly in the black as Chinese copper producers consider a possible production cut in January. Meanwhile, BG Group and Royal Dutch Shell were also on the front foot as oil prices recovered. West Texas Intermediate was up 0.4% at $35.95 a barrel while Brent crude was 0.1% lower at $36.32, having fallen to 2004 lows in the previous session.

On the downside, retailer Marks & Spencer and slid after Nomura cut its price target on the stock to 565p from 600p, although it retained its ‘buy’ rating. The Japanese bank was updating its estimates for clothing retailers following November Kantar Worldpanel Fashion data.

European markets made a third day of losses on Tuesday, as markets on the continent started to wind down for the holidays.

The Stoxx Europe 600 had an early rally, but finished down 0.11% to 356.77, with consumer services, technology and utilities struggling the most.

A mild increase in oil prices, first seen in Asia and repeated in Europe during the day, helped resource shares to gains. Telecoms and finance stocks were up too.

BG Group up 3.08% to 929.7p, ENI up 1.61% to €13.50 (£10.00) and Galp Energia up 2.13% to €10.95. In the oil services sector, Amec Foster Wheeler was up 8.82% to 426.7p and SBM Offshore closed up 1.18% to €13.66.

The energy sector’s gains were overshadowed somewhat by the fine issued in the UK to French multinational Total over the March 2012 Elgin incident.

Almost 240 workers had to be evacuated from the rig in the North Sea when 3,000 tonnes of gas was inadvertently released 150 miles off the coast of Aberdeen. On Tuesday, the Health and Safety Executive fined the company £1.125m.

But investors didn’t seem phased, and Total’s stocks were up 0.2% to €40.81 in Paris.

In Frankfurt, the DAX 30 was down 0.23% to 10,473.12 and France’s CAC 40 was lower slighty, down 0.02% to close at 4,564.38.

French supermarket giant Carrefour watched its stock sink 0.57% to €26.29 after it announced an agreement to by Romanian supermarket shain Billa Romania. The value of the deal was not disclosed.

Airbus also glided lower, down 0.24% to €61.77, after the aerospace firm agreed to sell its commercial satellite business to Apax Partners as part of its wider restructuring. Like Carrefour, terms of the deal were not made public.

Spain’s IBEX 35 was the odd one out on Tuesday, nudging higher by 0.40% to 9,403.60 after Monday’s slide. The index started the week in shock, after the Spanish electorate ended decades of two party rule and left the parliament in a kingmaker situation.

Slow progress in talks, edging the country closer to a socialist coalition government, appeared to ease fears of investors in Madrid on Tuesday.

On the economic data front, GfK’s German consumer confidence index rose to 9.4 in January from 9.3 the previous month, surprising analysts who had expected no change.

“The terrorist attacks in Paris in mid-November and the resulting increased terror threat in Germany do not seem to be impacting German consumers,” GfK said. “Thus, the good conditions domestically seem to be reassuming more importance.”

In the US, the final estimate of third quarter gross domestic product was revised to an annualised 2% from a previous estimate of 2.1%. Analysts had been expecting a revision to 1.9%.

“Altogether, the third estimate of third quarter GDP does little to change the picture of solid domestic activity offset by weakness abroad, as final sales to domestic purchasers (GDP less trade and inventories) rose 2.9% in the quarter,” said Barclays Research analysts.

US stocks finished in positive territory on Tuesday as economic growth data came in better than expected.

The Dow rose 0.96%, the Nasdaq increased 0.65% and the S&P 500 gained 0.88%.

The final estimate of third quarter US gross domestic product was revised to an annualised 2% from a previous estimate of 2.1% but it exceeded analysts’ estimates of 1.9%.

“Altogether, the third estimate of third quarter GDP does little to change the picture of solid domestic activity offset by weakness abroad, as final sales to domestic purchasers (GDP less trade and inventories) rose 2.9% in the quarter,” said Barclays Research analysts.

The core personal consumption expenditure index unexpectedly increased to 1.4% quarter-on-quarter in the third quarter from a prior estimate of 1.3%. PCE is a measure of GDP and the Federal Reserve’s preferred measure of inflation . The US central bank, which this month decided to increase interest rates for the first time in nearly a decade, is targeting 2% inflation.

On the downside of data, the National Association of Realtors revealed existing US homes fell sharply in November, to their lowest pace in 19 months. The NAR figures suggest existing home sales dropped 10.5% to an annual rate of 4.76m from a downwardly-revised 5.32m in October and compared with consensus estimates for an increase to 5.35m.

Meanwhile, oil rebounded with West Texas Intermediate up 1.05% to $36.16 per barrel at 0926 GMT.

On the corporate front, Google and Ford were higher amid expectations that the two companies will be teaming up on a self-driving project.

Wearable action camera company GoPro gained after it said a new GoPro Channel has become available on PlayStation gaming systems.

Fashion retailer Abercrombie & Fitch rallied after it appointed Fran Horowitz to the newly-created role of chief merchandising officer.

Chipotle was in the red after as JPMorgan downgraded the stock to ‘neutral’ from ‘overweight’ following the latest E.coli outbreak at some of its outlets.

The US dollar was down 0.36% against the euro, up 0.42% against the pound and down 0.10% against the yen.

Oil futures reversed declines during early trading stateside on Tuesday, as the spread between both benchmarks – Brent and WTI – narrowed to zero, with the US marker recovering at a better rate  than the global proxy standard.

At 1655 GMT, the Brent front-month futures contract was up 0.14% or five cents to $36.40 per barrel, not far from $36.06; its lowest level since July 2004. However, the WTI jumped 1.65% or 59 cents higher to equal Brent, for the first time since 15 January, at $36.40 per barrel.

Yann Quelenn, market strategist at Swissquote, said, “The medium-term technical structure remains clearly negative in a context of oil oversupply and is expected to show continued weakness. We see the session’s bounce as temporary.

“In the long-term, crude oil has not shown signs of recovery. Nonetheless, crude oil is holding way below its 200-day Moving Average [setting up at $50]. A very unlikely break of the resistance at 60.72 [noted back in July 2015] would confirm an underlying uptrend.”

Elsewhere, base metals had a mixed session with selected futures contracts trading up earlier in the session only to shed their intraday gains during late afternoon trading in Europe. The three-month copper delivery futures contract was down 1.0% to $4,687.00 per metric tonne at 1635 GMT on the London Metal Exchange. Additionally, primary aluminium (down 0.5%), nickel (down 1.9%), lead (down 0.7%) and zinc (down 1.2%) futures were also in negative territory.

Liz Grant, senior account executive at Sucden Financial, said, “LME prices moved to lower ground in thin pre-Christmas trading over the course of the session. Copper resumed its pivotal movement either side of $4,700. However, overall market turnover was very light.”

Meanwhile, the precious metals market uptick of recent sessions came to a grinding halt with the COMEX gold futures contract posting a marginal decline of 0.50% or $5.40 to $1,075.20 an ounce, while spot gold was 0.27% or $2.91 lower at $1,075.49 an ounce. Away from gold, COMEX silver fell 0.28% or four cents to $14.28 an ounce, while spot platinum fell 0.05% or 37 cents to $872.38 an ounce.

Agricultural commodity futures also slid lower in early trading stateside. CBOT corn (down 0.47%), wheat (down 0.68%), ICE cotton (down 1.33%) and cocoa (down 0.06%) futures headed lower. However, CME live cattle futures bucked the trend inching up 0.65%.

The dollar shed further froth in European trading on Tuesday, while the euro notched decent upticks over another slow pre-Christmas session in Europe.

The greenback’s correction follows survey data pointing to a decline in US economic activity declined in November. At 1438 GMT, the dollar shed another 0.20% against the yen changing hands at JPY120.95, with the Chicago Fed National Activity Index  (CFNAI) at -0.30 in November, down from -0.17 in October.

Analysts had expected a reading of +0.10 for the survey published overnight. The drop was led by a fall in the production-related indicators on the CFAI to –0.27 in November from –0.11 in October.

Industrial production dropped 0.6% in November, compared to a 0.4% decrease a month earlier. Manufacturing production was unchanged in November, following an increase of 0.3% the previous month.

Elsewhere, National Association of Realtors data suggested that existing US home sales dropped 10.5% to an annual rate of 4.76m from a downwardly-revised 5.32m in October and compared with consensus estimates for an increase to 5.35m.

There were 2.04m available homes for sale, a 3.3% month-on-month decline, while the median price for a home rose 6.3% year-on-year to $220,300.

The euro also strengthened against the dollar changing hands at $1.0967, up 0.48%. However, the pound fell 0.35% exchanging at $1.4833 after the UK Office for National Statistics said the country’s public sector borrowing rose £1.3bn to £14.2bn in November, from the same month last year.

The figure was far higher than the £11.8bn economists had been expecting. Kit Juckes, head of forex at Societe Generale, said: “The pound is one currency I remain wary of when I look ahead at US Federal Reserve / Bank of England decoupling, and the danger of UK growth losing some momentum with a slowdown in wages.

“I don’t want to make too much of the slowdown in wage growth yet, but it’s all a bit close to home as the construction sector booms and the finance sector heads in the opposite direction. Then, of course there’s Brexit. This week all will be quiet and at least the solstice will be behind us tomorrow, but we’ll have to live with a weaker pound in 2016.”

Meanwhile, commodity linked currency crosses had mixed fortunes versus the greenback. The Australian dollar rose against its US counterpart exchanging at US$0.7245 up 0.76%, as did the New Zealand dollar up 0.78%, changing hands at US$0.6816. The greenback also shed gains against the Canadian dollar changing hands at CAD$1.3941, down 0.13%.

In Latin America, the dollar traded higher against the Chilean (up 0.10%) and Mexican (up 0.06%) pesos. Going the way, Brazilian Real and Colombian peso gained 0.67% and 0.71% against the US currency respectively.