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LONDON (Alliance News) – The FTSE 100 ended lower on Tuesday, giving back earlier gains made on a weak sterling, as a decline in the dollar supported a recovery in the pound and boosted commodities prices along the way.

UK stock indices attempted to recover from the decline seen on Monday, when investors had reacted negatively to the executive order by US President Donald Trump banning refugee travel from seven predominantly Islamic countries.

However, the FTSE 100 index – full of dollar-earning companies – ended down 0.3%, or 19.33 points, at 7,099.15, having fallen 0.9% on Monday.

Meanwhile, the more UK economy sensitive FTSE 250 ended 0.4% higher, or 65.95 points, at 18,147.77. The AIM All-Share finished up 0.2%, or 1.60 points, at 882.58.

A soft pound helped the FTSE 100 trade firmly in the green in the London morning, but the blue-chip index started to give back the gains as sterling recovered the ground lost against a weak dollar.

The UK currency fell in the morning after UK mortgage approval and consumer credit data missed consensus estimates, but the greenback declined in the London afternoon after US consumer confidence dropped in January.

Sterling fell to an intraday low of USD1.2412 after Bank of England data showed that UK mortgage approvals for house purchase were 67,898 in December versus 67,461 in November. While this was the highest level since last March, it was below economists expectations of 68,900.

Meanwhile, also released in the morning, the BoE reported that net growth in consumer credit slowed to GBP1.0 billion in December from GBP1.9 billion in November. The expected growth was GBP1.7 billion.

In the London afternoon, the US Conference Board said its consumer confidence index fell to 111.8 in January from 113.3 in December, below economists expectations of a 112.2 score.

Separately, MNI Indicators said its Chicago business barometer dropped to 50.3 in January from a revised 53.9 in December, hitting its lowest level since last May. While a reading above 50 indicates continued growth in Chicago-area business activity, economists had expected the barometer to climb to 55.3.

At the London equities close, the pound was quoted at USD1.2573 compared to USD1.2513 at the same time on Monday.

In New York at the London close, the Dow Jones Industrial Average was down 0.8%, the S&P 500 index was 0.5% lower and the Nasdaq Composite was down 0.6%.

The euro benefited from the soft dollar, but it also got a second wind after the Financial Times reported that Trump’s top trade adviser accused Germany of currency exploitation.

Peter Navarro, head of Trump’s National Trade Council, told the Financial Times that the euro was like an “implicit Deutsche Mark” whose low valuation gave Germany an advantage over its main trading partners.

The single currency was quoted at USD1.0795 at the London equities close compared to USD1.0693 at the same time on Monday.

“Any pretence that the US would be pursuing a so called strong dollar policy appears to have been blown to shreds today,” said CMC Markets chief market analyst Michael Hewson.

Navarro also called Germany one of the major hurdles to a US trade deal with the EU, the report said, and declared talks over the Transatlantic Trade and Investment Partnership dead.

German Chancellor Angela Merkel responded that Germany could not influence the euro, the Financial Times reported, speaking at a press conference in Stockholm. Merkel said Germany has always “supported an independent European Central Bank”.

The French CAC 40 index and the German DAX 30 ended down 0.8% and 1.3%, giving back earlier gains made in the morning on some positive macroeconomic data from the eurozone.

Eurozone consumer price index rose 1.8% year-on-year following 1.1% increase in December. Economists had forecast 1.5% inflation. Energy price inflation jumped to 8.1% from 2.6%. Core inflation, which excludes energy, food, alcohol and tobacco prices, was 0.9% in January, unchanged from December and in line with economists’ expectations.

Another report from Eurostat showed that the eurozone gross domestic product grew 0.5% quarter-on-quarter in the fourth quarter, faster than the 0.4% expansion seen in the third quarter. Economists had forecast the growth rate to remain at 0.4%.

Meanwhile, Eurostat also showed that the eurozone unemployment rate inched down in December to the lowest in more than seven years. The jobless rate declined to 9.6% in December from a revised 9.7% in November.

The fall in the dollar supported commodities prices. Gold was quoted at USD1,212.91 an ounce at the London close, compared to USD1,197.46 an ounce on Monday.

Brent oil was quoted at USD56.27 a barrel against to USD55.38 a barrel on Monday. Still ahead in the economic calendar are API weekly crude oil stock data at 2130 GMT.

London-listed mining stocks ended among the best performers in the FTSE 100, with Fresnillo and Anglo American the biggest gainers, up 3.1% and 2.3%, respectively. In the FTSE 250 KAZ Minerals ended up 7.3%, and the FTSE 350 Mining Sector index ended up 1.2%.

Elsewhere on the London Stock Exchange, Royal Dutch Shell ‘A’ shares rose 1.3% after the oil major announced a deal to sell its stake in the Bongkot gas field in Thailand.

Shell will sell its 22.22% stake in the field, held through its Shell Integrated Gas Thailand and Thai Energy Co subsidiaries, for USD900.0 million to KUFPEC Thailand Holdings, a unit of Kuwait Foreign Petroleum Exploration Co. The assets sold include blocks 15, 16 and 17, and block G12/48 on the field.

FTSE 250-listed Greencore Group ended 5.4% higher. The convenience foods maker said revenue rose in the first quarter of its financial year and said its integration of recent US acquisition Peacock Foods is on track, albeit in the early stages.

Nostrum Oil & Gas ended up 6.4% after the oil and gas company said it beat its full-year production guidance by a fraction and exited 2016 at an even higher rate, but said revenue has dropped significantly, as has its cash balance.

Lender CYBG finished down 2.7%. The bank said trading in the first quarter of its financial year was in line with its expectations and it remains on track to meet its targets for the full year, but Numis sees potential problems along the way which could make meeting expectations difficult.

In the UK corporate calendar Wednesday, Wizz Air Holdings and TalkTalk Telecom Group release third-quarter results, Centamin and Low & Bonar publish full-year results and AG Barr issues a trading statement.

In the economic calendar, the Nikkei manufacturing Purchasing Managers’ Index for Japan is at 0030 GMT, while NBS manufacturing PMI for China is at 0100 GMT. Markit manufacturing PMIs for the UK, the eurozone and the US are at 0900 GMT, 0930 GMT and 1445 GMT, respectively. The ISM manufacturing PMI for the US is at 1500 GMT.

At 0700 GMT are the UK’s Nationwide housing prices. Meanwhile, US construction spending data are at 1500 GMT, while the EIA crude oil stocks data are at 1530 GMT.

The Federal Reserve’s Federal Open Market Committee is set to announce the results of its two-day policy meeting at 1900 GMT on Wednesday. There is no press conference scheduled with Chair Janet Yellen.

By Daniel Ruiz; danielruiz@alliancenews.com

Copyright 2017 Alliance News Limited. All Rights Reserved.

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