The FTSE crept higher after the bell, though its 15 point rise couldn’t take the UK index back above 7300. However, the real movement this morning came from the pound, which rose 0.2% against the dollar, leaving it just under $1.25, and half a percent against the euro, taking it within touching distance of €1.19.
Spreadex Analyst, Connor Campbell commented – “The Pound is at a 2 month high against the Euro which is suffering from both the ongoing Greek debt crisis and, perhaps more prominently, the fact that the anti-EU Marine Le Pen is now favourite to win the first round of France’s presidential election.”
The biggest news of the morning came, once again, from the banking sector, with Lloyds the latest company to post its annual results. Statutory pre-tax profit at the partially government-owned bank more than doubled year-on-year, from £1.6 billion to a slightly lower than expected £4.2 billion, in part thanks to the fact that its conduct charges more than halved to (an admittedly still hefty) £2.1 billion. A 13% increase in its total ordinary dividend, alongside a special dividend of 0.5p per share (something analysts speculated might not happen thanks to Lloyds’ £1.9 billion MBNA purchase at the end of 2016) was the cherry on top for investors, who sent the stock 3.5% higher after the bell.
Having enjoyed a long weekend, US equity markets continued where they left off yesterday, with the four major bourses of Wall Street all notching fresh record closing highs as corporate earnings once again impressed. The Dow Jones rallied 0.6% as Retail names Home Depot and Wal-Mart reported positive FY earnings, while the S&P also closed 0.6% stronger as all 11 sectors represented on the index finished firmer. The Nasdaq finished 0.5% higher and the small-cap Russell Index outperformed, up 0.65%.
LCG Analyst Ipek Ozkardeskaya commented – “Despite warnings of drying liquidity for big investors, which increase the risk of potential headwinds, the VIX index (volatility index on S&P500 futures) remains steady at about its 100-day average of 11.80. Based on stats, there are no visible signs of stress in the US stock markets. Of course, a financial bubble cannot be predicted before it bursts. Either way, the US equity futures traded in the green in Asia, hinting that it could be another day of record highs for the US stocks.”
In focus today
In focus today will be UK Q4 GDP for which the second estimate is seen unchanged at 0.6% quarter-on-quarter for a third straight quarter and 2.2% year-on-year for the second quarter in a row as the Index of Services and Business Investment both cooled into the end of last year.
Connor Campbell noted – “Analysts are expecting the figure to remain unchanged, though a few pieces of positive data from the end of last year does mean it could be revised higher to 0.7%. If that is the case the pound may well absorb most of the market’s goodwill, something that could see it cross both $1.25 and €1.19 (while potentially keeping the FTSE away from 7300).
The Fed Minutes may also grab a little of the attention this evening given the hawkish rhetoric from the central bank of late – suggesting it’s unwise to wait too long for the next interest rate rise – alongside some positive US data this year.
Accendo Markets Analyst, Mike Van Dulken noted that – “political uncertainty could yet play a part in delaying, or even scuppering, plans for multiple interest rate hikes in 2017.”
Elsewhere the final reading for January Eurozone Consumer Price Inflation (CPI) is forecast to show a monthly figure plunging following last month’s jump while an annual jump is confirmed.
This afternoon the China Leading Economic Index may add to this morning’s solid property prices data to give us an update on the state of play in the world’s #2 economy, before US Existing Home Sales are expected to show an increase in January after December’s fall to add to the message of solid US consumer confidence.