- FTSE 100 closes up 20 at 6,871
- US Q1 GDP comes in below expectations
- Smith & Nephew in focus
techMARK 2,809.39 +0.34%
FTSE 100 6,871.29 +0.29%
FTSE 250 15,954.82 +0.12%
UK stocks settled higher after rising early on and staying fairly steady throughout the afternoon, despite the release of a worse-than-expected US GDP reading.
The FTSE 100 closed up 20.07 points at 6,871.29, the highest closing level seen for several weeks.
Chris Beauchamp, a Market Analyst at IG, said: "The FTSE has remained confidently in positive territory all day, flirting with a push towards 6,900. Risk assets are in favour, with miners boosted by a more optimistic outlook on the Australian economy, but the impact of holidays in parts of Europe should still be taken into account.
"M&A is still the key driver of the FTSE, with Smith & Nephew under the microscope today as Stryker keeps the world guessing over whether it will launch an attempt on the company."
The FTSE was largely unaffected by this afternoon's news that US GDP shrank by an annualised rate of 1% in the first quarter of 2014, according to revised estimates from the Department of Commerce.
The figures surprised analysts, who had expected the initial estimate of 0.1% growth to be revised lower to -0.5% and follows a 2.6% rate of expansion in the fourth quarter of 2013.
Beauchamp described it as a "relative non-event", adding that the reading "showed decent consumer spending, and most people have now moved on to wondering whether the second quarter can show a nice bounceback".
That came as it was revealed initial US weekly unemployment claims fell by 27,000 to reach 300,000 during the week ending on May 24th, according to the US Department of Labor. The consensus estimate had been for a reading of 318,000.
The four-week moving average dropped by 11,250, to hit 311,500.
Rates need to rise "sooner rather than later", says MPC's Weale
Back in the UK, Martin Weale, a member of the Bank of England's Monetary Policy Committee (MPC), has said that policymakers will need to lift interest rates from record-low levels "sooner rather than later".
In an interview with the Financial Times that will likely bring forward expectations of a rate raise, Weale said the central bank must act soon to avoid a sharper and more painful tightening in policy in the future.
"If you want to have baby steps you do have to start sooner," he told the UK paper.
In other UK macro news, the Treasury today revealed that 7,313 homes at a total value of £1bn have so far been sold under the Help to Buy mortgage scheme.
In March the scheme contributed to around 3.5% of mortgage completions.
"Despite the apparently low take-up, this scheme is far from trivial," argued Rob Wood, Chief Economist at Berenberg. "The indirect effects are much more important. Like an iceberg, the part visible above water grossly understates its true size."
The news sent housebuilders into the red, with several analyts saying the data indicates the scheme has had a limited effect.
"Looking at usage data available today, there is further evidence the scheme is unlikely to be inflicting significant damage, or fuelling a London bubble," broker Investec said in a note to clients.
Consultants Ernst&Young were of a similar opinion, writing that "curtailing the scheme would do nothing to dampen the factors pumping up the London market - domestic and foreign cash buyers, rapid population growth and planning restrictions".
Italy sold €7.5bn of bonds maturing in five and 10 years. The Rome-based Treasury allotted €3bn of debt due in September 2024 at an average yield of 3.01%, the lowest for similar-maturity securities since Bloomberg started compiling the data in 1991.
The average yield to maturity on bonds from Greece, Ireland, Italy, Portugal and Spain fell to 2.13% yesterday, matching the least since the formation of the currency bloc in 1999, according to Bank of America Merrill Lynch indexes.
Smith & Nephew driven higher by Stryker bid talk
Medical device maker Smith & Nephew was a high riser again after reports yesterday suggested that US peer Stryker was working on a bid for the firm. While the rumours were denied by Stryker, Smith & Nephew's share price was continuing to extend gains this morning after Credit Suisse said it sees "merger synergies of about 160-195p/S&N share" if the hypothetical deal were to go ahead.
The UK group also this afternoon announced that it has completed the acquisition of ArthroCare Corporation, a medical device company with a highly complementary sports medicine portfolio. The purchase price was $48.25 per share paid in cash.
IMI was trading higher after UBS lifted its rating on the stock from 'neutral' to 'buy', saying that growth rates at the engineering group have the potential to double in the medium-term.
DIY retailer Kingfisher dropped despite hailing a "strong start to the year" as 20% growth in retail profits in the first quarter came in shy of analysts' expectations. Group sales growth of 6.1% also failed to impress.
Aggreko the temporary power and temperature control services group, was a heavy faller after saying that interim Chief Executive Officer Angus Cockburn will be replaced on a permanent basis by Centrica board member Chris Weston. Cockburn, who stepped in after previous boss Rupert Soames quit earlier this year, is "keen to seek fresh challenges", the company said.
Housebuilder Barratt Developments led housebuilders and related companies lower following the release of the latest data on the Help to Buy scheme, which, according to analysts, indicated it has had a limited impact.
On the second tier, Man Group leapt after it confirmed it is in talks to buy US money manager Numeric Holdings. The world's largest publicly traded hedge-fund manager said the discussions are "ongoing and may or may not lead to a transaction". Numeric, which uses quantitative analysis to make investments, manages $13.9bn.
FTSE 100 - Risers
Smith & Nephew (SN.) 1,029.00p +3.57%
IMI (IMI) 1,608.00p +3.01%
William Hill (WMH) 355.20p +2.57%
Rolls-Royce Holdings (RR.) 1,035.00p +1.87%
Morrison (Wm) Supermarkets (MRW) 202.20p +1.66%
Centrica (CNA) 336.30p +1.66%
Fresnillo (FRES) 835.00p +1.64%
Sainsbury (J) (SBRY) 340.60p +1.52%
Pearson (PSON) 1,164.00p +1.48%
Admiral Group (ADM) 1,428.00p +1.42%
FTSE 100 - Fallers
Kingfisher (KGF) 397.00p -4.86%
Aggreko (AGK) 1,671.00p -4.46%
Barratt Developments (BDEV) 359.90p -2.44%
Persimmon (PSN) 1,326.00p -2.21%
Johnson Matthey (JMAT) 3,274.00p -2.09%
Travis Perkins (TPK) 1,685.00p -1.92%
Prudential (PRU) 1,390.00p -1.14%
easyJet (EZJ) 1,548.00p -1.09%
ARM Holdings (ARM) 918.00p -0.81%
Next (NXT) 6,625.00p -0.75%
FTSE 250 - Risers
esure Group (ESUR) 264.50p +5.80%
Evraz (EVR) 109.20p +5.20%
Ladbrokes (LAD) 150.40p +5.10%
Man Group (EMG) 99.55p +5.01%
Domino's Pizza Group (DOM) 554.00p +4.23%
Tate & Lyle (TATE) 701.50p +4.00%
Go-Ahead Group (GOG) 2,202.00p +3.82%
Dairy Crest Group (DCG) 450.00p +3.45%
Rathbone Brothers (RAT) 2,053.00p +3.27%
Premier Oil (PMO) 351.50p +2.93%
FTSE 250 - Fallers
Redrow (RDW) 266.80p -4.10%
De La Rue (DLAR) 843.50p -3.49%
ITE Group (ITE) 232.00p -3.01%
Genesis Emerging Markets Fund Ltd Ptg NPV (GSS) 527.00p -2.95%
Berkeley Group Holdings (The) (BKG) 2,238.00p -2.70%
Fisher (James) & Sons (FSJ) 1,301.00p -2.69%
Howden Joinery Group (HWDN) 321.00p -2.61%
Taylor Wimpey (TW.) 108.30p -2.61%
Galliford Try (GFRD) 1,118.00p -2.61%
Rank Group (RNK) 156.00p -2.50%