- Footsie jumps 150 points in two days
- Markets react to mixed economic data
- UK 10-year bond yields above two per cent
London's blue-chip index was able to build on Wednesday's massive surge today in the aftermath of the fiscal cliff deal Stateside on New Year's Day.
Market analyst Michael Hewson from CMC Markets said this afternoon: "While currency markets appear somewhat dismissive of the agreement on the fiscal cliff, equity markets have still managed to hold on to a good chunk of yesterday's gains, helped by better than expected German and Spanish unemployment data and some extremely robust US ADP payrolls numbers for December."
Stock markets across the globe rallied strongly on Wednesday after US politicians decided to allow some tax increases on America's wealthiest workers and delay specifics on spending cuts by two months. The FTSE 100 jumped 130 points, or 2.2%, yesterday.
However, despite the strong end to today's session, the Footsie started out with slight losses early on as investors digested the agreement and what it means for the US economy in the coming months.
Market strategist Ishaq Siddiqi from ETX Capital said today that the agreement "only addressed certain facets of the fiscal cliff". He said: "Lawmakers will need to kick-off another round of negotiations to compromise on a matter that both Republicans and Democrats are at total opposite ends; longer term spending cuts."
In other news, the yield on a 10-year UK bond surpassed 2% for the first time since May 2012. The borrowing rate has jumped from 1.83% to 2.07% over the past three days since the fiscal cliff deal, as the demand for safety diminished.
Economic news comes in mixedProviding some support to stocks early on was the China non-manufacturing purchasing managers' index (PMI) which rose from 55.6 to 56.1 in December, "providing yet more evidence that the turnaround of the Chinese economy is gaining pace with stronger economic growth likely in the months ahead," according to Markus Huber, the head of German HNW trading at ETX Capital.
However, sentiment was dampened slightly after Markit's construction PMI for the UK dropped from 49.3 to 48.7 in December, missing forecasts for a slight rise to 49.5. Nationwide also reported that UK average house prices fell by 0.1% month-on-month in December; forecasts were for no change.
German unemployment increased by 3,000 in December, well below the 10,000 gain expected. Meanwhile, Spain registered its first drop in unemployment in four months in December, down 59,094, much to the surprise of economists who had forecast a 62,000 increase.
FTSE 100: Serco makes strong gains after upgrade
Making headlines today was High Street giant Next, which jumped after saying in a Christmas trading statement that its full-year results would come in towards the top of expectations. The company said although 2012 sales had been in line with forecasts, cost control measures, markdowns and gross margins had all been slightly better than expected.
Panmure Gordon hiked its profit forecasts and target price for the stock this morning, while Prime Markets told clients in an email that it sees "little on the horizon to stand in the way of the Next retailing juggernaut".
Serco Group was a high riser after the outsourcing company was upgrade by Espirito Santo. Compass Group, the contract caterer, was downgraded by the same broker, prompting shares
Building materials group CRH fell after announcing that full-year development activity in 2012 totalled over €0.6bn, helped by 18 acquisition and investment initiatives undertaken in the second half.
Experian was on the up after the Financial Times reported that Bank of America is ramping up mortgage and corporate lending. Seymour Pierce upgraded its rating for Experian this morning from 'reduce' to 'add', saying that the article suggests a "return to health" in the US mortgage market which is beneficial to the business.
FTSE 250: Fresh blood for Chemring
Defence firm Chemring was one of the top risers after its Chief Executive put boots on the ground in the form of new directors of finance and human resources.
Investec has reiterated its 'buy' rating for the stock, hailing today's appointment of Finance Diretor Steve Bowers. "We regard Steve highly and the market should welcome a further strengthening of the executive team charged with steering the group after a difficult year," the broker said.
Without any discernible evidence to explain the 10.17% jump in Imagination Technologies, it would be nice to think it was an acknowledgement of Hossein Yassaie's recent Knighthood. The Chief Executive was given the award in her majesty's New Year Honours 2013 in recognition of his services to technology and innovation.
With little news on the biggest FTSE 250 fallers either, it looks likely there was profit taking after yesterday's buying fever in the wake of the fiscal cliff deal. A certain amount of sobriety has returned now investors have started thinking about further obstacles ahead for the US economy, such as the $109bn spending cuts and talks over the debt ceiling.
For example, Elementis, one of the big risers on Wednesday with a 2.4% gain, gave most of this back today.
WH Smith said it will open eight stores at New Doha International Airport when panes begin landing their later this year, however, this hardly seems to be a reason for shares to drop off almost 3%.
FTSE 100 - Risers
Next (NXT) 3,873.00p +2.68%
BP (BP.) 441.70p +2.41%
Tesco (TSCO) 350.00p +2.12%
Aberdeen Asset Management (ADN) 383.20p +2.05%
Serco Group (SRP) 550.50p +1.66%
Marks & Spencer Group (MKS) 388.40p +1.49%
Imperial Tobacco Group (IMT) 2,412.00p +1.13%
Evraz (EVR) 280.60p +1.08%
InterContinental Hotels Group (IHG) 1,772.00p +1.08%
British American Tobacco (BATS) 3,124.00p +1.07%
FTSE 100 - Fallers
CRH (CRH) 1,266.00p -1.32%
Croda International (CRDA) 2,357.00p -1.30%
Capital Shopping Centres Group (CSCG) 358.30p -1.27%
Centrica (CNA) 336.80p -1.17%
Associated British Foods (ABF) 1,573.00p -1.13%
Intertek Group (ITRK) 3,185.00p -1.06%
Johnson Matthey (JMAT) 2,363.00p -1.05%
Severn Trent (SVT) 1,590.00p -0.93%
Reckitt Benckiser Group (RB.) 3,939.00p -0.91%
Rio Tinto (RIO) 3,658.50p -0.88%
FTSE 250 - Risers
Imagination Technologies Group (IMG) 439.70p +7.77%
Chemring Group (CHG) 253.60p +6.42%
Kenmare Resources (KMR) 34.98p +6.00%
Fenner (FENR) 435.20p +3.69%
SDL (SDL) 534.50p +3.29%
AZ Electronic Materials SA (DI) (AZEM) 363.50p +3.27%
Vesuvius (VSVS) 367.10p +3.06%
Domino Printing Sciences (DNO) 609.00p +3.05%
Cairn Energy (CNE) 277.60p +2.93%
easyJet (EZJ) 817.00p +2.90%
FTSE 250 - Fallers
Howden Joinery Group (HWDN) 171.50p -2.78%
ITE Group (ITE) 237.40p -2.74%
WH Smith (SMWH) 636.00p -2.68%
Dechra Pharmaceuticals (DPH) 608.50p -2.41%
Renishaw (RSW) 2,031.00p -2.40%
Computacenter (CCC) 400.00p -2.22%
JD Sports Fashion (JD.) 670.00p -2.19%
Elementis (ELM) 231.50p -1.99%
Ashtead Group (AHT) 436.80p -1.89%
Capital & Counties Properties (CAPC) 246.00p -1.76%