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FTSE shrugs off G7 split, manufacturing fall hits pound

FTSE shrugs off G7 split, manufacturing fall hits pound

by Michelle McGagh Jun 11, 2018 at 12:30

The FTSE 100 shook off concerns about tense talks between the US and the rest of the G7 leaders at their weekend summit in Canada where they failed to agree on trade rules.

The blue-chip index advanced 66 points, or 0.9%, to 7,747, helped by gains in utilities, tobacco, and financial stocks.

The move shows the market is so far unconcerned by the disunity of the G7 summit leaders  and US president Donald Trump’s decision to remove his name from a joint communique over trade and criticise Canadian president Justin Trudeau who chaired the talks.

However, the political challenges remain in the foreground after Trump flew to meet North Korean leader Kim Jong Un for historic talks in Singapore tomorrow.

Fiona Cinotta, senior market analyst at City Index, said the positive start to markets ‘belied the tensions which will shape trading this week, with trade strife between the US and a number of other countries set to escalate ahead of a key political summit in North Korea which could shape future relations between countries in Asia’.

Accendo Markets analyst Mike van Dulken was more upbeat about the prospect for the historic meeting between North Korea and the US.

‘Potential for a meaningful discussion about de-nuclearisation of the Korean peninsula could diffuse some of the tensions between US and North Korea, improve the global mood and gain Trump some brownie points after this weekend’s events at the G7,’ he said.

Pound falls on poor manufacturing

By contrast to the FTSE, the pound fell 0.45% to $1.3349 against the dollar after UK manufacturing and construction figures disappointed.

XTB analyst David Cheetham said the April figures ‘paint a pretty bleak picture’, with manufacturing production falling 1.4% after a 0.1% decline in March, the worst monthly fall since 2012.

‘The fall in construction output is the largest in almost six years and, perhaps most worryingly of all, there is a clear lack of new work so far this year which suggests there won’t be a marked improvement anytime soon,’ said Cheetham.

The broader measure of industrial output measured by the Office for National Statistics fell 0.8% month on month, with a weaker-than-expected 1.8% annual rise.

The poor data mean the Bank of England is unlikely to raise interest rates, and keep sterling subdued.

‘Unless there is a significant pick-up in economic data in the next month or so, or further signs inflation won’t continue to come back to target on its own, then it’s hard to see much justification for tightening anytime soon and this will likely keep any pound rallies subdued,’ said Cheetham.

Inmarsat soars on bid approach

Shares in Inmarsat (ISA) jumped 13% after rejecting a bid from EchoStart (SATS.O) of the US late on Friday which investors believe could start a bidding war for the satellite company and the valuable spectrum of telecom frequencies it owns. 

Inmarsat did not state how EchoStar's offer was worth but said it undervalued the business. Its shares leaped 62p to 536p with analysts from RBC Capital Markets whetting the market's appetite by estimating the spectrum could fetch £10 a share.

Miner Evraz (EVR) was the FTSE 100's biggest riser, up 7% at 534p, followed by NMC Health (NMC) – up 5% to £36.04 – on news of a joint venture to create a new healthcare platform in Saudi Arabia.

The biggest faller was plumbing supplier firm Ferguson (FERG), previously known as Wolseley. The price fell 4.3% to £59.55 after announcing plans to consolidate its shares.

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Comments  (2)

  • Alan Anderson: 

    Still 3 hours to go for the UK markets. An hour before the US markets open and here is the last email of the day from Citywire. Well it is a lovely day out there. :)

    13:41 on 11 June 2018

  • SDRL: 

    This is the time for the UK to make deals with the US and put the UK first. Angila Merkel is weak and will screw things up. The US economy is booming and it is time to put the UK first.

    01:22 on 12 June 2018

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