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Miners lift FTSE as dollar dives against pound
Interest rate comments by central banks on either side of the Atlantic cause dollar to tumble, boosting commodities and miners.
(Update) A bad day for the dollar lifted commodity prices and boosted shares in miners which dragged the FTSE 100 higher in their wake.
The UK's leading index closed 25 points, or 0.4%, higher at 6,201, reversing an earlier fall, as the greenback tumbled against the pound sending miners to the top of the leader board. A weak dollar typically boosts commodities, which are priced in the US currency. Risers included:
- Fresnillo (FRES) +10% at £10.07;
- Anglo American (AAL) +9.8% at 541p;
- Glencore (GLEN) +9.5% at 158p;
- Antofagasta (ANTO) +8.3% at 537.5p;
- Randgold Resources (RRS) +7.8% at £66.55
- BHP Billiton (BLT) +7.7% at 822p;
- Rio Tinto (RIO) +5.4% at £20.34.
The dollar initially weakened 0.5% after the US Federal Reserve last night calmed fears of a series of further interest rate rises this year.
It then dropped further to trade 1.6% down at $1.4483 against the pound after sterling jumped after Bank of England policymakers said nothing in their monthly monetary policy committee (MPC) meeting about cutting UK interest rates from the 0.5% record low at which they have been frozen at for seven years.
Chris Hare of Investec said: 'Following fairly dovish language in recent weeks from Governor Carney, there had been speculation that the MPC would start having discussions about cutting Bank rate. There was no mention at all of a rate cut, and the minutes highlighted that "the Committee’s best collective judgement was that it was more likely than not that Bank Rate would need to increase over [three year] the forecast period".’
The Fed's decision to keep interest rates on hold came with an estimate that it would only raise rates twice this year, with perhaps the next move up coming in June, having earlier suggested four hikes were on the cards.
'In a surprising move, the Fed reduced the predicted number of rate increases for the remainder of the year, as officials avoided giving overly hawkish signals,' said Stephanie Sutton, investment director for US equities at fund group Fidelity.
'Stocks reacted well to the announcement with the S&P 500 witnessing an uptick, and the US dollar has weakened to the dovish tone.'
Emerging markets focused stocks also benefited from the Fed's dovish stance, with fund group Aberdeen Asset Management (ADN) up 4.5% at 289p.
Banks were meanwhile in the red, as investors digested yesterday's Budget move to reduce the amount of past losses they can offset against their profits to reduce tax.
On the FTSE 250, shares in OneSavings Bank (OSBO) surged 18% to 302p after the lender reported a 52% jump in full-year profits. Yesterday's Budget also sparked a relief rally, containing no more bad news for the buy-to-let market it serves, following the chancellor's Autumn Statement which hiked stamp duty on homes bought by landlord investors.
AG Barr (BAG) continued to slump, down 5.5% at 511p on fears over the impact of the Budget sugar tax on the Irn Bru soft drinks maker.
Among 'small cap' stocks, EnQuest (ENQ) surged, up 31% at 19p, as the oil explorer posted better-than-expected earnings and said it would benefit from tax cuts for North Sea oil operators announced in the Budget.
Among investment trusts Biotech Growth (BIOG) and International Biotechnology (IBT) were out of favour, down over 4%, but BlackRock World Mining (BRWM ) basked in the rally in miners, up 4.8% at 233.25p.
Premier Farnell (PFL) dropped 4.5% to 116p as the electronic parts distributor cut its dividend by 40% and said difficult trading conditions in the US and UK were likely to persist.
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- Anglo American PLC (AAL.L)
- Glencore PLC (GLEN.L)
- BHP Billiton PLC (BLT.L)
- Antofagasta PLC (ANTO.L)
- Fresnillo PLC (FRES.L)
- Randgold Resources Ltd (RRS.L)
- Rio Tinto PLC (RIO.L)
- Aberdeen Asset Management PLC (ADN.L)
- Old Mutual PLC (OML.L)
- Royal Bank of Scotland Group PLC (RBS.L)
- HSBC Holdings PLC (HSBA.L)
- Barclays PLC (BARC.L)
- Standard Chartered PLC (STAN.L)
- OneSavings Bank PLC (OSBO.L)
- A.G.Barr PLC (BAG.L)
- EnQuest PLC (ENQ.L)
- Premier Farnell PLC (PFL.L)
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by Daniel Grote on Jan 16, 2017 at 11:43