The FTSE opened in the red, as an overnight dip on Wall Street left the blue-chip index vulnerable to additional selling pressures.
US equity markets retreated last night despite a rather positive 'Beige Book' survey, which indicated that the economy had improved across all twelve districts that the Fed covers. While the growth may have been modest, this was the first time in almost two years that all districts improved, adding some support to the US economic recovery story.
The FTSE managed to pare earlier losses by mid-morning, however, as investors chose to focus on a swathe of positive data out of Asia. It was confirmed that China's exports did in fact grow by a whopping 48.5% in May. The information was initially leaked yesterday from undisclosed sources by Reuters, though the Chinese customs bureau was able to confirm the details today. Elsewhere in the Asia-Pacific region, the unemployment rate fell in South Korea and Australia, while Japan's economy grew more-than-expected in the last quarter.
The news helped lift the FTSE 100 out of the red to trade 23.66 points (+0.46%) above its previous close at 5109.52, while the FTSE 250 index gained 52.49 points (+0.55%) to 9539.67.
Resource stocks benefited from the Asian economic data, with Xstrata, Rio Tinto and BHP gaining between 2% to 2.6% this morning. The Aussie dollar also rebounded, gaining 1.7% against the US dollar to fetch 84.11 cents. The Japanese Yen initially strengthened to hit 90.84 cents against the US dollar, but as risk appetite returned to the market it reversed its gains to trade at 91.20 cents.
The banking sector was also in demand, with Barclays, Lloyds, Royal Bank of Scotland and HSBC adding 0.5% to 2.5%.
Shares in ARM Holdings skyrocketed 16.2% to 318.40p on rumours that Apple may be interested in making a bid for the company again. However a spokesperson from ARM is said to have denied that there was an approach from Apple.
BP was once again in the headlines today after its shares plummeted almost 16% on the New York Stock Exchange last night. The company's share fell as much as 11% on the FTSE this morning. Part of the fall may be attributed to the market re-pricing the shares on the view that BP will eventually have to suspend dividend payments. This is off the back of continued pressure from US politicians to redirect the cash towards legal claims and environmental costs. The cost of the response effort is said to be $1.43 billion to date.
The other major casualty on the FTSE this morning was Home Retail Group, which reported an 8.1% drop in like-for-like sales over the last quarter. The CEO Terry Duddy commented that 'economic conditions remain both challenging and uncertain, with this quarter proving difficult in terms of consumers' willingness to spend.' Shares in the retailer slumped 3.99% to 228.50p.
Later today the Bank of England and the European Central Bank will announce their latest interest-rate decisions. While it is expected that both central banks will keep rates on hold, the decision is not as clear cut for the Bank of England, which is faced with an inflation rate of 3.7%. The central bank, which is under pressure to lower the rate of inflation to its 2% target, keeps reiterating that the excess margin of spare capacity will eventually lower the inflation rate back to its target, yet until now there has been no evidence of this. It is considered that most of the UK's inflationary pressures are largely due to the falling pound, which has lifted the price of imports.
