The FTSE was trading in positive territory this morning as miners rallied on the back of a pickup in Chinese metal imports. Upbeat domestic data also contributed to market optimism this morning.
China, which is one of the world’s biggest metal consumers, today revealed that iron ore imports jumped 29% in the first half of 2009 from a year ago, while on the domestic front, housing market and retail sales showed further signs of recovery.
The latest survey from the Royal Institution of Chartered Surveyors (RICS) revealed that more UK real estate agents and surveyors saw house prices rise rather than fall in June. The RICS house price balance rose to a reading of -18.1 in June, the highest since September 2007 and substantially better than Bloomberg’s expectations for a rise to -40 from -43.8 in May. RICS also said that new buyer enquiries increased for an eighth consecutive month.
'The June survey provides more evidence that activity in the housing market is recovering, albeit from historic lows,’ RICS said. [1]
RICS revealed that a lack of housing stock in the market and an increase in buyer interest were responsible for driving up house prices and increasing optimism. The organisation also said that it was still cautious about a sustainable recovery in the housing market, however, saying that tight mortgage conditions and rising unemployment could dampen any meaningful recovery.
A separate report from the British Retail Consortium (BRC) revealed that domestic like-for-like retail sales rose 1.4% on the year in June following a 0.8% drop in May. The BRC attributed the rise in sales to hot weather conditions, which encouraged consumers to buy more summer goods. Total sales, which include new floorspace, climbed 3.2% from a year ago in June, following a 0.8% the month before.
Both domestic and Chinese data point to a resurrection in demand, and that’s boding well for commodity and equity markets this morning.
By 10.30am (London time) the FTSE 100 was trading 30.28 points (+0.72%) higher at 4232.41, while the broader FTSE 250 was 105.89 points (+1.45%) above its previous close at 7384.69.
The heavyweight mining sector added the most points to the FTSE this morning, rallying on the back of a rise in copper prices. The best performing miner was Fresnillo, which rose 8.3% to 509.5p, followed by Lonmin, which advanced 8.2% to 1066p. Kazakhmys climbed 5% to 620.5p, Xstrata gained 4.6% to 609.7p, while Rio Tinto and BHP Billiton rose 3.8% to 1995p and 2.8% to 1373.5p respectively.
Retailers and homebuilders also helped the FTSE move higher, benefitting from the BRC and RICS reports. Home Retail was up 1.3% higher at 278.25p, Kingfisher gained 1% to 195.6p and Next added 0.6% to 1619p. In the meantime, house builders Persimmon, Bellway and Barratt Developments gained 3.9% to 404p, 2.7% to 641.5p and 6% to 159.5p respectively.
In contrast, mobile telecommunications giant Vodafone was the biggest single drag on the blue-chip index this morning, down by almost 2% to 112.7p after UBS downgraded the company from ‘buy’ to ‘neutral’ and slashed its price target. In a note, UBS said economic pressures, market share loss and currency effects will weigh on Vodafone’s earnings. [2]
Elsewhere, official government data released by mid-morning revealed that UK inflation fell below the BoE’s medium-term 2% target for the first time in two years in June.
The consumer price index (CPI), an important inflationary barometer, rose 0.3% on the month and 1.8% on the year in June, the Office for National Statistics (ONS) unveiled this morning. This follows a 2.2% annual rise in May and was also in line with Bloomberg’s median analyst estimates.
Separately, the retail price index (RPI), which is a broader measure of inflation that takes into consideration housing costs, fell 1.6% on the year, the biggest decline since records began in 1948.
Looking ahead to the US this afternoon, the producer price index (PPI) and retail sales data are scheduled for release at 1.30pm (London time), followed by business inventories at 3pm and the ABC/Washington post consumer confidence index at 10pm.
It is also important to note that Goldman Sachs will publish its second-quarter results today. The market is expecting the company to report strong earnings following upgrades from Meredith Whitney yesterday and Bank of America’s Guy Moszkowski last week.
In the meantime, Wall Street looks ready for another positive start this afternoon as September Dow and S&P 500 futures were trading 0.40% and 0.44% higher by 10.30am (London time).
[1] Source: Reuters News (14 July 2009)
[2] Source: Reuters News (14 July 2009)
