FTSE CLOSE: Footsie stages rally after Fed boss says she expects US rate rise by end of year

Published: 02:42 EST, 25 September 2015 | Updated: 11:52 EST, 25 September 2015

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17.25: The FTSE 100 closed up 147.52 points at 6109.01 as investors took heart from Federal Reserve boss Janet Yellen's signal that a US rate hike will happen before the year is out.

Her speech last night was taken as an indication of central bank confidence that the US economic recovery remains on track, despite wobbles elsewhere in the world, notably China.

Germany's DAX and France's CAC also posted strong gains today, while the US Dow Jones was ahead 198.6 points at 16,399.9 in early trading.

Recovery: US stocks opened higher as sentiment received a boost from Fed boss Janet Yellen’s signal that the economy is strengthening and an interest rate hike is likely before the end of the year

'Major indices are ending the week more or less where they finished the last, a recognition of how this week has seen much heat, but little light where markets are concerned,' said Chris Beauchamp of IG.

'Janet Yellen’s hint that rates will still rise this year has actually prompted a bout of buying in stock markets, on the calculation that the Fed is more optimistic about the global economy than it hinted in its most recent meeting, and thus valuations are not as overstretched as previously thought.

'Such thinking might not last if the round of economic data next week – especially China numbers and US non-farm payrolls – do not match up to estimates, but overall good news is good news once again.'

Banks, which stand to gain from a higher interest rate environment, were among those making gains today.

Barclays rose more than 3 per cent or 8.5p to 255p, while HSBC added 15.5p to 503.6p and Royal Bank of Scotland climbed 8.3p to 319p.

Fellow state-backed lender Lloyds Banking Group added 1.7p to 75.5p as it was announced that the Government had sold another 1 per cent chunk of the group to take its stake below 12 per cent.

Almost all FTSE 100 stocks were ahead though a slide in the price of safe-haven gold - which had climbed amid recent share falls - saw gold miners turn lower. Randgold Resources fell 20p at 3926p while Fresnillo was down 2.5p at 618.5p.

Meanwhile, commodities giant Glencore, hard hit by recent turbulence, saw initial gains fade away to fall 1.4p at 97.2p.

Platinum metals company Johnson Matthey, the world's largest supplier of vehicle catalytic converters, continued its strong recovery from falls following the Volkswagen scandal. Shares climbed almost 5 per cent or 116p to 2514p.

Elsewhere, tool and equipment firm HSS Hire made gains made after it announced that chief executive Chris Davies was stepping down. The announcement come a month after HSS issued a profit warning and reported a widening half-year loss. Shares rose 1.5p to 60p.

On currency markets, sterling was down slightly against the US dollar at just under $1.52 and little changed against the euro at slightly above €1.35.

The biggest risers on the FTSE 100 were ARM Holdings up 55.5 points to 982p, Johnson Matthey up 116p at 2514p, St. James Place up 37p at 873.5p and Unilever up 112p at 2650p.

The biggest fallers on the FTSE 100 were Anglo American down 9.9p at 614.7p, Glencore down 1.4p at 97.2p, Antofagasta down 5.5p at 506p and Randgold Resources down 20p at 3926p.

17.01: The FTSE 100 closed up 147.52 points at 6109.01. More to come.

15.00: The Footsie stayed around 2.5 per cent in late afternoon trade as US stocks started strongly, joining in the bounce by European markets after Federal Reserve chair Janet Yellen last night said she expects interest rates to rise by the year-end.

With an hour and a half of trading to go in London, the FTSE 100 index was up 147.0 points, or 2.5 per cent at 6,108.5, just above last Friday's closing level at the end of another see-saw week.

Europe markets were also strong, with Germany's Dax 30 index jumping 2.7 per cent and France's CAC 40 index leaping 3.3 per cent.

In early trade on Wall Street, the blue chip Dow Jones Industrial Average jumped 157.5 points higher to 16,355.8, while the broader S&P 500 index added 1.7 points to 1,943.9, and the tech-laden Nasdaq Composite gained 25.0 points at 4,759.5.

Sentiment received a boost from Fed boss Yellen’s signal that the US economy is strengthening and an interest rate hike is likely before the end of the year.

Final data on US second quarter GDP, released today, appeared to underline that view, with growth revised up to 3.9 per cent from a previous reading of 3.7 per cent, driven by higher consumer spending and somewhat stronger business investment.

In other data, the final September reading for the University of Michigan consumer sentiment index was revised up to 87.2, as expected, from a shock initial estimated drop to 85.7 which had been the lowest since last year, but it was still well below August’s final reading of 91.9.

Dennis de Jong, managing director at UFX.com, said: ‘As global inflation broadly grinds to a halt, Fed chair Janet Yellen and her colleagues are doing everything in their power to keep the US economy in growth.

‘Low interest rates continue to offer some form of stimulation, and Yellen will be content with today’s GDP figures.

‘However, external pressures from the slowdown in China and emerging economies are unlikely to subside any time soon, which may point to weaker domestic growth for the States in the coming months.’

12.45: The Footsie maintained its strong gains at lunchtime, up over 2.5 per cent as European markets rallied after Federal Reserve chair Janet Yellen said she expects interest rates to rise by the end of the year, with US stocks expected to jump higher.

By mid session, the FTSE 100 index was 154.1 points, or 2.6 per cent higher at 6,115.6, rallying at the end of another see-saw week. The UK benchmark had relinquished the 6,000 level on Tuesday after a 3 per cent slump amid fresh market jitters over a slowing Chinese economy and the Volkswagen emissions scandal.

A decision by the Fed not to lift rates this month had last week added to the anxiety in financial markets because it appeared to imply the US economy was not ready to withstand a hike yet given risks from the rest of the world.

Big gains: US stocks looked on track to open sharply higher today on Yellen’s hawkish speech, although investors were also bracing for fresh readings on US economic growth and consumer sentiment

But Ms Yellen's remarks yesterday suggesting that global weakness will not be significant enough to stop a US rate rise this year helped remove some of that uncertainty facing markets.

Europe markets were stronger too, Germany's Dax 30 index up 3.1 per cent and France's CAC 40 index ahead 3.7 per cent.

On currency markets, as the dollar got a boost from the Fed chair’s comment, the pound was down slightly against the US currency at just under $1.52 and little changed against the euro at slightly above €1.36.

US stocks looked on track to open sharply higher, with Dow futures up over 250 points on Yellen’s hawkish speech although investors were also bracing for fresh readings on US economic growth and consumer sentiment.

The third and final reading on US gross domestic product for the second quarter is due at 1.30pm London time, with growth expected to be confirmed at an annualised 3.7 per cent.

Later will see the release of the final University of Michigan's consumer confidence reading for September, and a speech by Fed policymaker James Bullard.

In London, banks - which stand to gain from a higher interest rate environment - were among those making gains. Barclays rose 3 per cent, or 8.2p, to 254.6p, while HSBC added 12.7p to 500.8p.

State-backed lender Lloyds Banking Group was also higher as it was announced that the Government had sold another 1 per cent chunk of the group to take its stake below 12 per cent. Lloyds shares added 1.3p at 75.1p.

And fellow taxpayer-owned Royal Bank of Scotland gained 6.9p at 317.6p after broker RBC Capital Markets upgraded its rating for the lender to sector perform from underperform.

The bank also benefited from positive comments from Morgan Stanley, which replaced Barclays with RBS in its preferred names in the sector.

Broker comment buoyed consumer products giant Unilever as well, gaining 87p to 2,625p as Berenberg raised its stance on the stock to buy from hold.

Chip designer ARM Holdings was also one of the top FTSE 100 gainers, up 4 per cent or 37.0p to 963.5p, with major customer Apple expected to report record first weekend sales for its latest iPhone models, the 6S and 6S Plus which went on sale today.

And platinum metals company Johnson Matthey, the world's largest supplier of vehicle catalytic converters, continued its recovery after being hit earlier this week by the escalating Volkswagen emissions scandal, with its shares topping the FTSE 100 leader board – up 6 per cent, or 149p to 2,547p.

On the second line, Quintain Estates and Development jumped 7 per cent higher, up 9.25p to 140.75p after US private equity firm Lone Star increased its takeover offer for the North London-focused property developer to 141p a share, valuing the company at around £745million.

Quintain accepted a £700million takeover bid from Lone Star at the end of July, but since then the bid deadline has been extended twice as Lone Star has struggled to secure the required level of acceptances. The Times reported yesterday that US hedge fund Elliot Capital Advisors had built up a stake in Quintain and was opposing Lone Star's offer.

Among the small caps, shares in Ultima Networks halved in value, down 0.125p to 0.125p after the firm announced plans to sell all of its operating subsidiaries, raise money via a placing and convert itself into an investing company in the natural resources sector, changing its name to Ozima Ventures in the process.

And Bagir Group dropped 32 per cent, or 1.75p to 3.75p after the formalwear tailor said it will take action to restructure its board and cut costs, and it predicted a ‘significantly’ worse second half performance due to competitive pressures as it reported a first half pretax loss of $3.2million.

10.00: The Footsie strongly extended its gains as the morning session progressed, with European markets bouncing back sharply after Federal Reserve chair Janet Yellen said she expects the US to start raising rates by the end of the year.

By mid morning, the FTSE 100 index was up 143.9 points, or 2.5 per cent, to 6,109.2, rallying after a 70-point fall in the previous session, to finally surpass last Friday’s closing level after a see-saw week which saw the 6,000 level relinquished on Tuesday.

In Europe, Germany's Dax 30 index jumped 2.9 per cent and France's CAC 40 index surged 3.5 per cent. The rallies come at the end of a volatile week amid fresh market jitters over a slowing Chinese economy, and the Volkswagen emissions scandal.

Bounce back: Commodities stocks, hardest hit by the recent market volatility on concerns over a slowing in China's economy, led the FTSE 100 risers

The Fed's decision a week ago not to lift rates this month added to the anxiety but Ms Yellen's remarks yesterday that global weakness will not be significant enough to alter plans for a rate rise removed some of the uncertainty facing markets.

Lukman Otunuga, research analyst at FXTM, said: ‘A mildly hawkish Janet Yellen offered the clarity most investors had been seeking, when at yesterday’s conference she stated that rates in the US may likely be hiked before the end of the year.

‘Some mist was cleared away as investors digested the news that the hike would take place either in October or December.’

He added: ‘The additional statement which discussed that global economic weaknesses may have a muted impact on altering the Fed’s plan to raise rates may reduce some of the pressure which the USD has been receiving from the developments within China.’

On currency markets today, the pound edged down against a stronger dollar to $1.5524, near a four month low as the US currency rose on Yellen’s comments. Sterling is facing its worst weekly performance against the greenback in six months, having fallen 2 per cent so far.

Against the euro, which was sharply weaker across the board today, sterling gained 0.8 per cent at €1.3681, albeit having hit a one-month trough against the single currency yesterday.

The Bank of England is expected to follow the Fed with a rise in interest rates from their current historic lows. But with UK inflation stuck at zero, the BoE is in no hurry, and investors do not expect a hike until the second half of 2016.

There was little impact after Bank of England Monetary Policy Committee member Ian McCafferty again reiterated his hawkish stance, writing in the Times that the time has come for the bank to start raising interest rates to prevent inflation overshooting in two to three years' time.

Similarly the release of a slightly cautious statement today from the BoE's Financial Policy Committee meeting earlier this week was shrugged aside.

The FPC said the outlook remains ‘challenging’ with the weak Chinese economy, which has caused wild swings by global stock markets this summer, weighing on the stability of the UK's financial system.

Among equities, commodities stocks, hardest hit by the recent volatility led the FTSE 100 risers, with Glencore up 6 per cent or 6.3p to 104.9p, while Antofagasta added 18.2p to 529.8p, and Anglo American was up 20.3p to 644.9p.

The recent turmoil has helped buoy demand for gold - and gold miners - but these slipped back today, with the only two blue chip fallers being Randgold Resources, down 22.5p to 3,923.5p, and Fresnillo off 2p at 619p.

There was very little corporate news around, but FTSE 250 tool and equipment firm HSS Hire rose 2.5 per cent after it announced that chief executive Chris Davies was stepping down, a month after issuing a profit warning as it reported a widening half-year loss. HSS shares added 1.5p to 60.0p.

Synergy Healthcare was the top FTSE 250 gainer, leaping 43 per cent, or 678p higher to 2,258p after the US District Court for Northern District of Ohio ruled against an FTC request for a preliminary injunction to block Steris’s takeover of the UK firm.

09.00: The Footsie leapt higher in early trade, recovering all and more of yesterday's falls as the prospect of a US rate rise by the year-end looked firmly back on the table following comments overnight from Federal Reserve chair Janet Yellen.

After an hour of trading, the FTSE 100 was 111.5 points, or 1.9 per cent higher at 6,072.9, having shed 70.75 points yesterday, reversing gains from the previous session after slumping nearly 3 per cent on Tuesday. The index was only around 30 points shy of last Friday's closing level of 6,104.

European markets were also stronger, with Germany’s Dax 30 up 2.1 per cent and France’s CAC 40 index ahead 2.5 per cent, having been battered recently by the Volkswagen emissions scandal.

See-saw week: After slumping by nearly 3 per cent on Tuesday, the FTSE 100 index has now gradually recouped that fall taking it back to around 30 points shy of last Friday's closing level of 6,104

In a lecture last night at the University of Massachusetts, one week after the Fed left US interest rates on hold, Janet Yellen said that the bulk of Fed policymakers still expect a rise to happen by the end of 2015.

Her comments sent the dollar higher but US stocks fell, spooked by the fact that the Fed chair had to cut short her speech after being taken ill, although she was just said to be suffering from dehydration.

Shares in Asia also fell today, with the Nikkei in Japan down over 1 per cent as the country's core consumer prices saw their first annual drop since its central bank deployed its massive stimulus programme more than two years ago.

Tony Cross, market analyst at Trustnet Direct said: ‘The FTSE-100 has punched its way higher at the open with yesterday’s sell-off looking to have been somewhat overdone, although the volatile market conditions are likely to prevail as the debate over interest rate hikes on both sides of the Atlantic rolls on.’

He added: ‘Looking ahead it’s a relatively quiet day in terms of fundamentals today although we do have the Michigan sentiment survey due from the US and this could add weight to the idea that the Fed will look to hike interest rates before the year end.

‘However the relative absence of data means it’s going to be sentiment that dictates much of the market’s direction as the choppy trading conditions continue.’

Stocks in focus in London include:

LLOYDS BANKING GROUP – The Treasury has reduced its holding in the lender to below 12 per cent, taking the bank closer to full privatisation following a taxpayer bailout in the 2008/09 financial crisis. Shares add 0.67p at 74.5p.

RBS – Shares in the majority taxpayer-owned lender gain 5.3p at 316.0p as broker RBC Capital ups its rating to sector perform from underperform.

UNILEVER – Shares in the consumer product giant add 31p at 2,569p as broker Berenberg raises its stance to buy from hold.

IMPERIAL TOBACCO - The Financial Times' Market Report said break-up speculation for Imperial Tobacco has been revived by AB InBev's bid approach for SABMiller. Notes that possible predator Japan Tobacco’s management was in London last week for investor meetings. Shares down 30p at 3,435p.

AGGREKO – The FTSE 250-listed temporary power provider's shares fell 5.5p to 926.0p as broker HSBC cut its rating to reduce from hold.

G4S – Shares in the outsourcing firm gain 4.0p at 234.9p as HSBC upgrades its rating to hold from reduce.

SYNERGY HEALTH – The US District Court for Northern District of Ohio has ruled against an FTC request for a preliminary injunction to block Steris’s takeover of Synergy Health. Shares leap 42 per cent, up 675p to 2,255p.

HSS HIRE – The tool and equipment hire company said its chief executive, Chris Davies will step down from the company and be replaced by its chief operating officer, John Gill, in a move that comes following a torrid time for the company characterised by tough trading conditions and profit warnings. Shares up 2.5p at 61.0p.

JUST RETIREMENT, PARTNERSHIP ASSURANCE- The two pension providers have announced plans to raise £150million in a share placing to help pay for their planned merger. Just Retirement shares add 4.4p at 176.2p; Partnership down 1.25p at 143.25p.

CVS – The vetinary products firm has lifted its dividend as it reported a rise in full year pretax profit, and said its outlook ‘remains very promising’. Shares gain 2 per cent, or 13.5p at 645p.

DENSITRON TECHNOLGIES – Shares in the small cap technology firm soar 23 per cent, up 2.0p to 10.5p as it agrees to a takeover deal from Quixant which values it at around £7.7million. Quixant shares flat at 140.5p.

08:15: The Footsie bounced higher this morning, recovering all of yesterday's falls as the prospect of a US rate rise by the year-end looks firmly back on the table following comments overnight from Federal Reserve chair Janet Yellen.

In early trade, the FTSE 100 was 81.6 points, or 1.3 per cent higher at 6,041.3, having closed 70.75 points lower yesterday extending gains from the previous session after slumping 3 per cent on Tuesday.

In a speech last night, Janet Yellen told journalists at the University of Massachusetts that the bulk of Fed policymakers still expect a rate raise to happen by the end of 2015.

Hawkish: Yellen's comments sent the dollar up after her hawkish comments last night

The comments sent the dollar higher but US stocks fell, spooked by the fact that the Fed chair had to cut short her speech after being taken ill, although she was just thought to be suffering from dehydration.

Shares in Asia also mostly fell today, although Japanese stocks rebounded from initial big falls made after the country's core consumer prices saw their first annual drop since its central bank deployed its massive stimulus programme more than two years ago.

The Nikkei 225 index rallied sharply to end 1.7 per cent higher after prime minister Shinzo Abe announced an ambitious goal to expand the nation’s economy by around a fifth.

Michael Hewson, at chief market analyst at CMC Markets UK, said: 'Last night's speech by Fed chief Janet Yellen certainly kept the Fed's options open for a rate rise this year, saying that most participants on the FOMC expected an "initial increase in the federal funds rate later this year" but if the economy surprises them then judgements might change.'

Meanwhile in London Bank of England Monetary Policy Committee member Ian McCafferty has again reiterated his hawkish stance, writing in the Times that the time has come for the bank to start raising interest rates to prevent inflation overshooting in two to three years' time.

Traders will eye the release of a statement today from the BoE's Financial Policy Committee meeting earlier this week for any hints on its current thinking.

In the absence of any other important UK data today, the main focus will be on the final reading for US second quarter GDP, which is forecast to come in at 3.7 per cent.

The main company focus will undoubtedly be the unfolding soap opera at Volkswagen, with reports that we could see further dismissals in the wake of the ones announced yesterday, as the hunt for scapegoats begins, and the company goes into damage limitation mode.

UK company news scheduled today includes:

Finals: Asian Citrus, CVS Group, Judges Scientific

Economic news scheduled today includes:

Bank of England Financial Policy Committee September meeting statement at 9.30am

US final Q2 GDP at 1.30pm

UMich final consumer confidence at 3pm