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FTSE rebounds as China-US trade fears pause

FTSE rebounds as China-US trade fears pause

The UK stock market rallied for the first time in four days as calm words from China’s central bank regarding the country's worsening trade relations with the US prompted bargain hunting by investors.

After a sell-off on Wall Street overnight the governor of the People’s Bank of China said the country had ‘good economic fundamentals and resilient growth’, propelling the FTSE 100 76 points, or 1% higher in morning trading, although it settled back to close 36 points or 0.5% up at 7,639.

‘The yuan is one of the few currencies that have appreciated against the US dollar this year. I’m fully confident about the health of China’s capital market based on the fundamentals,’ said Yi Gang.

Although fears remain of the 2-3% hit to global economic growth that a full trade war between China and the US could inflict, investors took their cue to buy stocks on the dip.  

'The situation remains just as incendiary and animosity is still heightened. However, by default, tit-for-tat has paused and investors are using the hiatus for selective buys,’ said Ken Odeluga of City Index.

Ocado (OCDO) led the FTSE higher with a 5.8% leap to £10.04 after Peel Hunt analyst dubbed the the online grocer the ‘Microsoft of retail’ and said it could become the ‘standard’ platform for retail logistics as he hiked his target price to £17.

Berkeley (BKG) dropped 5.75% to £38.99 as the housebuilder followed McCarthy & Stone (MCS) in issuing a profits warning saying its latest full-year results, with pre-tax profits up 15.1% at £935 million, represented ‘a peak’ as the number of houses it built reduces.

On currency markets the pound bounced off an earlier seven-month low to trade 0.2% up at $1.3202 against the dollar after prime minister Theresa May passed another testing vote on its Brexit bill in the House of Commons.

A surge in manufacturing orders also supported sterling, easing concerns about the economy and making it easier for the Bank of England to raise interest rates. 

The Confederation of British Industry’s industrial orders index jumped to +13 in June from -3 in May, and reversing a fall in April due to wintery conditions. 

‘The recovery in orders and a return to bumper growth in prodction suggests the lull in manufacturing activity may be over,’ CBI economist Anna Leach said.

 

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