FTSE 100 advances after sparkling show by US stocks

The FTSE 100 bounced higher in early action, taking its cue from a sparkling performance in New York with the Dow putting on its best one-day show in three years.

Early on the FTSE was 40 points or 0.62% higher at 6506. In New York Dow closed 2.43% or 421.28 points higher at 17,778.15, the surge reflecting easing investor concerns over oil price volatility and timing of a rate hike by the Fed.

Overnight, a better economic outlook for Japan from the Bank of Japan (BOJ)after the country fell into recession in the last quarter provided a further fillip for markets this morning.

Jasper Lawler notes that the BOJ has ruled out any immediate new stimulus programme so soon after it expanded its QE programme in October but recommitted itself to the existing program of asset purchases. The BOJ also offered an upbeat outlook for the Japanese economy suggesting it can overcome international difficulties and soon pull out of recession

Lawler says: “With the Central Bank of Russia seemingly having done enough for now in support of the rouble, traders may turn their attention to another central bank, the Swiss National Bank, pushing the limits of ordinary monetary policy.”

He notes that the SNB has introduced a negative deposit rate with the hope of putting off safe-haven flows into the Swiss franc that would otherwise have appreciated the currency to the disadvantage of exporters.

At home the Gfk consumer confidence report for the UK showed a surprise slip in December. “The Gfk data goes somewhat counter to a huge leap in retail sales for November that saw the British pound pull strongly off its lows. The tightening of the labour market and lower oil prices should be supportive of consumer confidence and retail sales growth”, says Lawler.

On the corporate front British American Tobacco was in focus on news that it will have to fork out $575m to settle a legacy litigation case with a company involved in the production and sale of asbestos-containing products in the 1980s. Its shares eased 3p to 3448p.

Support services group Serco saw its shares fall 4.24% to 148.76p despite news that police had ended their investigation into its contract to move prisoners from custody to courts without bringing charges against the company.

The Ministry of Justice called in the police in August 2013 to examine whether Serco had misleadingly recorded prisoners as being ready for court when they were not, in order to meet the performance criteria of the contract.

Fashion retailer Next was a notable faller in early action, easing 1.3% to 6474p after Jefferies downgraded the stock to hold from buy. The broker reckons the company’s “competitive advantage is diminishing.”