Source: Sharecast
Mirroring a recovery in Asia, the FTSE 100 jumped 53.54 or 0.7% to 7,731.74, back towards recent all-time highs, as the pound lost territory on the dollar, falling below $1.33 again, and remained little moved against the euro at 1.1365.
Italy's President Sergio Mattarella overnight gave his consent to a new populist government agreed between the League and Five Star, with academic Giuseppe Conte as Prime Minister and the finance ministry brief to be held by another professor, Giovanni Tria, who has warned of an implosion of the euro if it isn’t reformed. This now paves the way for the government to be sworn in later this afternoon which will be followed by a confidence vote in parliament next week.
"Markets were reassured when Italy stepped away from the precipice of fresh elections and the populist coalition proposed a new cabinet. While Eurosceptics will still dominate potential future Italian government of Giuseppe Conte, markets were considering this a preferable outcome to the alternative of fresh elections that would have been seen as a potential vote of confidence in the European system," said market analyst Artjom Hatsaturjants at Accendo Markets.
Some immediate respite for investors, maybe, but Neil Wilson at Markets.com noted that the 10-year BTP is still above 2.6%, pushing 2.7%, well north of the 1.7%-1.8% level before the mini-crisis blew up.
"So, some calm but certainly the market is still pricing expansionary fiscal policies and/or a run-in with the EU on borrowing and the expectation of ballooning debt-to-GDP. Whatever it is there is still risk in there, but the redenomination/Eurozone breakup risks (the tail risk that wagged the dog this week) have decidedly retreated with the approval of the govt," Wilson said.
Whilst political fears receded in Italy receded these are being balanced by trade war concerns, said Jasper Lawler at London Capital Group, but the market losses have not been as large as we would have expected just a few months ago. "The market is becoming more familiar with this administrations’ negotiating tactics and as a result, rather than seeing a move straight into risk off trading, we are seeing some investors take a wait and see approach."
Traders will be focused on economic data on Friday though the political theme will continue to offer a background beat. The release of US non-farm payroll report is the main event, with nearly 190,000 new jobs expected ahead of the next Federal Reserve meeting in less than two weeks.
In Europe it's a morning of manufacturing PMI surveys an interesting industrial insight as market stand at the brink of a potential global trade war.
As for the UK report, due at 0930 BST, the market is expecting the PMI to fall to 53.5 for May from 53.9 a month earlier.
There was a dearth of major UK company news on Thursday, with Rio Tinto confirming completion of the sale of its 75% share of the Winchester South coal development project in Queensland for an up-front $150m cash, while ZPG confirmed the sale of Hometrack Australia for A$130m in cash.
FirstGroup shares were up after Wolfhart Hauser, who has become executive chairman after chief executive Tim O’Toole was sacked on the back of major losses a day earlier, was reported as saying he would accept a bid for all or part of the company if an offer created value for shareholders.
Sainsbury's came under political pressure after being asked to explain the reasoning behind a pay deal which could leave 9,000 staff worse off, by Rachel Reeves, chairwoman of the business, energy and industrial strategy committee, who is already closely scrutinising Sainsbury’s proposed merger with Asda.
Royal Dutch Shell announced production start at the Kaikias field in Gulf of Mexico, 12 months ahead of schedule.
Ryanair said chief executive Michael O'Leary sold €33m worth of stock in the airline earlier in the week.
The Competition & Markets Authority said it was launching a review into the £2bn funerals market to ensure that people are not getting a bad deal from pre-paid funeral plans. Around 1.3m people in the UK have a pre-paid plan.
Meanwhile, electricity regulator Ofgem launched a probe into the way that Utility Warehouse manages its customers who are in debt, investigating whether the supplier has breached rules related to the way it manages these customers.
Market Movers
FTSE 100 (UKX) 7,722.59 0.58%
FTSE 250 (MCX) 20,961.84 0.55%
techMARK (TASX) 3,546.90 0.24%
FTSE 100 - Risers
Barratt Developments (BDEV) 559.20p 2.49%
Anglo American (AAL) 1,840.00p 2.38%
Glencore (GLEN) 379.52p 2.01%
Johnson Matthey (JMAT) 3,576.00p 1.79%
Rio Tinto (RIO) 4,310.00p 1.65%
Antofagasta (ANTO) 1,071.00p 1.56%
Barclays (BARC) 200.25p 1.53%
Royal Dutch Shell 'B' (RDSB) 2,711.50p 1.29%
3i Group (III) 964.80p 1.24%
Schroders (SDR) 3,277.00p 1.24%
FTSE 100 - Fallers
Shire Plc (SHP) 4,046.00p -1.32%
Severn Trent (SVT) 1,974.50p -0.73%
Evraz (EVR) 507.40p -0.67%
United Utilities Group (UU.) 771.80p -0.52%
Pearson (PSON) 897.20p -0.49%
Smith & Nephew (SN.) 1,363.00p -0.40%
Taylor Wimpey (TW.) 189.55p -0.32%
Standard Chartered (STAN) 752.30p -0.30%
British American Tobacco (BATS) 3,858.00p -0.28%
NMC Health (NMC) 3,514.00p -0.28%
FTSE 250 - Risers
FirstGroup (FGP) 94.33p 5.05%
Euromoney Institutional Investor (ERM) 1,320.00p 3.61%
Bakkavor Group (BAKK) 199.00p 2.58%
Dixons Carphone (DC.) 189.25p 2.30%
OneSavings Bank (OSB) 411.80p 2.18%
Games Workshop Group (GAW) 2,960.00p 2.07%
Millennium & Copthorne Hotels (MLC) 548.00p 2.05%
Renewi (RWI) 75.40p 2.03%
Man Group (EMG) 185.20p 1.93%
Ted Baker (TED) 2,484.00p 1.89%
FTSE 250 - Fallers
Provident Financial (PFG) 633.51p -1.26%
Ascential (ASCL) 426.00p -1.21%
Daejan Holdings (DJAN) 5,770.00p -1.20%
Telecom Plus (TEP) 1,024.00p -1.16%
On The Beach Group (OTB) 494.00p -1.10%
Card Factory (CARD) 196.28p -1.02%
TBC Bank Group (TBCG) 1,638.00p -0.97%
Contour Global (GLO) 224.00p -0.88%
Renishaw (RSW) 5,330.00p -0.74%
F&C Global Smaller Companies (FCS) 1,375.00p -0.72%