Bullish start to 2017

Year kicks off with higher shares and factory output

Wireline industry2017 kicked off in bullish mood with an increase in manufacturing activity and shares.

Oil prices also jumped to an 18 month high although they retreated later.

The Markit/Purchasing Managers’ index rose to 56.1 in December from 53.6 in November, its quickest rate of growth since June 2014. It has been boosted by the weak pound which has given a lift to exporters.

Shares in London soared to a new high, led by financials and exporters. The FTSE 100 followed European markets which rose strongly on Monday.

The blue chip index hit 7,205.21 points, the first time it has broken through the 7,200 mark. It closed 35.06 points higher (0.49%) at 7,177.89.

Banks and other financials rose on the prospect of higher interest rates while mining stocks continue to improve on the back of incoming US president Donald Trump’s promise to invest in infrastructure.

Among the fallers, Next was under pressure after a broker downgrade and in spite of expectations that tomorrow’s update will show it performed well over the festive period.

On Wall Street, stocks rose, with all major indexes not far from their historic highs. The Dow Jones rose 119.16 points, or 0.6%, to 19,881.76, the S&P 500 gained 19 points, or 0.85%, to 2,257.83 and the Nasdaq Composite added 45.97 points, or 0.85%, to 5,429.08.

Shares in London and New York followed European bourses which traded higher on Monday. The pan-European STOXX 600 index continued its rise to hit its highest level since December 2015.

Oil prices fell after hitting an 18-month high, weighed down in part by the strong dollar. Traders said crude prices were buoyed earlier in the day by hopes that a deal between OPEC and other big oil exporters to cut production, which kicked in on Sunday, will cut a global glut.

US crude rose earlier to $54.52 but later fell 2.4% to $52.42. Brent crude, having hit $57.48 was trading at $55.59, down 2.2% on the day.

Commenting on the PMI figures. Andy Hall, Barclays’ head of corporate banking in central Scotland, said: “Resilient as the [manufacturing] sector has proved to be over the years, weaker sterling is making imports more expensive, feeding inflationary pressures which will inevitably impact domestic output.  

“To keep the momentum going, what we need to see now is manufacturers realising more of the investment decisions that were put on hold in 2016.”

Forthcoming data:

Wednesday 4 January

Trading statement from Topps Tiles

Latest monthly mortgage approval figures in the UK

Services PMI sentiment surveys in Europe and US

US weekly oil inventories data

Minutes from the December Federal Reserve interest rate meeting

US monthly car sales data 

Thursday 5 January

Trading statement from FTSE 100 house builder Persimmon

CES Consumer Electronics and Technology show in Las Vegas (to 8 Jan)

Friday 6 January

Monthly German factory orders and retail sales figures

US non-farm payroll figures: In November America added 178,000 jobs, below the 12-month average of 188,000. This was not enough to stop the Federal Reserve from pushing through a second interest rate hike in December.

Russ Mould at AJ Bell says a figure higher than 161,000 could stoke expectations that the Fed will follow through on its plan to hike rates three more times in 2017.

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