Stocks extended gains on Wednesday as a tentative agreement on Greek debt relief and a fresh seven-month high in the price of oil offered more cause for optimism. Banks were top risers for a second day as markets price-in the earnings benefit of a possible US rate rise in the summer.
The FTSE 100 was edging out gains of over half-a-percent by mid-morning despite a drag from shares of M&S (LON:MKS) which fell sharply after poorly-received results. Next (LON:NXT) shares fell in sympathy, with M&S results pointing to stress for UK clothing retailers.
Greek shares rose and the yield on Greek Debt fell after the IMF and Germany deferred a quarrel on Greek debt relief until 2018. A tentative deal has put differences amongst creditors aside in order to allow €10.3bn in relief loans this summer to top up Greek coffers and make debt payments. Greece avoiding another cliff-edge moment is undoubtedly positive for markets, which already face the uncertainty of the Brexit referendum and Spanish elections in June.
Shares of M&S slid as much as 9% after new CEO Steve Rowe warned that plans to revamp its general merchandise division and close stores would hurt near-term profits. The share slump came in spite of the department store announcing it was raising its dividend. The divi rise appears to be exacerbating rather than steadying the drop in shares. The money would be best invested into the turnaround to help secure M&S’ long term profitability.
Sterling was flat after interventions from the Institute for Fiscal Studies and the World Trade Organisation outlining the risk of a Brexit were offset by a YouGov poll putting the Leave and Remain campaign neck and neck. The growing list of institutions warnings on the economic uncertainty of an exit is crowding out a political discussion about the EU’s impact on Britain’s democracy. This is giving the ‘Leave’ campaign an edge over ‘Remain.’
US markets look set to build on yesterday’s strong gains at the open ahead of more housing data and US oil inventories from the Department of Energy.
USA pre-opening levels
S&P 500: 9 points higher at 2,085
Dow Jones: 76 points higher at 17,782
Nasdaq 100: 22 points higher at 4,468
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