Commodity Stocks Surge As US Shares Hit Record

 London shares ended higher on Tuesday, as a surge in copper and oil prices helped commodity stocks dominate the best performers, while US equities were heading higher on strong company earnings to push the S&P 500 to a new record high.

The FTSE 100 index recovered the vast majority of its losses incurred on Monday, closing up 0.8%, or 57.09 points at 7,434.82. The FTSE 250 ended 0.1% higher, or 25.03 points, at 19,641.28, and the AIM All-Share closed up 1.0%, or 9.27 points, at 978.84.

The BATS UK 100 ended up 1.2% at 12,632.59, the BATS 250 closed up 0.5% at 17,872.83, and the BATS Small Companies ended 0.4% higher at 12,118.37.

"The UK index maintained its rebound, regaining almost all of Monday's losses. The commodity sector was the main driver of the FTSE's comeback, with Brent crude and copper leading the oil and mining stocks higher," said SpreadEx analyst Connor Campbell.

Miners dominated the top group of blue-chip gainers, led by Antofagasta, up 6.6%, and closely followed by Anglo American, Glencore, Rio Tinto and BHP Billiton, which closed 5.2%, 4.9%, 2.6% and 2.9% higher, respectively. In the FTSE 250, KAZ Minerals closed up 3.4%.

Gold lost some ground and an ounce of the precious metal was quoted at USD1,250.53 against USD1,256.58 on Monday.

Acacia Mining's slump continued as the gold miner was by far the worst mid-cap performer, down 11%, adding to losses seen on Monday when it ended down 28%. The company said late Monday that the Tanzanian government claims the business owes USD190 billion in unpaid taxes, penalties and interest relating to alleged under-declared export revenue.

Brent oil pushed higher and was quoted at USD49.94 a barrel at the close, versus USD48.58 at the same time the prior day. The US API weekly crude oil stocks are still to come at 2130 BST.

"Sentiment on the oil market turned positive when Saudi Arabia’s energy minister announced yesterday that his country's oil exports will be reduced by a good 600,000 barrels per day in August to 6.6 million barrels daily. This was not only in response to some OPEC nations producing more oil than agreed, but also an attempt to help reduce inventories in the US," said Forex.com analyst Fawad Razaqzada.

The FTSE 350 oil and gas sector index ended up 1.3%, with BP closing 1.6% higher and Royal Dutch Shell 'A' shares ending up 1.0%.

Meanwhile, the latest data from Kantar Worldpanel showed UK grocery sales exceeded growth of 3% for the fourth consecutive period for the first time in nearly four years, receiving a boost from the hot weather in June. Overall sales in the grocery market rose by 3.9% year-on-year in the 12 weeks ended July 16, marking the first time since November 2013 that sales have been above 3% for four periods in a row.

Of the big four UK supermarkets, Tesco just edged ahead of its rivals, achieving sales growth of 2.3%, even as its market share slipped to 27.8% from 28.3%. Just behind was J Sainsbury, where sales grew by 2.2% and its market share decreased to 16.0% from 16.3%, followed by Wm Morrison Supermarkets, which posted a rise in sales of 2.1% as its market share slipped to 10.5% from 10.7%.

The worst of the big four was once again Asda Stores Ltd - owned by US retail giant Wal-Mart Stores Inc - where sales rose by 1.0% and market share fell to 15.1% from 15.5%.

Meanwhile, online grocery delivery firm Ocado Group achieved strong growth of 11.7%, while its market share was maintained at 1.3%.

Tesco ended 0.8% higher, with Sainsbury's up 0.7% and Ocado up 0.3%. Morrisons ended down 1.2% and clothing & food retailer Marks & Spencer closed 0.9% lower.

Events and publishing firm Informa was the other stand-out performer, up 3.4%. Informa reported a 29% rise in interim 2017 profit to GBP182.2 million from GBP141.6 million in 2016 as revenue rose 41%.

Provident Financial was the worst performer, down 5.5%. Provident reported that its pretax profit for the first half of 2017 fell 46% to GBP90.0 million from GBP165.4 million the prior year, due to disruption from restructuring in its home credit business.

British American Tobacco closed down 1.4%, after completing the acquisition of the remaining 57.8% of Reynolds American Inc that it didn't already own, paying GBP49 billion for the stake to form the largest tobacco company in the world by market capitalisation, at around GBP150 billion.

"The UK index will face a tougher test tomorrow, however. Not only will it have to deal with a potential perky pound, in light of the dollar's pre-Fed jitters, but an absurdly busy morning for corporate earnings," said SpreadEx's Campbell.

The latest quarterly industrial trends survey from the Confederation of British Industry showed a balance of 31% of manufacturers said the volume of output increased over three months to July, the fastest paced increase since early January 1995 when the balance stood at 33%. Meanwhile, the balance for expectations for output growth reached 28%, the highest since April 2014.

However, in July alone, the new order balance fell to 10% from 16% in June.

The survey revealed that a balance of 14% reported an increase in total orders in three months to July. Despite slowing, the export order balance remained strong at 17%. Expectations for domestic order growth were the most upbeat since April 2015, whereas expected growth in export orders was the highest in four decades.

"The fairly upbeat tone of July's CBI Industrial Trends Survey suggests that the manufacturing sector gathered momentum at the start of the third quarter," said Andrew Wishart from Capital Economics.

"This is consistent with quarterly manufacturing output growth accelerating to 1.0% at the start of the third quarter, up sharply from the -0.1% we expect to be revealed in the preliminary estimate of second-quarter GDP released tomorrow," Wishart added.

"The latest survey data supports our view that the manufacturing sector should help to offset a slowdown in consumer services this year," the economist said.

The pound was quoted at USD1.3039 at the London equities close compared to USD1.3029 at the same time on Monday.

Attention will be on a speech Tuesday evening by the Bank of England's Andrew Haldane at 1800 BST. Haldane has called for higher interest rates from the UK central bank in recent weeks.

In mainland Europe, the CAC 40 in Paris ended up 0.7% while the DAX 30 in Frankfurt ended 0.5% higher.

The euro stood at USD1.1653 at the European equities close, against USD1.1645 the prior day.

German business confidence strengthened further to a fresh record all-time high in July as companies became more satisfied with their current situation amid the improving business outlook, survey data from the Ifo Institute revealed.

The business confidence index rose to 116 in July from a revised 115.2 in June. The score was forecast to fall to 114.9.

Likewise, the current business situation index of the survey reached its highest level since the German reunification. The measure climbed to 125.4 in July, while it was expected to fall to 123.8 from 124.2 in June. The expectations index rose unexpectedly to 107.3 from 106.8 in the previous month. The forecast for July was 106.5.

"July's increase in German Ifo business sentiment to a new record high suggests that neither the euro's rise nor hints of quantitative easing tapering have taken the steam out of the economic upturn so far," said Jennifer McKeown from Capital Economics.

"In all, the latest survey evidence will encourage the European Central Bank to taper its asset purchases next year. But the bank can afford to tread very carefully to avoid a severe market reaction: we see few signs of inflationary pressure even in Germany," she added.

Stocks in New York were climbing at the London equities close. The DJIA was up 0.5%, the S&P 500 index was 0.4% higher and the Nasdaq Composite was flat.

The DJIA hit a new intraday peak in earlier trade, as it came within 10 points of 21,700, while the S&P 500 hit a new all-time high after several major firms released better-than-expected results.

Earnings reports continued to flood in from US firms after Google-parent company Alphabet kicked-off with disappointing second quarter results late Monday.

Post-it notes inventor 3M said its bottom line rose to USD1.58 billion in the second quarter of 2017 from USD1.29 billion the year before, to top analyst estimates.

Construction machinery firm Caterpillar reported a 12% increase in profit for the second quarter to USD114 million from USD102 million in the previous year, and raised the mid-point of its full-year profit per share outlook range to USD3.50 from USD2.10.

Fast food giant McDonald's said its bottom line in the second quarter rose to USD1.40 billion from USD1.09 billion the year before despite reporting a 3.5% decline in revenue.

General Motors did not fare as well, after second quarter net income attributable to shareholders plunged to USD1.66 billion from last year's USD2.87 billion. GM reported weak vehicle sales and USD700 million worth of items related to restructuring international operations, deconsolidation in Venezuela, and legal matters related to an ignition switch recall. Adjusted earnings did beat expectations, however.

"It is becoming a running theme of this earnings season that we are seeing figures substantially beat market estimates. Whether that is associated with the impact of a weak dollar or simply a low bar being set by analysts remains to be seen," said IG analyst Joshua Mahony.

The US Conference Board said its consumer confidence index climbed to 121.1 in July from a revised 117.3 in June. Economists had expected the index to drop to 117.0 from the 118.9 originally reported for the previous month.

"Consumers' assessment of current conditions remained at a 16-year high and their expectations for the short-term outlook improved somewhat after cooling last month," said Director of Economic Indicators Lynn Franco. "Overall, consumers foresee the current economic expansion continuing well into the second half of this year."

All eyes are on the Federal Reserve's monetary policy announcement due on Wednesday. While the Fed is widely expected to leave interest rates unchanged, traders will pay close attention to the accompanying statement.

The Fed's monetary policy statement and rate decision is at 1900 BST on Wednesday. Beforehand, there is UK GDP, BBA mortgage approvals, and index of services at 0930 BST.

Elsewhere, French consumer confidence is at 0745 BST, and in the afternoon there is US MBA mortgage applications and new homes sales at 1500 BST.

The corporate calendar is busy on Wednesday. Morning highlights include interim results from ITV, 3i Group, Fresnillo, Hammerson, GKN, Sage Group, Antofagasta, Metro Bank and Tullow Oil. GlaxoSmithKline will release first half results at 1200 BST.

Meanwhile, Marston's and Compass Group post third-quarter results, and Vedanta Resources releases first-quarter production results, while Paragon Group, Paypoint and Flybe give trading updates.