London open: UK stocks gain as China's central bank denies currency war
UK stocks opened higher on Thursday as China devalued the yuan for the third consecutive day, increasing the prospect of a delay in an US interest rate hike.
The People’s Bank of China set the parity rate at 6.4010 yuan for $1, down 1.11% from the previous day’s 6.3306, in an effort to boost exports to feed the slowing economy.
The move has sparked concerns of a “currency war” but the central bank dismissed the claims. PBoC economist Ma Jun said on Wednesday that there was no need for a currency war as exports were expected to pick up in the second half of the year.
“It is also entirely probable that in these attempts to try and stem the tide of deflation afflicting the Chinese economy that we could well see further Yuan weakness, and as a result see China export further deflation into the global economy, and in all likelihood delay the lift off in rates widely expected from the Federal Reserve later next month,” said Michael Hewson, chief market analyst at CMC Markets.
“The recent US jobs report has certainly raised expectations of just such a rate move, but nagging doubts still remain about the wisdom of acting next month, given the low levels of inflation, as well as Deputy Fed chief Fischer’s comments earlier this week.”
Turning to Thursday’s agenda, a report on US retail sales at 1330 BST is expected show an improvement in July as the Fed looks for signs of economic growth before raising interest rates.
The report from the Commerce Department is forecast to reveal retail sales climbed 0.6% last month, compared to a 0.3% fall in June.
The US will also see the release of weekly jobless claims at 1330 BST. Analysts predict initial jobless claims remained at 270,000 in the week to 8 August.
Michael Page rallied after the British recruiter said it would pay a special dividend after posting an increase in half-year pre-tax profit on the back of a rise in revenue.
Coca-Cola HBC jumped after posting a 31.7% rise in first-half net profits to €125.2m, although sales fell by 1% to €3.15bn due to an adverse impact from currencies.
Glencore ticked up as the miner said it will cut capital expenditure as a result of falling oil prices, as it reported mixed first-half production.
Grainger gained after the residential property group announced plans to sell its assets in German as part of a strategy to simplify the business and increase its focus on the UK market, as it said trading in the first ten months of this year was strong.
Sainsbury's was slightly lower after it launched a clothing website on Thursday, providing wider access to its Tu collection.
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