dailyfx financial markets headlines

A light release slate and, as noted yesterday, the uncertainty surrounding the US interest rate kept pound trading relatively light Tuesday morning.  BBA May Mortgage Approvals reported at 81.3k against a 67.7k revised total for April, while mortgage lending remained at 5.7 billion pounds.  The increase suggests continued strength in the British housing market, which has been growing very quickly in the first half of the year.  Some analysts have predicted that rising rates and inflationary pressures will drive down the real estate market in the coming months.  Thursday's Bank of England mortgage lending figures should provide a better insight into mortgage lending totals and direction of the important sector of the economy.  The elephant in the room remains this Thursday's FOMC meeting, which is expected to result in a 25bp hike.  Some analysts, however, have suggested a 50bp hike could be in the making.  As of 8:45GMT GBP/USD traded at 1.8230, down from Monday's New York close at 1.8234.

Despite looming concerns of a US rate hike London stocks moved higher Tuesday morning led by oil and mining stocks.  The FTSE 100 was 0.6% higher at 5,715.6, while the mid-cap FTSE 250 up 0.8% at 9,267.9. Rexam led the way with a 1.5% rise to 495p after Citigroup increased its rating on the stock to “buy."  It also raised its price target to 550p, as stronger than anticipated sales in Europe & the US left the stock undervalued.  Stronger commodities prices helped lift BP 1.2% higher at 616½p and Royal Dutch Shell 0.9% up at £18.17 with crude prices over $72 per barrel.  The mining sector took its traditional place at the heart of the rally as metals prices rose.  The sector was also in focus on continued hopes for further consolidation after Phelps Dodge’s bid for Canadian miners Inco and Falconbridge.  BHP Billiton rose 1.4% to £10.11, Vedanta was up 2% at £13.38 and Kazakhmys rose 1.3% to £11.23.  On the downside, Smith & Nephew fell 0.2% to 413½p after Bridgewell Securities cut its rating on the medical devices maker to “neutral” from “overweight”.  Lower down the market, shares in WH Smith rose 1.8% to 475¾p after it issued details of its long-awaited demerger plans.  Investors will receive one share in its separated news distribution unit and one share in its new, stand-alone retail business for each share currently held in the combined company.  Aviation services provider BBA Group was 1.7% higher at 252p after it said it expected a “substantial improvement” in its maintenance operations in the current year.

Ten year gilt future yields were steady at 4.720% with prices at 94.220.

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