Latest market news

LONDON MARKET MIDDAY: London level, Europe down as rate cut hopes rise

Stocks in London were largely flat at midday on Tuesday, on the back of boosts at Burberry and Vodafone, as hopes for a summer interest rate cut were bolstered by supportive comments from the Bank of England’s top economist.

The FTSE 100 index was up 5.85 points, 0.1%, at 8,420.89. The FTSE 250 was up 14.46 points, 0.1%, at 20,574.80, and the AIM All-Share was little changed at 786.60.

The Cboe UK 100 was up 0.1% at 841.04, the Cboe UK 250 was up slightly at 17,884.26, and the Cboe Small Companies was up 0.3% at 16,081.01.

In European equities on Tuesday, the CAC 40 in Paris was down 0.1% while the DAX 40 in Frankfurt was down 0.2%.

The Bank of England’s top economist has boosted hopes of lower borrowing costs after saying it is ‘not unreasonable’ to expect the bank to consider cutting interest rates over the summer.

Huw Pill, the BoE’s chief economist, told an online event organised by the accountancy body ICAEW that the bank could consider cutting rates if inflation continues to ease off.

Pill said: ‘I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that bank rate will come into consideration.’

BoE Governor Andrew Bailey said last week that a rate cut in June could not be ‘ruled out’, although he stressed it was not a ‘fait accompli’.

His comments came as the Bank held rates at 5.25%, keeping them at the highest level since 2008, but were widely seen as strengthening the case for a cut.

Pill said the UK jobs market was still tight by historical standards, even though latest official data also out Tuesday showed the unemployment rate rising to its highest for nearly a year, at 4.3% in the three months to March.

According to the Office for National Statistics, the UK unemployment rate in the three months to March ticked up to 4.3% from 4.2% in the three months to February. The reading landed in line with FXStreet-cited market consensus.

The ONS said average earnings excluding bonuses rose 6.0% on-year in the period, matching the pace of growth in the three months to February. Including bonuses, wages increased 5.7%, also matching the prior month, which was revised upwards from 5.6%. Market consensus had been anticipating a rise of just 5.3%.

ING’s James Smith said the main takeaway from the figures was that the UK jobs market ‘is cooling and that’s gradually translating into lower wage growth.’

Sterling was quoted at $1.2553 at midday on Tuesday, little changed from $1.2552 at the London equities close on Monday.

The euro traded at $1.0795 at midday on Tuesday, up from $1.0791 late Monday. Against the yen, the dollar was quoted at JP¥156.41, up from JP¥156.21.

In London’s FTSE 100, luxury goods retailer Burberry was in demand, up 2.8% ahead of its full year results on Wednesday.

Vodafone was also in the green, up 3.4%, after reporting a return to growth in Germany, as it delivered full-year results slightly ahead of its expectations.

The Newbury, Berkshire-based telecommunications provider said pretax profit fell 88% to €1.62 billion in the financial year that ended March 31 from €13.07 billion the year prior.

Vodafone said this primarily reflects business disposals in the prior financial year, in particular the €8.6 billion gain on the disposal of Vantage Towers.

Revenue declined by 2.5% to €36.72 billion from €37.67 billion a year prior.

Chief Executive Margherita Della Valle said Vodafone was ‘delivering growth in all of our markets across Europe and Africa.’

She said the performance was ‘slightly ahead of expectations’ but stressed ‘much more still needs to be done.’

Leading the fallers, DCC fell 3.5%, after reporting a drop in annual pretax profit and revenue.

Dublin-based DCC is a provider of sales, marketing and support services.

It said pretax profit declined by 1.8% to £423.7 million in the financial year that ended March 31 from £431.6 million the year before, as revenue fell by 11% to £19.86 billion from £22.21 billion.

Anglo American fell 1.4% after it unveiled a new ‘radical’ strategy that will see it keep copper and iron ore assets, while getting rid of platinum and diamond businesses.

The move, which follows a ‘comprehensive asset review’, comes a day after the London-based mining company rebuffed a sweetened takeover offer from BHP Group, its major peer.

To unlock shareholder value and to simplify its portfolio, Anglo American said it intends to ‘demerge’ Anglo American Platinum and also ‘divest’ or ‘demerge’ De Beers as part of its new strategy.

The diversified miner also wants to divest its steelmaking coal business, saying it is already responding to ‘strong’ buyer interest. It is also exploring options for care and maintenance and divestment of its nickel operations.

‘Bid or no bid, it looks as if we‘re getting a break-up of Anglo American whatever the outcome,’ said Dan Coatsworth, investment analyst at AJ Bell.

‘However, there are major consequences if Anglo American demerges or sells certain interests including diamond, platinum and coal assets.’

‘Doing so would effectively make Anglo American even more attractive to potential bidders as it would have slimmed down and got rid of a lot of the fat that someone like BHP wouldn’t want,’ Coatsworth felt.

In the FTSE 250, Currys soared 9.1%.

The electricals retailer raised full-year profit guidance after a reporting like-for-like sales returned to growth in the 16 weeks to April 27.

As a result, Currys expects full-year adjusted pretax profit will be £115 million to £120 million, up from guidance of at least £105 million before.

Chief Executive Alex Baldock said: ‘Our performance is strengthening, with good momentum in the UK&I, and with the Nordics getting back on track. Sales are now growing again, margins are benefiting from higher customer adoption of solutions and services, and cost discipline is good. All this means improved profits and, with our strong cash position, we’re well set up for the year ahead.’

Analysts at Liberum noted this was the ‘third consecutive upgrade year-to-date and means cumulative upgrades of around 24%.’

‘The current valuation remains far too cheap, giving no credit for any further earnings upside even as momentum now turns positive and ahead of macro signs improving,’ Liberum added.

Elsewhere, Treatt rose 4.4% after predicting full-year profit in line with its expectations.

It said that it has built strong momentum going into the second half, with a ‘solid order book and healthy sales pipeline’.

But Headlam plunged 12% after it said it would report a ‘significant’ pretax loss in the first half on a double-digit revenue decline.

The Birmingham-based floor coverings company said revenue in the four months to April 30 was down by slightly more than 12% from a year before, with the UK down 12% and continental Europe down 17%.

The expected spring seasonal uplift did not occur, Headlam said.

On AIM in London, Sondrel leapt 55% after raising £5.6 million from a subscription priced at 10 pence each by ROX Equity Partners Ltd.

Stocks in New York were little changed. The Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite were all expected to open flat.

The main focal point for investors this week will be Wednesday’s US inflation figures, which will likely inform market expectations of potential US interest rate cuts.

According to FXStreet-cited consensus, consumer prices are expected to have risen 3.4% annually in April, cooling slightly from 3.5% in March.

US producer prices data on Tuesday and retail sales numbers on Wednesday add to an important week of economic releases across the pond.

Gold was quoted at $2,344.48 an ounce at midday on Tuesday, higher than $2,333.92 on Monday.

Brent oil was trading at $83.33 a barrel at midday on Tuesday, higher than $83.07 late Monday.

Copyright 2024 Alliance News Ltd. All Rights Reserved.