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LONDON BRIEFING: BP swings to profit; HSBC launches share buyback

2nd May 2023 07:48

(Alliance News) - Stocks in London were expected to edge into the green at Tuesday's market open, ahead of EU inflation data and purchasing managers' index readings.

"With European markets closed yesterday, US markets finished the first day of the month broadly unchanged, with the Nasdaq 100 posting its best monthly close in 12 months, while the S&P 500 closed within touching distance of its highs this year," said CMC Markets' Michael Hewson.

Early economic data showed UK shop price inflation remained near record highs in April, despite a slight deceleration. Food price inflation sped up to a record high of 15.7% annually.

Investors on Tuesday will be keeping a close eye on the eurozone consumer price index reading at 1000 BST. The European Central Bank is due to announce its rate decision on Thursday.

"We've had a raft of ECB officials say there remains a long way to go before the central bank would even start to consider a pause in its rate hiking cycle. A strong core CPI print today could prompt a continued aggressive approach, with expectations that we could stay at a record high [core price inflation rate] of 5.7%," said CMC's Hewson.

Before the ECB's decision on Thursday, the US Federal Reserve will announce its own rate decision on Wednesday. Market consensus is expecting another 25 basis point hike, bringing rates to their expected peak.

In early UK company news, lender HSBC announced the reinstatement of quarterly dividends and a shares buyback programme, as first-quarter profit surged. Oil major BP swung to a quarterly pretax profit, as revenue rose from the previous year.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called up 8.6 points, 0.1%, at 7,879.17

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Hang Seng: up 0.4% at 19,974.12

Nikkei 225: closed up 0.1% at 29,157.95

S&P/ASX 200: closed down 0.9% at 7,267.40

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DJIA: closed down 46.46 points, or 0.1%, at 34,051.70

S&P 500: closed down 1.61 points at 4,167.87

Nasdaq Composite: closed down 13.99 points, or 0.1%, at 12,212.60

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EUR: down at USD1.0985 (USD1.1040)

GBP: down at USD1.2496 (USD1.2575)

USD: up at JPY137.63 (JPY136.18)

Gold: down at USD1,982.98 per ounce (USD1,990.27)

(Brent): down at USD79.36 a barrel (USD79.87)

(changes since previous London equities close)

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ECONOMICS

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Tuesday's key economic events still to come:

10:00 CEST EU manufacturing PMI

11:00 CEST EU flash CPI

09:55 CEST Germany manufacturing PMI

09:30 BST UK manufacturing PMI

08:55 EDT US Johnson Redbook retail sales index

10:00 EDT US labour turnover survey

16:30 EDT US API weekly statistical bulletin

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UK shop price inflation saw a mild deceleration in April, according to data from the British Retail Consortium, but remained near record-highs. Shop price inflation slowed slightly to 8.8% in April on an annual basis, from 8.9% in March. The BRC said this was above the 3-month average rate of 8.7%, however. Against the month prior, shop price inflation decelerated to 0.2% in April from 0.8% in March. Food inflation accelerated to 15.7% on an annual basis in April, from 15.0% in March. The BRC said this was above the 3-month average rate of 15.1%, and was the highest inflation rate in the food category on record.

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BROKER RATING CHANGES

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HSBC raises Rightmove to 'buy' (hold) - price target 645 (530) pence

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SocGen cuts Petrofac price target to 103 (200) pence - 'buy'

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COMPANIES - FTSE 100

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BP said in the first quarter of 2023, total revenue rose to USD56.95 billion from USD51.22 billion a year before, but was lower than USD70.36 billion in the fourth quarter. BP swung to a pretax profit of USD11.85 billion from a loss of USD17.54 billion a year before. It also swung to a replacement cost profit before interest and tax of USD13.23 billion from a USD20.40 billion loss. Total hydrocarbon production was little changed at 969 million barrels of oil equivalent per day, compared to 966 million a year before. Natural gas production rose to 4,962 million cubic feet per day from 4,897 million, as liquids production fell to 114,000 barrels per day, compared to 121,000 barrels. Looking ahead, BP expects oil prices to remain elevated in the second quarter, but guides for upstream production to fall from the first quarter. It announced a dividend of 6.61 cents per share for the first quarter, up from 5.46 cents a year before, but unchanged from the fourth quarter.

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HSBC announced the reinstatement of a quarterly dividend and a USD2 billion share buyback programme amid surging first-quarter profit. In the first quarter of 2023, the bank said pretax profit more than tripled to USD12.89 billion from USD4.14 billion a year before. This was well above market consensus of USD8.64 billion. "This included a USD2.1 billion reversal of an impairment relating to the planned sale of our retail banking operations in France, as the completion of the transaction has become less certain, and a provisional gain of USD1.5 billion on the acquisition of Silicon Valley Bank UK Ltd," HSBC explained. The bank reported net interest income rose 38% year-on-year to USD8.96 billion from USD6.48 billion. Market analysts had been expecting USD8.85 billion, according to company-compiled consensus. Overall net operating income reached USD19.74 billion, compared to USD11.67 billion a year before.

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COMPANIES - FTSE 250

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Mitie Group announced the USD19.1 million acquisition of security services specialist RH Irving Industrials. "The acquisition will strengthen our existing fire and security systems capabilities in Business Services, whilst the company's earthing services complement our Projects and Technical Services businesses," the facilities management company said. It will be funded from Mitie's existing bank facilities.

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OTHER COMPANIES

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BHP completed its acquisition of Oz Minerals, a deal valued at AUD9.60 billion, around USD6.44 billion. The Melbourne-based diversified mining group said Oz shareholders received AUD28.25 per share in cash. It funded the takeover using a combination of cash from reserves and a debt facility. Oz on Tuesday applied to be removed from the Australian Securities Exchange, BHP said. The delisting of the gold, copper and nickel miner is expected on Wednesday. Oz owns and operates the Prominent Hill and Carrapateena mines in South Australia. It also has an interest in the Pedra Branca copper-gold mine in Brazil. BHP Chief Executive Mike Henry said thr Oz acquisition strengthened BHP's portfolio in copper and nickel and is in line with its strategy to meet increasing demand for the critical minerals needed for electric vehicles, wind turbines, and solar panels to support the energy transition.

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By Elizabeth Winter, Alliance News senior markets reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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