20th May 2025 17:05
(Alliance News) - Stocks in London made strong gains on Tuesday, shrugging off hawkish comments from a leading Bank of England official, as well received earnings set the upbeat tone.
The FTSE 100 index rose 81.81 points, 0.9%, at 8,781.12, hitting its best level since early March.
The FTSE 250 advanced 135.35 points, 0.7%, at 21,096.44, and the AIM All-Share firmed 4.02 points, 0.6%, at 737.58.
The Cboe UK 100 ended up 1.1% at 876.32, the Cboe UK 250 rose 0.9% at 18,459.54, and the Cboe Small Companies climbed 2.1% at 16,245.88.
Diploma, Vodafone and Smiths Group advanced after well-received updates while banks climbed on reports of an easing in ring-fencing rules.
In European equities on Tuesday, the CAC 40 in Paris ended up 0.8%, while the DAX 40 in Frankfurt climbed 0.4%. The DAX 40 had earlier hit another all-time high, reaching 24,082.48.
In New York on Tuesday, stocks were lower. The Dow Jones Industrial Average was down 0.2%, the S&P 500 was down 0.3% and the Nasdaq Composite was down 0.4%.
The yield on the US 10-year Treasury was quoted at 4.48%, narrowing from 4.49% on Monday. The yield on the US 30-year Treasury was quoted at 4.97%, widening from 4.96%.
London's latest gains came despite a warning from the Bank of England's chief economist that the central bank has been cutting interest rates too quickly.
Huw Pill said the pace of interest rate reductions since August last year has been "too rapid" given the balance of risks to UK inflation.
Speaking at an event held at Barclays in London, he said progress of "disinflation" was partly a signal that easing monetary policy – meaning rates coming down – was working.
"And in my view, that withdrawal of policy restriction has been running a little too fast of late, given the progress achieved thus far with returning inflation to target on a lasting basis."
"I remain concerned about upside risks to the achievement of the inflation target," he added.
Pill, who is a member of the Bank's Monetary Policy Committee, was among the members to vote against cutting rates to 4.25%, instead preferring to leave them unchanged.
The bank's base rate has come down from a peak of 5.25%, when it was hiked to try to quell surging inflation across the UK.
The pound was quoted little changed at USD1.3363 late on Tuesday in London, compared to USD1.3365 at the equities close on Monday. The euro firmed slightly to USD1.1258 against USD1.1254. Against the yen, the dollar was trading down at JPY144.62 compared to JPY144.85.
Bank of America thinks the UK-EU 'reset summit' is positive for sterling.
"At a time when tariffs and protectionism are driving global trade, it is encouraging that the UK is moving in the opposite direction - more trade liberalisation and crucially stronger links with its largest trading partner."
The broker sees the reset as the platform for a deeper, more comprehensive deal that is "secularly bullish" for sterling.
"At a minimum, the deal helps to absorb some global trade headwinds due to tariffs, insulating further an economy that is service sector reliant. This is good news for GBP, with EUR/GBP our preferred expression for GBP bullishness," BofA added.
On the FTSE 100, Diploma jumped 15% with earnings upgrades of around 5% expected after the firm delivered strong results and raised its full-year forecast.
"This is clearly a strong and reassuring update from Diploma, and we would expect consensus [financial 2025] adjusted EPS to rise by mid-single digit levels today," analysts at Stifel said.
Adjusted earnings per rose 23% in the half-year to 80.2p from 65.1p. In the year to September 30, 2024 adjusted EPS totalled 145.8p.
The London-based supplier of specialised technical products and services said pretax profit in the six months that ended March 31 was GBP122.3 million, rising 57% from GBP77.8 million a year before.
Adjusted operating profit jumped 25% to GBP156.9 million from GBP125.4 million, beating GBP150.1 million consensus.
RBC Capital Markets said the beat was all driven by the Controls division with organic growth of 16% beating the 10% forecast.
Diploma upgraded its guidance for full-year organic revenue growth to 8%, lifted from its prior 6% forecast. It guided for a full-year operating margin of around 22%, compared to the previous estimate of approximately 21%.
Vodafone jumped 5.7% as it announced a new share buyback after reporting mixed annual results with a soft performance in Germany offset by growth elsewhere in Europe.
The Newbury, England-based telecommunications provider swung to a pretax loss of EUR1.48 billion for the financial year that ended March 31 from a profit of EUR1.62 billion the year prior.
Hurting Vodafone's bottom-line were non-cash impairments totalling around EUR4.5 billion for Germany and Russia.
Adjusted earnings before interest, tax, depreciation, and amortisation after leases slipped 0.8% to EUR10.93 billion from EUR11.02 billion a year ago, landing just shy of company-compiled consensus of EUR10.99 billion.
Revenue increased 2.0% to EUR37.45 billion from EUR36.72 billion but was behind market consensus of EUR37.71 billion.
AJ Bell's Russ Mould said while the "latest update hasn't exactly got investors jumping up and down, there was enough for them to dial up a little enthusiasm."
"Crucially, there is an improving signal on the company’s German business – its largest geographic operation and one which has been badly affected by regulatory headwinds," he noted.
Meanwhile, Smiths Group rose 4.3% after it said growth picked up in its third-quarter, and it now expects a full-year outcome at the top end of its guidance.
The company said revenue rose 11% on-year on an organic in the third-quarter to May 3. It means growth for the nine-month period is 9.6%.
"Reflecting this strong performance and momentum in the order book, the group now expects to be towards the top end of its 6-8% organic revenue growth guidance range and continues to expect margin expansion of 40-60 basis points for FY2025," Smiths added.
Banking stocks were in demand after Sky News reported Rachel Reeves, the chancellor, has told UK bank bosses she is "open-minded" about reforming the industry's ring-fencing regime.
Sky News said it has seen a letter sent last week by Reeves to the chief executives of a quartet of Britain's biggest banks, in which she acknowledges their view that adjustments to ring-fencing - which creates a firewall between groups' investment banking and retail operations - "have not gone far enough".
"As I have said previously, I am open-minded about the case for further reform," the chancellor told the CEOs of HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK, part of Banco Santander.
Shares in HSBC rose 0.8%, Lloyds Banking Group was up 2.1%, NatWest Group was 1.1% and Barclays rose 1.3%. Banco Santander was up 1.2% in Madrid.
Elsewhere, Renold leapt 35% after it confirmed it has received two separate all-cash takeover proposals from private equity firms.
The two proposals were for 81 pence per share and 77p, respectively, Renold said.
One is from a consortium of Buckthorn Partners LLP and One Equity Partners IX LP. The other is from Webster Industries Inc, which is majority owned by a fund managed and controlled by Morgenthaler Private Equity. The consortium's latest proposal is 81p per share, while Webster's is 77p.
Brent oil was quoted at USD65.09 a barrel in London on Tuesday, down from USD65.41 late Monday.
Gold was higher at USD3,276.82 an ounce against USD3,233.73 on Monday.
Wednesday's global economic calendar has Japanese trade figures overnight and UK inflation figures.
The domestic corporate calendar on Wednesday has full-year results from sports retailer JD Sports Fashion, clothing and food retailer Marks & Spencer, water utility Severn Trent and electricity generator SSE.
By Jeremy Cutler, Alliance News reporter
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