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LONDON MARKET CLOSE: Stocks struggle in nervy trade before US data

9th Apr 2024 16:53

(Alliance News) - European equities closed lower on Tuesday, with sentiment downbeat ahead of Wednesday's US inflation reading, though impetus could be found in gold, which hit another record high.

The FTSE 100 index ended down 8.68 points, 0.1%, at 7,934.79. The FTSE 250 ended down 91.23 points, 0.5%, at 19,763.35, while the AIM All-Share rose 2.15 points, 0.3%, at 750.98.

The Cboe UK 100 ended down 0.2% at 792.86, the Cboe UK 250 fell 0.5% at 17,208.36, and the Cboe Small Companies finished up 0.5% at 14,760.33.

The CAC 40 in Paris ended down 0.9%, while the DAX 40 in Frankfurt slumped 1.3%.

In New York, the Dow Jones Industrial Average was down 0.4% at the time of the London equities close. The S&P 500 was 0.6% lower. The Nasdaq Composite gave back 0.5%.

"In an otherwise quiet trading session without major economic data releases, investors sold stock indices as risk off sentiment dominated the agenda ahead of Wednesday's Federal Open Market Committee minutes and CPI print," IG analyst Axel Rudolph commented.

Wednesday's US inflation data is expected to show the rate of year-on-year consumer price growth picked up to 3.4% last month, from 3.2% in February, according to FXStreet cited consensus.

If the rate of consumer price inflation picks up by more than expected, it could mean the Federal Reserve will re-think its interest rate outlook. In its last set of economic projections, the dot-plot showed three rate cuts were still the best bet for 2023.

The pound was quoted at USD1.2672 in London late Tuesday afternoon, higher compared to USD1.2652 at the equities close on Monday. The euro stood at USD1.0856, rising slightly against USD1.0854. Against the yen, the dollar was trading at JPY151.65, down compared to JPY151.82.

Gold was quoted at USD2,347.44 an ounce, higher against USD2,330.93. Gold hit a new record high earlier Tuesday, above USD2,365 per ounce, before easing back.

DHF Capital analyst Bas Kooijman commented: "Despite reaching peak levels, gold prices remain supported by solid demand, evidenced by rising net long positions. However, following its strong surge, gold could be exposed to price corrections over the short term in particular if Wednesday's US data comes in stronger than expected."

Bank of America on Tuesday suggested the price of gold could hit USD3,000 an ounce.

"Gold and silver are among our most preferred commodities, with the yellow metal pushed up by central banks, China investors and, increasingly, Western buyers on a confluence of macro factors, including an end to hiking cycles," BofA explained.

The bank adjusted price targets for several London-listed mining stocks and upgraded its recommendation on Fresnillo. Shares in Fresnillo rose 4.0% on Tuesday.

Brent oil was quoted at USD89.82 a barrel at the time of the London equities close on Tuesday, down from USD89.93 late Monday.

More than six months into the war, Hamas said it was "studying" a new proposal for a temporary truce, taking some heat out of Crude prices.

Nonetheless, shares in BP and Shell rose 1.3% and 0.8%.

BP said it expects first quarter upstream production to be higher than the previous three-month period but cautioned lower prices would hurt performance elsewhere.

The London-based oil and gas major said upstream production in the quarter ending March is expected to be higher compared to the prior quarter, with output higher in oil production & operations and slightly higher in gas & low carbon energy.

But in the gas & low carbon energy segment, lower gas prices compared to the prior quarter are expected to have an adverse impact in the range of USD200 million to USD400 million, BP said.

There is also expected to be an adverse impact of around USD200 million as a result of the devaluation of the Egyptian pound.

In the oil production & operations segment, lower realizations compared to the prior quarter are expected to have an adverse impact in the range of USD300 million to USD600 million, BP commented.

Analysts at Jefferies commented: "BP's first trading update suggests limited downside to consensus numbers (Bloomberg USD3 billion net income). Strong gas trading will address a key concern during the quarter, while strong oil trading provides a good uplift quarter-on-quarter. Key operational upsets in the quarter (Whiting, Freeport) seem to have caused a lower impact than feared."

It was a tough day for defence stocks across Europe. BAE Systems fell 4.5% in London, the worst large-cap performer. In Frankfurt, Rheinmetall gave back 6.2%. Shares in the duo have enjoyed a rip-roaring gain over the past two years, on the expectation that there will be a rise in military spending amid intensifying geopolitical tensions.

Elsewhere, ProCook shares rose 4.4%. The company predicted annual profit to be "marginally" ahead of market expectations, shaking off "subdued" economic conditions.

The Gloucester-based kitchenware company reported revenue of GBP13.2 million for the fourth quarter for the year ended March 31, a rise of 4.8% on-year. It would mean full year revenue of GBP62.6 million, an increase of 0.4% from the previous year.

ProCook said its fourth-quarter sales were in line with board expectations. It also noted "strong margin and cost discipline". It means it expects full-year underlying pretax profit to be between GBP500,000 and GBP1.0 million, which would top the current company-compiled consensus of GBP400,000, and represent a swing from a GBP200,000 loss in financial 2023.

Tasty shares tumbled 17% as it announced a restructuring plan to combat "difficult recent trading conditions", and struck a GBP750,000 loan agreement to bolster its coffers and "stabilise the company" in 2024.

It plans to close "20 loss-making sites". For the 53 weeks to December 31, Tasty expects to report revenue of GBP46.9 million, a 6.6% increase from the GBP44.0 million of revenue in the year prior.

It expects to post a loss before interest, tax, depreciation and amortisation of GBP900,000 narrowing from a loss of GBP2.7 million.

"The group has made reasonable progress since the year end and despite difficult recent trading conditions, management continue to navigate through challenging times to mitigate cost rises and lower trading performance," Tasty said.

"The cost-of-living crisis, transportation strikes, and interest rate rises continued to significantly impact 2023 revenue and inflationary pressure on labour, food and utilities continue to adversely affect profitability. The group's financial performance has been inhibited by a tail of underperforming sites, despite efforts at improving operational performance."

The loan agreement is with Will Roseff, a "high net worth investor" who is a shareholder in bet365. He is also a director at the gambling firm.

Wednesday's economic calendar has the US inflation reading and Fed minutes at 1330 BST and 1900 BST. There is a producer price index reading from Japan overnight.

The UK corporate calendar has annual results from grocer Tesco.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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