3rd Jun 2025 11:55
(Alliance News) - Stock prices in London were mostly slightly higher at midday on Tuesday, while the Organisation for Economic Co-operation & Development has slashed its annual global growth forecast due to trade disputes.
After 3.3% growth last year, the world economy is now expected to expand by a "modest" 2.9% in 2025 and 2026, the Paris-based OECD said.
In the UK, the economy is expected to grow by 1.3% this year, with the OECD cutting its previous forecast of 1.4%.
"The global outlook is becoming increasingly challenging," the economic policy group explained. It said "substantial increases" in trade barriers, tighter financial conditions, weaker business and consumer confidence, and heightened policy uncertainty will all have "marked adverse effects on growth" if they persist.
The FTSE 100 index was up 0.69 points at 8,774.95. The FTSE 250 was up 2.54 points at 21,031.51, and the AIM All-Share was up 1.89 points, 0.3%, at 750.02.
The Cboe UK 100 was down 0.1% at 873.40, the Cboe UK 250 was down 0.1% at 18,546.10, and the Cboe Small Companies was up less than 0.1% at 16,656.11.
On the FTSE 100, British American Tobacco was up 0.6%.
This was despite the London-based cigarette and nicotine product maker raising its revenue guidance for 2025 following a better-than-expected first-half performance.
"On the face of it, British American Tobacco's trading update contains the type of information that investors might celebrate," AJ Bell's Russ Mould explained. "A problem area (the US) looks to be improving, revenue is ahead of guidance, and it continues to generate lots of cash.
"Unfortunately for investors, so much good news has already been priced into the shares that the update failed to move the dial...It's notable that profit is not ahead of guidance, despite revenue beating forecasts. That's down to unfavourable foreign exchange rates.
"When you factor in these negatives, it means British American Tobacco is still plodding along as expected, but there is nothing to shoot the lights out in the statement."
On the FTSE 250, Pennon lost 2.7%.
The Exeter-based water utility cut its annual dividend by 14% to 31.57 pence, after posting a widened GBP72.7 million pretax loss for the year to March 31. This was despite a 16% rise in revenue to GBP1.05 billion.
The company said it expects to return to profitability in the current financial year through increased revenue and a reset of its cost base.
Among smaller companies, Dalata Hotel Group jumped 11% after a consortium formed by Pandox and Eiendomsspar said it had submitted an acquisition proposal.
The proposal is for EUR6.05 per Dalata share, valuing the Dublin-based hotel operator at around EUR1.3 billion. This represents an estimated premium of 27% to Dalata's closing price of EUR4.76 per share on March 5.
"The big unknown is whether their proposed bid is enough to seal the deal and whether another party makes a higher offer," Mould said. "The consortium's 27.1% bid premium is below the 36% average on UK-listed takeovers so far this year, according to analysis by AJ Bell.
"That leaves scope for someone else to come along and offer slightly more."
In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was up 0.1%.
"European equity markets struggled to find direction early on Tuesday, with investors still showing signs of nervousness around tariffs and the economic outlook," commented AJ Bell's Mould, citing the OECD's outlook downgrade. "It's only a small revision – from 3.1% to 2.9% for 2025 – but it's still enough to cause investors some indigestion as they consume their morning news.
"The downgrade weighed on the mining sector as the market fears it could mean reduced demand for commodities, and therefore a potential knock to the price of metals and minerals."
On London's FTSE 100, for example, Antofagasta was down 2.2% while Rio Tinto lost 1.8% and Glencore lost 1.7%.
He continued: "The 90-day pause on tariffs has just over a month before expiration, meaning the pressure is on countries to do deals with the Trump administration. Reports suggest that Trump wants best offers on trade negotiations by Wednesday, perhaps to avoid any last-minute rush or stalemate situations."
Meanwhile in the eurozone, annual consumer price inflation is estimated to have been 1.9% in May (down from 2.2% in April), according to a flash estimate from Eurostat.
The deceleration, mainly driven by slower growth in services prices and ongoing energy deflation, came below the 2.0% FXStreet-cited market consensus. It also put inflation below the European Central Bank's 2% target for the first time since September.
The flash reading comes ahead of the European Central Bank's interest rate decision on Thursday, with markets widely expecting a 25 basis point cut.
The pound was quoted at USD1.3516 at midday on Tuesday in London, lower compared to USD1.3546 at the equities close on Monday. The euro stood at USD1.1411, lower against USD1.1429. Against the yen, the dollar was trading higher at JPY142.91 compared to JPY142.75.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.4%, the S&P 500 index down 0.4%, and the Nasdaq Composite down 0.3%.
The US economy is now expected to grow by just 1.6% this year, down from 2.2% in the previous outlook, and slow further to 1.5% in 2026, the OECD said.
"This reflects the substantial increase in the effective tariff rate on imports and retaliation from some trading partners," it explained.
The yield on the US 10-year Treasury was quoted at 4.42%, narrowing from 4.46%. The yield on the US 30-year Treasury was quoted at 4.95%, narrowing from 5.00%.
Germany's languishing economy meanwhile is likely to see growth of 0.4% this year, the OECD said.
Brent oil was quoted higher at USD64.75 a barrel at midday in London on Tuesday from USD64.58 late Monday.
Gold was quoted lower at USD3,358.33 an ounce against USD3,371.47.
DHF Capital's Bas Kooijman said gold traders were "[locking] in their profits following the metal's strongest daily gain in nearly a month, as markets reacted to recent geopolitical and trade developments.
"Despite the pullback, the precious metal held close to four-week highs, underpinned by lingering uncertainty across global markets."
Kooijman continued: "Geopolitical tensions add to the appetite for gold and could support a return to the upside." He noted that "In the Middle East, rising tensions could continue to fuel safe-haven demand...Persistent concerns over fiscal imbalances and expectations for Fed rate cuts later this year should continue to lend underlying support to gold."
Still to come on Tuesday's economic calendar, the US has factory orders, total vehicle sales and the Redbook index.
Also, there will be comments from US Fed Governor Lisa Cook.
By Emma Curzon, Alliance News reporter
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