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LONDON MARKET MIDDAY: Stocks mostly up, but US budget impasse worries

15th May 2023 12:22

(Alliance News) - Stock prices in London were largely higher at midday on Monday and the pound held firm against the dollar, with the FTSE 100 boosted by a strong performance by mining stocks.

The FTSE 100 index was up 37.74 points, or 0.5%, at 7,792.36. The FTSE 250 was up 47.62 points, or 0.3%, at 19,235.99, while the AIM All-Share was down 1.22 points, or 0.2%, at 815.74.

The Cboe UK 100 was up 0.5% at 779.02, the Cboe UK 250 was flat at 16,797.67, and the Cboe Small Companies was up 0.5% at 13,617.37.

The pound was quoted at USD1.2502 at midday on Monday in London, higher compared to USD1.2465 at the close on Friday.

Matthew Ryan, head of market strategy at financial services firm Ebury, said sterling should remain "well-supported" in the coming weeks as a "cheap" valuation and a "relatively hawkish" Bank of England act as tailwinds.

In London, commodity stocks were the top performers in the FTSE 100 as investors looked to safe-haven assets such as gold amid concerns about the political impasse over the US debt ceiling.

Gold was quoted at USD2,016.36 an ounce midday Monday, higher against USD2,010.46.

US Treasury Secretary Janet Yellen has warned a default could occur by June 1, while the non-partisan Congressional Budget Office forecast on Friday the date of June 15.

"Negotiations between President Biden and congressional leaders should resume on Tuesday, but unless we see truly encouraging progress, investors' fears may keep growing," commented Francesco Pesole at ING.

Anglo American was the top blue-chip performer at midday, up 1.9%. Glencore, Antofagasta, and Endeavour Mining were up 1.8%, 1.5% and 1.4%, respectively.

Oil majors came under pressure, as the price of Brent slipped amid investor hopes of a global economic recovery dwindled following a raft of lacklustre data from China and a weak consumer confidence print from the US on Friday.

Shell was down 0.3%, and BP was flat.

Brent oil was quoted at USD74.30 a barrel at midday in London on Monday, down from USD74.87 late Friday.

HSBC added 1.6%.

The Asia-focused lender said it is aiming for revenue and lending growth in Asia over the medium term, amid a week-long seminar for investors and analysts in Hong Kong and Singapore.

HSBC said it is targeting mid-single-digit percentage growth in lending over the medium to long term for its Asia business, but is more cautious in the short-term. It aims for mid-teens return on tangible equity.

The banks targets high-single-digit percentage growth in revenue for its Wealth arm in Asia in the medium-term.

British American Tobacco rose 0.5% as it announced that Finance Director Tadeu Marroco will take over as chief executive, replacing Jack Bowles, who is stepping down with immediate effect.

Russ Mould, investment director at AJ Bell, commented that it was "never a good look" when a company says its chief executive is leaving with immediate effect, suggesting that "something is not right in the business."

"The fact British American Tobacco has promoted its finance director to the CEO role provides some comfort that the new leader already knows the business inside out. However, it raises a lot of questions as to why the change has happened. Unlike many companies in this situation, we haven't had any major clues for problems behind closed doors for British American Tobacco," Mould said.

BAT shares are down 21% over the past 12 months.

In the FTSE 250, John Wood plunged 34% after private equity firm Apollo Management dropped its takeover approach.

In early April, Apollo had proposed a potential offer of 240 pence per share in cash - a 59% premium to Wood's share price at the time. On Monday, Apollo confirmed it will not be making an offer for the consulting and engineering company.

The stock is now trading at 144.00p.

In response to Apollo's "no intention to bid" statement, John Wood said: "The board remains confident in Wood's strategic direction and long-term prospects and believes that, following a transformative year in 2022, including new executive leadership and a new strategy, Wood is well placed to deliver substantial value for shareholders."

Currys climbed 5.5% as it raised guidance for adjusted profit in its recently completed financial year.

The electronics and electrical goods retailer said adjusted pretax profit for the financial year that ended April 29 is expected to be between GBP110 million and GBP120 million. This is up from previous guidance of GBP104 million, though down from GBP186 million in financial 2022.

AJ Bell's Mould said that the profit upgrade raises the question of just how well Currys might be doing if it wasn't for the company's Nordics business "hitting the skids".

"Like an athlete who has found a new level of performance only to find a stone in their shoe, the electronics retailer continues to churn out an impressive performance in the UK and Ireland, belying a difficult backdrop, while continuing to struggle in Scandinavia."

Elsewhere in London, Orcadian Energy dropped 25% after the North Sea Transition Authority declined the firm's request to extend phase A of Licence P2320, resulting in the licence expiring on Sunday.

The oil and gas development company also announced that the potential disposals of its interests in sub-areas of the licence to Rapid Oil and Carrick Resources - announced back in January - will no longer go ahead.

In European equities on Monday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.3%.

The European Commission boosted its 2023 economic growth outlook for the eurozone, but it also raised the inflation forecast for the single currency area.

The commission raised its growth outlook by 0.2 point to 1.1% for 2023. The eurozone inflation forecast has been revised higher, forecast to be 5.8% in 2023, compared to 5.6% in the previous outlook. Inflation in the eurozone was running at 7.0% in April.

"The European economy is in better shape than we projected last autumn," the EU commissioner for the economy, Paolo Gentiloni, said in the statement.

The euro stood at USD1.0874 midday Monday, higher against USD1.0857 at the European equities close on Friday.

Stocks in New York were called to open higher. The Dow Jones Industrial Average was called up 0.4%, the S&P 500 index up 0.4%, and the Nasdaq Composite up 0.3%.

On Friday, US stocks ended largely lower amid fresh concerns over the health of the US economy, as a survey of consumer sentiment slipped to its lowest level this year.

The preliminary reading of the University of Michigan's consumer sentiment index sank to 57.7 points, missing economists' expectations for it to stay close to April's reading of 63.5.

Against the yen, the dollar was trading at JPY136.15 on Monday, higher compared to JPY135.39 on Friday.

By Heather Rydings, Alliance News senior economics reporter

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