14th Jan 2025 11:53
(Alliance News) - Stock prices in London were in the green at midday on Tuesday ahead of producer price inflation data from the US, due out at 1330 GMT.
Meanwhile in the UK, Chancellor Rachel Reeves will move to reassure turbulent markets amid high government borrowing costs as she faces a grilling from MPs later today.
The UK chancellor will answer questions in the House of Commons for the first time since her return from a trip to China criticised by political opponents for coinciding with a week of volatility for the pound and soaring yields on UK bonds.
Speculation about her position mounted on Monday after Prime Minister Keir Starmer said he had confidence in her but declined to confirm she would stay in Number 11 until the next general election. However, Downing Street later clarified Reeves would remain in her role "for the whole of this Parliament".
"Investors are worried about extra borrowing by the UK government to achieve its plans and the uncertain outlook for the economy given widespread pessimism by businesses and consumers, hence why the pound has also fallen alongside gilt prices. Concerns that inflation could remain sticky is also a nagging factor," commented AJ Bell's Dan Coatsworth. "Rising gilt yields have a direct impact on the UK government's fiscal headroom as debt servicing costs have put Rachel Reeves' fiscal rules under threat.
"The hike in borrowing costs narrows the chancellor's buffer on her budget, making further tax rises and spending cuts more likely."
He continued: "This situation threatens to stir up speculation that the country is headed towards recession, although that event wouldn't be a surprise given that we haven't had a proper one in a long time and Reeves implied from the start that things could get worse before they get better."
The FTSE 100 index was up 6.02 points, 0.1%, at 8,230.21. The FTSE 250 was up 116.02 points, 0.6%, at 19,834.39, and the AIM All-Share was up 0.89 points, 0.1%, at 710.28.
The Cboe UK 100 was marginally higher at 824.78, the Cboe UK 250 was up 0.6% at 17,220.55, and the Cboe Small Companies was up 0.4% at 15,219.72.
BP lost 2.4%.
The London-based oil major said it expects to report lower fourth production figures as it delayed its capital market event set for next month. It expects upstream production in its fourth-quarter to be lower than the prior quarter, with weaker figures in gas & low carbon energy and oil production & operations.
BP furthermore updated guidance for its full year, noting that the underlying effective tax rate is now expected to be in the region of 42% instead of the previously guided 40%. It also revised its full-year expectation for its other business & corporate segment, with its underlying annual charge now anticipated to be in the region of USD600 million, up from the previous range of between USD300 million and USD400 million.
"The warning from BP sours the recent recovery in its share price after a prolonged weak spell," said AJ Bell's Russ Mould. "Concern about the global economy puts a cloud over oil demand this year and BP's latest update continues its bad run for news, having suffered impairments and warned of weak refining margins last year.
"Investors often think BP and its peers are well-oiled machines, pumping out oil and gas with ease and doling out endless dividends and share buybacks. In reality, they operate in a high-risk environment with unpredictable earnings."
On the FTSE 250, Ocado jumped 10%.
The Hatfield, Hertfordshire-based licenser of grocery delivery technology said Ocado Retail Ltd's revenue for the fourth quarter that ended December 1 grew 18% on-year to GBP715.8 million, while full-year revenue grew 14% to GBP2.69 billion.
The company added that Ocado Retail achieved "strong earnings before interest, tax, depreciation and amortisation growth" due to top-line growth "as well as continued focus on cost and efficiency".
Further, Ocado Retail celebrated "another record-breaking Christmas, with our highest-ever level of sales over the peak Christmas trading period."
"Ocado's retail joint venture with Marks & Spencer finally seems to have cracked the recipe for success," Mould commented. "There are significantly more customers and they're shopping more frequently. This performance should settle some nerves at Marks & Spencer given relationships have been fragile between the two partners.
"The key challenge is to sustain this momentum."
Among small caps, retailer Card Factory gained 7.2% after reporting that sales for the 11 months to December 31 totalled GBP506.6 million, up 6.2% on-year, while total store revenue increased 5.7%. Also, trading in the Christmas period was in line with expectations.
Looking ahead, it expects a financial 2025 adjusted pretax profit "in line with current market expectations", reflecting "robust revenue growth", and a mid-to-high single-digit percentage increase in adjusted pretax profit for financial 2026.
"Card Factory delivered a reassuring Christmas update, helping to calm some nerves around whether cash-strapped consumers would pull back from sending Christmas cards," Mould said. "Card Factory’s cheap prices mean shoppers often walk out with much more than they originally intended to buy, loading up on items as they walk along the aisles.
"Like all UK retailers, costs are going up for the business but Card Factory remains upbeat about its earnings expectations in 2025."
In European equities on Tuesday, the CAC 40 in Paris was up 1.2%, while the DAX 40 in Frankfurt was up 0.8%.
The pound was quoted higher at USD1.2189 at midday on Tuesday in London, compared to USD1.2161 at the equities close on Monday. The euro stood higher at USD1.0258, against USD1.0209. Against the yen, the dollar was trading higher at JPY157.88 compared to JPY157.66.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.5%, and the Nasdaq Composite up 0.6%.
Brent oil was quoted lower at USD79.85 a barrel at midday in London on Tuesday from USD81.25 late Monday.
Gold was quoted lower at USD2,665.53 an ounce against USD2,666.56.
Still to come on Tuesday's economic calendar, alongside the PPI data look out for the US Redbook index this afternoon.
By Emma Curzon, Alliance News reporter
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