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LONDON MARKET MIDDAY: Stocks up despite Eurozone recession fear

31st Oct 2023 11:52

(Alliance News) - Stock prices in Europe were higher at midday Tuesday, despite new data adding to fears that the Eurozone may sink into recession.

The FTSE 100 index was up 35.88 points, 0.5%, at 7,363.27. The FTSE 250 was up 144.35 points, 0.9%, at 17,161.94, and the AIM All-Share was up 1.02 points, 0.2%, at 679.59.

The Cboe UK 100 was up 0.5% at 734.40, the Cboe UK 250 was up 1.0% at 14924.97, and the Cboe Small Companies was up marginally at 12,639.97.

In European equities on Tuesday, the CAC 40 in Paris was up 1.2%, while the DAX 40 in Frankfurt was up 0.7%.

There was some mixed data about the health of the Eurozone's economy on Tuesday morning.

The Eurozone's economy saw a slight quarterly contraction in the three months to September, whilst inflation slowed in October, according to Eurostat.

According to Eurostat, quarter-on-quarter, gross domestic product fell by 0.1%, having risen by 0.1% in the second quarter. This was worse than expected, with markets expecting GDP to have stagnated.

Rabobank said it expects "another modest decline" in GDP in the fourth quarter, followed by a slow recover.

"The war in the Middle-East is a clear downside risk to our outlook, however," Rabobank warned.

In better news,the flash eurozone harmonised index of consumer prices rose by 2.9% annually in October, slowing from a 4.3% increase in September. The print was expected to show a 3.1% rise in the period.

Month-on-month the figure rose by 0.1%, cooling from a 0.3% increase in September.

Eyes have also been on interest rate decisions.

On Tuesday, the BoJ stuck with sub-zero borrowing costs to support the world's number three economy. Instead, it has sought to keep interest rates at ultra-low levels by buying up huge quantities of government bonds in an attempt to keep a lid on yields.

Meanwhile, the US Federal Reserve begins its two-day monetary policy meeting, with the market widely expecting there to be no interest rate hike announced on Wednesday.

The Bank of England will follow on Thursday, with the market anticipating it will hold interest rates once again. The BoE is likely hoping the historically high rates will do their work to throttle inflation in the coming months, having previously emphasised the lag between monetary policy and its effects.

AJ Bell's Russ Mould described the US and UK's interest rate decisions as a "doubly whammy" for the markets. He added that "investors will be focusing hard on signals about where rates might go in 2024."

The pound was quoted at USD1.2196 at midday on Tuesday in London, up compared to USD1.2144 at the equities close on Monday. The euro stood at USD1.0664, higher against USD1.0607. Against the yen, the dollar was trading at JPY150.69, higher compared to JPY149.13.

The FTSE 100 was able to stay afloat at midday Tuesday, despite anchor BP falling 4.0% on some disappointing results.

After the shock departure of its CEO in September, oil major BP announced a further USD1.5 billion share buyback for the third quarter. However, its shares fell 5.2% as its bottom line missed market forecasts.

Replacement cost profit fell to USD3.29 billion from USD8.15 billion on an underlying basis, which was behind company-compiled analyst consensus of USD4.01 billion.

However, the underlying RC profit rose from USD2.59 billion in the second quarter, which BP credits to "higher realized refining margins, lower level of refining turnaround activity, a very strong oil trading result, higher oil and gas production, partly offset by a weak gas marketing and trading result".

Total revenue and other income fell to USD54.02 billion from USD57.81 billion a year before, but rose from USD49.48 billion in the second quarter.

BP also announced a further USD1.5 billion share buyback programme, the same amount it announced with its second quarter results in August.

Looking ahead, said it expects oil prices in the fourth quarter to be supported by Opec+ production restrictions and the continued demand rebound.

"European gas and Asian [liquefied natural gas] prices will be driven by weather, demand recovery in Europe and China and ongoing geopolitical tension. In the US, weather is also a risk factor, but higher than normal storage levels and higher production should help to dampen volatility," the company said.

Meanwhile, oil prices retreated somewhat, as the market assessed the risk of potential disruption in the Middle East. Brent oil was quoted at USD87.11 a barrel at midday in London on Tuesday from USD88.31 late Monday.

Fellow oil firm Shell dropped 0.3%.

Rolls-Royce was the best performer on the index, jumping 5.8%. Barclays raised the aircraft engine manufacturer's stock to 'overweight' from 'equal weight'.

In the FTSE 250 index, IG group rose 2.8%.

The London-based online trading provider said it will lay off 300 staff members, or 10% of its workforce, in a bid to save costs and become a "lean fintech company".

It will undertake other "efficiency measures", including expanding use of its global centres of excellence, and expects to deliver full run rate cost savings of GBP50 million per year over the medium term.

On London's AIM, Velocys plummeted 70%.

The sustainable fuels technology company updated shareholders on its financing progress. It said there will be no further extension to the convertible loan notes long stop date, and any investment is unlikely to be on the same terms as its previous CLNs.

Its discussions with strategic investors continue, Velocys added.

Real Good Food surged 38%.

Ahead of its annual general meeting, the Liverpool, England-based food manufacturer shared an upbeat trading update. It said that it is trading well in its seasonally busy third quarter in the run up to Christmas, and is seeing benefits from its recent "radical" reform programme.

"We have made substantial progress since this time last year when the group was really struggling," Executive Chair Mike Holt commented.

Stocks in New York were called lower. The Dow Jones Industrial Average was called to open virtually unchanged. However, the S&P 500 indexis called to open down 0.2%, and the Nasdaq Composite down 0.5%.

Gold was quoted at USD1,997.51 an ounce, down against USD2,000.32.

By Sophie Rose, Alliance News reporter

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