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LONDON MARKET MIDDAY: Stocks up; RS falls on slowing industrial growth

23rd May 2023 12:06

(Alliance News) - Stock prices in London were higher at midday on Tuesday, as investors remained calm about the possibility of US government debt default.

The FTSE 100 index was up 21.33 points, or 0.3%, at 7,792.32. The FTSE 250 was up 29.99 points, 0.2%, at 19,303.33, and the AIM All-Share was up 0.13 of a point at 808.34.

The Cboe UK 100 was up 0.3% at 778.90, the Cboe UK 250 up 0.2% at 16,823.57, and the Cboe Small Companies up 0.1% at 13,595.40.

Across the Atlantic, political negotiations to break the impasse over the US government debt limit ended without agreement.

House Speaker Kevin McCarthy on Monday said his talks with President Joe Biden to avert a debt default were "productive", but there was still no deal.

The US Treasury's June 1 cut-off date is fast approaching for Congress to authorize more borrowing. Negotiations resume on Tuesday.

"Experience tells investors that these stand-offs always end with a last-minute deal so the market is mostly taking this saga in its stride, particularly given commentary from both sides seems to be increasingly conciliatory," said AJ Bell investment director Russ Mould.

"Just how close Washington must push for there to be a genuine fear of default is an open question, but right up to the eleventh hour, or in other words the end of this month, the expectation is likely to remain that a deal will be done."

Stocks in New York were called to open lower. Both the Dow Jones Industrial Average and the S&P 500 index were called down 0.1%, whilst the Nasdaq Composite was seen flat.

The UK is seeing a "tale of two economies", survey results from S&P Global showed on Tuesday, as the service sector grows while manufacturing contracts.

The headline seasonally adjusted S&P Global flash UK composite output index read 53.9 points in May, down from April's 12-month high of 54.9 points. However, the reading remained above the crucial 50-point no-change threshold that separates growth from contraction.

The UK flash services purchasing managers' index stood at 55.1 points in May, up from 55.9 in April. By contrast, the flash manufacturing PMI slipped further into contraction to 46.9 points from 47.8.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said "the UK is seeing a tale of two economies, with the divergence between manufacturing and services posing difficulties for policymakers."

A similar dynamic was seen in the eurozone, with the divergence within the private sector becoming more pronounced in May, as there as well services grew but the downturn in manufacturing worsened.

The eurozone flash services PMI fell to 55.9 points in May from 56.2 in April.

The expansion in the services sector was the second fastest in the past 12 months. It was a different story in the eurozone manufacturing sector, however, where output fell at the fastest rate in six months.

The eurozone flash manufacturing PMI fell to 44.6 from 45.8, indicating a worsening contraction in the sector.

Still ahead, the US flash PMI readings are due at 1445 BST.

In European equities on Tuesday, the CAC 40 in Paris was down 0.8%, and the DAX 40 in Frankfurt was down 0.1%.

The pound was quoted at USD1.2382 at midday on Tuesday in London, down compared to USD1.2424 at the equities close on Monday. The euro stood at USD1.0775, down against USD1.0802. Against the yen, the dollar was trading at JPY138.50, unchanged compared to JPY138.52.

In London equities, RS Group lost 5.6%, making it the worst performer at midday in the FTSE 100 index.

The industrial and electronics products distributor said revenue for the year ended March 31 grew by 17% to GBP2.98 billion from GBP2.55 billion a year prior, citing strong growth across its industrial product ranges in the Americas, Europe, Middle East & Africa and Asia Pacific regions.

Pretax profit was GBP383.0 million, up 24% from GBP308.8 million in financial 2022.

This is slightly below company-compiled consensus. RS was expected to report revenue of GBP3.00 billion and pretax profit of GBP378.7 million.

RS Group proposed a final dividend of 13.7 pence per share, up 18% from 11.6p a year prior, bringing the total proposed dividend to 20.9p per share, a 16% increase from 18.0p per share a year before.

Looking ahead, RS Group said trading for the first seven weeks of financial 2024 have been hurt by slowing industrial growth.

BT shares were trading flat, after Patrick Drahi's Altice bought more shares.

Altice UK said that it has bought a further 650.0 million BT shares, increasing its ownership of the telecommunications company to 2.44 billion shares. This represents about a 24.5% stake in BT.

The purchase was worth about GBP961 million at the current market price for BT shares, while Altice's total stake is worth GBP3.61 billion.

BT on Thursday last week released its annual results, which sent its shares down 5.1% that day. Over the past 12 months, the stock is down 21%, but it had staged a recovery so far in 2023, rising 29%.

Victoria Scholar, head of Investment at interactive investor said: "Clearly Altice UK judged that now is an opportune moment to acquire further shares at an attractive price point with the stock down several percent since last week."

BT had said it will cut up to 55,000 jobs between by 2030, as it reported a decline in profit and revenue for its recent financial year. BT said it will reduce its number of workers to between 75,000 and 90,000 by financial years 2028 to 2030 from 130,000 currently.

On AIM, Southern Energy jumped 17%.

The natural gas exploration and production company said it has entered a deal with PetroTX Energy to buy the remaining producing acreage in the Gwinville Field, Mississippi. It said the purchase will cost the company USD3.2 million in cash.

Chief Executive Officer Ian Atkinson added: "Our team will seek to incorporate these operations with our own, achieving substantial synergies and cost savings that will help drive a very quick return of capital even at current natural gas pricing."

Brent oil was quoted at USD76.10 a barrel at midday in London on Tuesday, up from USD75.94 late Monday. Gold was priced at USD1,955.62 an ounce, down against USD1,972.21.

By Sophie Rose, Alliance News reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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