22nd Oct 2024 09:01
(Alliance News) - Stock prices in London opened lower on Tuesday, as Federal Reserve interest rate expectations steadily turn more hawkish, while UK government borrowing data gave the chancellor food for thought ahead of next week's budget.
The FTSE 100 index traded down 29.08 points, 0.4%, at 8,289.16. The FTSE 250 was down 34.05 points, or 0.2%, at 20,872.55, and the AIM All-Share was down just 0.10 of a point at 734.85.
The Cboe UK 100 was down 0.4% at 829.88, the Cboe UK 250 fell 0.1% to 18,438.95, and the Cboe Small Companies lost 0.1% at 16,921.46.
The CAC 40 in Paris was flat, and Frankfurt's DAX 40 added 0.5%. A 5.7% rise from SAP helped the DAX outperform. It raised its annual outlook Monday as strong demand for cloud and artificial intelligence products underpinned a decent third quarter.
In New York on Monday, the Dow Jones Industrial Average lost 0.8%, the S&P 500 fell 0.2%, while the Nasdaq Composite added 0.3%.
According to the CME FedWatch Tool, there is a 13% chance the US central bank leaves rates unmoved at the 4.75%-5.00% range at its November meeting. Though it is still odds on to cut by 25 basis points, a hold this time last week was seen as slim to none.
"It was almost unthinkable a week ago, when there was a mere 2% chance of no rate cut, according to CME's Fedwatch tool. Thus, the prospect of a pause from the Fed is a possibility, as US economic data continues to surprise on the upside. This helped the dollar to rise on Monday, and the dollar was the top performing currency in the G10 FX space. Overall, a shift in Fed expectations and earnings data will be key for market sentiment this week," XTB analyst Kathleen Brooks commented.
The dollar returned some progress on Tuesday. The pound rose to USD1.3012 early Tuesday, from USD1.2984 at the London equities close on Monday. The euro climbed to USD1.0836 from USD1.0825. Against the yen, the dollar perked up to JPY150.94 from JPY150.34.
UK public sector borrowing spiked in September, ahead of the budget next week, amid lofty interest payable on government debt.
According to the Office for National Statistics, public sector net borrowing amounted to GBP16.61 billion in September, stretching from GBP13.02 billion in August and GBP14.48 billion a year prior.
It was the "third highest September borrowing since monthly records began in January 1993", the ONS said.
"The interest payable on central government debt was GBP5.6 billion in September 2024, GBP4.6 billion more than in September 2023; this was owing to the interest payable in September 2023 being exceptionally low at GBP900 million because of movements in the retail price index around that time, rather than September 2024's interest being unusually high."
Public sector net debt, excluding public sector banks, was estimated at 98.5% of gross domestic product in September, sitting at levels last seen since the "early 1960s", but fading slightly from 98.8% in August. Net debt to GDP was at 86.2% in September 2023.
"Excluding the Bank of England, debt was 91.2% of GDP, 5.0 percentage points more than at the end of September 2023 but 7.3 percentage points lower than the wider debt measure," the ONS added.
Lloyds Bank analysts noted the borrowing reading pushes the year-to-date overshoot to GBP6.7 billion versus the most recent Office for Budget Responsibility forecast.
The reading comes just over a week before UK Chancellor Rachel Reeves sets out the government's budget announcement.
The Cabinet is united on the UK government's spending plans, Reeves has insisted.
The chancellor was reportedly locked in negotiations with some ministers until last week as she sought GBP40 billion of tax rises and spending cuts ahead of the announcement on October 30.
Speaking to the PA news agency, Reeves said the final settlements had been confirmed but acknowledged it had been "right for all Cabinet members to want to get the best settlement for their departments".
She added that settling departmental budgets was "an important achievement and shows the determination of this government to get a grip of the public finances, and shows that we are as one, united in fixing the mess that the Conservatives left for us".
Several ministers were reported to have written to the prime minister to express concern about the scale of cuts being demanded in some areas as the chancellor attempts to find GBP40 billion with which to deliver Labour's promises.
In Tokyo, the Nikkei 225 ended down 1.4%, the Shanghai Composite rose 0.5%, while the Hang Seng in Hong was 0.1% to the good in afternoon trade. The S&P/ASX 200 fell 1.7% in Sydney.
HSBC announced a new chief financial officer, and re-jigged its organisational structure.
The firm named Pam Kaur, its current chief risk compliance officer, as CFO with effect the start of January. Interim CFO Jon Bingham will resume his role as global financial controller. Former HSBC CFO Georges Elhedery became chief executive officer earlier this year.
In addition, the lender announced a "simplified organisation structure".
From the start of next year, it will operate through four business lines, it explained. They will be the Hong Kong division, the UK arm, Corporate & Institutional Banking and International Wealth & Premier Banking.
Hong Kong will include personal banking and commercial banking services. The UK arm will house its ring-fenced bank in the national.
HSBC added: "We are creating a new Corporate & Institutional Banking business through the integration of our Commercial Banking business (outside the UK and Hong Kong) with our Global Banking and Markets business and with the geographic region of the Western Markets (comprising our UK non ring-fenced bank, Europe, and the Americas), which is a predominantly wholesale banking region.
"Our new International Wealth and Premier Banking business will bring together our Premier banking focussed businesses outside of Hong Kong and the UK, our Global Private Bank, and our wealth manufacturing businesses, Asset Management & Insurance."
The stock barely budged in early trade in London.
Admiral fell 1.7%, while Direct Line moved 1.3% lower. Smaller insurer Sabre lost 3.9%.
The motor insurance underwriter said gross written premiums in the nine months to September 30 have risen 15% on-year to GBP186.5 million. It is on track for "record" gross written premiums this year.
It said it has seen signs of claims inflation cooling, though it remains "at a high single-digit level".
Sabre expects annual profit in line with current market expectations.
Chief Executive Officer Geoff Carter said: "We have seen clear signs that market pricing has softened considerably during the summer. Our view is that market price movements outstrip any potential short-term benefits from a slight softening in claims inflation. We remain confident in our view on inflation and that market pricing will have to reflect this in due course."
Hunting plunged 16%. It cut its annual profit guidance, as a recent decline in oil and US natural gas pricing has hit sector sentiment.
The manufacturer of equipment for the energy industry now expects 2024 earnings before interest, tax, depreciation, and amortisation between USD123 million and USD126 million, its outlook cut from the USD134 million and USD138 million range.
Morgan Sindall marched 10% higher. It now anticipates that results for 2024 will be significantly ahead of its previous expectations.
The construction group said profit in its Partnership Housing division will be "slightly ahead of the group's previous expectations". Trading has stayed "subdued" in the Mixed Use Partnerships offering, though the unit has secured preferred bidder positions for a number of developments in the UK.
Morgan Sindall continued: "Fit Out's profits have continued to strengthen significantly due to exceptional volumes and is now expected to materially exceed the group's previous expectations. Both Construction and Infrastructure are on target to meet their revenue and margin medium-term targets this year. Property Services remediation plan remains on track to be completed by the end of 2024 and is expected to return to profit in 2025."
Elsewhere, Pinewood rose 16%, as it won a UK deal. Marshall Motor will be the first "non-associated" major UK dealer to use its software.
The pact with the Constellation Automotive-owned firm is for five-years. Constellation also owns cinch, BCA and webuyanycar.
Motor dealer software provider Pinewood came to be after the company, onced named Pendragon, conducted a comprehensive strategic review which lead to the sale of its Motor & Leasing division to Lithia Motors.
The company changed its name in February, shortly after the near GBP400 million deal with Lithia was sealed.
Gold rose to USD2,734.24 an ounce early Tuesday, from USD2,723.74 at the time of the London equities close on Monday. A barrel of Brent was down to USD73.69 from USD73.85.
Gold spiked to a record high above USD2,740 on Monday.
By Eric Cunha, Alliance News news editor
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