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LONDON MARKET OPEN: Shares firm amid "hawkish hold" in Australia

4th Apr 2023 09:09

(Alliance News) - London share prices opened mostly higher on Monday, as investors came to terms with the Opec+ oil production cut and after Australia's central bank paused its interest rate hikes.

The FTSE 100 index opened up 21.49 points, 0.3%, at 7,694.49. The FTSE 250 was up 68.46 points, 0.4%, at 18,947.87, and the AIM All-Share was down 2.07 points, 0.3%, at 811.32.

The Cboe UK 100 was up 0.4% at 769.89, the Cboe UK 250 was up 0.3% at 16,543.27, and the Cboe Small Companies was flat at 13,338.60.

In Tokyo on Tuesday, the Nikkei 225 index closed up 0.4%. The Shanghai Composite closed up 0.5%, but the Hang Seng index in Hong Kong was down 0.4%. The S&P/ASX 200 in Sydney closed up 0.1%.

The Reserve Bank of Australia decided to leave interest rates unchanged at its April meeting. The cash rate target remains 3.60% and the interest rate on exchange settlement balances remains 3.50%. The RBA noted the decision follows a cumulative 3.5 percentage point increase to interest rates since May last year.

Market consensus, as cited by FXStreet, had been expected the move, though some analysts had believed a 25 basis point hike was possible.

"The board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook," said RBA Governor Philip Lowe.

"Today's 'hold' from the RBA was a hawkish hold, as the RBA didn't close the door to further rate hikes saying that 'some further tightening of monetary policy may well be needed to ensure that inflation returns to target'," said Swissquote Bank senior analyst Ipek Ozkardeskaya.

"Still, it's the first major central bank to hold fire since the banking crisis."

Stocks in New York closed mixed on Monday as soaring oil prices pushed blue-chips firmly into the green but knocked tech stocks. The Dow Jones Industrial Average ended up 1.0% and the S&P 500 up 0.4%, but the Nasdaq Composite lost 0.3%.

Oil prices jumped after Opec+ nations on Sunday announced unexpected production cuts of more than one million barrels a day in the face of weaker demand. Oil prices continued to make gains on Tuesday morning.

Brent oil was trading at USD85.70 a barrel early Tuesday, higher than USD84.52 late Monday.

US President Joe Biden on Monday shrugged off the output cut, while the White House criticized the move but said it would be of limited impact on the US economy.

"It's not going to be as bad as you think," Biden told reporters while travelling in Minnesota to promote his economic record.

White House National Security Council spokesman John Kirby told reporters "we don't think that production cuts are advisable at this moment, given market uncertainty." The US "made that clear", he said, but added: "We're focused on moving ahead here."

In London early Tuesday, Investec and Rathbones Group said they have agreed an all-share merger of Rathbones with Investec Wealth & Investment to create one of UK's leading wealth manager.

Investec W&I UK includes Investec's wealth and investment businesses in the UK and Channel Islands but excludes Investec Bank and Investec Wealth & Investment International, both of which will remain wholly-owned subsidiaries of Investec.

The merger will create a UK wealth manager with around GBP100 billion of funds under management and administration, the two companies said.

The enlarged Rathbones will remain an independent premium-listed company in London operating under the Rathbones brand with Investec as a long-term, strategic shareholder. It will continue to be led by Rathbones Chair Clive Bannister and Chief Executive Officer Paul Stockton.

Under the terms of the deal, new Rathbones voting and non-voting shares will be issued in exchange for 100% of Investec W&I UK's share capital. Following completion, Investec will have an economic interest in Rathbones' enlarged share capital of 41.25% but its voting rights will be limited to 29.9%. Investec will receive both voting ordinary shares and convertible non-voting ordinary shares that may convert into ordinary shares on a 1-for-1 basis.

Existing Rathbones shareholders will have an economic interest of 58.75% and voting rights of 70.1%. The terms of the combination imply an equity value of about GBP839 million for Investec W&I UK.

Rathbones shares were up 2.8% to 1,936.25 pence early Tuesday, giving the company a market capitalisation of GBP1.23 billion. Investec shares were up 2.4% to 455.00p in London. They were flat at ZAR98.16 in Johannesburg.

In the FTSE 250, Digital 9 jumped 3.6%, after it commented on its recent share price volatility.

The London-based investor in digital infrastructure said it is not aware of any portfolio-specific factors that have led to the recent decline in the share price. It said it believes that the discount to net asset value of the company's current share price materially undervalues Digital 9.

"The board maintains confidence in the group's diversified portfolio of nine high-quality data centre, subsea fibre, wireless and terrestrial fibre assets which continue to perform strongly, in line with management expectations," Digital 9 said.

On London's AIM market, Light Science Technologies dropped 47% to 2.00 pence.

The company said it has conditionally raised GBP1.5 million through the issue of 150.0 million new shares priced at 1p each. The fundraising consists of a placing of 107.8 million shares, as well as a private subscription for 42.3 million shares.

Light Science said the proceeds from that the funding will be predominantly used for product development and intellectual property protection.

In European equities on Tuesday, both the CAC 40 in Paris and the DAX 40 in Frankfurt were up 0.3%.

The pound was quoted at USD1.2440 at early on Tuesday in London, up compared to USD1.2386 at the equities close on Monday. The euro stood at USD1.0907, up against USD1.0883. Against the yen, the dollar was trading at JPY132.71, up compared to JPY132.32.

Gold was quoted at USD1,980.32 an ounce, down against USD1,988.83.

In the economic calendar, the EU's producer price index will be released at 1000 GMT.

By Sophie Rose, Alliance News reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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