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LONDON MARKET OPEN: Sluggish open ahead of US Fed testimony this week

6th Mar 2023 09:04

(Alliance News) - London's equities got off to a slow start on Monday, lagging behind more positive trading in Europe and Friday's rally on Wall Street.

Indices were mixed. The FTSE 100 index opened down 2.38 points at 7,944.73, amid strength in the pound. The FTSE 250 was up 26.01, 0.1%, at 19,951.78 and the AIM All-Share was down 2.27 points, 0.3%, at 862.70.

The Cboe UK 100 was down 0.1% at 795.12, the Cboe UK 250 was up 0.1% at 17,501.45, and the Cboe Small Companies was down 0.2% at 14,137.36.

"UK markets were slow to the latest party, with a tepid opening which reflected a lack of immediate catalysts," said interactive investor's Richard Hunter.

In Paris, the CAC 40 index was up 0.4%. In Frankfurt, the DAX 40 was up 0.2%.

The week ahead will be a consequential one for US economic data and monetary policy guidance.

Before the key US jobs report on Friday, Federal Reserve Chair Jerome Powell will testify before Congress on Tuesday and Wednesday.

"It's unlikely that he will give too many clues given how close to the next meeting we are, and the main takeaway is likely to be data dependence, however, don't be surprised if markets pore over every single nuance just so that they can reinforce their own particular mindset," said CMC Markets' Michael Hewson.

The next Federal Open Market Committee policy-making meeting is on March 21 and 22.

The dollar was softer against major currencies in early exchanges.

Sterling was quoted at USD1.2040 early Monday, firming from USD1.1979 at the London equities close on Friday. The euro traded at USD1.0650, higher than USD1.0601. Against the yen, the dollar was quoted at JPY135.81, down versus JPY136.21.

Wall Street rallied on Friday, with the Dow Jones Industrial Average ending up 1.2%, the S&P 500 up 1.6%, and the Nasdaq Composite up 2.0%.

In the UK, Prime Minister Rishi Sunak unveiled a new plan for the country to become a science and technology "superpower" by the end of the decade.

Funding of more than GBP360 million has been promised by the UK government, as the prime minister hopes a science and technology framework will place the UK at the forefront of new technologies including artificial intelligence and supercomputing.

Meanwhile, the UK government faced criticism from the oil and gas sector. In an interview with the Times, Shell's new chief executive, Wael Sawan, said the US is more attractive for energy investment than the UK.

Sawan told the newspaper that the UK government should look to the US's recent actions, such as the 'inflation reduction act', which gives a USD369 billion subsidy package to encourage domestic green investment.

Sawan said he would "think twice" about further oil investment in the UK, citing "more attractive" propositions, such as the US Gulf of Mexico.

Recent developments in the UK such as ad-hoc interventions, delays to planning, and a lack of clarity over subsidies are likely to hinder Shell's goal to invest GBP25 billion in the UK over the next decade, he said.

Shares in Shell were up 0.4%. Peer BP was up 0.3%.

Brent oil was trading at USD85.20 a barrel early Monday, little changed from USD85.34 on Friday. Gold was quoted at USD1,853.42 an ounce, higher than USD1,845.56.

In Asia on Monday, the Nikkei 225 index in Tokyo closed up 1.1%. The S&P/ASX 200 in Sydney closed up 0.6%.

China's economy is expected to grow "around 5%", outgoing Chinese Premier Li Keqiang said as he opened this year's National People's Congress in Beijing. Last year's growth target was around 5.5%.

The focus of the annual week-long meeting of hand-picked delegates is the approval of the planned formation of a new government and the setting of the country's economic and political course.

China also plans to increase its military spending by 7.2% this year in response to geopolitical uncertainties, according to a draft budget.

"The path to economic reopening could be bumpy with the potential for further spikes in Covid infections on the mainland and issues surrounding its embattled property sector, prompting some investors to remain cautious towards China," ii's Victoria Scholar.

The cautious growth projections suggest the Chinese government is taking a "vigilant approach", she added.

In China, the Shanghai Composite fell 0.2%, while the Hang Seng index in Hong Kong added 0.2%.

Back in London, FTSE 250-listing Aston Martin jumped 24% to 296.60 pence, as Jefferies raised the target price for the stock to 160p from 120p.

Last Wednesday, the luxury carmaker hailed its "strongest order book in many years", alongside its annual results.

Clarkson rose 4.5%.

The shipping services provider raised its shareholder payout for the 20th year in a row, amid a "record" performance.

In 2022, revenue jumped to GBP603.8 million from GBP443.3 million. Pretax profit increased to GBP100.1 million from GBP69.1 million.

The firm increased its final dividend to 64p from 57p, resulting in a full-year payout of 93p, up from 84p. "

"Whilst the global geo-political outlook for 2023 and beyond remains uncertain, the strength of business and balance between supply and demand, supported by our record level of forward order book, gives us confidence in the outlook for Clarksons," said CEO Andi Case.

Among London small-caps, Foxtons added 2.0%.

The London-based estate agent firm confirmed the acquisition of Atkinson McLeod for GBP7.4 million, to be funded from its existing cash reserves. Atkinson McLeod is an estate agent operating in Central East London, with four branches, bringing in around 90% of its revenue from around 1,100 tenancies.

The acquisition, intended to bolster Foxtons' letting business, is expected to be accretive to earnings this year, it said. Monday's announcement confirmed a report by Sky News on Sunday.

On AIM, Fusion Antibodies plunged 26%.

The antibody developer said revenue and earnings for the year ending March 31 are expected to be "significantly" behind market expectations, with revenue to be no less than GBP2.8 million.

This is due continuing uncertainty over the timing of several anticipated orders, which is outside the firm's control.

As Fusion shifts its focus on larger integrated service contracts, it notes "very positively received" discussions with several potential clients.

Still to come on Monday's economic calendar, the latest UK construction purchasing managers' index is due at 0930 GMT.

By Elizabeth Winter, Alliance News senior markets reporter

Comments and questions to [email protected]

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