27th Sep 2022 08:50
(Alliance News) - European markets made a more confident start on Tuesday, giving investors a reprieve from recent volatility.
Stock prices have been hit of late by fear of recession and by central bank interest rate hikes. While New York failed to shake-off those nerves overnight, stocks in Asia traded strongly on Tuesday and Europe shares have followed them higher.
The FTSE 100 index was up 42.30 points, or 0.6%, at 7,063.25 early Tuesday. The mid-cap FTSE 250 index was up 136.23 points, or 0.8%, at 17,859.06. The AIM All-Share index was up 2.04 points, or 0.3%, at 829.93.
The Cboe UK 100 index was up 0.9% at 705.29. The Cboe 250 was up 0.8% at 15,268.04, and the Cboe Small Companies was up 0.2% at 12,893.42.
The CAC 40 stock index in Paris surged 1.3% early Tuesday, while the DAX 40 in Frankfurt was up 0.7%.
Equities had a positive day in Asia Pacific. The Nikkei 225 index in Tokyo closed 0.5% higher, while the S&P/ASX 200 in Sydney ended up 0.4%. In China, the Shanghai Composite jumped 1.4%, and the Hang Seng in Hong Kong was up 0.1% in late trade.
"Stock markets have steadied in Asia and early European trade on Tuesday but that is not reflective of the mood in the markets at the moment so it may struggle to hold," Oanda analyst Craig Erlam commented.
"The volatility in FX markets at the start of the week has been extreme but it's also been building for weeks as authorities desperately try to arrest the decline in their currencies, particularly against the US dollar."
There was some respite for the pound, a day after it had tumbled to a record low of USD1.0349 on Monday morning. Sterling fetched USD1.0832 early Tuesday, up from USD1.0655 at the London equities close on Monday.
The UK government moved to calm tetchy currency markets, announcing it will now publish a "medium-term fiscal plan" in November. The Bank of England also said Monday it is not afraid to act, though it ruled out an emergency rate hike before its next meeting.
"There's nothing wrong with being ambitious on the economy, but timing is everything and when the cost is much higher interest rates, there won't be many winners and the economy simply won't see the benefit. The question now is whether the pressure both externally and from within will force a rethink in order to settle things down," Oanda's Erlam added.
The euro rose to USD0.9662 early Tuesday UK time from USD0.9626 at the European equities close on Monday. Against the yen, the dollar slipped to JPY144.12 from JPY144.41.
Gold rose to USD1,640.25 an ounce early Tuesday from USD1,639.00 late Monday. A barrel of Brent firmed to USD85.65 from USD85.30.
In London, United Utilities lost 2.3% after it warned on annual revenue.
The water and wastewater company expects revenue in the half year ending September 30 to be 1% lower year-on-year, due to "moderately lower-than-forecast consumption". This weaker consumption will continue into the second half, hurting full-year revenue, United Utilities said.
It expects annual revenue will be lower than a May forecast. Back then, the company said it expected annual revenue to grow 1%.
United Utilities was among the worst large-cap performers.
Biffa was the standout among mid-caps, rising 28% to 407.80 pence, giving it a market capitalisation of GBP1.25 billion.
It backed a GBP1.3 billion takeover from Energy Capital Partners. ECP will pay 410 pence cash for each share in the waste management firm, a 27% premium to its 323.90p closing price on Monday.
The acquisition sum is, however, 7.9% lower than an initial 445p per share proposal made back in June.
Biffa Chair Ken Lever said: "It is the Biffa board's view that this offer represents a compelling opportunity, particularly in a weakening economic environment, for shareholders to realise, in cash and with certainty, the potential for future value creation."
ECP is an "experienced investor in environmental infrastructure and sustainability assets", Lever noted.
Elsewhere on the M&A front, a deal to acquire wealth manager Brewin Dolphin has come into effect. Royal Bank of Canada's GBP1.6 billion buyout has been sealed. Brewin shares were suspended Tuesday ahead of a subsequent cancellation on Wednesday.
SSP climbed 4.0%. The Upper Crust and Camden Food owner expects annual sales and profit to be ahead of guidance as business for its travel food and beverage outlets get closer to pre-virus levels.
In the fourth quarter alone, revenue is expected be at roughly 91% of 2019 levels.
For the year ending September 30, SSP expects sales of GBP2.17 billion and pre-IFRS 16 earnings before interest, tax, depreciation and amortisation of GBP140 million. Both will be "slightly ahead of our previous full year guidance". Revenue will be nearly tripled from the GBP834.2 million recorded in the Covid-19 hit prior year.
Saga tumbled 14% as the company swung to a sizeable half-year loss due to insurance-related impairments.
Saga provides insurance, cruises and package holidays to people over 50.
While revenue in the half year that ended July 31 improved, jumping 65% to GBP258.3 million from GBP156.4 million, its bottom-line figure was markedly worse.
Saga posted a GBP257.5 million pretax loss, swinging from a GBP700,000 profit a year earlier. Saga booked a GBP269.0 million impairment of insurance goodwill. The hit is due to a weaker outlook for future motor and home margins.
Admiral and Direct Line, which also operate in the motor and home insurance spaces, were down 4.3% and 2.0%, respectively.
Still to come on Tuesday, are a US durable goods orders at 1330 BST and a housing price index at 1400 BST. There is also a US consumer confidence reading at 1500 BST.
By Eric Cunha; [email protected]
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