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LONDON MARKET OPEN: Stocks drift higher; Smith & Nephew performs well

27th Feb 2024 08:51

(Alliance News) - Stock prices in London edged higher on Tuesday, as data pointed to cooling UK inflation trends, while investors awaited US economic prints later in the week.

The FTSE 100 index opened up 8.58 points, 0.1%, at 7,692.88. The FTSE 250 was up 20.49 points, 0.1%, at 19,147.41, and the AIM All-Share was down 0.32 of a point at 745.49.

The Cboe UK 100 was up 0.2% at 770.90, the Cboe UK 250 was up 0.1% at 14,499.03, and the Cboe Small Companies was up 0.6% at 14,499.03.

In European equities, the CAC 40 in Paris was up slightly, while the DAX 40 in Frankfurt was up 0.1%.

In the US on Monday, Wall Street ended in the red, with the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.1%.

The US will release its latest economic growth figures on Wednesday, with personal consumption expenditures - which contains a key inflation metric - to follow on Thursday.

"US markets paused for breath after a strong run powered by a largely successful earnings season and renewed excitement over the potential of AI, which has driven the main indices to hover around record highs," explained interactive investor's Richard Hunter.

"At such elevated levels, expectations will tick up given more stretched valuations, while investors will continue to scrutinise the economic data which has so far defied estimates and lessened any pressure on the Federal Reserve to cut interest rates for the moment. The current consensus points to three cuts this year beginning in June, something of a far cry from the beginning of the year when six cuts were expected to commence in March."

According to FXStreet-cited consensus, the headline annual PCE inflation rate is to ease to 2.4% in January, from 2.6% in December. The core reading, the Fed's preferred inflationary gauge, is to ebb to 2.8% from 2.9%.

The dollar was weaker in early exchanges in Europe.

Sterling was quoted at USD1.2692 early Tuesday, higher than USD1.2676 at the London equities close on Monday. The euro traded at USD1.0858, rising from USD1.0849. Against the yen, the dollar was quoted at JPY150.29, down versus JPY150.81.

Meanwhile, in a hopeful sign for UK consumers, shop price inflation ebbed to an almost two-year-low in February, according to the latest British Retail Consortium-NielsenIQ shop price index.

Annual shop price inflation ebbed to 2.5% in February, from 2.9% in January. The reading was also short of the three-month average inflation rate of 3.3%. The non-food inflation rate was unmoved at 1.3% in February, below the 3-month average rate of 2.0%. Food price inflation eased to 5.0% in February, from 6.1% in January, below the three-month average rate of 6.0%.

The trend was confirmed by new data on grocery inflation from Kantar, showing annual UK grocery price inflation in February eased to 5.3% in February, marking the lowest rate since March 2022 and down from 6.8% from January.

Kantar said grocery sales in the 12 weeks to February 18 were up 5.1% annually to GBP35.37 billion from GBP33.64 billion.

In the FTSE 100, Smith & Nephew was the top performer, rising 3.8%, after medical technology firm reported slightly stronger-than-expected annual results.

In 2023, revenue climbed 6.4% to USD5.55 billion from USD5.22 billion a year before. The topline figure beat company-compiled analyst consensus of USD5.53 billion. Trading profit increased to USD970 million from USD901 million, beating consensus of USD966 million. Pretax profit rose to USD290 million from USD235 million.

For 2024, S&N is guiding for underlying revenue growth of 5.0% to 6.0% or reported revenue growth of 4.6% to 5.6%, with trading profit margin of at least 18.0%, which would be a step up from 2023's 17.5%.

In the FTSE 250, investment firm abrdn rose 6.1%.

abdrn reported a pretax loss of GBP6 million in 2023, narrowed substantially from GBP612 million the prior year. Net operating revenue fell 4.0% to GBP1.40 billion from GBP1.46 billion. Assets under management and administration fell 1% or so to GBP494.9 billion from GBP500.0 billion the year before, "with net outflows in Investments and Adviser partly offset by positive market movements and continued net inflows in ii," abrdn noted. Net outflows over the year worsened to GBP13.9 billion from GBP10.3 billion in 2022.

Among London's small-caps, On the Beach jumped 11%.

The beach package holiday retailer announced it has signed a long-term distribution agreement with budget airline carrier Ryanair.

OTB customers will be able to access Ryanair's low fare flights as part of their holiday packages with "full price transparency", while continuing to have access from OTB's flexible payment plans, customer perks and Air Travel Organisers' Licensing protection.

"We are excited to have entered into this transformational partnership with Ryanair. This will improve the booking and travel experience for our customers selecting Ryanair flights, while ensuring we can continue to provide customers with best value package holidays...Importantly, this agreement enables both parties to move on from outstanding litigation and we look forward to working closely with our new partner," OTB CEO Shaun Morton said.

OTB had previously sued Ryanair for some GBP2 million over refunds paid after flights were cancelled or changed.

"The news reiterates, to us, the need Ryanair has to work with OTA to fill its seat supply, noting it has previously announced three other similar deals including one with Tui. By giving consumers direct access to their booking through Ryanair accounts, it implies that the customer data will be shared between the OTA's and Ryanair, which could further benefit Ryanair's future customer acquisition strategy," said Shore Capital research analysts.

In Asia on Tuesday, the Nikkei 225 index in Tokyo closed marginally higher, as new data showed Japanese inflation slowed by less than expected. Consumer price inflation hit the Bank of Japan's 2.0% target in January, according to official data, helping to firm expectations of an end to its ultra-loose monetary policy.

Consumer prices rose 2.0% year-on-year in January, slowing from 2.3% in December - the third straight monthly easing. The January data "will support market speculation for an April rate hike", ING economists said, although inflation could still be "choppy" in coming months.

In China, the Shanghai Composite closed up 1.3%, while the Hang Seng index in Hong Kong added 1.0%. The S&P/ASX 200 in Sydney closed up 0.1%.

Gold was quoted at USD2,035.34 an ounce early Tuesday, higher than USD2,028.18 on Monday. Brent oil was trading at USD82.87 a barrel, rising slightly from USD82.18.

Tuesday's economic calendar has the latest US durable goods orders data at 1330 GMT, as well as a consumer confidence reading from the world's largest economy at 1500 GMT. There will be the latest Kantar supermarket sales and grocery inflation data at 0800 GMT.

By Elizabeth Winter, Alliance News deputy news editor

Comments and questions to [email protected]

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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