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LONDON MARKET OPEN: Stocks head higher before UK autumn statement

22nd Nov 2023 09:02

(Alliance News) - Stock prices in London opened slightly higher on Wednesday, signalling cautious optimism ahead of UK fiscal policy announcements.

The FTSE 100 index opened up 13.59 points, 0.2%, at 7,495.58. The FTSE 250 was up 67.31 points, 0.4%, at 18,414.94, and the AIM All-Share was up 11.15 points, 0.2%, at 7,493.14.

The Cboe UK 100 was up 0.2% at 748.21, the Cboe UK 250 was up 0.3% at 15,932.57, and the Cboe Small Companies was slightly lower at 13,531.91.

In European equities, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.2%.

The main focus on the local front will be Chancellor Jeremy Hunt's statement at around 12.30 GMT.

Hunt's Commons statement is expected to contain 110 different growth measures as he seeks to revive the UK's economy and the Tories' election chances.

"The rumour mill continues to grind about the seasoning Jeremy Hunt plans to sprinkle into the UK economy to try and improve its growth prospects. Investors will be highly attuned to what the Chancellor plans as part of that recipe and tax cuts now look set to be a key ingredient, even though they risk turning up the heat on inflation," said Susannah Streeter, head of money & markets at Hargreaves Lansdown.

Hunt will reportedly use his autumn statement to reduce headline rates of national insurance and make permanent a GBP10 billion-a-year tax break for companies that invest in new machinery and equipment. He will promise to cut business taxes, remove planning red tape and speed up access to the national grid.

Meanwhile, traders were weighing up the minutes from the latest Federal Reserve meeting released on Tuesday evening.

Fed officials indicated interest rates would need to remain high for "some time" judging it as "critical" to return "unacceptably high" inflation to its 2% target. Officials "continued to judge that it was critical that the stance of monetary policy be kept sufficiently restrictive to return inflation to the committee's 2% objective over time."

"Alas, the cautious tone in Fed minutes went completely unheard as the latest CPI data acted as a shield against the Fed hawks. As such, the market reaction to the Fed minutes was muted," noted Swissquote Bank senior analyst Ipek Ozkardeskaya.

The dollar was mixed against major currencies early.

Sterling was quoted at USD1.2536 early Wednesday, higher than USD1.2531 at the London equities close on Tuesday. The euro traded at USD1.0917, lower than USD1.0926. Against the yen, the dollar was quoted at JPY148.90, up versus JPY147.91.

In the FTSE 100, Sage Group jumped 9.2%.

The enterprise software company announced double-digit annual revenue growth, and began a share buyback of GBP350 million.

In the year to September 30, revenue rose 12% year-on-year to GBP2.18 billion from GBP1.95 billion, and annualised recurring revenue rose 11% to GBP2.19 billion from GBP1.96 billion. Pretax profit dropped 16% to GBP282 million from GBP337 million, as the firm's operating profit margin shrunk to 14.4% from 18.9%. The final dividend proposed is 12.75p, bringing the annual total to 19.3p, up from 18.4p a year before.

Kingfisher dropped 5.6%.

The owner of DIY chains, including B&Q, cut profit guidance once again, now expecting annual underlying pretax profit of GBP560 million. In September, it had cut guidance to GBP590 million from its original forecast of GBP634 million.

Kingfisher said it was seeing a more "resilient" DIY market in the UK, with third quarter sales across its various brands edging up. However, it said sales in its French arm, where it trades as Castorama and Brico Depot, dropped 8.7%.

"A number of issues plagued the business over the quarter, ranging from the unseasonably warm weather which delayed the start of sales of products such as heating and insulation, to the general weakness of the French home improvement market, which deteriorated much more than had been expected," said interactive investor's Richard Hunter.

Elsewhere in London equities, CRH rose 0.5% as it announced it will divest its European lime operations to SigmaRoc for around USD1.1 billion.

The Dublin-based building materials on Tuesday announced a USD2.1 billion deal to acquire cement and ready-mixed concrete assets in Texas.

Sigmaroc, a buy-and-build group targeting construction materials assets, said the lime deal represented an opportunity to become "Northern Europe's leader in lime". The firm suspended trading of its shares this morning, noting the deal constitutes a reverse takeover.

In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.6%.

AI chipmaker Nvidia reported third-quarter profit and revenue that shattered expectations. In the three months to October 29, revenue trebled annually to USD18.12 billion, and non-GAAP diluted earnings per share surged to USD4.02 from USD0.58. However, the firm expected a sharp drop in its sales to China in its fourth quarter due to US export restrictions, though expects growth elsewhere to more than offset this.

Its shares slipped 1.7% in after-hours trade.

Swissquote's Ozkardeskaya said: "Investors couldn't decide whether they should buy the fact that the company exceeded the sky-high expectations, or they should sell the reality that the chip sales to China will slow this quarter and that would weigh on revenue – although Nvidia stated that the 'decline will be more than offset by strong growth in other regions' and that they are working to comply with regulations to sell to China, anyway."

Derren Nathan, head of equity at Hargreaves Lansdown, commented: "There are concerns there will be more restrictions to follow, which could accelerate local efforts to close the technological gap. But given how high Nvidia's set the bar, that won't be easy."

In other news in the AI sector, early Wednesday, OpenAI announced its co-founder Sam Altman will return as CEO, days after he was fired by the board. He was set to head up an AI team at Microsoft.

In a post on X, Altman said he had the support of Microsoft chief Satya Nadella for his return to OpenAI, and was looking forward to building on OpenAI's "strong partnership" with Microsoft.

In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 0.3%. In China, the Shanghai Composite closed down 0.8%, while the Hang Seng index in Hong Kong was flat. The S&P/ASX 200 in Sydney closed down 0.1%.

Gold was quoted at USD2,006.13 an ounce early Wednesday, up from USD1,999.42 on Tuesday.

Brent oil was trading at USD82.58 a barrel, higher than USD81.74.

In Wednesday's economic calendar, there is eurozone consumer confidence data at 1500 GMT. There will also be the US weekly initial jobs claims, released ahead of Thursday's Thanksgiving public holiday in the US.

By Elizabeth Winter, Alliance News deputy news editor

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