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LONDON MARKET OPEN: Upbeat market mood ahead of rate decisions

12th Jun 2023 08:57

(Alliance News) - Stock prices in London opened higher on Monday as markets looked ahead to three major central bank policy meetings, in the US, EU and Japan, with increasing confidence in their outcome.

The FTSE 100 index opened up 20.69 points, or 0.3%, at 7,583.18. The FTSE 250 was up 46.67 points, or 0.2%, at 19,138.33, and the AIM All-Share was up 0.53 of a point, or 0.1%, at 793.87.

The Cboe UK 100 was up 0.3% at 793.87, the Cboe UK 250 was up 0.3% at 16,687.02, and the Cboe Small Companies was up 0.3% at 13,256.69.

The US Federal Reserve will announce its latest interest rate decision on Wednesday after the London market close. The European Central Bank and the Bank of Japan will follow a day after.

"Of the three G3 central banks that meet in the days ahead, the market is the most confident of a rate hike by the European Central Bank," said Marc Chandler at Bannockburn Global Forex.

"The market sees a hawkish hold from the Federal Reserve. However, the idea of a skip, a topic which even Fed officials have broached, would seem to pre-commit to another hike, and this is not typically the central bank's modus operandi.

"Moreover, it may be difficult for the Fed to resume hikes in July if inflation falls as we expect toward 3.2% to 3.3% this month and the economic activity slows. Still, Chair Powell may go to pains to underscore that a pause is simply the decision not to raise rates now, rather than necessarily signalling an end to the cycle."

Markets see a 74% chance of the central bank holding US interest rates steady this week, with the balance expecting another 25 basis point hike, according to the CME FedWatch tool.

In the US on Friday, Wall Street ended higher on growing confidence the Federal Reserve will leave interest rates unchanged. The Dow Jones Industrial Average ended up 0.1%, the S&P 500 up 0.1%, and the Nasdaq Composite up 0.2%.

The pound was quoted at USD1.2574 at early on Monday in London, down a touch from USD1.2577 at the close on Friday.

"Sterling is now the best-performing currency in the G10 space this year at plus 4.08%. Whether that rally represents more than a mere unwinding of short positions remains to be seen," said Chris Turner at ING.

"The highlight for sterling this week will be tomorrow's release of April [UK] wage data and the employment report for May. Given that we hear so little from the Bank of England, the data has been the primary driver of sterling strength. We think softer wage and price data could emerge at any time and that market pricing of the Bank Rate (now at 5.50% for 24 January) is subject to a sharp downward revision.

"Let's see whether tomorrow's data gives BoE Governor Andrew Bailey the chance to push back against those aggressive tightening expectations when he testifies to a House of Lords committee tomorrow afternoon."

The euro stood at USD1.0753 early Monday in London, virtually unchanged against USD1.0750 late Friday. Against the yen, the dollar was trading at JPY139.60, higher compared to JPY139.33.

In London, Ocado was the top blue-chip performer in early morning trade, up 6.9%, after Exane BNP raised the online grocer and warehouse technology firm to 'neutral'.

Oil majors were amongst the worst performers in the FTSE 100 on Monday morning, with Shell and BP down 0.9% and 0.5%, respectively.

The stocks suffered as oil prices headed south. Caution remained about the future of energy demand, amid worries about China's disappointing economic recovery.

Brent oil was quoted at USD73.65 a barrel early Monday in London, down from USD76.12 late Friday.

Elsewhere in the FTSE 100, Frasers added 0.4% as it announced it had bought a stake in online electricals retailer AO World.

The Sports Direct owner said it bought a 19% stake in AO World through the purchase of 109.4 million shares at a price of 68 pence each, for a total investment of GBP75 million.

Shares in AO World jumped 6.6% to 74.14p on the news.

In the FTSE 250, Indivior climbed 1.2% after it said that it will start trading on New York's Nasdaq Global Select Market when the US market opens.

"The additional US listing of Indivior shares is an important milestone," Chief Executive Officer Mark Crossley said. "We believe it will bring additional exposure to both Indivior and the disease space in the US, which is our largest opportunity market. Over time, we expect it will facilitate increased ownership by additional US-based biopharma investors. We also are mindful of the significant unmet need for opioid use disorder treatment in the US, and are hopeful our US listing will help raise awareness of the opioid epidemic."

The company, which is based in the US state of Virginia, said it will keep its listing on the London Stock Exchange.

Great Portland Estates shares lost 2.8% after Goldman Sachs cut the property developer to 'sell' from 'neutral' and lowered its price target to 440p from 470p. The stock is currently trading at 470.60p.

Elsewhere in London, Ocean Wilsons surged 8.5% as it confirmed that it is undertaking a strategic review of 57%-owned subsidiary Wilson Sons, a maritime services provider in Brazil.

Ocean Wilsons said the review, "which will consider all potential strategic options", is at an early stage. The company said there is no certainty as to its outcome.

In European equities on Monday, the CAC 40 index in Paris was up 0.5%, while the DAX 40 in Frankfurt was 0.6% higher.

In Tokyo on Monday, the Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong ended 0.2% lower.

The Sydney market was closed for the King's birthday holiday.

Gold was quoted at USD1,959.66 an ounce early Monday in London, lower against USD1,961.75 late Friday.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

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