Blue-chip European stocks were on the decline heading into Tuesday afternoon, in lacklustre trade as investors await more impetus from central bank decisions.
The Bank of Canada is among the next major central banks to give a rate decision on Wednesday, before the European Central Bank on Thursday.
Closer to home, a more favourable government borrowing reading has lifted morale and strengthened the case for UK tax cuts.
The FTSE 100 index was down 10.52 points, 0.1%, at 7,477.19. The more domestic-focused FTSE 250 showed some resilience, however. The mid-cap index was up 38.56 points, 0.2%, at 19,114.20, and the AIM All-Share was 2.50 points higher, 0.3%, at 737.84.
The Cboe UK 100 was down 0.3% at 747.22, the Cboe UK 250 was up 0.3% at 16,563.20, and the Cboe Small Companies was marginally up at 14,858.50.
In European equities, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.1%.
‘The FTSE 100 has found itself on the back foot in early trade despite a welcome decline in UK public sector net borrowing for December,’ Scope Markets analyst Joshua Mahony commented.
UK government borrowing dropped sharply in December, figures from the Office for National Statistics showed. Public sector net borrowing, excluding public sector banks, amounted to £7.8 billion - some £8.4 billion less than the prior year. It was the lowest level for December since 2019.
Borrowing in the financial year to December was £119.1 billion, which was the fourth-highest for the period on record. It was 10% higher than the equivalent nine-month period of the prior fiscal year.
Public sector net debt excluding public sector banks was £2.686 trillion, which is provisionally estimated to be around 97.7% of the UK’s annual gross domestic product.
AJ Bell analyst Danni Hewson commented: ‘For a chancellor hoping to fund a series of crowd-pleasing tax cuts in the not-too-distant future, the latest health check on public sector finances will be cause for celebration.
‘Borrowing has fallen significantly due to the impact of cooling inflation on debt interest payments and the end of expensive energy schemes that had cushioned UK households from the worst impact of last year’s volatility. There’s also more cash coming into the coffers thanks to that sneaky fiscal drag, which has helped boost the income tax take, and the flip side of those rising prices that have cost the government dearly is that VAT receipts are also up significantly on the same time last year.’
UK Chancellor Jeremy Hunt will unveil his spring budget on March 6.
Sterling was quoted at $1.2704 on Tuesday at midday, lower than $1.2717 at the London equities close on Monday. The euro traded at $1.0865, lower than $1.8990. Against the yen, the dollar was quoted at JP¥147.96, up versus JP¥147.94.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index marginally down, and the Nasdaq Composite down 0.1%.
Focus in New York will be on a slew of corporate earnings, with the likes of Johnson & Johnson, 3M and Netflix reporting on Tuesday.
‘Thus far we have seen a particular focus on the banking sector, with 30% of the financials having reported. However, we will be looking for greater insight into US consumers today, with both cyclicals and non-cyclicals having thus far struggled to match market expectations around revenues,’ Scope’s Mahony added.
In the FTSE 100 in London, Associated British Foods rose 1.6%.
The company said revenue rose 2.8% to £6.89 billion in its first quarter ended January 6, or by 5.4% in constant currency. For Primark, sales rose 7.9% in constant currency, with the period getting off to a slow start amid unseasonal warm weather, but seeing strong Christmas trading. Like-for-like Primark sales rose 2.1% due to higher average selling prices.
Elsewhere, Vistry rose 2.1%, after it said its housebuilding and urban regeneration arm Countryside Partnerships has been selected as preferred developer to build new homes in London.
It said Countryside Partnerships will deliver 739 new homes in the northern London borough of Barnet as part of a £276 million redevelopment scheme. Of these, 427 will be classified as affordable homes, while 144 will be build-to-rent and 168 will be for private sale.
Countryside was selected by the Greater London Authority and the Mayor’s Office for Policing & Crime. The project is on the site of the former Hendon Metropolitan Police training centre and driving school in Colindale.
Among London’s small-caps, Henry Boot plunged 9.9%, after the property developer warned it expects pretax profit for 2024 to be significantly below current market expectations, which is £37.2 million according to company-compiled consensus.
It pointed to ‘extended payment profiles’ with major housebuilders on strategic land sales, which will keep gearing at the upper end of its optimum range.
Henry Boot expects profit in 2023 to meet market expectations, however, citing market consensus also at £37.2 million.
Brave Bison gained 21%, after the digital advertising and technology service provider said its results for the last year beat market expectations, as it remained focused on becoming a ‘market-leading’ digital advertising company.
Net revenue jumped 23% to £20.8 million in 2023 from £16.9 million in 2022, while turnover grew 12% to £35.5 million from £31.7 million.
Adjusted earnings before interest, tax, depreciation and amortisation surged 43% to £4.3 million from £3.0 million. Adjusted pretax profit was 38% higher at £3.6 million in 2023 from £2.6 million in 2022.
Brent oil was trading at $79.14 a barrel, falling from $79.73 on Thursday afternoon, with focus on continued escalations in the Middle East.
The US and UK launched new strikes on Yemen’s Houthis on Monday, saying their second round of joint military action against the Iran-backed rebels was in response to continued attacks on Red Sea shipping.
Gold was quoted at $2,022.77 an ounce on Tuesday at midday, lower than $2,024.07 on Monday.
Still to come in Tuesday’s economic calendar, there is a eurozone flash consumer confidence reading at 1500 GMT.
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