Equities in London were on the up heading into Wednesday afternoon, with a better UK economic data and measures out of China lifting the mood.
The pound climbed on an improved UK purchasing managers’ index reading, while miners cheered a move by China’s central bank which it hopes will spark some life into the Asian economy.
Over in Frankfurt, SAP was one of the stories of the day. The software firm announced an AI push and improved annual results.
The FTSE 100 index was up 30.73 points, 0.4%, at 7,516.46. The FTSE 250 traded 155.89 points higher, 0.8%, at 19,148.51, and the AIM All-Share was up 3.88 points, 0.5%, at 742.80.
The Cboe UK 100 was up 0.3% at 751.28, the Cboe UK 250 rose 1.1% at 16,602.20, though the Cboe Small Companies was marginally down at 14,860.04.
The UK’s private sector expansion was stronger than anticipated at the start of 2024, preliminary data suggested, although the Red Sea crisis is showing early signs of reigniting inflationary pressures.
The S&P Global flash composite purchasing managers’ index rose to a seven-month high of 52.5 points in January, from 52.1 in December. Rising further about the 50-point no-change mark, it shows the pace of expansion sped up slightly. The reading was higher than FXStreet-cited market consensus of 52.2.
‘This morning’s PMI data provided some very welcome news on the health of Britain’s economy. While the UK’s manufacturing industry continues to contract, the strong rebound in the dominant services sector, which is now growing at its fastest pace in eight months, has provided investors with reasons to cheer,’ Ebury analyst Matthew Ryan commented.
‘It remains a toss-up as to whether next month’s GDP data will confirm that the UK economy officially entered into a technical recession in the fourth quarter of last year. But today’s data does, at least, suggest that the economy began 2024 on a strong footing, and that any downturn may be both modest and temporary. This economic resilience should, we believe, deter the Bank of England from signalling that lower rates are on the way any time soon.’
Still to come on Wednesday is a flash composite PMI read for the US at 1445 GMT.
The better UK data supported the pound. Sterling was quoted at $1.2741 on Wednesday at midday, higher than $1.2660 at the London equities close on Tuesday. The euro traded at $1.0893, higher than $1.0835. Against the yen, the dollar was quoted at JP¥147.55, down versus JP¥148.54.
In the FTSE 100, miners were some of the top performers, with Anglo American among the best of the lot, adding 3.2%.
China said it would next month cut the amount banks must hold in reserve in order to boost lending, state media reported.
The decision comes as the world’s second-largest economy faces multiple headwinds, including a prolonged crisis in the property sector, sluggish domestic consumption and weakening foreign demand.
The move will provide ‘¥1 trillion, or $140 billion, of liquidity to the market’, it added.
The central bank’s governor also said Wednesday that more policies to offer support for the country’s struggling property sector will be announced tomorrow.
Miner Rio Tinto rose 1.4%.
It has been informed by authorities that a plane carrying its employees crashed on its way to the Diavik mine, near Forth Smith, Northwest Territories, Canada. The crash resulted in fatalities, Rio Tinto said.
‘We are working closely with authorities and will help in any way we can with their efforts to find out exactly what has happened,’ said Chief Executive Jakob Stausholm.
Separately, Rio Tinto said it has agreed to buy all electricity from the 1.1 gigawatt Upper Calliope solar farm to provide renewable power for its Gladstone operations.
Fresnillo rose 4.6%, after reporting fourth quarter production data.
The gold and silver miner in Mexico said annual silver equivalent production met guidance of 105.1 million ounces, with gold, lead, and zinc also coming within guided ranges. Silver production rose 4.7% year-on-year, following the ramp up at Juanicipio and higher ore grade at San Julian Vein, but was below expectations.
easyJet added 4.0%. The budget airline said it reduced its losses in its first-quarter, despite suffering a £40 million hit from the Hamas-Israel conflict.
easyJet recorded a headline pretax of £126 million in the quarter ended December 31, slimming from £133 million a year prior 2022. Passenger numbers increased by 14% year-on-year.
The airline said it expects to suffer a ‘direct impact of £40 million’ in the six months to the end of March due to the war between Israel and Hamas.
Elsewhere, abdrn shares were 4.3% higher as it outline a transformation programme to bring about annualised cost savings of at least £150 million by the end of next year.
The investment company said the programme will include removing management layers, increasing spans of control, efficiencies in outsourcing and technology areas, as well as cutting overheads in group functions and support services.
While most of the savings will come from non-staff costs, abdrn expects to cut around 500 roles.
At the end of the second half of 2023, assets under management and administration eased to £494.9 billion, down from £495.7 billion at the end of June. Meanwhile, net outflows widened to £12.4 billion in the second half from £5.2 billion in the first half.
Elsewhere in London, Revolution Bars shares slumped 22%. It said its recovery will take longer than previously forecast, as younger drinkers are feeling the squeeze of the cost of living crisis in the UK.
The Tameside, England-based operator of 58 premium bars reiterated that like-for-like sales in the four weeks to December 31 from December 4 were up 9.0% year-on-year, ‘the best festive period since 2019’.
However, citing ‘soft’ January trade, the company expects IAS 17 earnings before interest, tax, depreciation and amortisation for financial 2024 of between £3.0 million and £3.5 million, down at least 47% from £6.6 million in financial 2023, which had ended on July 1, 2023. IAS 17 is an alternative performance measure.
Revolution Bars said younger customers are still feeling the disproportionate effect of the cost-of-living crisis.
In European equities, the CAC 40 in Paris was up 0.8%, while the DAX 40 in Frankfurt was up 1.2%.
SAP was among those setting the pace in Frankfurt, surging 6.1%. The software firm said it beat its cash flow outlook in 2023, and it rounded off a ‘year of inflection’ with a fourth-quarter earnings rise.
The company also set out a restructuring plan, which affects 8,000 roles, amid a focus towards artificial intelligence.
Total revenue in the fourth-quarter to December 31 rose 5.0% to €8.47 billion from €8.06 billion a year prior. Cloud revenue alone jumped 20% to €3.70 billion.
Net profit more than doubled to €1.17 billion from €600 million. The Walldorf, Germany-based firm’s basic earnings per share expanded to €1.02 from €0.46.
For the full-year, revenue was 5.7% higher at €31.21 billion, from €29.52 billion. Its net profit jumped to €5.93 billion from €1.71 billion, while basic earnings per share shot-up to €5.23 from €1.95.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 index up 0.4, and the Nasdaq Composite up 0.7%.
Gold was quoted at $2,032.49 an ounce on Wednesday at midday, up from $2,023.60 on Tuesday. Brent oil was trading at $79.47 a barrel, lower than $79.92.
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