Oil companies and banks were helping London’s FTSE 100 index to outperform stock-market measures elsewhere in Europe, after BP reported a massive annual profit and Australia became the latest central bank to raise rates once again.
The dollar continued to climb, building on its post-US jobs data gains. The pound traded below the $1.20 mark as market participants look to a speech by US Federal Reserve Chair Jerome Powell later in the day.
The FTSE 100 index of large-caps was up 44.58 points, 0.6%, at 7,881.29.
Mid-cap and small-cap benchmarks struggled, however.
The FTSE 250 was down 98.63 points, 0.5%, at 20,310.75, and the AIM All-Share was down 2.52 points, 0.3%, at 881.27.
Among the Cboe UK indices, the picture was similar, with mid-caps suffering the most. The Cboe UK 100 was up 0.6% at 787.97, the Cboe UK 250 was down 0.5% at 17,694.96, and the Cboe Small Companies was up 0.1% at 14,158.37.
In mainland Europe, the CAC 40 in Paris marginally lower, and the DAX 40 in Frankfurt was down 0.2%.
Helping the FTSE outperform was a 5.5% share price rise for BP.
‘BP may be enemy number one in the public’s eyes for its record profits, but its latest success has helped to drive up the FTSE 100, which in turn will benefit people up and down the country with exposure to UK stocks in their pension,’ AJ Bell analyst Russ Mould commented.
‘Unfortunately, BP’s success makes it a target because other people have suffered at the same time it has enjoyed bolstered earnings - namely the public and businesses who’ve had to stomach higher energy bills. Therefore, BP cannot lay back and expect to see praise for its operational and financial performance.’
BP said underlying replacement cost profit for 2022 more than doubled to $27.65 billion from $12.82 billion, or to $46.04 billion from $22.34 billion before interest and tax.
BP announced a further $2.75 billion share buyback. It raised its fourth quarter dividend by 21% year-on-year to 6.61 cents per share. The annual dividend totalled 24.082 cents, up 11% from 21.630 cents in 2021.
Oil peer Shell - which had announced bumper profit of its own last week and a $4 billion share buyback - climbed 2.1% in a positive read-across.
The FTSE 100’s banking constituents were also on the up on Tuesday. Barclays rose 1.6%, HSBC added 1.5% and NatWest traded 0.8% higher.
AJ Bell’s Mould commented: ‘Over the past month or so, investors have become more optimistic that we’re near the top of the rate rise cycle, hence why you’ve seen higher-risk companies do well on the stock market. If this optimism turns out to be misplaced then we’ll likely see investors flock back to sectors where you can typically find value stocks such as banking, energy and tobacco. In a way, today’s movement on the FTSE 100 already reflects this investor thinking.’
In Paris, BNP Paribas rose 3.2%. It said it plans to complete a €5 billion share buyback in 2023, after reporting an increase in full-year revenue.
In the three months to December 31, the Paris-based bank’s revenue increased 7.8% to €12.11 billion from €11.23 billion in the same period of 2021. However, pretax profit fell by 7.3% to €2.94 billion from €3.17 billion.
For all of 2022, BNP brought in €50.42 billion in revenue, up 9.0% from €46.24 billion in 2021. Pretax profit increased by 6.0% to €14.45 billion from €13.64 billion.
The dollar was mixed early on Tuesday afternoon. Sterling was quoted at $1.1975, down from $1.2026 at the London equities close on Monday. The euro traded at $1.0700, down from $1.0737.
Against the yen, the dollar was quoted at JP¥132.18 on Tuesday afternoon London time, down versus JP¥132.80 late Monday, but up from an intraday low of JP¥131.70.
Australia’s central bank on Tuesday hiked interest rates to a 10-year high as it tries to rein in surging inflation while also trying not to trigger a recession. The Reserve Bank of Australia lifted borrowing costs 25 basis points to 3.35%, marking the ninth successive increase and highest rate since October 2012.
Focus later Tuesday will be on Federal Reserve Chair Jerome Powell, who speaks at the Economic Club of Washington at 1740 GMT. Stock market investors will be hoping Powell offers clues on the future of US monetary policy, particularly in light of Friday’s US nonfarm payrolls beat.
SPI Asset Management analyst Stephen Innes commented: ‘When Chair Powell was asked about the potential for rate cuts, previously, he had been very persistent that the risks to rates were to the upside. During the post-[Federal Open Market Committee] Q&A, however, he made a heavily qualified but important statement suggesting that if inflation was to fall rapidly this year or more quickly than the FOMC themselves expected, they could cut rates.
‘Then came the rally-capper in the form of a colossal NFP beat.’
US employment growth was well ahead of expectations last month, according to figures on Friday. Nonfarm payrolls rose by 517,000 in January, almost double the 260,000 in December. January’s number was well-ahead of the market consensus of 185,000.
Ahead of Powell’s speech, US stock index futures are mixed. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 marginally higher and the Nasdaq Composite up 0.1%. They had fallen 0.1%, 0.6% and 1.0% overnight.
Back in London, Smartspace Software rallied 14% on AIM. The building-focused software provider said revenue for the year to January 31 was up 36% to £7.0 million from £5.1 million.
The firm said adjusted loss before interest, tax, depreciation and amortisation is expected to be better than market consensus forecasts.
Brent oil was trading at $82.08 a barrel early Tuesday afternoon, up from $79.90 late Monday. Gold was quoted at $1,867.33 an ounce, largely flat from $1,868.01.
Still to come on Tuesday’s economic calendar is a US goods and services trade reading at 1330 GMT.
In the UK political front, Prime Minister Rishi Sunak has carried out a sweeping shake-up of Whitehall with the creation of four new government departments aimed at boosting economic growth and addressing the energy crisis.
The PM replaced sacked Tory party chair Nadhim Zahawi with Greg Hands, who had been trade minister.
But the main element of the reshuffle saw the business, trade and culture departments restructured into four different ministries. Grant Shapps, who had been business secretary, will now be the energy security & net zero secretary. Kemi Badenoch, who was international trade secretary, will now lead the joint Department for Business & Trade.
In the US, President Joe Biden delivers his state of the union address late Tuesday in Washington, which is early Wednesday morning, London time.
‘In a preview of the economic element of his speech released yesterday by the White House it is noted that the president will call for a quadrupling of the 1% tax on corporate stock buybacks and will call on Congress to pass his billionaire minimum tax,’ analysts at Rabobank commented.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
