London’s FTSE 100 led the way in Europe on Tuesday, as its influential mining sector got a boost from economic support measures planned in China.
The specific details were scarce, investors cheered the development.
Among individual London listings, AMTE Power jumped on plans for a cash injection of its own. WANdisco’s stock resumed trading after a suspension, though shares tumbled.
The FTSE 100 index rose 13.21 points, or 0.2%, to 7,691.80. The FTSE 250 closed just 4.90 points higher at 19,149.88, and the AIM All-Share added 2.40 points, or 0.3%, at 766.00.
The Cboe UK 100 ended up 0.1% at 767.50, the Cboe UK 250 rose 0.1% to 16,804.53, though the Cboe Small Companies fell 0.5% to 13,688.05.
In European equities on Tuesday, the CAC 40 in Paris lost 0.2%, while the DAX 40 in Frankfurt ended up 0.1%.
AJ Bell analyst Danni Hewson said ‘investors got some of the news they wanted’ after Chinese leaders pledged fresh measures to boost the nation’s stuttering economy.
After a meeting, the 24-person Politburo recognised ‘the current economic operation is facing new difficulties and challenges’ and agreed they must ‘implement precise and effective macroeconomic regulation, strengthen countercyclical regulation and policy reserves’.
Miners were the biggest beneficiaries in London, with Anglo American closing 5.3% higher, among the best FTSE 100 performers.
Analysts at ING commented: ‘Having broadly disappointed investor expectations this year, China’s economy is seen as enjoying a lift after China’s Politburo yesterday promised ’counter-cyclical’ measures. These follow a drip feed of support measures over recent weeks, such as the easing of restrictions in the mortgage sector, the encouragement to buy cars and electronics, and perhaps some support to local governments saddled with debt. None of these seem to be a game-changer so far, but the market optimists are hoping that this new directive from the Politburo will be turned into powerful stimulus at the State Council level.’
Stocks in New York were in the green ahead of the latest Fed decision. The Dow Jones Industrial Average was up 0.1% at the time of the London close, the S&P 500 index rose 0.2%, and the Nasdaq Composite was up by a more confident 0.5%.
A 25 basis point hike by the Federal Reserve on Wednesday is seen as a foregone conclusion, though analysts are divided over whether it will be ‘one and done’ or more rate lifts ahead for the US central bank.
The Federal Open Market Committee kicks off its two-day meeting on Tuesday, with an interest rate decision expected at 1900 BST on Wednesday. A press conference with Chair Jerome Powell will follow shortly after.
According to the CME FedWatch Tool, there is a 99% chance the central bank lifts rates by 25 basis points. It would take the federal funds rate range to 5.25% to 5.50%. The Fed decided against a hike last month, ending a streak of 10 successive rate rises.
Liberum analyst Joachim Klement commented: ‘And as with every time the Fed decides on interest rates, investors will pour over both the actual change in Fed Funds Rates and the guidance given by Jerome Powell and his colleagues. But I would argue that whatever the Fed decides to do today is simply irrelevant. Instead, we should look at what the Fed intends to do in the future. Words speak louder than actions when it comes to the Fed.’
The pound was quoted at $1.2853 at late Tuesday afternoon in London, up from $1.2816 at the close on Monday. The euro stood at $1.1044, lower against $1.1073. After a streak of eight successive daily gains against the dollar, the single currency is on the verge of a sixth fall against the greenback on-the-trot.
Against the yen, the dollar was trading at JP¥141.03, down compared to JP¥141.27.
The International Monetary Fund has slightly upgraded its outlook for global growth this year on the back of resilient service sector activity in the first quarter and a strong labour market, the lender said Tuesday.
But despite the mildly better economic outlook, global growth is expected to slow to three percent this year and then stay there, held down by weak growth among the world’s advanced economies, the IMF announced in a new report.
The global growth forecast for this year was raised by 0.2 percentage points from the IMF’s last forecast in April, putting the world economy on track for 3% growth in both 2023 and 2024.
The UK is expected to be the second worst-performing economy in the G7 this year. A new IMF forecast expects the UK’s output to grow by 0.4% during 2023, better than Germany, but worse than any other country in the G7.
Back in London, Ben & Jerry’s maker Unilever added 4.5%.
The consumer goods firm reported that pretax profit jumped 21% to £5.27 billion in the first half of 2023, from £4.36 billion a year before. Revenue rose 2.7% year-on-year to £30.43 billion, compared to £29.62 billion.
AMTE Power shares trebled to 12.40 pence, from 4.00p on Monday. The developer of lithium-ion and sodium-ion battery cells penned a £1.0 million loan facility, to help it buy time while it agrees to an equity investment worth £2.5 million.
The update provides some certainty for the AIM-listing, whose future was at risk. The loan facility is provided by Arena Investors.
An unnamed ‘equity investor’ as proposed to subscribe for 147.1 million shares at 1.7p each. It would give the backer an 80% stake in AMTE.
‘The proposed subscription of £2.5 million will, if completed, provide the company with sufficient financial resources to the end of September 2023. However the equity investor has indicated that, following its proposed subscription and at its own discretion, it intends to implement a financial solution for the group, including providing for future funding requirements. The equity investor would also have the sole discretion to allow the investment in the company under the terms of the Initial recapitalisation plan to be extended to other investors. The company notes that the terms and quantum of the initial recapitalisation plan and any funding beyond has yet to be agreed and remains uncertain at this stage,’ AMTE added.
It was a grim return to equity market trading for data migration platform WANdisco, as 96% of its value was wiped.
WANdisco shares had been suspended from trading in London since March, after uncovering signs of possible ‘fraudulent irregularities’ on its books, days after announcing it was exploring a potential US listing.
Brent oil was quoted at $82.73 a barrel late Tuesday afternoon in London, up from $82.23 late Monday. Gold was quoted at $1,962.17 an ounce, higher against $1,958.30.
Wednesday’s economic calendar is an otherwise light one with the exception of the Fed decision at 1900 BST.
The local corporate calendar has half-year results from luxury carmaker Aston Martin Lagonda, lender Lloyds Banking Group and consumer goods company Reckitt Benckiser.
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