Equity prices in Europe were weaker heading into Tuesday afternoon in listless trade as investors nervously await next week’s central banking action.
The US Federal Reserve and European Central Bank announce rate decisions next week Wednesday and Thursday, respectively.
There is also a UK unemployment reading and US inflation data next week on Tuesday. The latter may give the Fed some food for thought ahead of its decision.
Elsewhere in the central banking space, the Reserve Bank of Australia surprised with a 25 basis point rate lift. Tuesday’s hike took the benchmark rate to 4.10%.
‘With limited corporate news on the agenda this week to drive trading volumes, it’s likely that we could see markets struggle to find direction until we get updates on inflation, jobs and monetary policy,’ AJ Bell analyst Russ Mould commented.
The FTSE 100 index was down 24.57 points, or 0.3%, at 7,575.42. The FTSE 250 was down 27.50 points, or 0.1%, at 19,086.05, and the AIM All-Share was down 0.81 of a point, or 0.1%, at 791.00.
The Cboe UK 100 was down 0.3% at 756.08, the Cboe UK 250 lost 0.2% at 16,634.78, and the Cboe Small Companies was 0.3% lower at 13,248.15.
UK retail sales increased last month, though the trio of bank holidays failed to boost figures as much as expected.
According to the British Retail Consortium, sales rose 3.9% on-year in May. It compares to a 1.1% fall a year prior. It is also below the three-month average growth of 4.7%.
On a like-for-like basis, sales increased 3.7% year-on-year last month, falling below the three-month average rise of 4.7%.
‘With consumer confidence still recovering from record depths, and continued tightening of household incomes, we are unlikely to see substantial sales growth in the coming months,’ BRC Chief Executive Helen Dickinson said.
The pound was quoted at $1.2408 at midday on Tuesday in London, lower compared to $1.2415 at the close on Monday.
In London, oil majors Shell and BP were among the worst blue-chip performers at midday. The stocks were down 2.7% and 1.9%, respectively, as the rally seen in oil prices on Monday, following a production cut by Saudi Arabia, gave way to selling pressure.
Brent oil was quoted at $75.38 a barrel at midday in London on Tuesday, down from $77.37 late Monday.
The top performers in the FTSE 100, however, were Ocado, abrdn and Legal & General. The stocks were up 3.7%, 3.1%, and 1.4%.
Also on the up, British American Tobacco added 1.1% after the cigarette maker said it will make no change to strategy under its new chief executive, focusing on non-combustible ‘reduced-risk products’ for smokers.
BAT said it is on track to deliver its revenue goal of £5 billion for its New Categories segment in 2025 and added it is eyeing profitability for the segment in 2024.
However, Russ Mould, investment director at AJ Bell, was cautious on the shift: ‘Tobacco companies are pinning their hopes on mass take-up of next generation products such as vaping, yet they face considerable pushback from regulators, health campaigners and more. Each week there seems to be someone else calling for tougher rules on vaping, in particular, with children’s doctors the latest to say the rules have to change.’
In the FTSE 250, Warehouse REIT dropped 6.6% as it swung to an annual loss and reported a lower portfolio value.
The industrial warehouse investor swung to a pretax loss of £182.9 million from a profit of £191.2 million the prior year. This was driven by a fair value loss of £193.4 million on investment properties, from a gain of £163.7 million gain the prior year.
Warehouse REIT’s portfolio valuation was £828.8 million, a 19% decline from £1.01 billion the previous year. The company explained that this was caused by central bank interest rate hikes.
Chemring jumped 8.3% after it reported a record first-half order intake, with its order book reaching the highest level in over a decade at £750 million.
AJ Bell’s Mould said the company was benefiting from ‘stronger prospects’ thanks to the Russia-Ukraine war ‘encouraging governments around the world to spend more on defence’.
Elsewhere in London, Zotefoams added 3.5% after the cellular material technology producer extended its exclusivity agreement with sportswear maker Nike to the end of 2029.
On AIM, Barkby soared 70% after its subsidiary, Cambridge Sleep Sciences, was granted a five-year licence to Sleep Sense International for the manufacture of a ’smart pillow’ using CSS’s ’Sleep Engine’ platform.
The commercial property development and investment firm expects the agreement to generate royalty payments of £1.3 million in the first year and £3.0 million in the second year.
In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was 0.2% lower.
The Eurozone construction sector fell in May, and at the fastest rate in the year so far to boot. It kept sector firmly in contraction territory, according to figures from S&P Global and Hamburg Commercial Bank.
The HCOB Eurozone construction purchasing managers’ index total activity index posted at 44.6 points, down from 45.2 in April.
Remaining below the 50-point no-change mark, it shows the sector remains in contraction. This was due to activity levels falling for the thirteenth month in a row, with surveyed firms continuing to signal weak demand for new projects.
The euro stood at $1.0686 midday Tuesday, lower against $1.0711 at the time of the European equities close on Monday.
Stocks in New York are called to open lower. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite were all seen 0.1% lower on Tuesday.
On Monday, US equities ended lower as investors mulled the Federal Reserve’s next interest rate move and Apple’s shares fell after the iPhone maker announced its mixed-reality headset, the Vision Pro.
Apple shares were 2.6% lower in pre-market dealings. It had risen 1.5% on Monday.
Against the yen, the dollar was trading at JP¥139.36 midday Tuesday, lower compared to JP¥139.60 at the close on Monday.
‘The unexpected vitality of the American labour market, revealed by Friday‘s publication of new jobs figures, largely surpassed expectations. Many saw the monster jobs report as an omen for another Fed rate hike when it meets on June 14. However, a more detailed analysis of the figures reveals that not all is rosy in the US labour market; there was a slowdown in average wage growth. In the meantime, the release of unexpectedly soft US services data further hindered the prospect of a June rate hike,’ ActivTrades analyst Ricardo Evangelista commented.
‘Considering the lack of consensus amongst Fed officials, the softening of inflation, and mixed signals from economic data, it looks increasingly likely that the Fed will pause when it meets on June 14.’
US employment growth was strong than expected last month, figures on Friday had showed.
According to the US Bureau of Labor Statistics, nonfarm payroll employment increased by 339,000 in May, accelerating from a rise of 294,000 in April.
Gold was quoted at $1,964.41 an ounce, higher against $1,959.00.
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