Share prices in London, Paris and Frankfurt were holding onto gains morning at midday on Tuesday, with banks stocks on the rise on the prospect of a faster-than-expected rise in US interest rates, which would pad lending margins, while the market also held out hope for peace in Ukraine.
The US central bank is prepared to raise interest rates by bigger steps than the quarter-point hike announced last week if needed to contain ‘much too high’ inflation, Federal Reserve Chair Jerome Powell said on Monday.
Meanwhile, any deal agreed in peace negotiations with Russia will be submitted to a referendum in Ukraine, President Volodymyr Zelensky told a regional Ukrainian public media outlet.
‘I explained it to all the negotiating groups: when you speak of all these changes (in a future accord) and they can be historic...we will come back to a referendum,’ Zelensky told Suspilne, an internet news site. ‘The people will have to weigh in on certain kinds of compromise,’ Zelensky said, adding that what the compromises cover are part of the talks with Russia.
The FTSE 100 index was up 29.49 points, or 0.4%, at 7,471.88 at midday in London. The mid-cap FTSE 250 index was up 50.86 points, or 0.3%, at 21,057.42. The AIM All-Share index was down 3.74 point, or 0.4%, at 1,034.12.
The Cboe UK 100 index was up 0.3% at 743.15. The Cboe 250 was up 0.2% at 18,566.09, and the Cboe Small Companies was up 0.7% at 15,040.34.
In mainland Europe, the CAC 40 stock index in Paris was up 0.7%, while the DAX 40 in Frankfurt was up 0.5%.
‘Investors’ appetite for riskier assets has been given another fresh boost following Jerome Powell’s hawkish wording yesterday evening, as many traders welcomed the Fed’s strong will to combat inflation. However, on the other hand, flattening yield curves suggesting rising concerns of an economic slowdown to come in the longer run, associated with the lack of any clear breakthrough in Ukraine-Russia diplomatic talks in the short-term,’ said ActivTrades analyst Pierre Veyret.
Despite the positive session so far in Europe, New York was pointed to a lower open. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 down 0.2%, and the Nasdaq Composite down 0.3%, based on futures trading. The indices closed down 0.6%, 0.1% and 0.4% respectively on Monday.
In the FTSE 100, banks were in demand amid the prospect faster interest rate rises. HSBC was up 3.5%, Standard Chartered up 2.9%, NatWest up 3.0%, Barclays up 1.4% and Lloyds up 2.3%.
In pre-market trade on Wall Street, JPMorgan Chase, Goldman Sachs and Bank of America were up 0.8%, 0.9% and 1.1% respectively.
In London, athletic apparel retailer JD Sports Fashion was up 1.8% after sportswear maker Nike, late Monday, reported robust revenue growth in the third quarter.
Revenue in the three months to the end of February rose 5% to $10.87 billion from $10.36 billion a year before. Revenue rose 8% on a currency-neutral basis, led by Nike Direct growth of 17%.
The stock was up 5.8% in pre-market trade in New York on Tuesday.
Shore Capital believes JD Sports is set to benefit from Nike’s reduced product allocation for rival retailer Footlocker.
‘We see JD benefit from this latest development, particularly outside North America, as no other retailer has been reported to experience such a reduction in the region,’ said Shore Capital’s Eleonora Dani.
At the other end of the large-caps, Kingfisher was the worst performer, down 5.7%. The DIY retailer enjoyed a ‘record’ year for earnings, benefiting as the pandemic-induced jump in demand for home improvement has endured.
In the 12 months ended January 31, sales rose 6.8% to £13.18 billion, from £12.34 billion. At constant currency, sales were up 9.7%. Pretax profit rose by a third to £1.01 billion from £756 million.
However, Kingfisher said first quarter like-for-like sales were down 8.1% from the year before.
‘Kingfisher benefited from people looking to do up their homes during the pandemic, however the world has since moved on and, despite management reporting a strong start to the current year, there has to be a risk that the company’s moment in the sun has passed,’ remarked AJ Bell’s Russ Mould.
In the FTSE 250, Softcat was up 4.5%, after the IT services provider reported interim profit growth ahead of expectations and strong cash generation.
For the six months that ended January 31, pretax profit increased to £64.2 million from £57.0 million a year before, on revenue of £770.9 million, up from £577.0 million.
Softcat declared an interim dividend of 7.3p, up 14% from 6.4p the year before.
At the other end of London mid-caps, Trustpilot was the worst performer, down 15%, after the online review platform posted a widened loss for 2021.
For 2021, Trustpilot’s pretax loss came to $25.9 million, widened from $12.3 million the year before, as a result of administrative expenses nearly doubling to $51.6 million, including non-recurring IPO costs and share-based compensations.
Looking ahead, due to cost inflation, Trustpilot expects these expenses to remain at largely similar percentages in 2022, with ‘overhead leverage to come thereafter’.
The pound was quoted at $1.3225 at midday in London on Tuesday, up from $1.3192 at the London equities close Monday.
The euro was priced at $1.1001, down from $1.1033 late Monday. Against the yen, the dollar was trading at JP¥120.73, higher against JP¥119.25.
Brent oil was quoted at $115.78 a barrel Tuesday at midday, up from $114.84 a barrel late Monday, but retreating from a high of $119.48 in early trade.
Gold stood at $1,927.78 an ounce, lower against $1,936.69 late Monday.
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