Share prices rose early Monday, with London investors encouraged by a report showing stronger-than-expected UK house prices this month, but caution reigned as the US debt ceiling impasse remained unresolved.
The FTSE 100 index opened up 22.42 points, 0.3%, at 7,779.29. The FTSE 250 was up 13.87 points, 0.1%, at 19,302.97, and the AIM All-Share was up 0.38 of a points at 809.35.
The Cboe UK 100 was up 0.1% at 777.22, the Cboe UK 250 was flat at 16,831.33, and the Cboe Small Companies was up 0.1% at 13,576.56.
US President Joe Biden returned from Japan and will meet with Republican House Speaker Kevin McCarthy on Monday for another round of talks on raising the US debt ceiling less than two weeks before a key deadline to avoid a disastrous default, officials said.
Anxiety was mounting in Washington on Sunday ahead of the June 1 deadline, set by the US Treasury, for Congress to authorize more borrowing, as the two sides appeared nowhere near a compromise.
‘Personally, I had reduced my probability of default reading from 25% to 10%, but it is this morning back up again at 25%, with risk to the upside,’ commented Clifford Bennett, chief economist at ACY Securities. ‘This is not a good situation at all when there is so little time left.’
In the UK, house prices hit a new record high in May, as the housing market continued to defy pessimistic forecasts at the start of the year, figures showed on Monday.
Rightmove’s house price index showed the average price of property coming to market jumped by 1.8%, £6,647, to set a new peak of £372,894 as sellers responded with increased pricing confidence. The 1.8% monthly increase is the biggest of the year so far, and significantly higher than the historic average rise in the month of May of 1.0%, Rightmove said.
Housebuilding stocks were firm in London early Monday. Barratt Developments was up 0.5%, Persimmon up 0.2% and Taylor Wimpey up 0.9%.
In European equities, the CAC 40 index in Paris and the DAX 40 in Frankfurt were both down 0.2%.
The pound was quoted at $1.2423 early on Monday in London, down compared to $1.2463 at the equities close on Friday. The euro stood at $1.0800, down against $1.0812. Against the yen, the dollar was trading at JP¥137.93, up compared to JP¥137.64.
On the FTSE 100, NatWest was up 0.7%.
UK Government Investments said it sold £1.26 billion in NatWest shares back to the company, reducing its stake to 39% from 41% and halved from a holding of more than 80% at one point.
The government said it sold 469.2 million shares, priced at 268.4p each, back to the Edinburgh-based lender as part of a buyback agreement first put in place with NatWest back in 2019. The sale was worth £1.26 billion in total.
As a result, the UK taxpayer’s stake in NatWest will fall to 38.6% from 41.4%.
The UK government first began building a majority stake in the bank from October 2008 during the financial crisis. The taxpayer ended up holding an 81% stake in the lender - called Royal Bank of Scotland Group PLC at the time - after a hefty £45.5 billion taxpayer bailout. This has been steadily reduced since.
In the FTSE 250 index, Dechra Pharmaceuticals was the worst performer in early trade. It shed 6.1%.
The FTSE 250-listed veterinary pharmaceutical company said underlying operating profit for the financial year ended June 30 was likely to fall short of its £186 million guidance.
Back in February, the Cheshire, England-based company had said profit was expected to be at the lower end of analyst expectations, which it cited at the time as a range of between £186 million and £199 million.
The trading environment from January to April was tougher than the firm had predicted when it provided that guidance, Dechra said.
‘In the US, the impact of the now widely reported de-stocking by US wholesalers has been deeper and longer than initially expected and had a material impact on [the third quarter from January to March’s] performance,’ it explained.
On AIM, Lansdowne Oil & Gas plummeted 58%, whilst Barryroe Offshore Energy was down 52%.
On Friday, Barryroe said a government minister in Ireland is not ‘satisfied with the financial capability’ of those involved in an oil and gas lease application.
The company, chasing a Dublin government green light for the SEL1/11 licence, said it received correspondence from Eamon Ryan, Ireland’s minister for the Department of the Environment, Climate & Communications.
SEL1/11 houses the Barryroe field. Barryroe Offshore owns an 80% stake in the asset, while Lansdowne Oil & Gas PLC owns 20%.
On Monday, Lansdowne said it has received no direct correspondence from the Irish government department regarding the decision. However, it noted that it has verified the content directly with Barryroe.
Lansdowne said that it has engaged with external legal counsel to assess its legal rights and the potential options available, including pursuing legal proceedings, for the purposes of protecting its investment in the Barryroe project.
Lansdowne Chief Executive Officer Steve Boldy said: ‘It is with great reluctance that we must now resort to legal proceedings in relation to our investment as we would much rather have moved forward with a Lease Undertaking and appraisal drilling, for which funds had been sourced, to advance Barryroe toward development for the benefit of all stakeholders.’
In Asia on Monday, the Nikkei 225 index closed up 0.9%. In China, the Shanghai Composite closed up 0.4%, while the Hang Seng index in Hong Kong was up 1.3%. The S&P/ASX 200 in Sydney closed down 0.2%.
New York ended lower on Friday, with the Dow Jones Industrial Average down 0.3%, S&P 500 down 0.1% and Nasdaq Composite down 0.2%.
Brent oil was quoted at $75.21 a barrel early in London on Monday, down from $75.74 late Friday. Gold was quoted at $1,975.11 an ounce, up against $1,972.99.
Monday’s economic calendar has a eurozone flash consumer confidence reading at 1500 BST. The week picks up pace with a host of flash purchasing managers’ index readings on Tuesday, a UK inflation reading on Wednesday, and US gross domestic product on Thursday.
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