Stocks in London were down at midday on Tuesday as an unexpected return to growth for the UK private sector failed to offset investor apprehension ahead of the minutes of January’s US Federal Reserve meeting, due out Wednesday.
‘Hints a 50 basis-point rate hike could be in the offing [from the US central bank] have helped sour sentiment a little but confirmation could really undermine investor confidence,’ said Russ Mould, investment director at AJ Bell.
The FTSE 100 index was down 13.53 points, or 0.2%, at 8,000.78. The FTSE 250 was down 123.22 points, or 0.6%, at 19,975.19, and the AIM All-Share was down 0.83 of a point, or 0.1%, at 865.41.
The Cboe UK 100 was down 0.1% at 801.03, the Cboe UK 250 was down 0.6% at 17,428.77, and the Cboe Small Companies was down 0.2% at 14,016.94.
The UK private sector saw an unexpected return to growth in February, according to preliminary survey results.
The S&P Global/CIPS UK flash composite purchasing managers’ index rose to an eight-month high of 53.0 points in February from 48.5 in January.
Crossing over the 50-point no-change mark, it shows the UK private sector has returned to growth. The reading was also well above the 48.7 market consensus, as cited by FXStreet.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the much better than anticipated PMI data for February indicated ‘encouraging resilience’ from the UK economy in the face of headwinds including rising interest rates, the ongoing cost of living crisis, labour shortages and strikes.
Sterling strengthened in the wake of the PMI print. The pound was quoted at $1.2112 at midday on Tuesday in London, sharply higher compared to $1.2034 at the equities close on Monday.
In London, Smith & Nephew was the best blue-chip performer at midday, up 5.1%, as it kept its full-year dividend unchanged and eyed further revenue growth in 2023.
For 2022, the portfolio medical technology company said annual revenue edged up 0.1% to $5.22 billion from £5.21 billion a year ago. Pretax profit, meanwhile, fell to $235 million from $586 million, as operating profit declined by 24% to $450 million from $593 million a year ago.
HSBC added 3.3% despite reporting a dip in annual profit due to expected credit charges and impairments, as it said it was considering shareholder returns from the sale of its Canadian banking arm.
In 2022, the Asia-focused lender said pretax profit fell 7.3% to $17.53 billion from $18.91 billion. This was slightly better than company-compiled market consensus of $17.49 billion, however.
HSBC also updated on the $10 billion sale of its Canadian banking business to the Royal Bank of Canada.
As a ‘priority use’ of the sale proceeds, the board will consider a special dividend of $0.21 per share. Any additional surplus capital from the sale would then be put towards organic growth and investment opportunities, as well as potential share buybacks, it said.
Antofagasta fell 2.0% as it reported a drop in both profit and revenue in 2022 due to poor copper production and prices and the impact of inflation on costs.
For 2022, the Chile-focused mining group reported pretax profit of $2.56 billion, down 26% from $3.48 billion a year prior. Revenue also fell, down 22% to $5.86 billion from $7.47 billion the previous year.
Antofagasta attributed this to a 12% decrease in copper sales to 642,500 tonnes from 725,600, as well as a 12% decline in realised copper prices. It also noted the impact of inflation and higher input prices.
Also weighing on the FTSE 100 at midday on Tuesday was Anglo American, Hargreaves Lansdown and Prudential. The stocks were down 4.3%, 3.2%, and 2.5%, respectively.
In the FTSE 250, Safestore fell 1.8% despite reporting a strong start to its financial year in the quarter that ended January 31.
First quarter revenue rose 9.4% to £55.7 million from £50.9 million a year prior, as the average storage rate increased 2.9% to £30.42 from £29.55.
Safestore now expects to deliver adjusted diluted EPRA earnings per share for financial 2023 in line with analysts’ forecasts, with consensus cited as 49.5 pence, within a range of 45.3p to 54.0p. This would be up 4.2% from 47.5p in financial 2022.
Serco added 0.3% after the UK Financial Reporting Council said it closing its investigation regarding the company’s annual results for 2011 and 2012.
The probe centred on fraud relating to a contract with the UK government for the electronic tagging of prisoners. Serco was accused of charging the taxpayer for tagging prisoners who were dead, in prison or overseas.
Elsewhere in London, Hyve jumped 19% after it announced it had received a preliminary and conditional approach from Providence Equity LLP for a possible cash offer of 105 pence per Hyve share.
In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.4%.
Growth in the eurozone’s private sector accelerated to a nine-month high in February. The S&P Global flash eurozone composite PMI rose to 52.3 in February, from 50.3 in January.
The euro stood at $1.0657 midday Tuesday, lower against $1.0687 at the London equities close on Monday. Against the yen, the dollar was trading at JP¥134.60, higher compared to JP¥134.07.
Ricardo Evangelista, senior analyst at ActivTrades, explained that as investors are currently pricing in renewed hawkishness from the Fed, this is causing the dollar to strengthen.
Still to come on Tuesday, there are flash PMI readings for the US at 1445 GMT.
Stocks in New York were called lower ahead of the data, as Wall Street returns to trading following the US Presidents’ day holiday on Monday.
The Dow Jones Industrial Average was called down 0.7%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 0.8%.
Brent oil was quoted at $83.37 a barrel at midday in London on Tuesday, up slightly from $83.29 late Monday. Gold was quoted at $1,834.90 an ounce, lower against $1,843.50.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
