London’s FTSE 100 closed up on Tuesday as oil prices spiked, lifting oil producers higher, but eyes now turn to the publication of US Federal Open Meeting Committee minutes tomorrow at at 1900 GMT.
‘With the central bank set to publish the minutes from its November meeting tomorrow, equity investors need to brace themselves for the Fed to say it is likely to keep raising rates to tame inflation,’ said Russ Mould at AJ Bell.
‘Investors may have got carried away by the recent inflation surprise which triggered a rally in stocks around the world. Tomorrow could feel like a bucket of cold water has been poured on this rally,’ Mould continued.
The FTSE 100 index closed up 75.99 points, or 1.0% at 7,452.84 on Tuesday. The FTSE 250 ended up 9.02 points at 19,422.37 and the AIM All-Share closed up just 0.35 of a point at 837.94.
The Cboe UK 100 ended up 1.0% at 745.57, the Cboe UK 250 closed up 0.4% at 16,762.48, and the Cboe Small Companies ended up 0.9% at 13,096.00.
In UK news, pressure on Chancellor Jeremy Hunt rose as government borrowing struck £13.5 billion in October.
The Office for National Statistics said the reading was £4.4 billion higher than the same month last year and was the fourth highest figure for October on record.
The figure for October was, nevertheless, below the expectations of economists, with a consensus of experts predicting borrowing of £21 billion for the month.
Hunt warned there is ‘no easy path to balancing the nation’s books’ after the scale of increased spending was unveiled.
Total public sector spending grew to £91.2 billion in October, after central government spending increased by £6.5 billion to £76.8 billion for the month.
The ONS estimated that this included around £3 billion on the cost of energy support schemes, including £1.9 billion for the £400 home energy discount payments.
An international report judged that the UK economy will contract more than any of the world’s seven most advanced nations next year as Britain suffers from painful inflation exacerbated by worker shortages and ‘untargeted’ energy support.
The latest forecasts from the Organisation for Economic Co-operation & Development reveal a sharp downgrade for the UK economy, which is expected to shrink by 0.4% in 2023 and grow by just 0.2% in 2024.
The OECD had predicted in September that UK growth would flatline in 2023.
Nonetheless, the pound was quoted at $1.1871 at the London equities close on Tuesday, up from $1.1794 at the close on Monday.
In the FTSE 100, oil producers Harbour Energy, BP and Shell sat at the top of the blue-chip index at the close on Tuesday.
The firms were up 4.7%, 6.5%, and 2.9%, respectively, thanks to a spike in oil prices.
Brent oil was quoted at $88.86 a barrel at the London equities close Tuesday, up sharply from $83.07 late Monday.
Saudi Arabia denied a report that oil producers were discussing a production increase for their next meeting, saying a cut approved last month would stay in place until the end of 2023.
The Wall Street Journal reported on Monday that Saudi Arabia, which co-leads the OPEC+ cartel along with Russia, and other members were considering an ‘increase of up to 500,000 barrels a day’.
But the official Saudi Press Agency said on Monday night that energy minister Prince Abdulaziz bin Salman ‘categorically denies’ the report.
In the FTSE 250, Babcock closed up 2.0% after it maintained annual guidance following a first-half revenue improvement.
The London-based aerospace, defence and nuclear engineering services firm said its pretax profit in the six months that ended September 30 fell by 13% to £51.2 million from £58.8 million a year ago.
Babcock explained its falling profit was largely down to a £28.7 million non-cash mark-to-market movement on currency derivative contracts.
Its revenue, meanwhile, was up 0.5% to £2.14 billion from £2.13 billion.
‘With over 90% of FY23 revenue contracted as at 30 September 2022, we have good visibility of the top line,’ Babcock explained, as it maintained its overall expectations for financial 2023.
Petershill Partners dropped 8.1% after it noted that its near-term outlook is weaker due to the wider market environment.
The firm called its outlook for ’partner-realised performance revenues’ ‘subdued’. For the first nine months of 2022, they totalled $63 million, down from $67 million.
Elsewhere in London, AO World surged 15% as the online electrics retailer confirmed that it was making progress on its strategic plans.
In the six months that ended September 30, AO’s pretax loss widened to £11.6 million from £4.3 million in the same period last year.
However, AO said the results represented ‘solid progress’ in the plan to pivot the business to focus on profit and cash generation.
Founder & Chief Executive John Roberts said: ‘we’ve made good progress with our strategic realignment as we focus on profitability and cash generation, all of which is yielding the results we expected.’
Sales for the 2023 financial year are forecast to be within the range guided while profit is now expected to be around the top end of previous guidance, between £20 million and £30 million.
In European equities on Tuesday, the CAC 40 in Paris ended up 0.4%, while the DAX 40 in Frankfurt ended up 0.3%.
The euro stood at $1.0275 at the European equities close Tuesday, higher against $1.0236 at the same time on Monday.
Stocks in New York were called higher at the London equities close, with the Dow Jones Industrial Average called up 0.7%, the S&P 500 index up 0.6%, and the Nasdaq Composite 0.4% higher.
Against the yen, the dollar was trading at JP¥141.35 late Tuesday, slightly lower compared to JP¥141.96 late Monday.
Gold was quoted at $1,741.10 an ounce at the London equities close Tuesday, higher against $1,733.19 at the close on Monday.
In Wednesday’s UK corporate calendar, pet supplies retailer Pets at Home and motor and cycling products retailer Halfords will publish half-year results.
In the economic calendar, there are flash PMI readings from the EU, the UK, France and Germany before the FOMC publish its meeting minutes at 1900 GMT.
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