Stocks in London were lacking direction by Tuesday’s close, but managed to claw back lost ground form earlier in the day, as the International Monetary Fund took a brighter view of the UK’s prospects.
The FTSE 100 index closed down 11.70 points, or 0.1%, at 8,306.54. The FTSE 250 ended up 43.05 points, or 0.2%, at 20,949.65, and the AIM All-Share lost 0.79 of a point, 0.1%, at 734.16.
The Cboe UK 100 closed down 0.2% at 831.88 on Monday, the Cboe UK 250 ended up 0.3% at 18,521.29, and the Cboe Small Companies fell 0.4% at 16,873.56.
In European equities on Tuesday, the CAC 40 in Paris ended flat while Frankfurt’s DAX 40 eased 0.1%.
Supporting the DAX, SAP climbed 2.1% after strong third-quarter results and raised guidance.
Late Monday, SAP, the Walldorf, Baden-Wurttemberg, Germany-based software firm, raised its outlook for cloud and software revenue, operating profit and free cash flow.
Deutsche Bank called it an ‘impressive’ and ‘nearly flawless’ third quarter.
In New York, the Dow Jones Industrial Average was down 0.2%, the S&P 500 was also 0.2% lower and the Nasdaq Composite ebbed 0.1%.
Markets across the pond have been reacting to more hawkish chat surrounding the likely path of interest rates in the US.
According to the CME FedWatch Tool, there is a 13% chance the US central bank leaves rates unmoved at the 4.75%-5.00% range at its November meeting. Though it is still odds on to cut by 25 basis points, a hold this time last week was seen as slim to none.
‘Yesterday equity prices moved lower and Treasury yields moved higher as ’no landing‘ scenarios are being taken more seriously by the market. But a true no landing would involve inflation picking up and the labour markets tightening - the opposite of what has occurred over the course of the year. It may take over a month of data to shift attention back toward the evident slowdown in inflation and softening in the labour market,’ economists at Citi commented.
Providing direction in New York, third quarter results spurred Philip Morris, up 7.9% and General Motors, up 9.3% while Verizon dropped 4.2%.
Philip Morris, the Stamford, Connecticut-based tobacco company, reported operating income of $3.65 billion, up from $3.37 billion a year prior.
Looking ahead, the Marlboro owner raised its annual guidance for diluted EPS to between $6.20 and $6.26, and adjusted diluted EPS to $6.45 to $6.51.
‘In the third quarter, we delivered exceptionally strong performance, with record quarterly net revenues and earnings per share,’ said Chief Executive Officer Jacek Olczak.
In London, BAT perked up 1.4% in a read across from the results, although Imperial Brands remained in the red, down 0.6%.
The pound was quoted at $1.2973 late Tuesday afternoon in London, down compared to $1.2984 at the equities close on Monday. The euro stood at $1.0808, lower against $1.0825. Against the yen, the dollar was trading at JP¥151.06, up compared to JP¥150.34.
UK public sector borrowing spiked in September, ahead of the budget next week, amid lofty interest payable on government debt.
According to the Office for National Statistics, public sector net borrowing amounted to £16.61 billion in September, stretching from £13.02 billion in August and £14.48 billion a year prior.
It was the ‘third highest September borrowing since monthly records began in January 1993’, the ONS said.
‘The interest payable on central government debt was £5.6 billion in September 2024, £4.6 billion more than in September 2023; this was owing to the interest payable in September 2023 being exceptionally low at £900 million because of movements in the retail price index around that time, rather than September 2024’s interest being unusually high.’
In better news for the government, the International Monetary Fund said the UK economy is set to grow faster than previously thought in 2024 as drops in inflation and interest rates help drive spending.
The organisation meanwhile said UK gross domestic product is due to grow by 1.1% in 2024.
It represents a significant upgrade after predicting 0.7% growth in July.
The UK economy is then expected to grow by 1.5% in 2025, with the IMF maintaining its prediction from earlier in the year.
Chancellor Rachel Reeves said: ‘It’s welcome that the IMF have upgraded our growth forecast for this year, but I know there is more work to do.
‘That is why the budget next week will be about fixing the foundations to deliver change so we can protect working people, fix the NHS and rebuild Britain.’
The IMF report also found that UK inflation for 2024 is set to be slightly higher than expected at 2.6%, having previously pointed towards a 2.5% reading.
It likewise slightly increased its inflation projection for 2025 to 2.1% from 2% in its previous outlook.
Fresnillo rose 2.9%. The gold miner was the best FTSE 100 performer benefiting from another bump in the gold price. Endeavour Mining was also in favour, up 0.8%.
Gold continued to climb with the yellow metal quoted at $2,739.35 an ounce, up against $2,717.31.
HSBC climbed 0.9% after announcing an organisational revamp and the appointment of a new Chief Finance Officer.
HSBC promoted Chief Risk & Compliance Officer Pam Kaur to CFO from January 1.
In addition, the company said from the start of 2025, it will simplify its organisational structure into four businesses: Hong Kong, UK, Corporate & Institutional Banking, and International Wealth & Premier Banking.
Hunting plunged 17%. It cut its annual profit guidance, as a recent decline in oil and US natural gas pricing has hit sector sentiment.
The manufacturer of equipment for the energy industry now expects 2024 earnings before interest, tax, depreciation, and amortisation between $123 million and $126 million, its outlook cut from the $134 million and $138 million range.
Brent oil was quoted at $75.86 a barrel on Tuesday, up from $73.85 late Monday.
Wednesday’s economic calendar sees an interest rate decision in Canada, eurozone consumer confidence figures and the US Beige Book.
In the local corporate calendar, trading statements are due from lender Lloyds Banking Group, housebuilder Barratt Redrow, consumer goods manufacturer Reckitt Benckiser and advertiser WPP.
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