Equities on Monday continued to benefit from a US jobs report on Friday that showed the world's largest economy in surprisingly good health, though still suffering from rampant price inflation.
Offering potential relief on that front, oil prices continued their steady fall away from $100 a barrel.
In London, the FTSE 100 index was up 33.50 points, or 0.5%, at 7,473.24 midday Monday. The FTSE 250 index was up 41.71 points, or 0.2%, at 20,093.19. The AIM All-Share index was down 0.28 of a point at 920.10.
The Cboe UK 100 index was up 0.5% at 745.87. The Cboe 250 was up 0.2% at 17,407.65. The Cboe Small Companies was flat at 13,950.60.
In Paris, the CAC 40 stock index was up 0.6%, while in Frankfurt, the DAX 40 was 0.8% higher.
In Asia, the Nikkei 225 index in Tokyo closed down 0.3%. In China, the Shanghai Composite closed up 0.3%, while the Hang Seng index in Hong Kong closed down 0.8%. The S&P/ASX 200 in Sydney ended up 0.1%.
Despite its initial announcement that Chinese manoeuvres around Taiwan would end on Sunday, the People's Liberation Army continued its large-scale sea and air drills on Monday. China's state television reported that the exercises were focussing on ‘anti-submarine and sea assault operations’.
In announcing the manoeuvres to the north, south-west and east of self-ruled island last Tuesday, China had originally promised their conclusion on Sunday. No new formal end date has been announced.
Taiwan will hold live-fire military drills this week simulating a defence of the island against a Chinese invasion. The island's forces will hold anti-landing exercises in the southernmost county of Pingtung on Tuesday and Thursday, the Taiwanese army said.
Meanwhile, China's foreign trade continued to grow unexpectedly strongly in July, with an 18.0% rise in exports compared to the same period last year, the Chinese customs authority said. Analysts had actually predicted a slowdown in Chinese export growth after a similarly large increase of 17.9% was recorded last month. By contrast, imports to China increased by just 2.3%.
Investors also continued to digest Friday's blockbuster US jobs report. The strong numbers - employment rose by 528,000, more than double consensus of 250,000 - ramped up bets the Federal Reserve will announce more sharp interest rate hikes as it tries to tame runaway inflation.
‘With the labour market clearly stronger than what the Fed and the market had anticipated, US rate expectations rose,’ said Marshall Gittler, head of Investment Research at BDSwiss. ‘The market is now assuming that the fed funds rate will peak at 3.65% in April, which is one rate hike more than it was assuming on Thursday.’
Added ActivTrades analyst Pierre Veyret: ‘While a 75 basis point rate hike is now fully on the table of expectations for the next September [Federal Open Market Committee] meeting, investors will keep both eyes on this week's US inflation data and assess whether there is a peak on price pressure yet. Elsewhere, US-Sino tensions over Taiwan are far from over as Chinese military drills are set to continue over the island, which will certainly add uncertainty towards riskier assets in the region.’
The US consumer price index report is due on Wednesday.
In the FTSE 100, Hargreaves Lansdown was the best performer, up 7.1%, as the fund supermarket extended Friday's gains. HL shares had closed up 4.9% on Friday after reporting annual underlying pretax profit ahead of market forecasts.
Legal & General was up 1.4% after JPMorgan upgraded the insurer to 'overweight' from 'neutral'. The 186-year old company will report interim results on Tuesday.
Conversely, Phoenix Group was down 0.8% after JPMorgan cut the life insurer to 'neutral' from 'overweight'. M&G was down 0.6%. JPMorgan downgraded the asset manager to 'underweight' from 'neutral'.
In the FTSE 250, PageGroup was down 8.7%, despite reporting strong interim results and declaring a special dividend, as the recruiter issued a slightly cautious outlook.
Rival headhunter Hays was down 3.3% in a negative read-across.
PageGroup said it achieved a strong first-half performance across of its geographies, disciplines and brands, prompting the recruitment firm to raise its dividend.
For the six months that ended June 30, pretax profit rose 80% to £114.5 million from £63.7 million a year before, on revenue of £977.3 million, up 28% from £766.4 million.
PageGroup declared an interim dividend of 4.91p, up 4.5% from 4.70p paid last year. In addition, the company announced a special dividend of 26.71p, unchanged from last year.
‘Looking forward, we recognise the heightened degree of global macro-economic and geo-political uncertainty, particularly with regards to increasing inflation around the world. In July, we noted a slight slowing in time to hire in some of our markets, and we continue to closely monitor our forward-looking key performance indicators. However, at this point, our expectations for 2022 full year operating profit remain in line with the company compiled consensus of £206 million,’ said Chief Executive Officer Steve Ingram.
PageGroup's operating profit in 2021 was £168.5 million, so consensus implies a 22% improvement.
Jefferies analyst Kean Marden commented: ‘We acknowledge the second half appears undemanding, but expect consensus EPS estimates to remain largely unchanged given the cautious tone.’
Elsewhere in London, BHP said that it offered to buy Oz Minerals late last week but that the Oz board rejected its approach.
BHP said it offered A$25.00 per share for Sydney-listed Oz, 32% above its close on Friday of A$18.92. On Monday, the stock ended up 35% at A$25.59, giving Oz a market capitalisation of A$8.57 billion, about £4.93 billion.
The offer requires unanimous recommendation by the Oz board, but BHP said the board has refused to engage.
‘Our proposal represents compelling value and certainty for Oz Minerals shareholders in the face of a deteriorating external environment and increased OZL operational and growth-related funding challenges,’ said BHP Chief Executive Officer Mike Henry.
‘We are disappointed that the board of OZL has indicated that it is not willing to entertain our compelling offer or provide us with access to due diligence in relation to our proposal.’
In response, Oz Minerals said the BHP offer ‘significantly undervalues’ the company.
BHP shares closed up 0.8% in Sydney on Monday but were down 0.6% in London.
On AIM, Joules Group was up 49%. The British lifestyle retailer confirmed a weekend press report that it was in discussions to sell a stake to FTSE 100-listed retailer Next, in a move that could raise around £15 million.
Next shares were down 0.4%.
Joules did not confirm the size of the stake but said Next would become a ‘strategic minority shareholder’.
In addition, Joules said it was also in discussions over joining Next's burgeoning online platform to support its ‘long-term growth plans’.
Last month, Joules confirmed it was in talks with KPMG to shore up its balance sheet, as the retailer grapples with a cost of living crisis and inflationary pressures. In May, Joules had warned that challenging market conditions caused profit to fall below management expectations in some areas of its business.
The dollar was lower across the board.
The pound was quoted at $1.2080 at midday Monday, up from $1.2060 at the London equities close Friday. The euro was priced at $1.0185, up from $1.0165. Against the yen, the dollar was trading at JP¥134.97 in London, lower against JP¥135.20.
Brent oil was quoted at $94.18 a barrel Monday at midday, down from $96.23 late Friday. Gold stood at $1,775.72 an ounce, slightly lower against $1,776.71.
New York was pointed to a higher open on Monday. The Dow Jones Industrial Average was called up 0.2%, the S&P 500 up 0.3% and the Nasdaq Composite up 0.4%.
The Dow Jones Industrial Average closed up 0.2%, but the S&P 500 slipped 0.2% and the Nasdaq Composite by 0.5% on Friday.
Berkshire Hathaway on Saturday revealed it swung to a huge net loss in the second quarter of 2022, due to investment losses from falling stock markets.
The Omaha, Nebraska-based insurance and railways conglomerate led by Warren Buffett, reported a $43.76 billion net loss attributable to shareholders, falling from a $28.09 billion profit a year before.
In its commentary on the quarterly results, Berkshire insisted that investment gains and losses, predominantly unrealized reflections of equity market volatility, ‘are generally meaningless in understanding our reported quarterly or annual results or in evaluating the economic performance of our businesses.’
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