Equity prices in London were lower during quiet trade on Tuesday, with investors moving cautiously ahead of a Bank of England interest rate decision and a UK inflation reading.
Among local corporate updates, Lookers agreed to a takeover bid, while Frasers Group went shopping once again. Ocado fell as JPMorgan analysts warned it has a tricky next few months to navigate.
The FTSE 100 index was down just 0.1 of a point at 7,588.37. The FTSE 250 was down 125.05 points, 0.7%, at 18,729.24, and the AIM All-Share was down 2.38 points, 0.3%, at 787.15.
The Cboe UK 100 was flat at 756.96, the Cboe UK 250 was down 0.7% at 16,394.18, and the Cboe Small Companies was down 0.1% at 13,861.04.
‘The rest of the week could be more challenging for UK stocks with inflation figures out tomorrow, followed by the next UK interest rate decision on Thursday. A rate hike to 4.75% looks highly likely,’ AJ Bell analyst Russ Mould commented.
The next key market catalyst will come in the form of UK inflation data on Wednesday morning, which may frame the Bank of England interest rate decision on Thursday. The central bank is expected to enact a 25 basis point hike.
The pound was quoted at $1.2767 at midday on Tuesday in London, down compared to $1.2797 at the equities close on Monday. The euro stood at $1.0932, up slightly against $1.0928. Against the yen, the dollar was trading at JP¥141.44, down compared to JP¥141.85.
After a trio of major central bank decisions last week, China’s central bank cut two benchmark interest rates on Tuesday, as part of measures to boost economic growth in the nation.
The one-year loan prime rate, which serves as a benchmark for corporate loans, was reduced to 3.55% from 3.65%, the People’s Bank of China said in a statement, while the five-year LPR, which is used to price mortgages, was cut to 4.20% from 4.30%.
Sticking with central banks, eyes will be on Federal Reserve Chair Jerome Powell on Wednesday, who testifies before US lawmakers.
In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.6%.
Stocks in New York, reopening after the Juneteenth public holiday on Monday, are called lowed. The Dow Jones Industrial Average and the S&P 500 index are both called down 0.4%, while the Nasdaq Composite is called down 0.5%.
In the FTSE 100, Ocado shed 4.9% on a bearish note from JPMorgan.
JPMorgan analysts said: ‘We believe Ocado’s online grocery activities will continue to face meaningful headwinds in the next months.’ It noted that UK consumers may turn to discount chains as cost-of-living worries persist.
JPMorgan rates Ocado at ’underweight’ and has Ocado under ’negative catalyst watch’ into the firm’s half-year results on July 18.
Frasers was up 0.5%. It continued its streak of buying up shares in UK retail outfits, with a regulatory filing showing it has taken up a position in online fashion firm boohoo group.
Frasers, which owns, House of Fraser, Sports Direct and Flannels retail chains, has a stake of 5.0% in boohoo.
The announcement on Tuesday came hours after a filing showed Frasers has built an 8.9% stake in London-based electronics and electrical goods retailer Currys. Currys was up 2.0% at midday, while boohoo was down 0.8%.
Frasers said that the stake acquisitions are part of a wider strategy of taking up ‘supportive shareholder positions in attractive retail companies’.
Automotive retail and service group Lookers said it has agreed to a takeover offer from Global Auto Holdings of 120 pence a share in cash, which values the firm at £465.4 million.
The offer is a 35% premium to the closing price of 88.7p on Monday. Global Auto is a related party to Alpha Auto Group, a private Canada-headquarter operator and consolidator of auto retail dealerships across North America.
The board of Lookers said they believe the offer represents a ‘compelling proposition’ for the firm’s shareholders, and will unanimously recommend the offer at an upcoming court meeting and general meeting.
Shares in Lookers were up 34% to 118.50 pence at midday.
AJ Bell’s Mould added: ‘Lookers received a takeover offer, continuing a trend that has seen the UK-listed car retail sector shrink in recent years including successful bids for Marshall Motors and Cambria Automobiles as well as a failed one for Pendragon. Scale matters in this industry and operators are always looking for a way to plant more flags, be it locally or internationally. Investors will be looking closely at Motorpoint in this regard as its shares last night hit a new all-time low of 102.75p, having lost 73% of its value since September 2021 thanks to a pullback in car prices, with the pains of higher interest rate costs and the cost-of-living pressures hurting demand for vehicles. Might it be the next company in the sector vulnerable to a bid.’
Motorpoint shares traded 0.2% higher.
Bidstack shares fell 33%, after it reported an increase in annual administrative costs offset revenue growth for 2022.
The in-game advertising firm said that in 2022, its pretax loss widened 10% to £8.8 million from £8.0 million a year prior. Revenue more than doubled to £5.3 million from £2.6 million.
However, administrative costs increased 45% to £12.5 million from £8.7 million. Cost of sales decreased 11% to £1.5 million from £1.7 million.
Brent oil was quoted at $76.74 a barrel at midday in London on Tuesday, up from $76.02 late Monday. Gold was quoted at $1,951.71 an ounce, down slightly against $1,952.97.
Still to come on Tuesday’s economic calendar, there is a US housing starts and building permits reading at 1330 BST.
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