Stocks in London opened mixed on Tuesday ahead of the testimony by US Federal Reserve Chair Jerome Powell, while BP and Shell fell as BP expects a $2 billion impairment charge.
The FTSE 100 index opened up 18.23 points, 0.2%, at 8,211.72. The FTSE 250 was down 16.05 points, 0.1%, at 20,782.27, and the AIM All-Share was down just 0.20 of a point at 774.96.
The Cboe UK 100 was up 0.2% at 818.02, the Cboe UK 250 was down 0.1% at 18,077.01, and the Cboe Small Companies was up marginally at 17,124.36.
In European equities on Tuesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.4%.
UK retail sales declined in June as the cooler weather held back purchases of clothing and footwear.
According to the BRC-KPMG retail sales monitor, UK total retail sales decreased by 0.2% in June from a year prior, against growth of 4.9% in June 2023. This was above the 3-month average decline of 1.1% and below the 12-month average growth of 1.5%.
In May, retail sales rose 0.7% after falling 4.0% in April.
British Retail Consortium Chief Executive Helen Dickinson said: ‘Retail sales performed poorly in June as the cooler weather during the first half of the month dulled consumer spending.’
In the US on Monday, Wall Street ended mixed, with the Dow Jones Industrial Average down 0.1%, the S&P 500 up 0.1% and the Nasdaq Composite up 0.3%. For the S&P 500 and Nasdaq Composite, it represented another record closing high.
Still to come on Tuesday’s economic calendar, investors await comments from Federal Reserve officials, including Jerome Powell’s testimony to Congress which may bring hints on the timing of rate cuts.
‘The first day of the testimony is always the most important day as we will get to catch the overall tone and the key messages,’ said Ipek Ozkardeskaya at Swissquote Bank.
‘Some expect Powell to sound cautious regarding the progress on inflation and tell the US politicians to be patient until the Fed gathers enough evidence that inflation is on a solid path toward their 2% target. But there is a chance that he sounds slightly more optimistic and willing to cut the interest rates sooner rather than later pointing at the slowing economic growth and loosening jobs market – which will eventually help cooling inflation.’
Further, eyes are on Thursday’s US consumer price index data, which will see if the US is tracking towards its 2% target.
Focus is also on US politics, after President Joe Biden insisted again Monday he would not quit the US election race, as the White House denied he had Parkinson’s disease following a disastrous debate performance.
The pound was quoted at $1.2811 early on Tuesday in London, lower compared to $1.2829 at the equities close on Monday. The euro stood at $1.0828, down against $1.0833. Against the yen, the dollar was trading at JP¥160.77, higher compared to JP¥160.71.
In the FTSE 100, BP lost 3.5%.
BP said it expects to take an impairment charge of up to $2 billion in the second quarter, partly because of the review of refining activities in Germany that it announced in March.
The London-based energy company also flagged that lower refining margins will hit earnings by $500 million to $700 million.
In as negative read across the board, Shell fell by 0.4%.
In the FTSE 250, Hunting jumped 7.0%.
The manufacturer of equipment for the energy industry said its sales order book at June 30 was about $700 million compared to $565 million at December 31.
Earnings before interest, tax, depreciation and amortisation for the first half of 2024 is likely to be in the range of $59 million and $61 million, which it said is ahead of management’s expectations and 22% ahead annually.
Looking ahead, Hunting said its outlook for 2024 and 2025 is ‘positive’. It added that its performance in the second half of the year is anticipated to be ahead of the first half.
On the other hand, PageGroup lost 11%, after the recruitment company offered a profit warning.
PageGroup noted that gross profit in the second quarter of 2024 fell 12% annually to £224.3 million. This was a result of ‘softening’ in activity levels.
Given the weaker than expected trading in June, recent increased geopolitical and macro-economic uncertainty and consequently a more cautious view for second half of the year, PageGroup now expects full year 2024 operating profit to be in the region of £60 million.
Amongst London’s small-caps, Capita jumped 21%.
The outsourcing and professional services company said it has agreed to sell its standalone software business, via the sale of Capita One by Capita Business Services, to Orchard Information Systems. The deal values Capita One at £200 million.
‘Capita One provides local authorities, local education authorities and housing associations with revenues & benefits, social housing management and education management software. It helps local authorities drive efficiency, maximise revenue collection, and deliver essential public services as cost effectively as possible,’ Capita said.
It explained that the sale follows an evaluation carried out by Capita, which noted which activities are not core to its future strategy.
In Asia on Tuesday, the Nikkei 225 index in Tokyo was up 2.0%. In China, the Shanghai Composite was up 1.3%, while the Hang Seng index in Hong Kong was down marginally. The S&P/ASX 200 in Sydney closed up 0.9%
Brent oil was quoted at $85.43 a barrel early in London on Tuesday, down from $86.16 late Monday.
Gold was quoted at $2,358.50 an ounce, lower against $2,370.69.
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