Europe and the UK were leading a rebound in stock prices on Tuesday after a bleak close on Wall Street and mostly negative Asian trading.
‘After yet another miserable session in the US yesterday, Europe and pockets of Asia managed to avoid the rout and push ahead on Tuesday. This is unexpected given market sentiment is weak and the VIX 'fear' index yesterday jumped to its second-highest closing price in the past 12 months,’ Russ Mould, investment director at AJ Bell, said.
The FTSE 100 index was up 48.35 points, or 0.7%, at 7,264.93 midday Tuesday. The mid-cap FTSE 250 index was up 185.98 points, or 1.0%, at 19,493.25. The AIM All-Share index was up 1.87 points, or 0.2%, at 947.98.
The Cboe UK 100 index was up 0.5% at 723.67. The Cboe 250 was up 0.7% at 17,169.30, but the Cboe Small Companies down 0.7% at 14,455.41.
In Paris, the CAC 40 stock index was up 1.0%. The DAX 40 in Frankfurt was 1.5% higher.
‘The narrative has gone from 'how can I make money?' to 'how can I protect my money?',’ Mould continued. ‘Growth stocks have gone from invincible to un-investable in the eyes of many investors, while commodity producers have also lost their shine of late, depressed by concerns that economic activity is grinding to a halt.’
As result, he noted, investors are searching out stocks with generous shareholder payouts.
‘It's no coincidence that the entire top 10 risers on the FTSE 100 today, as measured by index points, are all mid-to-high yielding stocks including HSBC, Unilever, Glencore and British American Tobacco,’ Mould said.
HSBC was up 1.4%, Unilever 2.3% and BAT 1.5%. Glencore was down 0.6% at midday but spent most of the morning session in London in the green.
ActivTrades analyst Pierre Veyret added: ‘Market sentiment remains generally bearish for riskier assets as Chinese economic worries, the lingering war in Ukraine, and monetary tightening maintain pressure on prices. However, most investors have now accepted the second part of 2022 will be marked by higher volatility and will wait for further major developments before driving prices towards more directional moves.’
Looking ahead to the US open, major stock indices were set to recoup some of Monday's heavy losses. The Dow Jones Industrial Average was called 0.7% higher, the S&P 500 up 0.8%, and the tech-heavy Nasdaq Composite up 1.3%.
The next major risk event is the release of the US consumer price index for April on Wednesday.
Inflation was running 8.5% in March.
‘Markets are expecting an easing in the headline measure of price growth that, if confirmed, would be the first time this has happened since August last year,’ comments Matthew Ryan, senior market analyst at financial services firm Ebury. ‘We think that a surprise to the downside here could be enough to trigger a fairly marked unwinding in some of the recent bullish US dollar bets that have left the currency trading at very elevated levels.’
Back in London, Centrica was 4.3% higher.
The power utility kicked off 2022 promisingly and expects annual earnings at the top end of analyst expectations, despite seeing inflationary and supply chain ‘headwinds’.
The British Gas owner forecasts its 2022 adjusted earnings per share to be around the top of a 6.7p to 10.8p range. At the very least, this would be 63% higher than the 4.1p adjusted basic earnings per share it achieved in 2021.
It has delivered a ‘strong operational performance’ in the first four months of 2022, though the company noted it has not been all plain sailing.
In the British Gas Services & Solutions, Centrica said it has seen ‘some supply chain disruption and higher inflation impacting both the cost base and customer demand’.
‘We expect those headwinds to continue to, at least partially, offset underlying operational progress for the duration of this period of higher inflation,’ Centrica added.
Looking to the rest of the year, Centrica warned of ‘significant uncertainties’. Weather, commodity prices and the possibility of bad debt charges could hit the business this year, it cautioned.
Spectris and Coats were 3.3% and 3.2% higher, respectively, as the FTSE 250 listed firms reported M&A activity.
Spectris has expanded in North America with the acquisition of accelerometers maker Dytran Instruments. Spectris will fork out $82 million for the California-based firm, the precision instrument supplier said.
Dytran specialises in producing instruments which measure dynamic force. Its product range includes accelerometers and innovative sensors. Its products have applications in automobile, industrial and aerospace sectors.
Thread manufacturer Coats Group has signed a deal to sell its business in Brazil and Argentina. The unit will be sold to Reelpar, a local entity backed by a Sao Paulo, Brazil-based private equity firm. The deal is expected to close this month.
Coats expects to see a 50 basis point annualised lift to adjusted operating margins as a result of the deal.
It will fund $10 million to Reelpar to support a restructuring of the Brazil and Argentina business.
‘An exit from the Brazil and Argentina business is in line with Coats' strategic initiatives, announced in March, to accelerate profitable sales growth and transform the company,’ Coats said.
Domino's Pizza gained 2.8% after Berenberg upped the master franchiser for the Domino's brand to 'hold' from 'sell'.
Renishaw was trading 1.4% lower around midday in London, recovering slightly after sinking around 5.9% at the open. It reported a sharp rise in total revenue in the first nine months of its financial year, thanks to growth in all of its product lines.
For the nine months to March 31, total revenue was up 21% to £492.4 million from £407.4 million, with Manufacturing Technologies revenue up 22% to £467.4 million.
Renishaw expects revenue in financial 2022, ending June 30, to be between £655 million and £675 million, a rise from £565.6 million the year prior.
Pretax profit was up 13% in the nine-month period to £120.2 million. Adjusted pretax profit was £124.0 million, up from £84.4 million. For all of financial 2022, adjusted profit is expected to be between £155 million and £170 million, up from the £119.7 million seen the year before.
Renishaw said it continues to see ‘strong demand’ for its product lines and has a ‘strong’ order book.
In London's junior market, Mosman Oil & Gas slumped 32% after a £1.1 million share placing to fund the drilling of the first re-development well at the Challenger project in Texas.
Mosman, a Sydney-based oil and gas company with projects in Australia and the US, raised the funds through a placing of 1.38 billion shares at a price of 0.08 pence each. This price represents a 28% discount to Monday's closing price of 0.1125p.
Investors will receive one warrant with every two new shares, exercisable at a price of 0.16p with a term of 24 months.
If targeted production rates are achieved, Mosman said net production could increase 88% to around 245 barrels of oil equivalent per day from the 130 barrels reported for the first quarter of 2022.
Brent oil was quoted at $104.05 a barrel Tuesday at midday in London, sharply lower from $107.50 late Monday. Oil prices continue to be hurt by China's zero-Covid approach, which is likely to hit demand.
Gold stood at $1,858.90 an ounce, lower against $1,861.75.
The pound was quoted at $1.2357 midday Tuesday, higher than $1.2320 at the London equities close Monday.
The euro was priced at $1.0547, higher from $1.0535. Against the yen, the dollar was trading at JP¥130.08, down from JP¥130.45.
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