Blue-chip stocks in Europe fell on Tuesday, though oil majors and miners stopped London’s FTSE 100 from suffering a sharper decline.
Stocks struggled, but gold was on the rise again, achieving another record high. Defence firms were sold off, meanwhile.
The FTSE 100 index ended down 8.68 points, 0.1%, at 7,934.79. The FTSE 250 ended down 91.23 points, 0.5%, at 19,763.35, while the AIM All-Share rose 2.15 points, 0.3%, at 750.98.
The Cboe UK 100 ended down 0.2% at 792.86, the Cboe UK 250 fell 0.5% at 17,208.36, and the Cboe Small Companies finished up 0.5% at 14,760.33.
The CAC 40 in Paris ended down 0.9%, while the DAX 40 in Frankfurt slumped 1.3%.
In New York, the Dow Jones Industrial Average was down 0.4% at the time of the London equities close. The S&P 500 was 0.6% lower. The Nasdaq Composite gave back 0.5%.
‘A cautious start to the day for European equities set the tone for Wall Street with US shares in the red as trading began across the pond,’ AJ Bell analyst Dan Coatsworth commented.
‘Investors were in a bad mood and they may not get out of the funk until we‘ve seen US inflation figures on Wednesday. Forecasts suggest we’ll see the annual rate of inflation creep up when the figures are released and that will certainly give the Fed food for thought.
Wednesday’s US inflation data is expected to show the rate of year-on-year consumer price growth picked up to 3.4% last month, from 3.2% in February, according to FXStreet cited consensus.
If the rate of consumer price inflation picks up by more than expected, it could mean the Federal Reserve will re-think its interest rate outlook. In its last set of economic projections, the dot-plot showed three rate cuts were still the best bet for 2023.
The pound was quoted at $1.2672 in London late Tuesday afternoon, higher compared to $1.2652 at the equities close on Monday. The euro stood at $1.0856, rising slightly against $1.0854. Against the yen, the dollar was trading at JP¥151.65, down compared to JP¥151.82.
Gold was quoted at $2,347.44 an ounce, higher against $2,330.93. Gold hit a new record high earlier Tuesday, above $2,365 per ounce, before easing back.
DHF Capital analyst Bas Kooijman commented: ’Despite reaching peak levels, gold prices remain supported by solid demand, evidenced by rising net long positions. However, following its strong surge, gold could be exposed to price corrections over the short term in particular if Wednesday’s US data comes in stronger than expected.‘
Bank of America on Tuesday suggested the price of gold could hit $3,000 an ounce.
‘Gold and silver are among our most preferred commodities, with the yellow metal pushed up by central banks, China investors and, increasingly, Western buyers on a confluence of macro factors, including an end to hiking cycles,’ BofA explained.
The bank adjusted price targets for several London-listed mining stocks and upgraded its recommendation on Fresnillo. Shares in Fresnillo rose 4.0% on Tuesday.
Also rising in London, copper miner Antofagasta climbed 2.4%. Anglo American and Rio Tinto each added 2.0%.
Brent oil was quoted at $89.82 a barrel at the time of the London equities close on Tuesday, down from $89.93 late Monday.
More than six months into the war, Hamas said it was ‘studying’ a new proposal for a temporary truce, taking some heat out of Crude prices.
Nonetheless, shares in BP and Shell rose 1.3% and 0.8%.
BP said it expects first quarter upstream production to be higher than the previous three-month period but cautioned lower prices would hurt performance elsewhere.
The London-based oil and gas major said upstream production in the quarter ending March is expected to be higher compared to the prior quarter, with output higher in oil production & operations and slightly higher in gas & low carbon energy.
But in the gas & low carbon energy segment, lower gas prices compared to the prior quarter are expected to have an adverse impact in the range of $200 million to $400 million, BP said.
There is also expected to be an adverse impact of around $200 million as a result of the devaluation of the Egyptian pound.
In the oil production & operations segment, lower realizations compared to the prior quarter are expected to have an adverse impact in the range of $300 million to $600 million, BP commented.
Analysts at Jefferies commented: ‘BP’s first trading update suggests limited downside to consensus numbers (Bloomberg $3 billion net income). Strong gas trading will address a key concern during the quarter, while strong oil trading provides a good uplift quarter-on-quarter. Key operational upsets in the quarter (Whiting, Freeport) seem to have caused a lower impact than feared.’
It was a tough day for defence stocks across Europe. BAE Systems fell 4.5% in London, the worst large-cap performer. In Frankfurt, Rheinmetall gave back 6.2%. Shares in the duo have enjoyed a rip-roaring gain over the past two years, on the expectation that there will be a rise in military spending amid intensifying geopolitical tensions.
AJ Bell’s Coatsworth added: ‘Investors appear to have taken a ’what goes up, must come down’ view of the defence sector.
‘These names have soared since Russia invaded Ukraine as governments around the world took the view that they needed to stock up on equipment and commit more money to protecting their own nation. News flow has been positive, earnings forecasts have been upgraded many times, and investors felt the geopolitical backdrop warranted owning these types of companies.’
Elsewhere, ProCook shares rose 4.4%. The company predicted annual profit to be ‘marginally’ ahead of market expectations, shaking off ‘subdued’ economic conditions.
The Gloucester-based kitchenware company reported revenue of £13.2 million for the fourth quarter for the year ended March 31, a rise of 4.8% on-year. It would mean full year revenue of £62.6 million, an increase of 0.4% from the previous year.
ProCook said its fourth-quarter sales were in line with board expectations. It also noted ‘strong margin and cost discipline’. It means it expects full-year underlying pretax profit to be between £500,000 and £1.0 million, which would top the current company-compiled consensus of £400,000, and represent a swing from a £200,000 loss in financial 2023.
Tasty shares tumbled 17% as it announced a restructuring plan to combat ‘difficult recent trading conditions’, and struck a £750,000 loan agreement to bolster its coffers and ‘stabilise the company’ in 2024.
It plans to close ‘20 loss-making sites’. For the 53 weeks to December 31, Tasty expects to report revenue of £46.9 million, a 6.6% increase from the £44.0 million of revenue in the year prior.
It expects to post a loss before interest, tax, depreciation and amortisation of £900,000 narrowing from a loss of £2.7 million.
‘The group has made reasonable progress since the year end and despite difficult recent trading conditions, management continue to navigate through challenging times to mitigate cost rises and lower trading performance,’ Tasty said.
‘The cost-of-living crisis, transportation strikes, and interest rate rises continued to significantly impact 2023 revenue and inflationary pressure on labour, food and utilities continue to adversely affect profitability. The group’s financial performance has been inhibited by a tail of underperforming sites, despite efforts at improving operational performance.’
The loan agreement is with Will Roseff, a ‘high net worth investor’ who is a shareholder in bet365. He is also a director at the gambling firm.
Wednesday’s economic calendar has the US inflation reading and Fed minutes at 1330 BST and 1900 BST. There is a producer price index reading from Japan overnight.
The UK corporate calendar has annual results from grocer Tesco.
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