The London market returned from a three-day holiday weekend in a positive frame of mind on Monday, helped by positive results from lender HSBC.
The week ahead holds some key economic data and central bank decisions, with a surprise from Australia on Monday to get things underway.
The FTSE 100 index opened up 17.45 points, 0.2%, at 7,888.02. The FTSE 250 was up 128.03 points, 0.7%, at 19,553.17, and the AIM All-Share was up 12.01 points, 0.3%, at 4,295.84.
The Cboe UK 100 was up 0.3% at 788.87, the Cboe UK 250 was up at 0.9% at 17,194.69, and the Cboe Small Companies was up 0.2% at 13,495.41.
In Paris the CAC 40 in Paris was down 0.1%, while in Frankfurt the DAX 40 was up 0.1%.
The dollar was stronger in early exchanges in Europe.
Sterling was quoted at $1.2504 early Tuesday, lower than $1.2575 at the London equities close on Friday. The euro traded at $1.0991, lower than $1.1040. Against the yen, the dollar was quoted at JP¥137.67, up versus JP¥136.18.
Investors on Tuesday will be keeping a close eye on the eurozone consumer price index reading at 1000 BST. The key inflation report comes two days before the European Central Bank is due to announce its rate decision on Thursday.
‘According to the consensus of analyst forecasts on Bloomberg, Eurozone’s headline inflation may have popped back to 7.0% in April (from 6.9% in March] due to the rise in energy prices, yet core inflation is seen steady at 5.7% - the historical high level. If inflation data doesn’t surprise to the upside, and if the bank lending survey doesn’t ring the alarm bell about credit growth, the ECB should be happy to deliver a 25 basis point hike at this week’s meeting,’ said Swissquote Bank senior analyst Ipek Ozkardeskaya.
Before the ECB’s decision on Thursday, the US Federal Reserve will announce its own rate decision on Wednesday. Market consensus is expecting another 25 basis point hike, bringing rates to their expected peak.
In Australia, equities took a hit as the central bank announced a surprise interest rate hike.
The Reserve Bank of Australia lifted the key interest rate by 25 basis points to 3.85%, wrong-footing many economists who predicted there would be no change. Figures released in late April showed that consumer price inflation slowed to 7.0% from 7.8% in December but still stubbornly above the bank’s target of between 2% and 3%.
Reserve Bank Governor Philip Lowe said inflation had ‘passed its peak’, but was still too high.
‘Given the importance of returning inflation to target within a reasonable timeframe, the board judged that a further increase in interest rates was warranted today,’ he said.
The S&P/ASX 200 in Sydney closed down 0.9%. Elsewhere in Asia on Tuesday, the Nikkei 225 index closed up 0.1% in Tokyo. In China, Shanghai remained closed for the Labour Day holiday. The Hang Seng index in Hong Kong was up 0.4%.
In early UK economic news, there were ‘tentative signs of a recovery’ in UK house prices, according to mortgage lender Nationwide. In April, house prices rose 0.5% from the previous month, halting seven consecutive months of decline.
The pace of decline in annual house prices also slowed to 2.7% in the month, compared to 3.1% annually in March.
Shares in UK housebuilders were among the top performers at the open, with Persimmon up 5.5%, Taylor Wimpey up 2.8% and Barratt Developments up 2.7%.
Elsewhere in the FTSE 100, HSBC added 4.0%, as it announced the reinstatement of a quarterly dividend and a $2 billion share buyback programme amid surging first-quarter profit.
In the first quarter of 2023, the bank said pretax profit more than tripled to $12.89 billion from $4.14 billion a year before. This was well above market consensus of $8.64 billion.
‘This included a $2.1 billion reversal of an impairment relating to the planned sale of our retail banking operations in France, as the completion of the transaction has become less certain, and a provisional gain of $1.5 billion on the acquisition of Silicon Valley Bank UK Ltd,’ HSBC explained.
Net interest income rose 38% year-on-year to $8.96 billion from $6.48 billion. Market analysts had been expecting $8.85 billion, according to company-compiled consensus. Overall net operating income reached $19.74 billion, compared to $11.67 billion a year before.
At the other end of London’s large-caps was BP, with the oil major’s shares losing 3.9% upon the release of quarterly results.
BP said in the first quarter of 2023, total revenue rose to $56.95 billion from $51.22 billion a year before, but was lower than $70.36 billion in the fourth quarter.
BP swung to a pretax profit of $11.85 billion from a loss of $17.54 billion a year before. It also swung to a replacement cost profit before interest and tax of $13.23 billion from a $20.40 billion loss.
BP announced a dividend of 6.61 cents per share for the first quarter, up from 5.46 cents a year before, but unchanged from the fourth quarter. It scaled back its share buyback to $1.75 billion this quarter, compared to the $2.75 billion programme announced in the previous quarter.
Brent oil was trading at $79.32 a barrel early Tuesday, lower than $79.87 late Friday. Gold was quoted at $1,983.72 an ounce, edging lower from $1,990.27.
Educational materials publisher Pearson was the worst performer in the FTSE 100, falling 5.3%. The stock had gained 4.3% on Friday, after announcing a share buyback and positive first quarter.
In the FTSE 250, cruise operator Carnival rose 4.7%, as its maritime peer Norwegian Cruise closed up 8.9% in New York following strong first-quarter results.
On AIM, Longboat Energy shares surged 97%.
The North Sea-focused oil explorer and producer announced a new agreement with Japan Petroleum Exploration Co for a significant investment into its Norwegian subsidiary, Longboat Energy Norge, in order to form a joint venture.
The JV will be called Longboat Japex Norge, and will receive a cash investment of $50 million for a 49.9% stake. Japan Petroleum will also provide the JV with a $100 million acquisition financing facility.
Wall Street was open on Monday and ended lower, with the Dow Jones Industrial Average down 0.1%, the S&P 500 marginally lower, and the Nasdaq Composite down 0.1%.
Still to come on Tuesday’s economic calendar, there’s the latest series of manufacturing purchasing managers’ index prints from the UK, EU and Germany. There’s also flash eurozone inflation at 1000 BST.
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