London’s miners got a boost from unconfirmed speculation that China is considering backing off its zero-Covid policy, which has damped the country’s demand for metals, while BP promised more shareholder returns as long as oil prices remain high.
The FTSE 100 index was up 98.58 points, or 1.4%, at 7,193.11 at midday in London. The FTSE 250 was up 399.68 points, or 2.2%, at 18,289.61, and the AIM All-Share was up 10.64 points, 1.3%, at 816.77.
The Cboe UK 100 was up 1.2% at 718.80, the Cboe UK 250 was up 2.2% at 15,696.73, and the Cboe Small Companies was up 0.3% at 12,375.84.
In European equities on Tuesday, the CAC 40 in Paris was up 1.8%, while the DAX 40 in Frankfurt was up 1.4%.
The rally in London continued throughout the morning, undeterred by a gloomy UK manufacturing survey, showing the sector has continued to weaken.
The seasonally adjusted S&P Global/CIPS UK manufacturing purchasing managers’ index slipped to 46.2 points in October from 48.4 in September. The reading was a 29-month low, but came in above the flash estimate of 45.8. With readings remaining below the 50.0 no-change mark, October marks the third consecutive month of contraction in UK manufacturing.
Among the key issues cited by factory owners were weak demand, high inflation, and supply chain constraints, as well as political and economic volatility.
Still to come, there will be a US manufacturing PMI at 1345 GMT.
Stocks in New York were called higher, with the DJIA up 0.6%, the S&P 500 index up 0.9%, and the Nasdaq Composite up 1.1%.
The dollar was lower at midday in London, as the two-day meeting of the US Federal Open Market Committee starts on Tuesday.
Sterling was quoted at $1.1544, higher than $1.1500 at the London equities close on Monday. The euro traded at $0.9938 at midday Tuesday, up from $0.9885 late Monday. Against the yen, the dollar was quoted at JP¥147.24, down from JP¥148.61.
‘The US economy has recently shown some signs of weakness, and pressure has been mounting for the central bank to take the foot of the monetary tightening accelerator, with growing concerns that its determination to curb inflation will end up breaking the economy,’ said ActivTrades senior analyst Ricardo Evangelista.
While a 75 basis hike point is widely expected to be announced on Wednesday, analysts will be watching closely for any hints of the central bank’s thinking about future rate hikes.
Following on Thursday will be the Bank of England’s interest rate decision. The central bank also is expected to enact a 0.75 percentage point increase to the base rate, which would take it to 3%.
‘As ever, we’ll see some investors demand aggressive action from the central bank to stop inflation getting out of control, but others will be worried that too big a rate hike is inappropriate for consumers and businesses already under financial pressure,’ said AJ Bell investment director Russ Mould.
In the FTSE 100, Ocado shares soared 37%.
The online grocer announced a partnership between Ocado Solutions and Lotte Shopping, the largest retail affiliate of the South Korean conglomerate Lotte Group. Ocado said the pair will develop a network of customer fulfilment centres in South Korea, with six planned by 2028. Ocado plans to roll out its in-store fulfilment solution in 2024, with the first CFC to go live in 2025.
No financial details were provided, but Ocado said: ‘Ocado group expects this deal to create significant long term value to the business. The impact of this transaction should be negligible on earnings in the current financial year as no cash fees will be recognised in revenue until operations commence.’
Ocado remains down 59% in 2022 so far, however.
BP continued ‘performing while transforming’ in the third quarter of the year. It recorded $57.81 billion in revenue during the quarter, up 52% from $37.87 billion a year prior but 19% lower from $67.87 billion in the second quarter.
It swung to a pretax profit of $1.98 billion from a loss of $495 million a year before. Third quarter profit was however significantly lower than £14.06 billion in the second quarter to June 3
BP also swung to a replacement cost profit of $23 million from a loss of $2.93 billion a year before. The profit is however dwarfed by a second quarter replacement cost profit of $7.65 billion.
The company said it plans to executive another $2.5 billion share buyback before the release of its fourth quarter results. Further, BP said it expects to be able to deliver share buybacks of $4.0 billion every year and increase annual dividends per share of around 4% through 2025, based on its forecast with a price of around $60 per barrel Brent.
‘The debate over the rights and wrongs of BP’s bumper profits will run and run, but from the narrow perspective of investment the oil major’s announcement of its fourth share buyback scheme in 2022 means the FTSE 100’s members are on track to return record amounts of cash to their shareholders this year,’ said AJ Bell’s Mould.
‘It also cements the oil and gas sector’s position at the top of the buyback charts, as ranked by industrial sector. This will doubtless make environmental campaigners despair, but it also may also mean their pleas for further windfall taxes resonate with politicians and the wider public alike.’
Mould noted that while BP can offset the windfall levy with investment in the UK, there is a growing risk that governments in other jurisdictions may decide to become ‘more aggressive’ in their taxation policies.
BP shares were trading marginally lower at midday in London.
Brent oil was trading at $94.41 a barrel Tuesday at midday, higher than $92.24 late Monday.
Blue-chip miners continued to add to their morning gains, remaining near the top of the FTSE 100, with Anglo American up 5.6%, Glencore up 5.1%, Rio Tinto up 4.8% and Antofagasta up 4.8%. They were benefiting from a rally in Chinese stocks on Tuesday.
This followed unconfirmed posts on Chinese social media saying officials were putting together a committee to discuss how to move the country away from its economically damaging zero-Covid policy, AFP reported. An improved economic outlook would bode well for miners, given that China is a major importer of industrial metals.
However, Bloomberg reported that Chinese Foreign Ministry spokesman Zhao Lijian said he is ‘not aware’ of such a committee.
Gold was quoted at $1,652.67 an ounce, higher than $1,638.60 .
On AIM, Westminster Group plunged 25%.
The provider of security services for sensitive places such as ports, airports and commercial buildings said it expects revenue to be around a third lower than market expectations for 2022 and loss before tax to be around half that of 2021, when Westminster’s pretax loss was £1.9 million.
This is mostly due to ‘slippage’ from a ‘multi-million-pound’ technology project for the Middle East & North Africa region.
‘Whilst we still expect to be awarded the contract this year, we are now running short on time to deliver and recognise revenues in 2022, and accordingly, depending on when the order arrives, some of this revenue is now likely to slip into 2023,’ Westminster said.
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