Share prices in London started the day mixed on Tuesday, as a leap in profit for oil major BP supported the FTSE 100 but the rest of the London market continued to suffer from poor economic data and expectations that more interest rate hikes lay ahead.
The large-cap index was up 33.89 points, 0.4%, at 7,870.60. The FTSE 250 was down 31.42 points, 0.2%, at 20,377.96, and the AIM All-Share was down 2.51 points, 0.3%, at 881.28.
The Cboe UK 100 was up 0.5% at 787.20, the Cboe UK 250 was down 0.1% at 17,783.05, and the Cboe Small Companies was marginally higher at 14,144.98.
The FTSE 100’s European peers got no such oil boost and were lower early Tuesday. The CAC 40 in Paris was down 0.1%, and the DAX 40 in Frankfurt was down 0.2%.
Industrial production in Germany slumped at the end of 2022, new data showed on Tuesday. According to figures from Destatis, industrial production fell 3.1% in December from the month before. In November, it had risen by 0.4%. On an annual basis, industrial production was down 3.9% in December, worsening from a 0.5% annual decline in November.
In 2022 as a whole, German industrial production was 0.6% behind 2021.
‘Combined with the poor retail sales and trade reports that we got last week, it shows that Germany had a very weak end of 2022,’ commented Oxford Economics. ‘Barring any strong backward revisions, this means that Germany is on course to contract into Q1 as well.’
The dollar was mixed early Tuesday. Sterling was quoted at $1.2018, lower than $1.2026 at the London equities close on Monday. The euro traded at $1.0718, down from $1.0737.
However, against the yen, the dollar was quoted at JP¥131.78, down versus JP¥132.80.
New York ended lower on Monday, with the Dow Jones Industrial Average down 0.1%, the S&P 500 down 0.6%, and the Nasdaq Composite down 1.0%.
In Asia on Tuesday, the Nikkei 225 index closed marginally lower in Tokyo. In China, the Shanghai Composite rose 0.3%, while the Hang Seng index in Hong Kong added 0.4%.
The S&P/ASX 200 stock index in Sydney closed down 0.5%, after the country’s central bank lifted interest rates by 25 basis points to 3.35% - a 10-year high.
In UK economic news, retail sales growth slowed last month, with consumers reining in spending amid rampant inflation.
According to the latest British Retail Consortium-KPMG tracker, UK retail sales rose by 4.2% on-year in January. Growth slowed markedly from 12% a year earlier. It was also down on the three-month average of 5.2%. On a like-for-like basis, sales rose 3.9% yearly in January, slower than the 4.9% three-month average.
Meanwhile, UK house prices remained stable in January, according to Halifax’s house price index. This follows a 1.3% monthly fall in December and a 2.4% drop in November. The typical UK property now costs £281,684, little changed from £281,713 in December.
On an annual basis, prices were 1.9% higher - the lowest level of growth in the last three years. In December, prices saw annual growth of 2.1%. Compared to the peak back in August, UK house prices are 4.2% lower.
In London, BP was the top performer, up 3.7%. The oil major said underlying replacement profit more than doubled in 2022, in line with increasing natural gas and oil sales from rising prices.
BP said 2022 underlying replacement cost profit was $27.65 billion, multiplying from $12.82 billion in 2021, or to $46.04 billion from $22.34 billion before interest and tax.
This was underpinned by rising underlying pretax RC profit in gas and low carbon energy to $16.06 billion from $7.53 billion, and to $20.22 billion from $10.29 billion in oil production and operations.
In the three months that ended December 31, underlying pretax RC profit was up 32% to $9.32 billion from $7.05 billion a year earlier; for gas and lower carbon energy, it rose 43% to $3.15 billion from $2.21 billion; and for oil production and operations, it was up 10% to $4.43 billion from $4.02 billion.
Across the full year, BP’s performance soared, owing to rising natural gas and oil prices across the year.
For all of 2022, sales and other operating revenue was $241.39 billion, up 53% from $157.74 billion in 2021, while pretax profit ticked down to $18.04 billion from $18.08 billion, due to a net impairment and losses on sale of businesses and fixed asset, as well as higher purchases and other expenses.
Looking ahead, BP said it expects oil prices to be supported by recovering demand from China. For gas prices, BP said the outlook depends on the pace of Chinese demand recovery and weather in the Northern Hemisphere.
Oil peer Shell added 1.7% in a positive read-across.
Brent oil was trading at $82.44 a barrel early Tuesday, up from $79.90 late Monday. Gold was quoted at $1,874.83 an ounce, higher than $1,868.01.
In the FTSE 250, Auction Technology added 5.4%, as it announced a new acquisition of a US estate sales listing site.
The online auction firm has bought Vintage Software, which trades as estatesales.net, in a $40 million deal. The acquisition to be is expected to accretive to the group’s adjusted earnings in the current financial year.
At the other end of London’s mid-caps was Morgan Advanced Materials, down 6.9%.
The specialist industrial product manufacturer warned it expects around £8 million to £12 million in exceptional costs from the cyber attack it suffered last month.
As a result of the disruption from the attack, Morgan expects adjusted operating profit for 2023 to be around 10% to 15% below previous expectations. More positively, Morgan expects its 2022 annual trading performance to be slightly ahead of market expectations.
The firm has pushed back the release of its 2022 results, which now will be released by the end of April.
On AIM, Smartspace Software jumped 15%.
The building-focused software provider said revenue for the year to January 31 was up 36% to £7.0 million from £5.1 million.
The firm said adjusted loss before interest, tax, depreciation and amortisation is expected to be better than market consensus forecasts.
‘We have continued to make good progress despite challenging macro-economic indicators and inflationary environment. Even despite the economic headwinds and market turmoil, we believe that we are in a good place and on track to ensure we achieve sustained growth for the business going forward,’ said CEO Frank Beechinor.
Still to come on Tuesday’s economic calendar, US President Joe Biden will deliver his State of the Union address on Tuesday evening in Washington.
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