Share prices started the new week mostly higher, as investors looked past a dismal UK economic reading on Friday to fresh data due for release in the days ahead.
Wage and price inflation readings will be particularly influential on the thinking of the Bank of England, as interest rate hikes remain on the agenda for central banks globally.
‘The general state of the British economy is not a concern for the FTSE 100 stocks, where 80% of the revenues are made abroad. Therefore, any weakness in the UK economy... on the contrary, is supportive of the British big-cap index,’ said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The FTSE 100 index opened up 18.29 points, 0.2%, at 7,900.74 on Monday. The FTSE 250 was up 16.77 points, 0.1%, at 20,046.84. The AIM All-Share was down 1.88 points, or 0.2%, 872.51.
The Cboe UK 100 was up 0.3% at 790.76, the Cboe UK 250 was marginally higher at 17,473.11, and the Cboe Small Companies was up 0.3% at 13,861.51.
The UK’s economy flatlined in the last three months of 2022, according to data released on Friday last week. The Office for National Statistics recorded no growth at all in gross domestic product in the fourth quarter.
The UK chancellor warned on Friday that the nation is ‘not out of the woods’ despite avoiding a recession by a tiny margin last year, as economic forecasts for the year ahead remain grim.
The pound was quoted at $1.2051 at early on Monday in London, lower compared to $1.2072 at the London equities close on Friday.
‘The UK dodged a technical recession according to last week’s fourth quarter figures, but that was hardly the key data point the Bank of England was focused on. This week sees the release of jobs, wages, CPI and retail sales. Among those, tomorrow’s wages should be the most important release for the BoE’s next policy moves,’ said Francesco Pesole at ING.
UK wage and unemployment data will be released at 0700 GMT on Tuesday. The consumer price index for January is published on Wednesday and retail sales figures are released on Friday.
‘While total pay growth may have slowed modestly, we project regular (ex-bonus) pay to have picked up further to 6.6%,’ said Lloyds Bank. ‘In all, we expect [the labour market data] to do little to relieve Bank of England policymakers’ concerns about domestic inflationary pressures.’
In London, utility stocks were top performers on Monday morning. Centrica was up 1.8%, National Grid up 1.2% and United Utilities up 1.0%.
United Utilities and National Grid both benefited from Royal Bank of Canada reinitiating the stocks at ’outperform’.
Housebuilders were in the red, with Persimmon, Barratt Developments and Taylor Wimpey dropping to the bottom of the blue-chip index.
Persimmon was down 2.0%, Barratt down 1.2%, and Taylor Wimpey down 1.8%.
In the FTSE 250, BH Macro rose 1.6% as it announced it raised £315 million through an equity placing, intermediaries offer, and offer for subscription.
The company said it will invest the fresh cash in Brevan Howard Master Fund.
Network International lost 1.4% as Barclays cut the payments firm to ’equal-weight’ from ’overweight’ with a reduced price target of 300 pence.
Elsewhere in London, Kape Technologies jumped 12%, after it received a takeover offer from Unikmind Holdings, a company wholly-owned by Teddy Sapi, who holds around 55% of Kape.
The offer for $3.44 per Kape share, or 285 pence per share, values the entire company at around $1.51 billion or £1.25 billion. The offer price represents a 9.7% premium to Kape’s closing price of 260 pence on Friday.
Kape said that, regardless of the outcome of the offer, Unikmind intends to call a general meeting to try to pass a resolution to delist Kape from trading on AIM ‘as soon as reasonably practicable following the offer.’
Kape urged shareholders to take no action.
Asset manager MJ Hudson said Ernest & Young has quit as its auditor with immediate effect, less than 18 months after being appointed.
The letter of resignation from EY said: ‘We are ceasing to hold office because we have lost trust and confidence in the company’s management and those charged with governance, and in their ability, along with your finance team, to provide us with accurate and reliable information for audit.’
Consequently, MJ Hudson said it believes the finalising of its financial 2022 reports will ‘take some time’ as it commences a search for a new auditor.
The resignation was first reported by Sky News. Shares in MJ Hudson are suspended from trading.
In European equities on Monday, the CAC 40 in Paris was up 0.4%, while the DAX 40 in Frankfurt was up 0.1%.
Deutsche Bank Chief Executive Christian Sewing believes further interest rate hikes are ‘absolutely’ necessary in the fight against the eurozone’s high inflation.
‘The inflationary risks remain high. The cost of energy can easily rise again, and the reopening of China can also give prices a temporary boost,’ Sewing told the Welt am Sonntag newspaper.
The European Central Bank raised interest rates in the eurozone for the fifth time in a row at the beginning of February and held out the prospect of a further increase of another 50 basis point hike for its meeting on March 16.
The euro stood at $1.0677 early Monday, unchanged from $1.0677 at the London equities close on Friday. Against the yen, the dollar was trading at JP¥132.43, higher compared to JP¥131.44.
On Friday, reports in Japanese media, including the Nikkei business daily and public broadcaster NHK, said the government plans to nominate economics professor Kazuo Ueda as Bank of Japan governor.
Current chief Haruhiko Kuroda, the central bank’s longest-serving governor, is expected to step down when his second term ends on April 8.
The decision on his replacement will be presented to Parliament on Tuesday, the media reports said, without citing sources. The ruling coalition’s majority means it is almost guaranteed to pass.
In Tokyo on Monday, the Nikkei 225 index closed down 0.9%.
In China, the Shanghai Composite closed up 0.7%, while the Hang Seng index in Hong Kong closed down 0.1%.
The S&P/ASX 200 in Sydney closed down 0.2%.
In the US on Friday, Wall Street ended broadly higher, with the Dow Jones Industrial Average up 0.5% and the S&P 500 up 0.2%. The Nasdaq Composite, meanwhile, closed down 0.6%.
Brent oil was quoted at $85.55 a barrel at early in London on Monday, down from $86.41 late Friday. Gold was quoted at $1,860.33 an ounce, higher against $1,858.39.
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