The FTSE 100 on Tuesday snapped its seven day losing streak, as investors welcomed better-than-expected public sector borrowing figures in the UK.
Eyes also remain on the US monetary policy outlook, with Federal Reserve Chair speaking at the Jackson Hole meeting in Wyoming, US, which begins on Thursday.
The FTSE 100 index closed up 12.94 points, or 0.2% at 7,270.76 on Tuesday, ending its seven day losing streak.
The FTSE 250 ended up 125.27 points, or 0.7%, at 18,024.26. The AIM All-Share closed up 2.97 points, or 0.4%, at 732.18.
The Cboe UK 100 ended up 0.2% at 724.99, the Cboe UK 250 closed up 0.5% at 15,813.73, and the Cboe Small Companies ended up 0.2% at 12,691.03.
Public sector net borrowing, excluding public sector banks, reached £4.3 billion in July. This was £3.4 billion more than in July 2022. However, it was below the consensus of around £5.0 billion, as well as the Office for Budget Responsibility’s £6.0 billion forecast.
‘The chancellor has responded to today’s figures with textbook precision, urging continued caution, fiscal responsibility and no detours from the current conservative course. But privately he must be letting out a rather large sigh of relief that these numbers at least give him a bit of wiggle room to consider crowd-pleasing tax cuts before the next election,’ AJ Bell analyst Danni Hewson said.
In London, there were broad-based gains in the FTSE 100 on Tuesday with Fresnillo, RS Group and Unite Group among the top blue-chip performers. The stocks closed up 5.6%, 3.5% and 2.6%, respectively.
JD Sports, Ocado and Melrose Industries were among the index’s worst-performers, meanwhile, finishing 6.2%, 2.1%, and 1.4% lower, respectively.
In the FTSE 250, John Wood Group closed 4.7% higher on Tuesday as it reported a slightly narrowed pretax loss in the first half of 2023, amid higher revenue and gross profit.
The engineering and consulting business reported a pretax loss from continuing operations of $26.0 million for the six months that ended June 30, narrowed from $30.5 million a year before.
Revenue rose by 17% to $2.99 billion from $2.56 billion, lifting gross profit by 22% to $345.5 million from $283.6 million.
‘After a bid from private equity firm Apollo collapsed earlier this year Wood Group has been under pressure to deliver, and these results go some way towards doing that as it pulls the rabbit of slightly improved full year guidance out of its hat,’ Russ Mould, investment director at AJ Bell commented.
For 2023, John Wood expects revenue to be around $6 billion, up from $5.44 billion the previous year.
Crest Nicholson was among the FTSE 250’s worst-performing stocks again on Tuesday, closing 2.5% lower after losing 8.2% on Monday.
The housebuilder lowered its profit guidance on Monday after warning that conditions in the housing market worsened over the course of the summer. It added that it does not expect conditions to improve before its financial year-end on October 31.
The company now expects to achieve annual adjusted pretax profit of £50.0 million, which would represent a 64% decline from the £137.8 million achieved in the prior year. It had previously expected a profit outcome of £73.7 million, the company said in June, which would have been in line with published consensus at the time.
Elsewhere in London, Cake Box added 2.7% as it reported its sales momentum has increased in recent weeks, while input cost inflation has eased.
The chain of fresh cream cake shops said like-for-like sales were up 6.8% in the first 17 weeks of the financial year that began on April 1. This represents a pick-up from 5.4% growth in the first 11 weeks.
On AIM, Plexus surged 40% after it announced that the value of a major contract from March has increased by 60%.
The engineering services provider said its wellhead equipment and sealing technology supply contract is now worth around £8 million, up from around £5 million.
In European equities on Tuesday, the CAC 40 in Paris finished 0.6% higher, while the DAX 40 in Frankfurt closed up 0.7%.
Stocks in New York were mixed at the London equities close, with the Dow Jones Industrial Average down 0.3%, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.4%.
The tech-heavy Nasdaq was upbeat ahead of the release of quarterly results from chip maker Nvidia.
‘A very high bar is being set for the chipmaker and the disappointment could be amplified if it falls short of heightened expectations,’ said AJ Bell’s Mould.
Nvidia was down 1.8% at $461.42 in New York at the time of the London equities close but had rallied to an all-time high of $481.87 earlier in the day.
The dollar was mixed as traders looked ahead to Jackson Hole, the Kansas City Federal Reserve’s annual symposium, attended by top central bankers from around the world.
The pound was quoted at $1.2734 at the London equities close on Tuesday, virtually unchanged from $1.2732 at the close on Monday. The euro stood at $1.0851, down from $1.0887. Against the yen, the dollar was trading at 145.79, lower compared to JP¥146.31 late Monday.
Ricardo Evangelista, senior analyst at ActivTrades, warned that any downside for the dollar will be ‘limited’, as trading for the currency will likely remain within a ‘relatively tight’ price range before Federal Reserve Chair Jerome Powell’s speech at Jackson Hole on Friday.
Powell is expected to speak on Friday at the Jackson Hole meeting, which begins the day prior. Analysts at Brown Brothers Harriman expect a ‘hawkish tone’ to emerge from the symposium, with Powell predicted to underscore the central bank’s commitment to meeting its 2% inflation target.
Currently, markets see an 85% chance of the Fed holding rates steady at its next meeting in September, according to the CME Fed Watch Tool. For the November meeting, markets see just a 57% chance of rates remaining unchanged.
These predictions may change should Powell come across as particularly hawkish or surprisingly dovish on Friday, however.
Brent oil was quoted at $84.25 a barrel at the London equities close on Tuesday, down from $84.98 late Monday. Gold was quoted at $1,897.80 an ounce, sharply higher against $1,888.81 at the close on Monday.
In Wednesday’s UK corporate calendar, there are half-year results from construction and engineering firm Costain.
The economic calendar has a slew of PMI prints, with the EU, UK and the US all reporting flash figures from 0900 BST.
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