Stock prices in London were mostly flat on Tuesday morning despite broadly positive market sentiment elsewhere, as oil majors’ shares rose after the US and UK launched more strikes on the Houthis in Yemen.
The FTSE 100 index opened up 3.03 points at 7,490.73. The FTSE 250 was up 12.41 points, 0.1%, at 19,088.05, and the AIM All-Share was up 0.19 of a point at 735.53.
The Cboe UK 100 was slightly lower at 748.83, the Cboe UK 250 was flat at 16,507.91, and the Cboe Small Companies was down 0.1% at 14,847.06.
In European equities, the CAC 40 in Paris and the DAX 40 in Frankfurt were up 0.1%.
In early UK economic news, government borrowing dropped sharply in December, figures from Office for National Statistics showed. Public sector net borrowing, excluding public sector banks, amounted to £7.8 billion - some £8.4 billion less than the prior year. It was the lowest level for December since 2019.
Borrowing in the financial year to December was £119.1 billion, which was the fourth-highest for the period on record. It was 10% higher than the equivalent nine-month period of the prior fiscal year.
Public sector net debt excluding public sector banks was £2.686 trillion, which is provisionally estimated to be around 97.7% of the UK’s annual gross domestic product.
‘Next month’s data for January, which will include self-assessment income tax receipts, will be particularly revealing about the potential room Chancellor [Jeremy Hunt] has for tax cuts [in his upcoming March budget],’ Lloyds Bank analysts said.
AJ Bell’s head of financial analysis Danni Hewson commented: ‘For a chancellor hoping to fund a series of crowd-pleasing tax cuts in the not-too-distant future, the latest health check on public sector finances will be cause for celebration. Borrowing has fallen significantly due to the impact of cooling inflation on debt interest payments and the end of expensive energy schemes that had cushioned UK households from the worst impact of last year’s volatility.
‘There’s also more cash coming into the coffers thanks to that sneaky fiscal drag, which has helped boost the income tax take, and the flip side of those rising prices that have cost the government dearly is that VAT receipts are also up significantly on the same time last year.’
Sterling was quoted at $1.2742 early Tuesday, higher than $1.2717 at the London equities close on Monday. The euro traded at $1.0908, higher than $1.8990.
Associated British Foods rose 0.8%.
The company said revenue rose 2.8% to £6.89 billion in its first quarter ended January 6, or by 5.4% in constant currency. For Primark, sales rose 7.9% in constant currency, with the period getting off to a slow start amid unseasonal warm weather, but seeing strong Christmas trading. Like-for-like Primark sales rose 2.1% due to higher average selling prices.
Oil majors BP and Shell got a boost from rising oil prices, up 1.4% and 0.9% respectively.
Brent oil was trading at $80.34 a barrel, rising from $79.73 on Thursday afternoon, following the latest escalations in the Middle East.
The US and Britain launched new strikes on Yemen’s Houthis Monday, saying their second round of joint military action against the Iran-backed rebels was in response to continued attacks on Red Sea shipping.
The strikes will not go ‘unpunished’, the rebels warned on Tuesday, detailing 18 raids on their territory overnight.
Meanwhile, Crest Nicholson rose 1.4%.
The housebuilder said it has appointed Persimmon’s Martyn Clark as its new chief executive, replacing Peter Truscott, who is retiring after joining the firm in 2019. Clark is currently the chief commercial officer at rival Persimmon, and will join Crest later this year. Persimmon shares were up 0.5%.
Crest also reported its annual results for the year ended October 31. Revenue fell 28% year-on-year to £657.5 million from £913.6 million, while pretax profit dropped 30% to £23.1 million from £32.8 million. Home completions dropped similarly by 26% to 2,020 from 2,734. Still, the firm left its total dividend unchanged at 17.0 pence per share.
The housebuilder shared a cautiously optimistic outlook for its current financial year.
‘Recently there have been some positive macro trends with inflation and mortgage rates falling, which bode well for the housing sector. Although it is too early to gauge customer behaviour, we have been encouraged by an increase in customer interest levels and inquiries this calendar year,’ said outgoing CEO Truscott.
Among London’s small-caps, Marston’s rose 2.1%.
The pub operator reported strong trading over Christmas, ahead of its annual general meeting later on Tuesday morning. In the 16 weeks to January 20, total retail sales in the firm’s managed and franchised pubs rose 8.8% year-on-year, with strong sales of both food and drink.
Meanwhile, Henry Boot dropped 11%
The property developer warned it expects profit for 2024 to be significantly below current market consensus. It points to ‘extended payment profiles’ with major housebuilders on strategic land sales, which will keep gearing at the upper end of its optimum range. It anticipates profit in 2023 to meet market expectations, however.
In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.4%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.3%.
In Asia on Tuesday, the Nikkei 225 index in Tokyo closed down 0.1%.
The Bank of Japan maintained its signature monetary easing measures on Tuesday, as speculation grows of a shift away from its ultra-loose stance.
After a two-day policy meeting, board members decided to keep interest rates in negative territory – a global anomaly that has driven down the yen against the dollar, while also leaving unchanged the band in which rates for 10-year government bonds fluctuate.
Analysts had predicted the BoJ would stand pat, partly to avoid further disruption after an earthquake on New Year’s Day killed at least 233 people in central Japan.
The BoJ sees the increases in prices as driven by temporary factors including higher energy costs, and on Tuesday it revised down its inflation forecast for the next fiscal year to 2.4% from 2.8%.
Against the yen, the dollar was quoted at JP¥147.57, down versus JP¥147.94.
In China, the Shanghai Composite was up 0.6%, while the Hang Seng index in Hong Kong jumped 2.7%.
Traders were cheered by reports that Chinese authorities were considering a blockbuster boost to equities after a painful start to the year.
Authorities are looking at a raft of initiatives, Bloomberg reported, adding that policymakers were seeking to mobilise nearly $280 billion, mainly from the offshore accounts of state-owned enterprises.
The S&P/ASX 200 in Sydney closed up 0.5%.
Gold was quoted at $2,031.07 an ounce early Tuesday, higher than $2,024.07 on Monday.
Still to come in Tuesday’s economic calendar, there will be consumer confidence data out for the eurozone.
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