Sterling was rebounding early Tuesday and stock prices were firm, as Liz Truss prepared to meet the Queen to be named as her 15th prime minister and to deliver a plan to address the energy crisis in the UK.
The FTSE 100 index was up 33.65 points, or 0.5%, at 7,320.85 early Tuesday. The mid-cap FTSE 250 index was up 274.95 points, or 1.5%, at 7,320.85. The AIM All-Share index was up 4.29 points, or 0.5%, at 865.43.
The Cboe UK 100 index was up 0.4% at 730.87. The Cboe 250 was up 1.6% at 16,290.57, and the Cboe Small Companies flat at 16,676.41.
In mainland Europe, the CAC 40 in Paris was up 0.3% while the DAX 40 in Frankfurt was 0.7% higher.
Sterling was quoted at $1.1592 early Tuesday, up sharply from $1.1507 at the London equities close on Monday.
‘The pound rallied this morning on the back of some reports that the new UK Prime Minister Liz Truss has drafted a £130 billion plan to fix energy bills. The news appears to partially ease the market's concerns - that have weighed on sterling - that Truss' promised tax cuts would ultimately worsen the inflation picture,’ analysts at ING said.
ING feels the pound could still face further volatility as Truss's plans come under scrutiny.
‘If tax cuts would likely argue in favour of larger BoE tightening, caps on energy bills might both reduce the risk of recession and trim inflation expectations: it will be interesting to see how the BoE addresses these policies. Yesterday, we heard some hawkish comments by MPC member Caroline Mann, and markets are closing in on pricing a 75bp move next week,’ ING said.
Added Holger Schmieding at Berenberg: ‘So far, the UK has offered less support to households than most other European countries. If Truss goes ahead with the reported idea, the UK would go super-European, intervening more than many EU governments.’
In London, Berkeley Group was one of the best blue-chip performers in early trade, adding 3.7%, after it said trading in the first four months of its new financial year was ahead of financial 2022.
‘The good level of demand continues to support pricing above business plan levels, which is sufficient to cover cost increases on a blended basis across Berkeley's developments,’ it added.
Berkeley said it on track to meet annual profit guidance, guiding for financial 2023 pretax profit of £600 million and £625 million for financial 2024. In financial 2022, it recorded pretax profit of £551.5 million.
Looking ahead, the housebuilder said its forward sales will be ‘marginally above’ the £2.17 billion booked as of April 30.
Peers Taylor Wimpey, Barratt Development and Persimmon were up 3.2%, 3.1% and 2.8%, respectively.
DS Smith was 2.8% higher.
The packaging firm said its its overall trading in its first quarter, ended June 30, was in line with management expectations.
DS Smith said its corrugated box volumes in the quarter declined ‘slightly’ on a like for like basis, as expected, but expects corrugated box volume growth of ‘at least’ 2% for financial 2023.
Separately, it said Finance Director Adrian Marsh will retire once a successor is in place. The process to find Marsh's replacement is underway, and will announce his retirement date ‘in due course’.
At the other end of the FTSE 100, Ashtead was down 1.7%, despite the industrial equipment rental company firm saying it has made a strong start to the new financial year. It warned that nterest costs are rising.
In the quarter ended July 31, pretax profit rose to $527 million from $416 million, with revenue up to $2.26 billion from $1.85 billion.
Chief Executive Brendan Horgan said: ‘The business is performing strongly, with revenue and operating profit ahead of our previous expectations. This performance is offset by increasing interest costs and therefore, we expect adjusted profit before taxation for the year to be in line with our previous expectations and the board looks to the future with confidence.’
Brent oil was trading at $95.51 a barrel, firm from $95.49 late Monday.
The US said Monday that oil production must be kept up to bolster global economic growth after the OPEC+ cartel agreed to cut supply to lift falling prices.
US President Joe Biden ‘has been clear that energy supply should meet demand to support economic growth and lower prices for American consumers and consumers around the world’, White House Press Secretary Karine Jean-Pierre said in a statement.
The US had pressed OPEC+ to increase output to bring down energy prices that have fuelled decades-high inflation.
The euro traded at $0.9968 early Tuesday, higher than $0.9919 late Monday. Against the yen, the dollar was quoted at JP¥141.59, up from JP¥140.53.
In Asia on Tuesday, the Japanese Nikkei 225 index closed up slightly. In China, the Shanghai Composite ended up 1.4%, while the Hang Seng index in Hong Kong was 0.1% higher in late trading.
Gold was quoted at $1,714.70 an ounce early Tuesday, higher than $1,710.56 on late Monday.
Still to come Monday, there is a UK construction PMI reading at 0930 BST, before US services PMI data at 1445 BST.
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