Stock prices in London rose at midday on Monday as markets looked to positive news for the UK’s service sector and oil majors got a boost from a cut to oil production by Saudi Arabia.
The FTSE 100 index was up 40.52 points, or 0.5%, at 7,647.80. The FTSE 250 was up 112.29 points, or 0.6%, at 19,261.60, and the AIM All-Share was 2.36 points, or 0.3%, at 791.94.
The Cboe UK 100 was up 0.5% at 763.53, the Cboe UK 250 was up 0.6% at 16,796.69, and the Cboe Small Companies was up 0.5% at 13,378.48.
Survey data showed that the strong expansion for UK service providers continued during May, helping to boost the country’s private sector as a whole, despite a weakening manufacturing sector.
The S&P Global/CIPS services purchasing managers’ index edged down to 55.2 points in May from 55.9 in April. Remaining above the 50-point mark that separates growth from expansion, it shows the sector continued to expand, but at a marginally slower pace.
The strong second-quarter growth was fuelled by demand for consumer and technology services, and a ‘post-pandemic tailwind’ of households opting for spending on services rather than goods, S&P Global Market Intelligence Economics Director Tim Moore explained.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said that the final PMIs for May suggest the recovery in the private sector is gathering momentum and remain consistent with a 0.4% quarter-on-quarter expansion in gross domestic product in the second quarter of 2023.
The pound was quoted at $1.2386 at midday on Monday in London, lower compared to $1.2476 at the close on Friday.
In London, the top performers in the FTSE 100 were abrdn, Vodafone and Airtel Africa at midday. The stocks were up 4.1%, 3.9%, and 2.6%, respectively.
Shell and BP added 1.0% and 1.1% after Saudi Arabia announced it will reduce how much oil it sends to the global economy.
The country said it is taking a unilateral step to support the sagging cost of crude after two earlier production cuts by members of the Opec+ alliance of major oil-producing countries failed to push prices higher.
The rest of the Opec+ oil producers agreed to extend earlier cuts in supply through the end of 2024.
Brent oil was quoted at $77.41 a barrel at midday in London on Monday, up from $75.89 late Friday.
In contrast, gold was quoted at $1,943.77 an ounce, sharply lower against $1,963.45. Gold producer Endeavour Mining dropped 3.5% on the yellow metal’s declining price, making it the worst blue-chip performer at midday.
Mondi also traded at the bottom of the FTSE 100, down 2.4%.
The paper and packaging firm said is withdrawing the disposal of its most significant facility in Russia, Syktyvkar mill, due to lack of progress in gaining regulatory approvals in that country.
Mondi entered into an agreement to sell the Syktyvkar mill for around €1.5 billion in August 2022. The disposal was conditional on the approval of Russian government, however.
Despite failing to gain the necessary approvals, Mondi said it remains committed to divesting Syktyvkar and will continue to assess all alternative sale options.
In the FTSE 250, Asos jumped 8.7% to 382.30 pence amid reports by the Sunday Times that the online fashion retailer had received a takeover approach from a Turkish company backed by China’s Alibaba.
Citing ‘City sources,’ the newspaper said Trendyol approached its UK peer in late December with a potential deal that would have valued Asos at between £10 and £12 a share, triple its current price. The Times added there are currently no live talks.
Russ Mould, investment director at AJ Bell, commented: ‘Takeover interest often emerges when a broken company lays out a recovery plan and there are early signs it is working. Those green shoots can give a suitor confidence it is worth making a bid now rather than waiting for the company to be repaired and then having to pay a much higher price when the risks are lower.’
Elsewhere in London, Chill Brands climbed 13% after it said it agreed to relationships with specialist carriers and fulfilment providers for the home delivery of its products in all 50 US states.
On AIM, Tristel surged 15% after it was granted approval from the US Food & Drug Administration for its ultrasound disinfectant, Tristel Ult, for immediate sale.
Tristel Ult, a disinfectant gel which is used on endocavity ultrasound probes and skin surface transducers, will be its second product to be approved in the US, and will be launched in October.
In European equities on Monday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was marginally higher.
The eurozone private sector expanded in May, thanks solely to sustained strong performance from the services sector.
The HCOB eurozone services PMI fell to 55.1 points in May from 56.2 in April. Falling close to the 50-point mark that separates growth from contraction, it shows growth slowed during the month.
Demand for services continued to improve in the single currency area during the month, with a solid rise in new business intakes for the fifth month in a row.
‘The services sector is being supported by the strong labor market, rising wages and a tourism sector that is flourishing throughout Europe,’ said Hamburg Commercial Bank’s chief economist, Cyrus de la Rubia.
The euro stood at $1.0691 midday Monday, lower against $1.0728 at the close on Friday.
Stocks in New York were expected to open mixed on Monday. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index was seen flat, and the Nasdaq Composite was seen down 0.2%.
On Friday, US equities ended the week with a flourish as investors cheered strong jobs data, cooling wage growth and lawmakers passing a debt ceiling bill that averts a US default.
The Federal Open Market Comittee has now entered its black-out period ahead of its next interest rate decision on Wednesday next week. According to the CME FedWatch Tool, markets see a 79% chance the central bank will hold rates steady. Last week, markets only saw a 36% chance of this outcome.
Against the yen, the dollar was trading at JP¥140.31 midday Monday, higher compared to JP¥139.68 at the close on Friday.
Still to come in Monday’s economic calendar, the US composite and services PMIs will be published at 1445 BST. The US ISM services PMI will be released shortly after.
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