European equities opened in a tepid fashion on Tuesday, with market drivers scarce as focus turns to Thursday’s Bank of England decision.
The lack of a New York trading day overnight, due to Monday’s Juneteenth market holiday, also meant the European open lacked spark. It was a mixed day in Asia, meanwhile, after the People’s Bank of China cut interest rates.
The FTSE 100 index opened up 14.29 points, 0.2%, at 7,602.77. The FTSE 250 was down 33.29 points, 0.2%, at 18,821.00 and the AIM All-Share was down 1.58 points, 0.2%, at 787.95.
The Cboe UK 100 was up 0.2% at 758.30, the Cboe UK 250 was down 0.2% at 16,486.36, and the Cboe Small Companies was flat at 13,869.73.
Financial markets in New York were closed on Monday for the Juneteenth holiday.
In Asia on Tuesday, trading was mixed, despite China’s central bank cutting two benchmark interest rates as part of recent measures to boost economic growth in the country.
The one-year loan prime rate, which serves as a benchmark for corporate loans, was reduced to 3.55% from 3.65%, the People’s Bank of China said in a statement, while the five-year LPR, which is used to price mortgages, was cut to 4.20% from 4.30%.
This follows several similar measures in recent days in a bid to counter the post-Covid growth slowdown in the world’s second-largest economy. Last week, the PBoC lowered two other key rates and pumped billions into financial markets, as fresh data showed the economy continued to struggle.
The Nikkei 225 index in Tokyo closed up 0.1%. In China, the Shanghai Composite closed down 0.5%, while the Hang Seng index in Hong Kong was down 1.5%. The S&P/ASX 200 in Sydney closed up 0.9%.
Meanwhile, the dollar was slightly stronger in early exchanges in Europe on Tuesday.
Sterling was quoted at $1.2778 early Tuesday, down from $1.2797 at the London equities close on Monday. The euro traded at $1.0922, lower than $1.0928. Against the yen, the dollar was quoted at JP¥141.96, up versus JP¥141.85.
The next key market catalyst will come in the form of UK inflation data on Wednesday morning, which will inform the Bank of England’s interest rate decision on Thursday. The central bank is expected to enact a 25 basis point hike.
‘If we look at BoE pricing, the terminal base rate moved to 5.97%, which implies 147bp of additional rate hikes.’ Rabobank analysts commented.
‘This compares to a Bloomberg consensus among economists of a terminal rate of 5.00% and Rabo’s expectation of 5.25% - in short, there is a significant discrepancy between pricing and the views of economists.’
Kantar data brought some slightly more positive news for UK households, with grocery inflation easing to its slowest pace of the year so far. The price of groceries was 16.5% higher year-on-year for the four weeks to June 11.
‘Price rises are now being compared to the increasing rate of grocery inflation seen last summer, which means that it should continue to fall in the coming months, a welcome result for everyone,’ said Kantar analyst Fraser McKevitt.
The reading is still the sixth highest since 2008, however.
In the FTSE 100, Ocado was the worst performer, down 3.4%, as JPMorgan placed the retailer and warehouse technology firm’s stock on ’negative catalyst watch’. In addition, the Kantar data revealed its market share slipped to 1.7% in the 12 weeks to June 11 from 1.8% a year before.
Among mid-caps, SThree fell 1.3%.
The London-based staffing company reported a 2% constant currency, year-on-year fall in net fees during the half-year to May 31. This was against a strong post-Covid comparator, it noted.
Contract fees rose 3%, growing to represent 81% of net fees across the group, compared to 77% a year before. Permanent net fees, however, fell 19%, reflecting market conditions and tough comparatives, SThree explained.
Elsewhere in the recruitment sector, Hays added 0.6%, as Redburn started the stock with ’buy’, expecting the technical and temporary recruiter to outperform its specialist peers.
On AIM, automotive retail and service group Lookers said it has agreed to a takeover offer from Global Auto Holdings of 120 pence a share in cash, which values the firm at £465.4 million.
The offer is a 35% premium to the closing price of 88.7p on Monday. Global Auto is a related party to Alpha Auto Group, a private Canada-headquarter operator and consolidator of auto retail dealerships across North America.
The board of Lookers said they believe the offer represents a ‘compelling proposition’ for the firm’s shareholders, and will unanimously recommend the offer at an upcoming court meeting and general meeting.
Shares in Lookers were up 34% to 118.69p.
In European equities on Tuesday, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.4%.
Lanxess fell 16% in Frankfurt, as the Cologne-based chemicals company warned it expects second quarter earnings to be below market expectations, citing ‘generally very weak demand’ and customer destocking.
German producer price inflation cooled by more than expected, meanwhile.
Destatis said the producer price index cooled to 1.0% on an annual basis in May, compared to 4.1% in April. This was tamer than the FXStreet-cited market consensus of 1.7%.
Gold was quoted at $1,952.54 an ounce early Tuesday, little changed from $1,952.97 on Monday.
Brent oil was trading at $76.06 a barrel, edging up from $76.02.
Still to come on Tuesday’s economic calendar, there’s EU construction output data on 1000 BST.
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