Monday was trading like the calm before a storm, with little market direction ahead of several key US economic reports and a wave of earnings reports, including from the biggest of big tech.
The FTSE 100 was marginally in the red at midday on Monday, weighed by a poor performance by oil majors. The index was down 3.03 points at 7,910.88.
The mid-cap FTSE 250 was up 18.24 points, or 0.1% at 19,288.38, but the AIM All-Share was down 0.36 of a point at 829.94.
The Cboe UK 100 was up 0.1% at 791.50, the Cboe UK 250 was up 0.4% at 16,919.70, and the Cboe Small Companies was up 0.1% at 13,821.12.
Shell and BP were amongst the worst blue-chip performers at midday. The stocks were 0.9% and 0.7% lower, respectively, weighed down by softening oil prices.
Brent oil was quoted at $81.19 a barrel at midday in London on Monday, soft from $81.23 late Friday. A week ago, Brent fetched $85 a barrel.
‘With most central banks still battling to control inflation and set for further interest rate hikes, a growing number of traders and investors are assuming a scenario of lower-than-previously-expected oil demand. Unless there is an increase in demand for crude, the cuts in production recently announced by Opec+ are unlikely to offer much support to the price of the barrel, with the whole scenario largely hinging on developments in China,’ said Ricardo Evangelista, senior analyst at ActivTrades.
Faring better, JD Sports, CRH and abrdn were the top performers in the FTSE 100 at midday. The stocks were up 1.9%, 1.4%, and 1.3%, respectively.
In the FTSE 250, Trainline climbed 3.6% to the top of the index after UBS raised the ticketing platform to ’buy’ from ’neutral’ with a price target of 300 pence. The stock is currently trading at 248.60p.
Wizz Air rose 3.4% as Citigroup raised the low-cost airline to ’neutral’ with a price target of 3,000p. The stock is currently trading at 2,871.00p.
The Budapest-based airline on Monday announced a £5 million investment in biofuel company Firefly. The investment represents Wizz Air’s first in sustainable aviation fuel research and development, it said.
The partnership will allow Wizz Air to supply up to 525,000 tonnes of sustainable aviation fuel over 15 years to its UK operations, starting from 2028. The agreement has the potential to save 1.5 million tonnes of carbon dioxide equivalent, the airline said.
Elsewhere in London, Medica surged 33% after it said it has reached an agreement with private equity firm IK Investment Partners, on a takeover.
Moonlight Bidco, a wholly owned vehicle of IK Investment, will acquire the telemedicine services provider for 212 pence per share in cash. The deal values all of Medica at £269 million.
The price represents a 33% premium to the shares’ closing price of 160.0 pence on Friday. The stock is currently trading at 212.17p.
Peel Hunt analysts Miles Dixon and Edward Sham said: ‘Whilst we appreciate that some investors may want to see a premium greater than 32%, Medica’s share price has been range-bound for some time (significantly longer than the style rotation), and we believe this is a good price for a business that, in our view, requires investment in technology in order to maintain its market-leading position.’
On AIM, Karelian Diamond Resources jumped 8.8% after it said exploration programmes are planned to begin in the Kuhmo region of Finland for diamonds and in Northern Ireland for nickel, copper and platinum group metals.
Chair Richard Conroy said: ‘The work, in both cases, will give us additional information and in relation to Finland could include the discovery of diamonds in one or more of the kimberlite targets.’
In European equities on Monday, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was flat.
Germany business sentiment improved slightly in April, survey data showed. According to the ifo, the Business Climate index rose to 93.6 points in April from 93.2 in March.
‘This was due to companies’ improved expectations. However, companies assessed their current situation as a little worse. German business’s worries are abating, but the economy is still lacking dynamism,’ ifo said.
Stocks in New York were called lower, with the Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite all seen down 0.2%.
US shares ended higher on Friday amid better economic news for the US private sector after a week of banking earnings. This week, investors will be switching their attention from banks to big tech, with Microsoft, Alphabet, Amazon and Meta all reporting their earnings.
‘Cost-cutting has been a key driver for many of their share prices [in the tech sector] in recent months, yet investors will want to know that underlying business is still healthy otherwise the recent rally in US tech names could grind to a halt,’ said Russ Mould, investment director at AJ Bell.
Also eagerly watched this week will be an estimate of US gross domestic product, out on Thursday at 1330 BST.
In the final three months of 2022, US GDP expanded by 2.6% from the preceding quarter in the final three months of 2022. Markets are expecting GDP growth to slow to 2.0% in the first quarter of 2023, according to FXStreet.
The dollar was mixed. The pound was quoted at $1.2447 at midday on Monday in London, higher compared to $1.2410 at the close on Friday. The euro stood at $1.1008, higher against $1.0974. Against the yen, the dollar was trading at JP¥134.57, higher compared to JP¥134.28.
Marc Chandler, chief market strategist at Bannockburn Global Forex, commented: ‘The key question remains: how much of the Fed’s work is being done by the tightening of lending? Initially, economists, rushed to judgment in our view, claiming it was worth 50-75 [basis points].
‘Prior to the stress, the futures market had a nearly 5.75% terminal rate discount. Now, the derivatives market is saying that next month’s move to 5.25% is the final move. Yet, the risk of another hike seems underpriced.’
Gold was quoted at $1,984.77 an ounce, sharply higher against $1,977.53.
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