European markets were in confident mood as traders returned to desks from the Easter break on Tuesday, as comments from the International Monetary Fund on the fate of interest rates boosted sentiment.
The dollar was largely higher than it ended on Thursday. Miners were among the stocks leading the way on the FTSE 100.
The FTSE 100 index was up 18.37 points, or 0.2%, at 7,759.93. The FTSE 250 was up 133.23 points, or 0.7%, at 18,930.26, and the AIM All-Share was up 5.08 points, or 0.6%, at 816.23.
The Cboe UK 100 was up 0.3% at 776.22, the Cboe UK 250 was up 0.7% at 16,499.37, and the Cboe Small Companies was up 0.3% at 13,546.11.
A poll of polls by accountancy firm BDO has suggested that UK inflation is still rising rapidly, but has fallen to its lowest point for a year.
BDO’s inflation index dropped by 2.19 points, the consultants said, dropping to 110.99 points. A score above 95 means that inflation is growing.
It is the lowest score since March 2022, but still high by historical standards as the cost of living continues to bite households and costs rise for businesses.
Nonetheless, despite high inflation levels, a recent rise in global interest rates will only be temporary, the International Monetary Fund predicted on Monday.
Central banks across the globe have moved to lift rates from historic lows in a bid to keep rampant inflation under control. However, once spiralling prices are contained, rates are likely to come down, the IMF said.
‘Our analysis suggests that recent increases in real interest rates are likely to be temporary. When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels,’ the IMF said.
‘How close to those levels will depend on whether alternative scenarios involving persistently higher government debt and deficits, or financial fragmentation materialize. In large emerging markets, conservative projections of future demographic and productivity trends suggest a gradual convergence towards advanced economies’ real interest rates.’
In European equities on Tuesday, the CAC 40 in Paris was up 0.9%, while the DAX 40 in Frankfurt was up 0.5%.
‘All benchmarks from London to Madrid were in the green in early trading, led higher by commodities as basic material and energy shares were among the top performers this morning,’ said Pierre Veyret, technical analyst at ActivTrades.
In London, Antofagasta, Rio Tinto, Glencore, and Anglo American were among the best performing blue-chip stocks.
Antofagasta rose 3.5%, Rio Tinto climbed 3.3%, while Glencore and Anglo American added 2.5%.
Meanwhile, Shell was marginally higher, while BP was up just 0.2% as oil prices surrendered recent ground.
Brent oil was quoted at $83.86 a barrel at midday in London on Tuesday, down from $84.48 late Thursday. Gold was quoted at $2,004.63 an ounce against $2,009.21.
In the FTSE 250, Harbour Energy dropped 2.7%. It agreed to develop the Viking carbon capture & storage transportation and storage project with BP.
Harbour continues to operate the Viking CSS with a 60% interest, with BP buying a 40% non-operated stake. Harbour did not give any financial details of the deal.
Harbour said that the project has the potential to capture and store up to 10 million tonnes of carbon dioxide per year by 2030, one third of the UK’s government target of up to 30 million tonnes.
‘The delivery of the Viking project could be transformational for the region, potentially unlocking up to £7 billion of investment across the full CO2 capture, transport, and storage value chain over the next decade, creating over 10,000 jobs during construction, and providing an estimated £4 billion of gross value add to the Humber and its surrounding areas,’ the company said.
Harbour anticipates a final investment decision in 2024, with the project potentially operational as early as 2027.
JTC rose 1.0% as it said yearly revenue hit the £200.0 million mark for the first time, and it hailed ‘good momentum’ at the start of 2023.
The fund management company said its 2022 revenue was £200.0 million, up 36% from £147.5 million in 2021. Net organic growth picked up to 12% compared to 9.6% a year prior.
Elsewhere in London, Hollywood Bowl climbed 1.5% as the ten-pin bowling operator reported solid interim revenue growth amid strong consumer demand.
The firm said revenue in the half-year ended March 31 was up 11% year-on-year to a record £111.1 million from £100.2 million a year prior.
It noted ‘continued strong customer demand’, with like-for-like revenue growth of 3.5%. Analysts at Berenberg said this growth was ahead of their expectations and was ‘impressive’ in light of the uncertain macroeconomic environment.
While ‘mindful’ of the economic backdrop, Hollywood said it is confident of its prospects for financial 2023 as a whole. It said it expects to announce its interim dividend alongside its half-year results in May.
Cineworld plunged 27% as it updated on its Chapter 11 proceedings in the US, filing a plan of reorganisation in a Texas bankruptcy court and a disclosure agreement.
Cineworld noted that the plan would mean a wipe out of shareholder value.
The company reiterated the plan has support from lenders holding a majority of its various debt instruments. It seeks to confirm the plan on an ‘expeditious’ timeline, and confirms the restructuring does not allow for recovery of any shareholder value.
‘During the restructuring process, Cineworld continues to operate its global business and cinemas as usual without interruption,’ it said.
Stocks in New York were called higher, with the Dow Jones Industrial Average seen 0.1% higher, and the S&P 500 index and the Nasdaq Composite both 0.2% higher.
Job gains in the US eased in March for a second straight month, government data showed Friday, adding to signs that the economy is cooling as policymakers push on in their fight against inflation.
The country added 236,000 jobs in March, compared to a revised 326,000 in February and 472,000 in January.
On Wednesday, US inflation data for March will be released at 1330 BST. Markets are expected the annual inflation rate to cool to 5.2% from 6%, according to FXStreet.
Chris Turner at ING said that the March CPI should make the case for a 25 basis point interest rate hike from the US Federal Reserve at its next meeting on May 3.
‘Any signs that the Fed is very close to a peak in rates - and that it will have the ability to cut rates if need be - would be seen as risk-positive and dollar negative,’ Turner said.
The pound was quoted at $1.2436 at midday on Tuesday in London, unchanged compared to $1.2436 at the equities close on Thursday.
The euro stood at $1.0909, lower against $1.0919. Against the yen, the dollar was trading at JP¥133.19, sharply higher compared to JP¥131.72.
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