Stocks closed largely down in London on Tuesday as the FTSE 100 dropped into the red despite US President Joe Biden and House speaker Kevin McCarthy reaching an agreement to temporarily suspend the US debt ceiling.
The FTSE 100 index closed down 105.13 points, or 1.4% at 7,522.07 on Tuesday in the first day of trade following a long weekend.
Meanwhile, the FTSE 250 ended up 13.28 points, or 0.1%, at 18,807.37. The AIM All-Share closed down 3.77 points, or 0.5%, at 787.94.
The Cboe UK 100 ended down 1.4% at 751.09, the Cboe UK 250 closed up 0.2% at 16,382.84, and the Cboe Small Companies ended down 1.2% at 13,147.28.
President Joe Biden and Republican Speaker Kevin McCarthy both said they are confident the bill will pass a House vote scheduled for Wednesday and then move swiftly to the Senate, but organized dissent could force some nerve-shredding delays.
The key deadline is June 5. This is when, according to Treasury estimates, the government will no longer have the funds required to pay all its debts and bills.
‘While this may temporarily end the stress...investors are likely to remain cautious for some time as the agreement still needs to go through Congress,’ warned Pierre Veyret, technical analyst at ActivTrades.
Stocks in New York were mixed at the London equities close, with the Dow Jones Industrial Average down 0.5%, the S&P 500 index was flat, and the Nasdaq Composite up 0.5%.
The pound was quoted at $1.2404 at the London equities close on Tuesday, up from $1.2325 at the close on Friday. Against the yen, the dollar was trading at JP¥139.74, lower compared to JP¥140.65 late Friday.
In London, Unilever was one of the worst blue-chip performers, finishing 3.1% lower on Tuesday.
The consumer goods company announced that Chief Financial Officer Graeme Pitkethly intends to leave the company at the end of May next year.
Pitkethly joined the company in 2002 as chief accountant and was appointed as CFO in 2015.
Diageo dipped 2.7% as it confirmed it has delisted from the Euronext Dublin, focusing its share trading on London and New York.
‘The decision by Diageo to delist was taken following a review of the trading volumes, costs and administrative requirements related to its listings on Euronext Paris and Euronext Dublin,’ the brewer and distiller said last month.
In the FTSE 250, Dr Martens closed 5.1% lower at 153.10 pence, after Royal Bank of Canada cut the boot maker to ’sector perform’ from ’outperform’ and its target price to 180 pence from 230p.
‘Whilst we view the longer-term growth potential for [Dr Martens] as attractive, we are mindful of nearer term challenges, particularly for the US market [which makes up 37% of revenues],’ RBC said.
Back in January, the bootmaker warned of ‘significant operational issues’ in the US, stemming from its Los Angeles distribution centre. This prompted a reduction in earnings guidance for its financial year ended March 31.
Looking ahead to financial 2024, the firm had guided for revenue growth in the mid-to-high single digits on a constant currency basis. This guidance is ‘likely to prove too optimistic’, according to RBC.
Dr Martens is due to report its annual results on Thursday.
RHI Magnesita jumped 24% to 2,532.00p after it received an offer for a 20% stake in the company that values RHI as a whole at £1.38 billion in total.
Ignite Luxembourg, a company indirectly managed by Rhone Holdings VI, offered to buy a 20% stake in RHI Magnesita at £28.5 per share in cash, a 39% premium to the stock’s close on Friday.
Rhone said it aims to buy a non-controlling minority stake in the Vienna-based supplier of refractory products. RHI Magnesita said its board is ‘considering its response to the partial offer and a further announcement will be made in due course’.
Hunting climbed 13% as it announced that its Asia Pacific operating segment has won a significant new oil country tubular goods contract with Cairn Oil & Gas, Vedanta, for its operations in Rajasthan, India.
The contract is worth up to $91 million and is for an estimated 100 wells, the energy services group said. With this order, Hunting’s sales order book is now about $575 million.
Elsewhere in London, DWF Group added 3.2% as it said it expects to report net revenue of around £380 million for the financial year ended April 30, which would reflect growth of more than 8% against the year prior.
Chief Executive Officer Nigel Knowles commented: ‘Our performance continues to show how robust a business we are, even in a challenging environment. We have delivered consistently strong revenue growth and underlying organic growth, with the initial benefits of our cost control programme also coming through.’
On AIM, Empire Metals surged 68% as it confirmed the presence of a giant-scale hydrothermal titanium and copper mineral system at its Pitfield project in Western Australia.
The firm said drilling has identified consistently high-grade titanium in thick intersections in the area, with titanium mineralisation of between 4% and 10% titanium oxide in 20 of the 21 holes drilled.
Empire Metals said the results also show highly anomalous copper values - greater than 100 parts per million - in 60% of the drill samples, with the average at 131 parts per million and the highest at 605.
In European equities on Tuesday, the CAC 40 in Paris ended down 1.3%, while the DAX 40 in Frankfurt ended 0.3% lower.
Economic sentiment in the eurozone took a hit in May, according to Eurostat survey data. The economic sentiment indicator fell to 96.5 points in May from 99.0 in April.
Bert Colijn, senior eurozone economist at ING, commented that the eurozone likely saw negative growth over the winter and added that May’s economic sentiment survey ‘does not suggest that a vibrant recovery is underway.’
‘Weak growth and a falling inflation outlook both add to expectations that the peak in [European Central Bank] rates is getting near,’ he continued.
On Thursday, the ECB’s most recent meeting minutes will be released. The next ECB interest rate decision will be on June 15.
The euro stood at $1.0721 at the European equities close on Tuesday, higher against $1.0703 at the same time on Friday.
Brent oil was quoted at $74.30 a barrel at the London equities close on Tuesday, down from $76.63 late Friday. Gold was quoted at $1,960.99 an ounce, higher against $1,939.81 at the close on Friday.
In Wednesday’s UK corporate calendar, there are full-year results from B&M European Value Retail, Tern, and Bloomsbury Publishing.
The economic calendar has US retail sales data at 1355 BST.
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