London stock prices were mixed early Tuesday after a similarly indecisive session in New York and weakness in Asia, as US politicians continue to fight over terms for raising the federal government debt limit.
The FTSE 100 index opened down 10.12 points, 0.1%, at 7,760.87. The FTSE 250 was up 12.74 points, 0.1%, at 19,286.08, and the AIM All-Share was up 0.47 of a point, 0.1%, at 808.68.
The Cboe UK 100 was down 0.2% at 775.45, whilst the Cboe UK 250 was up 0.1% at 16,801.09, and the Cboe Small Companies was up 0.1% at 13,593.69.
In the US on Monday, Wall Street ended mixed, with the Dow Jones Industrial Average down 0.4%, the S&P 500 flat, and the Nasdaq Composite up 0.5%.
A top US Republican on Monday said that his first one-on-one talks in months with President Joe Biden to avert a calamitous debtdefault were ‘productive’ but that there was still no deal.
The White House meeting came after Biden returned from a trip to Asia early to hammer out a deal ahead of the US Treasury’s June 1 cut off date for Congress to authorize more borrowing.
‘I felt we had a productive discussion. We don’t have an agreement yet, but I did feel the discussion was productive in areas [where] we have differences of opinion,’ House Speaker Kevin McCarthy said after the talks.
McCarthy told reporters that negotiators were going to ‘work through the night’ to move the sides closer and that he and Biden would ‘talk every day to try to find a way to get this done’.
Commented Rabobank: ‘It remains the desk’s base case that a deal will ultimately be reached prior to the X-date [of default] being reached. However, numerous headlines are likely to continue to emerge as both sides attempt to use the possibility of default to their advantage.’
Added AJ Bell investment director Russ Mould: ‘Experience tells investors that these stand-offs always end with a last-minute deal so the market is mostly taking this saga in its stride, particularly given commentary from both sides seems to be increasingly conciliatory.’
In the UK, government borrowing swelled to £25.6 billion last month amid the cost of energy support schemes, higher benefit payments, and rising debt interest, according to official figures.
The Office for National Statistics said it was the second-highest April borrowing on record, outstripped only by the pandemic-impacted month in 2020. It represented an £11.9 billion rise compared with the same month last year.
The latest figure was £7.7 billion bigger than economists had predicted and £3.1 billion larger than predictions from the UK government’s official forecaster, the Office for Budget Responsibility.
Meanwhile, UK grocery price inflation eased slightly for the second month in a row, but remained at its third-highest rate since 2008.
According to Kantar, grocery price inflation eased to 17.2% in the four weeks to May 14 from 17.3% in the previous four weeks.
At the current rate of inflation, the average UK household faces spending £833 extra on its annual grocery bill.
‘Grocery sales soared by 16% during the week of the coronation, adding up to an extra £218 million passing through the tills. Shoppers filled up their glasses, with sparkling and still wine especially popular. Sales of these products climbed by 129% and 33% respectively, driven by demand not price rises with wine inflation only at 1%,’ said Fraser McKevitt, Kantar’s head of retail & consumer insight.
In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was flat.
The asymmetrical performance of Germany’s private sector deepened in May, preliminary survey data showed on Tuesday, as growth in the services sector accelerated and the slump in manufacturing worsened.
The Hamburg Commercial Bank flash services purchasing managers’ index rose to a 21-month high of 57.8 points from 56.0 in April, topping FXStreet-cited market consensus of 55.5.
In stark contrast, the flash manufacturing PMI dropped to 42.9 from 44.5, showing the contraction in the factory sector of Germany has worsened.
Tuesday’s economic calendar has more flash PMI readings, including for the UK at 0930 BST and the US at 1445 BST.
The pound was quoted at $1.2414 early on Tuesday in London, down slightly compared to $1.2424 at the equities close on Monday. The euro stood at $1.0798, soft against $1.0802. Against the yen, the dollar was trading at JP¥138.44, down compared to JP¥138.52.
On the FTSE 100, BT shares were up 1.6%.
Billionaire telecom tycoon Patrick Drahi’s Altice UK Sarl said it has bought more BT shares, taking its stake to just under 25%.
Altice said that it has bought a further 650.0 million shares in the telecommunications company, increasing its ownership to 2.44 billion shares. This represents about a 24.5% stake in BT.
The purchase was worth about £977 million at the current market price for BT shares, while Altice’s total stake is worth £3.66 billion.
‘Altice UK has restated its position to the board of BT that it does not intend to make an Offer for BT,’ Altice added.
In the past two years, Altice’s investment in BT has faced scrutiny.
Back in December 2021, Patrick Drahi’s Altice lifted its stake in BT to 18%.
In May 2022, BT said it had received notification from the UK secretary of state for Business, Energy & Industrial Strategy saying that the government was exercising its power under the National Security & Investment Act 2021 to investigate the increase in the French company’s stake. In August, the UK government said it would take ‘no further action’ over the increase of Altice’s shareholding in BT.
RS Group lost 4.9%, making it the worst FTSE 100 performer in early London trade.
RS said revenue in the financial year that ended March 31 rose by 17% to £2.98 billion from £2.55 billion a year earlier. Pretax profit jumped 23% to £371.5 million from £302.2 million.
This is slightly below company-compiled consensus. The London-based industrial and electronics products distributor was expected to report revenue of £3.00 billion and pretax profit of £378.7 million.
RS declared a final dividend of 13.7p. This brought the full-year dividend to 20.9p, up 16% from 18.0p previously.
Chief Executive Officer Simon Pryce said: ‘RS delivered a strong performance in 2022/23 despite a more challenging macroeconomic backdrop in the second half. This reflected our on-going operational excellence initiatives, geographical, industry and product mix, inventory availability and strong pricing.’
In the FTSE 250, Pennon lost 3.0%, after Ofwat launched an investigation into South West Water.
The Exeter, England-based water services company and the UK water industry regulator said the investigation relates to the accuracy of information reported by South West Water for its performance on leakage and per capita consumption. South West Water is a part of Pennon.
Pennon said that it will work ‘openly and constructively’ with Ofwat to comply with the formal notice issued to South West Water as part of this investigation.
On AIM, Physiomics lost 20%, after it lowered its full-year outlook.
The oncology consultancy said it now expects total income for the financial year ending June 30 to be more than 10% lower than the £750,000 given in its previous guidance. It now expects total income to be about £660,000.
It explained that this is due to unforeseen delays in data delivery to Physiomics for contracted projects and the signing of a project with a potential new client.
In Asia on Tuesday, the Nikkei 225 index closed down 0.4%. In China, the Shanghai Composite closed down 1.5%, while the Hang Seng index in Hong Kong was down 1.2%. The S&P/ASX 200 in Sydney closed down 0.1%.
Brent oil was quoted at $75.90 a barrel early in London on Tuesday, down from $75.94 late Monday. Gold was quoted at $1,957.96 an ounce, down against $1,972.21.
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