Only a handful of FTSE 100 stocks were in the red at midday on Monday, as markets were in a confident mood with all eyes on progress in talks between the UK and EU in London.
UK Prime Minister Rishi Sunak will hold face-to-face talks in Windsor, Berkshire, with the European Commission President Ursula von der Leyen on Monday, as Sunak looks to finalise a deal to fix issues with the Northern Ireland protocol.
The deal risks deepening divides in the governing Conservative Party in the UK. Sunak will also be mindful of not alienating the Democratic Unionist Party of Northern Ireland.
The FTSE 100 index was up 62.62 points, 0.8%, at 7,940.79. The FTSE 250 was up 116.23 points, 0.6%, at 19,812.76, and the AIM All-Share was up 2.08 points, 0.2%, at 854.71.
The Cboe UK 100 was up 0.7% at 794.95, the Cboe UK 250 was up 0.7% at 17,335.36, and the Cboe Small Companies was down 0.1% at 14,031.23.
‘There was volatility in the pound early on Monday as traders waited to see if a deal might be done on the Northern Ireland protocol in the face of opposition from the eurosceptic wing of the Conservative party and the DUP,’ said AJ Bell analyst Russ Mould.
The pound was quoted at $1.1981 at midday on Monday in London, up compared to $1.1947 at the equities close on Friday. The euro stood at $1.0565, up against $1.0545. Against the yen, the dollar was trading at JP¥136.25, down compared to JP¥136.31.
Number 10 raised the prospect that the talks could produce a breakthrough moment after months of negotiations with Brussels about fixing the protocol.
Analysts at Berenberg commented: ‘The news that European Commission President Ursula von der Leyen is en route to meet UK Prime Minister Rishi Sunak in order finalise revisions to the post-Brexit deal for Northern Ireland suggest the answer is yes. Despite all of the noise and uncertainty that often comes with UK-EU relations, one pattern is familiar: once the top-brass are ready to meet for the final grand spectacle of a friendly handshake, a deal is usually (almost) ready to go.’
A plan for von der Leyen to meet King Charles III has caused a stir. The King will host EU chief von der Leyen at Windsor Castle despite warnings that the meeting will drag the monarchy into the political announcement on a new Brexit deal.
Charles and the European Commission president will sit down for tea late on Monday after she is expected to sign off on a Northern Ireland protocol agreement with UK PM Sunak.
There were fears the King, who as head of state must remain politically neutral, might be drawn into the process of the UK and EU agreeing the new deal or be seen as tacitly endorsing it.
Conservatives were among those voicing their criticism of the meeting before it was even confirmed, following suggestions the deal would be called the ‘Windsor Agreement’.
Monday’s stock market gains contrast with a tough session for global equities on Friday, in the wake of a red-hot US personal consumption expenditures index reading.
According to the US Bureau of Economic Analysis, the personal consumption expenditures index increased 5.4% on-year in January. The rate of PCE inflation quickened from 5.3% in December and came in markedly ahead of the FXStreet cited consensus of a slowdown to 4.9%.
Core PCE inflation, the Federal Reserve’s preferred price gauge, quickened to 4.7% on-year in January, from 4.6% in December. The figures suggest inflationary pressures are proving stickier than ideal, and may suggest more rate hikes are in the offing by the Fed.
Stocks in New York were called higher, as sentiment looks to rebound following last week’s PCE reading-induced equity market slump. The Dow Jones Industrial Average is called up 0.4%, and the S&P 500 and the Nasdaq Composite both called 0.5% higher.
In European equities on Monday, the CAC 40 in Paris was up 1.6% and the DAX 40 in Frankfurt was up 1.5%.
In the FTSE 100, Primark owner Associated British Foods gained 1.3%.
AB Foods said it expects interim sales to be over 20% ahead of the last year at actual exchange rates, or over 16% ahead in constant currency. It now expects adjusted operating profit to be ‘broadly’ in line with the previous year.
Primark interim sales are expected to be £4.2 billion, or 19% higher than the year before.
The high street retail division is still facing ‘significant’ cost pressures, but has seen more resilient consumer spending than previously forecast. It raised expectations for its full year, now predicting adjusted operating profit and adjusted earnings per share to be in line with the previous year. AB Foods ends its financial year in September.
While input costs have eased somewhat, AB Foods noted the continuing presence of macroeconomic headwinds, which could weigh on consumer spending in the months ahead.
Index peer Bunzl gained 2.5%, after it hailed ‘another excellent year’.
The London-based distribution services company said annual revenue rose 17% year-on-year to £12.04 billion from £10.29 billion. Pretax profit increased 12% to £634.6 million from £568.7 million.
Bunzl increased its dividend by 10% to 62.7 pence from 57.0p.
The company left guidance for 2023 unchanged from its December trading statement. Back then, it said it expected a ‘resilient’ adjusted operating profit, with its operating margin ‘slightly higher than historical levels’.
Separately, Bunzl said it has agreed to acquire Arbeitsschutz-Express, a German distributor of workwear and personal protection equipment. It also said it completed the acquisition of Capital Paper Products, a Canadian packaging company.
Both acquisitions are for undisclosed sums. Bunzl added that Arbeitsschutz-Express generated a revenue of €41 million in 2022, while Capital Paper had a revenue of C$26 million, around £16 million in 2021.
Among the few London-listed large-caps in the red, Hargreaves Lansdown lost 0.9%. Citigroup cut the stock to ’sell’.
Among mid-caps, Dechra slumped 15% on a profit warning.
The veterinary pharmaceutical company said revenue in the six months to December 31 rose 14% to £377.4 million from £332.4 million a year before.
‘The global companion animal healthcare market has returned to more normalised levels of growth following the extraordinarily high rates seen during the Covid-19 pandemic, and against that context our performance has been robust,’ the firm said.
Pretax profit fell sharply to £29.7 million from £53.4 million, as operating profit fell to £44.6 million from £57.4 million a year before.
Dechra declared an interim dividend of 12.50 pence each, up 4.2% from 12.0p a year prior.
Looking ahead, Dechra now expects full year underlying operating profit to be at the lower end of analyst expectations.
On AIM, Elixirr International surged 22%. The consultancy firm said 2022 was a ‘strong year’, with all metrics to be ‘in line or above’ market expectations.
Revenue is expected to rise 40% to £70.7 million, within previous guidance, and adjusted earnings before interest, tax, depreciation and amortisation are expected to amount to £20.4 million - which is in line with Elixirr’s guidance of exceeding £20 million.
It said 2023 has started ‘strongly’ with an acceleration of organic growth in the first quarter, and January seeing record monthly revenue.
Brent oil was quoted at $82.70 a barrel at midday in London on Monday, up from $81.83 late Friday. Gold was quoted at $1,811.01 an ounce, flat against $1,811.07.
Still to come on Monday’s economic calendar, there is data from US pending home sales index at 1500 GMT.
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