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LONDON MARKET CLOSE: Stocks turn red ahead of UK inflation reading
Stocks in London closed lower on Tuesday, as investor nerves around Bank of England interest rates dominated the market, before the next UK inflation print.
The FTSE 100 index closed down 7.75 points, 0.1%, at 8,416.45. The FTSE 250 ended down 89.96 points, 0.4%, at 20,783.37, and the AIM All-Share closed down 2.85 points, 0.4%, at 807.09.
The Cboe UK 100 ended down 0.1% at 840.04, the Cboe UK 250 closed down 0.3% at 18,202.46, and the Cboe Small Companies ended up 0.7% at 16,646.41.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.7%, while the DAX 40 in Frankfurt ended down 0.2%.
Investors this week are eyeing Wednesday’s inflation reading for the UK. It is expected to show that the rate of consumer price inflation moderated markedly to 2.1% in April, from 3.2% in March, according to FXStreet cited consensus.
Core CPI, excluding food and inflation, is expected to come in at 3.6% in April, decelerating from 4.2% a month earlier.
Analysts at Lloyds said: ‘this obviously remains more elevated than the headline rate, while notably services inflation is expected to still be above 5%. So while the expected decline in inflation is welcome news, it is still unclear whether BoE policymakers will regard it as sufficient progress to justify an interest rate cut.’
Meanwhile, on Tuesday, the International Monetary Fund said the UK economy is set for a ‘soft landing’, and it urged the Bank of England to be mindful of rate cut timing.
The IMF said in a new report on the health of the UK economy that gross domestic product in the country is expected to grow by 0.7% for 2024, following 0.6% growth over the first quarter.
It represents an upgrade from the IMF’s previous prediction of 0.5% growth for the year.
The economic calendar for Wednesday also has the release of the latest US Federal Open Market Committee meeting.
‘I believe investors are now looking for new signals regarding when the Federal Reserve (Fed) will begin cutting interest rates. They are awaiting the FOMC minutes to better understand officials’ views on policy regarding interest rate expectations,’ said Rania Gule at XS.com.
The pound was quoted at $1.2715 at the London equities close Tuesday, higher compared to $1.2702 at the close on Monday. The euro stood at $1.0856 at the European equities close Tuesday, down against $1.0862 at the same time on Monday. Against the yen, the dollar was trading at JP¥156.10, lower compared to JP¥156.14 late Monday.
In the FTSE 100, AstraZeneca closed up 2.3%.
Ahead of a Tuesday investor day, AstraZeneca set out its ambition to achieve $80 billion in annual revenue by the end of the decade as it signalled a new ‘era of growth.’
The target, which the Cambridge pharmaceuticals manufacturer described as ‘bold,’ would represent a 75% jump from the $45.81 billion it achieved in 2023.
AJ Bell Investment Director Russ Mould thinks AstraZeneca is now ‘reaching for the stars’ with its new target.
Schroders was up 3.9%.
UBS thinks the recent underperformance of Schroders PLC offers investors an attractive risk-reward profile.
As a result, the Swiss broker upgraded the London-headquartered asset management company to ’buy’ from ’neutral’.
In the FTSE 250, Greencore shot up 19%.
The Dublin-based producer of convenience foods said in the first half ended March 29, it swung to a pretax profit of £14.7 million, from a pretax loss of £6.2 million the year prior.
Revenue fell 6.4% to £866.1 million from £925.8 million. The revenue decline reflects its decision to leave a ‘number of low margin contracts’.
Looking ahead, Greencore currently expects a full year adjusted operating profit in the range of £86 million to £88 million, up from £76.3 million last year. Its guidance is ahead of ‘current market expectations’.
Further, if trading continues as expected, Greencore said it will pay a dividend for the first time since financial 2019.
On the other end of the index, SSP lost 9.0%.
In the six months ended March 31, the London-based travel food outlet operator said pretax profit fell 19% to £12.8 million from £15.8 million a year earlier.
This was despite revenue rising 15% to £1.52 billion from £1.32 billion, as operating costs rose 15% to £1.46 billion from £1.27 billion.
Despite a falling bottom-line, SSP maintained its first half dividend at 1.2 pence per share.
Amongst London’s small-caps, XP Power shares jumped 48% to 1,720.00 pence. The firm confirmed it rejected takeover approaches by New York-listed Advanced Energy Industries.
The maker of power control systems received approaches valuing it at £17 per share in October, at £18.50 in November and finally at £19.50 two weeks ago.
The latest proposal gives it an equity value of £468 million, and £571 million when including debt.
XP Power said the bids ‘fundamentally undervalues the company and its prospects’.
Stocks in New York were higher at the London equities close, with the DJIA, the S&P 500 index and the Nasdaq Composite all up 0.1%.
Focus this week will be on earnings from chipmaker Nvidia, whose AI-driven stock market surge has been a key theme in recent months.
Brent oil was quoted at $82.66 a barrel at the London equities close Tuesday, down from $83.65 late Monday. Gold was quoted at $2,425.40 an ounce at the London equities close Tuesday, up slightly against $2,423.50 at the close on Monday.
In Wednesday’s UK corporate calendar, there are full year results from British Land, Marks & Spencer and Severn Trent.
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