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LONDON MARKET MIDDAY: Europe stocks down; New York set for muted open

Investors in London showed caution heading into the afternoon on Tuesday, while the pound was supported by the International Monetary Fund upping its economic forecast for the UK.

The FTSE 100 index traded down 33.15 points, 0.4%, at 8,391.05. The FTSE 250 was down 83.38 points, 0.4%, at 20,789.95. The AIM All-Share fell 1.84 points, 0.2%, at 808.10.

The Cboe UK 100 was down 0.4% at 837.74, the Cboe UK 250 was down 0.3%, trading at 18,205.17, and the Cboe Small Companies was up 0.1% at 16,554.39.

In European equities on Tuesday, the CAC 40 in Paris was down 1.0%, while the DAX 40 in Frankfurt fell 0.4%.

‘European markets are in the red today, with concerns over the pathway to lower rates denting sentiment after a period of relative optimism,’ Scope Markets analyst Joshua Mahony commented.

‘In a week that looks to be dominated by central bank appearances, the cautious approach taken by the Fed members Bostic and Mester did little to lift expectations over the September cut currently priced in by the markets. Today sees comments from the Bank of England Governor Bailey, who should set out his stall ahead of tomorrow’s likely collapse in UK CPI inflation. With markets looking for headline inflation to fall back down towards the 2.3% region tomorrow, traders will be looking for Bailey to further shed light on the chance of a June rate cut given the wide disparity growing between headline and core inflation.’

According to FXStreet cited consensus, the rate of annual consumer price inflation in the UK is expected to have declined to 2.1% in April, from 3.2% in March.

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.

‘As monetary policy reaches an inflection point, the timing and pace of rate cuts must carefully balance the risks of premature and delayed easing,’ the IMF cautioned Tuesday in its latest outlook document.

The pound was quoted at $1.2717 early Tuesday afternoon in London, up from $1.2702 at the time of the European equities close Monday. The euro stood at $1.0866, up slightly from $1.0862. Against the yen, the dollar was trading at JP¥156.22, up from JP¥156.14.

Stocks in New York are called to open largely flat. The Dow Jones Industrial Average and S&P 500 are called flat and the Nasdaq Composite down 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.

‘The bar is high for Nvidia,’ XTB analyst Kathleen Brooks commented.

‘The narrative ahead of the Nvidia results is that they will determine the fate of the AI stock market boom and the next leg higher for US stocks. However, while we think Nvidia’s results are worth watching closely, the stock market rally has broadened out in recent weeks, so if Nvidia’s results are a mild disappointment, we think the market should be able to recover.’

In London, AstraZeneca was among the large-caps leading the way, rising 1.4%. It 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 firm described as ‘bold,’ would represent a 75% jump from the $45.81 billion it achieved in 2023.

AstraZeneca said it would meet its aim by bolstering its oncology offering and rare disease portfolio, and launching 20 new treatments before the end of the decade.

Speaking ahead of an investor day, Chief Executive Officer Pascal Soriot said: ‘Today AstraZeneca announces a new era of growth. In 2023 we delivered the ambitious $45 billion revenue goal set a decade ago. With the exciting growth of our innovative pipeline, which has the potential to transform millions of lives, we are now aiming for $80 billion by 2030. We are planning to launch 20 new medicines by 2030, many with the potential to generate more than $5 billion in peak year revenues. The breadth of our portfolio together with continued investment in innovation supports sustained growth well past the end of the decade.’

Reckitt rose 1.1%. The Financial Times reported activist Eminence Capital has built up a stake in the consumer goods firm.

Citing people familiar with the matter, the FT reported Eminence owns at least 0.5% of Reckitt’s shares. It began buying in March, when the stock was hit by a verdict from an Illinois jury, which ordered Reckitt to pay $60 million sum to the mother of a premature baby who died of an intestinal disease after being fed Enfamil baby formula.

Reckitt in March said it stands by the safety of its products. The company vowed to pursue all options to overturn the verdict.

Elsewhere in London, XP Power shares jumped 48% to 1,726 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’.

Dowlais declined 6.6%, among the worst mid-cap performers. It cited foreign exchange headwinds and weakness in its ePowertrain business as it reported a drop in revenue in the first four months of 2024.

The automotive engineering spin-off of Melrose Industries, which listed in London back in April, was updating investors on trading ahead of Tuesday’s annual general meeting.

In the four months to April 30, Dowlais said adjusted revenue fell 1.9% to £1.7 billion from the same period a year prior.

Revenue growth ahead of the market in Powder Metallurgy, Driveline3 and its China joint venture was more than offset by weakness in the ePowertrain4 product group of the Automotive business, Dowlais said.

Including foreign exchange headwinds of £90 million, adjusted revenue fell by 6.6%.

Overall, Dowlais described the start to the year as ‘broadly in line with expectations.’ The company anticipates revenue for 2024 will be slightly below the prior year at constant currency, with performance more weighted to the second half.

Gold was quoted at $2,417.12 an ounce early Tuesday afternoon, down from $2,423.50 late Monday afternoon. Brent oil was quoted at $82.51 a barrel, falling from $83.65.

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