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LONDON MARKET OPEN: Kainos, Keywords Studios and gold shine

Stocks in London started the week strongly on Monday, as hopes of a US interest rate cut lifted equities, gold and kept the pound supported around the $1.27 mark.

The FTSE 100 index opened up 21.60 points, 0.3%, at 8,441.86. The FTSE 250 was up 84.15 points, 0.4%, at 20,834.05. The AIM All-Share surged 13.56 points, 1.7%, at 807.58, getting a boost from possible M&A at Keywords Studios, one of the junior market’s largest constituents.

The Cboe UK 100 was up 0.3% at 842.52, the Cboe UK 250 was also up 0.3%, trading at 18,202.10, and the Cboe Small Companies was up 0.2% at 16,439.74.

In European equities on Monday, the CAC 40 in Paris and the DAX 40 in Frankfurt were each up 0.2%.

The pound was quoted at $1.2697 early Monday in London, barely budging from $1.2696 at the time of the local equities close on Friday. The euro stood at $1.0874, up from $1.0866. Against the yen, the dollar was trading at JP¥155.61, up from JP¥155.53.

‘USD is starting the week on the backfoot against most major currencies on narrower bond yield spreads between the US and other major economies. Fed funds future pricing for a first rate cut in September (80% discounted) is also curtailing USD strength and supporting risk assets. Stocks in Asia and US equity futures are up,’ Brown Brothers Harriman analysts commented.

‘There are no major US economic data releases this week can could trigger a delay in expectations for Fed easing. Instead, the global May PMI readings Thursday will help determine if economic growth momentum is indeed shifting from the US towards other major economies.’

Lloyds Bank said that while US data ‘dominated’ last week, this week it is the turn of UK economic reports.

‘The highlight will probably be Wednesday’s inflation report. That is set to show a big fall in annual headline CPI inflation, but we do expect it to remain slightly above the 2.0% target. Core inflation is also expected to be down but still well above the headline rate,’ Lloyds analysts commented.

‘It is also a big week for UK activity numbers including PMI data, retail sales and the GfK consumer confidence numbers. In contrast to the US, recent UK data have surprised on the upside, including a stronger than expected Q1 GDP outturn. A big question is whether the pace of growth will moderate in Q2.’

The latest UK consumer price index reading is released Wednesday. 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.

In Tokyo, the Nikkei 225 closed up 0.7%, while the S&P/ASX 200 in Sydney added 0.6%. In China, the Shanghai Composite was up 0.5% in afternoon dealings, while the Hang Seng in Hong Kong was up 0.2%.

China’s central bank left key interest rates unchanged at its May meeting, as expected.

The People’s Bank of China left the one-year loan prime rate - which serves as the benchmark for corporate loans - unchanged at 3.45%. The five-year LPR - which is used to price mortgages - was left at 3.95%.

It had been cut from 4.20% in February, in an effort to stimulate the country’s flagging housing market.

A top Chinese economic official had said Friday the state could buy up commercial real estate in a bid to boost the country’s ailing housing market, currently battling an unprecedented debt crisis.

Property and construction accounts for more than a quarter of gross domestic product, but the sector has been under unprecedented strain since 2020, when authorities tightened developers’ access to credit in a bid to reduce mounting debt.

And in a bid to boost the ailing market and ensure millions of unused homes go to those in need of housing, Beijing’s State Council met Friday, state news agency Xinhua said.

‘Great efforts should be made to promote the handling of commercial housing projects classified as under construction that have been sold and are facing difficulties to deliver,’ Vice Premier He Lifeng told the meeting, according to state media.

Gold was quoted at $2,437.44 an ounce early Monday, rising from $2,407.63 late Friday. The precious metal hit a record high above $2,450 an ounce earlier Monday, on hope that the Federal Reserve may cut interest rates this year.

Gold’s price surge helped Fresnillo surge 3.7%. The gold miner was the best large-cap performer early Monday.

Keywords Studios was the star performer in the wider London market, however, jumping 62%. It said it would be ‘minded to recommend’ a possible offer from EQT Group, following a series of bids from the private equity firm.

The AIM-listed provider of technical and creative services for video game production said the latest cash approach of 2,550p per share is a ‘significant increase from the initial proposal’.

It values all of Dublin-based Keywords at around £2.03 billion. The proposed bid price is a chunky 73% premium to the firm’s closing price of 1,470p on Friday.

Keywords said the latest approach follows ‘four previous unsolicited proposals from EQT in recent months’.

Kainos also climbed, adding 10%. It reported annual earnings growth and lifted its dividend, and also announced a new chair.

Independent Non-Executive Director Rosaleen Blair will replace outgoing Tom Burnet as chair. Burnet steps down following the IT provider’s annual general meeting on September 24.

Kainos, a partner of enterprise software provider Workday, said revenue in the year to March 31 rose 2.0% to £382.4 million from £374.8 million. Pretax profit climbed 19% to £64.8 million from £54.3 million. Kainos upped its final dividend by 19% to 19.1 pence per share from 16.1p a year prior. Its total dividend amounted to 27.3p, a rise from 23.9p.

‘Our latest results, record our 14th consecutive year of growth with disciplined execution in the current macro-economic climate,’ Chief Executive Officer Russell Sloan said. ‘Despite the ongoing global economic uncertainty, we believe that our largest business areas, Workday Products, Workday Services and the public sector segment of Digital Services, will continue to be resilient and will offer substantial growth opportunities in both the near term and medium term. We are well positioned within these markets, both locally and, increasingly, internationally, and we remain confident in our strategy.’

Brent oil was quoted at $84.20 a barrel on Monday morning in London, rising from $83.61 late Friday afternoon.

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