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(Alliance News) - Blue-chip equities in Europe ended higher on Tuesday, though the FTSE 100 underperformed and ended with only a minor gain, as initial bullish trade following optimism out of China gave way to caution as the day wore on.
The euro was on the up, meanwhile, as European Central Bank President Christine Lagarde said more rate hikes in the eurozone are on the horizon. Central bankers remain in focus on Wednesday, with Bank of England Governor Andrew Bailey speaking at an event in Portugal.
The FTSE 100 index added 7.88 points, 0.1%, at 7,461.46 on Tuesday. The FTSE 250 climbed 80.17 points, or 0.5%, at 18,054.84, while the AIM All-Share ended down 5.25 points, or 0.7%, at 755.61.
The FTSE 100 opened in the green, after Chinese Premier Li Qiang said the country is on course to achieve its 5% target for economic growth in 2023 set by Beijing earlier this year. It fell in the afternoon, however, before rising in the final hour of the day, taking confidence from a strong start in New York.
The Cboe UK 100 ended up 0.2% at 745.00, the Cboe UK 250 climbed 0.3% to 15,824.23, while the Cboe Small Companies also added 0.3% to end the day at 13,752.33.
The CAC 40 in Paris climbed 0.3%, while the DAX 40 in Frankfurt rose 0.2%.
In New York, the Dow Jones Industrial Average was up 0.4%, the S&P 500 index added 0.6%, while the Nasdaq Composite shot up 0.8%.
Trade in Europe was muted on Tuesday, and IG analyst Axel Rudolph said volatility is falling.
"The slow decline in equities seen since last week's highs is happening while volatility as measured by the CBOE Vix is tumbling back towards pre-Covid-19 levels, indicating that investors aren't at all worried about the slide," Rudolph commented.
The CBOE Volatility Index, or Vix, was some 4% lower on Tuesday.
The euro stood at USD1.0959 around the time of the European equities close, higher against USD1.0913 at the London equities close on Monday.
The ECB's Lagarde said it was "unlikely" policymakers could state soon when interest rates had peaked as they battle stubbornly high inflation, and pledged yet another hike in July.
"It is unlikely that in the near future the central bank will be able to state with full confidence that the peak rates have been reached," she said at the start of an annual gathering of central bank chiefs and economists in Sintra, southern Portugal.
The ECB's policy would be decided "meeting by meeting", she said, but added that "barring a material change to the outlook, we will continue to increase rates in July", at the bank's next meeting.
The Frankfurt institution raised borrowing costs by another 0.25 percentage points this month, taking the key deposit rate to a 22-year high at 3.50%.
The pound was quoted at USD1.2748 at the time of the London equities close on Tuesday, higher compared to USD1.2719 late Monday.
The pound received some respite, though it is still on weaker footing than it was at the start of last week, when it had traded above USD1.28.
A more aggressive than expected 50 basis point hike from the Bank of England last week failed to inspire sterling, with traders instead fretting over a difficult outlook for the UK, amid the expectation that a hard landing would be the only way to get inflation back to target.
The Bank of England's terminal rate remains in focus. ING analyst Francesco Pesole said the event in Portugal, where Lagarde spoke, is a big one for the pound too. Governor Andrew Bailey speaks tomorrow.
"The [sterling overnight index average] curve is pricing in a 6.15-6.20% peak rate as of this morning around the turn of the year, and keeping the option of a 50 [basis point] hike in August very much on the table (44 [basis points] priced in). Data may argue against such aggressive action down the road, but the majority of Bank of England officials look unlikely to vehemently push back against tightening expectations for now," Pesole added.
Sonia is a rate benchmark which sues actual transactions and reflects the rate banks pay to borrow sterling from other institutions, as well as investors.
Against the yen, the dollar was trading at JPY144.01, higher compared to JPY143.52.
In London, BT and JD Sports were the worst FTSE 100 performers, down 3.4% and 2.8%. Telecommunications firm BT fell after UBS cut the stock to 'sell' from 'neutral'.
Athleisure retailer JD reported a moderation in sales growth in May and softening of trade in North America.
It reported overall growth in organic sales at constant exchange rates of around 8% in May, compared to organic sales growth at constant exchange rates of more than 15% in the first three months of the year.
JD said the moderation in sales growth during the month reflected tougher comparatives in the year prior as the supply chain normalised and the availability of product improved.
It also noted that there had been some softening of trade in North America, which partially offset positive trends in the UK, Europe and the Asia Pacific region.
Fourth-quarter results from New York-listed Nike will put JD Sports shares in focus later this week, amid a possible read across. Oregon-based Nike reports results after the closing bell in New York on Thursday.
On the up, Ocado shares added 6.1%. Lingotto Investment Management, owned by Exor, has built a 5.0% stake in the company, according to a regulatory filing on Monday. Exor is controlled by Italy's illustrious Agnelli family.
On Tuesday, the online grocer firm and warehouse technology provider said it has added Rachel Osborne to its board as an independent non-executive director, with effect the start of September.
Osborne was former the chief executive of retailer Ted Baker and has also held finance positions at Debenhams, Domino's Pizza Group and the John Lewis division of the John Lewis Partnership.
"I am very excited to welcome Rachel to our board. Rachel's significant experience in transformation and her commercial mindset will be a real asset as Ocado Group continues to expand globally and seeks to enter into new non-grocery markets," Ocado CEO Tim Steiner said.
Ocado shares are up over 20% since the start of last week, also supported by rumours of a possible takeover.
Wise shares jumped 15%. It reported a significant surge in annual profit in the financial year that ended March 31, supported by solid growth in active customers.
The money transfer firm reported pretax profit of GBP146.5 million, multiplied from GBP43.9 million the year prior. Revenue climbed 51% to GBP846.1 million from GBP559.9 million.
This came as the company upped its active customer number by 34% year-on-year to around 10 million.
Brent oil was quoted at USD73.55 a barrel late Tuesday in London, down from USD74.12 late Monday. Gold fetched USD1,914.73 an ounce, lower against USD1,926.27.
Wednesday's economic calendar has a German consumer climate survey reading from GfK at 0700 BST. The Federal Reserve releases its annual stress test results shortly after the New York equities close on Wednesday.
The local corporate calendar has annual results from SDCL Energy Efficiency Income Trust.
By Eric Cunha, Alliance News news editor
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