LONDON MARKET CLOSE: FTSE 100 climbs into green on back of miners

(Alliance News) - Stocks in London ended Tuesday in the green, with mining heavyweights pushing the blue chips higher after peer BHP assuaged fears over potentially weakened demand.

The FTSE 100 closed up 26.91 points, or 0.4%, at 7,536.06 on Tuesday. The FTSE 250 index ended down 46.35 points, or 0.2%, at 20,336.41. The AIM All-Share index closed down 2.57 points, or 0.3%, at 931.54.

The Cboe UK 100 index closed up 0.5% at 753.34. The Cboe 250 gave back 0.1% at 17,648.85. The Cboe Small Companies ended down 0.2% at 14,447.60.

In Paris, the CAC 40 was up 0.3%, while the DAX 40 in Frankfurt climbed 0.7%.

"European markets have continued to edge higher, with the DAX and FTSE 100 both eking out fresh two-month highs. The UK index has been helped by a decent performance from the mining sector, with solid gains from Rio Tinto, Glencore and Anglo American," CMC Markets analyst Michael Hewson said.

The blue chip miners gained 3.9%, 4.0%, and 3.5%, respectively. Antofagasta gained 3.0%.

The firms were getting a boost from peer BHP, which is no longer a FTSE 100 constituent after the demerger of its petroleum business with Woodside Petroleum.

The change moved its primary listing to Sydney's Australian Securities Exchange, meaning it was no longer eligible for FTSE index inclusion in London.

In the year to June 30, BHP's revenue rose 14% to USD65.10 billion from USD56.92 billion. Pretax profit was 36% higher at USD33.14 billion from USD24.29 billion. It raised its dividend by 8.0% to USD3.25 per share from USD3.01.

CMC's Hewson said: "There had been some concern that weaker demand for industrial metals like iron ore and copper might have weighed on the results, and indeed iron ore profits were lower due to reduced demand from China, but management were optimistic that this would improve."

Looking forward, BHP said it was in "great shape strategically, operationally, and financially."

"BHP said they expected Chinese demand to pick up strongly, against a backdrop of rising costs. This seems optimistic given the current economic backdrop and relies on the Chinese government calling time on its zero-covid policy, which to date it has shown little sign of even considering," Hewson added.

BHP advanced 5.5%.

In the midcaps, Darktrace ended a mammoth 24% higher.

The cybersecurity company late Monday confirmed that it is in early stages of discussions with private equity company Thoma Bravo on a possible cash offer for the Cambridge-based firm.

Private equity firm Thoma Bravo has until September 12 to either make a firm offer for Darktrace, or state that it will not be making an offer.

FirstGroup ended the day as the worst performer in the FTSE 250, losing 11%, after I Squared Capital Advisors confirmed it has pulled out of a deal to buy the Aberdeen, Scotland-based public transport provider.

In June, FirstGroup had rejected a possible takeover offer from I Squared at 118 pence per share in cash, plus 45.6p more contingent on the proceeds of FirstGroup's recent disposals of its First Transit and Greyhound businesses in the US.

On Monday, I Squared made a final proposal of 135 pence per share, with further contingent value from the First Transit earnout, which FirstGroup also rejected.

In response to I Squared Capital pulling out, FirstGroup said: "The board is confident the transformation undertaken since the arrival of David Martin as chair in August 2019 will deliver significant long term value creation for FirstGroup shareholders.

"The board reaffirms its expectation that, while some uncertainty remains around the pace of recovery in light of the pandemic and the broader macroeconomic backdrop, the group will make significant further progress in the current financial year."

In London's junior market, Power Metal Resources jumped 43%.

The metals exploration firm has completed two ground-based electromagnetic geophysics surveys at its Molopo Farms Complex project in Botswana, with preliminary results highlighting a large shallow dipping magnetic conductor at drillhole K1-6.

"Today's exploration news is, in my view, potentially one of the more significant the company has released in its 3-year history as Power Metal," Chief Executive Paul Johnson said.

In the US, the Dow Jones Industrial Average was up 0.5%, the S&P 500 was slightly higher, while the Nasdaq Composite was down 0.4%.

Retailers enjoyed a positive session after Walmart and Home Depot posted strong quarterly results.

Walmart seen growth in sales and net profit in its second quarter, as a smaller-than-expected decline in operating income prompted the firm to slightly upgrade annual guidance.

For the three months to July 31, the Bentonville, Arkansas-based retailer said revenue grew 8.4% to USD152.86 billion from USD141.05 billion, which was "partially driven by inflation". Net profit jumped 18% to USD5.15 billion from USD4.36 billion. Diluted earnings per share rose 24% to USD1.88 from USD1.52.

Walmart was up 6.0% in New York. Home Depot, up 4.9%, posted its highest ever quarterly sales and earnings, leading the retailer to reaffirm its full-year guidance.

The Atlanta, Georgia-headquartered home improvement company reported sales of USD43.79 billion in its second quarter ended July 31, up 6.5% from USD41.12 billion a year before. Net earnings rose 7.6% year-on-year to USD5.17 billion in the second quarter from USD4.81 billion a year prior. Basic earnings per share jumped by 12% to USD5.06 from USD4.54.

In London, Next gained 2.5%, B&M European 3.1% and Kingfisher added 1.7%.

The pound was quoted at USD1.2099 Tuesday evening in London, rising from USD1.2075 late Monday. Sterling was on the back foot after UK wages fell at record speed in real terms.

In a monthly labour market update, figures showed the UK unemployment rate was steady at 3.8% in the three months to June, though a fall in real wages stole the headlines.

According to the Office for National Statistics, regular UK wages fell 3.0% year-on-year on an inflation-adjusted basis, a record slump in real pay. Including bonuses, real pay fell 2.5%.

Unadjusted wage growth figures came in above expectations. Regular pay, so excluding bonuses, was 4.7% higher in the three months to June. The figure topped FXStreet cited consensus of 4.5% growth. Including bonuses, wage growth was 5.1% year-on-year, beating a forecast of 4.5% growth.

Joshua Mahony, senior market analyst at IG, said: "Thankfully, the UK is yet to see any significant pick-up in unemployment, thus ensuring that the current 'technical recession' remains someway off a fully blown recession with widespread job losses."

The euro stood at USD1.0177 in London on Tuesday evening, down from USD1.0184 after markets closed on Monday. Against the yen, the dollar was trading at JPY134.28, up sharply from JPY133.07.

Gold stood at USD1,774.80 an ounce Tuesday evening, down from USD1,778.71 at the London equities close on Monday. Brent oil was quoted at USD93.04 a barrel, down from USD94.22.

In the international economics calendar on Wednesday, there is UK inflation reading at 0700 BST, alongside producer and retail prices, followed by a eurozone GDP and employment figures at 1000 BST, and US retail sales at 1200 BST. In the evening, the US Fed will release the minutes from its latest monetary policy meeting at 1900 BST.

The UK corporate calendar has interim results from construction firm Balfour Beatty, online stockbroker Plus500, gold miner Hochschild Mining, and blue chip housebuilder Persimmon.

By Paul McGowan; paulmcgowan@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.