LONDON MARKET CLOSE: Stocks higher as interest rate decisions loom

(Alliance News) - Stocks in London were largely higher at the close on Tuesday, shrugging off a poor performance for oil majors in the FTSE 100 and lacklustre data for the UK's retail sector.

The FTSE 100 index closed up 28.11 points, or 0.4% at 7,628.10 on Tuesday. The FTSE 250 ended up 103.67 points, or 0.5%, at 19,217.22. The AIM All-Share closed up just 0.31 of a point at 792.12.

The Cboe UK 100 ended up 0.4% at 761.50, the Cboe UK 250 closed up 0.6% at 16,765.53, and the Cboe Small Companies ended up 0.4% at 13,343.37.

UK retail sales increased last month, though the trio of bank holidays failed to boost figures as much as expected.

According to the British Retail Consortium, sales rose 3.9% on-year in May. It compares to a 1.1% fall a year prior. It is also below the three-month average growth of 4.7%.

On a like-for-like basis, sales increased 3.7% year-on-year last month, falling below the three-month average rise of 4.7%.

"With consumer confidence still recovering from record depths, and continued tightening of household incomes, we are unlikely to see substantial sales growth in the coming months," BRC Chief Executive Helen Dickinson said.

The pound was quoted at USD1.2411 at the London equities close on Tuesday, down a touch from USD1.2415 at the close on Monday.

In London, abrdn, Ocado, and Melrose Industries were the top performers in the FTSE 100. The stock finished 4.1%, 3.6%, and 2.7% higher on Tuesday.

At the bottom of the blue-chip index were Vodafone, Flutter Entertainment, and Centrica. The stocks ended down 1.1%, 1.3%, and 0.9%.

Shell and BP also weighed on the FTSE 100 on Tuesday, as the rally in the price of oil seen on Monday following a production cut by Saudi Arabia proved short-lived.

Brent oil was quoted at USD76.40 a barrel at the London equities close on Tuesday, down from USD77.37 late Monday.

Shell closed down 1.2% and BP finished 0.3% lower.

In the FTSE 250, Paragon Banking climbed 9.7%, making it the best performer in the index, after it reported "record interim operating profits" and "robust growth" in the first half of its financial year.

The mortgage and loan provider said its total operating income increased 21% to GBP220.2 million in the six months ended March 31, from GBP181.7 million the previous year.

Going forward, the firm said it is "well-placed" to deliver a profitable loan book, and protect the value of its assets, despite potential "adverse economic headwinds".

It also claimed stronger short-term prospects for future lending, "with a more stable economic outlook leading to increasing numbers of proposals in the system".

Chemring jumped 9.1% after it reported a record first-half order intake, with its order book reaching the highest level in over a decade at GBP750 million.

AJ Bell's Mould said the company was benefiting from "stronger prospects" thanks to the Russia-Ukraine war "encouraging governments around the world to spend more on defence".

Elsewhere in London, Zotefoams added 3.8%. The cellular material technology producer extended its exclusivity agreement with sportswear maker Nike to the end of 2029.

On AIM, Gfinity plunged 23% after it announced it is closing down its Esports division and selling a majority stake of its subsidiary, Athlos.

The company will focus on digital media and the gamer website industry.

Chair Neville Upton said: "This has been a difficult year for digital media with the company having losses across all verticals, however after a significant re-structuring, we are confident that Gfinity will flourish without the requirement to raise further working capital. By focussing on our core web offering for gamers, we are able to remove the capital intensive businesses of software development and esports events, and focus on returning to a positive return on investment."

In European equities on Tuesday, the CAC 40 in Paris ended up 0.1% and the DAX 40 in Frankfurt ended up 0.2%.

Figures from S&P Global and Hamburg Commercial Bank showed that the eurozone construction sector fell in May at the fastest rate in the year so far and remained firmly in contractionary territory.

The HCOB eurozone construction purchasing managers' index total activity index posted at 44.6 points, down from 45.2 in April.

Remaining below the 50-point no-change mark, it shows the sector remains in contraction due to activity levels falling for the thirteenth month in a row.

Mateusz Urban, senior economist at Oxford Economics, said there is "little hope" for a rebound in eurozone construction activity before late 2023, given the expectations of further hikes in the European Central Bank's pipeline.

The European Central Bank will announce its interest rate decision on June 15. Analysts at UBS expect the central bank to hike rates by 25 basis points, and said the move is "firmly priced in" by markets.

The euro stood at USD1.0687 at the European equities close on Tuesday, lower against USD1.0711 at the same time on Monday.

Stocks in New York were mostly higher at the London equities close, with the Dow Jones Industrial Average down 0.1%, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.3%.

Trade was tepid on Wall Street as investors look ahead to next week's interest rate decision from the US Federal Reserve.

According to the CME FedWatch Tool, markets see a 76% chance of the Fed holding interest rates steady next Wednesday.

Matthew Weller, global head of research at FOREX.com and City Index, commented: "Between a chorus of Fed speakers coming out in favour of a pause and the middling US economic data of late, it's increasing difficult to see the Fed hiking interest rates this month unless next week's [consumer price inflation] report is truly elevated."

The US inflation reading is released on June 13, a day before the Fed's interest rate decision. According to FXStreet-cited consensus, the annual inflation rate is expected to cool to 4.2% in May from 4.9% in April.

Against the yen, the dollar was trading at JPY139.77 late Tuesday, higher compared to JPY139.60 late Monday. Gold was quoted at USD1,959.55 an ounce, up slightly against USD1,959.00 at the close on Monday.

In Wednesday's UK corporate calendar, there are full-year results from LXi REIT and discoverIE.

The economic calendar has the Halifax UK house price index at 0700 BST. The Bank of Canada will announce its next interest rate decision at 1500 BST.

Chris Turner at ING said the Reserve Bank of Australia's move to restart its tightening cycle on Tuesday with a 25 basis point lift to rates may throw "extra focus" on the BoC meeting.

"A 25 basis point BoC rate hike tomorrow (now priced with a 43% probability) would probably cause ripples across core bond markets around the world and could keep the dollar bid on the view that the Fed might be closer to hiking than first thought," Turner said.

By Heather Rydings, Alliance News senior economics reporter

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