LONDON MARKET CLOSE: Tepid close after quiet day with US market closed

Tue, 04th Jul 2023 16:49

(Alliance News) - Stocks in London were largely higher on Tuesday, though the FTSE 100 slipped into the red amid weakness, while US markets were shut for the independence day holiday.

The FTSE 100 index closed down 7.54 points, or 0.1% at 7,519.72 on Tuesday. The FTSE 250 ended up 26.02 points, or 0.1%, at 18,533.79. The AIM All-Share closed up 1.55 points, or 0.2%, at 755.86.

The Cboe UK 100 ended down 0.1% at 749.94, the Cboe UK 250 closed up 0.3% at 16,238.52, and the Cboe Small Companies ended down 0.1% at 13,117.19.

"It's been a relatively quiet session with the US bank holiday naturally weighing on activity and those remaining having an eye on Friday's jobs report but the day hasn't been without interest as the [Reserve Bank of Australia] opted against hiking interest rates again," said Craig Erlam, senior market analyst at Oanda.

The Reserve Bank of Australia left its key interest rate unchanged Tuesday, in a move Commerzbank called a "hawkish pause" after Governor Philip Lowe indicated more tightening may be on the horizon.

The decision comes after monetary policymakers last month hiked the benchmark rate 25 basis points to 4.1% – its highest level since May 2012.

Governor Lowe said on Tuesday that whilst inflation in Australia has already peaked, it is still "too high" and will remain so for "some time yet". Consequently, he suggested some further monetary policy tightening may be required.

Many other central banks have opted to continue tightening monetary policy in an attempt to tame runaway food and energy prices.

Federal Reserve Chair Jerome Powell last week told an event in Portugal that further hikes in the US were likely, after the central bank left rates unchanged at its June meeting.

The US Federal Open Market Committee will publish its latest meeting minutes on Wednesday. A series of US jobs data will be released on Thursday and Friday.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "While the potential for further hawkish pricing for the [US Federal Reserve] seems limited, there is a good chance of a dovish readjustment in the case of soft jobs data."

According to the CME FedWatch Tool, markets currently see an 86% chance the US central bank will hike interest rates by 25 basis points at its next meeting. One week ago, markets saw a 77% chance of this outcome.

In London, the top blue-chip performers on Tuesday were Ocado, Segro and AstraZeneca. The stocks finished 1.9%, 2.0%, and 2.2% higher, respectively.

AstraZeneca had closed 4.9% lower on Monday as test results suggested its new lung cancer drug may be less successful than hoped, despite being generally positive.

Sainsbury's remained one of the FTSE 100's worst-performing stocks, ending the day 1.8% lower despite reporting an improved first quarter, with grocery sales on the up.

The grocer said in the 16 weeks to June 24, total retail sales excluding fuel grew 9.2% annually. Like-for-like sales climbed 9.8% on-year, also excluding fuel. Fuel sales alone fell 21%.

Sainsbury's said first-quarter growth was led by convenience stores and supermarkets, with customers continuing to return to stores.

Zoe Gillespie, investment manager at RBC Brewin Dolphin, said the results were "resilient".

"In an environment that many feared would lead to customers trading down, the supermarket continues to grow sales and its guidance for the year is largely unchanged...With a relatively strong balance sheet, excess cash flow, and growing market share, Sainsbury's looks well placed among its peers," she said.

In the FTSE 250, Dunelm finished 4.3% lower, making it the index's worst-performing stock on Tuesday.

RBC downgraded the home furnishings retailer to 'underperform' from 'sector perform' and lowered its price target for the firm to 1,000 pence from 1,300p. The stock closed at 1,072.00p on Tuesday.

"We view Dunelm as a well-managed business with a strong position in the UK homewares market. However, with cost of living pressures persisting, unfavourable movements in the UK housing market and only a moderate store expansion story, we think growth will be more difficult to come by now," RBC said.

Wizz Air added 1.8%.

The Budapest-based budget airline carried 5.3 million passengers in June, up 23% from 4.3 million a year before and 6.0% from 5.0 million in May.

Wizz Air's planes were 92.2% full last month, up from 86.1% in June 2022 and 90.2% in May.

Russ Mould, investment director at AJ Bell, commented low-cost airlines were having "a whale of a time" thanks to the sharp rebound in travel demand.

"The decision to expand fleet capacity during the cost-of-living crisis was a calculated risk and the move is now paying off," he said.

Elsewhere in London, Predator Oil & Gas dropped 13% despite reporting it has begun drilling at the MOU-4 well on Thursday last week.

This follows Predator announcing last Tuesday that it had successfully completed drilling and logging operations for the MOU-3 well appraising the Moulouya Fan primary reservoir target.

On AIM, Aptamer plunged 20% after it announced it is seeking additional funding to ensure its survival.

Aptamer said further short-term funding will be required to continue as a going concern, noting that its directors are "actively reviewing all possible financing options that are in the best interests of the company and its shareholders."

The company eyes being cash flow positive in financial 2026, but noted this would require annual revenue of GBP6 million, some way above the GBP1.8 million it achieved in the year just gone.

In European equities on Tuesday, the CAC 40 in Paris ended down 0.2%, while the DAX 40 in Frankfurt ended 0.3% lower.

The pound was quoted at USD1.2728 at the London equities close on Tuesday, up from USD1.2675 at the close on Monday. The euro stood at USD1.0900, slightly lower against USD1.0905 late Monday. Against the yen, the dollar was trading at JPY144.46, down from JPY144.59 on Monday.

Brent oil was quoted at USD76.13 a barrel at the London equities close on Tuesday, up from USD75.92 late Monday. Gold was quoted at USD1,927.60 an ounce, up a touch from USD1,927.00 at the close on Monday.

In Wednesday's UK corporate calendar, there are full-year results from Supreme, AO World and Quiz, as well as third-quarter results from Topps Tiles.

The economic calendar has a slew of services PMI prints and the latest meeting minutes from the US Federal Open Market Committee at 1900 BST.

By Heather Rydings, Alliance News senior economics reporter

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