LONDON MARKET MIDDAY: BP and Shell fuel FTSE 100 outperformance

(Alliance News) - Stock prices in London were mostly lower on Wednesday, ahead of the UK spring statement at around 1230 GMT, though the FTSE 100 was outperforming continental peers thanks to its oil members.

The FTSE 100 index was up 16.59 points, or 0.2%, at 7,493.31 at midday. The mid-cap FTSE 250 index was down 116.05 points, or 0.5%, at 20,996.55. The AIM All-Share index was down 7.50 points, or 0.7%, at 1,030.08.

The Cboe UK 100 index was up 0.4% at 745.41. The Cboe 250 was down 0.6% at 18,519.74. The Cboe Small Companies was down 0.5% at 15,034.87.

In mainland Europe, the CAC 40 stock index in Paris was down 0.2% while the DAX 40 in Frankfurt was 0.4% lower.

"The FTSE 100 has a spring in its step despite the UK inflation rate going up again, and a potential cut in the country's economic outlook when Chancellor Rishi Sunak announces his mini-budget," said Russ Mould, investment director at AJ Bell.

In the FTSE 100, BP was the best performer, up 3.6%, after Morgan Stanley raised the oil major to 'overweight' from 'equal-weight'.

In addition, BP is expanding its offshore wind portfolio by forming a strategic partnership with Japanese conglomerate Marubeni for offshore wind and other potential decarbonisation projects including hydrogen in Japan.

BP will acquire a 49% stake in Marubeni's proposed offshore wind project in the country for an unspecified amount. In Tokyo, BP will set up a local offshore wind development team.

Shell was just behind, up 3.3%. The oil major filed an appeal against a Dutch ruling to slash by 45% its worldwide aggregate carbon emissions by 2030.

Last year, a group of Dutch NGOs won a major district court battle in The Hague against Shell, with a ruling saying the company was contributing to the "dire" effects of climate change. It was the first time a company had been made to align its policy with the 2015 Paris climate accords.

The Dutch branch of Friends of the Earth followed up in January by saying it was targeting some 30 multinational companies to produce a plan to cut greenhouse emissions in the hope the Shell ruling could set a precedent.

In a statement Tuesday, Shell said "we want to be a leader in the energy transition" but added that it had filed an appeal against the court decision ordering it to slash worldwide aggregate carbon emissions by 45% by 2030 over its 2019 levels.

Higher oil prices were also benefiting the two oil companies, with Brent oil quoted at USD118.70 a barrel at midday, up sharply from USD115.05 late Tuesday.

Oil shares also were among the best performers among London mid-caps, with Harbour Energy, Energean and Tullow Oil up 3.4%, 3.0% and 2.6% respectively.

Back in the FTSE 100, Halma was up 1.0% after the hazard detection and life protection firm said it expects annual profit to meet market forecasts.

The Amersham, England-based company said it expects a "further sequential improvement in revenue" in the second half of its financial year ending March 31. Revenue growth for the year as a whole will be "substantial".

For the current year, Halma said it expects adjusted pretax profit to be in line with market forecasts, which a range from GBP300.7 million and GBP313.4 million. With a consensus of GBP306.5 million, Halma could see adjusted pretax profit rise 10%.

Diageo was up 0.9%. Keppler Cheuvreux upgraded the distiller and brewer to 'buy' from 'hold'.

Reckitt Benckiser was the worst large-cap performer, down 3.1%, after Jefferies downgraded the household goods maker to 'underperform' from 'hold'.

Elsewhere in London, Dignity was down 12%. The funeral services provider warned of lower profit ahead in the short term due to lower prices and the UK death rate normalising as the pandemic begins to wind down.

Dignity expects to report lower profit in the short term. This is due to lower prices and a normalising the UK death rate as the danger of Covid-19 dissipates and the excess death effect of the past two years start to reverse.

In addition, Dignity said it is putting forward a new business strategy, which includes the setting up of a new organisational structure with 12 regions and preparing the company for regulation in the pre-paid funeral plan market by the UK Financial Conduct Authority.

This will require additional investment into the business, which will in turn lead to higher costs in the future.

The pound was quoted at USD1.3217 at midday on Wednesday, down from USD1.3255 at the London equities close Tuesday.

The UK annual inflation figure hit its highest level since March 1992 as the country grapples with a cost of living crisis, data from the Office for National Statistics showed on Wednesday.

On an annual basis, the UK consumer price index rose by 6.2% in February, accelerating sharply from a 5.5% rise in January. The reading was higher than the market forecast, cited by FXStreet, of 5.9%.

The annual inflation rate remains well above the Bank of England's 2.0% target, as UK Chancellor of the Exchequer Sunak faces increasing pressure to take action over the country's cost of living squeeze.

Sunak will present the latest updates from the Office for Budget Responsibility on the state of the UK economy and public finances as part of the spring statement later on Wednesday. He is set to unveil new plans to help struggling households as he is set to vow to "stand by" British families amid the deepening cost of living crisis.

Sunak will be forced to address a crisis at home, with Labour dubbing him the "high-tax chancellor" and the Federation of Small Businesses urging him to provide more help. It has been suggested Sunak may look to ease the burden on the taxpayer by cutting fuel duty and raising the income threshold at which people begin to pay national insurance.

The euro stood at USD1.1005 midday Wednesday in London, soft on USD1.1014 late Tuesday. Against the yen, the dollar was trading at JPY120.95, higher against JPY120.55.

Gold stood at USD1,933.02 an ounce, advancing against USD1,922.93 late Tuesday.

The US and its allies will soon announce "a further package of sanctions" against Russia, the White House said on Tuesday.

The new punitive actions will be revealed when US President Joe Biden is in Europe to attend NATO and EU summits later this week, National Security Advisor Jake Sullivan said. Sullivan also said "one of the key elements" of the announcement will be a tightening of existing sanctions to make it more difficult for Moscow to evade the measures.

New York was pointed to a lower open. The Dow Jones Industrial Average was called down 0.3%, the S&P 500 down 0.4%, and the Nasdaq Composite down 0.7%, based on futures trading. The indices closed up 0.7%, 1.1% and 2.0% respectively on Tuesday.

On Wall Street, Abode shares were down 2.7% in pre-market trade. The computer software firm late Tuesday posted record first quarter revenue in a period of "strong execution", though warned of a hit to annual revenue due to the conflict in Ukraine.

The San Jose, California-based firm notched record revenue of USD4.26 billion for its first quarter ended March 4, up from USD3.91 billion a year before. Net income rose to USD1.27 billion from USD1.26 billion, and diluted earnings per share improved to USD2.66 from USD2.61.

However, Adobe expects a full-year hit of USD87 million due to the war in Ukraine, translating into a USD75 million hit to revenue.

In the economic calendar, a eurozone consumer confidence reading is due out at 1500 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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