LONDON MARKET MIDDAY: European stocks jump after bumper US session

(Alliance News) - European equities surged on Tuesday, with the FTSE 100's decent start to the year continuing into February, helped by a boost from miners and a buoyant financial services sector.

Market sentiment was bolstered by day of hefty gains in New York on Monday. Stock index futures suggest Tuesday will be a more muted session on Wall Street, however.

The FTSE 100 index was up 69.11 points, or 0.9%, at 7,533.48 midday Tuesday in London. The mid-cap FTSE 250 index was up 255.31 points, or 1.2%, at 22,181.93. The AIM All-Share index was up 6.82 points, 0.6%, at 1,101.79.

The Cboe UK 100 index was up 1.0% at 748.16. The Cboe 250 was up 1.2% at 19,802.54, and the Cboe Small Companies was 0.7% higher at 15,460.46.

In mainland Europe, the CAC 40 stock index in Paris and the DAX 40 in Frankfurt both were up 1.1%. Although outperforming the FTSE slightly on Tuesday, the CAC and DAX are 1.1% and 1.5% below where they ended last year, while the London benchmark is roughly 2.0% higher.

"Like a prize fighter on the ropes, the US tech sector produced a stunning fightback overnight and helped provide a positive cue for European markets this morning," AJ Bell analyst Russ Mould commented.

Scottish Mortgage Investment Trust, which has stakes in the likes of Tesla and Amazon, surged 4.0%. It was the best performing large-cap stock in London at midday.

Anglo American added 2.8%, and Rio Tinto rose 1.8% as the mining sector enjoyed a strong session, recovering from losses on Monday in the wake of weak economic data from China.

Rio Tinto's gains came despite a damning report into workplace culture at the miner. Rio said that over the past five years, "bullying and sexism are systemic across Rio Tinto worksites, with almost half of the people experiencing bullying". The miner commissioned an independent review of its workplace culture back in March 2021.

AJ Bell's Mould said: "The revelations about the workplace culture at Rio Tinto are genuinely jaw dropping – they tick about all the negative boxes you can find. Sexual assaults and harassment, racism and bullying. In that context, an increase in the share price in response looks a little odd, but perhaps it reflects market appreciation for Rio at least fronting up and taking the bull by the horns when it comes to fixing these deep-rooted problems."

The dollar was weaker on Tuesday.

The euro rose to EUR1.1277 midday Tuesday from USD1.1211 late Monday. Against the yen, the dollar fetched USD114.62, down from JPY115.25.

Factories in the eurozone regained momentum at the start of the new year in tandem with easing supply chain issues, survey data showed.

IHS Markit's manufacturing purchasing managers' index for the bloc rose to 58.7 points in January from 58.0 in December, with the reading further above the no-change mark of 50.0, indicating growth sped up at the start of 2022.

The pound was trading at USD1.3501 midday Tuesday, up from USD1.3425 at the London equities close on Monday.

Sterling shook off similar survey results suggesting manufacturing growth in the UK has slowed.

The latest IHS Markit-CIPS PMI fell to 57.3 points in January from 57.9 points in December. However, the final figure topped the flash estimate of 56.9 points. It was the UK manufacturing sector's 20th successive month of expansion.

The weaker dollar gave the gold price a boost. The precious metal stood at USD1,807.41 an ounce midday Tuesday, up from USD1,797.05 at the London equities close on Monday.

"Rising interest rates raise the opportunity cost of holding gold, making it less appealing to investors. However, the dollar index has retreated from multi-month highs, which has supported gold prices to some extent. In the short term, investors should keep in mind that rising consumer prices and greater volatility in stock markets will likely support the precious metal," AvaTrade analyst Naeem Aslam commented.

Profit taking hit oil prices after a strong run recently. A barrel of Brent fetched USD89.16 midday Tuesday, down markedly from USD91.12 late Monday.

On AIM, shares in retailer Joules Group plunged 40%. It warned on annual profit and said that revenue over the Christmas period and January was lower than it had expected.

Revenue in the nine weeks ending January 30, part of its financial third quarter, was 31% higher annually, which was below board expectations.

Joules now expects adjusted pretax profit for the financial year of no less than GBP5 million, meaning as much as 18% below GBP6.1 million from financial 2021.

In Zurich, UBS shares were trading 7.3% higher. The Swiss bank said it plans to buy back USD5 billion worth of shares in the year ahead after seeing profit surge in 2021.

Total operating income increased 9.7% to USD35.54 billion from USD32.39 billion. UBS posted a pretax profit of USD9.48 billion for 2021, up 16% from USD8.16 billion in 2020.

The lender said it plans to propose a dividend of USD0.50 per share for 2021 and intends to buyback up to USD5 billion of shares in 2022, after repurchasing USD2.6 billion in 2021.

Banking stocks in London were higher as well, with HSBC up 2.5% and Barclays up 1.4%, both helping to bolster the FTSE 100. Like UBS, both HSBC and Barclays have strong investment banking arms.

Still to come on Tuesday's economic events calendar is the US manufacturing PMI reading for January at 1445 GMT.

Ahead of the release, US stock market futures are lower. The Dow Jones Industrial Average was called down 0.1%, while the S&P 500 and Nasdaq Composite are both called down 0.2%.

By Eric Cunha; ericcunha@alliancenews.com

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