LONDON MARKET MIDDAY: Miners and oil majors lead FTSE 100 march

(Alliance News) - European equities went into Monday afternoon on the up, with the FTSE 100 outperforming as it was supported by its natural resources sector and oil majors.

Stimulus hope out of China, on the back of a tepid, but not quite dire, reading of the manufacturing sector, boosted mining stocks. Oil output cuts from major producers lifted Shell and BP.

A noticeable laggard on the FTSE 100 was AstraZeneca, on underwhelming trial results.

"The markets built on last week's strong finish to start the second half of the year in decent fettle," AJ Bell analyst Russ Mould commented.

"Asian stocks took their cue from Friday's rally on Wall Street, prompted by data showing core inflation in the US is easing, perhaps reducing the need for too many more rate hikes across the Atlantic."

The FTSE 100 index rose 28.61 points, 0.4%, at 7,560.14. The FTSE 250 was up 102.32 points, 0.6%, at 18,519.08. The AIM All-Share edged up just 0.11 of a point to 753.62.

The Cboe UK 100 was up 0.3% at 753.83, the Cboe UK 250 was up 0.4% at 16,175.61, though the Cboe Small Companies fell 0.1% to 13,705.14.

In European equities, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was 0.1% higher.

The Chinese manufacturing sector saw a softer rise in production last month, according to survey data on Monday.

The Caixin manufacturing purchasing managers' index eased to 50.5 points from 50.9 in May, coming in slightly higher than a flash estimate of 50.2.

Last Friday, the official manufacturing purchasing managers' index– a key measure of factory output – came in at 49.0, rising above the 48.8 figure recorded in May, but still indicating a contraction.

The reading remains just above the 50-point no-change mark, indicating the sector remains in a state of marginal expansion.

"Now some of the disappointment about a slower than expected post-Covid recovery has eased, the focus is turning to potential financial stimulus and support, which could have positive implications for metals and energy demand," AJ Bell's Mould commented.

Anglo American and Glencore were up 4.1% and 3.6%, among the best large-cap performers in London, on the back of stimulus hope in China.

Pantheon Macroeconomics analyst Duncan Wrigley commented: "China is likely to add fiscal, quasi-fiscal and targeted monetary measures to the recent broad 10bp lending rate cuts. But the scale of stimulus should still be limited, as the goal will be for GDP growth to get back on track for a relatively conservative 'about 5%' target."

Oil prices were on the move, getting a lift from output cuts by Russia and Saudi Arabia. Brent oil was trading at USD75.94 a barrel midday Monday, up from USD75.58. It had spiked as high at USD76.55 at around 1030 BST.

Boosted by the rising Brent price, Harbour Energy, BP and Shell were up 5.0%, 2.8% and 2.2%. Harbour Energy was the best performing FTSE 250 constituent.

Saudi Arabia announced it was extending a voluntary oil production cut of one million barrels per day, in a bid to prop up slumping prices. The cut which first took effect July will continue in August and "can be extended", the official Saudi Press Agency reported, citing an energy ministry source.

Russia's top energy official, meanwhile, said that Moscow will voluntarily cut oil exports by 500,000 barrels per day, building on previously announced production cuts.

Alexander Novak said the move is to ensure "the oil market remains balanced".

Sterling was quoted at USD1.2674 midday Monday, lower than USD1.2706 at the London equities close on Friday. The euro traded at USD1.0891, down from USD1.0916. Against the yen, the dollar was quoted at JPY144.73, up versus JPY144.58.

The downturn in the UK's manufacturing sector continued in June. The S&P Global/CIPS manufacturing PMI worsened to a six-month low of 46.5 points in June from 47.1 in May.

In the eurozone, the Hamburg Commercial Bank manufacturing PMI fell to 43.4 points in June from 44.8 in May, its lowest level since May 2020.

There is a US Institute for Supply Management PMI to come at 1500 BST, after an S&P Global reading at 1445 BST.

The data will be closely-scrutinised in light of Federal Reserve Chair Jerome Powell last week putting successive US rate hikes on the table. The Fed had decided against hiking in its June meeting, keeping the federal funds rate range at 5.00%-5.25%.

ACY Securities analyst Clifford Bennett commented: "The market's bizarre expectations of a pivot were always a fantasy and this has been seen to be the case. Nevertheless, markets have been climbing. Not because the market is getting what it wants fundamentally, but simply because it 'wants' to go higher. Such 'wants' if continuing to remain un-supported by the fundamental reality, have throughout history never ended well."

On Friday, the Dow Jones Industrial Average had risen 0.8%, the S&P 500 1.2% and the Nasdaq Composite 1.5%.

Stocks in New York are called largely higher at the start of the week. The Dow is called to open 0.1% lower, the S&P is seen opening up 0.1%, and the Nasdaq 0.2% higher.

Financial markets in New York close early at 1800 BST on Monday, 1pm local time, and remain closed on Tuesday for the Independence Day holiday.

In London, AstraZeneca shares slumped 5.4% after results from a trial of its Dato-DXd lung cancer drug disappointed.

AstraZeneca is working with Tokyo-listed Daiichi Sankyo, who it has also collaborated with for the Enhertu drug.

In patients will locally advanced or metastatic non-small cell lung cancer treated with at last one prior therapy, Dato-DXd demonstrated a "statistically significant" improvement for the dual primary endpoint of progression-free survival compared to docetaxel, the current standard of care chemotherapy.

However, for the dual primary endpoint of overall survival, the data "were not mature".

"An early trend was observed in favour of [Dato-DXd] versus docetaxel that did not meet the prespecified threshold for statistical significance at this interim analysis," AstraZeneca said.

However, for the dual primary endpoint of overall survival, the data "were not mature".

On AIM, Yourgene Health shares more than doubled to 0.47 pence, having closed at 0.20p on Friday. It has a market capitalisation of GBP14.7 million.

The molecular diagnostic group has agreed a cash takeover offer from fellow AIM listing Novacyt. The offer of 0.522p a share values the company at GBP16.7 million.

Novacyt, focused on clinical diagnostics, traded 19% higher.

"The acquisition combines highly complementary technologies and services, with the enlarged group able to leverage mutual research and development capabilities for ongoing product development and portfolio enhancement to improve the customer offering," the companies said.

Gold was quoted at USD1,913.83 an ounce midday Monday, down from USD1,915.48 late Friday.

By Eric Cunha, Alliance News news editor

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