LONDON MARKET MIDDAY: Stocks shrug off recession warning in Germany

(Alliance News) - European equities were higher at midday on Monday, bouncing back from a lower start, as investors took a warning from a business poll that showed Germany is on "brink of recession" in their stride.

The FTSE 100 was up 19.35 points, or 0.3%, at 7,295.72. The FTSE 250 index was up 10.87 points, or 0.1%, at 19,835.64. The AIM All-Share index was down 3.12 points, or 0.3%, at 901.97.

The Cboe UK 100 index was up 0.2% at 727.87. The Cboe 250 was up 0.1% at 17,290.12. The Cboe Small Companies was up 0.6% at 13,671.81.

In mainland Europe, the CAC 40 stock index in Paris was up 0.4%, while the DAX 40 in Frankfurt was 0.5% higher.

On the economic front, the German Ifo business climate index fell to 88.6 points in July from a revised reading of 92.2 in June and missed expectations of a score of 90.1.

"The further decline in the [index] adds to the evidence that the German economy is on the brink of a recession as high energy prices and worries about energy security in particular take their toll on firms' expectations for the months ahead," commented Capital Economics.

In London's FTSE 100, Airtel Africa was up 2.3% after the Africa-focused telecommunications firm's subsidiary Airtel Kenya Networks bought 60 megahertz of additional spectrum in Kenya for USD40 million. It added that Airtel Kenya is one of its largest markets by revenue.

AstraZeneca was up 1.1% after the drugmaker said it won two recommendations for approval in the EU and one priority review in the US. AstraZeneca's and Daiichi Sankyo's breast cancer drug Enhertu won strategic priority review in the US for patients with some forms of breast cancer.

At the other end of the large-caps, Haleon was the worst performer, down 3.4% after Jefferies started coverage on GSK consumer healthcare spin-off with a 'hold' rating.

In the FTSE 250, Ferrexpo was the best performer, up 14%, after the iron ore pellet producer said it completed an external assurance process for the reporting of crucial safety metrics and scope 1 and scope 2 greenhouse gas emissions for its performance in 2021.

In addition, Credit Suisse upgraded Ferrexpo to 'outperform' from 'neutral'.

Vesuvius was the second best performer, up 7.5%, after the molten metal flow engineer said trading for the months of May and June remained stronger than anticipated.

As such, Vesuvius expects to report a trading profit for the first half of 2022 of GBP127.4 million. This would be sharply higher than the GBP73.3 million reported a year before.

The company said its outperformance in the first half was due to the successful implementation of pricing strategy to recover input costs as well as market share gains, supported by "technological differentiation".

Looking ahead, Vesuvius now expects its full-year trading profit to be towards the top end of the range of current analysts' expectations of GBP155 million and GBP199 million. This compares to GBP142.4 million in 2021.

Premier Foods was up 3.5% after the Kipling cakes owner agreed to acquire Indian and South East Asian meal kit brand Spice Tailor for an initial GBP43.8 million on a cash free and debt free basis. Premier Foods said Spice Tailor is expected to generate revenue of GBP17.3 million in financial 2023.

On AIM, 7digital was up 37% after the music licensing provider signed a long-term contract with music fintech company Utopia Music. The financial sum of the deal with Zug, Switzerland-based Utopia Music is undisclosed.

The pound was quoted at USD1.2034 at midday on Monday, recovering from USD1.2028 at the London equities close Friday.

The euro was priced at USD1.0224, unmoved from USD1.0223. Against the yen, the dollar was trading at JPY136.39, up from JPY136.11.

Brent oil was quoted at USD104.11 a barrel on Monday at midday, down from USD104.74 at the close Friday. Gold stood at USD1,730.21 an ounce, marginally lower against USD1,731.12.

New York was pointed to a higher open on Monday, looking to rebound from Friday's losses, as tech earnings season begins in earnest this week.

The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite were all called up 0.5% on Monday. The indices had closed down 0.4%, 0.9% and 1.9% respectively on Friday.

Trillion-dollar tech names report earnings this week with Alphabet and Microsoft on Tuesday, followed by Amazon and Apple on Thursday.

The other market focus for the week ahead is a key policy decision by the US Federal Reserve on Wednesday. The central bank is widely expected to jack up rates by 75 basis points.

"While central banks worldwide have consistently surprised on the hawkish side, we do not expect this to be the case at the Federal Reserve July meeting, as signs of a US slowdown should be enough to keep its increase to 75bps. More generally, we think outsize rate increases are now a thing of the past, and we should revert to the 25 or 50 bps of the past after the July meeting, which could cap dollar gains," said Ebury's Matthew Ryan.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.