LONDON MARKET OPEN: Banks in demand after hawkish tones from US Fed

(Alliance News) - Stock prices in London opened mostly higher on Tuesday with banks among the best performers in the FTSE 100 following hawkish comments from the US Federal Reserve.

The US central bank is prepared to raise interest rates by bigger steps than the quarter-point hike announced last week if needed to contain "much too high" inflation, Federal Reserve Chair Jerome Powell said Monday.

The FTSE 100 index was up 42.26 points, or 0.4%, at 7,484.65 early Tuesday. The mid-cap FTSE 250 index was up 84.53 points, or 0.4%, at 21,091.09. The AIM All-Share index was down 1.24 point, or 0.1%, at 1,036.62.

The Cboe UK 100 index was up 0.5% at 744.35. The Cboe 250 was up 0.4% at 18,593.19, and the Cboe Small Companies was up 0.3% at 14,978.34.

In mainland Europe, the CAC 40 stock index in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.8%.

"European markets have opened on a positive note with the energy and banking sectors leading the gains. Financial stocks and the US dollar have caught a bid on the back of comments from Fed Chair Jay Powell, who signalled the potential for a more hawkish path ahead for US monetary policy, opening the door to a possible 50 basis point hike," said Victoria Scholar, head of Investment at interactive investor.

Blue-chip banks were in demand, with HSBC up 3.2%, Standard Chartered up 2.7%, NatWest up 2.7%, Barclays up 1.6% and Lloyds up 1.3%.

In the FTSE 100, athletic apparel retailer JD Sports Fashion was up 3.8% after sportswear maker Nike, late Monday, reported robust revenue growth in the third quarter.

Revenue in the three months to the end of February rose 5% to USD10.87 billion from USD10.36 billion year-on-year. Revenue rose 8% on a currency-neutral basis, led by Nike Direct growth of 17%.

Nike shares closed up 5.9% in New York on Monday.

Conversely, Kingfisher was down 1.7%, despite the DIY retailer reporting strong annual results and raising its dividend.

For the financial year that ended January 31, pretax profit was up 33% to GBP1.01 billion from GBP756 million the year before, as sales rose 6.8% to GBP13.18 billion from GBP12.34 billion.

Kingfisher said that financial 2022 was a year of record revenue, profit and that it was gaining market share in the UK and France. It said its B&Q chain had an "outstanding year", with sales passing GBP4 billion. It was also a record year of expansion for Screwfix, with 70 new stores opened in the UK and Ireland, and Screwfix France showing promising early progress.

Turning to shareholder returns, Kingfisher raised its annual payout by 50% to 12.40 pence per share from 8.25p paid out the year before.

Kingfisher said first quarter like-for-like sales were down 8.1% from the year before, but up 16% from two years earlier.

"The outlook comments from the group are also largely positive, hoping to continue its momentum with further market share growth, expansion of 'own exclusive brand' products, mobile-led innovation and a continuing eye on cost containment and right-sizing. This is despite a reduction in sales in the first quarter of the new year, which will inevitably pique the interest of the bears following the stock," said interactive investor's Richard Hunter.

In the FTSE 250, Softcat was the best performer, up 8.5%, after the IT services provider reported interim profit growth ahead of expectations and strong cash generation.

For the six months that ended January 31, pretax profit increased to GBP64.2 million from GBP57.0 million a year before, on revenue of GBP770.9 million, up from GBP577.0 million.

Softcat declared an interim dividend of 7.3p, up 14% from 6.4p the year before.

Elsewhere in London, THG was up 1.0% after the beauty products retailer said founder Matthew Moulding will relinquish his position as executive chair but remain CEO.

THG has appointed Charles Allen as independent non-executive chair, starting immediately. Allen currently is chair of construction firm Balfour Beatty and previously was CEO of ITV and Granada.

In Asia on Tuesday, the Japanese Nikkei 225 index closed up 1.5%. Tokyo reopened after being closed for a holiday on Monday. In China, the Shanghai Composite closed up 0.3%, while the Hang Seng index in Hong Kong gained 3.2%. The S&P/ASX 200 in Sydney closed up 0.9%.

The pound was quoted at USD1.3150 early Tuesday, down from USD1.3192 at the London equities close Monday.

The euro was priced at USD1.0993, down from USD1.1033. Against the yen, the dollar was trading at JPY120.43 in London, higher against JPY119.25.

Brent oil was quoted at USD115.58 a barrel Tuesday morning, up from USD114.84 a barrel late Monday, but easing from a high of USD119.48 in early trade.

Gold stood at USD1,927.76 an ounce, lower against USD1,936.69 late Monday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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