LONDON MARKET OPEN: Stocks flat; oil slips amid US recession fear

(Alliance News) - Stock prices in London made little progress at Tuesday's market open, as the spectre of a US recession dulled risk appetite.

The FTSE 100 index opened down 4.24 points at 7,595.75. The FTSE 250 was up 19.04 points, 0.1%, at 19,132.59. The AIM All-Share was down just 0.25 of a point at 791.56.

The Cboe UK 100 was marginally lower at 758.17, the Cboe UK 250 was up 0.1% at 16,677.43, and the Cboe Small Companies was up 0.2% at 13,717.45.

In European equities on Tuesday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.1%.

Economic data on the US services sector raised concerns about the health of the country's economy on Monday afternoon.

The ISM services PMI registered 50.3 in May, its fifth consecutive month of growth. But this was down from 51.9 in April.

"As the world's largest economy shows more signs of heading for a contraction, with growth in the mighty services sector slowing more quickly than expected last month, worries are rising about the knock-on effect around the world," said Hargreaves Lansdown analyst Susannah Streeter.

New York ended in the red on Monday, with the Dow Jones Industrial Average down 0.6%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.1%.

In after-hours trade, Apple fell 2.4%, after unveiling an augmented reality headset, Vision Pro. The stock had reached a record high in anticipation of the launch, closing up 1.5% in the main trading session. Apple shares are up 26% over the past 12 months.

The Cupertino, California-based iPhone maker said the virtual reality headset will be "the most advanced personal electronic device ever".

The device, which resembles a pair of ski goggles, features a glass 23-million-pixel screen which covers the upper face and is controlled using the wearer's eyes, hands and voice.

Vision Pro will cost USD3,499 – roughly 10 times the price of the Meta Quest 2, the leading VR headset from Facebook's parent company, which retails around USD373.40.

"The USD3,500 headset failed to convince investors that it will be the next big thing. It's too expensive to democratize and rivals' efforts haven't paid much so far. Giving a fancy design to a product of little interest may not be the next big thing for Apple," commented Swissquote Bank's Ipek Ozkardeskaya.

The dollar was slightly lower early Tuesday in London.

Sterling was quoted at USD1.2436 higher than USD1.2415 at the London equities close on Monday. The euro traded at USD1.0722, higher than USD1.0711. Against the yen, the dollar was quoted at JPY139.22, edging down versus JPY139.60.

Gold was quoted at USD1,958.98 an ounce early Tuesday in London, unchanged from USD1,959.00 late Monday.

Amid concerns of a US recession, oil returned some of the price gains made after the production cut announced by Saudi Arabia on Sunday.

Brent was trading at USD75.55 a barrel, lower than USD77.37. Oil majors BP and Shell shed 0.8% and 0.6% respectively in London.

Elsewhere the FTSE 100, British American Tobacco was in the green in early trade.

The cigarette maker's new chief executive, Tadeu Marroco, affirmed there would be no change in the company's strategy.

In a trading update, BAT's former finance director admitted the performance in US combustibles over the first half ending June 26 was "disappointing", and improving it will be a strategic focus. BAT's tobacco heating product, glo, saw an "underwhelming" start to the year, but has since seen more encouraging momentum.

BAT maintained guidance for 2023 as a whole, expecting global tobacco industry volumes to be down around 3%. For itself, BAT expects 3% to 5% constant currency revenue growth, with a second-half weighting.

Associated British Foods was trading flat, after it announced a deal to acquire National Milk Records, worth GBP48 million. The agreement values NMR's shares at 215 pence, which is an 87% premium to Monday's closing price. NMR will be acquired by AB Agri, which is AB Food's international agri-food business.

NMR provides technology information services to the UK dairy sector and is currently listed on the Aquis Stock Exchange in London. Its shares jumped 81% to 199.60p.

The takeover agreement has support from just under 69% of NMR's shareholders, and is expected to become effective in the third quarter.

Chemring rose 4.5%, as it reported record first-half order intake, with its order book reaching the highest level in over a decade at GBP750 million.

The military technology company's pretax profit in the half-year ended April 30 fell to GBP22.0 million from GBP28.9 million a year before. Revenue was lower at GBP212.1 million, compared to GBP220.4 million. The results were in line with the board's expectations, the firm said, reiterating the second-half weighting for Countermeasures & Energetics due to order intake delays.

"Chemring is well placed to capitalise on its many opportunities and with 90% of expected H2 revenues covered by the order book, the board's full year expectations are unchanged," said CEO Michael Ord.

On AIM, Barkby Group jumped 78%.

The commercial property development and investment firm said its subsidiary, Cambridge Sleep Sciences, granted a five-year global license to Sleep Sense International for the manufacture of a smart pillow, which uses CSS's SleepEnginge platform.

The deal is expected to generate GBP1.3 million in royalty payments over the first year, and GBP3.0 million in the second year. The subsequent payments will be agreed next November.

SleepEngine is an audio technology which "helps to retrain the brain to restore healthy natural sleeping patterns", Barkby explains.

In Asia on Tuesday, the Nikkei 225 index closed up 0.9% in Tokyo. The Shanghai Composite closed down 1.2%, while the Hang Seng index in Hong Kong was down 0.3%.

The S&P/ASX 200 in Sydney closed down 1.2%.

The Reserve Bank of Australia enacted another unexpected interest rate hike of 25 basis points, bringing the cash rate target to 4.10%. The interest rate paid on exchange settlement balances was also increased by 25bp to 4.00%.

This follows a surprise 25bp hike in May.

RBA Governor Philip Lowe explained that upside risks to the outlook for inflation have increased, noting "very high" services price inflation.

Still to come on Tuesday's economic calendar, there's a UK construction PMI print at 0930 BST and US retail sales at 1500 BST.

By Elizabeth Winter, Alliance News senior markets reporter

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