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London open: Stocks gain; RBA pauses rate hikes
London stocks rose in early trade on Tuesday following mixed sessions in the US and Asia, as investors mulled the latest policy announcement from the Reserve Bank of Australia.
At 0825 BST, the FTSE 100 was up 0.6% at 7,722.37.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “A decision by the Reserve Bank of Australia to pause interest rate rises, combined with the UK market’s reliance on big oil names, means the FTSE 100 is largely expected to continue its positive run today.
“While equity markets have largely had a strong start to the year, attention is turning to what may happen next. A weak economic outlook and the new oil shock could inject some volatility into things in the short to medium term.”
The RBA said earlier that it was keeping rates at 3.6%, in line with consensus expectations, following 10 hikes.
Bank Governor Philip Lowe noted that the decision follows a cumulative increase in interest rates of 3.5 percentage points since May last year.
“The board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt,” he said. Lowe said the board had made the decision to hold rates steady “to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook”.
He pointed out that the outlook for the global economy remains subdued, with below-average growth expected this year and next.
“The recent banking system problems in the United States and Switzerland have resulted in volatility in financial markets and a reassessment of the outlook for global interest rates,” he said. “These problems are also expected to lead to tighter financial conditions, which would be an additional headwind for the global economy.”
The RBA said some further tightening of monetary policy may be needed to ensure that inflation returns to its 2% to 3% target.
In corporate news, the UK wealth business of Investec and Rathbones have agreed to merge in an £839m all-share deal.
New Rathbones shares will be issued for 100% of Investec Wealth & Investment shares, which would leave Investec with an economic interest of 41.25% in the combined company. Shares in both companies were trading higher.
Miners were also on the front foot, with Glencore and Anglo American among the top performers on the FTSE 100.
Elsewhere, Digital 9 Infrastructure rose after it moved to reassure investors following continued volatility in its share price.
Shares in the investment firm, which specialises in the infrastructure used to run and manage the internet, have lost 27% over the last month, and 30% in the year to date.
But Digital 9, which joined the London Stock Exchange in 2021, insisted earlier that it was not aware of any portfolio specific factors that might have caused the decline.
In broker note action, Auto Trader was higher after an upgrade to ‘neutral’ from ‘underweight’ at JPMorgan, while Virgin Money was boosted by an upgrade to ‘outperform’ at KBW. Pennon was knocked lower by a downgrade to ‘equalweight’ at Morgan Stanley.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Aviva Plc | +1.75% | +7.10 | 411.70 |
| 2 |  |
Glencore Plc | +1.75% | +7.90 | 460.40 |
| 3 |  |
International Consolidated Airlines Group S.a. | +1.46% | +2.15 | 149.65 |
| 4 |  |
Legal & General Group Plc | +1.18% | +2.80 | 240.80 |
| 5 |  |
Rightmove Plc | +1.14% | +6.40 | 566.40 |
| 6 |  |
Auto Trader Group Plc | +1.11% | +6.80 | 619.80 |
| 7 |  |
Direct Line Insurance Group Plc | +1.00% | +1.40 | 141.35 |
| 8 |  |
Next Plc | +0.99% | +64.00 | 6,516.00 |
| 9 |  |
Prudential Plc | +0.99% | +11.00 | 1,124.50 |
| 10 |  |
St. James’s Place Plc | +0.95% | +11.50 | 1,218.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Tui Ag | -2.09% | -12.80 | 598.60 |
| 2 |  |
Vodafone Group Plc | -1.51% | -1.35 | 88.11 |
| 3 |  |
United Utilities Group Plc | -0.97% | -10.00 | 1,025.50 |
| 4 |  |
Johnson Matthey Plc | -0.90% | -18.00 | 1,983.00 |
| 5 |  |
Bhp Group Limited | -0.89% | -22.50 | 2,497.00 |
| 6 |  |
Bt Group Plc | -0.88% | -1.30 | 145.90 |
| 7 |  |
Smith & Nephew Plc | -0.84% | -9.50 | 1,117.00 |
| 8 |  |
Rolls-royce Holdings Plc | -0.80% | -1.20 | 148.45 |
| 9 |  |
British American Tobacco Plc | -0.64% | -18.50 | 2,854.00 |
| 10 |  |
National Grid Plc | -0.64% | -7.00 | 1,085.00 |
US close: Mixed start to Q2 trading
Wall Street stocks turned in a mixed performance on Monday but the Dow Jones still managed to kick off the second quarter in the same manner it wrapped up the first.
At the close, the Dow Jones Industrial Average was up 0.98% at 33,601.15 and the S&P 500 had advanced 0.37% to 4,124.51, while the Nasdaq Composite saw out the session 0.27% weaker at 12,189.45.
The Dow closed 327.0 points higher on Monday, extending gains recorded in the previous session.
Oil prices surged on Monday, with both West Texas Intermediate and Brent Crude up more than 6% following an announcement from Saudi Arabia and other OPEC+ members that they will make a voluntary cut to output of 5% – or around 500,000 barrels per day.
On the macro front, factory sector activity in the US softened a bit more quickly than anticipated during the previous month, according to the Institute for Supply Management‘s manufacturing sector purchasing managers’ index, which slipped from a reading of 47.7 in February to 46.3 in March. Consensus had been for a decline to 47.1. A subindex for new orders fell from 47.0 to 44.4, denoting a faster rate of contraction than in February, while the subindex for employment slipped fell from 49.1 to 46.9, and the subindex tracking the prices paid by firms slipped from 51.3 to 49.2.
Elsewhere, S&P Global‘s March manufacturing PMI came in at 49.2, broadly in line with a flash estimate of 49.3 and above February’s reading of 47.3, the weakest pace of contraction in the sector in the five months, as output rose for the first time since last October and employment increased modestly.
Finally, construction spending slipped 0.1% month-on-month in February, according to the Census Bureau, dropping to a seasonally adjusted annual rate of $1.84trn. The decline follows January’s 0.5% rise but was broadly in line with expectations for a flat monthly reading.
No major corporate earnings were released on Monday.
Tuesday newspaper round-up: Energy support, chatbots, Hyve
Some of the UK’s least well-off households could be left more than £200 worse-off on their energy bills this year because of reduced government support, the consumer body Which? has warned. Joining calls made by other campaigners, it said the government urgently needed to introduce a “social tariff” for gas and electricity to protect the most financially vulnerable. – Guardian
Britain’s data watchdog has issued a warning to tech firms about the use of people’s personal information to develop chatbots after concerns that the underlying technology is trained on large quantities of unfiltered material scraped from the web. The intervention from the Information Commissioner’s Office came after its Italian counterpart temporarily banned ChatGPT over data privacy concerns. – Guardian
Bickering in Brussels is threatening to inflict queues and disruption on British holidaymakers for years to come by derailing the rollout of new technology that would speed up passport checks. The European Union has been hit by opposition from member states over the development of a new app for border crossings by non-EU citizens. – Telegraph
A shareholder revolt against a £481 million private equity takeover of Hyve is being led by M&G Investments, which claims that it significantly undervalues the international exhibition company. Hyve announced last month that it had agreed to a 108p-a-share takeover offer from Providence Equity Partners after the media-focused US investor had initially offered 101p, then 105p. – The Times
Some savers with Phoenix Life have been unable to withdraw their funds since Friday because the company’s systems were serviced by Capita, the hacked outsourcer. Chris Johnson, a customer who contacted The Times, reported that he was advised by a Phoenix Life call handler that he could not cash in his pension because of the technical issues and should ring back “in a few days”, with no estimated timeframe for when normal services would resume. – The Times
