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London open: Stocks gain; oil rallies on Saudi production cuts
London stocks gained in early trade on Monday following positive US and Asian sessions, with oil prices on the rise.
At 0845 BST, the FTSE 100 was up 0.5% at 7,642.49.
On Sunday, Saudi Arabia announced that it will cut oil production next month and do “whatever is necessary” to lift prices.
Saudi Arabia said it would cut 1m barrels per day (bpd) in July, while OPEC+ said targets would decline by a further 1.4m bpd from next year.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The FTSE 100 has opened higher, gaining a lift upwards from strong trading in Asia, amid ongoing relief about the US reaching a debt ceiling deal and the move by oil-rich nations to keep crude prices higher.
“Brent crude is trading higher, just above $77 a barrel, but has lost a little bit of steam, after initially jumping on the news of Saudi Arabia’s production cut, which is designed to keep cash rolling into the kingdom. The decision by Riyadh to reduce production by a million barrels a day in July, and the pledge from other OPEC+ members to lower targets again next year was aimed at shoring up the oil price to breakeven levels. Oil prices are trapped in conflicting tides between production cuts on one hand, and concerns about demand as China’s recovery slows, while a recession in the US looms. So, for now, this production cut is unlikely to show up in a dramatic way at the pumps.
“However, depending on the trajectory of the world’s largest economies, and if Saudi Arabia cuts again, supply shortages could emerge later this year, which could push prices higher but still way off the excruciating levels of last summer.”
Investors were also mulling the latest data out of China, which showed that activity in the services sector unexpectedly picked up in May.
The Caixin/S&P Global services purchasing managers’ index rose to 57.1. from 56.4 in April, coming in above consensus expectations of 55.2.
A reading above 50.0 indicates expansion, while a reading below signals contraction.
Wang Zhe, senior economist at Caixin Insight Group, said: “In general, it remains a prominent feature of the Chinese economy that the services sector is stronger than manufacturing.
“This divergence highlights that economic growth is lacking internal drive and market entities lack sufficient confidence, underscoring the importance of expanding and restoring demand.”
On the UK macro front, investors will eye the S&P Global/CIPS services PMI for May at 0930 BST.
In equity markets, BP and Shell gained but telecoms were the biggest risers, with BT, Vodafone and Airtel Africa all sharply higher,
Opioid addiction treatment maker Indivior surged after it reached an agreement to resolve litigation claims over Suboxone.
Online fashion retailer Asos jumped following a report that Turkish online retailer Trendyol made a £1bn approach in late December.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Vodafone Group Plc | +3.05% | +2.31 | 77.94 |
| 2 |  |
Bt Group Plc | +2.68% | +3.85 | 147.50 |
| 3 |  |
United Utilities Group Plc | +1.83% | +19.00 | 1,055.50 |
| 4 |  |
Tui Ag | +1.80% | +9.50 | 537.50 |
| 5 |  |
Marks And Spencer Group Plc | +1.50% | +2.80 | 188.85 |
| 6 |  |
Severn Trent Plc | +1.33% | +36.00 | 2,742.00 |
| 7 |  |
St. James’s Place Plc | +1.26% | +14.50 | 1,168.00 |
| 8 |  |
Experian Plc | +1.21% | +35.00 | 2,933.00 |
| 9 |  |
Hsbc Holdings Plc | +1.16% | +7.00 | 609.70 |
| 10 |  |
Gsk Plc | +1.14% | +15.60 | 1,383.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Mondi Plc | -3.18% | -41.00 | 1,250.00 |
| 2 |  |
Fresnillo Plc | -2.23% | -15.40 | 676.40 |
| 3 |  |
Rolls-royce Holdings Plc | -1.17% | -1.75 | 148.25 |
| 4 |  |
Scottish Mortgage Investment Trust Plc | -1.00% | -7.00 | 690.60 |
| 5 |  |
Antofagasta Plc | -0.86% | -12.50 | 1,444.00 |
| 6 |  |
Auto Trader Group Plc | -0.62% | -3.80 | 613.20 |
| 7 |  |
Whitbread Plc | -0.59% | -20.00 | 3,354.00 |
| 8 |  |
Informa Plc | -0.34% | -2.40 | 702.40 |
| 9 |  |
Ferguson Plc | -0.34% | -40.00 | 11,770.00 |
| 10 |  |
Wpp Plc | -0.30% | -2.60 | 876.40 |
Monday newspaper round-up: UK breweries, German car makers, HSBC
Leicester’s garment makers have said they are in crisis as a growing number of fast-fashion brands are forcing through discounts, making last-minute cancellations and imposing financial penalties for what suppliers claim are tiny errors. In the east Midlands city – where manufacturers make clothes for a range of brands including Boohoo, Misguided and Frasers Group, the owner of Sports Direct and the online specialist Missguided – hundreds of garment businesses have shut in recent years, local organisations say, and suppliers warn that more are likely to follow. – Guardian
The number of UK breweries going out of business has tripled in the past year, with smaller craft beer manufacturers most at risk as consumers opt for cheaper options during the cost of living crisis, according to research. In total, 45 breweries entered insolvency in the 12 months ending 31 March, compared with 15 in the previous year, according to the most recent official Insolvency Service statistics analysed by Mazars, an audit, tax and advisory firm. – Guardian
German car makers are ramping up pressure on Brussels to avoid a post-Brexit “cliff edge” for the auto industry as officials in Whitehall race to strike a deal. Mercedes and Volkswagen have this week joined other car marques in calling for the EU to delay the introduction of new rules that will hit cross-border trade with Britain. – Telegraph
The British Chambers of Commerce is establishing a new business body composed of some of the country’s biggest companies, including BP and Drax, days ahead of a crunch vote that will decide the fate of the CBI. As its embattled peer faces job losses and a potential insolvency, the BCC today will convene a new council made up of business leaders “who are looking for a different kind of representation”. – The Times
HSBC has come under fire for closing bank accounts held by a Hong Kong opposition political party and some of its core members. Last week the FTSE 100 bank notified the League of Social Democrats of its decision to close the group’s three accounts after having “carefully considered various factors and conducted detailed assessments before making the relevant decision.” – The Times
