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London open: Stocks gain as miners rally; borrowing data in focus
London stocks nudged higher in early trade on Tuesday following another record close on Wall Street, as investors mulled better-than-expected UK borrowing figures.
At 0845 GMT, the FTSE 100 was up 0.1% at 7,497.65.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Positive sentiment appears to be clinging on, following continued optimism emanating from Wall Street about the prospects for a softer landing for the US economy as interest rate cuts are eyed up in the Spring.
“Although hopes for super-early rate cuts have dissipated there are still expectations that with inflation heading in the right direction in the US, policymakers will go easier. The S&P 500 crept even higher to fresh new levels, and the expectations are that this will support a slightly higher open again in Europe.
“The fresh wave of military action involving UK and US forces in Yemen, has sent oil prices higher, amid concerns of the potential of tensions escalating in the Middle East, disrupting supply.”
On the macro front, figures released earlier by the Office for National Statistics showed the government borrowed much less than expected last month.
Public sector borrowing, excluding banks, rose £7.8bn in December, which was below the £14.1bn economists were expecting.
It was also £8.4bn below the amount borrowed a year earlier and marked the lowest borrowing for the month of December since 2019.
For the nine months to December, total public sector net borrowing came in at £119.1bn, which was £5bn below the £124.1bn forecast by the Office for Budget Responsibility.
Ruth Gregory, deputy chief UK economist at Capital Economics, said: “After nine months of the 2023/24 fiscal year, borrowing is on track to undershoot the OBR’s full-year borrowing forecast of £123.9bn by £5.0bn.
“What’s more, with market interest rate expectations and long-dated gilt yields having fallen since November, we suspect the OBR will revise down its borrowing forecast significantly from 2025/26.
“That may provide the Chancellor with ‘headroom’ against his fiscal mandate of about £20bn in the Budget. That will probably allow him to unveil a freeze in fuel duty in April 2024 (costing about £6.0bn a year) but perhaps also to announce more crowd-pleasing measures, such as a 1p cut to income tax (costing £6.9bn a year), while still maintaining fiscally prudent appearances.”
In equity markets, heavily-weighted mining shares were up following a report that Chinese authorities are considering a package of measures aimed at stabilising the stock markets. According to Bloomberg, policymakers are looking to mobilise about 2 trillion yuan, mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilisation fund to buy shares onshore through the Hong Kong exchange link.
Associated British Foods advanced as it said sales at clothing retailer Primark grew 2.1% on a like-for-like basis over the Christmas period despite warmer weather. ABF also said it does not expect supply disruptions from attacks on commercial shipping in the Red Sea.
Mr Kipling and Bisto owner Premier Foods was a smidgen firmer after saying it was on track to hit profit forecasts this year following a solid third quarter with double-digit sales growth across the group.
Crest Nicholson was flat as the housebuilder posted a bigger-than-expected fall in annual profits but said it was encouraged by an increase in customer inquiries as borrowing costs fell.
In broker note action, Royal Mail parent IDS gained after an upgrade to ‘buy’ at HSBC.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Anglo American Plc | +2.73% | +47.80 | 1,799.00 |
| 2 |  |
Smurfit Kappa Group Plc | +2.22% | +64.00 | 2,944.00 |
| 3 |  |
Prudential Plc | +1.81% | +14.40 | 810.80 |
| 4 |  |
Associated British Foods Plc | +1.68% | +38.00 | 2,306.00 |
| 5 |  |
Rio Tinto Plc | +1.65% | +87.00 | 5,375.00 |
| 6 |  |
Standard Chartered Plc | +1.55% | +9.00 | 589.60 |
| 7 |  |
Glencore Plc | +1.53% | +6.10 | 404.00 |
| 8 |  |
Ocado Group Plc | +1.46% | +8.20 | 569.80 |
| 9 |  |
Bhp Group Limited | +1.35% | +32.00 | 2,395.50 |
| 10 |  |
Fresnillo Plc | +1.23% | +5.90 | 483.70 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Carnival Plc | -4.26% | -51.50 | 1,158.50 |
| 2 |  |
Rolls-royce Holdings Plc | -1.59% | -4.90 | 304.00 |
| 3 |  |
Compass Group Plc | -1.43% | -31.00 | 2,134.00 |
| 4 |  |
Whitbread Plc | -1.41% | -50.00 | 3,506.00 |
| 5 |  |
Burberry Group Plc | -1.21% | -15.00 | 1,229.50 |
| 6 |  |
Intercontinental Hotels Group Plc | -1.17% | -88.00 | 7,402.00 |
| 7 |  |
Tui Ag | -1.09% | -6.00 | 542.00 |
| 8 |  |
Crh Plc | -1.08% | -60.00 | 5,484.00 |
| 9 |  |
British Land Company Plc | -1.01% | -3.80 | 372.70 |
| 10 |  |
Relx Plc | -0.89% | -29.00 | 3,243.00 |
US close: Dow and S&P 500 both close at fresh record highs
US stocks booked modest gains on Monday but that didn’t stop the Dow Jones Industrial Average and S&P 500 both closing at new all-time highs.
The Dow closed above the psychologically important barrier of 38,000 for the first time ever, rising 0.4% to 38,001.81, while the S&P 500 rose 0.2% to register its second-straight record of 4,850.43. The Nasdaq, meanwhile, gained 0.3% to 15,360.29.
“Wall Street’s bull run shows no signs of petering out as the S&P 500 hit another new record high and the Nasdaq charged to a three-year peak thanks to continued exuberance about the potential for AI to fill coffers,” said Danni Hewson, AJ Bell’s head of financial analysis.
Quarterly results from Tesla are out on Wednesday, as the first of the so-called ‘Magnificent Seven’ tech stocks report to the market. IBM and Netflix also be in focus this week, along with central bank decisions in Japan and Europe on Tuesday and Wednesday, respectively.
“The first of those massively important Magnificent Seven stocks charges out of the gates later this week with its latest figures, but with plenty of warnings about production disruption, Chinese competition and huge discounting, investors aren’t expecting much from Tesla,” Hewson said.
On home shores, the US economic data schedule looks relatively sparse this week, though the personal consumption expenditures index – the Federal Reserve’s preferred measure of inflation – will make headlines on Friday. The index is forecast to show that the annual rate of inflation eased to 3.0% in December from 3.2% in November – which was already the lowest level since April 2021.
NuStar-Sunoco deal hits headlines
Fuels storage and pipeline operator NuStar Energy surged 18% after agreeing to be bought by US gas station owner Sunoco in a $7.3bn all-share deal. Sunoco dropped 4% on the news.
Commodities trade Archer-Daniels-Midland dropped 24% after delaying its quarterly results and putting its CFO on leave on the back of an investigation into accounting practices within its nutrition unit.
Macy’s rose strongly after saying over the weekend that it had rejected Arkhouse Management and partner Brigade Capital Management’s $5.8bn proposal to take the department store chain private.
Gilead Sciences fell 10% after its Trodelvy treatment failed to significantly improve survival rates in a trial of patients with advanced lung cancer.
Boeing edged lower after the US Federal Aviation Administration recommended that operators check door plugs on another aircraft model.
Tuesday newspaper round-up: Prepayment meters, The Telegraph, Vertical Aerospace
London is capturing an ever-bigger share of the UK’s record service sector exports and government action is needed to ensure other big cities keep pace with the capital, a report says. The Resolution Foundation said London accounted for almost half of the UK’s service sector exports, with its share of the total rising from 38% to 46% between 2016 and 2021. – Guardian
More than 2 million people across the UK will be cut off from their gas and electricity this winter because they cannot afford to top up their prepayment meters, according to Citizens Advice. The charity said it had made the estimate for what is expected to be its busiest winter ever for helping people who cannot afford to top up, after last year 1.7 million people were disconnected at least once a month. About 800,000 people went more than 24 hours without gas and electricity, unable to make a hot meal or take a warm shower, because they could not afford to top up. – Guardian
The leader of the Abu Dhabi-backed bid for The Telegraph has attended a Conservative networking lunch alongside the Prime Minister and the Culture Secretary, as they prepare to decide whether the takeover can go ahead. Jeff Zucker, the head of RedBird IMI and former CNN chief, was among guests at the Conservative Friends of Israel’s annual business lunch at the InterContinental Park Lane in London. – Telegraph
Vertical Aerospace, the electric flying taxi business, has been handed $50 million by its founder to keep it airborne. Stephen Fitzpatrick, the Northern Irish entrepreneur who is behind the household supplier Ovo Energy, will inject $25 million of equity capital in the first instance at $10 a share, with a further $25 million by the end of July at an undetermined price. This will be reduced if the company secures equity funding from alternative sources. – The Times
A start-up that can clone people’s voices has been valued at more than $1 billion in its latest funding round, with investment from Silicon Valley stalwarts including Andreessen Horowitz and Sequoia Capital. ElevenLabs uses artificial intelligence to convert written words into speech that sounds as if it is being read by real voices and “renders human intonation and inflections with unrivalled fidelity”, according to the business. – The Times
