LONDON MARKET OPEN: Investors "reflective" after central bank shocks

(Alliance News) - Stock prices in London opened flat on Thursday, as investors re-evaluate the potential trajectory of interest rates across the globe.

The FTSE 100 index opened down 1.13 points at 7,623.21. The FTSE 250 was up 4.31 points at 19,156.58, and the AIM All-Share was down 0.43 of a point at 792.62.

The Cboe UK 100 was flat at 760.66, the Cboe UK 250 was up 0.1% at 16,728.77, and the Cboe Small Companies was up 0.1% at 13,816.94.

In European equities, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was down 0.2%.

"UK markets opened in [a]...reflective mood, with the interest rate increases from elsewhere providing an unwelcome reminder that the Bank of England is more than likely to follow suit, heaping further pressure on an economy which is already struggling to find meaningful growth," said interactive investor's Richard Hunter.

The Bank of Canada defied expectations and lifted its benchmark rate on Wednesday, following in the footsteps of the Reserve Bank of Australia a day before.

Having largely expected rate hike pauses, equity investors are now increasingly pricing in the possibility that the monetary tightening cycle will continue in major economies.

The US Federal Reserves announces its rate decision on Wednesday next week, the European Central Bank follows suit on Thursday. The Bank of England weighs in the following week on June 22.

Sterling was quoted at USD1.2448 early Thursday in London, edging down from USD1.2459 at the London equities close on Wednesday. The euro traded at USD1.0707, little changed than USD1.0705. Against the yen, the dollar was quoted at JPY139.90, edging up from JPY139.85.

In New York on Wednesday, the Dow Jones Industrial Average closed up 0.3%, but the S&P 500 index down 0.4% and the Nasdaq Composite down 1.3%.

M&G fell 0.7% in early exchanges.

The London-based investment manager said it started 2023 with strong momentum carried over from the previous year. At the end of March, its assets under management and administration edged up to GBP344 billion from GBP342 billion at the end of 2022.

It saw net client outflows of GBP1.1 billion during the quarter. Excluding heritage, it saw net inflows of GBP400 million, which was down from GBP1.6 billion a year before.

In the FTSE 250, Wizz Air rose 3.9%.

The budget airline said its recent financial year was one of "significant growth", despite the hit from higher fuel prices and structural capacity issues at airports.

For its financial year ended March 31, the Budapest-based budget airline's pretax loss narrowed to EUR564.6 million from EUR641.5 million the previous year.

Revenue more than doubled to EUR3.90 billion from EUR1.66 billion the prior year. Wizz Air said this was due to an 88% increase in the number of passengers it carried, rising to 51.1 million from 27.1 million the prior year.

Elsewhere, CAB Payments announced its intention to float in London. It is a London-based business-to-business cross-border payments and foreign exchange provider, specialising in emerging markets.

"Its decision to launch an IPO in London will help add shine to the capital's reputation as a fintech hub," said Susannah Streeter, head of Money & Markets at Hargreaves Lansdown.

The news follows a recent boost for London, after the world's largest natural soda ash producer, WE Soda, confirmed its intention to float on the premium segment of the London Main Market on Wednesday.

International specialist fund Amicorp FS also began its first day of trading on Thursday, joining the standard listing segment of the Main Market.

"After the drought of IPOs in the capital, the taps are now being slowly turned on and the flotation tank is starting to fill, but don't expect the trickle to turn into a flood just yet," Streeter said. "There is still uncertainty about the direction of interest rates which could still provoke unsettled trading going forward."

Meanwhile, US asset manager BlackRock said it has agreed to buy London-based privately-held debt financer Kreos Capital.

Private debt investing is now an "increasingly important component" of investing portfolios, said Blackrock's Stephan Caron, head of Private Debt for Europe, the Middle East & Africa.

"Current market dynamics have made private credit an attractive asset class as investors focus on its income generation, low volatility, portfolio diversification and its low defaults versus public markets," he explained.

BlackRock shares closed down 0.3% in New York on Wednesday.

On the AIM market in London, PetroTal fell 5.1% early Thursday.

The Alberta, Canada-based oil and gas company said vessels that provide services to the company are being affected by an "illegal and violent" river blockade by indigenous activists in Puinahua Canal in Peru.

The Indigenous Association for Development & Conservation of Bajo Puinahua has been engaging in a blockade since Saturday, blocking all ships providing services to the firm - including barges that transport oil and vessels carrying critical camp supplies.

In Asia on Thursday, the Nikkei 225 index in Tokyo closed down 0.9%.

Japan's economy expanded 0.7% in the January-March quarter, improved from an initial estimate of 0.4%, government data showed. The latest figure – which also beat market expectations of 0.5% growth – reflects strong corporate investments, data released by the Cabinet Office showed. The first-quarter number was much stronger than the 0.1% seen in the final quarter of 2022.

In China, the Shanghai Composite closed up 0.5%, while the Hang Seng index in Hong Kong was up 0.2%. The S&P/ASX 200 in Sydney closed down 0.3%.

Gold was quoted at USD1,945.79 an ounce early Thursday, lower than USD1,954.11 on Wednesday. Brent oil was trading at USD77.05 a barrel, a touch lower than USD77.24.

UK Prime Minister Rishi Sunak will meet UK President Joe Biden at the White House on Thursday for talks during which he will voice unstinting support for Ukraine. Opening his two-day trip, Sunak announced that Britain would hold the world's first summit on artificial intelligence in the second half of the year.

Still to come in the economic calendar, there's EU GDP at 1000 BST and the US weekly unemployment insurance claims at 1330 BST.

By Elizabeth Winter, Alliance News senior markets reporter

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