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London shares were mixed early Tuesday, with the FTSE 100 slightly outperforming European peers due to a weaker pound and concern about the economic impact on the EU of a partial ban on imports of Russian oil.
Also hanging over equity markets was an inflation reading for the eurozone, due at 1000 BST.
The FTSE 100 index was up 12.45 points, or 0.2%, at 7,612.51 early Tuesday. Smaller companies weren't faring as well. The mid-cap FTSE 250 index was down 127.11 points, or 0.6%, at 20,419.78. The AIM All-Share index was down 3.21 points, or 0.3%, at 971.00.
The Cboe UK 100 index was up 0.2% at 758.22. The Cboe 250 was down 0.7% at 18,100.92 and the Cboe Small Companies was 0.7% lower at 14,639.47.
In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.7%.
Brent oil quoted at $119.30 a barrel, down from $120.20 at the London equities close on Monday, and pulling back from over $124 seen earlier this morning.
Gold stood at $1,855.10 an ounce, down from $1,857.80.
EU leaders agreed late Monday to ban more than two-thirds of Russian oil imports, tightening economic screws on the country even as Moscow's forces made gains in the eastern Donbas region of war-ravaged Ukraine.
The compromise deal, meant to punish Russia for its invasion three months ago, cuts ‘a huge source of financing for its war machine,’ European Council chief Charles Michel tweeted.
Leaders of the 27-nation bloc had met to negotiate the long-sought deal earlier Monday in Brussels, amid concerns raised by Hungary and other neighbouring countries reliant on Russian fuel.
The agreement also includes plans for the EU to send €9 billion in ‘immediate liquidity’ to Kyiv, Michel announced.
London's oil majors Shell and BP both advanced 1.3%.
In Tokyo on Tuesday, the Nikkei 225 ended down 0.3%. The Shanghai Composite was up 1.2%, while the Hang Seng in Hong Kong was 1.0% higher in late trade. The S&P/ASX 200 in Sydney closed down 1.0%.
Equities in China got a boost following better-than-expected manufacturing data.
China's manufacturing sector improved in May, data showed Tuesday, as some factories gradually resumed work after the easing of strict Covid lockdowns.
The purchasing managers' index a key gauge of manufacturing activity edged up to 49.6 points from April's 47.4, which was the worst reading since early 2020. However, the reading remained stuck below the 50-point mark separating growth from contraction.
SPI Asset Management analyst Stephen Innes said: ‘China's May official manufacturing and non-manufacturing PMI were a positive surprise given the mobility restrictions throughout the month.
‘However, the composite PMI remains below the expansion mark of 50, but investors are focused on improvements considering Shanghai's slated reopening and associated economic support measures. Hence risk sentiment remains on an even keel so far.’
Back in London, GSK gained 0.8% after it said it has agreed to pay $2.1 billion upfront, with potentially a further $1.2 billion coming, to acquire Boston, Massachusetts-based Affinivax.
Affinivax is a clinical-stage biopharmaceutical company focused on developing a novel class of vaccines.
‘The proposed acquisition further strengthens our vaccines R&D pipeline, provides access to a new, potentially disruptive technology, and broadens GSK's existing scientific footprint in the Boston area,’ GSK's Chief Scientific Officer Hal Barron said.
GSK said Affinivax was attractive for its next-generation 24-valent pneumococcal vaccine candidate, as well as multiple antigen presenting system, which GSK described as novel technology.
The deal is expected to close in the third quarter of 2022.
GSK also reaffirmed for 'new GSK' - the part remaining after the spin-off of its consumer arm - its full-year 2022 guidance and the medium-term outlook for 2021 to 2026 of more than 5% sales and 10% adjusted operating profit compound annual growth rate at constant currency.
At the other end of the FTSE 100, B&M European Value Retail sunk 8.4% as it promoted its current chief financial officer to take over from departing Chief Executive Simon Arora.
CFO Alex Russo will succeed Arora in ‘due course’, B&M said.
‘The board will now consider the most appropriate handover plan. A process to recruit a successor to Alex as CFO has already begun. In the meantime, both Simon and Alex will remain in their existing roles in order to minimise disruption to the business. A further announcement will be made when appropriate,’ B&M added.
Turning to its results, B&M reported flat annual profit despite a decline in revenue.
For the 52 weeks ended March 26, pretax profit was stable at £525 million, while revenue slipped to £4.67 billion from £4.80 billion the year prior.
B&M recommended a final dividend of 11.5 pence, slipping from the 13.0p final payout offered last year. The total dividend was cut to 16.5p from 17.3p.
Outgoing CEO Arora said: ‘The retail industry is facing inflationary pressures whilst our customers are having to cope with a significant increase in the cost of living, making spending behaviour in the year ahead difficult to predict. However, we have seen before that during such times customers will increasingly seek out value for money, and B&M is ideally placed to serve those needs.’
Commented Russell Pointon at research house Edison: ‘If the group is to sustain the step-up in sales compared to pre-pandemic levels, it must find new ways to provide competitive prices for its customers. Amidst rising inflation, B&M's may be able to benefit from customers looking for lower-priced alternatives as they tighten their budgets.’
The pound was quoted at $1.2614 early Tuesday in London, falling from $1.2640 at the London equities close on Monday.
The euro stood at $1.0736, soft from $1.0780. Against the yen, the dollar was trading at JP¥127.68, firm on JP¥127.60.
The economic events calendar on Tuesday also has UK mortgage approvals at 0930 BST.
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