LONDON MARKET CLOSE: FTSE 100 defies European inflation hit

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Stocks in London came to a mixed close on Tuesday, as oil companies helped bolster the FTSE 100 from the impact of record European inflation, which dragged its continental counterparts into the red.

The FTSE 100 index closed up 7.60 points, or 0.1%, at 7,607.66. The mid-cap FTSE 250 index closed down 128.94 points, or 0.6%, at 20,417.95. The AIM All-Share index closed down 0.12 of a point at 974.09.

The Cboe UK 100 index closed down 0.1% at 756.27. The Cboe 250 ended up 0.9% at 18,068.49 and the Cboe Small Companies finished 0.8% lower at 14,620.56.

In mainland Europe, the CAC 40 stock index in Paris closed down 1.4%, while the DAX 40 in Frankfurt ended down 1.3%.

‘The FTSE 100 just about kept up its run of recent gains as Russia turns off gas to the Netherlands after it refused to pay in roubles for imports and the EU banned most Russian oil,’ said AJ Bell investment director Russ Mould. ‘As we head into summer Russia has less leverage with its oil and gas supplies but the Netherland's move is a reminder of the havoc Moscow could wreak later this year as temperatures drop and this remains a lingering inflation

BP and Shell closed up 0.2% and 0.1% respectively, tracking spot oil prices higher.

Brent oil was quoted at $123.75 a barrel at the equities close, up sharply from $120.20 at the close Monday.

Crude prices built on Monday's advance after the EU reached a deal on a partial embargo of Russian imports as part of a punishment for its invasion of Ukraine.

Meanwhile, Saudi Arabia, Russia and their allies are likely to stick to their policy of modest oil output increases when they meet Thursday after the EU banned most imports from Moscow. This has caused oil prices, which have already hit record highs so far this year, to soar further amid pressure on the 23-member OPEC+ to open taps more widely and relieve the market.

In the FTSE 100, Unilever ended the best performer, up 9.0%, after the consumer goods firm appointed activist investor Nelson Peltz to its board, starting July 20.

Peltz is chief executive officer and a founding partner of Trian Fund Management LP. Funds managed by Trian have 37.4 million Unilever shares, a 1.5% stake, both companies confirmed.

‘We are pleased to be welcoming Nelson to the Unilever board,’ said Unilever Chair Nils Andersen. ‘We have held extensive and constructive discussions with him and the Trian team and believe that Nelson's experience in the global consumer goods industry will be of value to Unilever as we continue to drive the performance of our business.’

Mould continued: ‘Inviting Peltz in is only likely to ramp up the pressure on beleaguered CEO Alan Jope and we may now see the company advance plans to streamline the business and address governance concerns.’

BT Group closed up 1.7% after the telecommunications provider entered a new ‘multi-million pound’ joint venture partnership with Swedish peer Telefonaktiebolaget LM Ericsson.

BT has signed a multi-year contract with Stockholm-based Ericsson, which will enable it to sell the mobile network technology products to businesses and organisations in different sectors. These include manufacturing, defence, education, retail, healthcare, transport and logistics, it listed.

5G private networks are expected to grow at an average rate of 40% a year between 2021 and 2028, according to a forecast BT sourced from MarketResearch.com. At this time the market will be worth $14 billion, BT continued.

GSK closed up 0.2% after the drugmaker agreed to buy Affinivax for up to $3.3 billion, to gain access its ‘highly innovative’ next-generation 24-valent pneumococcal vaccine candidate.

Affinivax is a Boston, Massachusetts-based clinical-stage biopharmaceutical firm focused on developing a novel class of pneumococcal vaccines.

London-based GSK said that in addition to a $2.1 billion initial payment, it will potentially make two milestone payments of $600 million each, dependent on the achievement of paediatric clinical development milestones.

GSK said Affinivax was attractive for its pneumococcal vaccine candidate, as well as multiple antigen presenting system, which GSK described as novel technology. The vaccine targets streptococcus pneumoniae, an anaerobic bacteria that can cause middle ear infections, sepsis in children and pneumonia in immunocompromised individuals.

Languishing at the end of the large-caps, B&M European Value Retail was the worst performer, down 14%, after the variety store chain warned over inflationary pressures. It also promoted its current chief financial officer to replace the departing Chief Executive Simon Arora.

The Luxembourg-headquartered retailer said the appointment of Alex Russo as its new chief executive officer reflected the outcome of a ‘thorough assessment and external benchmarking process over the last six weeks.’

B&M reported flat annual profit despite a decline in revenue. For the 52 weeks ended on March 26, pretax profit was stable at £525 million, while revenue slipped to £4.67 billion from £4.80 billion the year prior.

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.’

B&M declared a final dividend of 11.5 pence, falling from the 13.0p final payout offered last year. The total dividend was cut to 16.5p from 17.3p.

Looking ahead, the company noted: ‘Notwithstanding the many and varied uncertainties and headwinds which are likely to impact on our trading performance during [the next financial year], at this early stage in the year group adjusted Ebitda is expected to be in the range of £550 million to £600 million, significantly ahead of the [financial 2020] pre-pandemic level of £342 million.’

Adjusted Ebitda in financial 2022 came in at £619 million.

Royal Mail was the second-worst performer, down 5.7%, as the postal operator faces imminent demotion from the FTSE 100 with a market capitalisation of £2.96 billion. FTSE Russell will announce its latest index review changes on Wednesday, which will be based on Tuesday's closing prices.

In the FTSE 250, Trustpilot ended the worst performer, down 8.6%. With a market value of £396.3 million, the online review site is staring down the barrel of demotion from the mid-cap index.

The pound was quoted at $1.2605 at the London equities close, down from $1.2640 at the close Monday.

The euro stood at $1.0722 at the European equities close, down from $1.0780 late Monday.

The single currency was on the back foot despite data showing the eurozone's inflation rate rising to another record high in May on the fallout from Russia's invasion of Ukraine.

Eurozone consumer price inflation is expected to be 8.1% in May, accelerating from 7.4% annually in April, according to the latest flash estimate from Eurostat, the statistical office of the European Union, on Tuesday.

Red-hot eurozone inflation intensified calls for interest rate hikes from the European Central Bank, which has already flagged plans to hike borrowing costs in July.

Against the yen, the dollar was trading at JP¥128.50, up from JP¥127.60 late Monday.

Stocks in New York were lower at the London equities close following the long holiday weekend. The DJIA was down 0.5%, the S&P 500 index down 0.6% and the Nasdaq Composite down 0.5%.

Gold stood at $1,845.51 an ounce at the London equities close, lower against $1,857.80 late Monday.

The economic events calendar on Wednesday has manufacturing PMI readings from the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST. The Bank of Canada interest rate decision is at 1500 BST.

The UK corporate calendar on Wednesday has annual results from iconic boot maker Dr Martens and interim results from Impax Asset Management.

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