LONDON MARKET MIDDAY: Prices firm as US reopens, investors look ahead

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Investors were showing more confidence on Tuesday, after a positive day for equity markets on Monday and with New York called to open higher after holiday weekend.

Rising interest rates remained a concern, but analysts were looking beyond the current tightening cycle.

Stocks suffered a sell-off globally last week after the US Federal Reserve jacked up interest rates with the biggest single increase in nearly 30 years, while smaller hikes in the UK and Switzerland added to the gloom.

The FTSE 100 index was up 51.10 points, or 0.7%, at 7,172.91 midday Tuesday. The mid-cap FTSE 250 index was up 105.69 points, or 0.6%, at 19,116.51. The AIM All-Share index was up 2.40 points, or 0.3%, at 899.57.

The Cboe UK 100 index was up 0.5% at 715.60. The Cboe 250 was up 0.8% at 16,833.33, and the Cboe Small Companies up 0.6% at 13,771.34.

In mainland Europe, the CAC 40 stock index in Paris was up 1.5%, while the DAX 40 in Frankfurt was up 1.2%.

‘With equity returns essentially bimodal and largely recession-dependent, today's calm would suggest that investors believe front-loaded monetary policy will be just that - giving scope for the looser policy later in the year if demand conditions subside,’ commented Stephen Innes at SPI Asset Managment.

Added Joachim Klement of Liberum: ‘It is no longer a question of 'if' we get into a recession, but 'when' the combined effects of high energy prices and rate hikes will suck growth out of the economy and create a recession. The faster the Fed and Bank of England hike rates, the sooner this recession will start.’

In the FTSE 100, DS Smith was the best performer, up 3.6%. The packaging company raised its dividend after strong annual results.

For the financial year that ended April 30, pretax profit increased 64% to £378 million from £231 million the year before, on revenue of £7.24 billion, up 21% from £5.98 billion.

DS Smith declared a total dividend of 15.0 pence, up 24% from 12.1p paid out in financial 2021.

Looking ahead, DS Smith said it has seen good early momentum at the start of its current financial year, despite a more-challenging backdrop.

Walid Koudmani, chief market analyst at XTB commented: ‘The company achieved positive profit momentum through the period and strong cash flow generation driving leverage reduction. Thanks to excellent service levels and security of supply, the outlook remains strong while the general economic situation remains troubling for the foreseeable future.’

Paper and packaging peers Mondi and Smurfit Kappa were up 2.1% and 1.5% respectively in a positive read-across.

At the other end of the large-caps, Ocado was the worst performer, down 5.9%, at 826.20 pence, after the online grocer completed the fundraise it had announced after the market close on Monday.

Ocado had said it planned to raise the funds to expedite growth plans, amid what it called surging online grocery demand in the wake of the Covid-19 pandemic and the need to bring new technology solutions to the market faster.

The online grocer placed 72.3 million shares at 795 pence each, raising £575 million. The placing price was a 9.4% discount to Monday's market close of 877.6p.

The placing, led by Goldman Sachs, was done in conjunction with an offer to retail investors via PrimaryBid involving 246,405 shares and 150,944 subscription shares taken by members of the senior management team, including Chief Executive Officer Tim Steiner, Ocado said.

The total equity raise was £578 million, and the new shares represent about 9.7% of Ocado's total prior to the raise.

Associated British Foods was down 1.9% after JPMorgan downgraded the Primark clothing chain owner to 'neutral' from 'overweight'.

Supermarket chains Tesco and J Sainsbury were down 0.5% and 0.2% respectively following the latest UK grocery market share figures from Kantar.

UK grocery sales fell by 1.9% to £30.19 billion over the last 12 weeks to June 12 from the same period a year before.

Tesco outperformed the sector average, with a sales decline of only 1.1% to £8.25 billion over the 12 week period, and market share edging up slightly to 27.3% from 27.1% a year prior. J Sainsbury's sales fell 3.9% to £4.48 billion during the period, as its market share decreased slightly to 14.9% from 15.2%.

In the FTSE 250, Spire Healthcare was up 3.7% after Berenberg started coverage on the private hospital group with a 'buy' rating.

At the other end of the midcaps, Asos was the worst performer, down 2.7% after JPMorgan cut the online fashion retailer to 'neutral' from 'overweight'.

Elsewhere, Record was up 8.5% after the currency manager hiked its annual dividend following a double-digit rise in profit and revenue.

For the year ended March 31, Record reported a pretax profit of £10.9 million, up 78% from £6.2 million the year before, on revenue which grew 38% annually to £35.1 million, driven by growth in the group's managed assets, particularly in Record's higher revenue margin products, as well as a 37% increase in management fees.

Record declared a final ordinary dividend of 1.8 pence per share, bringing the total payout to 3.6p, up 47% from 2.3p the year before. In addition, Record more than doubled its special dividend to 0.92 pence from 0.45p the year prior.

The pound was quoted at $1.2300 at midday on Tuesday, up from $1.2246 at the London equities close Monday.

The euro was priced at $1.0560, higher against $1.0528 Against the yen, the dollar was trading at JP¥135.45 in London, up from JP¥135.03.

Brent oil was quoted at $115.90 a barrel Tuesday at midday, up from $113.70 late on Monday. Gold stood at $1,834.44 an ounce, lower against $1,838.66.

New York was pointed to a sharply higher open on Tuesday after being closed on Monday for the maiden Juneteenth holiday.

The Dow Jones Industrial Average was called up 1.7% and the S&P 500 up 1.1% and the Nasdaq Composite up 1.6%. The indices had lost 7.4%, 8.5% and 8.1% respectively over the course of last week.

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