LONDON MARKET MIDDAY: Oil majors lead further gains for London


Global energy supply was in focus once again on Tuesday, as Western leaders meeting in Germany discussed further restrictions on Russian exports.

London was slightly outperforming other European stock markets at midday, as its oil heavyweights benefited from rising crude prices.

The FTSE 100 index was up 85.84 points, or 1.2%, at 7,343.56, extending its winning streak to three trading days. The mid-cap FTSE 250 index was up 53.33 points, or 1.3%, at 19,371.68. The AIM All-Share index was up 4.85 points, or 0.5%, at 908.34.

The Cboe UK 100 index was up 0.9% at 731.60. The Cboe 250 was up 0.2% at 16,962.33 and the Cboe Small Companies up 0.6% at 13,563.31.

Paris and Frankfurt also were making gains. The CAC 40 stock index was up 1.1%, while the DAX 40 was up 0.8%.

In the FTSE 100, energy stocks BP, Shell and Harbour Energy all were up more than 2%, tracking spot oil prices higher on renewed concern about supply constraints.

Ecuador and Libya flagged potential output cuts due to political unrest, SP Angel Energy noted. Meanwhile, the UAE said it is pumping already at full capacity. This comes as G7 leaders agreed to work on a price cap for Russian oil, a US official said, as part of efforts to cut the Kremlin's revenue from energy exports.

Brent oil was quoted at $117.11 a barrel Tuesday at midday, up sharply from $114.74 late Monday.

In Paris, TotalEnergies was up 2.4%. In Milan, Eni was up 1.5%. Repsol was up 3.0% in Madrid.

Group of Seven leaders will ‘task ministers to work urgently towards developing, consulting with third countries and the private sector in an effort to develop a price cap around oil’, the senior US official told reporters. The official announcement is expected to come in the final communique later as a three-day G7 summit in the Bavarian Alps draws to a close.

At the other end of the large-cap list, Severn Trent was the worst performer, down 5.1%, after JPMorgan downgraded the water company to 'underweight' from 'neutral'.

In the FTSE 250, Petrofac was up 3.5%. The oilfield services firm its performance and expectations remain in line with guidance provided at the end of May.

Petrofac said its Engineering & Construction arm is expected to deliver first-half revenue of around $0.6 billion and a loss before interest and tax of $35 million to $45 million. In the second half, Petrofac is expecting similar revenue and a marginal operating profit. However, the unit is expected to secure strong order intake in the second half and deliver backlog growth year-on-year.

Looking ahead, Petrofac said it is well positioned with a ‘healthy’ pipeline scheduled for award in the next 18 months.

Meanwhile, Hitachi Energy on Tuesday said it has entered an offshore wind market collaboration with Petrofac. The companies aim to decarbonise power systems and deliver clean energy, without providing financial figures or term lengths of the agreement.

Pennon was the worst performer among London mid-caps, down 6.5%. The water company noted that UK regulator Ofwat has included its South West Water business as part of an investigation into how water and wastewater companies manage their wastewater treatment works.

Pennon said it will continue to work ‘openly and constructively’ with Ofwat to comply with the formal notice issued to South West Water as part of this ongoing investigation.

Elsewhere, Wise was down 12%. The international money transfer provider said its annual revenue jumped by a third, though profit was held back by rising costs, and the firm remains under a cloud due to the tax affairs of its co-founder.

Wise reported a 7.1% rise in pretax profit to £43.9 million in the financial year that ended March 31 from £41.1 million the year before, as revenue jumped by 33% to £559.9 million from £421.0 million. Profit was held back by an even larger rise in administrative expenses, up 48% to £321.4 million from £217.5 million.

Wise said no dividends are expected to be paid for the current financial year.

Wise on Monday had said the UK Financial Conduct Authority has opened an investigation into CEO & Co-Founder Kristo Kaarmann after a tax breach. It had said it would not make any further comment given the ongoing regulatory investigation and didn't mention the situation in its earnings announcement on Tuesday.

The dollar was up across the board. The pound was quoted at $1.2265 at midday Tuesday, down from $1.2303 at the London equities close Monday.

The euro was priced at $1.0590, down from $1.0608. Against the yen, the dollar was trading at JP¥135.98 in London, higher against JP¥135.19.

Meanwhile, the European Central bank will go ‘as far as necessary’ to fight inflation that is set to remain ‘undesirably high’ for ‘some time to come’, the bank's president said.

Soaring inflation is ‘a great challenge’, ECB President Christine Lagarde said in a speech at the bank's annual conference in Sintra, Portugal on monetary policy.

‘We will go as far as necessary to ensure that inflation stabilises at our 2.0% target over the medium term,’ Lagarde said.

Gold was priced at $1,825.33 an ounce on Tuesday at midday in London, rising against $1,822.51 late Monday.

New York was pointed to a higher open on Tuesday, looking to rebound from Monday's lower close.

The Dow Jones Industrial Average was called up 0.5% and the S&P 500 up 0.4% and the Nasdaq Composite up 0.4%. The indices had lost 0.2%, 0.3% and 0.7% respectively on Monday.

Nike shares will be in focus after the athletic apparel maker, late Monday, reported a drop in fourth-quarter earnings and provided a downbeat assessment of its prospects in the first quarter.

The Beaverton, Oregon-based firm reported a drop in fourth-quarter earnings. For the three months ended May 31, revenue slipped 1% to $12.23 billion from $12.34 billion a year prior. On a currency-neutral basis, revenue was up 3%.

Net profit for the period fell 5% to $1.44 billion from $1.51 billion, as diluted EPS dropped to $0.90 from $0.93.

Looking ahead, Nike anticipates first-quarter revenue will be flat to slightly up versus the prior year, as it continues to manage Covid disruption in Greater China. It said it anticipates full-year revenue will grow by low double-digits on a currency-neutral basis.

‘We are closely monitoring consumer behaviour and the implications of high inflation on near-term economic growth and consumer demand. We are also taking a cautious approach to Greater China given uncertainty around additional COVID disruptions,’ Chief Financial Officer Matt Friend said on the subsequent conference call.

The Dow 30 constituent was down 2.5% in pre-market trade in New York.

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