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LONDON MARKET CLOSE: TI Fluid sinks among midcaps as revenue declines

Stocks in London ended in the green on Wednesday, as a stronger pound following UK jobs data failed to keep the FTSE 100 down.

The UK's flagship index undeperformed European peers on Tuesday, however, after bucking Monday's malaise and closing higher. Wider markets in London, meanwhile, received some impetus from M&A action.

‘Back in London early news from China that an end to the Shanghai lockdown might be imminent has kept markets in positive territory, miners and funds with exposure to China amongst the day's best performers,’ said Danni Hewson of AJ Bell.

The FTSE 100 closed up 53.55 points, 0.7%, at 7,518.35. The FTSE 250 ended up 141.48 points, 0.7%, at 20,065.59, and the AIM All-Share closed up 6.14 points, 0.6%, at 961.72.

The Cboe UK 100 ended up 0.8% at 749.15, the Cboe UK 250 rose 0.8% to 17,751.69, and the Cboe Small Companies also added 0.8%, closing at 14,777.11.

In European equities, the CAC 40 in Paris stock index ended up 1.3%, while the DAX 40 in Frankfurt jumped 1.6%.

London's blue-chip index, stacked with international earners, rose despite the pound rallying on Tuesday.

The pound was quoted at $1.2465 late Tuesday, up markedly from $1.2250 at the London equities close on Monday. The pound reached an intraday high of $1.2498, its best level in roughly two weeks.

The pound was boosted by strong UK jobs data which has lifted expectations of more Bank of England rate hikes.

The three-month UK unemployment rate was estimated at 3.7% for May, 0.3 percentage point lower than the previous three-month period, and 0.2 percentage point below pre-coronavirus pandemic levels. The figure also beat market consensus forecasts, according to FXStreet, of 3.8%.

The euro was priced at $1.0534 at the European equities close on Tuesday, up sharply against $1.0402 at the same time on Monday. Against the yen, the dollar was trading at JP¥129.29, firm from JP¥129.10.

The euro got a boost from hawkish comments from a European Central Bank Governing Council member.

Bloomberg reported Klaas Knot, president of the Dutch central bank, became the first eurozone official to moot a possible 50 basis point interest rate hike.

Knot told Dutch television that although he prefers a 25bp rate hike at the moment, if conditions change, a 50bp lift-off cannot be ruled out.

At its last meeting in April, the Frankfurt-based central bank kept the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%.

In London, Imperial Brands closed the best large-cap performer, rising 7.4%.

In the six months that ended March 31, the Bristol-based tobacco firm reported a 27% fall in operating profit to £1.20 billion from £1.64 billion a year before.

Imperial explained that operating profit in the recent year suffered from £201 million in charges for its exit from Russia, while the year before benefited from a £281 million gain from the sale of its cigar business.

Pretax profit sunk 39% to £1.26 billion from £2.06 billion, while net revenue fell 1.3% to £15.36 billion from £15.57 billion, which was blamed on lower excise duty in Europe.

Imperial Brands approved an interim dividend of 42.54 pence per share, a 1.0% increase from 42.12p a year ago.

TI Fluid was the worst mid-cap performer, slumping 15%. Revenue fell in the first quarter of 2022, reflecting the continued disruptions to its supply chain, the conflict in Ukraine, and Covid-19 lockdowns in China.

TI Fluid, which makes products including brake fluids and fuel tanks for cars and trucks, said revenue in the three months that ended March 31 fell 4.1% to €755.0 million from €787.0 million.

The company saw its steepest revenue decline in Latin America, where it dropped 19% against the previous year. The only revenue growth was in North America, where it grew 3.5% in the quarter against the prior year.

Elsewhere on the Main Market, Nanoco jumped 46% after the US Patent Trial & Appeal Board ruled in favour of the company's patent claims against Samsung Electronics.

The Manchester-based quantum dots manufacturer had brought 47 claims against Samsung for the wilful infringement of its intellectual property under five patents.

All claims have now been ruled in favour of Nanoco. The company added it expects Samsung to appeal the decision with a potential revised trial in the final quarter of the year.

Back among mid-caps, ContourGlobal jumped 33% to 257.00 pence after it agreed to a takeover by US private equity giant Kohlberg Kravis Roberts & Co.

New York-based KKR has offered 263.6p per share for ContourGlobal, valuing the London-based power generation firm at about £1.75 billion.

ContourGlobal's board have unanimously recommended the deal.

ContourGlobal's largest shareholder, Reservoir Capital, also has accepted the offer for its 71.4% stake. In total, KKR said it already has acceptances for the offer representing 72.8% of ContourGlobal shares.

‘The board of ContourGlobal welcomes KKR's intention to provide capital and operational expertise to support ContourGlobal's strategy, including accelerating investments in the energy transition,’ he added.

Elsewhere in the M&A space, M&C Saatchi fell 2.1% to 159.60p.

The London-based advertising agency rejected a new proposal from AdvancedAdvT, led by one of M&C's own directors Vin Murria.

AdvancedAdvT made a new offer which values M&C shares at 207.5p. Under the terms of the offer, M&C shareholders would receive either 40p in cash plus 2.043 new AdvancedAdvT shares, or just 2.503 new AdvancedAdvT shares.

M&C said the offer is ‘derisory’.

Stocks in the US were solidly higher at the time of the European equities close. The Dow Jones Industrial Average climbed 0.6%, the S&P 500 added 1.1% and the Nasdaq Composite rose 1.4%.

Brent oil was quoted at $115.10 a barrel late Tuesday, significantly higher from $112.19 late Monday. Gold stood at $1,820.68 an ounce, up against $1,812.63.

Wednesday's economic calendar has UK inflation data at 0700 BST, a eurozone inflation reading at 1000 BST and Japanese GDP numbers overnight.

The local corporate calendar has a trading statement from insurer Aviva, annual results from luxury retailer Burberry and interim numbers from pub operators Mitchells & Butlers and Marston's.

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