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Monday, January 30, 2023

FTSE 100 Live 1 June: Brent crude price falls, house market momentum continues

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Oil dips ahead of Opec meeting, FTSE 100 resilient

Traders headed for the Jubilee weekend in upbeat mood as oil prices eased and the FTSE 100 index held its gains from a stronger May.

Brent crude’s retreat from yesterday’s three-month high of $124 a barrel came amid speculation that Opec plans to eject Russia from its production calculations so that other countries have more room to boost output.

Ahead of tomorrow’s meeting of Opec ministers in Vienna, Brent fell to as low as $115 a barrel before settling today at $117.50.

The outcome of the oil cartel’s deliberations and further developments on the US interest rate outlook mean City traders will have plenty to digest once the festivities are over.

AJ Bell investment director Russ Mould said: “They could be facing a big hangover depending on the turn Wall Street takes over the next few days and the latest US jobs reading due on Friday.”

The FTSE 100 index weakened a little today, down 14.01 points to 7593.65, but this had no impact on the overall mood after an improved May left the top flight more than 3% higher in 2022.

The S&P 500 is still 13% lower, representing the biggest loss after five months since 1970, but Wall Street sentiment has picked up recently on hopes for less aggressive US rate hikes.

In fact, Deutsche Bank analysts noted today that May was the first time this year that most of the 38 non-currency assets in its coverage were in positive territory. However, 29 are still beneath their levels at the start of the year, which if continued would be the second-worst annual performance since 2008.

The FTSE 250 index has lagged the FTSE 100 this year and fell 15.42 points to 20,402.53 today, despite a results-day bounce of 27% for Dr Martens.

Wood Group fell 4% or 3.9p to 229.3p, even though it struck a major deal to sell its built environment consulting business to WSP Global. Chief executive Robin Watson said the $1.9 billion (£1.5 billion) of proceeds gave Wood the flexibility to accelerate its strategy to focus on growth opportunities in energy security and sustainability.

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Giant float of Panadol business moves closer

THE largest London listing for a decade moved a step closer today when GlaxoSmith Kline submitted the prospectus for the float of its Haleon arm to City watchdogs.

Haleon, the consumer products business behind Panadol and Sensodyne, will list on July 18 at a likely value of £45 billion. That takes it easily straight into the FTSE 100.

GSK earlier turned down a bid from Unilever for the business. Pfizer, which has a 32% holding, will sell down that stake.

GSK investors will get one share in Haleon for each GSK share they own.

A statement today called the deal “the most significant corporate change for GSK in the last 20 years”.

GSK shares fell 8p to 1724p. Once the float is done, it will focus on biopharmaceuticals, looking at “vaccines and speciality medicines”.

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Santander online banking down

Santander has got some internet issues, it seems. Downdetector has seen hundreds of complaints, with issues starting at about 5am this morning.

On Twitter, customers complained of not being able to make payments even though they know they have money in their account.

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Tullow and Capricorn unveil merger deal

FTSE 250-listed stocks Tullow Oil and Capricorn Energy are joining forces in a merger deal valuing the combined group at about £1.4 billion.

The tie-up aims to create a leading African energy company, including London-based Tullow’s West Africa-focused production assets.

Capricorn was founded as Cairn Energy in 1980 and generated huge returns for shareholders in the 2000s after making the largest onshore discovery in India for more than 25 years.

Senegal’s largest offshore discovery followed in 2014 and Capricorn took part in the development of two of the largest projects in the UK North Sea, Catcher and Kraken, which began production in 2017.

Edinburgh-based Capricorn’s current focus is on gas and liquids production interests in Egypt, Mauritania, Mexico, Suriname and the UK.

Tullow shareholders will hold 53% of the combined group, which has pledged not to have Tullow or Capricorn in its new name. Tullow chief executive Rahul Dhir will be the new boss.

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Dr Martens defies inflation to polish off record results

DR Martens today defied global economic turmoil to produce record results that offer at least a glimmer of hope for a battered UK high street.

With rival retailers floundering, the iconic boot brand saw sales jump 18% to £908 million with profits up 43% to £214 million as it shrugged off inflation and oil price pressures.

That is testament, said chief executive Kenny Wilson, to both the enduring power of the brand that “never goes out of fashion” and to thousands of enthusiastic staff.

They will share in the success with bonus pay outs, though the company wouldn’t be specific on what they are worth.

Shares jumped 29% or 64.2p to 280.6p after the results.

read more here

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House price momentum continues

The housing market retains a “surprising amount of momentum”, building society Nationwide said today after reporting a 0.9% month-on-month rise in prices in May.

The seasonally-adjusted performance left the annual growth rate at 11.2%, which compares with 12.1% the previous month. The average price is now £269,914.

Nationwide continues to expect the housing market to slow as the year progresses, with household finances under pressure and inflation set to reach double digits.

However, chief economist Robert Gardner added: “Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high.

“At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.”

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Brent crude back at $115, FTSE 100 holds firm

Brent crude futures are sharply lower at $115 a barrel, having risen earlier in the week after the EU banned Russian oil and China reopened key cities following Covid lockdowns.

Last night’s 6% decline came after the Wall Street Journal reported that Opec+ is planning to exempt Russia’s sanctions-hit output from its production calculations.

This would then allow other members to pump additional supplies in order to meet the oil cartel’s monthly quotas. Opec+ ministers are meeting tomorrow.

On stock markets, the S&P 500 closed 0.6% lower last night in its first session back since the benchmark recorded its best week since November 2020.

Major European markets were yesterday 1% lower after eurozone inflation topped 8% in May, sparking fears of sharper-than-expected interest rate rises.

The performance in London was much more resilient as the FTSE 100 index closed slightly higher, aided by stronger oil and commodity stocks, to finish May up by 1% overall. The FTSE 250 fell 1.5% in the month, despite a 2.8% rally since May 20.

CMC Markets expects the FTSE 100 to rise another eight points to 7615 in the final session of London’s trading week.

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