London close: BP rallies on mixed return from long weekend

London stocks closed in a mixed state on Tuesday, as traders returned to work after the Bank Holiday weekend, with results from oil giant BP in focus.

The FTSE 100 reversed earlier losses to close up 0.22% at 7,561.33, while the FTSE 250 was down 0.91% at 20,520.76.

Sterling was also struggling for direction, last trading up 0.07% on the dollar at $1.2501, while it weakened 0.02% against the euro to change hands at €1.1886.

“Investors might have been forgiven for hoping that yesterday’s late bounce in the US presaged further gains for stock markets today,” said IG chief market analyst Chris Beauchamp.

“But that has not been the case, and with the Fed’s rate hike edging closer a definite sense of nervousness pervades stocks.”

Beauchamp said last time US stocks fell to such levels in March, a savage bounce followed, although earnings season had not delivered “enough good news” for a rally to develop now.

“In any case, this week’s action-packed calendar will probably hold both buyers and sellers in check for the time being.”

On the economic front, fresh industry research showed the UK manufacturing sector picking up in April, although confidence tumbled as inflationary pressures continued to mount.

The S&P Global/CIPS UK manufacturing purchasing managers’ index was 55.8 in April, up from 55.2 in March and above both consensus and the flash estimate, of 55.3.

It meant the PMI - a weighted average of five sub-indices - had now risen for 23 consecutive months.

But while the outlook remained positive, with nearly 55% of companies expecting output to rise over the coming year, the overall degree of confidence tumbled to a 16-month low.

Headwinds cited included rising selling prices and lacklustre demand for the European Union due to longer delivery times, custom checks and higher shipping costs post-Brexit.

Foreign demand overall was further subdued by the war in Ukraine.

“The improved expansion of output failed to mask the continued headwinds buffeting the sector at the start of the second quarter,” said Rob Dobson, director at S&P Global.

“New business growth near-stalled, as a slowdown in the domestic market was accompanied by a further deterioration in export orders.

“The inflationary situation is getting increasingly fraught.”

Elsewhere, data showed visits to shops jumping over the early May bank holiday weekend, with Springboard reporting that footfall rose across all UK retail destinations by 8% week-on-week in the three days to 2 May.

Shopping centres saw the most trade over the three days, with footfall ahead 9.4% week-on-week, while retail parks reported an 8.2% improvement and high streets saw a 7.2% rise.

The bank holiday weekend jump in footfall was preceded by a more modest rise of 3.1% in the week to Saturday 30 April.

Within that, there was a 0.7% week-on-week improvement on high streets, and increases of 5.3% and 5.9% at retail parks and shopping centres respectively.

“It seemed consumers deferred shopping trips until the weekend, causing a spike in footfall,” said Diane Wehrle, insights director at Springboard.

“Not only this, the significant pick up of retail park footfall over the Saturday and Sunday was undoubtedly driven by consumers restocking on food and groceries after the weekend.

“What’s more, while it appears that Easter trips ended last week, with declines in footfall in coastal and historic towns, the bank holiday weekend showed a bounce back.”

Further afield, sentiment was dented in the Asian session overnight after Australia’s central bank hiked its key interest rate for the first time in 11 years.

The Reserve Bank of Australia lifted its official cash rate to 0.35% from the record low 0.10% it had hovered at since November 2020 amid the Covid pandemic.

It was larger than the 0.15% rise expected, as the RBA also signalled more rises to come.

“The board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic,” RBA governor Philip Lowe said in a statement.

In equity markets, Segro tumbled 10.32% after a downgrade at Kepler Cheuvreux, while Avast fell 5.74% after the cybersecurity firm said it expected annual revenue to slow and margins to be squeezed amid a "challenging global backdrop".

AO World was knocked 5.92% lower by a downgrade to ‘underweight’ at JPMorgan.

On the upside, Auction Technology Group was boosted 7.96% by an upgrade to ‘overweight’ by JPMorgan, while asset managers M&G and St. James’s Place were ahead 2.94% and 0.31%, respectively, after upgrades to ‘buy’ at HSBC.

BP gained 5.8% even as it said it swung to a massive first-quarter loss as a result of its decision to exit Russia after the country's invasion of Ukraine.

Analysts said investors were encouraged by better-than-expected underlying profits.

“$20.4bn is an eye-watering quarterly loss for BP but it’s far from unexpected,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“The market had already factored in a huge hit due to its Russia exit and now the company has unveiled the price to pay is a big and bold $25.5bn.

“That’s the amount it has set aside in pre-tax charges and the cost of extricating itself from Rosneft.”

Streeter said what was surprising was the boost to underlying profits at $6.2bn, sharply higher than consensus expectations for about $4.5bn.

“The company has been raking in cash as the supply squeeze on oil markets has intensified.

“The war and the high geopolitical tensions have brought about a surge in the oil price which is up 40% since the start of the year, spiking in the first weeks of the war at $139.”

Elsewhere, Energean gushed 7.6% higher after saying it had signed a new gas sales and purchase agreement for its Israeli gas assets, and confirming that the vessel for its key Karish project has left the yard in Singapore.

Berenberg also reiterated its ‘buy’ rating on the stock.

“Overall, we regard today's announcement as positive, providing more certainty on contracted volumes from the Karish development and reassuring that a key milestone in the timeline to first gas has been reached,” the broker noted.

Mitie Group gained 2.03% after the outsourcer agreed to buy 8point8, a provider of design and construction services in the UK for mobile telecoms tower infrastructure, for £10m.

Market Movers

FTSE 100 (UKX) 7,561.33 0.22%
FTSE 250 (MCX) 20,520.76 -0.91%
techMARK (TASX) 4,397.27 0.54%

FTSE 100 - Risers

BP (BP.) 414.25p 5.80%
BAE Systems (BA.) 766.60p 3.59%
International Consolidated Airlines Group SA (CDI) (IAG) 149.00p 3.50%
BT Group (BT.A) 183.15p 3.35%
Sainsbury (J) (SBRY) 240.90p 3.26%
M&G (MNG) 220.50p 2.94%
Whitbread (WTB) 2,892.00p 2.66%
Standard Chartered (STAN) 566.00p 2.57%
B&M European Value Retail S.A. (DI) (BME) 501.40p 2.53%
HSBC Holdings (HSBA) 512.80p 2.29%

FTSE 100 - Fallers

SEGRO (SGRO) 1,204.00p -10.32%
Avast (AVST) 531.60p -5.74%
Howden Joinery Group (HWDN) 724.60p -4.83%
Croda International (CRDA) 7,440.00p -4.66%
Spirax-Sarco Engineering (SPX) 11,720.00p -3.54%
Dechra Pharmaceuticals (DPH) 3,526.00p -3.08%
Glencore (GLEN) 482.30p -2.77%
Experian (EXPN) 2,722.00p -2.58%
Severn Trent (SVT) 3,076.00p -2.23%
Sage Group (SGE) 721.00p -2.22%

FTSE 250 - Risers

Auction Technology Group (ATG) 949.00p 7.96%
Energean (ENOG) 1,274.00p 7.60%
Trustpilot Group (TRST) 110.20p 5.66%
Micro Focus International (MCRO) 399.20p 5.14%
Marks & Spencer Group (MKS) 143.40p 4.10%
QinetiQ Group (QQ.) 355.20p 3.86%
TUI AG Reg Shs (DI) (TUI) 238.00p 3.34%
Polymetal International (POLY) 255.80p 3.10%
Diversified Energy Company (DEC) 123.90p 2.40%
Tate & Lyle (TATE) 800.00p 2.35%

FTSE 250 - Fallers

JTC (JTC) 708.00p -9.35%
Tritax Big Box Reit (BBOX) 222.80p -8.61%
Oxford Biomedica (OXB) 525.00p -7.89%
Chrysalis Investments Limited NPV (CHRY) 151.00p -6.79%
Discoverie Group (DSCV) 715.00p -6.41%
LondonMetric Property (LMP) 254.80p -5.49%
XP Power Ltd. (DI) (XPP) 3,060.00p -4.97%
Big Yellow Group (BYG) 1,377.00p -4.48%
HGCapital Trust (HGT) 411.00p -4.34%
Sirius Real Estate Ltd. (SRE) 116.20p -4.28%