London midday: Stocks pare gains as investors mull RBA decision; Glencore rallies

London stocks had pared earlier gains to trade just a touch higher by midday on Tuesday, as investors mulled the latest policy announcement from the Reserve Bank of Australia.

The FTSE 100 was up 0.1% at 7,677.31.

Oanda market analyst Craig Erlam said: "Stock markets are moving cautiously higher again on Tuesday as anxiety continues to subside in the aftermath of last month's mini-banking crisis."

The RBA announced earlier that it was keeping interest rates at 3.6%, in line with consensus expectations, following 10 hikes.

Bank Governor Philip Lowe noted that the decision follows a cumulative increase in interest rates of 3.5 percentage points since May last year.

"The board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt," he said. Lowe said the board had made the decision to hold rates steady "to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook".

He pointed out that the outlook for the global economy remains subdued, with below-average growth expected this year and next.

"The recent banking system problems in the United States and Switzerland have resulted in volatility in financial markets and a reassessment of the outlook for global interest rates," he said. "These problems are also expected to lead to tighter financial conditions, which would be an additional headwind for the global economy."

The RBA said some further tightening of monetary policy may be needed to ensure that inflation returns to its 2% to 3% target.

Erlam said: "It would appear the Australian central bank has now reached the point at which additional tightening will be very uncomfortable and risk tipping the economy into recession, or worse, deepening it.

"They aren't the only central bank to find themselves at that juncture. In fact, most others are either there or very close to that point, and recent strain in the banking sector has highlighted the downside risks of further significant tightening. We may see most now proceed with caution and only tighten if absolutely necessary. The time for pause and consideration may have arrived."

In equity markets, Glencore was the top performer on the FTSE 100. On Monday, Canada’s Teck Resources said it had received and unanimously rejected an unsolicited takeover approach from the mining giant.

Danni Hewson, head of financial analysis at AJ Bell, said: "While its business combination proposal was rejected, Glencore is likely to be persistent in its pursuit for greater things which means one cannot rule out a higher offer.

"Teck’s board said it wasn’t contemplating a sale of the business at this time, yet there is a price for everything and so it all boils down to how much Glencore is prepared to pay."

Elsewhere, the UK wealth business of Investec and Rathbones have agreed to merge in an £839m all-share deal. New Rathbones shares will be issued for 100% of Investec Wealth & Investment shares, which would leave Investec with an economic interest of 41.25% in the combined company. Shares in both companies were trading higher.

Drax powered ahead on the back of an upbeat note by Liberum.

Digital 9 Infrastructure rose after it moved to reassure investors following continued volatility in its share price. The company, which joined the London Stock Exchange in 2021, insisted that it was not aware of any portfolio specific factors that might have caused the decline.

In broker note action, Auto Trader was higher after an upgrade to ‘neutral’ from ‘underweight’ at JPMorgan, while Virgin Money was boosted by an upgrade to ‘outperform’ at KBW. Pennon was knocked lower by a downgrade to ‘equalweight’ at Morgan Stanley.

Market Movers

FTSE 100 (UKX) 7,677.31 0.06%
FTSE 250 (MCX) 18,956.93 0.41%
techMARK (TASX) 4,525.44 -0.14%

FTSE 100 - Risers

Glencore (GLEN) 464.05p 2.55%
Prudential (PRU) 1,133.50p 1.80%
International Consolidated Airlines Group SA (CDI) (IAG) 150.10p 1.76%
Aviva (AV.) 411.50p 1.71%
Haleon (HLN) 327.50p 1.50%
Weir Group (WEIR) 1,867.50p 1.49%
Admiral Group (ADM) 2,081.00p 1.46%
Beazley (BEZ) 595.50p 1.36%
B&M European Value Retail S.A. (DI) (BME) 483.30p 1.28%
Mondi (MNDI) 1,304.50p 1.12%

FTSE 100 - Fallers

Vodafone Group (VOD) 88.01p -1.62%
Rolls-Royce Holdings (RR.) 148.10p -1.04%
Johnson Matthey (JMAT) 1,980.50p -1.02%
JD Sports Fashion (JD.) 172.60p -0.89%
Smith & Nephew (SN.) 1,116.50p -0.89%
M&G (MNG) 191.55p -0.85%
Pershing Square Holdings Ltd NPV (PSH) 2,792.00p -0.78%
BT Group (BT.A) 146.05p -0.78%
British American Tobacco (BATS) 2,851.00p -0.75%
United Utilities Group (UU.) 1,028.50p -0.68%

FTSE 250 - Risers

Drax Group (DRX) 623.20p 5.09%
Syncona Limited NPV (SYNC) 154.20p 4.47%
Investec (INVP) 461.10p 3.73%
Balanced Commercial Property Trust Limited (BCPT) 86.80p 3.58%
SSP Group (SSPG) 254.20p 3.33%
Digital 9 Infrastructure NPV (DGI9) 63.10p 2.77%
Target Healthcare Reit Ltd (THRL) 74.00p 2.64%
SDCL Energy Efficiency Income Trust (SEIT) 86.80p 2.60%
Baltic Classifieds Group (BCG) 158.40p 2.59%
Bank of Georgia Group (BGEO) 2,830.00p 2.54%

FTSE 250 - Fallers

TUI AG Reg Shs (DI) (TUI) 586.00p -4.15%
Vanquis Banking Group 20 (VANQ) 219.50p -3.73%
Renishaw (RSW) 3,894.00p -3.61%
Wetherspoon (J.D.) (JDW) 693.00p -3.41%
Aston Martin Lagonda Global Holdings (AML) 226.40p -2.83%
Genuit Group (GEN) 280.50p -2.09%
Pennon Group (PNN) 840.00p -2.04%
Jupiter Fund Management (JUP) 131.20p -1.80%
NCC Group (NCC) 92.50p -1.70%
CLS Holdings (CLI) 131.80p -1.64%