London midday: Stocks rally as they play catch-up with US, European gains

London stocks were still firmly in the black by midday on Tuesday, with the FTSE 100 hitting record highs as markets played catch up with gains seen in the US and Europe a day earlier.

The FTSE 100 was up 1.1% at 8,299.99, having earlier risen above 8,300 for the first time.

Neil Wilson, chief market analyst at Finalto, said: "The FTSE 100 jumped above 8,300 for a fresh record high in buoyant trade early on Tuesday as London reopened following the holiday. There is a something of a catchup trade taking place with stocks in Frankfurt enjoying a strong session on Monday and more modestly higher this morning.

"There was a positive session on Wall Street again as the Dow Jones advanced for a fourth straight day in the wake of the less-hawkish-than-feared Fed and the S&P 500 rose 1%. It’s not all been rosy, but earnings have helped satisfy risk appetite."

Looking ahead to the rest of the week, attention will turn to the Bank of England’s latest policy announcement on Thursday.

"Most think it’s too early to cut this week - August is preferred as the starting date, but the Monetary Policy Committee is not speaking as one," said Wilson.

"Dave Ramsden, the BoE’s deputy governor, suggested last month that he did not need to see much more evidence of falling inflation to vote for a rate cut. He emphasised the ‘downside risks’ to the BoE’s February inflation forecast, which predicted CPI inflation would fall back to 2% before rising later in the year. Huw Pill, the Bank of England’s chief economist, sounded more hawkish in April, saying that he felt ‘relatively cautious’ about starting rate cuts."

On the macro front, a survey out earlier showed the UK construction sector expanded in April at its fastest pace in more than a year.

The S&P Global construction purchasing managers’ index rose to 53.0 from 50.2 in March. This marked the second month in a row it was in positive territory and the strongest pace of expansion since February 2023.

A reading above 50.0 signals expansion, while a reading below indicates contraction.

The index for commercial building rose for the first time since August 2023 - to 53.9 in April from 49.9 in March - and it was the fastest-growing area of construction last month. Survey respondents cited a turnaround in customer demand, in part driven by refurbishment projects.

Meanwhile, the civil engineering activity index printed at 53.6, revealing the strongest pace of expansion for nine months.

The index for housebuilding ticked down to 47.6 from 49.9 amid a moderate decline in residential building work, although the rate of decline was the steepest since January. Construction companies highlighted sluggish market conditions and the impact of high borrowing costs.

Tim Moore, economics director at S&P Global Market Intelligence, said: "The construction sector consolidated its recent return to growth in April, with total industry activity rising at the fastest pace for 14 months amid an ongoing recovery in order books. Demand was boosted by greater confidence regarding the broader UK economic outlook. Commercial construction outperformed in April and civil engineering also provided a solid contribution to overall growth.

"Lacklustre market conditions in the house building segment continued to weigh on activity. The latest survey pointed to the fastest reduction in residential building work since January, although the speed of the downturn remained much softer than in the second half of 2023."

Investors were also mulling the latest figures from Halifax, which showed that average house prices rose 0.1% on the month in April following a 0.9% decline in March.

On the year, house prices increased 1.1% following a 0.4% jump the month before.

The figures showed that a typical UK home now costs £288,949 compared to £288,781 in March.

Amanda Bryden, head of mortgages at Halifax, said the reality is that average house prices have largely plateaued in the early part of 2024.

"This reflects a housing market finding its feet in an era of higher interest rates. While borrowing costs remain more expensive than a few years ago, homebuyers are gaining confidence from a period of relative stability. Activity and demand is improving, evidenced by greater numbers of mortgage applications so far this year, while at an industry level mortgage approvals have reached their highest point in 18 months."

Finally, industry data out earlier showed that total retail sales fell 4% year-on-year in April as wet spring weather deterred shoppers, despite businesses offering hefty discounts in an attempt to entice customers into stores.

The rain dampened sales growth for clothing and footwear, especially outdoor sportswear, as well as DIY and garden furniture, the BRC-KPMG retail sales monitor for the four weeks to April 27 showed. The early timing of the Easter break also had an impact, it added.

In equity markets, Shell gushed higher following a report it is in talks with Saudi Arabia's state-owned Saudi Aramco to sell its gas station business in Malaysia. According to Reuters sources, a deal could be worth up to $1bn.

On the downside, BP nudged lower after it reported a fall in first-quarter profit on the back of lower oil and gas prices, an outage at a US refinery and "significantly weaker" fuels margins. It also started a $1.75bn share buyback.

Underlying replacement cost profit for the quarter was $2.7bn, compared with $5bn a year earlier and $3bn for the final three months of 2023, BP said.

Market Movers

FTSE 100 (UKX) 8,299.99 1.05%
FTSE 250 (MCX) 20,391.23 1.12%
techMARK (TASX) 4,698.71 0.67%

FTSE 100 - Risers

DCC (CDI) (DCC) 5,750.00p 4.64%
InterContinental Hotels Group (IHG) 7,966.00p 3.11%
Rentokil Initial (RTO) 418.70p 2.70%
Persimmon (PSN) 1,402.00p 2.60%
Flutter Entertainment (DI) (FLTR) 16,110.00p 2.58%
Kingfisher (KGF) 255.10p 2.57%
International Consolidated Airlines Group SA (CDI) (IAG) 183.20p 2.55%
Marks & Spencer Group (MKS) 264.60p 2.44%
Tesco (TSCO) 305.40p 2.38%
Airtel Africa (AAF) 116.70p 2.37%

FTSE 100 - Fallers

Smith & Nephew (SN.) 984.40p -1.24%
Phoenix Group Holdings (PHNX) 514.50p -0.96%
Haleon (HLN) 327.10p -0.85%
Convatec Group (CTEC) 256.80p -0.77%
Anglo American (AAL) 2,677.00p -0.61%
Standard Chartered (STAN) 750.40p -0.61%
Burberry Group (BRBY) 1,175.00p -0.42%
Smurfit Kappa Group (CDI) (SKG) 3,726.00p -0.37%
Melrose Industries (MRO) 602.40p -0.20%
Unilever (ULVR) 4,186.00p -0.05%

FTSE 250 - Risers

Asia Dragon Trust (DGN) 412.00p 7.57%
Diversified Energy Company (DEC) 1,125.00p 5.34%
Jupiter Fund Management (JUP) 82.80p 5.21%
RHI Magnesita N.V. (DI) (RHIM) 3,735.00p 5.06%
Wood Group (John) (WG.) 158.80p 4.47%
Hochschild Mining (HOC) 157.80p 4.37%
Mobico Group (MCG) 61.25p 3.90%
SDCL Energy Efficiency Income Trust (SEIT) 62.40p 3.83%
TUI AG Reg Shs (DI) (TUI) 587.00p 3.62%
CMC Markets (CMCX) 263.00p 3.54%

FTSE 250 - Fallers

TBC Bank Group (TBCG) 2,910.00p -2.84%
W.A.G Payment Solutions (WPS) 65.60p -2.09%
Dr. Martens (DOCS) 79.50p -1.73%
NextEnergy Solar Fund Limited Red (NESF) 74.25p -1.66%
Foresight Solar Fund Limited (FSFL) 89.40p -1.22%
Bluefield Solar Income Fund Limited (BSIF) 105.60p -1.12%
Baillie Gifford Japan Trust (BGFD) 727.00p -1.09%
Chemring Group (CHG) 386.50p -1.02%
Jlen Environmental Assets Group Limited NPV (JLEN) 89.60p -0.78%
North Atlantic Smaller Companies Inv Trust (NAS) 4,020.00p -0.74%