London open: Stocks gain; RBA pauses rate hikes

London stocks rose in early trade on Tuesday following mixed sessions in the US and Asia, as investors mulled the latest policy announcement from the Reserve Bank of Australia.

At 0825 BST, the FTSE 100 was up 0.6% at 7,722.37.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "A decision by the Reserve Bank of Australia to pause interest rate rises, combined with the UK market’s reliance on big oil names, means the FTSE 100 is largely expected to continue its positive run today.

"While equity markets have largely had a strong start to the year, attention is turning to what may happen next. A weak economic outlook and the new oil shock could inject some volatility into things in the short to medium term."

The RBA said earlier that it was keeping 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.

In corporate news, 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.

Miners were also on the front foot, with Glencore and Anglo American among the top performers on the FTSE 100.

Elsewhere, Digital 9 Infrastructure rose after it moved to reassure investors following continued volatility in its share price.

Shares in the investment firm, which specialises in the infrastructure used to run and manage the internet, have lost 27% over the last month, and 30% in the year to date.

But Digital 9, which joined the London Stock Exchange in 2021, insisted earlier 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) 7,722.37 0.64%
FTSE 250 (MCX) 18,946.98 0.36%
techMARK (TASX) 4,553.86 0.48%

FTSE 100 - Risers

Glencore (GLEN) 466.15p 3.02%
Auto Trader Group (AUTO) 625.20p 1.99%
Anglo American (AAL) 2,721.00p 1.61%
Abrdn (ABDN) 207.00p 1.37%
Melrose Industries (MRO) 168.90p 1.35%
Haleon (HLN) 326.90p 1.32%
Aviva (AV.) 409.60p 1.24%
Legal & General Group (LGEN) 240.90p 1.22%
Smith (DS) (SMDS) 320.20p 1.14%
Mondi (MNDI) 1,304.50p 1.12%

FTSE 100 - Fallers

Pershing Square Holdings Ltd NPV (PSH) 2,804.00p -0.36%
Vodafone Group (VOD) 89.17p -0.32%
Flutter Entertainment (CDI) (FLTR) 14,500.00p -0.21%
Centrica (CNA) 108.10p -0.14%
United Utilities Group (UU.) 1,034.50p -0.10%
Ocado Group (OCDO) 523.60p -0.08%
Tesco (TSCO) 263.90p -0.08%
SSE (SSE) 1,784.00p -0.03%
Smith & Nephew (SN.) 1,126.50p 0.00%
Convatec Group (CTEC) 229.00p 0.00%

FTSE 250 - Risers

Virgin Money UK (VMUK) 154.10p 3.81%
Digital 9 Infrastructure NPV (DGI9) 63.40p 3.26%
Investec (INVP) 455.00p 2.36%
Rathbones Group (RAT) 1,928.00p 2.34%
SDCL Energy Efficiency Income Trust (SEIT) 86.50p 2.25%
Domino's Pizza Group (DOM) 291.20p 2.10%
Quilter (QLT) 84.95p 2.10%
TP Icap Group (TCAP) 181.40p 2.08%
IntegraFin Holding (IHP) 276.60p 2.07%
Genus (GNS) 2,940.00p 2.01%

FTSE 250 - Fallers

Pennon Group (PNN) 830.00p -3.21%
PureTech Health (PRTC) 214.00p -2.95%
Jupiter Fund Management (JUP) 130.00p -2.69%
Renishaw (RSW) 3,952.00p -2.18%
TI Fluid Systems (TIFS) 107.00p -2.01%
Volution Group (FAN) 418.60p -2.01%
Liontrust Asset Management (LIO) 1,000.00p -1.77%
Diversified Energy Company (DEC) 95.00p -1.55%
Currys (CURY) 57.85p -1.53%
TUI AG Reg Shs (DI) (TUI) 602.60p -1.44%