Blue chips edge higher amid gains on Wall Street

Independent

03-06-2025

London's FTSE 100 posted modest gains on Tuesday as US markets rose after encouraging US jobs data, helping offset weak mining stocks and lower growth forecasts from the OECD.
The FTSE 100 index closed up 12.76 points, 0.2%, at 8,787.02. The FTSE 250 ended down 11.19 points, 0.1%, at 21,017.78, and the AIM All-Share closed up 5.38 points, 0.7%, at 753.51.
In London, mining stocks eased after figures from S&P Global showed China's manufacturing activity contracted in May, contrasting with expectations.
The Caixin China general manufacturing purchasing managers' index fell to 48.3 in May, down from 50.4 in April and below the FXStreet-cited consensus forecast of 50.6.
Stephen Innes at SPI Asset Management said the data 'isn't just a weak print – it's a body blow to the backbone of China's economy.'
He noted small and mid-sized exporters are now caught in a 'brutal vice grip' between 'faltering global demand and a Washington-led tariff regime that's more carrot-and-stick diplomacy than ceasefire'.
But Duncan Wrigley at Pantheon Macroeconomics does not expect a 'knee-jerk' reaction from Chinese policymakers.
'We think additional targeted support is likely, but a mega stimulus won't be needed,' he said.
Rio Tinto, also hit by a downgrade to 'hold' by Jefferies, fell 1.2%, Anglo American eased 1.8% and Antofagasta slipped 0.6%.
In European equities on Tuesday, the CAC 40 in Paris rose 0.3%, while the DAX 40 in Frankfurt firmed 0.7%.
UK economic forecasts have been downgraded for the next two years as trade tensions linked to US President Donald Trump's tariff plans hit the global economy, according to a report.
The Organisation of Economic Co-operation & Development also cut its projections for global growth in 2025 and 2026.
Economists from the organisation cautioned that the global outlook is 'becoming increasingly challenging'.
After 3.3% growth last year, the world economy is now expected to expand by a 'modest' 2.9% in 2025 and 2026, the Paris-based OECD said.
In its previous report in March, the OECD had forecast growth of 3.1% for 2025 and 3.0% for 2026.
In the UK, the economy is expected to grow by 1.3% this year, with the OECD cutting its previous forecast of 1.4%.
It also reduced its prediction for 2026 from 1.2% in its March report to 1%, blaming the cuts to forecasts on 'heightened trade tensions, tighter financial conditions, and elevated uncertainty'.
The US economy is now expected to grow by just 1.6% this year, down from 2.2% in the previous outlook, and slow further to 1.5% in 2026, the OECD said.
Europe will also be severely impacted by the trade war, with sharp downgrades across the board and the euro area as a whole now set to see growth of just 1% in 2025, down from 1.3% previously forecast, the OECD said.
Investors also weighed eurozone inflation data.
Inflation in the eurozone eased to 1.9% in May, falling below the European Central Bank's 2% target for the first time since September, figures on Tuesday showed.
According to a flash estimate from Eurostat, annual consumer price inflation is estimated to have been 1.9% in May, down from 2.2% in April.
The deceleration, mainly driven by slower growth in services prices and ongoing energy deflation, came below the 2.0% FXStreet-cited market consensus.
Prices for services rose 3.2% annually in May, slowing from 4.0% in April. Energy prices continued to fall, down 3.6% year-on-year for a second consecutive month. However, food, alcohol and tobacco prices rose 3.3%, accelerating from 3.0% the previous month.
Core inflation, which excludes energy, unprocessed food, alcohol and tobacco, eased to 2.3% in May from 2.7% in April.
On Thursday, the ECB announces its interest rate decision, with markets widely expecting a 25 basis point cut.
The pound was quoted down at 1.3499 dollars late on Tuesday afternoon in London, compared with 1.3546 dollars at the equities close on Monday. The euro stood lower at 1.1385 dollars against 1.1429 dollars.
Against the yen, the dollar was trading higher at 143.24 yen compared with 142.75 yen.
The yield on the US 10-year Treasury was steady at 4.46% on Tuesday. The yield on the US 30-year Treasury narrowed to 4.97% from 5.00%.
In New York, the Dow Jones Industrial Average was up 0.4% at the time of the London equities close on Tuesday. The S&P 500 was also 0.4% higher and the Nasdaq Composite rose 0.7%.
US job openings unexpectedly rose in April, indicating demand for workers remains healthy despite heightened economic uncertainty, a report on Tuesday showed.
Available positions increased to 7.39 million from a revised 7.20 million reading in March, according to Bureau of Labour Statistics data. The median estimate in a Bloomberg survey of economists called for 7.10 million openings.
Wells Fargo said the report shows labour demand is 'far from collapsing in the wake of policy uncertainty, but the modest gain still leaves openings declining on trend'.
But Samuel Tombs at Pantheon Macroeconomics suggested the report is an 'aberration', given the ongoing decline in Indeed's measure of postings throughout April and May, as well as the drop in the hiring intentions indexes of the regional Fed surveys.
In London, housebuilders fell back after a profit warning from MJ Gleeson.
The Sheffield, England-based housebuilder warned that annual operating profit will be below market expectations, reflecting lower gross margin at Gleeson Homes and fewer land sales than hoped.
MJ Gleeson said it expects operating profit at Gleeson Homes for the financial year ending June 30 to be around 15% to 20% below current expectations.
RBC Capital Markets said Visible Alpha consensus for operating profit at Gleeson Homes is £28.1 million.
MJ Gleeson slumped 22%, while housebuilding peer Persimmon fell 2.0%, Vistry fell 6.2% and Taylor Wimpey fell 1.9%.
GSK fell 2.1% after Berenberg downgraded the pharmaceuticals firm to 'buy' from 'hold', while Pearson slipped 6.6% after a weak update from IDP Education, the owner of the IELTS language test in Australia.
IDP warned of a sharp fall in testing volumes owing to tighter immigration policies in its key markets.
Pearson counts English Language Learning among its five divisions and competes with IDP in that sector. IDP notably said the UK is facing 'heightened uncertainty' following the recent immigration white paper published in the country.
The price of gold fell to 3,349.93 dollars an ounce on Tuesday against 3,371.47 dollars on Monday.
Brent oil was higher at 65.73 dollars a barrel at the time of the London equities close on Tuesday, compared with 64.58 dollars on Monday.
The biggest risers on the FTSE 100 were Centrica, up 6.8 pence at 164.0p, Airtel Africa, up 5.6p at 183.4p, Rolls-Royce, up 25.4p at 894.2p, Melrose Industries, up 12.6p at 473.5p and Ashtead Group, up 107.0p at 4,265.0p.
The biggest fallers on the FTSE 100 were Pearson, down 77.0p at 1,085.5p, Rentokil Initial, down 12.3p at 350.9p, Severn Trent, down 67.0p at 2,655.0p, Haleon, down 9.3p at 405.1p, and GSK, down 32.0p at 1,485.0p.
Wednesday's UK corporate calendar has a trading statement from WH Smith.
The global economic calendar on Wednesday has an interest rate decision in Canada, and composite PMI readings in the UK, US and eurozone.