FTSE 100 at new high despite poor borrowing data

Independent

3 days ago

London's FTSE 100 notched another record close, and hit an all-time intra-day high, despite the threat of higher UK taxes after figures showed a sharp increase in government borrowing.
The FTSE 100 index closed up 10.82 points, 0.1%, at 9,023.81. It had earlier hit a new all-time high of 9,035.37.
The FTSE 250 closed down 78.20, 0.4%, at 21,934.26, and the AIM All-Share closed down 0.74 of a point, 0.1%, at 770.14.
According to the Office for National Statistics (ONS), public sector borrowing totalled £20.68 billion in June, exceeding an FXStreet-cited consensus estimate for £15.6 billion and up from £17.44 billion in May.
It was the second-highest June borrowing since monthly records began in 1993, after that of June 2020, the ONS noted. It was also more than the £17.1 billion forecast by the Office for Budget Responsibility (OBR) in March.
Data showed borrowing through the three months to June totalled £57.8 billion, up £7.5 billion from a year earlier, but in line with an estimate from the OBR.
However, the central Government's net cash requirement was £55.7 billion for the period, £6.7 billion above the OBR forecast.
Russ Mould at AJ Bell said: 'Soaring debt interest payments haven't helped and the situation will further stir speculation that the Government will have to put up taxes in the autumn budget.'
Kathleen Brooks at XTB Research said the issue for the UK is that 'ever-growing public sector costs could lead to consistent tax rises over this parliament'.
She added that the government's unwillingness to 'rein in spending and the lack of realistic debate about public sector services and how much the state can provide could leave the UK in a very tricky position.'
The pound was little changed at 1.3508 dollars late on Tuesday afternoon in London, compared with 1.3506 dollars at the equities close on Monday. The euro traded at 1.1735 dollars, against 1.1711 dollars. Against the yen, the dollar was trading down at 146.49 yen compared with 147.29 yen.
Despite economic concerns, UBS thinks UK equities continue to trade at 'attractive valuations both in absolute and relative terms'.
'Low multiples, combined with high dividend yields underline the UK market's appeal, and there is room for further re-rating if earnings prove resilient and political risks abate. For now, UK equities offer cheapness with a catalyst, the fundamental discount is well known, and any improvement in macro or clarity in policy could help close the gap further,' strategists at the Swiss bank commented.
In European equities on Tuesday, the CAC 40 in Paris lost 0.8%, while the DAX 40 in Frankfurt fell 1.1%.
In New York, the Dow Jones Industrial Average was up 0.1%, the S&P 500 traded down 0.1% and the Nasdaq Composite fell 0.5%.
US Treasury Secretary Scott Bessent said that he would meet his Chinese counterparts in Stockholm next week for tariff talks, eyeing an extension to a mid-August deadline for levies to snap back to steeper levels.
Mr Bessent told Fox Business that he will be speaking to Chinese officials on Monday and Tuesday for a third round of high-level negotiations, to work out what he said would be a likely postponement of the deadline.
Washington and Beijing slapped escalating, tit-for-tat levies on each other's exports earlier this year, reaching triple digit levels and stalling trade between the world's two biggest economies as tensions surged.
But after top officials met in Geneva in May, both sides agreed to lower their tariff levels temporarily in a de-escalation set to expire next month. Officials from the two countries also met in London in June.
'That deal expires on August 12, and I'm going to be in Stockholm on Monday and Tuesday with my Chinese counterparts, and we'll be working out what is likely an extension then,' Mr Bessent said in the interview.
The yield on the US 10-year Treasury was quoted at 4.34%, narrowing from 4.36%. The yield on the US 30-year Treasury was quoted at 4.91%, trimmed from 4.92%.
On London's FTSE 100, Compass Group rose 5.3% after it raised full-year guidance and announced the 1.5 billion euro acquisition of Vermaat Groep.
The Chertsey, England-based contract caterer said the acquisition of European premium food services business Vermaat, for an enterprise value of 1.3 billion euros, is expected to be both margin and earnings per share accretive in the first full year of ownership.
Citi said that with compound annual growth of more than 20% over the last 15 years, and 'double-digit' operating margins, Vermaat appears to be a 'high-quality business'.
In addition, Compass reported organic revenue growth of 8.6% in the three months to June 30, the financial third quarter, and 8.5% for the financial year to date.
As a result, Compass raised its 2025 guidance.
'We now expect constant currency underlying operating profit growth to be towards 11%, driven by organic revenue growth above 8% and ongoing margin progression,' the firm said.
Compass had previously forecast high single-digit growth.
Centrica climbed 4.6% as it said it will jointly acquire a 15% equity stake in the UK's new Sizewell C nuclear plant with the UK government, Electricite de France, and International Public Partnerships, among other investors.
The new power station is currently under construction in Suffolk, targeting a generating capacity of 3.2 gigawatts, which is about 7% of the UK's entire electricity demand. It is expected to cost around £38 billion to build.
Windsor-based British Gas owner Centrica has committed £1.3 billion in construction funding.
But Legal & General fell 2.4% as RBC Capital Markets downgraded it to 'underperform' from 'sector perform', and cut its price target.
On the FTSE 250, Greencore jumped 12% after it raised full-year guidance, after reporting that the good weather and new business wins boosted sales in the financial third quarter.
Greencore now anticipates financial 2025 adjusted operating profit will be in a range of £118 million to £121 million, ahead of previous guidance of £114 million to £117 million.
At the top-end of guidance this would be 21% ahead of £97.5 million posted in the 52 weeks to September 27 2024.
Chief executive Dalton Philips said it was an 'outstanding performance'.
Pennon Group advanced 2.1% after JP Morgan upgraded it to 'overweight' from 'neutral'. Oxford Nanopore added 5.2%, building on Monday's stellar gains.
The biggest risers on the FTSE 100 were Compass Group, up 136.0 pence, at 2,660.0p, Centrica, up 7.45p at 164.1p, Glencore, up 9.8p at 322.55p, WPP, up 12.0p at 425.8p and Entain, up 27.4p at 986.4p.
The biggest fallers on the FTSE 100 were easyJet, down 14.4p at 492.2p, ICG, down 58.0p at 2,112.0p, Melrose Industries, down 13.4p at 522.6p, IAG, down 9.2p at 370.6p and Games Workshop, down 360.0p at 15,840.0p.
Brent oil was quoted lower at 68.30 dollars a barrel in London on Tuesday, from 68.72 dollars late on Monday. Gold climbed to 3,426.29 dollars an ounce against 3,397.12 dollars.
Wednesday's local corporate calendar has trading statements from miner Fresnillo and pub operator JD Wetherspoon and half-year results from international events, digital services and academic research group Informa.
The global economic calendar on Wednesday has eurozone consumer confidence figures and US existing home sales data.
Contributed by Alliance News.