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Shares prices were higher in London early Monday, after the US avoided a government debt default and there were positive readings on economic activity in China and Japan.
The announcement of a further cut to oil production by Saudi Arabia was giving a modest lift to crude prices, supporting London-listed oil shares.
The large-cap FTSE 100 index opened up 46.11 points, or 0.6%, at 7,653.39. The mid-cap FTSE 250 was up 79.65 points, 0.4%, at 19,228.96, and the AIM All-Share was up 2.00 points, 0.3%, at 791.58.
The Cboe UK 100 was up 0.5% at 763.66, the Cboe UK 250 was up 0.4% at 16,758.97, and the Cboe Small Companies was was up 0.3% at 13,707.54.
European equities were more mixed. The CAC 40 index in Paris was down 0.1%, while the DAX 40 in Frankfurt was up 0.2%.
Oil prices rose by just over a dollar a barrel, as major oil-producing nations announced on Sunday they will cut output.
Brent oil was trading at $77.24 a barrel, higher than $75.89 late Friday.
Saudi Arabia will reduce how much oil it sends to the global economy, taking a unilateral step to support the sagging cost of crude after two earlier production cuts by members of the Opec+ alliance of major oil-producing countries failed to push prices higher.
The announcement of the Saudi cuts of one million barrels per day came on Sunday after a meeting of the alliance at OPEC headquarters in Vienna. The rest of the Opec+ oil producers agreed to extend earlier cuts in supply through the end of 2024.
The news helped to lift London-listed oil majors, with BP up 1.0% and Shell up 1.2%. In the FTSE 250, Harbour Energy was up 1.8%, but Diversified Energy was down 0.4%.
‘The outcome of the much-anticipated OPEC+ meeting has created a splash in the oil market, if not a wave,’ commented Tim Waterer, chief market analyst at KCM Trade.
‘Saudi Arabia has backed up their words with actions by going it alone and extending their supply cuts; however with other members not on board with turning off some of the production taps...the current push higher in the oil price might be short-lived.’
The unilateral action by the Saudis behind the price jump in oil today pales in comparison to the spike seen after the previous cuts were announced in early April.
Meanwhile, there was some positive economic data from Asia on Monday, with the latest purchasing managers’ index surveys pointing to strong growth in the service sectors of China and Japan.
Japan saw record expansions in business activity, new business and new export orders, with China also seeing strong expansion in both supply and demand during the month.
In Japan on Monday, the Nikkei 225 index closed up 2.2%, reaching a fresh three-decade high. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong was up 0.7%. The S&P/ASX 200 in Australia closed up 1.0%.
Equities in New York had rallied on Friday, as US lawmakers voted through a bipartisan agreement to raise the debt limit, averting a catastrophic default.
The Dow Jones Industrial Average ended up 2.1%, the S&P 500 up 1.5% and the Nasdaq Composite up 1.1%.
President Joe Biden on Saturday signed the debt legislation into law.
Nevertheless, ratings agency Fitch said it is maintaining a ’rating watch negative’ on the US ‘as [it] consider[s] the full implications of the most recent brinkmanship episode and the outlook for medium-term fiscal and debt trajectories’.
US equities also were lifted by the non-farm payrolls print on Friday.
Growth in US employment was far stronger than anticipated in May, according to the US Bureau of Labor Statistics.
Nonfarm payroll employment increased by 339,000 in May, accelerating from a rise of 294,000 in April. That number was revised up by 41,000 from 253,000. March’s increase was revised up by 52,000 to 217,000 from 165,000.
The May increase was markedly above FX Street-cited market consensus of growth in jobs of 190,000.
The headline figure seemed like it would increase the likelihood of further interest rate hikes by the Federal Reserve, but investors were cheered by signs of weakening wage inflation, and rising unemployment.
The dollar was stronger in early exchanges in Europe.
Sterling was quoted at $1.2417 early Monday, lower than $1.2476 at the London equities close on Friday. The euro traded at $1.0694, lower than $1.0728. Against the yen, the dollar was quoted at JP¥140.24, up from JP¥140.09.
Gold was quoted at $1,943.05 an ounce early Monday in London, lower than $1,963.45 late on Friday.
Miners were weighing on the FTSE 100. Endeavour was down 3.0%, Fresnillo down 2.0%, and Antofagasta down 1.0%. Rio Tinto slipped 0.7%, despite the stock being raised to ’buy’ from ’hold’ by Deutsche Bank.
Meanwhile, in the mid-caps, Asos rose 11%.
Asos received a takeover approach from a Turkish company backed by China’s Alibaba, the Sunday Times reported, citing ‘City sources’.
The sources said online fashion retailer Trendyol approached its UK peer in late December with a potential deal that would have valued Asos at between £10 and £12 a share, triple its current price. This would have valued Asos at more than £1 billion.
The Times said there are no live talks, and Asos and Trendyol declined comment.
Asos is set to be demoted from the FTSE 250 on June 19, the stock still being down 76% over the past 12 months.
On AIM, DeepVerge plunged 30%.
The Dublin-based environmental and life science group warned of a ‘significant risk’ of a delay to its annual results for 2022, following the resignation of its auditor. Consequently, its shares would be suspended from trading in early July until the results are published.
DeepVerge also said its financial position can no longer shoulder the costs of progressing with the Labskin and Skin Trust Club businesses, and associated elements of the Rinocloud businesses, which it now plans to downsize.
DeepVerge said continues to explore various financing options, which could include an equity raise, and the sale of ‘one or more lines of business’.
The economic calendar has more services PMI prints, including those from the EU, the UK and the US.
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