- FTSE 100 sees gains following mixed trading in US and Asia
- NatWest buys back £1.3bn stake from government
- New chief executive of Rolls Royce takes aim at the mismanagement of a core division
- Brent crude at around $75 a barrel
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“The FTSE 100 has seen an 18-point gain in early trading. The continuation of positive momentum comes ahead of important talks in the US. President Biden is due to speak to Republican House Speaker Kevin McCarthy today, for another round of talks surrounding the raising of the debt ceiling. This comes just under two weeks before an important deadline. The general sense is that a solution will be found before boundaries are crossed, but markets will remain highly sensitive. That’s why US futures have dipped ahead of regular trading across the pond, although the major indices saw positive movements last week as mega-cap tech buoyed overall sentiment. There are some important US earnings due this week, including Zoom and Lowe’s. These will both give an indication on discretionary spending sentiment, and GDP and personal consumption expenditure figures will highlight the most likely path the Federal Reserve will take at the next interest rate decision.
Trading in Asia has been positive, with the Shanghai Composite up around 0.5% as the People’s Bank of China maintained its key lending rates unchanged for the ninth consecutive month. More broadly, semiconductor stocks in the region have also been given a boost following China’s ban of US Micron products over the weekend, naming national security concerns as the reason. Looking further out, there are some signs that China’s Covid recovery is beginning to lose traction. Should this be prolonged, there’s likely going to be downwards pressure on valuations.
The UK government has now sold over half of its shareholding in NatWest, following peak ownership of 84% when it had to rescue the firm during the global financial crisis. While the change doesn’t fundamentally change much about NatWest, other than giving it a little more flexibility over the capital base, the broader change is a symbolic one. Removing government stabilisers is a clear marker of the bank entering a new chapter.
Tufan Erginbilgic, 63, who took the top job at Rolls Royce at the start of this year has publicly criticised the group’s Power Systems division, which makes engines used in mining transport vehicles, trains and superyachts. The business made up 26% of revenue last year and is largely regarded as an important core pillar for Rolls’ business. Thinning margins despite a growing top line are said to be the root of Erginbilgic’s assessment that costs aren’t being properly controlled. It’s certainly true that Rolls Royce needs a firm hand if it’s going to be moulded back into full health, and there will be corners of the market who agree with taking a hard line. More important to investors though will be an ironclad plan and execution of strategy to plug the holes in margins.
Brent crude is tracking just under $75 a barrel, with declines seen in three straight sessions. Concerns around the debt ceiling negotiations in the US, coupled with more persistent concerns around inflation, mean pressure has been heaped on the price.”
“The FTSE 100 has seen an 18-point gain in early trading. The continuation of positive momentum comes ahead of important talks in the US. President Biden is due to speak to Republican House Speaker Kevin McCarthy today, for another round of talks surrounding the raising of the debt ceiling. This comes just under two weeks before an important deadline. The general sense is that a solution will be found before boundaries are crossed, but markets will remain highly sensitive. That’s why US futures have dipped ahead of regular trading across the pond, although the major indices saw positive movements last week as mega-cap tech buoyed overall sentiment. There are some important US earnings due this week, including Zoom and Lowe’s. These will both give an indication on discretionary spending sentiment, and GDP and personal consumption expenditure figures will highlight the most likely path the Federal Reserve will take at the next interest rate decision.
Trading in Asia has been positive, with the Shanghai Composite up around 0.5% as the People’s Bank of China maintained its key lending rates unchanged for the ninth consecutive month. More broadly, semiconductor stocks in the region have also been given a boost following China’s ban of US Micron products over the weekend, naming national security concerns as the reason. Looking further out, there are some signs that China’s Covid recovery is beginning to lose traction. Should this be prolonged, there’s likely going to be downwards pressure on valuations.
The UK government has now sold over half of its shareholding in NatWest, following peak ownership of 84% when it had to rescue the firm during the global financial crisis. While the change doesn’t fundamentally change much about NatWest, other than giving it a little more flexibility over the capital base, the broader change is a symbolic one. Removing government stabilisers is a clear marker of the bank entering a new chapter.
Tufan Erginbilgic, 63, who took the top job at Rolls Royce at the start of this year has publicly criticised the group’s Power Systems division, which makes engines used in mining transport vehicles, trains and superyachts. The business made up 26% of revenue last year and is largely regarded as an important core pillar for Rolls’ business. Thinning margins despite a growing top line are said to be the root of Erginbilgic’s assessment that costs aren’t being properly controlled. It’s certainly true that Rolls Royce needs a firm hand if it’s going to be moulded back into full health, and there will be corners of the market who agree with taking a hard line. More important to investors though will be an ironclad plan and execution of strategy to plug the holes in margins.
Brent crude is tracking just under $75 a barrel, with declines seen in three straight sessions. Concerns around the debt ceiling negotiations in the US, coupled with more persistent concerns around inflation, mean pressure has been heaped on the price.”
