MARKET REPORT: London stocks edge higher despite commodity slump

The London stock market moved higher yesterday despite a sharp sell-off in commodity-focused stocks.

After a strong start to the year on Tuesday, the FTSE 100 rose another 0.4 percent or 31.10 points to 7585.19 while the FTSE 250 climbed 1.3 percent or 256.73 points to 19,391.07.

The rally came despite recession fears and weaker demand weighing on commodity prices, including oil.

Brent oil fell more than 5 percent to less than $80 a barrel.

The slump dragged the oil majors down, with BP down 3.6 percent, or 17.5 pence, to 465.85 pence, while Shell fell 3.5 percent, or 82 pence, to 2285 pence.

AJ Bell investment director Russ Mold said that while oil prices are already down 5 percent this year, such losses could ease inflation and encourage central banks to slow the pace of rate hikes or pause them altogether.

He said: “The dominant market narrative remains investors’ hope, or even expectation, that a global slowdown, or even a recession, will allow central banks to hold off on raising interest rates for a while and then move to lowering it.

Weaker oil and metal prices could help cool inflation and give them room to ease policy again, and a slowdown in China, the world’s second-largest economy, could weigh on growth and also hurt inflation. dampen competition for vital raw materials.

Lower interest rates can lead to lower bond yields and lower returns on cash, and may entice investors to look to other asset classes, such as equities, in search of higher yields and returns.

“The weaker-than-expected German inflation rate fits into this narrative and helped drive equity markets in Europe across the board.”

City analysts piled even more misery on energy and oil investors as Jefferies lowered his target price for three stocks.

Stock watch – Heiq

Fabric technology company Heiq fell to a record low after warning yesterday of a difficult year ahead.

The group, which makes waterproof coatings for jackets, said revenue for 2022 was likely to be about 20 per cent below market expectations, at around £45 million.

That put it on track for an annual loss of up to £2.9 million.

The outlook was also bleak as the company said trading would be “below market guidance” this year.

Shares fell 50.9 percent, or 28 pence, to 27 pence.

The victims were Harbor Energy, which fell 3.3 percent, or 9.6p, to 283.4p, while Capricorn Energy fell 2.9 percent, or 7.2p, to 245p, and Tullow Oil fell 2.8 percent, or 1p, fell to 35.34p.

Gas prices also fell, falling by more than 7 percent.

According to Investec analyst Martin Young, a sharp fall in projected wholesale prices for electricity and gas over the past four weeks should come as a “relief” to the government, as it would significantly reduce the cost of fiscal support in 2023-2024 compared to 2022-23.

British gas owner Centrica plunged 2.6 percent, or 2.34p, to 89.6p, while energy company Drax plunged 5.7 percent, or 38p, to 633.5p, and SSE fell 1.7 percent, or 28p, to 1635 ,5p.

There was also little to cheer for mining stocks. Falling metal prices saw Glencore fall 6.9 percent, or 37.8p, to 506.6p, while Anglo American fell 2.7 percent, or 87p, to 3180p and Antofagasta fell 0.5 percent, or 8p, to 1554p.

Ocado went the other way after city broker Evercore raised the online grocer’s target price from 600 pence to 700 pence. It rose 9 percent, or 58.6p, to 707.2p.

Similarly, Guinness maker Diageo added 1.3 per cent, or 46p, to 3658.5p after Credit Suisse raised its target price from 4400p to 4500p.

There was also good news for RS Group. The British technology company dubbed ‘Amazon for engineers’ completed the acquisition of Risoul, a Mexican distributor, for approximately £228 million. Shares rose 2.2 percent, or 20 pence, to 923.5 pence.

Clinical research specialist Hvivo has secured a £5.2 million contract with a client in the Asia Pacific region for the first time in more than a decade.

It will test the biotech company’s respiratory syncytial virus vaccine candidate on healthy volunteers as part of its human challenge trial.

The virus is a leading cause of pneumonia in toddlers and the elderly. Shares rose 10.3 percent, or 1.2 pence, to 12.9 pence.