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LONDON MARKET CLOSE: FTSE 100 declines but Nvidia powers on in US

Equities in London ended lower on Tuesday after the long weekend, with investors nervy ahead of a US inflation reading on Friday, with comments from a Federal Reserve central banker doing little to lift spirits.

The UK election campaign rumbled on as all three of the main party leaders spent Tuesday visiting seats that could be crucial in deciding the outcome of the general election.

Prime Minister Rishi Sunak, meanwhile, is gambling on a £2.4 billion tax break to help secure the support of pensioners as he battles to remain in No 10.

The PM, in what Labour described as a ‘desperate move’, promised to increase the income tax personal allowance for pensioners, giving them a tax cut worth around £95 in 2025-26, rising to £275 in 2029-30.

The FTSE 100 index closed down 63.41 points, or 0.8%, at 8,254.18. The FTSE 250 fell 65.66 points, or 0.3%, at 20,705.27, and the AIM All-Share lost 1.66 points, or 0.2%, at 808.36.

The Cboe UK 100 ended down 0.8% at 824.14, the Cboe UK 250 closed flat at 18,173.97, and the Cboe Small Companies ended up 1.6% at 16,882.23.

In European equities on Tuesday, the CAC 40 in Paris closed down 0.9%, while the DAX 40 in Frankfurt fell 0.5%.

Risk appetite in equities was hurt by comments from a US central banker.

Minneapolis Federal Reserve President Neel Kashkari wants to see more progress in the fight against inflation before the US central bank cuts rates.

Kashkari, who is not a voter on the Federal Open Market Committee this year, told CNBC that he wants to see ‘many more months of positive inflation data’ before he feels confident enough to back a cut.

He said he does not think ‘we should rule anything out at this point’, suggesting even a hike is not off the table.

In New York, the Dow Jones Industrial Average was down 0.4% at the time of the closing bell in Europe. The S&P 500 was a touch higher, while the Nasdaq Composite rose 0.5%, turbocharged by a 5.5% rise in Nvidia shares, as the chipmaker nears a $3 trillion valuation.

‘Investors have had time to think about their portfolios over the long weekend and Nvidia’s strong results last week have clearly given individuals enough confidence to want to own more shares,’ AJ Bell analyst Dan Coatsworth commented.

‘The stock has been bid up to a new record high potentially because the latest messages from the company contain all the right notes that investors want to hear,’ Coatsworth continued. ‘The business is doing incredibly well, there are so many opportunities to keep growing, and the AI theme still has legs. When the song is that catchy, investors want to keep humming it all day long.’

The pound was quoted at $1.2780 late on Tuesday afternoon in London, up from $1.2748 at the equities close on Friday. The euro stood at $1.0875, up against $1.0849. Against the yen, the dollar was trading at JP¥156.94, largely flat compared to JP¥156.96.

Analysts at ING commented: ‘In spite of short-dated US rates remaining reasonably firm, the dollar is edging lower. Driving this trend looks to be the dominant current theme of lower cross-market volatility and the search for risk. Here, sharply lower US interest volatility has dragged down volatility across the equity and FX spaces too. At the heart of this story are investors positioning once again for a soft US landing.

‘Central to this will be Friday’s release of the core PCE inflation data for April. Having taken inputs from the already released April CPI and PPI figures, consensus now expects Friday’s figure to come in at a benign 0.2% month-on-month. Such an outcome can rebuild expectations for a September Federal Reserve rate cut (now priced with a 44% probability) and prove bearish for the dollar.’

Numbers on Friday are expected to show that the core personal consumption expenditures index, the Federal Reserve’s preferred US inflation gauge, rose 2.8% year-on-year in April, the same pace of growth as in March.

The core PCE reading does not include food or energy. The headline index, which does, is expected to have risen 2.7% on-year in April, also the same pace of growth as in March.

US consumers appeared less gloomy about the job market and future business conditions in May, according to a survey released Tuesday.

The Conference Board’s consumer confidence index posted a surprise increase this month to 102.0, despite analyst expectations of a decline from April’s 97.5 level.

‘Confidence improved in May after three consecutive months of decline,’ said The Conference Board’s chief economist Dana Peterson.

While consumers’ were less optimistic of current business conditions than before, ‘the strong labour market continued to bolster consumers’ overall assessment of the present situation,’ Peterson said.

Brent oil was quoted at $83.65 a barrel, up from $81.54 late Friday. Gold was quoted at $2,359.03 an ounce, up against $2,336.80.

In the FTSE 100, Intermediate Capital was one of the best performers, up 3.2%.

For the year ended March 31, the London-based asset manager posted pretax profit rose of £597.8 million, up from £258.1 million a year prior. Fee-earning assets under management were up 11% to $69.7 billion from $62.8 billion.

At March 31, the private equity investment firm’s net asset value per share came to 801 pence, up 15% from 694p a year prior. ICG proposed a final dividend of 53.2p from 52.2p, taking its dividend to 79.0p from 77.5p.

Flutter lost 7.4%, after the US state of Illinois passed a measure that would hike taxes on sports betting.

According to the Illinois General Assembly, the new progressive model could mean as high as a 40% levy on ‘annual adjusted gross sports wagering receipts in excess of $200.0 million’. The current sports gambling tax rate is 15%.

The new measure would impose a 20% tax rate on annual adjusted gross sports wagering receipts up to and including $30.0 million, 25% on receipts over $30.0 million but under $50.0 million, 30% for receipts over $50.0 million but under $100.0 million and 35% between $100.0 million and $200.0 million.

The Sports Betting Alliance said it believes the proposed measures ‘will cause real harm’.

‘Rather than heeding the outcry from tens of thousands of residents who vocally opposed more than doubling sports betting taxes, the Illinois Senate advanced a budget tonight that would make Illinois sports betting tax the second highest in the country and counter-productively penalises sports betting operators who invested millions into the local economy and created jobs in the state,’ SBA President Jeremy Kudon said on Monday.

‘The tax hike will mean worse products, worse promotions, and inevitably, worse odds for Illinois customers.’

Elsewhere, Quadrise added 20%. It signed a commercial framework agreement with the Moroccan phosphate miner OCP.

The London-based energy technology company and supplier of MSAR emulsion technology fuel, which reduces energy costs and emissions, said the agreement relates to OCP’s Jorf Lasfar processing plant.

Chief Executive Officer Jason Miles commented: ‘We are delighted to be progressing towards the commercialisation of our technology with OCP, who are world leader in their sector. This agreement provides a clear pathway to long term commercial revenues and an opportunity to create a supply point for our fuels in the Mediterranean.’

Wednesday’s economic calendar has a German inflation reading at 1300 BST.

In the local corporate calendar, pet care retailer Pets At Home Group reports annual results.

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