London open: Stocks gain; oil rallies on Saudi production cuts
By Michele Maatouk
Date: Monday 05 Jun 2023
(Sharecast News) - London stocks gained in early trade on Monday following positive US and Asian sessions, with oil prices on the rise.
At 0845 BST, the FTSE 100 was up 0.5% at 7,642.49.
On Sunday, Saudi Arabia announced that it will cut oil production next month and do "whatever is necessary" to lift prices.
Saudi Arabia said it would cut 1m barrels per day (bpd) in July, while OPEC+ said targets would decline by a further 1.4m bpd from next year.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The FTSE 100 has opened higher, gaining a lift upwards from strong trading in Asia, amid ongoing relief about the US reaching a debt ceiling deal and the move by oil-rich nations to keep crude prices higher.
"Brent crude is trading higher, just above $77 a barrel, but has lost a little bit of steam, after initially jumping on the news of Saudi Arabia's production cut, which is designed to keep cash rolling into the kingdom. The decision by Riyadh to reduce production by a million barrels a day in July, and the pledge from other OPEC+ members to lower targets again next year was aimed at shoring up the oil price to breakeven levels. Oil prices are trapped in conflicting tides between production cuts on one hand, and concerns about demand as China's recovery slows, while a recession in the US looms. So, for now, this production cut is unlikely to show up in a dramatic way at the pumps.
"However, depending on the trajectory of the world's largest economies, and if Saudi Arabia cuts again, supply shortages could emerge later this year, which could push prices higher but still way off the excruciating levels of last summer."
Investors were also mulling the latest data out of China, which showed that activity in the services sector unexpectedly picked up in May.
The Caixin/S&P Global services purchasing managers' index rose to 57.1. from 56.4 in April, coming in above consensus expectations of 55.2.
A reading above 50.0 indicates expansion, while a reading below signals contraction.
Wang Zhe, senior economist at Caixin Insight Group, said: "In general, it remains a prominent feature of the Chinese economy that the services sector is stronger than manufacturing.
"This divergence highlights that economic growth is lacking internal drive and market entities lack sufficient confidence, underscoring the importance of expanding and restoring demand."
On the UK macro front, investors will eye the S&P Global/CIPS services PMI for May at 0930 BST.
In equity markets, BP and Shell gained but telecoms were the biggest risers, with BT, Vodafone and Airtel Africa all sharply higher,
Opioid addiction treatment maker Indivior surged after it reached an agreement to resolve litigation claims over Suboxone.
Online fashion retailer Asos jumped following a report that Turkish online retailer Trendyol made a £1bn approach in late December.
Market Movers
FTSE 100 (UKX) 7,642.49 0.46%
FTSE 250 (MCX) 19,204.58 0.29%
techMARK (TASX) 4,617.28 0.60%
FTSE 100 - Risers
BT Group (BT.A) 147.60p 2.75%
Vodafone Group (VOD) 77.49p 2.46%
Airtel Africa (AAF) 124.60p 1.55%
United Utilities Group (UU.) 1,050.50p 1.35%
Abrdn (ABDN) 206.10p 1.28%
Shell (SHEL) 2,316.50p 1.16%
Smurfit Kappa Group (CDI) (SKG) 3,004.00p 1.14%
HSBC Holdings (HSBA) 609.10p 1.06%
St James's Place (STJ) 1,165.00p 1.00%
Severn Trent (SVT) 2,732.00p 0.96%
FTSE 100 - Fallers
Endeavour Mining (EDV) 2,116.00p -2.85%
Fresnillo (FRES) 676.60p -2.20%
Antofagasta (ANTO) 1,441.00p -1.06%
Prudential (PRU) 1,145.00p -0.69%
Rio Tinto (RIO) 5,039.00p -0.61%
Anglo American (AAL) 2,403.50p -0.60%
Melrose Industries (MRO) 489.80p -0.59%
Aviva (AV.) 406.90p -0.54%
F&C Investment Trust (FCIT) 902.00p -0.44%
International Consolidated Airlines Group SA (CDI) (IAG) 157.30p -0.38%
FTSE 250 - Risers
Indivior (INDV) 1,645.00p 11.53%
ASOS (ASC) 370.50p 5.74%
Bridgepoint Group (Reg S) (BPT) 237.80p 4.76%
Senior (SNR) 179.80p 4.66%
Premier Foods (PFD) 137.80p 3.14%
RHI Magnesita N.V. (DI) (RHIM) 2,638.00p 3.13%
Vanquis Banking Group 20 (VANQ) 230.50p 2.90%
PureTech Health (PRTC) 237.00p 2.82%
Great Portland Estates (GPE) 509.50p 2.27%
Close Brothers Group (CBG) 989.00p 2.17%
FTSE 250 - Fallers
Auction Technology Group (ATG) 704.00p -5.12%
Chemring Group (CHG) 265.00p -2.39%
Ibstock (IBST) 159.60p -2.39%
Centamin (DI) (CEY) 98.85p -2.23%
Just Group (JUST) 84.50p -2.20%
Ferrexpo (FXPO) 98.50p -1.70%
Babcock International Group (BAB) 307.40p -1.66%
Softcat (SCT) 1,370.00p -1.58%
C&C Group (CDI) (CCR) 140.40p -1.54%
AJ Bell (AJB) 325.00p -1.52%
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