London pre-open: FTSE called higher after solid European, US sessions

(Sharecast News) - London stocks were set to rise at the open on Tuesday as investors play catch up following positive sessions in Europe and the US on Monday. The FTSE 100 was called to open around 90 points higher to just over 8,300.

Data released earlier by Halifax showed that house prices returned to growth in April, with the housing market "finding its feet in an era of higher interest rates".

According to Halifax, average house prices rose 0.1% on the month following a 0.9% decline in March.

On the year, house prices increased 1.1% in April following a 0.4% jump the month before.

The figures showed that a typical UK home now costs £288,949 compared to £288,781 in March.

Amanda Bryden, head of mortgages at Halifax, said the reality is that average house prices have largely plateaued in the early part of 2024.

"This reflects a housing market finding its feet in an era of higher interest rates. While borrowing costs remain more expensive than a few years ago, homebuyers are gaining confidence from a period of relative stability. Activity and demand is improving, evidenced by greater numbers of mortgage applications so far this year, while at an industry level mortgage approvals have reached their highest point in 18 months," she said.

"Our recent research also found that buyers are adjusting their expectations, with first-time buyers in particular compensating for higher borrowing costs by targeting smaller properties. We see this reflected in property prices for the first few months of this year, with the value of flats rising most sharply, closing the 'growth gap' on bigger properties that's existed for most of the last four years.

"However, we can't overlook the fact that affordability constraints are still a significant challenge, for both new buyers and those rolling off fixed-term deals. Mortgage rates have edged up again in recent weeks, primarily as a result of expectations around future Bank of England base rate changes, with markets now pricing in a slower pace of cuts."

She said that if the Bank of England cut rates later this year, as expected, fixed mortgage rates should fall. This, combined with the resilience displayed by the housing market over recent months, means Halifax now expects property prices to rise modestly over the course of this year.

Investors were also digesting industry data showing that UK retail sales fell 4% year-on-year in the April as wet spring weather deterred shoppers, despite businesses offering hefty discounts in an attempt to entice customers into stores.

The rain dampened sales growth for clothing and footwear, especially outdoor sportswear, as well as DIY and garden furniture, the BRC-KPMG retail sales monitor for the four weeks to April 27 showed. The early timing of the Easter break also had an impact, it added.

However, promotions in computing boosted sales as customers sought to upgrade their technology after a boom in purchases during the Covid-19 pandemic as people. There was also a small rise in online penetration - the proportion of non-food internet purchases - to 36.2% in April from 36.1% a year earlier.

The April figure compares with growth of 5.1% in April 2023 and was below the three-month average growth of 0.5% and the 12-month average of 2.2%.

When correcting for the distortion created by the earlier timing of Easter this year, average growth for March and April together was 0.2%, the survey showed. This year, the run-up to Easter was in March, while last year the run-up was in April - with results artificially higher in March and lower in April.

Food sales rose 4.4% year-on-year over the three-month period to April 27, below the 12-month average growth of 6.7%. Non-food sales decreased 2.8%, which was steeper than the 12-month average decline of 1.5%.

"Dismal weather and disappointing sales led to a depressing start to Spring for retailers, even accounting for the change in timing of Easter. People delayed typical spring purchases despite retailers' attempts to entice customers with heavy discounts," said BRC boss Helen Dickinson.

"Many retailers are hoping for brighter sales over the summer months as social events ramp up, and consumer confidence could improve with a potential cut in interest rates."

In corporate news, BP reported a fall in first-quarter profit on the back of lower oil and gas prices, an outage at a US refinery and "significantly weaker" fuels margins as it also started a $1.75bn share buyback.

Underlying replacement cost profit for the quarter was $2.7bn, compared with $5bn a year earlier and $3bn for the final three months of 2023, BP said.

Looking ahead, BP expects second quarter 2024 reported upstream production to be slightly lower than the first-quarter.

Elsewhere, Ferrexpo said that its Ukraine subsidiary Ferrexpo Poltava Mining (FPM) saw a significant increase in production and sales volumes in the first quarter, the highest since Russia invaded the country in early 2022.

It said that despite a postponed preparatory hearing regarding an application from LLC PCC Kysen and ongoing legal proceedings against FPM's senior manager Viktor Lotous for potential underpayment of iron ore royalties, its operations in the country were unaffected, as it opted to make a partial payment of the bail amount amidst a detailed assessment by its board.