The FTSE 100 was treading water on Monday with US equity markets closed for the President’s Day holiday providing little new impetus for major repositioning in European stocks.
“Volumes are set to be more muted during the sessions in Europe given that Wall Street is closed for the President’s Day holiday, so traders are likely to be searching around for a bit of a sense of direction today, looking ahead to fresh data out this week,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
There was strength in Asian markets overnight after the Chinese central bank kept rates on hold as their economy emerges from a prolonged period of covid restrictions.
“Asian stocks were higher as China’s central bank kept rates unchanged for a sixth consecutive month – hopes for a continuing recovery in demand from the world’s second largest economy helped support commodity prices,” said AJ Bell investment director Russ Mould.
Higher commodity prices helped provide support for miners sending Rio Tinto 1.2% higher while Anglo American added 1.7%.
Lloyds shares were 1% higher ahead of the release of their full year results on Wednesday. Both NatWest and Barclays had disappointing market reactions to their recent releases with shares falling heavily.
Tesco
Tesco shares were flat after reports it was exploring a potential demerger of their banking unit. A sale of their banking unit would allow for greater focus on their core operations at a critical point for supermarkets in the cost-of-living crisis and continued growth of the discounters, Lidl and Aldi.
“We’ve seen numerous demergers in recent years as companies streamline to have a sharper focus and unlock hidden value in their business. Doing less is more, as it provides management with an opportunity to make small incremental changes to operations and have the core business running like a well-oiled machine,” said Russ Mould.
“With that backdrop in mind, one should expect to see many companies like Tesco concentrate on what they do best and find someone else to take over activities on the periphery.”
“Offloading Tesco’s banking arm makes perfect sense. Supermarkets should concentrate on grocery and core essentials that fall under general merchandise, such as frying pans, greetings cards and a small line of toys to keep the kids happy while their parents shop. Things that people can pop into their basket without much thought.”