The FTSE 100 edged higher in early trade on Monday as investors prepared for a busy couple of weeks of central bank action.

The FTSE 100 was 0.1% higher at 7,568 at the time of writing.

All eyes will be on the Federal Reserve and their next move on rates scheduled for Wednesday. The Bank of England will issue their decision next week.

“The FTSE 100 ticked higher on Monday as central banks once again find themselves in the spotlight,” said AJ Bell investment director Russ Mould.

“The Fed is widely expected to keep its finger on the pause button when it announces its decision on rates on Wednesday. The US is showing some signs of slipping into a recession and inflation has eased considerably, even if it still stands a long way above the Fed’s 2% target.

“A last-minute shift in the plan cannot be ruled out given the Fed is taking a data-driven approach and inflation numbers from the US are out tomorrow. A higher-than-expected number could set the cat among the pigeons.”

The prospect of the Fed holding off another rate hike was causing weakness in the dollar and helping support GBP/USD.

FTSE 100 movers

With little in the way of corporate news on Monday, the FTSE 100’s top movers were largely continuing trends from last week.

Ocado added to its recent rebound after being raised to ‘neutral’ by Exane BNP. Ocado shares were over 6% higher at the time of writing and were the FTSE 100’s top riser.

Goldman Sachs has cut their year-end oil price targets, while Brent and WTI started the week on the back foot. BP and Shell were down around 1%.

Goldman Sachs also cut Segro to ‘neutral’ from ‘buy’ and lowered their price target to 800p. Segro shares were down 2% and were the FTSE 100’s top faller.

The UK Investor Magazine team has screened the UK equity market, and we highlight five stocks to buy that caught our attention for June 2023.

Remember, these shares are companies our team like the look of and may not be suitable for everyone’s investment strategies. Some included companies have recently presented at UK Investor Magazine Investor Conferences or featured on our Podcast.

Our shares to buy include companies from the FTSE 100, FTSE 250 and FTSE AIM.

IG Group Holdings 

IG Group Holdings does well during periods of financial market volatility. 

The S&P 500 entered a bull market recently, while many economists predict a US recession later this year. The UK housing market is slowing down, and listed lenders have remained steady. Inflation remains stubbornly high, but further interest rates aren’t fully priced into markets.

These disconnects between the underlying macroeconomic indicators and market pricing could lead to heightened volatility.

IG would benefit.

IG is a leading trading and investment platform, and revenue tends to increase when investors place more trades in periods of volatility.

Companies like IG also tend to win new clients when markets move dramatically as investors open new accounts to capture trading opportunities.

Antofagasta 

Miners are on their knees. A spluttering Chinese recovery from the pandemic and concerns about global growth has curtailed demand for natural resources.

Antofagasta is down 5% year-to-date and trades at 23x forward earnings with a 3.3% yield.

Antofagasta offers pure-play exposure to ‘Dr Copper’ and the longer-term global economic recovery. Copper is vital in facilitating economic growth and critical to the green energy revolution.

Antofagasta’s copper production fell 10% in 2022FY due to droughts and reduced concentrate pipeline availability.

Highlighting Anto’s future growth potential, the copper miner’s resources grew by 1bn tonnes to 20.1bn last year.

Several growth projects are due to come online soon and will help expand the topline.

Despite being a FTSE 100 company, this is a volatile stock, not for the faint-hearted.

Antofagasta is a hugely cyclical stock and will do very well on good days and can tank much faster than the broader market on bad days. Antofagasta’s Beta is 1.73 – the 5th highest of FTSE 100 companies.

National Grid

Dull but steady National Grid provides investors with a 5% yield and is trading near key support levels. 

National Grid’s operating profits grew 11% in the last full year to £4.6bn and increased their dividend by nearly 9%.

National Grid shares are unlikely to set the world on fire in terms of capital appreciation, but its defensive nature will be an income-bearing pillar of a portfolio.

During the period, National Grid made £7.7bn in capital investments to help bolster the UK and US energy supply and prepare for a cleaner energy future.

The company is an integral part of the energy transition and was awarded additional offshore energy transmission contracts last year by Ofgem. 

Tekcapital 

Tekcapital shares trade significantly below the company’s NAV. Tekcapital is an investment company with a portfolio of technology companies that can potentially improve millions of people’s lives.

Their portfolio includes AIM-listed Belluscura, NASDAQ-listed Innovative Eyewear, MicroSalt and Guident.

Based on analysis by SP Angel analysts, Tekcapital had a NAV of 30.9p as of 31st May 2023. The current share price of 12p represents a 61% discount to the portfolio’s NAV and offers excellent value as market sentiment improves.

SP Angel analysts said in their note:

“We continue to believe there is significant upside to the current valuations of each of TEK’s portfolio companies, which are not fully reflected in the current share price of TEK”.

Challenger Energy Group

Challenger Energy Group is a high-risk, high-reward energy play for adventurous investors.

Listed on London’s AIM, the company is focused on the exploration and production of oil in the Caribbean and South America. After a quiet transition period, Challenger Energy Group is back with a bang.

Challenger Energy is channelling efforts into their Uruguay offshore OFF-1 asset after a recent study estimated the licence could hold up to 4.9bn barrels of oil in an up-side scenario. This asset could be a company maker.

The OFF-1 license is the only license in the licence block not owned by a major oil company. Shell holds the two licenses adjoined to OFF-1.

Challenger announced they would be bidding on another license in the area, demonstrating their conviction.

The FTSE 100 was weaker on Friday despite the S&P 500 entering a bull market overnight in US trade.

The FTSE 100 outperformed the S&P 500 in 2022 as the US index tanked, but the S&P 500 has left the FTSE 100 in the dust in 2023.

US stocks have been led higher by technology growth stocks this year, while the FTSE 100’s defensive attributes have held London’s leading index steady just below all-time highs.

“The tech bulls may have come out to play, with US stocks higher, but it hasn’t yet spilled over into a stronger performance for the FTSE 100 which has opened pretty flat, as eyes stay fixed on gloomier prospects for global growth,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“A rate hike in two weeks is now pretty well priced in, fuelled by what’s happened in Canada and Australia in the past few days. That pushed the pound up nearly 1%, adding more pressure to the FTSE 100, which relies heavily on overseas income.

Britzman continued to explain that although US stocks have entered a bull market, the US economic picture is starting to show signs of weakness.

“The S&P 500 rallied on Thursday to end the day in a new bull market, up 20% from levels seen back in October 2022. The S&P 500 added 0.6%, with the tech-heavy Nasdaq 100 up 1.3% as a familiar story played out. Markets jostled with weekly US jobs data that showed unemployment on the rise.”

US recession?

Many commentators predict a US recession later in the year, suggesting the bull market in US stocks may be short-lived.

S&P 500 futures were already pointing to a lower open on Friday.

“The key question is what happens next. With plenty of signals suggesting we might see a recession soon, investors will be asking themselves if they should bank recent gains in US stocks or stay put and hope any economic downturn is only shallow and quick to pass,” said Russ Mould, investment director at AJ Bell.

“What might persuade investors to take a different course of action? Valuations are looking a bit rich and there is a risk that artificial intelligence becomes a bubble that’s waiting to burst. Savvy investors might think it is worth cashing in gains before the market turns. However, if inflation starts to become less sticky and the Fed decides it doesn’t need to keep raising interest rates, there is the possibility that markets can keep pushing higher, so why not enjoy the ride?”

FTSE 100 movers

Croda was the FTSE 100’s top faller after saying sales volumes fell in early 2023 due to destocking by customers.

Ocado was the top riser as investors continued to pick the stock up after the premium food retailer avoided demotion from the FTSE 100.