FTSE 100 Closed Down 0.06% Amid Further Uncertainty Over Pelosi's Taiwan Visit

The FTSE 100 closed down 0.06% on Tuesday, with European markets slipping back "as the rising uncertainty created by U.S. House Speaker Nancy Pelosi's trip to Taiwan has served to keep markets on edge," Michael Hewson at CMC Markets said. Taylor Wimpey was the day's biggest faller, closing 6.2% down, followed by Barratt Developments and Berkeley Group, down 5.6% and 5%, respectively. Meanwhile, Haleon was the day's biggest riser, closing up 4.3%, followed by BP and Standard Chartered which rose 2.8% and 2.6%, respectively. BP shares jumped after reporting 2Q results which beat analysts' expectations.

  Market Talk: 

Pound Could Rise But Only Briefly if Truss Becomes UK PM

1354 GMT - Liz Truss's plans to overhaul economic policy if she becomes U.K. prime minister could be well-received by sterling but only initially, BMO Capital Markets says. If Truss breaks up the Treasury but leaves the Bank of England's remit of price stability unchanged, interest rates will need to rise more quickly given her plans to loosen fiscal policy, BMO forex strategist Stephen Gallo says in a note. "While this will be short-term GBP supportive, it could create a boom and bust cycle." If the Treasury is split and the BOE is given a new remit to focus on economic growth and/or the unemployment rate, the economy could overheat and the current account deficit could widen, Gallo says. ([e-mail])

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UK Prime Minister Race Gets Tighter as Sunak Closes Gap

1351 GMT - The contest to become the next Conservative Party leader and U.K. prime minister has got closer, a bookmaker says. Ex-finance minister Rishi Sunak has narrowed the gap with rival and incumbent foreign minister Liz Truss, William Hill says. "Sunak's campaign has received a much-needed boost as recent polling suggests things are tightening up in the Tory leadership contest," William Hill spokesman Tony Kenny writes. "Truss dominated early proceedings and received the backing of former rival Penny Mordaunt last night, but has drifted to 2/9 and doesn't look as secure as she once was. Sunak, on the other hand, looks to be building momentum and appears to have won over some party members. As a result, we've cut him to 7/2." ([e-mail])

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Hiscox Reserve Buffer to Be Key Point of 1H Earnings

1330 GMT - Hiscox is set to report 1H earnings on Wednesday as investor debate will be focusing on key points such as rate, growth, and reserve strength amid the inflationary backdrop, Citi analyst Joshua Hole say in a research note. "We expect a continued strong reserve buffer and a healthy capital position to alleviate any immediate concerns about current inflation pressures," the analyst says. The specialist insurer's dividend is expected to come in at $0.12, below the consensus of $0.14, while COR--the proportion of revenue eaten up by costs--is forecast to be at 92.0%, Hole says. ([e-mail])

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Gas Gauge: BP CEO Sees 'Complex Picture' Across Customer Base

1324 GMT - BP's Chief Executive Bernard Looney looks across the economic landscape and sees a "relatively complex picture," he tells analysts Tuesday on an earnings call. Gasoline sales are down from prepandemic levels, he says. "It is very hard to get a true sense of what is driving that. Is it price? Is it changing customer behaviors and patterns? Is it the impact of people worried about inflation and the recession today?" Diesel sales, on the other hand, are up 5% in the U.S., he says, benefiting BP's refineries, which are weighted toward diesel. Sales of aviation fuel are up 60% quarter-on-quarter, he says, but that is still not back to prepandemic levels. ([e-mail]; @jennystrasburg)

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European Stocks Mostly Fall Ahead of Expected US Losses

1318 GMT - European markets mostly fall ahead of a likely lower U.S. open. The Stoxx Europe 600 drops 0.3% and the CAC 40 and DAX retreat 0.2%, though the FTSE 100 edges 0.1% higher. Brent crude gains 0.3% to $100.32 a barrel. IG futures data show the Dow opening at 32690, versus Monday's close of 32798. "U.S. earnings season has been better than feared, helping markets to rally and this may continue with a further barrage of updates Tuesday," IG analysts say in a note. "The host of earnings, including Starbucks, Uber, AMD and Caterpillar in the U.S. more than offsets today's quiet macro-economic calendar." ([e-mail])

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IAG's High Leverage Could Lead to Potential Rights Issue

1316 GMT - IAG's net debt of EUR11 billion at June 30 was better than expected but management acknowledged it will still increase by year-end, Bank of America Global Research analysts say in a note. This is mostly due to the positive working capital effect largely unwinding for the airline group, which houses British Airways and Iberia among others, the analysts say. The company is expected to proceed with its EUR3.9 billion capital expenditure, with a strong dollar likely to increase lease liabilities, BofA says. "Our investor discussions suggest the market remains concerned about a potential rights issue given high leverage, which is at 3.1 times net debt to Ebitda in 2023 estimates but declines to 2.3 times by 2024 estimates," the U.S. bank says. ([e-mail])

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Pound Seen Having Room to Gain on Largely Expected 50 Basis-Point Rate Rise

1301 GMT - Market pricing for Thursday's Bank of England policy decision suggests that sterling has room to strengthen on a potential 50 basis-point interest-rate rise but plenty of scope to fall on a smaller move, Ebury says. "According to swap markets, traders currently see around an 80-85% chance of a 50bp move on Thursday," Ebury strategist Matthew Ryan writes. There is also a reasonable chance that the BOE could indicate that at least one further 50bp rate rise is possible at upcoming meetings, which would trigger a sharp rally in sterling against most currencies, he says. Should policy makers indicate that a larger rate increase is a one-off, sterling would likely selloff, he says. ([e-mail])

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(END) Dow Jones Newswires

08-02-22 1303ET