The FTSE 100 and European stocks were lower this Tuesday as traders appeared to be on the backfoot despite figures showing an improved picture in the UK's public finances in January.
Across the pond, US stocks were in a downswing on Tuesday morning to start a busy holiday-shortened week as investors weighed earnings letdowns from retailers Walmart (WMT) and Home Depot (HD) and considered the prospect of higher-for-longer interest rates.
"The consumer is still very pressured, and if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods," Walmart chief financial officer John Rainey said during an earnings call. "And so that’s why we take a pretty cautious outlook on the rest of the year."
Back in London, the Treasury managed a surplus of £5.4bn in January, ahead of expectations of a deficit, but still well below the surplus of £12.5bn in the same month a year earlier.
Craig Erlam, senior market analyst, UK & EMEA, at OANDA, said: “This week may not be as all-action as others we've experienced this month but there is still plenty for investors to get their teeth stuck into.”
“Today is littered with economic releases throughout, with the PMIs being a key feature of that.”
“And what's more, they're expected to show businesses are becoming less pessimistic which would be a small win but a win nonetheless.”
Smith & Nephew (SN.L) was the best performing stock on the FTSE 100 index after annual results sent shares in the medical devices group up 5.04%.
InterContinental Hotels (IHG.L) was on the backfoot with shares down 1.32% after its full-year figures, while HSBC (HSBA.L) bounced back and jumped 4.41% after it reported pre-tax profits of $5.2bn (£4.33bn) for the final three months of last year.
Copper miner Antofagasta (ANTO.L) fell 0.88% after announcing it is slashing its dividend as profit fell over a quarter for 2022.
Markets have largely shunned encouraging figures from the UK’s PMI readings with the latest figures showing the private sector returned to growth in February.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “It would be premature to conclude from the jump in the composite PMI to well above 50 in February that the economy has avoided a recession.”
“The PMI is only a rough guide to activity and often is excessively influenced by sentiment.”
“Right now, purchasing managers probably are relieved that the economic outlook is not quite as bad as seemed likely in Q4, given that interest rates expectations and wholesale energy prices have fallen since then, while equity prices have picked up.”
“But we still think that GDP will drop in both Q1 and Q2, as households’ real disposable incomes continue to decline in response to further increases in consumer energy prices, and as households refinancing mortgages continue to cut back.”
Meanwhile, Brent crude (BZ=F) climbed slightly and was trading at around $83 per barrel as rising supplies in the United States and forecasts of more interest rate hikes cooled optimism over China’s demand recovery.
In Asia, Tokyo’s Nikkei 225 (^N225) lost 0.21% to 27,473 points, while the Hang Seng (^HSI) in Hong Kong dropped 1.71% to 20,529. The Shanghai Composite (000001.SS) bucked the trend across Asian markets, rising 0.49% to 3,306 points.