European equities are having a ‘largely positive’ session on Wednesday, but the FTSE 100 stuck out a like a sore thumb, with some of its more defensive stocks in the red.
The FTSE 100 index fell 18.05 points, 0.2%, at 8,341.36. The FTSE 250 added 31.42 points, 0.2%, at 20,924.16, and the AIM All-Share rose 0.75 of a point, 0.1%, at 735.84.
The Cboe UK 100 lost 0.4% at 837.01, the Cboe UK 250 was up 0.4% at 18,462.91, and the Cboe Small Companies fell 0.3% to 15,922.01.
The CAC 40 in Paris added 0.3% in early afternoon dealings. The DAX 40 in Frankfurt surged 0.9%.
US stocks are called higher. The Dow Jones Industrial Average is called up 0.4%, the S&P 500 up 0.3% and the Nasdaq Composite 0.6% higher.
The largely positive session for European equities on Wednesday follows ‘a strange 24 hours in South Korea’, which saw martial law briefly declared, XTB analyst Kathleen Brooks commented.
‘If anyone thought that political risk would settle down in the final weeks of 2024, they were wrong,’ Brooks said.
‘This is a keen reminder that the political risks can crop up in unexpected places. There is now expected to be a presidential election in South Korea at some point in the first half of 2025. Analysts are also pointing out that events in South Korea are a problem for the US. South Korea is a staunch US ally and a key democracy in the Asia region. However, after Tuesday‘s subversion of the democratic process, can the US rely on South Korea at the same time as China is flexing its muscles in the region, and propping up North Korea? The diplomatic ramifications of events in South Korea could be wide ranging. However, the market reaction could be mild, as investors have become adept at pricing in political risk.’
Eyes are also on political developments over in France.
France’s government on Wednesday faces no confidence votes that could spell the end of the short-lived administration of Prime Minister Michel Barnier, plunging the country into uncharted waters of political chaos.
Analysts at Rabobank commented: ‘Despite the significant issues facing the UK economy, at least it has a stable government and a budget in place. France and Germany both face significant political challenges and structural issues which could undermine the value of the EUR in the months ahead.’
The pound was quoted at $1.2675 early Wednesday afternoon, rising from $1.2660 at the time of the London equities close on Tuesday. The euro stood at $1.0506, fading from $1.0513. Against the yen, the dollar was trading at JP¥150.88, up from JP¥149.44.
Still to come on Wednesday is a US ADP jobs report figure at 1315 GMT, before a pair of US purchasing managers’ index readings at 1445 GMT and 1500.
Data from the UK showed service sector growth eased last month. The eurozone service sector, meanwhile, sat in contraction territory for the first time since the beginning of the year.
Brent oil was quoted at $73.85 a barrel early Wednesday afternoon, climbing from $73.67 late on Tuesday. Gold was higher at $2,645.86 an ounce from $2,644.88.
In London, Legal & General shares rose 4.6%, as it set out a decent outlook for a unit and suggested returns could be on the way for shareholders. The life insurer expects mid-single digit growth in operating profit for 2024, in line with guidance. Thereafter, it expects to achieve its 6% to 9% compound annual growth target in core operating earnings per share between 2024 and 2027.
The update came ahead of a ‘deep dive’ into its Institutional Retirement division, the first in a series of events which will cover all its units.
‘The global pension risk transfer market is growing and attractive and the group is well-positioned to continue to seize the opportunity,’ L&G said.
Its pipeline of PRT deals is ‘as strong as it has ever been’. Its guidance of £50 billion to £65 billion of UK pension risk transfers between 2024 and 2028 is unchanged. In the Institutional Retirement division, it expects compound annual operating profit growth between 5% and 7% between 2023 and 2028.
L&G added: ‘Year-to-date we have written global PRT volumes of £10.0 billion and are exclusive on a further £500 million expected to close in 2024. Of this £10.5 billion, £8.4 billion is UK and £2.1 billion is International, with L&G writing its highest ever volumes in the US and Canada.
Strain has also been lower than expected, it said, at 1% compared to initial guidance of below 4%.
‘We anticipate returning to shareholders a proportion of the capital not deployed on strain this year. This will form part of the board’s wider consideration of buyback capacity, which will be set out at the FY24 results in March 2025 and would be incremental to the capital return intentions indicated at the capital markets event in June,’ it added.
Putting pressure on the FTSE 100, however, were drugmaker AstraZeneca, down 2.7%, water utility Severn Trent, falling 2.0% and electricity transmission and distribution provider National Grid, 1.4% lower.
‘Defensive sectors like pharmaceuticals and utilities were on the back foot,’ AJ Bell analyst Dan Coatsworth commented.
‘These names had been in demand on Tuesday afternoon after South Korean president Yoon Suk Yeol briefly declared martial law. The situation seemed to de-escalate as quickly as it had escalated, with lawmakers voting to invalidate the decision.’
Elsewhere in London, Learning Technologies added 6.9% as it backed a £802 million takeover from a private equity firm.
The London-based digital learning and talent management firm will be bought out by GASC ABF LP and some of its managed or advised funds, a grouping collectively referred to as General Atlantic.
General Atlantic will pay 100 pence in cash per Learning Technologies share, a 34% premium to the 74.9p share price on September 26, the day before the private equity suitor’s interest was revealed.
The bid gives Learning Technologies a £802.4 million equity value.
On AIM, Biome fell 38% as it warned on annual revenue amid component delivery woes.
The bioplastics and radio frequency technology company said two projects in the latter division are now unlikely to get going by the end of the year.
‘Additional complexities relating to component deliveries for the two large projects, which were expected to be completed in 2024, have arisen recently. In two specific cases, externally manufactured parts and bought in assemblies have required rework or return to their suppliers for replacement,’ Biome explained.
‘The technical paths for rework and replacement are clear. However, despite significant recent work on expediting this, the timetables are such that this will not be delivered within a timeframe that will allow completion of the two final machine builds and the required extensive internal and customer testing acceptance process before the 2024 year end. Internal completion dates have therefore been revised into Q1 2025 and new final acceptance dates are being discussed with the customers.’
The firm now expects revenue to be ‘materially below current market expectations with a consequential impact on profitability’.
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