Stocks in London made a cautious start to the week, with falls in mining stocks pegging back the FTSE 100 after mixed economic data from China.
The FTSE 100 index traded down 7.60 points, 0.1%, at 8,139.26. The FTSE 250 edged up just 1.22 points to 20,121.58, and the AIM All-Share lost 0.54 of a point, 0.1%, at 775.50.
The Cboe UK 100 was down 0.2% at 810.01, the Cboe UK 250 was up 0.1% at 17,517.86, and the Cboe Small Companies was marginally lower at 16,449.01.
In European equities on Monday, the CAC 40 in Paris was up 0.2%, while the DAX 40 in Frankfurt was marginally higher. Both suffered heftier declines than the FTSE 100 last week, however. The CAC slumped 6.2% and the DAX lost 3.0%. London’s blue-chip benchmark declined 1.2%.
Political turmoil in France hit Parisian equities last week, and Paris lost its spot as Europe’s biggest equity market to London, less than two years after winning that crown, Bloomberg reported on Monday.
President Emmanuel Macron’s shock announcement of a snap election sparked a rout that wiped off about $258 billion from the market capitalisation of French firms last week.
XTB analyst Kathleen Brooks commented: ‘French stocks sold off led by French banks, which caused French bond yields to rise even more as traders added a bailout premium to French sovereign debt, this caused credit default swaps on investment grade European corporate entities, as measured by the Itraxx index, to rise to its highest level for 7 months.
‘The question is, what happens now? If French stocks sell off at the same pace this week as they did last week, then there is a real risk that French banks will need a bailout. We doubt that this will happen. While political uncertainty is still likely to weigh on French asset prices until the final round of voting on July 7th, there have been some developments over the weekend that could ease some market fears at the start of this week. The leader of France’s far right party, Marine Le Pen, who is expected to win the most seats in the upcoming French parliamentary elections, has said that she will work with centrist President Macron and will not try to push him out of office if her party wins the election.’
The pound was quoted at $1.2666 early on Monday afternoon in London, down from $1.2683 at the time of the European equities close Friday. The euro rose to $1.0708 from $1.0698, while against the yen, the dollar rose to JP¥157.62 from JP¥157.36.
The Bank of England announces an interest rate decision on Thursday, following a UK inflation reading for May on Wednesday.
Analysts at Lloyds Bank commented: ‘If the April CPI numbers didn’t completely kill off expectations of a June rate cut then subsequent news that the vote would be during an election campaign pretty much did, with markets ascribing less than a 5% probability to a 25bp cut on Thursday. It’s hard to see the language evolving much in the MPC minutes. That is partly due to the political backdrop, but mostly because what were the ’forthcoming data releases’ emphasised last time haven’t really worked in the direction of further laying the ground for an imminent rate cut
‘If economic forecasters have got it right, then it is too much for market participant to hope for that May CPI will ease enough to make up for last month’s overshoot versus BoE staff projections. Lloyds economists expect headline CPI inflation to fall to 2.0% year-on-year, so good news compared to 2.3% year-on-year last time, but still above the 1.9% year-on-year the BoE has pencilled in for this time.’
In London, miners struggled on the back of mixed China data. China is a major buyer of minerals. Rio Tinto fell 1.7%, Glencore gave back 1.5% and Anglo American lost 1.0%.
Chinese retail sales picked up in May but industrial production growth slowed, official data showed Monday, suggesting the recovery in the world’s second-largest economy remains uneven.
Leaders have struggled to kickstart growth since an initial burst followed the end in late 2022 of stringent Covid measures that had hammered businesses and consumer activity, while a property crisis and high unemployment has dented investor confidence.
In May, retail sales – a key measure of consumer spending – grew 3.7% year-on-year, rebounding from April’s 2.3% increase, according to the National Bureau of Statistics.
The figure was also higher than the 3.0% increase predicted in a Bloomberg survey of analysts.
However, industrial production growth slowed, with May’s 5.6% expansion well down from 6.7% in April and short of the 6.2% forecast in the Bloomberg survey.
Capital Economics analyst Louise Loo commented: ‘Unconvincing onshore activity momentum outside of the ’new’ industries in May suggests that the recent step-up in property and fiscal stimulus has not (yet) improved consumer and investor sentiment. Retail sales growth was an upside surprise, but that was likely partly a result of frontloaded spending and favourable base effects.’
Back in London, SSP fell 2.7%. Goldman Sachs cut the operator of food kiosks in travel locations to ’sell’ from ’neutral’.
Greencore fell 1.2%, as the on-the-go food maker looks set to extend its losing streak to seven days. Greencore is among the manufacturers that have recalled a variety of sandwiches, wraps and salads sold in major UK supermarkets because of a potential link to an E.coli outbreak that left people across the UK in hospital, PA reported.
Shares in Contango Holdings jumped after the company announced a new investor has bought a majority stake in its Muchesu coal project in Zimbabwe.
Contango said the investor, Wencai Huo, is ‘a prominent Zimbabwe-based Chinese national with extensive mining and business investments in Zimbabwe and the southern African region’.
Huo will buy a 51% stake in the Muchesu mine. Contango currently holds a 70% interest via its Monaf Investments (Pvt) Ltd subsidiary. This is interest is expected to rise to 74.75% in the near term, so Huo’s acquisition will leave Contango with a 23.75% stake.
Huo will make a cash investment in Contango at the recent average market price to take a 20% stake. The investor also will spend at least $20 million to develop Muchesu, matching what Contango has already invested in the project.
Contango shares traded 25% higher.
Brent oil was quoted at $82.51 a barrel early Monday afternoon, flat from late Friday. Gold was quoted at $2,319.64 an ounce, down from $2,327.27.
Equities in New York are called to open largely lower. The Dow Jones Industrial Average is called down 0.3%, the S&P 500 down 0.1%, but the Nasdaq Composite up 0.1%.
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