London’s equity markets started the week on a strong footing on Monday, though the pound weakened ahead of a trio of central bank decisions.
The Bank of England will announce its latest interest rate decision on Thursday, after rate calls from the Bank of Japan and the US Federal Reserve on Wednesday.
The FTSE 100 index traded up 60.77 points, or 0.7%, at 8,346.48 on Monday afternoon. The FTSE 250 rose 83.38 points, 0.4%, at 21,439.68, while the AIM All-Share added 1.27 points, 0.2%, at 780.94.
The Cboe UK 100 was up 0.7% at 833.40, the Cboe UK 250 added 0.3% to 18,779.92, and the Cboe Small Companies rose 0.5% to 17,393.13.
The CAC 40 in Paris fell 0.2%, while Frankfurt’s DAX 40 traded 0.4% higher.
Stocks in New York are called to open higher. Both the Dow Jones Industrial Average and S&P 500 are called up 0.5% and the Nasdaq Composite 0.6% higher.
The pound was quoted at $1.2844 early on Monday afternoon, fading from $1.2859 at the London equities close on Friday. The euro stood at $1.0841, down from $1.0859. Against the yen, the dollar was trading at JP¥153.72, down ever-so-slightly from JP¥153.75.
‘Sterling is bearing the brunt today, off a little less than half-of-a-cent as expectations creep up of a rate cut this week and Chancellor of the Exchequer [Rachel] Reeves plays up the poor state of public finances left by the Conservative government,’ Bannockburn Global Forex analyst Marc Chandler commented.
The BoE is expected to cut bank rate by 25 basis points to 5.00% on Thursday, from 5.25%. It would be its first cut since March 2020. It reduced rates by 15 basis points to 0.10% in a scheduled meeting that month, but that followed a 50 basis point cut in a ‘special’ meeting a week earlier, as part of Threadneedle Street’s response to the Covid-19 pandemic.
Since that second March 2020 cut, it has enacted 515 basis points worth of hikes, lifting off in December 2021, in a bid to tame inflation.
The rate of consumer price inflation returned to the 2% BoE target in May, though red-hot services inflation has given policymakers something to think about.
Barclays expects the BoE to cut, but sees a ‘a hike’ and ‘a hold’ from the Bank of Japan and Federal Reserve, respectively.
‘The Fed has little upside to do anything more than hint that a September cut is on track. For the BoJ, we maintain our out-of-consensus call for a 25bp hike. We expect the BoE to start the easing cycle with a ’hawkish’ cut, delivered by the finest of margins: a 5-4 vote split,’ analysts at the investment bank predicted.
In London, rate cut hopes lifted property and housebuilding shares. Land Securities added 1.8%, while Persimmon climbed 1.4%. Segro, recovering from a 1.7% fall on Friday, was up 3.4%.
On the decline, however, Reckitt slumped 9.7%. The firm fell in a negative read-across after Abbott Laboratories was ordered by a US court to pay $495 million in damages.
The ruling in St Louis, Missouri state court found that Abbott’s specialized formula for premature infants caused an Illinois girl to develop a dangerous bowel disease.
The jury awarded her $95 million in compensatory damages and $400 million in punitive damages.
Abbott said it strongly disagrees with the verdict and will try to have it overturned.
The ruling knocked shares in Reckitt, which faces its own litigation challenges.
Last week, Reckitt announced a wide-ranging shake-up, including plans to offload Mead Johnson Nutrition, the business behind Enfamil infant nutrition, currently the subject of ongoing US litigation.
The $17 billion acquisition of Mead Johnson in 2017 has been an unhappy one for Reckitt. Back in 2020, it took a £5.04 billion impairment on goodwill in the business. In 2021, it sold its infant nutrition business in China for $2.2 billion. This year, in March, a jury in the US awarded $60 million in damages to a mother who said her baby died after consuming Mead Johnson’s Enfamil baby formula.
NatWest extended gains, rising 2.4% after a 7.0% rise on Friday. The lender had raised its outlook on Friday.
It was a strong day so far for the London-listed banking sector, with Barclays adding 2.0%, Standard Chartered rising 1.0% and HSBC climbing 1.6%.
The trio report earnings this week, with Barclays on Thursday, after StanChart on Tuesday and HSBC on Wednesday.
On HSBC, analysts at Jefferies commented: ‘We see upside to consensus revenue: net interest income has support from UK margins and a stabilising Hong Kong term deposit backdrop and there are positive underlying trends in non-interest income (notably Wealth sales).
‘We increase share buyback estimates to [around] $10 billion in each of 2024 and 2025 from $8 billion prior, given return stability and management’s apparent capacity to deliver [around] $1 billion of buybacks a month.’
Elsewhere in London, Trakm8 fell 17%, as it warned of a slower recovery in the insurance sector. The fleet management software and data provider cautioned that the insurance market recovery is ‘slower than anticipated, with capacity and pricing challenges continuing for some customers’.
It is confident earnings in financial 2025 will improve, but the insurance market recovery means its outlook is still ‘uncertain’. For the insurance sector, Trakm8 produces telematics devices, which have the ability to track vehicle driver behaviour.
The warning came alongside weaker annual results, which showed revenue in the year to March 31 fell 20% to £16.1 million from £20.2 million and its pretax loss stretched to £1.5 million from £1.2 million.
Brent oil was quoted at $80.08 a barrel early Monday afternoon, up from $79.56 at the time of the London equities close Friday. Gold was quoted at $2,394.89 an ounce, climbing from $2,384.60.
XS.com analyst Samer Hasn commented: ‘Crude oil prices managed to recover today after three consecutive weeks of losses... The gains come amid unprecedented geopolitical tensions in the Middle East.’
On Sunday, Israel said it would retaliate after rocket fire launched from neighbouring Lebanon killed 12 young people in the Israeli-annexed Golan Heights, AFP reported.
Israel blamed Lebanon’s Hezbollah movement but the Iran-backed group said it had ‘no connection’ to the strike.
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