London’s FTSE 100 closed lower on Tuesday, underperforming European peers, as index heavyweight AstraZeneca held back the large-cap benchmark.
Eyes now turn stateside, hours before the closing of polls across the US - where Donald Trump and Kamala Harris lock horns in the presidential election.
The FTSE 100 index closed down 11.85 points, or 0.1%, at 8,172.39. The FTSE 250 ended down 91.25 points, 0.5%, at 20,370.04, 0.92 of a point, 0.1%, at 736.29.
The Cboe UK 100 ended down 0.3% at 818.74, the Cboe UK 250 closed down 0.3% at 18,020.88, and the Cboe Small Companies ended flat at 16,373.69.
Weighing on London, AstraZeneca fell 8.2%, losing its top spot as the most valuable company on the FTSE 100 to oil major Shell in the process.
The Cambridge-based pharmaceuticals firm fell back following the release of early data on its weight loss drug portfolio.
AstraZeneca had revealed early data for its prospective weight loss drug at the ObesityWeek 2024 meeting in San Antonio, Texas on Monday.
Deutsche Bank reiterated a ’sell’ rating following the update, noting the GLP-1 data ‘was somewhat underwhelming’.
Jefferies took a less pessimistic view noting the data was ‘largely incremental, as expected.’
After the closing bell, AstraZeneca noted its share price movement. It said it is not commenting on ‘speculative media reports including those related to ongoing investigations in China’.
‘If requested, we will fully cooperate with the Chinese authorities,’ Astra said.
London’s blue-chip index underperformed European peers. The CAC 40 in Paris rose 0.5% while the DAX 40 in Frankfurt climbed 0.6%.
In New York at the time of the London close, the DJIA was up 0.7%, the S&P 500 was 1.0% higher, and the Nasdaq Composite rose 1.3%.
In the US, voters are heading to the polls as the race to become the next President draws to a close.
Opinion polls suggest there is little to choose between Vice President Kamala Harris and former President Donald Trump.
Kathleen Brooks, research director at XTB, said the outcome of the election will impact financial markets around the globe in two ways.
In the short term, she thinks global financial markets could be hit by volatility if there is a surprise outcome.
‘We think that financial markets are pricing for a Trump victory. Thus, a win for Harris could lead to a short term sell off in the dollar, gold and potentially in US stocks. This could also boost global equities, as Harris is seen to be less tempted to slap tariffs on imports. Chinese stocks could rally sharply, along with key European and UK firms.’
‘Longer term: A win for Trump, could see the dollar pop higher, but we think a win for the former President could have a long-term impact on global financial markets due his plans for tariffs. A US system of import tariffs would reorder global trade flows and hurt global growth.’
Heading into the election, figures showed the US services sector remains in rude health.
The seasonally adjusted S&P Global US Services PMI Business Activity Index signalled further strong growth of service sector output in October, ticking down only slightly to 55.0 from 55.2 in September. Activity has now increased in each of the past 21 months.
The figure was well above the neutral 50-point mark separating growth from contraction but was below FXStreet-cited consensus of 55.3.
Separate figures from the Institute for Supply Management also painted a picture of a robust services sector.
In October, the ISM Services PMI registered 56% up from 54.9% in September, expansing for the fourth month in a row, and hitting its highest level since July 2022.
Economists at Wells Fargo noted the gap between service sector activity and manufacturing activity has now widened to a degree only seen once before in records dating back to the 1990s.
But Bradley Saunders at Capital Economics doesn’t expect the data to influence Thursday’s interest rate call by the US Federal Reserve.
‘Either way, we doubt the data will do much to sway the decision of the Fed on Thursday, who will attribute more weight to the third-quarter GDP data and employment report for October released last week.’
‘Therefore we, along with everyone else, still expect a 25bp cut,’ he added.
The pound was quoted at $1.3003 at the London equities close on Monday, compared to $1.2972 at the close on Monday. The latest gains took sterling back to levels seen before last week’s budget.
There was some renewed pressure on bonds. The yield on the long-dated 10-year UK bond yield rose 11 basis points to 4.56%.
The euro stood at $1.0917 at the European equities close on Tuesday, up against $1.0889 at the same time on Monday. Against the yen, the dollar was trading at JP¥152.08, up compared to JP¥151.94 late Monday.
In London, Schroders tumbled 14% after reporting a weaker-than-expected third quarter and flagging £10 billion of outflows in the quarter ahead.
The London-based asset manager, which is changing leadership, said AuM reached a new high of £777.4 billion on September 30, rising from £773.7 billion on June 30, as £6.0 billion in positive market, foreign exchange and investment performance outweighed £2.3 billion in net outflows.
The net outflows in the third quarter were entirely due to JVs and associates, where they totalled £2.6 billion.
In addition, Schroders said in the fourth quarter of 2024 a notified outflow of £8 billion from the legacy Scottish Widows mandate will affect Solutions, in addition to notified losses from three Institutional clients totalling £2 billion.
Citi analyst Nicholas Herman said while the share price reaction may look harsh it embeds a derating due to a ‘flow miss, cutting guidance again, comments that the new CEO will be focused on growth rather than on cost savings, and unwind of gains into results.’
Elsewhere, UK water stocks gushed higher on Tuesday as JPMorgan and Citi highlighted their attractions ahead of an expected favourable regulatory outcome in December.
Citi upgraded United Utilities to ’buy’ from ’neutral’ and Severn Trent to ’neutral’ from ’sell’. It retains a ’neutral’ rating on Pennon.
The broker also opened 90 day positive catalyst watches on United Utilities and Pennon.
JPMorgan was also positive and expects improvements at the final determination from Ofwat in December to drive a re-rating.
JPM placed all three water companies on positive catalyst watch into the event.
It upgraded Severn Trent to ’overweight’ from ’neutral’ and raised Pennon to ’overweight’ from ’neutral’. JPM remains ’overweight’ on United Utilities.
United Utilities rose 3.2%, Severn Trent climbed 2.8% and Pennon advanced 3.0%.
Brent oil was quoted at $76.10 a barrel at the London equities close on Tuesday, up from $74.70 late Monday.
Gold was quoted at $2,736.94 an ounce at the London equities close on Tuesday against $2,735.26 at the close on Monday.
Wednesday’s local corporate calendar sees half-year results from retailer Marks & Spencer, housebuilder Persimmon and insurance firm, Beazley.
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