London’s FTSE 100 index fell on Tuesday, amid share price falls for some of its largest constituents, including AstraZeneca, BP and Shell.
The FTSE 100 index fell 64.86 points, or 0.8%, at 8,205.98. The FTSE 250 ended flat at 20,656.14, and the AIM All-Share eased 2.87 points, or 0.4%, at 743.86.5.
The Cboe UK 100 slid 0.6% to 821.91, the Cboe UK 250 rose 0.1% at 18,185.65, and the Cboe Small Companies ended down 0.1% at 16,850.44.
In European equities on Tuesday, the CAC 40 in Paris declined 0.2%, while the DAX 40 in Frankfurt slipped 0.9%.
BMW tumbled 11% after cutting annual financial guidance, blaming headwinds in the automotive segment.
The Munich-based carmaker said it now expects a slight decrease in deliveries in 2024 from the year before, having guided for a slight increase previously. BMW’s earnings before interest and tax margin is expected to fall between 6% and 7%, down from the prior range of 8% to 10% - compared to prior year’s 9.8%. Return on capital employed is guided at a range of 11% and 13%, lower than the 15% to 20% range expected before.
BMW explained the headwinds result from ‘delivery stops and technical actions linked to the Integrated Braking System that is provided by a supplier’.
On Wall Street at the time of London’s close, the Dow Jones Industrial Average was down 0.6%, the S&P 500 was up 0.1% and the Nasdaq Composite advanced 0.3%.
In London, figures showed a drop in the unemployment rate and cooling wage pressures offering encouragement to the Bank of England ahead of next week’s Monetary Policy Meeting.
According to the Office for National Statistics, the jobless rate faded to 4.1% in the three months to July, from 4.2% in the three months to June. The latest figure landed in line with FXStreet-cited consensus.
Wage growth eased. Averages earnings excluding bonuses rose 5.1% in the three months, cooling from 5.4% in the three months to June. The figure for July was in line with expectations.
‘Growth was last lower than this in April to June 2022, when it was 4.7%,’ the ONS said.
Annual growth in total earnings, so including bonuses, was 4.0%, a figure the ONS said was skewed by NHS and civil service one-off payments made in June and July of 2023. Growth in earnings including bonuses eased from 4.6% in three months to June.
The latest figure fell short of an FXStreet-cited forecast of a 4.1% rise.
‘Not too hot, not too cold. The goldilocks UK labour market report for July is consistent with the broader economic trend of more growth and less inflation for the UK so far this year,’ said Kallum Pickering at Peel Hunt.
But economists don’t think the figures will prompt an interest rate cut next week, with a move in November seen as more likely.
Rob Wood at Pantheon Macroeconomics said the broad picture of a ‘gradually easing labour market appears on track, so the MPC will feel comfortable waiting until November to lower interest rates again.’
The pound was quoted at $1.3060 late on Tuesday afternoon in London, down compared to $1.3075 at the equities close on Monday. The euro stood at $1.1021, against $1.1039. Against the yen, the dollar was trading at JP¥142.55, down compared to JP¥142.93.
In London, the FTSE 100 was pegged back by falls in index heavyweights, AstraZeneca, Shell and BP.
Cambridge-based AstraZeneca, the largest listed UK stock, slipped 2.4% after tepid results from a lung cancer drug trial left investors fretting about regulatory approval chances.
AstraZeneca said datopotamab deruxtecan, or Dato-Dxd, failed to reach ‘statistical significance’ for overall survival in patients with metastatic non-small cell lung cancer.
XTB analyst Kathleen Brooks said the findings ‘could make it difficult to get approval’ by the US Food & Drug Administration.
Swiss bank UBS cut its ‘probability of success for Dato-DXd’ to treat the form of cancer.
‘Following the disappointing OS data, we see clear risks to approval for Dato-DXd in 2nd line NSCLC, with an FDA [advisory committee] now highly likely. We lower our probability of success from 80% to 40%,’ UBS added.
Elsewhere, a further drop in the oil price dragged BP down 2.2% and Shell down 1.3%.
Brent oil was quoted at $69.20 barrel at the time of the London equities close on Tuesday, down from $71.50 late Monday. Brent fell below $70 for the first time since December 2021, amid concerns about slowing economic growth depressing fuel demand.
B&M European Value Retail was another prominent faller, down 2.1%, as JPMorgan placed the retailer on ‘negative catalyst watch’.
On the FTSE 250, Centamin jumped 23%. It agreed to a cash and shares takeover offer from bigger peer AngloGold Ashanti, in a deal that values Centamin at about £1.9 billion.
Centamin operates the Sukari gold mine in Egypt, while AngloGold mines in Brazil, Democratic Republic of Congo, and Tanzania.
Under the terms of the proposed deal, Centamin shareholders will receive 0.06983 of a new AngloGold share and $0.125 in cash for each Centamin share.
AJ Bell’s Russ Mould said the takeover represents the ‘end of an era’ for mid and large-cap gold miners on the UK stock market.
‘Centamin is one of the last pure-play gold producers remaining on the London Stock Exchange. While there are plenty of tiny exploration companies hoping to strike it rich, few have enjoyed Centamin’s level of success and built a large-scale operating mine,’ he observed.
Mould thinks the takeover has come at an interesting time for the gold mining sector.
‘Shares in many operators have lagged the rising gold price because cost inflation has compressed profit margins. These inflationary pressures are now starting to ease, which implies that margins will start to go up, and investors might be willing to pay a higher multiple of earnings to own the shares.’
Mould suggested Centamin‘s takeover may not be the only one we see in the sector over the next six months or so.
The bid gave a boost to FTSE 100 peers Endeavour Mining, up 1.7%, and Fresnillo, up 1.9%.
The price of gold was flat at $2,515.08 an ounce against $2,514.36.
International Workplace Group firmed 2.5% after a shareholder said the firm should consider a share buyback, US listing or even a sale to unlock its intrinsic value.
In a letter to IWG management, Buckley Capital Management, LLC, a Miami-based investment firm, called for ‘immediate action to fully unlock the true value of the company’.
‘We are concerned that efforts by IWG’s management to articulate the investment merits of the company have fallen on deaf ears, and further action needs to be taken to unlock the company’s intrinsic value.’
Buckley urged IWG, the Zug, Switzerland-based FTSE 250 listing, to embark on a ‘meaningful’ share buyback program and to immediately appoint advisors to proceed with a relisting in the US.
Should that fail to drive a re-rating, a sale should be considered.
On AIM, Gamma Communications rose 13%.
The provider of communication services in UK, German, Spanish and Dutch business markets reported improved half-year results.
Pretax profit rose 11% to £48.5 million in the first half of 2024, from £43.5 million a year ago. Revenue is up 10% at £282.5 million from £256.2 million.
Looking ahead, Chief Financial Officer Bill Castell said: ‘Following a strong first half performance, growth is expected to continue across the second half and adjusted earnings before interest, tax, depreciation and amortisation is now anticipated to be in the top half and adjusted earnings per share at the top of the range of market expectations.’
Wednesday’s economic calendar sees UK gross domestic product figures at 0700 BST and US consumer price inflation data at 1330 BST.
The local corporate calendar has a trading statement from travel operator and retailer WH Smith, and results from home furnishings retailer Dunelm and consumer reviewing platform, Trustpilot.
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