Stocks in London ran out of steam by the end of Monday, with focus on the trio of major central bank meetings this week, and the UK chancellor’s latest update on the ‘£22 billion black hole’ in the country’s finances.
The FTSE 100 index closed up 6.64 points, 0.1%, at 8,292.35. The FTSE 250 ended down 104.23, 0.5%, at 21,252.07, and the AIM All-Share closed down 2.35 points, 0.3%, at 777.32.
The blue-chip FTSE 100 had earlier hit an intra-day high of 8,368.38.
The Cboe UK 100 ended up 0.1% at 828.40, the Cboe UK 250 closed down 0.8% at 18,572.22, and the Cboe Small Companies ended up 0.1% at 17,336.78.
European markets fell back while US stocks were also lower. The CAC 40 in Paris ended down 1.0%, while the DAX 40 in Frankfurt ended down 0.5%.
In New York, at the time of the London close, the DJIA was down 0.3%, the S&P 500 index was down 0.1%, and the Nasdaq Composite was down 0.2%.
In London, the Chancellor Rachel Reeves said that the country’s public finances face an additional hole of £22 billion inherited from the previous Conservative government.
‘We have inherited a projected overspend of £22 billion of spending this year that was covered up by the party opposite,’ said Reeves, appointed after the Labour party’s landslide election victory on July 4.
Reeves also said plans for a retail offer for shares in NatWest had been shelved.
She said that the proposals spearheaded by her predecessor Jeremy Hunt did not ‘represent value for money’. She said that the associated discounts would cost taxpayers hundreds of millions of pounds.
‘It will not go ahead. It is a bad use of taxpayers money and we will not do it,’ she said.
However, Reeves said the government still intended to fully exit its shareholding in the bank by 2026.
Shares in NatWest closed 2.6% to the good.
A budget on October 30 will involve ‘difficult decisions’ on spending, welfare and tax, Reeves warned.
On Thursday, the Bank of England will decide whether to lower interest rates after making progress in its battle to tame inflation. The decision is seen to be on a knife-edge.
Barclays expects the vote to be close but believes the BoE to lower rates.
‘We expect the [Monetary Policy Committee] to deliver a hawkish 25bp cut at its August meeting, with a finely balanced vote split of 5-4 in favour.’
Key to this will be the votes of the Governor Andrew Bailey and two of his Deputy Governors Sarah Breeden and Clare Lombardelli, the broker thinks.
‘On balance, we expect these three crucial voters to be swayed by the wider constellation of data and join [Swati] Dhingra and [Dave] Ramsden in voting for a cut.’
Goldman Sachs is also in the 5-4 rate cut camp.
But Goldman said it was a ‘close call’ and sees a ‘low bar’ for the Monetary Policy Committee to delay the first cut until September.
The pound was quoted at $1.2847 at the London equities close Monday, lower compared to $1.2859 at the close on Friday. The euro stood at $1.0819 at the European equities close Monday, down against $1.0859 at the same time on Friday. Against the yen, the dollar was trading at JP¥153.91, higher compared to JP¥153.75 late Friday.
This week also sees interest rate decisions in Japan and the US.
ING thinks markets are ‘underestimating’ the chances of a 15 basis point hike by the Bank of Japan.
‘We believe that inflationary pressure in services continues to build. It is a close call, but we maintain our view that the BoJ will hike rates by 15bp and reduce its bond-buying programme at the same time.’
In the US, no change is expected, although analysts think the Federal Reserve may lay the ground work for a cut in September.
Goldman Sachs said: ‘Encouraging inflation news and a further rise in the unemployment rate have pushed Fed officials closer to cutting. The FOMC is set to hold steady [this] week but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely.’
In London, Reckitt Benckiser shares fell 8.8%, the worst FTSE 100 performer. The consumer goods producer fell after New York-listed Abbott Laboratories was slapped with a $495 million in damages by a St Louis, Missouri state court.
A jury found Abbott’s infant formula caused a girl to develop a bowel disease.
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.
Analysts at Citi said that, while it is premature to draw any conclusions, the verdict could delay Reckitt’s plans to exit Mead, now potentially beyond the first half of 2025.
Entain fell 8.1% on concerns increased investment in its US joint venture BetMGM, to maintain market share, will hit the bottom line.
‘Management is now guiding to a loss of [around] $246 million as the business invests in growth. In reality, it is investing in trying to restore lost market share, having slipped behind while competitors FanDuel and DraftKings took advantage of better technology in the US,’ Peel Hunt analyst Ivor Jones commented.
‘It was clear from industry data that BetMGM was losing ground, and it is positive to see a clear plan to turn the business around. Investors may, however, be discouraged by the scale of the investment apparently needed. Entain’s share price is struggling for direction ahead of any clarity to be provided by the newly appointed CEO.’
In the FTSE 250, Cranswick rose 1.3% after an encouraging trading update.
The Hull, England-based premium food producer said revenue in the first quarter that ended June 29 was 6.7% ahead of the same period last year.
The company said its full-year expectations remain unchanged with management maintaining an optimistic outlook.
Analysts at Peel Hunt said Cranswick is benefiting from key customers performing well, a return to promotional activity, and some new business.
While the board‘s expectations remain unchanged, the strong start to the year ‘provides confidence for potential upgrades through the year,’ the broker added.
Bridgepoint climbed 2.7% as Bank of America increased its share price target to 300 pence from 270p and reiterated a ’buy’ rating.
‘We see potential for Bridgepoint Group to exceed its upgraded guidance, particularly in fundraising to 2026 and performance fees,’ BofA said.
SIG fell 7.2% after Sky News reported the building materials provider is considering a fundraise. Sky reported SIG was looking to raise between £100 million and £150 million, but SIG declined to comment on ‘market speculation’.
Brent oil was quoted at $79.80 a barrel at the London equities close Monday, up from $79.56 late Friday. Gold was quoted at $2,377.22 an ounce at the London equities close Monday, lower against $2,384.60 at the close on Friday.
In Tuesday’s UK corporate calendar, there are half-year results from BP and Standard Chartered plus full-year results from Diageo.
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