European equities kicked off the week in tepid fashion on Monday, heading into the afternoon largely lower, with a lack of progress in US debt ceiling talks keeping a lid on sentiment.
The FTSE 100 achieved a minor gain, however, helped by a share price rise for Standard Chartered. Gains for JD Sports and Burberry, on the back of a difficult week for the stocks, also helped London’s blue-chip index outperform slightly.
‘The week ahead is fairly quiet when it comes to corporates updating on trading, with only a few names in the retail, tech and utilities space standing out. That means market sentiment is likely to be driven by political and economic events, including any update on the US debt ceiling talks, UK inflation data and the minutes from the latest Federal Reserve interest rate meeting on Wednesday, as well as insight into durable goods orders and personal spending in the US at the end of the week,’ AJ Bell analyst Russ Mould commented.
The FTSE 100 index was up 8.29 points, 0.1%, at 7,765.16. The FTSE 250 was down 16.32 points, 0.1%, at 19,272.78, and the AIM All-Share was down 0.42 of a point, 0.1%, at 808.55.
The Cboe UK 100 was down 0.1% at 775.78 and the Cboe UK 250 was down 0.2% at 16,796.90. Whilst the Cboe Small Companies was up 0.2% at 13,587.13.
In European equities on Monday, the CAC 40 in Paris was down 0.2%, and the DAX 40 in Frankfurt was 0.1% lower.
Across the Atlantic, stocks in New York were called mixed as caution reigns with the US debt ceiling impasse unresolved. The Dow Jones Industrial Average and the S&P 500 index are both called to open flat, while the Nasdaq Composite is called down 0.1%.
US President Joe Biden returned from Japan and will meet with Republican House Speaker Kevin McCarthy on Monday for another round of talks on raising the US debt limit, less than two weeks before a key deadline to avoid a disastrous default, officials said.
Anxiety was mounting in Washington over the weekend ahead of the June 1 deadline, set by the US Treasury, for Congress to authorise more borrowing, as the two sides appeared nowhere near a compromise.
The pound was quoted at $1.2452 midday on Monday in London, down compared to $1.2463 at the equities close on Friday. The euro stood at $1.0825, higher against $1.0812. Against the yen, the dollar was trading at JP¥137.93, up compared to JP¥137.64.
Construction output in the eurozone declined in March, according to official data on Monday.
Eurostat figures showed that construction output fell 2.4% month-on-month in March, compared to a 1.7% rise in February. Market consensus, according to FXStreet, had been expecting no change.
From a year before, construction output was down 1.5%, compared to the 2.1% growth seen in February. Consensus expected a 2.2% rise for March.
On the FTSE 100, NatWest was up 0.9%, after the UK Government Investments sold £1.26 billion in NatWest shares back to the company.
The UK government said it sold 469.2 million shares, priced at 268.4 pence each, back to the Edinburgh, Scotland-based lender as part of a buyback agreement first put in place with NatWest back in 2019.
As a result, the UK taxpayer’s stake in NatWest will fall to 38.6% from 41.4%. This also means that the government has now halved its holding from peak ownership of 84% at one point.
AJ Bell’s Mould noted that there is still a ‘big overhang for the stock, which is likely to remain the case for some time given the slow pace of selling down’.
‘After all, it’s been 15 years since the bank was bailed out by the government and the latter still owns more than a third of the company,’ Mould added.
The UK government first began building a majority stake in the bank from October 2008 during the financial crisis. The taxpayer ended up holding an 81% stake in the lender - called Royal Bank of Scotland at the time - after a hefty £45.5 billion taxpayer bailout. This has been steadily reduced since.
Elsewhere among FTSE 100-listed banks, Standard Chartered added 3.1%. Bank of America lifted the stock to ’buy’ from ’neutral’.
Also supporting the large-cap index, and helping it outperform European peers, retailers JD Sports and Burberry rose 3.5% and 2.4%. The duo had lost around 8.1% and 9.0%, respectively, over the course of last week, amid poorly-received annual results.
In the FTSE 250 index, Dechra Pharmaceuticals was the worst performer at midday. It shed 12%.
The veterinary pharmaceutical company said underlying operating profit for the financial year ended June 30 was likely to fall short of its £186 million guidance.
Back in February, the Cheshire, England-based company had said profit was expected to be at the lower end of analyst expectations, which it cited at the time as a range of between £186 million and £199 million.
The trading environment from January to April was tougher than the firm had predicted when it provided that guidance, Dechra said.
‘In the US, the impact of the now widely reported de-stocking by US wholesalers has been deeper and longer than initially expected and had a material impact on [the third quarter from January to March’s] performance,’ it explained.
On AIM, Norman Broadbent jumped 23%.
The recruitment firm said revenue in the first quarter of 2023 jumped 67% annually to £2.9 million from £1.8 million. Net fee income rose 66% to £2.4 million from £1.5 million.
Looking ahead, Norman Broadbent noted ‘excellent forward momentum’, with a pipeline of contracted revenue at the end of the quarter of £2.6 million.
Lansdowne Oil & Gas plummeted 51%, while Barryroe Offshore Energy slumped 36%.
On Friday, Barryroe said a government minister in Ireland is not ‘satisfied with the financial capability’ of those involved in an oil and gas lease application.
Barryroe, chasing a Dublin government green light for the SEL1/11 licence, said it received correspondence from Eamon Ryan, Ireland’s minister for the Department of the Environment, Climate & Communications.
SEL1/11 houses the Barryroe field. Barryroe Offshore owns an 80% stake in the asset, while Lansdowne owns 20%.
On Monday, Lansdowne said it has received no direct correspondence from the Irish government department regarding the decision. However, it noted that it has verified the content directly with Barryroe.
Lansdowne said that it has engaged with external legal counsel to assess its legal rights and the potential options available, including pursuing legal proceedings, for the purposes of protecting its investment in the Barryroe project.
Lansdowne Chief Executive Officer Steve Boldy said: ‘It is with great reluctance that we must now resort to legal proceedings in relation to our investment as we would much rather have moved forward with a Lease Undertaking and appraisal drilling, for which funds had been sourced, to advance Barryroe toward development for the benefit of all stakeholders.’
Brent oil was quoted at $75.55 a barrel at midday in London on Monday, down from $75.74 late Friday. Gold was quoted at $1,980.23 an ounce, up against $1,972.99.
Monday’s economic calendar has a eurozone flash consumer confidence reading at 1500 BST.
The week picks up pace with a host of flash purchasing managers’ index readings on Tuesday, a UK inflation reading on Wednesday, and US gross domestic product on Thursday.
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