Markets made a slow start to a week likely to lack direction due to a holiday in the US on Thursday, with a resurgence of Covid-19 cases in China becoming an increasing concern.
The dollar was benefiting from the risk-off mood, sending the pound down a full US cent.
In London, the mood improved as the morning dragged on, with the FTSE 100 roughly flat, and the FTSE 250 reversing early weakness to sit higher.
The FTSE 100 index was down just 3.22 points at 7,382.30 midday Monday. The FTSE 250 was up 63.34 points, 0.3%, at 19,346.39. The AIM All-Share was down 1.06 points, or 0.1%, at 837.19.
The Cboe UK 100 was flat at 738.43. The Cboe UK 250 was up 0.1% at 16,651.12, and the Cboe Small Companies was up 0.4% at 12,882.42.
The CAC 40 index in Paris was down 0.2%, while the DAX 40 in Frankfurt shed 0.6% as shares in mainland Europe underperformed those in London.
Asian equities closed lower on Monday. The Hang Seng in Hong Kong ended down 1.9%, while the Shanghai Composite in China closed 0.4% lower. The S&P/ASX 200 in Sydney lost 0.2%. The Nikkei 225 in Tokyo rose 0.2%, however.
China reported two new deaths from Covid-19 on Monday, both elderly Beijing residents, as several major cities persisted with strict virus curbs despite a much-touted recent loosening.
The last major economy wedded to a zero-Covid policy, Chinese authorities have continued to impose snap lockdowns, mass testing, and lengthy quarantines in response to outbreaks.
Despite the central government this month announcing its most significant easing of the measures so far, authorities in many areas have stuck to hardline curbs as the number of new cases has spiked.
‘The market had been pinning hopes on a Chinese reopening to help ease global supply chain problems and kickstart growth in the world’s second-largest economy. However, renewed outbreaks of Covid have seen some restrictions return and helped dampen sentiment, with oil prices also lower,’ AJ Bell analyst Russ Mould commented.
The Covid-19 worries hit London-listed miners. BHP was down 1.7%, while Glencore fell 1.1%. China is a major buyer of minerals, so reduced demand from there could hit mining sector earnings.
The dollar was on the up, supported by the risk-off mood at the start of the week.
The pound was quoted at $1.1825 midday Monday in London, down more than a US cent from $1.1929 late Friday. The euro similarly struggled. The European single currency traded at $1.0242, down from $1.0362. Against the yen, the dollar was quoted at JP¥141.74, up from JP¥139.85.
In the FTSE 250, Virgin Money UK shares shot up 14%.
The lender said it will buyback another £50 million worth of shares on the back of a decent annual performance. This takes its total 2022 buybacks to £125 million.
Virgin Money said total underlying operating income rose 12% to £1.76 billion in the year that ended September 30 from £1.57 billion.
Underlying net interest income alone climbed 13% to £1.59 billion. Pretax profit surged 43% to £595 million from £417 million.
Virgin Money’s net interest margin expanded to 1.85% from 1.62% a year earlier, helped by higher interest rates. For the new financial year, it expects the net interest margin to grow further to between 1.85% and 1.90%, based on current interest rate expectations.
In the FTSE 100, Ocado was the worst performer, losing another 9.1% and extending a recent period of profit taking in the stock. Shares were supported earlier this month by a partnership with Lotte Shopping, the largest retail affiliate of the South Korean conglomerate Lotte Group.
The deal was announced at the start of November. Since then, Ocado is up some 30%. However, shares have fallen about a third from 925.60p on November 14.
Pendragon added 5.9% as its M&A story continues.
The car dealership said suitor Hedin’s put up or shut up deadline was extended once more to December 9.
Under the terms of the deal, announced in September, Hedin - the company’s largest shareholder - offered a price of 29 pence per share, a valuation of £405.1 million for the entire company.
The Sunday Telegraph reported over the weekend that Pendragon’s board will recommend the deal.
Citing City sources, the newspaper reported a deal could be announced as early as Monday.
On AIM, Real Good Food jumped 62% as the food manufacturing business said it has secured the funding needed for a turnaround.
The Liverpool-based firm, which specialises in cake decoration, said it has received an additional £2.5 million worth of funding to back its turnaround. The financing is being provided by Hilco Private Capital.
Real Good Food in September said it had been forced to ‘hunker down’ and keep a lid on expenses.
Gold was quoted at $1,740.02 an ounce midday Monday, down from $1,757.30 on Friday. Brent oil was trading at $87.32 a barrel, largely unchanged from $87.30.
In New York, the Dow Jones Industrial Average was called down 0.3%, the S&P 500 down 0.5% and the Nasdaq Composite down 0.8%.
Walt Disney was up 9.6% in pre-market dealings. Disney ousted chief executive Bob Chapek on Sunday and announced that it had brought back former CEO Bob Iger to once again take the reins.
The change, a dramatic turn of events for the world’s largest media company, was effective immediately, Disney said in a statement.
Chapek spent two years as CEO, a period that saw Wall Street concerned about rising expenses at the company. Disney’s stock has fallen 41% this year.
Iger, who served as Disney’s CEO for 15 years, increasing the company’s market capitalization five-fold during that period, has pledged to return as CEO for at least two years, the statement said.
Financial markets in New York will be closed on Thursday for the Thanksgiving Day holiday in the US. Equity markets there re-open for a half-day on Friday. Trading volumes are expected to be low this week as a result.
Also on the horizon this week will be on meeting minutes released by the Federal Reserve on Wednesday and European Central Bank on Thursday.
‘Focus will likely be on their thinking about the terminal rate (both) and QT plans (ECB), with both now more likely to hike 50bps than 75bps in December,’ analysts at Deutsche Bank commented.
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