London’s FTSE 100, the outperformer on Friday as investors fretted over a possible escalation in the Middle East, was the laggard on Monday in the wake of Iran’s strikes on Israel over the weekend, as the blue-chip index’s oil majors tracked crude prices lower.
Large-cap benchmarks in Frankfurt and Paris, which fell on Friday, were on the up on Monday. Stocks in New York tumbled at the end of last week, but are called to open higher on Monday, as the banking earnings season continues, with Goldman Sachs reporting later.
The FTSE 100 index opened 41.56 points lower, 0.5%, at 7,954.02. The FTSE 250 was down 34.91 points, 0.2%, at 19,686.33, and the AIM All-Share was down 3.36 points, 0.4%, at 752.55.
The Cboe UK 100 was down 0.5% at 795.57, the Cboe UK 250 was 0.2% lower at 17,085.19, and the Cboe Small Companies was down 0.1% at 14,849.50.
In European equities on Monday, the CAC 40 in Paris was up 0.3% and the DAX 40 in Frankfurt climbed 0.6%. Unlike the FTSE 100, both had declined on Friday as investors moved with trepidation amid fears Iran would strike Israel in response to an Israeli strike on the Iranian consulate in Damascus, Syria.
Iran on Saturday launched a wave of missiles and attack drones at Israel. The latter said the vast majority were repelled by air defences.
Israel and Iran accused one another Sunday at the United Nations of being the main threat to peace in the Middle East, each calling on the Security Council to impose sanctions on their sworn enemy.
Swissquote analyst Ipek Ozkardeskaya said the market reaction on Monday ‘could’ve been worse’.
‘Risk appetite is better this Monday morning than it was last Friday when the world was bracing for the Iranian retaliation on Israel. Iran fired more than 300 drones and missiles on Israel on Saturday night, but only a small number reached Israel, limiting damages. There were no fatalities, just an army base was slightly damaged. Good news is Teran called the operation a success and declared that it won’t take further actions unless Israel responds,’ Ozkardeskaya explained, noting oil traded lower early Monday.
Brent oil was quoted at $89.48 a barrel early Monday in London, down from $91.05 a barrel late Friday. Oil majors Shell and BP fell 1.5% and 2.5% in London, hurting the FTSE 100. Gold traded at $2,354.32 an ounce, falling from $2,396.43. Gold miner Fresnillo fell 2.9%.
The analyst noted base metal prices were on the rise, however, pushing London-listed miners higher. Rio Tinto rose 1.1%, while Antofagasta added 0.3%.
The US and Britain are extending their ban on imports of metals produced in Russia, due to the Russian war against Ukraine.
Aluminium, copper and nickel produced in Russia after April 13 will no longer be traded on the world’s two largest metal exchanges in London and Chicago, the US and British treasury departments announced overnight on Friday night.
The pound rose to $1.2469 early Monday in London, from $1.2451 at the time of the London equities close on Friday. The euro stood at $1.0656, rising from $1.0643. Against the yen, the dollar was trading at JP¥153.92, up from JP¥153.09.
Last week Wednesday, the Bureau of Labor Statistics reported that the year-on-year rate of consumer price inflation picked up to 3.5% last month, from 3.2% in February, taking it further above the Fed’s 2% inflation target.
Analysts at Lloyds Bank commented: ‘The upside surprise in last week‘s release of US CPI inflation for March led a sharp repricing in global interest rate expectations, with markets now fully discounting only 1 Fed rate cut for this year. The outturn meant that US CPI has been stronger than expected through Q1 and increases the risk that US policymakers will be more patient about cutting interest rates, making a mid-year first Fed rate cut less likely than before.
‘In the coming week, investors will be watching to see whether Fed officials will say much about the option of a June rate cut or whether they may prefer to stay more nebulous until after the 1 May update. Markets have pushed out a fully priced first cut until September.’
Monday’s economic calendar has a eurozone industrial production reading at 1000 BST, before US retail sales data at 1330 BST.
In the UK, there is unemployment data on Tuesday, before a consumer price index reading on Wednesday. The next Bank of England decision is on May 9.
Lloyds analysts added: ‘We look for further evidence of moderating inflationary pressures which will keep open the possibility of interest rate cuts by the Bank of England starting in the summer. Comments from MPC member Sarah Breeden may provide some insight into clues on the likely timing of the first cut in bank rate.’
Breeden is due to speak at 1215 BST on Monday.
In London, shares in Mitie rose 5.7%, the best mid-cap performer. The facilities management and professional services firm Mitie hailed ‘record revenue and operating profit’ and it has kicked off a further share buyback.
Mitie expects to report an 11% rise in revenue to £4.50 billion for the year to March 31, from £4.06 billion. Operating profit of £200 million is expected, a 23% surge from £162.1 million.
It announced a further £50 million share buyback programme. A share repurchase programme of the same size had been completed last month.
Inchcape rose 3.6% as it announced a deal to sell its UK retail operations of £346 million, following a review of strategic options it kicked off earlier this year. It will return £100 million of the proceeds to shareholders.
Elsewhere in M&A, Balanced Commercial Property Trust put itself up for sale, noting ‘significant challenges with a difficult near-term economic and property market backdrop’.
Recruiter PageGroup fell 4.5% as it cautioned that a ‘slower end’ to the final quarter of 2023 persisted at the start of this year. The recruitment company said it cut about 100 jobs, or 1.7% of its fee earning workforce, citing challenging market conditions.
‘Overall, activity levels remain strong, however we experienced a slight deterioration in job flow towards the end of the quarter. Conversion of final interviews to accepted offers is still the most significant challenge, as candidate and client sentiment remains subdued reflecting the general macro-economic uncertainty in most of our markets. Permanent recruitment was more impacted than temporary across all of our markets, as clients continue to seek more flexible options,’ Chief Executive Officer Nicholas Kirk said.
PageGroup said first-quarter gross profit fell 16% on-year to £219.7 million.
Elsewhere in London, Horizonte Minerals plunged 79%. It said it has not been able to secure the funds needed to complete the Araguaia nickel project in Brazil.
‘Horizonte must now consider alternative options for the company’s subsidiaries in the interest of its secured creditors, which may include raising financing at the subsidiary level, a sale of the project whilst in care and maintenance, the liquidation of the assets of the project, or other options available under Brazilian laws. The company does not believe that any of these options are likely to recover any value for the company’s shareholders,’ it warned.
In Tokyo, the Nikkei 225 ended down 0.7% on Monday, while the S&P/ASX 200 in Sydney fell 0.5%. The Shanghai Composite closed 1.3% higher, though the Hang Seng in Hong Kong was 0.6% lower in late dealings.
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