Stock market gains in Asia led to positive open for London on Monday, after a positive first set of US bank earnings on Friday with more to follow.
More M&A activity gave mid-cap stocks a further boost.
The FTSE 100 index opened up 41.10 points, 0.5%, at 7,913.01. The FTSE 250 was up 149.87 points, 0.8%, at 19,392.56, and the AIM All-Share was up 3.80 points, 0.5%, at 834.15.
The Cboe UK 100 was up 0.5% at 791.72, the Cboe UK 250 up 0.9% at 16,977.47, and the Cboe Small Companies rose 0.1% at 13,219.55.
In European equities, the CAC 40 in Paris and DAX 40 in Frankfurt were both up 0.4%.
Several US banks reported quarterly earnings on Friday, with investors pleasantly surprised at their resilience given the recent turbulence in the sector.
However, investors also feared that better-than-expected reports are likely to give the Federal Reserve less impetus to pause its interest rate hiking cycle, or cut rates as soon as some may have hoped.
New York ended lower on Friday, with the Dow Jones Industrial Average down 0.4%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.4%.
The dollar was firm in early exchanges, as an increasing majority of the market began to price in a 25 basis point hike on May 3rd, with around 22% now expecting another 25bp hike the following month, according to CME’s FedWatch tool.
Sterling was quoted at $1.2422 early Monday, soft on $1.2427 at the London equities close on Friday. The euro traded at $1.0988, little changed from $1.0987. Against the yen, the dollar was quoted at JP¥134.02, up versus JP¥133.68.
There will be more earnings from US banks this week, with Goldman Sachs and Bank of America reporting on Tuesday.
‘Absent significant banking spillovers so far, investors appear less worried about broader growth risks outside companies and sectors that could fall prone to tighter lending standards,’ commented Stephen Innes of SPI Asset Management.
Meanwhile, in the UK banking sector, Barclays is set to cut over 100 roles at its investment banks, according to a Sky News report late Sunday. This comes amid a lower rate of dealmaking and initial public offerings, Sky noted. It would be the second round of layoffs in less than six months, Sky noted, given that last November Barclays was reported to have axed around 200 jobs at its investment bank. The stock was down 0.6% in early trade.
In Asia on Monday, the Nikkei 225 index closed up 0.1%. The S&P/ASX 200 in Sydney was closed up 0.3%.
Sentiment was strong in China, with the Shanghai Composite rising 1.4%, while the Hang Seng index in Hong Kong rose 1.7%. There will be some key economic data out of China this week, with retail sales and GDP overnight.
The positive performance in China fed through to the FTSE 100’s mining stocks, with Rio Tinto up 2.1% and Anglo American up 1.9%. Oil majors also got a boost, with BP and Shell up 1.7% and 1.0% respectively.
Gold was priced at $2,011.89 an ounce early Monday, higher than $1,997.18 on Friday. Brent oil was trading at $86.30 a barrel, slightly lower than $86.42.
In the FTSE 250, Network International jumped 21% to 365 pence.
The Middle East and Africa-focused payments provider said it has received a non-binding takeover proposal from private equity firm CVC Capital Partners and tech-focused investor Francisco Partners Funds for a possible cash offer of 387p per share.
The new proposal follows a series of previous proposals that were rejected, Network International noted.
The board would be minded to recommend the offer to shareholders, should a firm offer be made, it said. The consortium now has until May 11 to announce the firm intention to make an offer, or withdraw from the takeover process.
Fellow midcap firm John Wood also rose on takeover news, rising 7.2% to 227.4p.
The energy sector-focused engineering and consulting business said it is engaging with Apollo Management Holding about its final takeover proposal of 240p per share. Apollo had announced the fifth proposal in early April. ‘Having now weighed all relevant factors, particularly feedback received from Wood shareholders, the board has decided to engage with Apollo to see if a firm offer can be made on the same financial terms as the final proposal,’ it explained.
It will now give Apollo access to due diligence materials and has agreed to extend the put-up-or-shut-up deadline for Apollo to May 17.
International Distributions Services rose 7.0%, as its Royal Mail arm announced an agreement with the Communication Workers’ Union on Saturday.
Royal Mail said it had reached a negotiators’ agreement in principle with the CWU, with more details expected to be confirmed this week. The statement said: ‘After almost a year of talks, Royal Mail and the Communication Workers’ Union are pleased to announce they have reached a negotiators’ agreement in principle.
‘The proposed agreement will now be considered by the executive of the union before being voted on by the union’s membership.
On AIM, DeepVerge sunk 43%.
The Dublin-based environmental and life science group said that, follow a review of major contracts, revenue for a ’number‘ of contracts has been incorrectly recognised ’in excess of work completed‘.
Accordingly, in 2022, it now expects to recognise just 45% to 55% of its January guidance of £17.2 million.
‘Whilst it is extremely disappointing that 2022 revenues are likely to be so far below the figures provided by the previous executive management team, I’m confident that the new management has robust plans in place to deliver the order book during 2023 and 2024,’ said Chair Ross Andrews.
In February, DeepVerge had appointed Andrew Waters as its new chief financial officer with immediate effect, replacing Camillus Glover.
Still to come on Monday’s economic calendar, there’s a speech from Bank of England Deputy Governor Jon Cunliffe. UK unemployment figures are published on Tuesday, ahead of UK inflation data on Wednesday. On Friday, there are a slew of PMI prints from the EU, UK, and the US.
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