Stocks in London trended lower on Monday, as oil majors retreated due to easing fears about Middle Eastern conflict, and car finance providers slumped further.
The FTSE 100 index traded down 20.47 points, 0.3%, at 8,228.18. The FTSE 250 was 42.07 points lower, or 0.2%, at 20,778.66, and the AIM All-Share shed 3.15 points, 0.4%, at 719.52.
The Cboe UK 100 was down 0.3% at 823.83, the Cboe UK 250 fell 0.1% to 18,307.30 and the Cboe Small Companies declined 0.5% at 16,827.52.
‘The next two weeks’ feel like they will determine the future direction of risk sentiment and consumer and business confidence for the rest of 2024 and beyond,’ said Kathleen Brooks at XTB Research.
‘Event risk is huge, there is a hotly anticipated UK budget this week, in the US, Q3 GDP is released and US payrolls for October are scheduled for release this coming Friday. Next week the US presidential election takes place on Tuesday, after that there are two key central bank meetings....the Bank of England and the [Federal Open Market Committee] meeting in the US, both central banks are expected to cut rates when they meet next week.’
In London, a sharp fall in the oil price limited progress.
Brent oil was quoted at $71.67 a barrel around Monday lunchtime, down from $75.98 at the time of the London close on Friday.
Ipek Ozkardeskaya at Swissquote Bank said there was a ‘sigh of relief’, as Israel’s attack on Iran on Saturday was more ‘retrained than expected’, targeting military facilities and not the country’s nuclear or oil infrastructure.
‘The cherry on top, Iran didn’t vow to respond, in a clear sign of de-escalation – or at least not a re-escalation – of the tensions in the region. As such, the geopolitical tensions that were keeping the oil bulls on alert....has gone up in smoke,’ she added.
The drop in the oil price weighed on BP, down 2.2%, and Shell, down 2.3%.
However, hopes for lower fuel costs say British Airways owner IAG climb 1.0%, and budget airline easyJet rise 2.2%.
The mood elsewhere in Europe was mixed. The CAC 40 in Paris was up 0.1%, while Frankfurt’s DAX 40 fell 0.3%.
Stocks in New York are called to open higher. The Dow Jones Industrial Average is called up 0.4%, the S&P 500 by 0.5% and the Nasdaq Composite is seen 0.6% higher.
XTB’s Brooks said economic data this week, will be ‘critical’ for the next move by the FOMC.
‘Currently there are 24 basis points of rate cuts priced in for next week’s meeting, and the market is convinced that the Fed will cut rates in the immediate aftermath of the election,’ she added.
The pound was quoted at $1.2980 early Monday afternoon, up a touch from $1.2979 late Friday. The euro stood at $1.0818, up from $1.0813. Against the yen, the dollar was trading at JP¥152.71, rising from JP¥152.07.
On Wednesday, Chancellor Rachel Reeves will reveal her budget statement, the first since the Labour Party swept to power in July.
On Monday, Prime Minister Keir Starmer is expected to promise that the budget will ‘ignore the populist chorus of easy answers’ amid a series of expected tax rises, including an increase to employer national insurance by at least one percentage point.
Referring to the previous governments of Tony Blair and David Cameron, the PM will tell people during a speech: ‘This is not 1997, when the economy was decent but public services were on their knees.
‘And it’s not 2010, where public services were strong, but the public finances were weak. These are unprecedented circumstances.’
Enrique Diaz-Alvarez at Ebury said the budget is shaping up to be an ‘unusually sizeable political event risk for sterling. Sweeping tax hikes are expected, with capital gains tax, employer NI contributions, inheritance tax and pensions all likely to be targeted.’
‘Chancellor Reeves will also provide details on Labour’s fiscal rule change, which is expected to unlock billions of pounds in extra borrowing. Should she successfully convince investors that Labour have a credible plan to boost growth, without triggering a blow up in the gilt market, then the pound could emerge unscathed, but this remains a big if.’
In London, car finance providers remained under pressure after an adverse court ruling.
Close Brothers fell a further 11%, Lloyds Banking Group 2.8% and Barclays 2.0%. All three nursed heavy falls on Friday.
Lloyds said it is ‘assessing the potential impact’ of a court ruling last week which sided with consumers in a row over commissions earned by companies selling car finance loans.
On Friday, judges ruled that dealerships must tell customers about any commission earned when they take out the loans.
The ruling makes it unlawful for dealers to get a commission from lenders like Lloyds and fellow motor finance seller Close Brothers ‘without obtaining the customer’s fully informed consent to the payment’.
Lloyds said the ruling ‘sets a higher bar’ for disclosure of such commissions than previously thought.
Regulators are looking into whether companies like Lloyds and Close Brothers mis-sold products to customers by using hidden so-called discretionary commission arrangements.
The ruling ‘changes the law’, analysts at Peel Hunt said, adding that for Close Brothers, and the wide range of different outcomes means the potential implications financially are ‘unquantifiable’ at present.
Trainline fared better with shares rising 8.5% after it raised its annual outlook amid higher ticket sales.
The rail ticketing platform now expects annual net ticket sales growth of 12% to 14%, its outlook bumped up from the top end of an 8% to 12% growth range. In financial 2024, net ticket sales were £5.30 billion, up 22% from financial 2023.
A revenue rise between 11% and 13% is now expected, the forecast raised from the top end of a 7% to 11% range.
Gold was quoted at $2,730.98 an ounce early Monday afternoon, up from $2,729.94 at the time of the London equities close on Friday.
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