Stocks in London recovered to close Monday in the green, as all eyes look to the UK budget to come on Wednesday.
The FTSE 100 index closed up 36.78 points, or 0.5%, at 8,285.62. The FTSE 250 ended up 15.19 points, or 0.1%, at 20,835.10, and the AIM All-Share closed down 0.2%, or 1.57 points, at 721.10.
The Cboe UK 100 ended up 0.5% at 830.25, the Cboe UK 250 closed up 0.3% at 18,385.28, and the Cboe Small Companies ended down 1.1% at 16,725.33.
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 European equities on Monday, the CAC 40 in Paris ended up 0.8%, while the DAX 40 in Frankfurt ended up 0.3%.
The pound was quoted at $1.2978 at the London equities close on Monday compared to $1.2979 at the close on Friday.
The euro stood at $1.0815 at the European equities close Monday, against $1.0813 at the same time on Friday.
‘The DXY dollar index is back at its strongest level since early August and one could easily forget that the Fed had started its easing cycle with a surprisingly large 50bp rate cut in September,’ said ING’s Chris Turner.
‘Driving this dollar strength has been the macro divergence story...and investors seemingly positioning for Republican success next week. On the latter, the latest polls suggest marginal swings towards Donald Trump, though his lead in the key swing states is still within the polling weighted-average margin of error in the 4-5% area.’
Against the yen, the dollar was trading at JP¥153.29, up compared to JP¥152.07 late Friday.
In London, car finance providers remained under pressure after an adverse court ruling.
Close Brothers fell a further 7.9%, and Lloyds Banking Group 2.7%. The two had 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 9.2% 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.
Stocks in New York were higher at the London equities close, with the DJIA up 0.7%, the S&P 500 index up 0.4%, and the Nasdaq Composite up 0.5%.
More than 41 million Americans have already cast early ballots ahead of Election Day on November 5, in what is expected to be one of the tightest elections of modern times, AFP reported.
Outgoing President Joe Biden will join them in casting his own vote Monday, the White House said.
On the campaign trail, both candidates return to key battleground states, with Democrat Kamala Harris heading to Michigan, where she faces opposition from Arab Americans outraged over US support for Israel.
Republican Donald Trump will head to Georgia, where he will address a gathering of pastors and faith leaders before holding a rally. The trips come after Harris spent Sunday going neighbourhood to neighbourhood in Philadelphia, in must-win Pennsylvania, with stops at a Black church and Puerto Rican restaurant.
Brent oil was quoted at $71.38 a barrel at the London equities close on Monday, down sharply from $75.98 late Friday.
The black stuff shed 4% at the start of the new week, after Israel attacked Iranian military facilities over the weekend.
Israel struck several military facilities in Iran on Saturday, in retaliation for the October 1 attack by Iran.
Investors breathed a sigh of relief as the Israel attack was more restrained than expected and Israel targeted the military facilities - and not the country’s nuclear or oil infrastructure, Swissquote analyst Ipek Ozkardeskaya said.
‘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,’ Ozkardeskaya said.
ING analysts Warren Patterson and Ewa Manthey agreed, noting that the more targeted response from Israel ‘leaves the door open for de-escalation and clearly the price action in oil this morning suggests the market is of the same view’.
Gold was quoted at $2,740.80 an ounce at the London equities close Monday, up against $2,737.99 at the close on Friday.
Gold bulls are likely ‘feeling rather optimistic as the new trading week gets underway’, Pepperstone analyst Michael Brown said.
‘The year so far has taught us that the yellow metal has obtained a near-unique ability to ignore its ’traditional’ drivers, with moves likely instead being beholden to flows, presumably in large part from EM central banks,’ Brown said.
One could also view bullion as a ‘pure momentum trade, of the like which has been so significant over recent years’, he said. ‘Either way, fading the market at fresh record highs isn’t something I’d be keen to do at this juncture,’ he added.
In Tuesday’s UK corporate calendar, there are half-year results from C&C Group, full-year results from Cap-XX, Sareum, and Ultimate Products, and third quarter results from BP and HSBC.
The economic calendar for Tuesday has unemployment data from Japan, money supply from the UK, and a whole handful from the US, including trade balance, wholesale inventories, and consumer confidence.
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