The FTSE 100 outperformed continental counterparts on Monday, helped by a weaker pound, though it was outshone by London’s mid-cap benchmark.
Rising Federal Reserve rate hike expectations meant it was a tricky day for equity markets at the start of the week. A weaker pound did lend some support to the international earner-heavy FTSE 100. Equipment rental firm Ashtead rose 1.2%, while packaging firm Smurfit Kappa added 2.0%.
The FTSE 250 index was lifted by M&A news, and shares in the Royal Mail owner got a boost after the postal service struck a deal with union leaders.
The FTSE 100 index edged up 7.60 points, or 0.1%, at 7,879.51. The FTSE 250 rose by a more solid 44.21 points, or 0.2%, at 19,286.90. The AIM All-Share closed up 3.02 points, or 0.4%, at 833.37.
The Cboe UK 100 ended up 0.1% at 788.70, the Cboe UK 250 rose by 0.5% to 16,920.27, and the Cboe Small Companies added 0.4% to 13,248.51.
In European equities on Monday, the CAC 40 index in Paris lost 0.3%, while the DAX 40 in Frankfurt edged down 0.1%.
Stocks in New York drifted largely lower. The Dow Jones Industrial Average was flat at the time of the closing bell in London, the S&P 500 index and the Nasdaq Composite were each down 0.1%.
‘Today has felt a bit like investors on both sides of the pond have been treading water waiting for a barrage of numbers heading our way. From jobs and inflation figures that should help us take the temperature of the UK economy, to trading updates from household names that will give us a clearer global picture, the next few days should be enlightening,’ AJ Bell analyst Danni Hewson commented.
The pound was quoted at $1.2364 at the time the London equities closed, lower compared to $1.2427 on Friday. The euro stood at $1.0919, down from $1.0987. Against the yen, the dollar was trading at JP¥134.49, higher compared to JP¥133.68.
The dollar was on the up at the start of the week after a strong start to the US banking earnings season strengthened the case for another Federal Reserve rate hike next month.
Numbers from Citigroup, Wells Fargo and JPMorgan in particular all impressed on Friday. The US banking sector remains in focus on Tuesday, when Goldman Sachs and Bank of America report.
‘The Fed funds futures is pricing in the greatest chance for a hike at the early May meeting since the banking stress erupted last month,’ Bannockburn Global Forex analyst Marc Chandler commented.
The stronger dollar hurt gold, which fell back below the $2,000 mark, having traded as high as $2,015 earlier on Monday. The yellow metal was quoted at $1,990.71 an ounce at the time of the European equities close, down from $1,997.18.
London-listed banks surrendered gains on Monday, after ending higher on Friday following strong earnings from peers listed across the Atlantic.
HSBC fell 1.3% on Monday, Barclays lost 2.2% and NatWest ended down 1.3%. On Friday, they had closed up 3.0%, 3.2% and 1.4%.
At the other end of the large-cap table on Monday, RS Group added 2.9%. RBC lifted the electronics products distributor to ’outperform’ from ’sector perform’.
Network International and John Wood Group closed among the best FTSE 250 performers on M&A news.
John Wood said it has decided to engage with Apollo Management Holdings to see if a firm takeover offer can be made by the private equity firm on the same financial terms as Apollo’s last proposal.
Apollo announced a fifth proposal for John Wood in early April at a price of 240 pence per share in cash. The offer represented a 59% premium to John Wood’s closing price of 151p at the time of the offer, and a 20% premium to the initial proposal submitted to John Wood of 200p per share in cash.
‘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,’ John Wood explained.
The stock surged 6.6% to 225.80 pence.
Middle East and Africa-focused payments provider Network International jumped 22% to 370.18p.
It 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.
Away from the mid-cap index, but also getting a boost from M&A news, THG’s stock jumped 32%, giving it a market capitalisation of around £1.13 billion.
The Manchester-based e-commerce company received a buyout proposal from Apollo Global Management.
It was in receipt of ‘a highly preliminary and non-binding indicative proposal’, but did not disclose the terms of the possible takeover tilt.
Apollo now is required to announce its intention to make an offer or walk away by May 15.
THG has had somewhat of a torrid time as a listed company. Its eagerly-anticipated stint on the equity market, which began in September 2020, soon turned sour.
A capital markets day in October 2021, made to shore up investor confidence, spooked traders instead. THG’s stock has faced heavy selling pressure since then, not helped by mixed trading updates.
‘Playing the game isn’t likely to be high on the agenda in the boardroom at THG. The ecommerce retailer hasn’t exactly enjoyed its time as a public company, so news of a takeover bid is likely to have been welcomed with open arms. With a golden share the group’s CEO Matthew Moulding has the option to veto any deal but he’s been incredibly vocal about his unhappiness with life on the London Stock Exchange, so potential suitor Apollo is likely to find him receptive to a fair offer,’ AJ Bell’s Hewson commented.
Back among the FTSE 250, International Distribution Services added 6.6% on news that UK postal service unit Royal Mail has come to an agreement with union leaders.
It follows a long and bitter dispute over pay, jobs and conditions. According to a joint statement, released on Saturday, Royal Mail said it had reached a negotiators’ agreement in principle with the Communication Workers’ Union.
On the decline on Monday, Capita slid 9.5%. The Sunday Times reported the outsourcer’s cyberattack was more serious than it initially admitted.
At the start of April, it said it saw no evidence of customer data being affected from the event. The Sunday Times said Capita is facing a ‘deepening hack crisis’, however.
‘Personal bank account details, addresses and passport photos’, stolen by hackers Black Basta, are being leaked online.
Quiz slumped 20%. The retailer expects to report a solid rise in yearly revenue, but warned on a tough outlook for consumer demand going forward.
In the financial year ended March 31, it expects to report revenue of £91.7 million, up 17% on-year.
However, it said revenue growth rates moderated as the year dragged on, amid inflationary pressure, and like-for-like revenue in February and March actually weakened annually.
Looking further forward, Quiz cautioned that the ‘widely reported and significant pressures’ on consumer spending seen in recent months are expected to continue into the new financial year.
Brent oil was quoted at $84.99 a barrel late Monday in London, down from $86.42 late Friday.
Focus on Tuesday will be on a China gross domestic product reading overnight. All eyes are on the health of the Chinese economy, which has recently re-opened from Covid curbs. Elsewhere on Tuesday, there is a UK unemployment reading at 0700 BST and the latest German ZEW economic sentiment reading at 1000 BST.
The UK corporate calendar has trading statements from budget carrier easyJet and Ladbrokes owner Entain. Fresh from receiving bid interest, THG reports annual results.
Away from the banking sector, the New York corporate earnings diary has results from pharmaceutical and consumer goods firm Johnson & Johnson and streaming service Netflix.
By Eric Cunha, Alliance News news editor
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