Stock prices in London rose on Monday morning, ahead of meetings of central banks from Japan, the US and the UK, as investors weighed up developments in the ongoing conflict in the Middle East.
The FTSE 100 index opened up 50.75 points, 0.7%, at 7,342.03. The FTSE 250 was up 139.01 points, 0.8%, at 17,005.24, and the AIM All-Share was up 5.10 points, 0.8%, at 679.56.
The Cboe UK 100 was up 0.7% at 732.23, the Cboe UK 250 was up 1.0% at 14,766.14, and the Cboe Small Companies was up 0.2% at 12,591.81.
Investors were feeling largely positive about the latest slate of company updates. Particularly notable was Ascential, with its shares up 35% as it announced plans to return £850 million to shareholders following two disposals.
In European equities on Monday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.8%.
Sentiment in Europe was rebounding amid some relief that Israel seemed to be taking a more incremental approach than expected to its ground incursion into Gaza. This helped to quell immediate fears of the conflict breaking out into the wider region.
Investors will still be somewhat cautious, assessing what remains a dynamic and volatile situation.
The Israeli military said its forces killed ‘dozens’ of militants in overnight clashes inside Gaza, hitting over ‘600 targets’ as it stepped up what Prime Minister Benjamin Netanyahu called a ‘new stage’ in the war, which he warned would be ‘long and difficult’.
Hamas also said its fighters were engaged in ‘heavy fighting’ with Israeli forces in northern Gaza.
Israeli tanks on Monday entered the edge of Gaza City and cut a key road from the north to the south of the war-torn Palestinian territory, witnesses told AFP.
While noting Middle Eastern geopolitical conflicts are often sidelined and deemed ‘storms in a teapot’, SPI Asset Management’s Stephen Innes said the Israel-Hamas war has stoked fears that it could ‘morph into one of the most sinister calamities in decades’.
‘As we enter zero hours, the extent to which war may spread beyond these borders and possibly turn global remains unknown. Given this uncertainty, geopolitical risk is very possibly currently being underestimated.’
Innes maintains ‘it’s best to hedge the possible disorder’.
‘Knowing how quickly global tinderboxes can ignite, it’s best to hedge the possible disorder. Even if the probability of a doomsday scenario is infinitesimally small, infinitesimally small is too big if religion, power, and chaos take hold,’ he continued.
Gold was quoted at $1,998.85 an ounce early Monday, higher than $1,981.94 on Friday. Brent oil was trading at $89.58 a barrel, higher than $87.63.
The dollar was mostly stronger against major currencies in early exchanges in Europe.
Sterling was quoted at $1.2096 early Monday, down sharply from $1.2149 at the London equities close on Friday. The euro traded at $1.0551, lower than $1.0594. Against the yen, the dollar was quoted at JP¥149.51, down slightly versus JP¥149.59, as the Bank of Japan begins its two-day monetary policy meeting.
Central bank decisions will be in focus this week, with a decision from the BoJ due on Tuesday, the Federal Reserve on Wednesday, and the Bank of England to follow on Thursday.
Traders will be keen to see if the yen’s recent historic lows will prompt the BoJ to pivot away from its ultra-loose monetary policy. Meanwhile, the Fed and the BoE are widely expected to leave interest rates unchanged, meaning all eyes will be on forward guidance.
In company news, HSBC rose 1.1%.
The Asia-focused, London-based lender reported that quarterly profit more than doubled, but fell short of market expectations, as it prepared to launch a $3 billion share buyback. Asia-focused, London-based HSBC said third-quarter pretax profit soared to $7.71 billion from $3.23 billion a year before, which HSBC said reflected the positive impact of a higher interest rate environment.
However, the figure fell short of company-compiled analyst estimates of $8.10 billion.
Net interest income rose 15% to $9.25 billion from $8.01 billion, as net fee income increased 5.3% to $3.00 billion from $2.85 billion. Net operating income climbed 45% to $15.09 billion from $10.44 billion, which was short of analyst estimates of $16.24 billion.
Pearson shares added 1.5%, as it raised annual guidance.
The education publisher said revenue in the third quarter rose 2% year-on-year on an underlying basis. It now expects group revenue growth, excluding online programme management and strategic review businesses to be at the higher end of its existing low-to-mid-single-digit guidance, and upgraded guidance for adjusted operating profit to a range of £570 million to £575 million, which is around £20 million higher than prior guidance.
This follows the ‘strong operational momentum and financial performance’ seen in the third quarter‘, Pearson said.
Retail group Frasers rose 1.7%, as it confirmed the divestment of the intellectual property of Missguided to Chinese fast fashion firm Shein. Frasers will retain Missguided’s real estate and employees, incorporating them into its fashion division. The deal, first reported by the Financial Times back in September, has ’enabled exciting discussions with Shein around opportunities for potential collaboration‘ across Frasers’ portfolio of brands, the firm said.
‘This development has the potential to create a ripple effect across the UK retail sector, in our view,’ said Shore Capital.
‘At a time when fast fashion is undergoing significant changes, with online pure plays already losing ground against Shein, this partnership could mark a significant moment in propelling Frasers’ investment case.’
In a similar vein, Asos added 2.5%, following reports from the Telegraph that is in talks to sell the Topshop brand to Authentic Brands Group, a US company behind brands such as Ted Baker, Reebok and Forever 21.
The Telegraph said that Authentic Brands is plotting its acquisition of Topshop after a failed attempt to buy the business in 2020.
In Shore Capital’s assessment, while the deal could offer Asos a ‘much-needed cash injection’, it ‘presents a conundrum for the retailer’s long-term prospects’.
‘Topshop had been a key growth driver for Asos since its acquisition. Selling it now could severely impede the company’s recovery efforts,’ the broker considered.
Meanwhile, Ascential surged 35%.
The business-to-business media and events company reported a proposed sale of its Digital Commerce and WGSN units for cash proceeds of £1.2 billion. It plans to sell the first to Omnicom Group, and the second to fund advised by Apax Partners. Once complete, it plans to distribute around £850 million to shareholders.
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In the US on Friday, Wall Street ended mixed, with the Dow Jones Industrial Average down 1.1%, the S&P 500 down 0.5% and the Nasdaq Composite up 0.4%
In Asia on Monday, the Nikkei 225 index in Tokyo closed down 1.0%. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong closed marginally higher. The S&P/ASX 200 in Sydney closed down 0.8%.
Still to come in the economic calendar on Monday, there’s German flash consumer price inflation data for October and a preliminary gross domestic product reading for the third quarter.
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