London's FTSE 100 grew in confidence on Monday, reversing a slow start to end higher, with sentiment bolstered by a strong start in New York.
The pound was also on the up, trading at post-mini-budget highs, after a humbling tax policy U-turn by the Conservative government.
The FTSE 100 index closed up 14.95 points, or 0.2% at 6,908.76 on Monday. The FTSE 250 ended up 116.54 points, or 0.7%, at 17,284.88. The AIM All-Share closed up 2.35 points, or 0.3%, at 808.73.
The Cboe UK 100 ended up 0.1% at 689.93, the Cboe UK 250 closed up 1.0% at 14,793.62, and the Cboe Small Companies ended up 0.2% at 12,053.01.
UK Prime Minister Liz Truss and Chancellor Kwasi Kwarteng have abandoned a plan to abolish the top rate of income tax for the highest earners in an astonishing U-turn.
The chancellor acknowledged that their desire to axe the 45% rate on earnings over £150,000 in a move to be paid for by borrowing had become a ‘distraction’ amid widespread criticism.
He issued a statement, hours before he had been due to defend the plans at the Conservative Party conference, saying: ‘We are not proceeding with the abolition of the 45p tax rate.’
The pair had been under pressure, including from senior Tory MPs, to back down on the measure announced in the mini-budget on September 23.
The mini-budget saw sterling hit an all-time low last week, but the pound has made a marked recovery following the U-turn.
The pound was quoted at $1.1309 at the London equities close Monday, jumping from $1.1149 at the close on Friday.
In the FTSE 100, B&M European Value Retail closed up 2.1% after Bank of America raised the retailer to 'buy' from 'neutral'.
Vodafone added 2.6%. Hong Kong-based conglomerate CK Hutchison confirmed it is in discussions with the firm over a possible merger of Three UK and Vodafone UK.
CK Hutchison said the envisaged transaction would involve both companies combining their UK businesses with CK Hutchison holding 49% and Vodafone holding 51% of the combined business.
It said the combination will ensure Three and Vodafone gain ‘the necessary scale to be able to accelerate the rollout of full 5G in the UK and expand broadband connectivity to rural communities and small businesses.’
Vodafone noted that there was ‘no certainty’ that any transaction between the two companies will be agreed, however.
Meanwhile, Endeavour Mining dropped 1.6%, though it said its operations in Burkina Faso, west Africa, have not been affected by recent political turmoil.
Burkina Faso's military leader Paul-Henri Damiba was ousted in a coup on Friday and ‘religious and community’ leaders said that he has formally agreed to step down.
This is the second coup this year, in both cases, the country's security situation and failure to deal with Islamist insurgency were blamed.
In the FTSE 250, Telecom Plus soared 24%. The multi-utility provider raised its full-year profit expectations, after a ‘record’ number of UK households signed up to try and save on their energy bills.
Net customer additions were 86,004, up from 67,980 in the second half of financial year 2022. This took its total customer base at September 30 to 814,684.
The company said it has seen a reduction in the previously expected cost of multi-service discounts during the second half and an improved outlook for energy affordability.
Telecom now expects full year profit to be ‘materially ahead’ of current market expectations.
Essentra jumped 16%. The components, packaging and filter maker said its Filters business has been sold to a wholly owned subsidiary of Centaury Management Ltd for an enterprise value of approximately £262.1 million.
The board said it intends to use the cash from the sales to prepay a portion of US private placement debt and make a small contribution to the company's defined-benefit pension schemes.
It added that it plans to return £150 million to shareholders through a special dividend after the Filters disposal has completed.
‘After completion of the sale of the Filters business, Essentra will be established as a pure play components business, with a healthy balance sheet, providing flexibility to pursue organic and inorganic growth opportunities,’ the company said.
Elsewhere in London, Tortilla Mexican Grill plunged 25% as it said a challenging summer and ongoing macroeconomic headwinds were to blame for a poor interim profit performance.
In the first half ended July 3, Tortilla reported pretax profit of £300,000, down 88% from £2.6 million a year prior. This was despite higher revenue, which was up 30% to £26.9 million from £20.8 million.
Chief Executive Officer Richard Morris said that while times were tough, he was ‘confident in our ability to successfully navigate our way through these industry-wide challenges whilst continuing to deliver against our ambitious growth strategy.’
Protein costs, which account for nearly a third of Tortilla's expenses on products sold, are expected to rise by 40%. This is expected to drive down gross profit margin by about £1.8 million.
In European equities on Monday, the CAC 40 in Paris ended up 0.6%, while the DAX 40 in Frankfurt ended up 0.8%.
The eurozone's manufacturing sector fell deeper into negative territory in September, suffering its worst performance in over two years, figures from S&P Global showed.
The latest S&P Global eurozone manufacturing purchasing managers' index fell to 48.4 points in September, from 49.6 in August. The PMI slid further below the 50.0 no change mark, suggesting a contraction quickened.
It was the lowest PMI score since May 2020, which was during the initial wave of Covid-19 lockdowns.
The euro traded at $0.9834 at the European equities close Monday, higher against $0.9796 at the same time on Friday.
Against the yen, the dollar was trading at JP¥144.35 late Monday, lower compared to JP¥144.68 late Friday.
Stocks in New York were firmly in the green at the London equities close, with the Dow Jones Industrial Average up 2.2%, the S&P 500 index up 2.0%, and the Nasdaq Composite up 1.5%.
The expansion in the US's manufacturing sector continued in September, according to new figures from S&P Global.
The seasonally adjusted S&P Global US manufacturing purchasing managers' index was 52.0 in September, up from 51.5 in August. This was also broadly in line with the earlier flash estimate of 51.8.
The rate of growth was the quickest since May, despite being slower than the series trend and only marginal.
Brent oil was quoted at $88.30 a barrel at the London equities close Monday, up from $86.35 late Friday.
Oil prices jumped on Monday as reports said the OPEC and other top producers considered slashing output.
Bloomberg News saying officials were discussing a one-million-barrel-a-day cut in output, which would be the biggest since the pandemic began, when crude prices collapsed.
Oil majors Shell and BP all benefited from Brent's higher price, rising 2.8% and 0.5%.
Gold was quoted at $1,690.38 an ounce at the London equities close Monday, higher against $1,672.50 at the close on Friday.
In Tuesday's UK corporate calendar, there is a trading statement from British bakery chain Greggs and half year results from medical technology providers Inspiration Healthcare
In the economic calendar, the UK Conservative Party's annual conference continues with a talk from Chancellor Kwarteng at 1745 BST.
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