London share prices started lower on Monday, at the start of a week expected to be dominated for markets by central bank policy.
Investors are looking ahead to a meeting of central bankers in Jackson Hole, Wyoming that starts on Thursday, with a keynote speech from Fed Chair Jerome Powell scheduled for Friday awaited for clues to the future pace and longevity of US interest rate hikes.
‘The message from Powell will probably be hawkish with the near-term priority to tackle high inflation,’ predicted Lloyds Bank. ‘A further rise in US policy interest rates of 50bp or 75bp is expected next month.’
More immediately, China’s central bank continued to move in the opposite direction from global peers, cutting interest rates to revive an economy hobbled by localised lockdowns to contain Covid-19.
The FTSE 100 was down 17.54 points, or 0.2%, at 7,532.83 early Monday. The FTSE 250 index was down 58.07 points, or 0.3%, at 19,831.47. The AIM All-Share index was down 2.23 points, or 0.2%, at 917.94.
The Cboe UK 100 index was down 0.1% at 748.81. The Cboe 250 was down 0.1% at 17,664.67. The Cboe Small Companies was flat at 14,476.24.
In Paris, the CAC 40 stock index was down 0.9%, while the DAX 40 in Frankfurt was 1.1% lower.
In the FTSE 100, Pershing Square Holdings was up 0.5%. Bill Ackman’s London-listed investment fund swung to a $3.04 billion pretax loss in the first half of 2022 from a profit of $718 million a year before, saying the six months were ‘a challenging time’ due to the geopolitical environment and inflation.
Net return in the half-year to June 30 was negative 26.0%. However, performance has improved since, bringing the year-to-date net return to August 16 to negative 10.8%.
‘The investment manager and the board view the decline in the market value of PSH’s portfolio year to date as a temporary dislocation resulting from market dynamics,’ Chair Anne Farlow said.
Vodafone was up 0.3% after the telecommunications company said it has entered into heads of terms with 4iG Public and Corvinus for the sale of Vodafone Hungary, for an enterprise value of €1.8 billion.
The Newbury, England-based company said the sale price represents a 9.1 times multiple of Vodafone Hungary’s adjusted earnings before interest, tax, depreciation and amortisation after leases for the financial year that ended March 31.
The FTSE 100 firm is targeting completion of the sale by the end of 2022. It noted that its shared services business in Hungary, VOIS, is not included in the transaction.
Conversely, oil majors BP and Shell were down 0.9% and 1.3% respectively, tracking spot oil prices lower.
Brent oil was quoted at $95.08 a barrel Monday morning, down from $96.45 late Friday.
Elsewhere, Cineworld Group was up 0.9%. The embattled cinema chain confirmed it is considering filing for Chapter 11 bankruptcy in the US, as it continues to battle with liquidity issues.
Last Wednesday, Cineworld said it was in ‘active discussions’ with various stakeholders, to explore the possibilities of securing further liquidity or restructuring its balance sheet through a ‘comprehensive deleveraging transaction’. It also warned that lacklustre trading was prompting potential financing decisions that could significantly dilute shareholders.
On Friday, the Wall Street Journal reported that the London-based movie house operator has engaged with lawyers from Kirkland & Ellis and consultants from AlixPartners to advise Cineworld on its bankruptcy process.
It said that Cineworld is expected to file a Chapter 11 petition in the US, and is also considering filing for an insolvency proceeding in the UK. Cineworld owns the Regal cinema chain in the US.
In response on Monday, Cineworld said strategic options through which it may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the US and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process.
Cineworld also said it is in discussions with many of its major stakeholders including its secured lenders and their legal and financial advisers.
Wall Street ended significantly lower on Friday, with the Dow Jones Industrial Average down 0.9%, S&P 500 down 1.3%, and Nasdaq Composite down 2.0%.
In Asia on Monday, the Nikkei 225 index in Tokyo closed down 0.5%. In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong was down 0.2%. The S&P/ASX 200 in Sydney ended down 1.0%.
China’s central bank cut its benchmark lending rate on Monday, a week after a surprising key interest rate cut, as the country looks to boost an ailing housing market.
The one-year loan prime rate, which serves as a benchmark for corporate loans, was reduced to 3.65% from 3.7%, the People’s Bank of China said in a statement. The five-year LPR, which is used to price mortgages, was cut to 4.3% from 4.45%, it added.
On Monday last week, the PBoC slashed other key interest rates, bringing its seven-day reverse repurchase rate - a key rate at which it provides short-term liquidity to banks - to a new low. It also cut its one-year medium-term lending facility, surprising forecasters.
The pound was quoted at $1.1810 early Monday, up from $1.1790 at the London equities close Friday.
The euro was priced at $1.0021, down from $1.0035. Against the yen, the dollar was trading at JP¥136.88 in London, lower against JP¥137.15.
Gold stood at $1,742.28 an ounce, lower against $1,748.05 late Friday.
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